General Signal Corp. v. MCI Telecommunications Corp.
| Decision Date | 26 September 1995 |
| Docket Number | Nos. 94-15476,94-15534,s. 94-15476 |
| Citation | 66 F.3d 1500 |
| Parties | , 95 Cal. Daily Op. Serv. 7499, 95 Daily Journal D.A.R. 12,843 GENERAL SIGNAL CORPORATION, Plaintiff-Appellant-Cross-Appellee, v. MCI TELECOMMUNICATIONS CORPORATION, Defendant-Appellee-Cross-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Ronald S. Katz, Coudert Brothers, San Francisco, California, for plaintiff-appellant-cross-appellee.
Christopher Wolf and Duane K. Thompson, Proskauer, Rose, Goetz & Mendelsohn, Washington, D.C., for defendant-appellee-cross-appellant.
Appeals from the United States District Court for the Northern District of California.
Before: D.W. NELSON and T.G. NELSON, Circuit Judges, and KING, * District Judge.
OVERVIEW
Appellant/Cross-Appellee General Signal Corporation ("GSX") appeals the district court's judgment in favor of appellee/cross-appellant MCI Telecommunications Corporation ("MCI") in its diversity action alleging fraud and breach of contract arising out of an GSX argues that the judgment must be reversed because (1) the district court erred in finding that New York law governed the case; (2) the court's denial of summary judgment to GSX on MCI's counterclaim was erroneous and prejudicial to GSX; and (3) the district court's imposition of rigid time limits on the length of trial and its refusal to allow additional time for cross-examination or rebuttal testimony denied GSX due process of law. MCI argues that (1) the district court erred in granting judgment as a matter of law to GSX on MCI's fraud counterclaim because MCI presented evidence at trial such that a reasonable juror could find for MCI; and (2) the imposition of sanctions was unjustified because the district court had given MCI leave to amend its pleadings. We have jurisdiction under 28 U.S.C. Sec. 1291, and we affirm.
agreement to develop the INpath, a telecommunications device. MCI cross-appeals from the district court's judgment as a matter of law on its counterclaim alleging fraud by GSX, and from the court's imposition of costs against MCI for dismissing its original counterclaims without leave of the court.
On June 9, 1989, GSX and MCI entered into a Joint Development Agreement ("JDA") under which MCI agreed to fund GSX's development of the INpath, a telecommunications data support unit. Once MCI provided technical specifications, GSX was required to produce and supply sufficient quantities of the product to satisfy MCI's needs.
After significant difficulties and delays in the development of the INpath, the parties entered into an agreement on February 5, 1991 ("the Letter Agreement") under which GSX, upon receipt of $5 million, released MCI from its commitment to purchase the end product and to fund the INpath development beyond an additional $500,000. The Letter Agreement also released GSX from any obligation to complete the project, but it required MCI to market the product to its customers if GSX successfully produced an INpath that passed laboratory tests.
During 1991, GSX, through a division known as Telecommunications Technology, Inc. ("TTI"), continued to develop the INpath in consultation with MCI officials. In October 1991, MCI informed GSX that the INpath as developed no longer met its functional requirements and that MCI no longer had any interest in purchasing or marketing the INPath.
In November 1991, GSX filed suit against MCI, alleging breach of contract and fraud. GSX charged that MCI breached its obligation under the Letter Agreement to provide specifications to GSX and to market the end product. In addition, GSX asserted that MCI fraudulently failed to inform GSX that it had decided prior to the Letter Agreement that it had no intention to market the INpath, thereby inducing GSX to sign the Letter Agreement and to continue development during 1991.
In its answer, MCI asserted counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and false advertising. After GSX amended its complaint in April 1993, MCI filed an amended answer which contained counterclaims alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud in the inducement. The district court permitted the new counterclaims but imposed costs against MCI under Fed.R.Civ.P. 41(a) for dismissal of the original counterclaims without leave of the court. In October 1993, the district court denied GSX's motion for summary judgment on MCI's fraud counterclaim.
