Dresser Industries, Inc. v. Pyrrhus AG

• Decision Date: 08 July 1991
• Docket Number: No. 89-3533,89-3533
• Citation: 936 F.2d 921
• Parties: RICO Bus.Disp.Guide 7802 DRESSER INDUSTRIES, INC., a Delaware corporation, Plaintiff-Appellee, v. PYRRHUS AG, formerly known as Pyrrhus Handels AG, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 921

936 F.2d 921

RICO Bus.Disp.Guide 7802

DRESSER INDUSTRIES, INC., a Delaware corporation, Plaintiff-Appellee, v. PYRRHUS AG, formerly known as Pyrrhus Handels AG, Defendant-Appellant.

No. 89-3533.

United States Court of Appeals Seventh Circuit.

Argued Sept. 24, 1990.

Decided July 8, 1991.

Patrick W. O'Brien, Michael J. Alter, Frank D. Mayer, Jr., Russell R. Eggert, Christopher T. VanWagner, Amy B. Eisenberg, Mayer, Brown & Platt, Chicago, Ill., for plaintiff-appellee.

Joel Sprayregen, Clifford E. Yuknis, Howard A. Davis, William H. Gifford, Jr., Tami J. Diamond, Shefsky & Froelich, Chicago, Ill., for defendant-appellant.

Before BAUER, Chief Judge, and COFFEY and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

Pyrrhus Handels AG ("Pyrrhus") appeals the district court's grant of summary judgment in favor of Dresser Industries, Inc. ("Dresser") on its complaint and against Pyrrhus on Count I of its counterclaim, both of which sought a declarative judgment as to whether the Advisory and After Sales Agreement (the "Contract") between the parties was terminated as of August 1, 1988. Pyrrhus also appeals the district court's dismissal of Counts II through XII (except for Counts V and VII, which were dismissed without prejudice) of its counterclaim for failure to state a claim upon which relief can be granted. We affirm the district judge as to the entry of summary judgment and the dismissal of Counts II, III, VIII, IX, X, XI and XII; we reverse and remand Counts IV and VI.

I. FACTUAL BACKGROUND

Pyrrhus, a Swiss corporation, and Dresser, a Delaware corporation, entered into the Contract, effective August 1, 1986, in which Pyrrhus was required to provide aftersales advisory services with respect to sales of Dresser's products to the country of Iran. Relevant provision of the Contract further provided: (1) Pyrrhus was to receive a commission for "orders received and accepted or Contracts entered into during the term of this Agreement" (section 3(a)); (2) Pyrrhus was to be the exclusive agent for Dresser with regard to services provided for by the Contract (section 4); (3) The Contract was for a two-year term ending August 1, 1988 (section 5(a)); and (4) Either party could terminate the Contract upon six months notice at the end of the two-year term or any subsequent one-year term (section 5(a)).

In July 1987, Earl Ternieden, the Vice President-Controller of the Construction Equipment Division of Dresser, and Jack Smith, an independent representative for Pyrrhus, entered into negotiations with regard to extending the Contract. Per these discussions, Ternieden and Smith reached a tentative agreement for an extension of the Contract. Significantly, while Smith was empowered to negotiate for Pyrrhus, he was without authority to sign any new agreement or an extension of the Contract.

On July 24, 1987, Dresser sent a letter to Pyrrhus that contained Dresser's understanding of an agreement reached during Ternieden's and Smith's negotiations to extend the Contract for two years with the following amendment:

"Notwithstanding anything in this Agreement to the contrary, the parties agree that (i) Section 4 of the Agreement and any other express or implied exclusivity provisions are hereby deleted from the Agreement; (ii) the Agreement will be a non-exclusive agreement between Pyrrhus and Dresser with respect to the subject matter therein; and (iii) the consideration/compensation to be received by Pyrrhus from Dresser for services performed under the Agreement shall be negotiated on a case-by-case basis with respect to specific transactions, based upon the services rendered by Pyrrhus. This negotiated compensation provision supercedes [sic] the compensation terms applicable to Pyrrhus' services and [sic] set forth in Section 3."

The letter included a request for confirmation that Pyrrhus agreed to extend the Contract on the terms in the amendment: "If the [sic] you agree with the above, please sign the counterpart of this letter enclosed and return it to me. Upon my receipt of same, we will have an amendment to the Agreement." Dresser sent a second letter two weeks later again asking for confirmation as to whether Pyrrhus would agree to an extension of the Contract as amended:

"Gentlemen:

"Attached are two copies of amendments to the agreement between Dresser and Pyrrhus dated August 1, 1986. This is as per discussions with Jack Smith.

"Would you please arrange to sign both copies and return them to my attention? Upon receipt I will sign and return a final copy for your records."

Pyrrhus responded by letter on August 28, 1987:

"Dear Mr. Ternieden "We have received an amendment dated July 24, 1987 to our agreement dated August 1, 1986.

