Bushkin Associates, Inc. v. Raytheon Co., s. 86-1025

• Decision Date: 20 March 1987
• Docket Number: 86-1326,Nos. 86-1025,s. 86-1025
• Citation: 815 F.2d 142
• Parties: BUSHKIN ASSOCIATES, INC. and Merle J. Bushkin, Plaintiffs, Appellants, v. RAYTHEON COMPANY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 142

815 F.2d 142

BUSHKIN ASSOCIATES, INC. and Merle J. Bushkin, Plaintiffs, Appellants, v. RAYTHEON COMPANY, Defendant, Appellee.

Nos. 86-1025, 86-1326.

United States Court of Appeals First Circuit.

Argued Dec. 2, 1986.

Decided March 20, 1987.

David J. Fine, with whom Silverglate, Gertner, Baker, Fine, Good & Mizner, Boston, Mass., was on brief, for plaintiffs, appellants.

Neal C. Tully, with whom Edward I. Masterman and Cargill, Masterman & Culbert, Boston, Mass., were on brief, for defendant, appellee.

Before COFFIN, BOWNES and TORRUELLA, Circuit Judges.

BOWNES, Circuit Judge.

Plaintiffs-appellants Merle J. Bushkin and Bushkin Associates, Inc., appeal from a directed verdict in their suit against defendant-appellee Raytheon Company. Appellants, an investment banker and his firm, originally commenced this suit in United States District Court for the District of Massachusetts in 1981. They sought damages from Raytheon, on theories of express and implied contract, in connection with their role in the merger of Raytheon with Beech Aircraft Corporation. ¹ In 1983, Raytheon was granted a motion for summary judgment by the district court. See 570 F.Supp. 596 (D.Mass.1983). We overturned that judgment and certified the case to the Massachusetts Supreme Judicial Court for decisions on choice of law and other questions. After the decision by the state court, see 393 Mass. 622, 473 N.E.2d 662 (1985), the suit again went to trial in district court. In December, 1985, upon conclusion of the presentation of plaintiffs' case, the district court directed a verdict for defendant on all counts. This decision forms the subject of the present appeal.

I. SUMMARY OF FACTS

In reviewing a motion for a directed verdict, we must give the losing party "the benefit of all inferences which the evidence fairly supports, even though contrary inferences might reasonably be drawn." Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S.Ct. 1404, 1499, 8 L.Ed.2d 777 (1962) (citing 5 Moore's Federal Practice 2316 (2d ed. 1951)). While the parties have not engaged on appeal in much dispute over the facts, they have vigorously argued about the context in which those facts should be viewed. Our summary of the facts must present them in the light most favorable to Bushkin.

In May, 1974, Bushkin asked Robert L. Seaman, Raytheon's vice-president for planning, if Raytheon would be interested in acquiring a company in the field of general aviation. In July, 1974, Seaman stated that it would be unlikely that Raytheon would have such an interest.

On January 28, 1975, Bushkin again spoke to Seaman about the same subject. Before revealing the name of the company he had in mind, Bushkin declared that "it would be appropriate to settle the issue of fee first." Testimony of Merle J. Bushkin, Plaintiffs' Appendix (App.) at 194. In Bushkin's words, "I set an appropriate fee on a transaction of that size which would be one percent." Id. at 194-95. Seaman said

that if Raytheon acquired the company and if Raytheon did not have a prior commitment with regard to that company, that Raytheon would pay a one percent fee and would work through Bushkin Associates....

Id. at 195. Neither Bushkin nor Seaman discussed a time term for this fee agreement. Bushkin then told Seaman that the company in question was Beech Aircraft. He proceeded to describe to Seaman the various conditions that Beech was setting for a takeover. Bushkin had obtained this information while researching Beech for another client. Seaman said that "he was very interested in Beech" and that he hadn't known it was available for acquisition. Seaman told Bushkin that he would discuss Beech with Thomas L. Phillips, chief executive officer of Raytheon. Bushkin's claim of an express contract is primarily based on this conversation.

Bushkin and Seaman had several more conversations before the presentation of Beech to Phillips. In an entry in Raytheon's "Acquisition Log," Beech was listed under the "Acquisition" column and Bushkin was listed under the "Offered/Suggested By" column. The page in the log is dated June 19, 1975; the entry is dated June 17, 1975. On June 27, 1975, Seaman made a presentation to Phillips about Beech. On June 30, Seaman spoke to Bushkin and asked him several questions that Phillips had about Beech. These questions concerned the reasons for Beech's interest in a merger. A memo from Seaman to Phillips, dated June 30, 1975, reported this conversation. The memo referred to Bushkin as "our contact on this matter." On July 11, 1975, Bushkin discussed with Seaman the structure of the proposed transaction and sent him a memo on the subject. On July 29, 1975, however, Seaman told Bushkin that Phillips was not interested in Beech. Phillips confirmed this lack of interest in acquiring Beech in a conversation with Bushkin on November 6, 1975.

