BWX Electronics, Inc. v. Control Data Corp., 89-7275

• Decision Date: 02 April 1991
• Docket Number: No. 89-7275,89-7275
• Citation: 929 F.2d 707
• Parties: , 32 Fed. R. Evid. Serv. 871 BWX ELECTRONICS, INC., a Body Corporate of the State of Maryland, Appellant, v. CONTROL DATA CORPORATION, a Body Corporate of the State of Delaware.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 707

929 F.2d 707

289 U.S.App.D.C. 114, 32 Fed. R. Evid. Serv. 871

BWX ELECTRONICS, INC., a Body Corporate of the State of Maryland, Appellant, v. CONTROL DATA CORPORATION, a Body Corporate of the State of Delaware.

No. 89-7275.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 28, 1991.

Decided April 2, 1991.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 87-01773).

Alan I. Baron, with whom Stephen L. Snyder, Baltimore, Md., was on the brief, for appellant.

Richard J. Leveridge, with whom Michael E. Nannes and David L. Engelhardt, Washington, D.C., were on the brief, for appellee.

Before MIKVA, Chief Judge, EDWARDS and THOMAS, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

This case involves a diversity action brought by appellant, BWX Electronics, Inc. ("BWX"), against appellee, Control Data Corporation ("CDC"), for breach of contract and fraud. In its contract claim, BWX alleged that CDC intentionally breached an agreement under which BWX had an exclusive option to negotiate for the purchase of a business and a building owned by CDC. In its fraud claim, BWX asserted that CDC had induced it to enter into the disputed agreement without ever intending to negotiate exclusively or in good faith with BWX. The District Court granted summary judgment for CDC on the breach of contract claim; the fraud claim, however, was tried before a jury. After trial, the jury returned a verdict for BWX and awarded it $23,750 in compensatory damages.

On this appeal, BWX contends that the trial court erred in three respects: first, in awarding CDC summary judgment on the breach-of-contract claim; second, in granting CDC's motion for a directed verdict on BWX's plea for punitive damages on its fraud claim; and third, in granting CDC's motion in limine to exclude certain evidence and argument that BWX sought to offer in support of its claim for punitive damages. On the record before us, we can find no merit in BWX's claims. We therefore affirm the judgments of the District Court.

I. BACKGROUND

CDC is a Minnesota-based company that manufactures and sells computers and related products. Prior to 1986, CDC supplied itself with the cable assemblies used to interconnect computer components through a wholly owned business, Capital Manufacturing Operations ("the Capital business"), located in the District of Columbia. In 1986, however, CDC's requirements for these cable assemblies declined due to changes in technology and markets. CDC therefore decided to sell the Capital business.

In May 1986, CDC solicited bids from several prospective buyers. After reviewing these proposals, CDC initiated discussions with American Technology Corporation ("ATC"), a Baltimore-based electronics firm, and one other bidder. In August 1986, CDC elected to negotiate exclusively with ATC for the sale of both the Capital business and the building in which it was housed ("the Capital building").

At ATC's request, CDC agreed to substitute BWX, a company apparently formed for the sole purpose of negotiating and effectuating the purchase transaction, as the potential purchasing entity of these properties. On September 5, 1986, BWX and CDC entered into a Letter of Intent ("LOI"). Under the terms of the LOI, CDC agreed to negotiate exclusively and in good faith with BWX for a limited time regarding the sale of both the Capital business and the Capital building. The LOI contemplated that negotiations concerning the two properties would proceed separately: the closing of the Capital business was to occur on or before September 30, 1986; the sale of the Capital building would take place "no later than three months from the Closing Date [on the Capital business], or December 31, 1986, whichever occurs first." ¹ The LOI further provided that "[i]f the Closing [on the sale of the Capital business] has not occurred on or before September 30, 1986, this letter will expire." ²

In exchange for these exclusive negotiating rights, BWX paid CDC $15,750 as a deposit towards the purchase price of the Capital business. The LOI provided that the deposit would be non-refundable in the event the parties failed to reach agreement on the sale of the business, unless that failure resulted from CDC's bankruptcy, inability to obtain necessary corporate approval of the final agreement or some other event "unrelated to the parties' mere failure to reach agreement." ³

Despite extensive negotiations over the next several weeks, the parties failed to reach any agreement by the September 30 closing deadline. On October 13, 1986, after additional bargaining efforts in early October proved unproductive, CDC notified BWX that it was terminating negotiations concerning both the Capital business and the Capital building. Approximately one month thereafter, CDC offered to refund the $15,750 deposit that BWX had paid, but BWX rejected that offer.

