Arabian Support & Servs. Co. v. Textron Sys. Corp.

• Decision Date: 19 April 2017
• Docket Number: No. 16-1309,16-1309
• Parties: ARABIAN SUPPORT & SERVICES CO., LTD., Plaintiff, Appellant, v. TEXTRON SYSTEMS CORP., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

855 F.3d 1

ARABIAN SUPPORT & SERVICES CO., LTD., Plaintiff, Appellant,

v.TEXTRON SYSTEMS CORP., Defendant, Appellee.

No. 16-1309

United States Court of Appeals, First Circuit.

April 19, 2017

Haig V. Kalbian , with whom D. Michelle Douglas , Kalbian Hagerty LLP , Washington, DC, Martin F. Gaynor III , Nicholas D. Stellakis , and Manion Gaynor & Manning LLP , Boston, MA, were on brief, for appellant.

Edwin John U , Washington, DC, with whom John A. Tarantino , Providence, RI, Brian R. Birke , Adler Pollock & Sheehan P.C. , Boston, MA, Eugene F. Assaf , Erin C. Johnston , Ronald K. Anguas, Jr. , and Kirkland & Ellis LLP , Washington, DC, were on brief, for appellee.

Before Lynch, Lipez, and Thompson, Circuit Judges.

LIPEZ, Circuit Judge.

In this diversity action, Arabian Support & Services Co. ("ASASCO"), a Saudi Arabian business, seeks compensation for assisting Textron Systems Corporation in its efforts, over a number of years, to complete a deal to sell sensor fuzed weapons ("SFWs") to the Saudi government. ASASCO claims that Textron failed to abide by a promise to supplement the modest fees paid under the parties' written consulting agreements through an "offset" arrangement linked to the weapons sale.¹ The district court granted summary judgment for Textron on all of ASASCO's claims after allowing limited discovery and declining to provide ASASCO an opportunity to amend its complaint.

Although we agree that ASASCO's contract and tort claims are not viable, we conclude that the district court erroneously dismissed ASASCO's Chapter 93A misrepresentation claim based solely on the failure of the contract claim. See Mass. Gen. Laws Ann. ch. 93A, § 11. Textron offers no persuasive alternative rationale to support the court's ruling. Hence, ASASCO is entitled to proceed with its claim that Textron engaged in an unfair business practice by procuring ASASCO's agreement to low-fee consulting contracts with the promise of a future offset benefit and then, after successfully signing the weapons deal, disclaiming any additional financial obligation to the Saudi company. Accordingly, we vacate the summary judgment in part and remand for further proceedings on ASASCO's misrepresentation theory.

I.

We will not review in full the parties' lengthy relationship, which developed largely through interactions between Mansour Al-Tassan, ASASCO's president, and Avedis Boyamian, Textron's Director of Middle East Business Development. As the history is well known to both parties, we choose here to recount only those facts pertinent to our decision.

A. The Consulting Agreements

For three-plus years—from March 2005 through August 2008—Textron and ASASCO signed successive consulting contracts providing ASASCO with a monthly retainer of $10,000. Beginning September 1, 2008, the consulting contract was extended in increments of one to three months on a no-fee basis. That arrangement continued for a year, until a new two-year agreement was signed that set ASASCO's monthly retainer at $500. The $500 fee remained in place through subsequent contract extensions until August 31, 2013, at which point Textron terminated the consulting arrangement. In the email sent on August 29 notifying ASASCO that Textron had elected to end the relationship, the company spokesperson stated that Textron was "not aware of any outstanding obligations between the parties."

Each of the consulting contracts between 2005 and 2011 contained a provision stating that the parties agreed that "any and all services rendered by CONSULTANT to the COMPANY shall be deemed to have been given pursuant to this Agreement and no additional payments [other than for approved travel expenses] shall be due to or paid to CONSULTANT." However, the 2011 agreement for the first time contained an expanded version of this no-other-payments statement, providing that the specified compensation was "the exclusive remuneration to be paid by the COMPANY" for "the services provide[d] by CONSULTANT." The 2011 agreement also featured an integration provision:

This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral. Each party hereby waives the right to assert any claim against the other, its employees, customers or assigns, based on any oral representations, statement, promise or agreement whether made before or after the date of this Agreement.