In September, 1976, Raytheon retained Lonsdale Enterprises, Inc. (Lonsdale), as a consultant in Raytheon's diversification program. On November 29, 1976, Phillips' office received a letter from Royal Little, a partner in Lonsdale Enterprises. The letter suggested Beech as a potential acquisition for Raytheon.

Angus MacDonald, an independent broker working with Lonsdale, testified by deposition that he had a conversation with Phillips about Beech on December 1, 1976. ² He discussed the advantages to Raytheon of a merger with Beech and gave Phillips written information about Beech. MacDonald testified that Phillips replied: "It does look very interesting, and let me think about it. Let me talk it over with our people." On February 16, 1977, Phillips telephoned Little and said that he wanted to meet Olive Beech, the chairman of Beech Aircraft, and that he was very interested in taking over the company. ³

On February 28, 1977, Bushkin once again raised the subject of Beech with Phillips. According to Bushkin, Phillips "dismissed it saying he had no interest in general aviation." App. at 275.

On or shortly before March 3, 1977, Phillips authorized representatives of Lonsdale Enterprises to contact Beech. A series of meetings eventually took place in 1978 between Phillips and Frank Hedrick, Beech's president. A merger agreement was signed in November, 1979; the merger became effective in February, 1980.

The value of the Raytheon-Beech transaction was somewhere between $815 and $816 million. In connection with the transaction, Raytheon and Beech paid $7,693,138 in fees to various investment bankers and financial advisors. Raytheon paid $500,000 to Angus MacDonald, $600,000 to Lonsdale, and $2.5 million to Lazard Freres. Beech paid $3,819,171 to Shearson Loeb Rhoades, Inc., and $273,967 to other financial advisors.

II. EXPRESS CONTRACT

The district court held that there was sufficient evidence for the jury to have found an express contract between Bushkin and Raytheon, based primarily on the conversation between Bushkin and Seaman on January 28, 1975. Raytheon has objected that Seaman had no authority to bind Raytheon to agreements with investment bankers and brokers. We agree with the district court, however, that sufficient evidence was presented for the jury to have concluded that Seaman at least had apparent authority to enter into such agreements. Such evidence includes the general authority apparently vested in Seaman by Raytheon to negotiate with investment bankers and brokers, as well as specific statements made by another Raytheon vice-president to Bushkin that Seaman would be responsible for such matters.

The central issue in the interpretation of the contract concerns the missing time term. As we noted, neither Bushkin nor Seaman mentioned a time term during their January 28 conversation. At trial, Bushkin testified that his practice during the period in question was to ask for a time term of "two years plus continuing negotiations." He declared that he expected the same time term for the contract with Raytheon. Bushkin acknowledged that the phrase "continuing negotiations" was somewhat unclear. He asserted, however, that by "continuing negotiations" he meant "continuing interest": the term of the contract would be for two years, but, if the acquisition was not completed within that time, the contract would continue until the date of the acquisition provided that the company's interest arose within the two-year period. In the present case, it seems clear from Phillips' statements in July and November, 1975, that Raytheon's desire to acquire Beech, as expressed by Seaman in January, 1975, went into a period of dormancy for at least a year. For the contract to have lasted more than two years, therefore, Raytheon's interest would have had to have been reawakened before January 28, 1977, and to have continued beyond that date.

Appellants, despite Bushkin's testimony at trial, strongly contend that the "two years plus" standard is inappropriate here. They argue, correctly, that contracts depend on objective manifestations of consent and not on uncommunicated subjective expectations. Thus, they conclude, even if we were to accept that Bushkin had an expectation of "two years plus," this expectation would not be binding evidence on the duration of the contract. Since no time term was explicitly discussed, appellants contend that the district court should have submitted the matter to the jury based on the standard of a "reasonable time." Such a "reasonable time" should have been determined on the basis of all the evidence, particularly, appellants urge, the testimony of their expert, Stanley Foster Reed.

The district court, we note, did not hold that Bushkin's testimony conclusively proved a "two years plus" time term. Rather, the court held that the testimony precluded a showing, based on trade usage, of a longer time term. Citing Caggiano v. Marchegiano, 327 Mass. 574, 99 N.E.2d 861 (1951), the court held that a trade usage must be universal in order to supplement the missing terms of a contract and that...