Evergreen Investments, LLC v. Fcl Graphics, Inc.

• Decision Date: 02 July 2003
• Docket Number: No. 02-3762.,02-3762.
• Citation: 334 F.3d 750
• Parties: EVERGREEN INVESTMENTS, LLC, a Montana limited liability company, Appellant, v. FCL GRAPHICS, INCORPORATED, an Illinois corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

334 F.3d 750

EVERGREEN INVESTMENTS, LLC, a Montana limited liability company, Appellant, v. FCL GRAPHICS, INCORPORATED, an Illinois corporation, Appellee.

No. 02-3762.

United States Court of Appeals, Eighth Circuit.

Submitted: May 15, 2003.

Filed: July 2, 2003.

COPYRIGHT MATERIAL OMITTED

Roger W. Yoerges, argued, Washington, DC (David S. Molot, on the brief), for appellant.

Denise K. Drake, argued, Kansas City, MO (Michael C. Leitch and Jeffrey H. Baum, on the brief), for appellee.

Before WOLLMAN, MAGILL, and BEAM, Circuit Judges.

WOLLMAN, Circuit Judge.

In this diversity action, the district court¹ granted summary judgment against Evergreen Investments, LLC (Evergreen), concluding that a letter of intent signed by Evergreen and FCL Graphics, Incorporated (FCL) did not constitute a binding agreement for the purchase and sale of FCL. We affirm.

I. Background

Evergreen is a Montana limited liability company, with offices in Missouri, that was formed to manage the investment activities of Robert Plaster and his family. FCL is a commercial printing company located in Harwood Heights, Illinois. In September 1997, discussions began concerning the sale of FCL to Evergreen. After two years of negotiations, Larry Weis, Evergreen's chief financial officer, and Frank Calabrese, FCL's president, signed a letter of intent, dated August 30, 1999. This letter, approximately two and one-half pages in length, "outlin[ed] the essential terms of an agreement between [FCL] and [Evergreen] pursuant to which a newly formed entity created by Evergreen (`Newco') will acquire 100% of the assets of FCL and related entities for $53 million (the `Purchase Price')." The first part of the letter set forth, in detail, the purchase price, what that price included, and how it would be paid. After discussing Calabrese's role as a consultant for Newco, the letter provided that:

The above-referenced terms are intended to form the basis and general understanding of the proposed acquisition. Binding terms and conditions for a potential transaction will depend on a number of factors, including but not limited to, the satisfactory completion of legal, business and financial due diligence investigations, and negotiation and execution of definitive legal documentation, including non-competition agreements with all existing owners.

Any proposed transaction will be subject to Evergreen's ability to arrange financing, on terms satisfactory to Evergreen, sufficient to consummate the acquisition and provide adequate working capital to meet the Company's on-going liquidity requirements and other obligations. The Seller agrees to cooperate fully with Evergreen in arranging such financing. In addition, any proposed transaction will be subject to certain legal, regulatory and other necessary third party approvals.

The letter concluded with the following language:

Subject to the above conditions, both parties hereto agree to use all their best efforts in good faith to close this transaction under the terms materially and substantially outlined herein within a reasonable time. In addition, by executing this Letter of Intent, Seller agrees to grant Evergreen a 90-day exclusivity period to consummate the proposed transaction. During such exclusivity period, Seller will not, directly or indirectly engage in, conduct or entertain offers or discussions with any other person or party regarding a transaction of any kind involving the Company.

On September 27, 1999, FCL's counsel notified Evergreen that FCL "[had] elected to terminate the Letter of Intent and all negotiations and other discussions concerning the sale of the assets of [FCL], or any other transaction between FCL, its shareholders, and Evergreen." By letter dated October 7, 1999, Evergreen advised FCL that it "ha[d] no right unilaterally to `elect' to `terminate' the Letter of Intent, which [was] a binding agreement between FCL and Evergreen," and that "Evergreen [was] fully prepared to move forward with its obligations under the Letter of Intent." After these letters were exchanged, negotiations ended and the sale did not take place.