B. The Offset Dialogue

Through the years of their consulting relationship, beginning no later than May 2006,² Textron and ASASCO regularly discussed the opportunity for additional compensation to ASASCO through its involvement in offset projects that were an anticipated requirement of the Saudi weapons deal. The record also contains internal Textron emails indicating that ASASCO's anticipated offset activity—and compensation—would be independent of the consulting agreement. This correspondence includes a draft "Offset Services Agreement" prepared by Textron in June 2006, an email from Boyamian to Al-Tassan that month stating that Textron was "in the process of getting the Offset Provider Agreement approved," and, on the same day, an internal Textron email asking that "two books" be started for the company's business with ASASCO ("one for a new offset agreement with Asasco, and one for a renewal of the consultant agreement").³

Textron and ASASCO never entered into a written offset agreement. Instead, in February 2008, Textron and Blenheim Capital Partners Limited signed an Offset Services Agreement ("OSA") that permitted but did not require Blenheim to subcontract with ASASCO—although no other subcontractor could be used without Textron's "prior written consent." Six months later, in an internal email dated September 8, Boyamian told colleagues at Textron that, "Effective September 1st, 2008, [Textron] stopped paying ASASCO the monthly consultancy fee because, [Textron] through Blenheim, an offset service provider company based in UK, has an offset service providing agreement with ASASCO for [Textron] business offset requirements in Saudi Arabia." The email also reported that a two-year renewal of ASASCO's consulting agreement was in the works, "with a nominal monthly fee of $500/month." Boyamian forwarded this email to Al-Tassan.

The Textron-Blenheim-ASASCO association was further formalized in April 2009, when Blenheim and ASASCO entered into a subcontracting agreement under which ASASCO was entitled to 75 percent of the fees paid by Textron to Blenheim under the OSA. The Blenheim-ASASCO contract anticipated that these fees would be deposited into an escrow account, which was to be created "as soon as practicable," and, indeed, ASASCO's right to payment under that contract was contingent on "the full amount of the applicable fee under the Offset Services Agreement being paid to the Escrow Account." Although Textron's agreement with Blenheim did not by its terms provide for an escrow account, Boyamian appeared to believe that such an account would exist. In a November 2008 email to Al-Tassan, Boyamian stated his understanding "that Textron will be paying 8% of the contract value to the escrow account for offset." So far as it appears from the record, no escrow account was ever created.

From the time of Blenheim's appearance on the scene (in 2008) through early 2011, all three businesses—Textron, ASASCO, and Blenheim—were involved in discussions about offset projects. Among the later emails exchanged was one sent to Al-Tassan on March 2, 2011 from Steven Cahall of Blenheim, which reviewed the possible fee arrangements among Textron, Blenheim, and ASASCO depending upon whether Textron was required to make offset investments.⁴ The three-way dialogue formally ended in November of that year, however, when Textron sent Blenheim a letter stating that the companies were mutually ending the OSA.⁵ By its terms, the Blenheim-ASASCO agreement also terminated when the OSA terminated. ASASCO claims that it was not told, and did not know, that Textron and Blenheim had ended the OSA until September 2013.

C. The Weapons Deal

On January 3, 2012, roughly a month after Textron sent Blenheim the termination letter, Boyamian sent Al-Tassan an email reporting that Saudi officials had, on December 24, signed a "Letter of Offer and Acceptance" ("LOA")—essentially a statement of intent to make a deal—"as a Christmas gift to us." Boyamian concluded his message with "CONGRATULATIONS to all of us." Through 2012, allegedly without knowledge that its subcontract with Blenheim had ended (upon termination of the OSA), ASASCO continued to work with Textron to set up meetings with Saudi government officials. The correspondence between the two companies included reference to the offset requirement. In an email to Boyamian in November 2012, Al-Tassan noted an effort to set up a meeting for Textron's chairman with the Saudi Minister of Economy and Planning, who "is also the Head of the Saudi Economic Offset which Textron might want to explore with the minister."

Textron and Saudi Arabia finalized an agreement for the weapons deal in late August 2013. About a week later, ASASCO received the notification that Textron was terminating their consulting relationship. In a deposition conducted on December 16, 2015, a Textron representative testified that, as of that date, the company had not yet reached an offset agreement with the Saudi Arabian government, but he reported that Saudi officials had confirmed that such an agreement was required.⁶

II.

In its lawsuit, ASASCO claims that, over an extended period of time, it provided essential support at minimal cost for Textron's pursuit of a weapons deal in Saudi Arabia based on assurances from Textron that ASASCO would have a large financial stake in any offset activity related to that deal. When the weapons deal was finally made, ASASCO asserts, Textron backed away from its promises. ASASCO's complaint presented this claim through three theories...