C.G. Schmidt, Inc. v. Permasteelisa N. Am.

• Decision Date: 16 June 2016
• Docket Number: No. 15-3617,15-3617
• Parties: C.G. Schmidt, Inc., Plaintiff–Appellant, v. Permasteelisa North America, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

825 F.3d 801

C.G. Schmidt, Inc., Plaintiff–Appellant

v.Permasteelisa North America, Defendant–Appellee.

No. 15-3617

United States Court of Appeals, Seventh Circuit.

Argued April 12, 2016

Decided June 16, 2016

Joshua B. Levy, Anthony J. Anzelmo, Lisa M. Lawless, Attorneys, Whyte Hirschboeck Dudek S.C., Milwaukee, WI, for Plaintiff–Appellant.

Steven J. Slawinski, Attorney, O'Neil Cannon Hollman Dejong & Laing, S.C., Milwaukee, WI, for Defendant–Appellee.

Before Wood, Chief Judge, and Flaum and Williams, Circuit Judges.

Flaum

, Circuit Judge.

Permasteelisa North America (“PNA”), a subcontractor, submitted a bid to C.G. Schmidt, Inc. (“CGS”), a general contractor, to provide a glass curtainwall. CGS selected PNA's bid but after extensive negotiations, the parties did not enter into a formal subcontract. PNA backed out of the project at the last minute, requiring CGS to use a different subcontractor at a higher price.

CGS filed suit against PNA alleging breach of contract and promissory estoppel. The district court granted summary judgment to PNA, finding that the parties did not intend to be bound until the execution of a formal subcontract. We agree with the district court that the parties never entered into a binding contract and that CGS's promissory estoppel claim fails as a matter of law. Accordingly, we affirm the district court's grant of summary judgment.

I. Background

CGS is a general contractor managing part of the construction of an eighteen-story office building at 833 East Michigan Street in Milwaukee, Wisconsin (the “project”). In April 2013, CGS solicited bids for a custom glass curtainwall—a nonstructural outer covering for weatherproofing and aesthetics. The curtainwall was one of the largest subcontracts of the nearly $52 million project. To facilitate the bidding process, CGS sent subcontractors, including PNA, a contract manual and a blank sample of CGS's standard subcontract. The contract manual stated that “[t]he bidder must accept all terms of the [standard CGS] subcontract as a condition for submitting a bid.” The manual contemplated that the parties would eventually sign a formal subcontract. CGS's policy was to require written agreements for all subcontracts, including the curtainwall subcontract.

On April 19, 2013, PNA submitted a bid to construct and install the curtainwall for a total contract price of $12,675,421. PNA had its operations and legal departments review the bid materials and then submitted its bid using the bid form specified in CGS's contract manual. The bid form stated, in relevant part, that the bidder “proposes ... to construct all work in the Work category” and “[i]n submitting and signing this bid form, Bidder agrees with all terms and conditions of the standard [CGS] agreement forms.” The bid included a base price, pricing schedule, alternate pricing, and a proposed scope for the project. PNA's Senior Vice President signed the bid.

Roughly two months later, CGS selected PNA as its “contractor of choice.” The parties, however, were not prepared to execute a formal subcontract. CGS had not yet entered into two preliminary contracts with the project owner: (1) a prime contract, the overarching agreement with the project owner; and (2) a Guaranteed Maximum Price Amendment (“GMPA”), which sets the project's overall budget and creates a financial reserve to cover unexpected costs. CGS needed the GMPA in place before committing to pay PNA. PNA was also not prepared to sign a subcontract before these contracts were in place. PNA repeatedly expressed a need to review the finalized prime contract before it would execute a formal subcontract.

In addition, CGS and PNA did not execute a subcontract because they had not settled on the terms of the subcontract agreement. Over the next year, CGS and PNA engaged in a “value engineering process” during which they refined the price and other terms of the subcontract as they worked towards a final, signed agreement. PNA regularly updated the proposed contract price and communicated these updates to CGS. And on multiple occasions, PNA raised concerns with some of the terms of the subcontract. At no point during the negotiation process did CGS express to PNA that, in CGS's view, there was already an existing agreement in place.

From June 2013, when CGS selected PNA's bid, to June 2014, the parties stayed in communication while they prepared for construction and refined the terms of the subcontract. In September 2013, PNA requested a production schedule from CGS so that it could confirm a time slot with its manufacturing facility in Thailand. Importantly, use of the Thai facility allowed PNA to offer CGS a substantial credit or deduction towards the total subcontract price due to the cheaper cost of labor.

