46 F.3d 718 (8th Cir. 1995), 94-1601, Essco Geometric v. Harvard Industries

Docket Nº:94-1601, 94-1753.
Citation:46 F.3d 718
Party Name:ESSCO GEOMETRIC, doing business as Diversified Foam Products, Inc., a Missouri Corporation, Appellee, v. HARVARD INDUSTRIES, doing business as Harvard Interiors Manufacturing Co., Inc., a Delaware Corporation, Appellant. ESSCO GEOMETRIC, doing business as Diversified Foam Products, Inc., a Missouri Corporation, Appellant, v. HARVARD INDUSTRIES, doi
Case Date:January 24, 1995
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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46 F.3d 718 (8th Cir. 1995)

ESSCO GEOMETRIC, doing business as Diversified Foam

Products, Inc., a Missouri Corporation, Appellee,


HARVARD INDUSTRIES, doing business as Harvard Interiors

Manufacturing Co., Inc., a Delaware Corporation,


ESSCO GEOMETRIC, doing business as Diversified Foam

Products, Inc., a Missouri Corporation, Appellant,


HARVARD INDUSTRIES, doing business as Harvard Interiors

Manufacturing Co., Inc., a Delaware Corporation, Appellee.

Nos. 94-1601, 94-1753.

United States Court of Appeals, Eighth Circuit

January 24, 1995

Submitted Nov. 17, 1994.

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[Copyrighted Material Omitted]

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Ann E. Buckley, St. Louis, MO, argued (Jay A. Summerville, on the brief), for appellant.

Mark G. Arnold, St. Louis, MO, argued (Thomas M. Dee, on the brief), for appellee.

Before RICHARD S. ARNOLD, Chief Judge, BRIGHT, Senior Circuit Judge, and McMILLIAN, Circuit Judge.

BRIGHT, Senior Circuit Judge.


In this breach of contracts action, Essco Geometrics, Inc., d/b/a Diversified Foam Products (Diversified), a materials supplier, sought damages from Harvard Industries, Inc. (Harvard), a manufacturer of office chairs, for Harvard's failure to honor (1) a written contract for materials and (2) an oral contract for materials, both allegedly made with Diversified. On the written contract claim, a jury awarded $400,000 and the district court entered judgment for that amount for Diversified. The district court summarily rejected the oral contract claim as unenforceable under the Missouri statute of frauds, Mo.Ann.Stat. Sec. 400.2-201(3)(b) (Vernon 1994). Defendant Harvard appeals the adverse judgment of $400,000. Plaintiff Diversified cross-appeals the summary dismissal of the oral contract claim. We affirm on both appeals.

Harvard raises these issues on appeal: (1) Diversified failed to make a submissible case that Harvard's purchasing agent, Michael Gray, had either actual or apparent authority to enter into a two-year, exclusive and non-cancelable requirements contract with Diversified; (2) even assuming Gray had either actual or apparent authority, because Gray did not have both types of authority, the district court erred in submitting both issues to the jury; (3) the district court erred in refusing Harvard's proposed Instruction No. C, which stated that an agent's own statement of authority is insufficient to establish that authority; and (4) the written agreement was too indefinite to be an enforceable contract.

Diversified in its cross-appeal contends that its evidence from Harvard's former sales manager acknowledging the oral contract took the claim outside the statute of frauds.


We present the relevant facts in the light most favorable to the nonmoving party, as is required in reviewing a denial of a motion for judgment as a matter of law. Thomure v. Phillips Furniture Co., 30 F.3d 1020, 1022 (8th Cir.1994).

Harvard produces several products, but most importantly for purposes of this appeal, it manufactures chairs, and sells those chairs both to private and public entities. Diversified sells foam used in the chairs manufactured by Harvard. For over thirty years, Diversified supplied a large portion of Harvard's foam needs.

Prior to 1988, Harvard usually subcontracted with only two foam suppliers, Diversified being one of them.

To determine which companies would supply its foam, Harvard would issue bid requests to several potential suppliers, detailing Harvard's needs for a particular chair contract. The bids submitted did not contractually bind either party, but usually determined

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which two companies would have Harvard's business, what prices the suppliers would charge, and approximately the quantity sellers would deliver.

Once Harvard had locked-in its two suppliers for a given chair contract, it ordinarily issued cancelable purchase orders whenever it needed foam. The purchase orders contained standard terms and conditions, which stipulated that the agreement committed Harvard only to the quantities of foam found in that particular purchase order. Harvard's purchase orders always applied to a limited time period, usually requiring the supplier to deliver within a couple of weeks or months.

