828 F.2d 989 (3rd Cir. 1987), 86-5726, Hershey Foods Corp. v. Ralph Chapek, Inc.

Docket Nº:86-5726.
Citation:828 F.2d 989
Case Date:September 11, 1987
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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828 F.2d 989 (3rd Cir. 1987)



RALPH CHAPEK, INC., Appellant.

No. 86-5726.

United States Court of Appeals, Third Circuit

September 11, 1987

Argued April 10, 1987.

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Weyman I. Lundquist, Peter A. Wald, Andrea G. Asaro, (argued), Heller, Ehrman, While & McAuliffe, San Francisco, Cal., Robert A. Barton, Killian & Gephart, Harrisburg, Pa., for appellant.

David E. Lehman (argued), Franklin A. Miles, Jr., Stephen A. Moore, McNees, Wallace & Nurick, Harrisburg, Pa., for appellee.

Before SLOVITER, BECKER and GARTH, Circuit Judges.


GARTH, Circuit Judge:

This is an appeal from a grant of summary judgment by the district court in favor

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of Hershey Foods Corporation and against Ralph Chapek, Inc. We affirm.


On August 13, 1981, Ralph Chapek, Inc. (Chapek), a marketing consulting firm, sent an unsolicited, seven-page licensing proposal to Hershey Foods Corporation (Hershey), in which Chapek proposed to assist Hershey in assessing the feasibility of marketing Hershey's chocolate milk and ice cream. App. at 59-66. The proposal outlined various studies to be undertaken by Chapek, as well as marketing plans and research. Id. at 62. The August 13, 1981 licensing proposal suggested two options by which Chapek would be compensated. "Option One" involved individual research studies to be conducted by Chapek. It also provided that Chapek would receive 15% of the first five years royalties and fees received by Hershey Foods Corporation "for the licensing of the Hershey Chocolate brand for use in the manufacture and sale of Hershey chocolate milk and ice cream, during the first five years." 1 App. at 65. Under "Option Two" Chapek would become the licensee of the Hershey Chocolate trademark for use in the manufacture, sale and store-door delivery of Hershey chocolate milk and ice cream. Under this option, Chapek would negotiate and pay to Hershey a royalty for all dairy products sold with the Hershey chocolate brand name to Chapek for sublicensing to local dairies. Id.

On October 27, 1981, Ralph Chapek, the president of Chapek, met in New York with Hershey's Director of New Products, Anthony Pingitore, to discuss Chapek's proposal. Only the two individuals were present. Chapek contends that at that initial meeting, Pingitore orally agreed, on Hershey's behalf, to "Option One" and committed Hershey to the 15% commission compensation arrangement as it pertained to Hershey's chocolate milk. In return, Chapek claims that it agreed to undertake the three specific research studies proposed in the August 13th proposal, i.e., the fresh chocolate milk and ice cream industry study, the brand impression and attitude and usage study, and a marketing research study with respect to six focus groups. App. at 65.

Three days later, on October 30, 1981, Chapek wrote to Pingitore and, referring to their October 27th meeting, set forth in its letter, an agreement into which Chapek and Hershey had entered. The agreement essentially provided that Chapek would perform a chocolate milk study for Hershey and Hershey would compensate Chapek in the sum of $17,500. The instant dispute between Chapek and Hershey focuses on this agreement: Chapek claiming that this, the October 30th agreement, is only a partially integrated agreement; Hershey claiming that it is the complete integrated agreement of the parties.

In addition to the August 13, 1981 licensing proposal for chocolate milk and ice cream which Chapek sent to Hershey, and the October 30, 1981 agreement involving the dairy industry and chocolate milk industry study for which Hershey paid $17,500, the record reveals other proposals and agreements. Chapek submitted six additional proposals to Hershey, each of which involved different research projects. Chapek was directed to proceed with three of these additional research projects. As to each, a separate agreement was negotiated. The other six written proposals made by Chapek were:

Consumer marketing research, Not accepted by Hershey chocolate milk (1/20/82)(App. at 81) "50 Metro" proposal Accepted by Hershey and (10/7/82)(App. at 96-100) for which Hershey paid referred to as the Licensing $50,000 strategy proposal or "major market" study) In depth market analysis Accepted by Hershey and (1/31/83)(App. at 114) for which Hershey paid ("broad scope study" portion) $23,825 Baked sweet goods proposal Accepted by Hershey and (4/20/83)(App. at 122-24) for which Hershey paid ("broad scope study" portion) $20,125 (expenses included) Frozen novelties (1/31/83) Not accepted by Hershey (App. at 140-42) Chocolate chip cookies Not accepted by Hershey (4/20/83)(App. at 143-57) Page 992

