Audio Visual Assoc. v. Sharp Elec. Corp.

Decision Date29 February 2000
Docket NumberNo. 98-2113,CA-97-3816-PJM,98-2113
Parties(4th Cir. 2000) AUDIO VISUAL ASSOCIATES, INCORPORATED, t/a Ritz Audio Visual Associates, Incorporated, Plaintiff-Appellant, v. SHARP ELECTRONICS CORPORATION, Defendant-Appellee. and DOUGLAS STEWART COMPANY, Defendant. (). . Argued:
CourtU.S. Court of Appeals — Fourth Circuit

Appeal from the United States District Court for the District of Maryland, at Green-belt.

Peter J. Messitte, District Judge.

[Copyrighted Material Omitted] COUNSEL ARGUED: Sylvia Jiva Rolinski, Silver Spring, Maryland, for Appellant. Brett Ingerman, PIPER & MARBURY, L.L.P., Baltimore, Maryland, for Appellee. ON BRIEF: Henry R. Lord, Anthony L. Meagher, PIPER & MARBURY, L.L.P., Baltimore, Maryland, for Appellee.

Before NIEMEYER, MICHAEL, and TRAXLER, Circuit Judges.

Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Michael and Judge Traxler joined.

OPINION

NIEMEYER, Circuit Judge:

Based on its efforts to purchase 1,400 calculators from Sharp Electronics Corporation, Audio Visual Associates, Inc., filed this action against Sharp for breach of contract, tortious business conduct, and violation of the antitrust laws. On Sharp's motion to dismiss filed under Federal Rule of Civil Procedure 12(b)(6), the district court dismissed Audio Visual's amended complaint. We affirm.

I

The allegations of Audio Visual's amended complaint, which at this stage of the proceedings we take to be true even though the allegations relate a somewhat incoherent series of events, state that Audio Visual contacted Sharp with the intent to purchase a number of Sharp brand, graphing calculators (Model EL-9200C). Audio Visual planned to resell the calculators to Corporate Systems Resources, Inc. ("CSR"), a "socially and economically disadvantaged small business concern" under § 8(a) of the Small Business Act, 15 U.S.C. § 637(a), which had received an award from the United States Navy to supply the Navy with 1,400 calculators. Sharp, which was aware of Audio Visual's arrangement with CSR and CSR's award from the Navy, quoted Audio Visual a price of $62.99 per calculator. Based on this quotation, Audio Visual contracted with CSR to provide it with the 1,400 calculators for $71.00 each, and CSR contracted to provide the Navy with the calculators at a sum not alleged in the complaint. Two days later, on January 25, 1995, Sharp orally informed Audio Visual that it had decided to "dump" the EL-9200C calculators and "quoted a price of $31.00 per unit." Pursuant to a "typical long-standing business practice" with Sharp, Audio Visual thereupon faxed Sharp a purchase order for 1,400 calculators at $31.00 per unit. The purchase order included the following language:

PLEASE ADVISE OUR COST IF CASH IS PROVIDED WITH ORDER

* * * * *

DO NOT RELEASE ORDER BEFORE YOU [HAVE] RECEIVED WRITTEN OR VERBAL AUTHORIZATION FROM GARY LUNSFORD OR BOB DVORAK

The purchase order was signed by Bob Dvorak as Audio Visual's executive vice president and owner.

On the same day that Audio Visual faxed Sharp the purchase order, a Sharp employee called Audio Visual demanding "to know the identity of the customer buying the calculators [and] asking whether it [was] the Navy and whether [Audio Visual] was acting as a broker for an `underprivileged firm.'" Sharp then advised Audio Visual that it "was not going to obtain the order at any price." When Audio Visual contacted another employee at Sharp to inquire about the status of its order, the employee stated that the calculators were "sold out." The complaint alleges that at that time Sharp actually had "at least 30,145 units then in stock."

During this same period, Audio Visual alleges, Sharp approached the Navy directly and offered to provide it with the calculators, along with some projectors, if the Navy would cancel its contract with CSR. Audio Visual alleges that the Navy did cancel the CSR contract and that this caused CSR to cancel its contract with Audio Visual. When Audio Visual called Sharp again, Sharp again stated that the calculators were sold out and that, in any event, it would not ship Audio Visual the calculators.

Less than two weeks later, Sharp informed Audio Visual that its EL-9200C calculators were now available at $31.00 each. Accordingly, Audio Visual faxed Sharp a purchase order for 1,400 calculators at this price. When Audio Visual followed up with a telephone call, however, Sharp stated that the calculators were sold out and that Audio Visual's order would not be filled. But Sharp referred Audio Visual to the Douglas Stewart Company ("DSC") in Wisconsin, one of Sharp's distributors.

