American Town Center v. Hall 83 Associates, s. 89-1153

• Decision Date: 17 August 1990
• Docket Number: 89-1154 and 89-1722,Nos. 89-1153,s. 89-1153
• Citation: 912 F.2d 104
• Parties: AMERICAN TOWN CENTER, Plaintiff-Appellant (89-1153/54), Plaintiff-Appellee (89-1722), v. HALL 83 ASSOCIATES, Defendant-Appellee (89-1153/54), Defendant-Appellant (89-1722).
• Court: U.S. Court of Appeals — Sixth Circuit

Page 104

912 F.2d 104

17 Fed.R.Serv.3d 949

AMERICAN TOWN CENTER, Plaintiff-Appellant (89-1153/54), Plaintiff-Appellee (89-1722), v. HALL 83 ASSOCIATES, Defendant-Appellee (89-1153/54),

Defendant-Appellant (89-1722).

Nos. 89-1153, 89-1154 and 89-1722.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 28, 1989.

Decided Aug. 17, 1990.

D. Michael Kratchman (argued), Christopher A. Andreoff, Evans & Luptak, Detroit, Mich., L. Stanford Evans, Vestevich, Dritsa, McManus, Evans, Payne & Vlcko, William J. Lamping, Bloomfield Hills, Mich., for plaintiff-appellant.

James E. Romzek, Fredric A. Smith (argued), Vivain B. Perry, Simpson & Moran, Birmingham, Mich., for defendant-appellee.

Before KEITH, JONES and BOGGS, Circuit Judges.

NATHANIEL R. JONES, Circuit Judge.

Plaintiff, American Town Center Associates (ATCA), appeals the district court's grant of summary judgment for defendant, Hall 83 Associates (Hall 83), in this diversity action for specific performance of an agreement to sell real property. Hall 83 appeals an order refusing to enjoin state court proceedings commenced by ATCA. For the following reasons, we affirm in part and reverse in part.

I.

This lawsuit concerns the alleged sale of the American Town Center Building (Building), a large office and retail complex in Southfield, Michigan, and 40 acres of adjacent land. The Building is owned by Hall American Center Associates Limited Partnership (the Building partnership) and the land is owned by American Center Properties Limited Partnership (the land partnership). Hall 83 is the managing general partner of each of the partnerships. Hall Financial Group (HFG) is a Texas corporation which conducts the real estate operations for Craig Hall, a Texas real estate syndicator.

In April 1986, Leslie Dick, a partner in ATCA, expressed an interest in purchasing the Building and land. On May 29, 1986, Dick sent a letter to Hall 83, expressing his willingness to pay approximately $67,000,000.00 for the Building and the land. This letter is similar in format to several which followed in the course of the next two years, and they are appropriately characterized as "letters of intent." In a letter dated June 2, 1986, Hall 83 responded that the offer was "unacceptable" and that the Building was no longer on the market. In late 1986 and in 1987, Dick sent several letters of intent to Hall 83, each of which was rejected. On December 18, 1987, Dick sent a revised letter of intent offering $66,000,000.00 for the Building and $6,000,000.00 for the nearby acreage. The two parties then engaged in negotiations over the price of the adjacent land. On January 5, 1988, Bryan Kaminski of Hall 83 returned the letter of intent with marked revisions reflecting Hall 83's requested purchase price, which was $67,500,000.00 for the Building and $8,750,000.00 for the land. Dick and Kaminski spoke on January 6, 1988 about the December 18 letter of intent. Dick alleges that the two agreed on terms, and that Kaminski assured Dick that Hall 83 would sign a letter of intent which reflected their agreement. Kaminski alleges that he told Dick that he did not have the authority to bind Hall 83 to any agreement, and that he could only present the draft letter of intent to Ron Berlin or Craig Hall for their review.

On January 7, 1988, Dick sent the revised letter of intent to Hall 83. It is this letter that ATCA relies upon as constituting the binding contract. This draft met Hall's asking price for the Building, but compromised on a price of $7,500,000.00 for the adjacent land. The letter of intent stated that it would "serve as an ongoing expression of our interest and cumulative efforts to date ..." J.App. (Nos. 89-1153/1154) at 112. The lawyers for Hall 83 revised the January 7 letter of intent, changing several of the terms and adding conditions for sale, such as full partnership approval and ATCA's receipt of insurance. However, Hall 83 never sent a revised copy to Dick. On January 11, 1988, Dick stated in a letter to Kaminski that:

[a]t this point in time I am interested in only one thing, and that is raising the appropriately structured financing for this transaction. I have no intention of getting mired in minutiae at this premature date, with no Letter of Intent signed on the details as yet to be negotiated in regard to a closing document.