For over twenty years, Frank Best served as Harvard's purchasing manager. From the beginning of his tenure at Harvard, Best cultivated a close business relationship with Edsel Safron, the president of Diversified, ensuring a continuing business relationship between supplier and manufacturer. In 1987, it appeared that Harvard would win the 1988-1990 General Services Administration (GSA) "double shell" chair contract. Best again issued a request to Diversified for bids on Harvard's foam needs. After the bids came in and were reviewed, Harvard issued purchase orders to Diversified for some of the GSA chairs, but Harvard also issued purchase orders to American Excelsior and Dalco, foam suppliers in competition with Diversified.

In July 1988, Frank Best retired, and Michael Gray, the former purchasing agent, became the new purchasing manager for Harvard. JoAnn Ceresia became Harvard's new purchasing agent under Gray and became responsible for issuing purchase orders as Harvard's day-to-day needs demanded. In September 1988, Ed Kruske became Harvard's new president.

With this new management in place, Harvard began a program to cut costs and improve quality. This program became known as the "world class manufacturing plan." Pursuant to this plan, Harvard decided in late 1988 to offer Diversified, Dalco and American Excelsior each an opportunity to quote new prices for the remainder of Harvard's 1988-1990 GSA contract. Because American Excelsior quoted the lowest prices and because JoAnn Ceresia desired to diminish Harvard's perennial reliance on Diversified foam, American Excelsior became the primary supplier of Harvard's foam needs for the remainder of that contract. Diversified, however, did not receive another purchase order from Harvard for over a year.

When Diversified first learned that it no longer would supply foam for the GSA contract, Edsel Safron immediately contacted Harvard's new president, Ed Kruske, and claimed he had an oral agreement with Frank Best, guaranteeing Diversified 70% of the foam business. Kruske asked Safron whether Safron had anything in writing supporting his claim. Safron did not.

In the ensuing months, and throughout most of 1989, Harvard accelerated the implementation of its new world class manufacturing plan. Three aspects of that program are of particular note. First, Harvard had committed itself to reducing its vendor base and to working more closely with its foam suppliers so as to make the entire process of foam manufacturing and delivery more efficient. A principal part of this effort resulted in the collaboration of Harvard's and American Excelsior's engineering departments to consolidate and standardize foam parts.

A second dimension to the world class manufacturing plan was quality control. Under this part of the program, Harvard began gathering information on how each vendor manufactured its foam products and how each controlled the quality of the products produced. Throughout late 1989 and early 1990, Harvard visited several foam manufacturing plants, sent surveys out to its suppliers requesting information on their particular quality control measures, and met internally through a committee of Harvard managers to formulate a plan of quality control--which presumably would be imposed on their primary vendor.

In the fall of 1989, Ed Kruske implemented the third facet to Harvard's world class manufacturing plan. In an effort to cut costs, Kruske issued two internal memoranda. The first, issued on October 26, 1989, directed that all purchase orders (production and non-production) be initialed by Kruske

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prior to being sent out to a vendor. The second directive, issued on December 4, 1989, stipulated that all requisitions of fifty dollars or more have both the departmental manager's approval and Kruske's approval, unless an emergency arose. Michael Gray received both of these directives, but Harvard never notified anyone outside of the company that it had instituted these internal operating procedures.

At the same time that Harvard was implementing these reforms, it began requesting bids for its 1990-1992 GSA chair contract. JoAnn Ceresia was responsible for sending out the requests and sent them to Dalco and American Excelsior. She did not send one to Diversified, however. Michael Gray had elected not to participate in this bid request and did not know that Ceresia had not sent a request to Diversified.

When Edsel Safron learned that Harvard had cut Diversified out of the bidding process for this new GSA contract, he contacted Gray to discuss whether Diversified could get a chance to bid. Safron and Gray met four or five times in early September 1989. Ultimately, Gray allowed Safron to submit a bid for the 1990-1992 GSA contract, which he did on September 12th. Based on further discussion in late September and October, Gray orally agreed to give Diversified all of its foam business for the GSA contract, as well as all of its commercial contracts covering the same two-year period. At the time, Harvard's quality department had rejected hundreds of American Excelsior's foam products because of manufacturing defects. Diversified, on the other hand, had never presented a "quality" problem, and its bids for the GSA contract were significantly lower than American Excelsior's. Gray had informed Kruske of Diversified's superiority, and believed Kruske would ultimately approve of his decision to make Diversified Harvard's primary vendor...

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