On August 22, 1983, Chapek wrote to Hershey claiming a commission calculated on "fifteen percent of the first five years' royalties and fees received by Hershey for the licensing of the Hershey Chocolate brand for use in the manufacturing and sale of Hershey Chocolate Milk to the dairy industry." Supp.App., Plaintiff's Ex. 20. Hershey rejected Chapek's claim and ultimately brought this action in the Middle District of Pennsylvania for declaratory relief on April 27, 1984. Hershey sought a declaration that it was not obligated to Chapek, under any legal or equitable theory, for commissions calculated on chocolate milk licensing royalties and fees. Chapek counterclaimed for breach of contract; for an award in quantum meruit; for damages for an implied breach of the covenant of good faith and fair dealing; and for damages for "false promise".

On April 5, 1985, Hershey moved for summary judgment. Hershey argued that the breach of contract claim should be dismissed because Chapek's proof of an oral agreement would be barred by the parol evidence rule. It asked for dismissal of the good faith and fair dealing claim as not recognized by Pennsylvania law. It sought dismissal of the quantum meruit and fraudulent misrepresentation claims because the material facts of the case would not support such causes of action. Hershey sought a judgment declaring Hershey free from any express or implied claims of Chapek.

The magistrate held that the October 30, 1981 letter written by Chapek as a result of the October 27th meeting and accepted by Hershey, integrated and incorporated every agreement between the parties as of that date. The magistrate further held that Chapek's good faith claim could not be sustained under Pennsylvania law, which was deemed to be applicable, and that the "false promise" count failed because there was no evidence that there was fraudulent intent on the part of Hershey and because it would negate Pennsylvania's parol evidence rule. As to the quantum meruit count, the magistrate ruled in favor of Hershey with two exceptions. Ultimately, those "exceptions" were removed from the case by a stipulation effected between Hershey and Chapek. 2 See App. at 445.

The district court approved the magistrate's report and recommendation, but modified the magistrate's holding, stating that "giving Chapek the benefit of all favorable inferences that might reasonably be drawn from the evidence, there is a reasonable basis for this court to conclude that the October 30, 1981 written contract integrates and incorporates every agreement between the parties as of that date." App. at 408. In its own opinion, the district court agreed with Hershey that the oral agreement of October 27, 1981, which Chapek claimed was a part of its agreement with Hershey, was proscribed by the parol evidence rule because it was offered by Chapek to vary, contradict, or otherwise attack the terms of the October 30, 1981 letter.

On September 9, 1986, the district court entered a judgment declaring that "Hershey Foods Corporation has no liability to Defendant Ralph Chapek Inc., and the Counterclaims of Defendant Ralph Chapek Inc. are dismissed." App. at 451.

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Chapek appealed, but on appeal abandoned the implied covenant of good faith issue and the issue of "false promise."


Chapek argues on appeal that, under Pennsylvania law, 3 the letter of October 30, 1981 did not constitute a fully integrated contract and that at the meeting with Pingitore on October 27, 1981, Pingitore orally agreed to "Option One" which was set forth in the August 13, 1981 licensing proposal. By this argument, Chapek claims that the 15% commission term of "Option One" became a part of its contract with Hershey.

Hershey responds that the October 30, 1981 "Dear Tony" letter is a complete and fully integrated document which cannot be varied by parol evidence. Because that letter does not include any provision for a 15% commission, Hershey argues that it cannot be bound to any commission arrangement. The October 30, 1981 letter reads in full as follows:

Dear Tony:

Per our meeting in New York City on October 27th, concerning Chapek conducting an industry study for the dairy category, this letter will serve as an agreement between Ralph Chapek, Inc. (hereafter Chapek) and Hershey Foods Corporation (hereafter Hershey). The details of the agreement are as follows:

1. Chapek will provide to Hershey a comprehensive study of the dairy industry in general and the chocolate milk market specifically for Hershey to evaluate a possible Hershey entry in the chocolate milk category.

2. The study and timing will be based on the attached research outline, with reasonable modification and additions by Hershey.

3. Chapek agrees to confidentiality of all research, findings and recommendations concerning research work conducted by Chapek for Hershey.

  1. Hershey agrees to compensate Chapek:

    a. Dairy Industry Study at $17,500 with 50% at project inception (see attached invoice...

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