City Solutions, Inc. v. Clear Channel

• Decision Date: 23 April 2004
• Docket Number: No. 03-15321.,No. 03-15249.,03-15249.,03-15321.
• Citation: 365 F.3d 835
• Parties: CITY SOLUTIONS INC, Plaintiff-Appellee, v. CLEAR CHANNEL COMMUNICATIONS, Inc.; Eller Media Inc; Adshel Inc., Defendants-Appellants. City Solutions Inc, Plaintiff-Appellant, v. Clear Channel Communications, Inc.; Eller Media Inc; Adshel Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

365 F.3d 835

CITY SOLUTIONS INC, Plaintiff-Appellee, v. CLEAR CHANNEL COMMUNICATIONS, Inc.; Eller Media Inc; Adshel Inc., Defendants-Appellants.

City Solutions Inc, Plaintiff-Appellant, v. Clear Channel Communications, Inc.; Eller Media Inc; Adshel Inc., Defendants-Appellees.

No. 03-15249.

No. 03-15321.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 10, 2004.

Filed April 23, 2004.

Nelson E. Brestoff, Moskowitz, Brestoff, Winston & Blinderman LLP, Los Angeles, California, for the plaintiff-appellee-cross-appellant.

Daniel S. Mason and Scott R. Campbell, Zelle, Hofmann, Voelbel, Mason & Gette LLP, San Francisco, California, for the defendants-appellants-cross-appellees.

Appeal from the United States District Court for the Northern District of California, William H. Alsup, District Judge, Presiding. D.C. No. CV-99-00060-WHA.

Before: HUG, ALARCON, and W. FLETCHER, Circuit Judges.

ALARCON, Circuit Judge:

City Solutions, Inc. ("CSI"), a Florida-based company specializing in the modular news rack business, appeals from the judgment of the district court granting the motion for a judgment as a matter of law ("JMOL") filed by Eller Media Company ("Eller"), an Arizona-based outdoor advertisement firm.¹ The court set aside the jury's verdict in favor of CSI on a claim of fraud in which the jury awarded damages in the amount of $9 million. Eller cross appeals from the denial of its motion for JMOL on a claim of unfair competition in which the jury awarded damages in the amount of $800,000, and in the alternative, for a new trial.

We hold that the district court properly denied Eller's motion for a new trial and its motion for judgment as a matter of law as to the common law unfair competition claim. We also conclude that the district court erred in granting Eller's motion for judgment as a matter of law on CSI's fraud claim. CSI also appealed from the order granting summary judgment in favor of Eller on its claims for breach of an oral joint venture agreement and breach of fiduciary duty. We do not reach the merits of these claims, however, because CSI informed the court in a letter dated March 29, 2004 that "if both the $9 million and the $800,000 jury verdicts are upheld, there is no need for you to decide the summary judgment issues."

I

This case arises out of a dispute between the parties over an alleged oral agreement to submit a joint bid in response to the City of San Francisco's ("City") March 12, 1998 request for proposals ("RFP") for a citywide news rack project. The City sought bids from vendors to provide one thousand modular news racks at no cost to the City. In return, the City proposed that the vendor would be allowed to include advertising on the sides of the news racks and potentially allowed access to free-standing advertising in the City.

Representatives of Eller and CSI met on at least four separate occasions between March 31, 1998, and May 26, 1998. It is undisputed that the parties discussed entering into a joint venture in order to bid on the City's RFP. It is also undisputed that the parties engaged in preliminary negotiations over the specific terms of their future business relationship to take effect if their joint proposal was selected by the City. The parties signed a written confidentiality agreement after their second meeting. They began working together on a proposal in response to the City's RFP after their third meeting. The parties also requested that their lawyers draft a term sheet for a written contract to cover their potential future business relationship. What is disputed by the parties, however, is whether they agreed to enter into an oral joint agreement to submit a bid to the City.

After the parties began discussions, representatives of Eller informed CSI that its parent company, Clear Channel, was in the process of acquiring Adshel, with whom Eller might be required to work on future projects. Clear Channel acquired Adshel on May 21, 1998. Representatives of CSI and Eller met for the final time on May 26, 1998. Clear Channel's acquisition of Adshel was not discussed with CSI's representatives. On June 3, 1998, Eller terminated its relationship with CSI and teamed up with Adshel to submit a timely bid in response to the City's RFP. With less than two weeks remaining before the June 15 deadline for the submission of a bid in response to the RFP, CSI entered into an agreement with two other San Francisco-based companies and submitted a joint proposal to the City. The Eller-Adshel Alliance received a score of 466 points in the competitive bidding process, out of 500 possible points. The CSI bid received a score of 390 points. The City selected the Eller-Adshel Alliance proposal and awarded it the exclusive right to negotiate a contract to provide modular news racks throughout the City.