Id. at 136. On January 12, 1988, Dick called Kaminski to inquire about the status of the letter of intent. Dick alleges that Kaminski told him that it would be signed within a day. Kaminski denies this allegation. On January 13, 1988, Kaminski sent a letter to Dick which stated in part the following:

... we have continued to work with you on a good faith basis in order to consummate a deal. However, our process with the city of Southfield to obtain approval for the additional 2,500,000 square feet of office is currently pending....

At this time we are unable to execute a letter of intent due to the negative impact it could have on our master plan approval....

Furthermore we would like for you ... to meet with us in our Dallas office to develop a plan to proceed further with this transaction.

Id. at 48. Subsequently, Dick telephoned Kaminski to discuss the status of the proposed sale. Transcripts from the telephone conversation reveal that Kaminski assured Dick that they had "an agreement on price and terms" and that Hall 83 would not "jerk the terms or maybe do another deal." Id. at 158.

During the next several months, ATCA proceeded as if there were a deal, meeting with prospective tenants, financiers, and investors. On March 23, 1988, Dick sent a letter to Kaminski asking for "a simple letter from your corporation that will acknowledge our agreement in regards to the sale as was represented to me on numerous occasions in which, as you know, I have relied on and continued to obtain financing for the purchase of the properties." Id. at 124. On April 14, 1988, Dick met with Stanley Ferenc, a representative of Hall 83, and Shearson Lehman, the financier to the deal. According to Ferenc, he told Dick that Hall 83 did not have an agreement with ATCA to sell the Building and land. Dick denies that Ferenc ever told him that no agreement existed. On April 20, 1988, Ferenc sent a letter to Dick that stated "there does not exist at this time, nor has there ever been, any contractual relationship between the parties." Id. at 125. On June 2, 1988, Craig Hall, President of the Hall Group, sent a letter to Dick stating that there was never any agreement between ATCA and Hall 83 because Ferenc and Kaminski, while they could recommend deals to Craig Hall, did not have the power to enter into agreements for Hall 83. Hall noted that Ferenc and Kaminski had planned to propose the deal to him, but did not since "a written contract of any sort never materialized." Id. at 129. Hall also stated that he was open to a "real offer" for the Building and land of $76,500,000.00 if Dick could send earnest money of $1,000,000.00 within two weeks.

On August 5, 1988, ATCA filed a three-count complaint in the United States District Court for the Eastern District of Michigan, Judge Lawrence P. Zatkoff presiding, seeking specific performance and damages. Count one alleged that Hall 83 breached the written contract of January 7, 1988; count two alleged that Hall 83 breached its oral contract; count three alleged that Hall 83 is liable for fraud and misrepresentation. On January 18, 1989, the district court issued an opinion and judgment in favor of Hall 83. The district court ruled against ATCA on the first two counts of its complaint. With respect to the written contract claim, the court held that it was not a contract because there was no "meeting of the minds." Id. at 79. The court also granted summary judgment to Hall 83 on the oral contract claim, ruling that such a contract is clearly within the statute of frauds. Id. The court rejected ATCA's arguments that Hall 83's promise to proceed with the deal is enforceable, that Hall 83's actions constituted part performance, and that the statute of frauds had "evolved" out of existence in Michigan. In addition, the court dismissed without prejudice the count alleging fraud and misrepresentation because it was not sufficiently pleaded under Fed.R.Civ.P. 9(b). Subsequent to its opinion, the court cancelled the notices of lis pendens that had been placed on the property because the underlying complaint had been dismissed.

The day after dismissal of its complaint in federal court, ATCA filed suit in Michigan state court against the Building partnership, the land partnership, and HFG. In the state court complaint, ATCA made several claims: that the January 7, 1988 letter of intent was a binding contract (count one); that the oral representations constituted either an oral contract or non-contractual promises that ATCA detrimentally relied upon (count two); that ATCA suffered consequential damages (count three); and that HFG committed fraud and misrepresentation and breached its duty to act in good faith (count four). J.App. (No. 89-1722) at 40. HFG and the partnerships filed a motion for summary judgment of this state court action based on the doctrine of res judicata. State court Judge Francis X. O'Brien ruled that summary judgment would be inappropriate because (1) one of the parties in the state court action, HFG, is possibly not in privity with Hall 83, the party to the federal judgment; and (2) there was a dispute regarding whether or not some of the state court claims were fully litigated in federal court. Id. at 92-93. As such, the state court concluded that it should not deny ATCA its "day in court." Id. The Michigan Supreme Court recently denied the application for leave to appeal this decision. American Town Center Associates v. Hall American Center Associates Limited Partnership, et al., No. 86197 (November 29, 1989). After the initial state court decision, Hall 83 returned to the federal district court and...