"We were surprised at the contents of paragraph 2 in this amendment. Our understanding was only the extension of the Agreement i.e., only paragraph 1, all other terms and conditions remaining as are.

"We kindly request you to rectify the amendment and send it for signature."

Negotiations over exclusivity continued, and on December 2, 1987, Pyrrhus sent Dresser a signed copy of the July 1987 proposed amendment with a notation in the margin referring Dresser to the attached cover letter. Pyrrhus' cover letter requested that Dresser "disregard the last paragraph of page 1 of the said amendment and confirm your agreement to the exclusivity of the 'Sales and Advisory Agreement' in a separate letter."

Dresser notified Pyrrhus by letter on December 23, 1987, that it could not respond to Pyrrhus' December 2, 1987, letter until after January 1, 1988. On January 25, 1988, Dresser sent Pyrrhus a notice of termination of the Contract effective August 1, 1988.

"With reference to the [Advisory and after Sales Agreement dated August 1, 1986], please be advised that under its terms, Dresser Industries is required to give Pyrrhus AG notice of non-renewal of the agreement prior to the end of January of this year. This is per Section 5(a) of the agreement.

"Please be advised that this letter constitutes notice of Dresser Industries' election not to renew the agreement which expires by its terms on August 1, 1988.

"As has recently been mentioned to one of your representatives, we wish to discuss a new form of relationship subsequent to termination on August 1, 1988. We understand that steps have been taken to have such discussions in the U.S. in February, however, such discussions are not intended and do not limit this termination notice.

"A full response to your prior communications to Mr. Ternieden dated December 2, 1987, will be shortly forthcoming. Be assured we will continue to perform our obligations under the current contract."

(Emphasis added). Robert Musgjerd, Dresser's Senior Vice President of Marketing, allegedly called Pyrrhus on or about January 25, 1988 and instructed Jawad Kamel, another Pyrrhus representative, to ignore the termination letter "because Dresser intended to continue its relationship with Pyrrhus but on an improved and expanded basis." However, Pyrrhus never received written confirmation that Dresser wished to disavow the termination letter; nor, despite continued negotiations, did the parties come to an agreement for an expanded relationship.

Dresser filed a complaint on August 22, 1988, seeking a declaratory judgment that the Contract was terminated August 1, 1988, and Pyrrhus responded with a 12-count counterclaim, Count I of which requested a declaratory judgment on the issue of renewal. The other eleven counts of Pyrrhus' counterclaim advanced a variety of theories: Count II, estoppel; Counts III-VIII, breach of contract; Amended Count IX, fraudulent representation; Amended Count X, tortious interference with a prospective business advantage; Amended Count XI, reimbursement of a Swiss withholding tax; and Amended Count XII, violation of Section 1962(c) of the Racketeer Influenced and Corrupt Organizations Act.

On December 21, 1988, Dresser filed its "Motion for Judgment on the Pleadings as to Plaintiff's Complaint and as to Count I of Defendant's Counterclaim" pursuant to Federal Rule of Civil Procedure 12(c) as well as a "Motion to Dismiss Counts II through XII of Defendant's Counterclaim" pursuant to Rule 12(b)(6). The district judge granted limited discovery prior to ruling on Dresser's motions, and in its memo in opposition to Dresser's "Motion for Judgment on the Pleadings," Pyrrhus relied upon evidence obtained through discovery. Dresser, in its reply memo, requested that the court view the "Motion for Judgment on the Pleadings" as a Rule 56 summary judgment motion in accordance with Rule 12(c).

In its memorandum opinion and order of April 27, 1989, 1989 WL 44571, the district court stated that "[b]ecause the parties rely on exhibits outside the pleadings, this court considers Dresser's motion [for Judgment on the Pleadings] as one for summary judgment under Fed.R.Civ.P. 56." Mem.Op. at 4. Specifically, the district court noted that Pyrrhus relied on affidavits and deposition testimony, and this reliance allowed for the Rule 12(c) motion to be treated as a Rule 56 motion for summary judgment. In addition, the district court found that "[b]oth parties are on notice that the court is treating the motion for judgment on the pleadings as a motion for summary judgment." Id. The district judge granted summary judgment in favor of Dresser and against Pyrrhus on the complaint and Count I of the counterclaim and dismissed all counts of Pyrrhus' counterclaim except V and VIII. Pyrrhus filed a motion to alter, amend or vacate, which was denied on August 2, 1989. On October 23, 1989, the district court granted Pyrrhus' motion to voluntarily dismiss Counts V and VIII of its counterclaim without prejudice in order that Pyrrhus might have a final order to appeal to this Court.

II. SUMMARY JUDGMENT

A. Existence of Valid Contract ¹

Pyrrhus contends that summary judgment was inappropriate because there were genuine issues of material fact concerning whether there was...