After negotiations between BWX and CDC had ended, CDC commenced negotiations with Edward R. Webster, a District of Columbia entrepreneur who owned property adjacent to the Capital building, and who had expressed some interest in the Capital building prior to CDC's involvement with BWX. On or about November 12, 1986, CDC and Webster entered into a contract for Webster's purchase of the Capital building, and the deal closed in late December 1986. In January 1987, CDC sold the Capital business separately to Stewart Peterson Industries, Inc.

BWX thereupon brought suit in the Superior Court of the District of Columbia stating claims for breach of contract and fraud, and seeking both compensatory and punitive damages. In its contract claim, BWX alleged that CDC had intentionally breached the LOI by selling the Capital building to a third party prior to December 31, 1986, the date, according to BWX, that its exclusive option to negotiate for the sale of the building expired. BWX's fraud claim alleged that CDC had induced BWX to enter into the LOI without ever intending to negotiate exclusively and in good faith with BWX concerning the sales of the Capital business and building.

Upon CDC's motion, the case was removed to the District Court for the District of Columbia based on the diversity of citizenship of the parties. See 28 U.S.C. Sec. 1441 (1988). Prior to trial, BWX moved for partial summary judgment on its breach of contract claim, arguing that the LOI created an enforceable option for BWX to purchase the Capital building extending from September 5 until December 31, 1986, and that CDC had breached that option by selling the building to Webster during this period. ⁴ In response, CDC requested summary judgment in its favor on BWX's contract claim. CDC argued that the LOI did not create an option contract for the purchase of the Capital building, but merely an agreement to negotiate, and that this agreement had expired by its own terms before CDC even began negotiations with Webster. ⁵ Finding CDC's construction of the LOI to be correct, the trial court entered summary judgment for CDC and against BWX. ⁶

Thereafter, the District Court granted CDC's motion in limine to exclude certain evidence and argument from trial on the remaining fraud claim. ⁷ Relevant to this appeal are the trial court's exclusion of: (i) evidence or argument pertaining to BWX's claims that CDC had engaged in sham negotiations with BWX in order to convince the District of Columbia Government that it had attempted to sell the Capital business and building to minority interests; and (ii) evidence or argument concerning CDC's alleged instigation of employee unrest at the Capital business in October 1986.

After BWX had presented its case-in-chief at trial, the trial court granted a directed verdict for CDC on the issue of punitive damages, finding that BWX had not presented any evidence of outrageous conduct necessary to support such damages. On September 29, 1990, the jury returned a verdict for BWX, awarding it compensatory damages of $23,750 on its fraud claim. This amount was based upon the $15,750 that BWX had paid CDC to secure its exclusive negotiating rights under the LOI, plus $8,000 in out-of-pocket expenses that BWX had incurred during the negotiations.

II. DISCUSSION

A. Choice of Law

As noted above, the property at issue in this case was located in the District of Columbia. Some of the negotiations concerning the LOI, however, took place in Maryland, and the LOI was signed in both Maryland (by BWX) and in Minnesota (by CDC), giving rise to the question of which jurisdiction's contract and tort law should apply. ⁸

Although the record before us does not disclose an explicit choice of law determination by the District Court, ⁹ both BWX and CDC relied exclusively upon District of Columbia substantive law in their pre-trial briefs, ¹⁰ and the District Court referred solely to District of Columbia law in addressing CDC's motion for directed verdict on BWX's fraud claim. ¹¹ Neither party has objected to this choice of law on appeal, and, finding no apparent error in the District Court's choice, we shall apply District of Columbia law as well. See Nello L. Teer Co. v. Washington Metropolitan Area Transit Authority, 921 F.2d 300, 302 n. 2 (D.C.Cir.1990) (applying same law as that applied by District Court where neither party objected to choice of law, and where there was no apparent error in choice made).

B. BWX's Breach-of-Contract Claim

BWX contends that, by selling the Capital building to Webster in December 1986, CDC breached its contractual obligations under the LOI. This claim is premised entirely upon paragraph seven of the LOI, which provides in pertinent part:

Upon execution of the Letter of Intent and receipt by Seller of [BWX's $15,750 payment] ..., Seller agrees to negotiate exclusively and in good faith with Buyer for the sale to Buyer of the Capital building at fair market value to occur no later than three months...