II

CSI filed this action on December 9, 1998, in a California state court, seeking damages for breach of an oral joint venture agreement, breach of fiduciary duty, breach of a written confidentiality agreement, fraud and deceit, interference with a contract, common law unfair competition, and violation of the California Uniform Trade Secrets Act ("UTSA"). See Cal. Civ.Code §§ 3426-3426.11. Eller timely removed the action to federal court pursuant to 28 U.S.C. § 1441(a) and 28 U.S.C. § 1332(a).

Eller filed a motion for summary judgment. The district court granted Eller's motion to dismiss CSI's claims for breach of an oral joint venture agreement and interference with a contract. The district court concluded as a matter of law that "no contract was ever formed between [CSI] and Eller." City Solutions, Inc. v. Clear Channel Communications, Inc., 201 F.Supp.2d. 1035, 1045 (N.D.Cal.2001) ("Clear Channel I"). In light of this ruling, the court invited Eller to file a motion for partial summary judgment regarding CSI's claim for breach of fiduciary duty. Id. Eller filed the motion suggested by the district court, which it granted, holding "as a matter of law [that] the negotiations [between the parties] did not produce a fiduciary duty." City Solutions, Inc. v. Clear Channel Communications, Inc., 201 F.Supp.2d. 1048, 1051 (N.D.Cal.2002) ("Clear Channel II").

At the close of CSI's presentation of evidence at trial, the defendants filed motions for the entry of a JMOL on each claim, pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The district court granted Clear Channel's motion, but denied Eller and Adshel's motion for a JMOL, without prejudice to renewal after the jury returned a verdict.

The jury found that Eller was liable on the fraud claim and awarded CSI $9 million in damages. The jury awarded CSI $800,000 on its unfair competition claim. In addition, the jury found that Eller had breached the confidentiality agreement, but awarded no damages. The jury also found that Eller had not violated the UTSA and that Adshel was not liable for common law unfair competition.

After the jury returned its verdict, Eller renewed its motion for a JMOL and in the alternative for a new trial, pursuant to Rule 59 of the Federal Rules of Civil Procedure. The district court granted Eller's motion for a JMOL with respect to the fraud verdict and set aside the $9 million award. The court denied Eller's motion for a JMOL regarding the award of $800,000 for unfair competition. The court denied Eller's motion for a new trial. Each party has appealed from the orders entered against it.

The district court had diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332(a). We have jurisdiction over this timely filed appeal under 28 U.S.C. § 1291.

III

CSI maintains its appeal from the order granting Eller's motion for a JMOL on CSI's fraud claim in which the jury awarded CSI $9 million in damages. Eller cross appeals from the denial of its motion for a JMOL on the unfair competition claim in which the jury awarded CSI $800,000 in damages, and the denial of its motion for a new trial.

CSI contends that Eller is liable in tort for fraudulently misrepresenting its agreement to work exclusively with CSI in submitting a joint bid to the City. In addition, CSI asserts that Eller's conduct, namely the misappropriation of confidential bidding strategies, constituted unfair competition which resulted in lost profits to CSI.

Eller asserts that the district court did not err in granting JMOL on the fraud claim because CSI failed to prove Eller was liable for fraud as a result of its decision to bid with Adshel. Eller contends that CSI did not rely on any representation by Eller that it would bid with CSI, and therefore failed to prove causation. In addition to contesting liability, Eller also contends that the $9 million damages award was impermissibly speculative. Further, Eller asserts that the $800,000 damage award for unfair competition was equally unsupported by the evidence presented at trial. Eller argues that the district court erred in denying its motions for a JMOL and its motion for a new trial on CSI's unfair competition claim.

We review de novo the granting of a motion for JMOL. Jorgensen v. Cassiday, 320 F.3d 906, 916 (9th Cir.2003). A district court may overturn a jury's verdict by granting a Rule 50(a) motion only if "a party has been fully heard on an issue and there is no legally sufficient basis for a reasonable jury to find for that party on that issue." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quoting Fed.R.Civ.P. 50(a)). We must review all of the evidence in the record, drawing all reasonable inferences in favor of the non-moving party. Id. at 150, 120 S.Ct. 2097.

A.

Viewing the evidence in the light most favorable to CSI, the record demonstrates that it carried its burden of persuading the jury that Eller committed fraud in representing to CSI that it would work exclusively with CSI to submit a joint bid in response to the City's RFP, and in later terminating its relationship...