In late 2013 and early 2014, CGS asked PNA to move forward with certain engineering activities to keep the construction schedule on track. PNA responded that it needed a financial commitment in order to proceed. On February 25, 2014, CGS sent PNA an unsigned letter of intent, stating that “it is the intent of [CGS] and [PNA] to enter into a Subcontract agreement....” The letter of intent contained an integration clause: “Upon execution of the Subcontract agreement between [CGS and PNA], the Subcontract and its Exhibits shall supersede in all respects prior negotiations between [CGS and PNA], including this letter of intent.” It proposed a total contract price of $7,744,469 and a May 14, 2014 deadline for PNA to produce shop drawings.

PNA responded with its own proposed schedule “until a contract can be finalized.” PNA's proposed schedule stated that it would not circulate shop drawings without an executed contract in place. PNA never produced any shop drawings.

On March 24, 2014, CGS and PNA, along with the project architect, operations, and engineering teams, convened for a scheduled “kick-off” meeting. PNA admitted that the company's policy is not to participate in design kick-off meetings unless it is under contract.

On April 21, roughly one year after PNA submitted its initial bid, CGS and the project owner finally executed the prime contract. On May 16, PNA sent CGS an updated bid price.¹ On May 21, PNA requested a second letter of intent. CGS responded with a signed, revised letter of intent on May 23. The revised letter of intent contained the same basic terms and contract price as the previous letter of intent, but it added four alternate materials and pushed back deadlines.

On May 27, CGS entered into the GMPA with the project owner. CGS contends that in doing so, it relied on the price in PNA's May 16 bid. CGS alleges that PNA knew that CGS was relying on its bid.

Even after the GMPA was in place, CGS and PNA did not sign an executed agreement and continued to refine the terms of the subcontract. On May 29, PNA submitted an updated bid proposal with a total contract price of $8,047,368. That same day, CGS sent PNA a copy of the prime contract. PNA responded that it had remaining concerns with certain terms in the proposed subcontract, including the liquidated damages and delay damages provisions.

By June 2014, internal communications at CGS expressed urgency about getting the subcontract signed and the work started. On June 5, CGS sent PNA a revised draft of the project scope and a total contract price of $7,824,529.67. On June 13, CGS sent PNA a proposed subcontract for electronic signature with a price term of $7,797,464. PNA did not respond. On June 16, CGS sent PNA a second proposed subcontract with a price term of $7,751,916.

Soon after, PNA abruptly “disengaged” from the project. PNA explained that because of civil unrest in Thailand, it no longer had the capacity to produce the curtainwall.² CGS urged PNA to honor its bid but PNA refused. The parties never signed a formal subcontract. Eventually, CGS replaced PNA with a different curtainwall subcontractor. CGS claims that it had to pay the replacement subcontractor a higher price and thus suffered damages.

On December 15, 2014, CGS filed a diversity action against PNA in the Eastern District of Wisconsin claiming breach of contract and promissory estoppel. CGS argued that PNA's bid constituted an offer, CGS's selection of that bid constituted an acceptance, and PNA breached the agreement by backing out. Alternatively, CGS argued that PNA's bid constituted a promise that induced CGS's reasonable reliance.

On August 3, 2015, PNA moved for summary judgment. On October 23, the district court granted summary judgment to PNA. The district court held that the parties never manifested an intent to be bound; rather, CGS and PNA were negotiating towards a final written subcontract that never transpired. As for the promissory estoppel claim, the district court held that the bid did not constitute a promise and any reliance by CGS was unreasonable because the parties intended to be bound by a final written agreement. The court also determined that justice did not require enforcement of the bid. CGS appeals.

II. Discussion

We review a district court's grant of summary judgment de novo, examining the record in the light most favorable to CGS, the nonmoving party. Nat'l Inspection & Repairs, Inc. v. George S. May Int'l Co. , 600 F.3d 878, 882 (7th Cir. 2010)

. Summary judgment is appropriate if there is no genuine dispute of material fact and the nonmovant is entitled to judgment as a matter of law. Id.

A. Breach of Contract

CGS first argues that PNA's initial bid was an offer and that CGS accepted that offer by selecting PNA's bid, thus forming an enforceable contract. CGS contends that the subsequent negotiations merely modified the terms of this existing contract. Therefore, CGS claims that PNA breached a binding agreement by disengaging from the project.

Both parties agree that Wisconsin law governs this dispute. Under Wisconsin law, an enforceable contract has three elements: offer, acceptance, and consideration. Runzheimer Int'l, Ltd. v. Friedlen , 362 Wis.2d 100, 862 N.W.2d 879, 885 (2015)

. Agreements...