Prior to trial, the district court limited the case to 56 hours of court time, evenly divided between the two sides. Breaks and delays in the trial were charged equally to both sides. After GSX ran out of time, the court granted GSX five additional minutes for cross-examination of each remaining witness, but denied GSX's motion to present a rebuttal case. At the close of testimony, the district court granted judgment as a matter of law in favor of GSX on MCI's fraud counterclaim. The jury returned a verdict in favor of MCI on GSX's claims. After the district court denied GSX's motion for a new trial, GSX timely appealed.
GSX alleges that the district court improperly held that New York law applied to this case because (1) MCI was estopped from arguing for the use of New York law because it had previously filed papers invoking California law; or (2) the choice of law provision of the JDA did not apply to this case. This court reviews decisions concerning the appropriate choice of law de novo. Waggoner v. Snow, Becker, Kroll, Klaris & Krauss, 991 F.2d 1501, 1505 (9th Cir.1993).
GSX argues that MCI waived its right to have New York law applied to this case because it did not seek a ruling on the issue until July 1993, 21 months into the case and three months before trial. GSX relies on case law which invokes the doctrine of judicial estoppel, which precludes a party from taking an inconsistent position in the same litigation if (1) the court actually adopted the inconsistent statement earlier in the litigation (the majority view), or (2) the change in position amounts to playing "fast and loose" with the court (the minority view). Yanez v. United States, 989 F.2d 323, 326 (9th Cir.1993); Morris v. State of California, 966 F.2d at 452-53 (9th Cir.1991). We have yet to adopt one of these definitions of judicial estoppel, see Britton v. Co-op Banking Group, 4 F.3d 742, 744 (9th Cir.1993), and we need not address the choice here because neither alternative is applicable to the present case.
Although the Special Master in this case found that "a reasonable person ... would have assumed that the parties both thought California law applied to the substantive issues of this case," the district court did not adopt the view that California law applied. Thus, the majority view of judicial estoppel would not apply. See Britton, 4 F.3d at 744; Radiation Sterilizers, Inc. v. United States, 867 F.Supp. 1465, 1473 (E.D.Wash.1994).
Moreover, MCI's citation to California law in its earlier papers and its delay in raising the choice of law issue does not constitute "playing fast and loose" with the court. This aspect of judicial estoppel "is reserved for more egregious conduct than just 'threshold' inconsistency." Britton, 4 F.3d at 744. Although MCI cited California law in earlier papers, it never specifically asserted as a legal argument that California law was applicable. See id. In fact, the prior motions predominantly related to interpretation of federal procedural rules rather than state substantive law. Furthermore, we are persuaded by the reasoning of the Radiation Sterilizers court, which rejected the precise argument presented here. 867 F.Supp. at 1473. There, a party's brief argument in an earlier motion that Washington law applied to the case did not bar that party's later motion to apply Georgia law, because the court had not yet ruled on the issue. Id. Thus, judicial estoppel is inapplicable.
To the extent that GSX's waiver argument goes beyond the judicial estoppel doctrine, it still should fail because GSX has not shown any evidence of an intentional delay, and because the motion on choice of law came before summary judgment. See id. at 1475 (applying this reasoning). Although a case cited by GSX held that a party had waived the right to seek belated application of Illinois law, that party made its motion after the district court had specifically decided, without objection, that New York law should apply. See Muslin v. Frelinghuysen Livestock Managers, Inc., 777 F.2d 1230, 1231 (7th Cir.1985). Because there was no earlier ruling on choice of law, we reject GSX's waiver argument.
On the merits, GSX argues that the district court erred in finding that the applicable law should be determined by the choice of law provision of the JDA, which states that the JDA "shall be interpreted, construed and governed by the laws of the State of New York." Because GSX conceded that the Letter Agreement modified, rather than superseded, the JDA, its argument rests on the proposition that the unmodified terms of the JDA are not applicable to the Letter Agreement. In assessing this argument, we apply the choice of law rules of California, the forum state for this action. See Day & Zimmermann We find that the JDA choice of law provision applies to disputes arising out of the Letter Agreement. Although the Letter Agreement does not explicitly incorporate any provisions of the JDA, the JDA's provision for written modifications or amendments does not mandate such language in order to preserve the unmodified terms. Not only does California law fail to impose such a requirement, but it provides that the unmodified terms of the original agreement are to be applied together with the terms of the new, modifying agreement. See In re Ferrero's Estate, 142...
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