When Audio Visual called DSC, DSC quoted a price of $29.95 per calculator. Shortly after providing this quotation, however, DSC told Audio Visual that the calculators had a new price of $31.00 because "Sharp says $31.00 is the fixed price." Ultimately, Audio Visual completed a transaction with DSC and purchased 1,400 calculators at the price of $31.00 each. Audio Visual then sold the calculators to CSR, which in turn provided them to the Navy.

Audio Visual filed this action against Sharp and DSC, alleging (1) breach of a contract to sell Audio Visual calculators at $31.00 each, (2) intentional interference with existing contractual relations between Audio Visual and CSR, (3) intentional interference with prospective economic advantage and business relations, (4) fraud and misrepresentation, (5) negligent misrepresentation, and (6) price fixing. Audio Visual sought $100,000 in compensatory damages, treble damages on the antitrust claim, $3 million in punitive damages, and attorneys fees.

On the defendants' motion to dismiss made under Federal Rule of Civil Procedure 12(b)(6), the district court dismissed the complaint. It concluded that Audio Visual's faxed purchase order was at most an offer that was rejected by Sharp and that no contract between Sharp and Audio Visual for the sale of calculators ever came into existence. On the intentional interference claims, the court concluded that because the alleged interference involved a contractual relationship between Sharp, Audio Visual, CSR, and the Navy,"effectively what you've got is, one of the parties to the contract alleging interference with the contract by another party to the contract, to the overall contract, which essentially you cannot do." With respect to the fraudulent and negligent misrepresentations, the court concluded that the statement by Sharp that it was sold out was not a representation upon which Audio Visual could have reasonably relied. The court concluded that the statement was simply a refusal to deal, which is not actionable. Finally, the court dismissed the price-fixing claim because there was no indication of agreement or concerted action between Sharp and DSC.

Because Audio Visual settled its claims against DSC, it filed this appeal only with respect to the district court's order dismissing its complaint against Sharp.

II

For its principal argument on appeal, Audio Visual contends that it adequately alleged the formation of a contractual relationship between it and Sharp under which Sharp agreed to sell Audio Visual 1,400 calculators at $31.00 each and that Sharp illegally refused to honor the contract. Audio Visual points to its allegations that Sharp "quoted a price of $31.00 per unit" and that"pursuant to typical longstanding business practice, it faxed a purchase order to Sharp," a copy of which it attached to the complaint. As Audio Visual characterizes this exchange in its complaint, "[Audio Visual] accepted an offer of Sharp to provide the calculators at a specified price. A complete contract between the parties was created."

Sharp contends that Audio Visual's purchase order amounted to "nothing more than an offer requiring acceptance of its terms to create a contract" and that Sharp was fully within its rights to reject the purchase order. It argues that if we were to rule otherwise, purchasers would be able "to create legally enforceable contracts simply by sending or faxing a purchase order to the seller." Moreover, Sharp notes, if sending a purchase order were held to create a contract, then a seller would never be able to reject an order or refuse to deal.

The commercial exchange between Audio Visual and Sharp was not unusual as far as it went, and the significance of each exchange is readily defined either by common law or the Uniform Commercial Code. Daily, sellers provide quotations on prices and delivery, and daily, buyers place purchase orders to acquire goods pursuant to these quotations. Often, the terms of proposed transactions are modified by oral or written communications and transactions are finalized simply by performance and payment in accordance with the latest proposals. This facility and flexibility in commercial transactions involving the sale of goods is specifically contemplated by the Uniform Commercial Code. See Md. Code Ann., Com. Law § 1-102(2).*

Under the Code, buyers and sellers may freely exchange purchase orders, faxes, and telephone calls relating to a proposed transaction without incurring contractual obligations unless and until the essential requirement for contract formation is satisfied-i.e. that there be an objective manifestation of mutual assent by the parties (sometimes referred to as a "meeting of the minds"). See Maryland Supreme Corp. v. Blake Co., 369 A.2d 1017, 1023 (Md. 1977); World Ins. Co. v. Perry, 124 A.2d 259, 267 (Md. 1956); Restatement (Second) of Contracts § 17(1) ("the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration"). The manifestation of mutual assent ordinarily takes the form of an offer by one party followed by an acceptance by the other party. See Blake, 369 A.2d at 1025. In determining whether a proposal by one party amounts to an offer, we must ask whether it can be...

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