Evergreen filed suit in Missouri state court, and the case was subsequently removed to the United States District Court for the Western District of Missouri. In its first amended complaint, Evergreen alleged breach of contract, breach of duty to negotiate in good faith, and fraud. Evergreen also sought to recover under a theory of promissory estoppel. FCL moved for summary judgment on all four counts. With respect to the breach of contract claim, FCL argued that the plain language of the August 30 letter demonstrated that the parties did not intend the letter to be a binding contract for the purchase and sale of FCL. The district court summarily denied FCL's motion, concluding that material factual issues remained as to each of Evergreen's claims. Evergreen then filed a motion in limine asking the court "to exclude evidence outside the four corners of the parties' contract dated August 30, 1999." According to Evergreen, "[e]xtrinsic evidence [was] neither relevant nor admissible, because it [was] clear and unambiguous from the face of the parties' written agreement that they formed a contract for the sale and purchase of the assets of Defendant [FCL], and intended to be bound by their agreement." In denying this motion, the district court found the August 30 letter to be ambiguous as to the parties' intent to be bound. Shortly before trial, however, the court reversed its ruling and entered an order granting FCL's motion for summary judgment on counts one and four of Evergreen's complaint, the breach of contract and fraud claims. In a later order, the court explained that "the clear language of the face of the letter" demonstrated that the parties did not intend the August 30 letter to be a binding contract for the purchase and sale of FCL. Having voluntarily dismissed its two remaining claims, Evergreen now appeals, arguing that the district court erred by granting FCL's motion for summary judgment on the breach of contract claim.

II. Analysis

"We review de novo a grant of summary judgment, applying the same standard as the district court." Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th Cir.2002) (citation omitted). "Summary judgment is proper if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law." Thomas v. Union Pac. R.R. Co., 308 F.3d 891, 893 (8th Cir.2002) (citation omitted). In this diversity case, we also review the district court's interpretation of state law de novo. Walk v. Starkey Mach., Inc., 180 F.3d 937, 939 (8th Cir.1999) (citing Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991); Kaplon v. Howmedica, Inc., 83 F.3d 263, 266 (8th Cir.1996)).

A.

The district court determined that Illinois law governs Evergreen's claims, a ruling that neither party contests. The Seventh Circuit, in applying Illinois law, has recognized that "it is a common commercial practice for two negotiating parties to sign a letter of intent or an agreement in principal, signaling that they have come to a tentative agreement on the general outlines of a deal without having nailed down all of the details." Ocean Atl. Dev. Corp. v. Aurora Christian Sch., Inc., 322 F.3d 983, 995 (7th Cir.2003) (citing Empro Mfg. Co. v. Ball-Co Mfg., Inc., 870 F.2d 423, 424 (7th Cir.1989)); see Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7th Cir.1993). Whether such a letter reflects a binding agreement between the parties "turns not on what the parties subjectively believed, but on what they expressly manifested in their writing." Ocean Atl. Dev. Corp., 322 F.3d at 995 (citing Empro Mfg. Co., 870 F.2d at 425); Venture Assocs. Corp., 987 F.2d at 432. Thus, in accordance with traditional contract principles:

A ... court must initially determine, as a question of law, whether the language of a purported contract is ambiguous as to the parties' intent. If no ambiguity exists in the writing, the parties' intent must be derived by the ... court, as a matter of law, solely from the writing itself. If the terms of an alleged contract are ambiguous or capable of more than one interpretation, however, parol evidence is admissible to ascertain the parties' intent. If the language of an alleged contract is ambiguous regarding the parties' intent, the interpretation of the language is a question of fact....

Quake Const., Inc. v. Am. Airlines, Inc., 141 Ill.2d 281, 152 Ill.Dec. 308, 565 N.E.2d 990, 994 (Ill.1990) (citations omitted); see also Air Safety, Inc. v. Teachers Realty Corp., 185 Ill.2d 457, 236 Ill.Dec. 8, 706 N.E.2d 882, 884 (1999) (noting that an ambiguity is present when "the language of the [alleged] contract is susceptible to more than one meaning").

The parties agree that the first question before us is whether the August 30 letter, viewed as a whole, is ambiguous as to their intent to be bound. We conclude that it is not. The clear language of the letter demonstrates that the parties did not intend the letter to constitute a binding agreement for the purchase and sale of FCL.

The first several paragraphs of the letter, which outline the purchase price, items to be purchased, and manner of payment, indicate that the parties had reached an agreement on the major issues, leaving minor issues for future negotiations. The remainder of the letter, however, clarifies that this was a "proposed acquisition" and a "potential transaction" that "depend[ed] on" and was "subject to" several factors and conditions, including, but not limited to, "the satisfactory completion of legal, business and financial due diligence investigations, and negotiation and execution of definitive legal documentation, including non-competition agreements with all existing owners," as well as "certain...