Highland Capital Mgmt., L.P. v. Bank of Am., Nat'l Ass'n

• Decision Date: 02 October 2012
• Docket Number: No. 11–11139.,11–11139.
• Citation: 698 F.3d 202
• Parties: HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff–Appellant, v. BANK OF AMERICA, NATIONAL ASSOCIATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

698 F.3d 202

HIGHLAND CAPITAL MANAGEMENT, L.P., Plaintiff–Appellant,

v.BANK OF AMERICA, NATIONAL ASSOCIATION, Defendant–Appellee.

No. 11–11139.

United States Court of Appeals, Fifth Circuit.

Oct. 2, 2012.

Lisa S. Tsai (argued), Barbara Whiten Balliette, Williams Thomas Reid, Sumit R. Shah, Reid, Collins & Tsai, L.L.P., Austin, TX, for Plaintiff–Appellant.

Toby L. Gerber (argued), Charles Rodney Acker, Oscar Rey Rodriguez, Fulbright & Jaworski, L.L.P., Dallas, TX, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before BENAVIDES, OWEN and SOUTHWICK, Circuit Judges.

PER CURIAM:

In this case, Plaintiff–Appellant Highland Capital Management, L.P. (“Highland”) appeals the district court's dismissal under Federal Rule of Civil Procedure 12(b)(6) of its claims for breach of contract and promissory estoppel brought against Defendant–Appellee Bank of America, National Association (“Bank of America”). Because we find that the district court was justified in dismissing Highland's promissory estoppel claim, but that it erred in dismissing Highland's breach of contract claim, we affirm in part, and reverse and remand in part.

FACTUAL AND PROCEDURAL BACKGROUND

Because Highland appeals the district court's order granting Bank of America's motion to dismiss under Rule 12(b)(6), we recite the facts as stated in Highland's complaint. See, e.g., Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 794 (5th Cir.2011). In late 2009, party representatives for Highland and Bank of America entered negotiations seeking to reach an agreement whereby Bank of America would sell its interest in certain bank debt (the “Regency Loan”) to Highland. On December 3, 2009, Highland's representative, Pat Daugherty, called Bank of America's representative, Andrew Maidman, to finalize the agreement and its terms. According to Highland's First Amended Complaint, Daugherty and Maidman agreed in the phone conversation to all material terms of the debt trade, including the description, amount, and price of the debt to be sold, namely, $15,500,000 of the Regency Loan at the price of 93.5% of par. Pursuant to industry practice, the agreement also incorporated standard terms and conditions published by the Loan Syndications and Trading Association, Inc. (“LSTA”) providing that an oral debt-trade agreement is binding on the parties, so long as the agreement includes all material terms. According to Highland, Maidman did not reserve any non-LSTA, non-industry terms or conditions during the December 3 phone call.

Following the December 3 phone conversation and on that same day, Daugherty sent an email to Maidman in which he confirmed that the debt-trade agreement was complete. Maidman responded shortly thereafter with an email confirming the agreement and adding that it was “subject to appropriate consents and documentation.” Pl.'s First Am. Compl. ¶ 10, Highland Capital Mgmt., L.P. v. Bank of Am., N.A., 2011 WL 5428779 (N.D.Tex. Nov. 7, 2011) (No. 3:10–CV–1632–L) [hereinafter Pl.'s Compl.]; see also Highland Capital Mgmt., L.P. v. Bank of Am., N.A., No. 3:10–CV–1632–L, 2011 WL 5428779, at *5 (N.D.Tex. Nov. 7, 2011). Highland alleged that, pursuant to industry practices, this “subject to” language called for the incorporation of the LSTA's standard terms in the agreement, but did not undermine the enforceability of the original oral agreement, nor did it permit either party to demand the inclusion of non-industry or non-LSTA standard terms in the agreement.

After December 3, 2009, Bank of America refused to settle the debt trade unless Highland agreed to include additional terms in the agreement relating, among other matters, to indemnification, legal fees, and waiver of legal claims. According to Highland, these additional terms departed from the standard terms governing the December 3 oral agreement. In response, Highland filed suit against Bank of America on July 27, 2010 for breach of contract and promissory estoppel, alleging that the terms sought by Bank of America did not conform to the parties' oral agreement. Because the Regency Loan was paid off at 100% of par, Highland claimed that Bank of America's failure to settle the deal as agreed upon caused Highland to lose the increased value of the principal of the Regency Loan. Bank of America filed a motion to dismiss under Rule 12(b)(6) and on November 7, 2011, the district court granted the motion. This timely appeal followed.

STANDARD OF REVIEW

This Court reviews a district court's grant of a motion to dismiss de novo, “accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff.” Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th Cir. 2010) (quotation marks omitted). Those facts, however, “taken as true, [must] state a claim that is plausible on its face.” Amacker v. Renaissance Asset Mgmt. LLC, 657 F.3d 252, 254 (5th Cir.2011). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A complaint is insufficient if it offers only “labels and conclusions,” or “a formulaic recitation of the elements of a cause of action.” Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

ANALYSIS

Relying on the “subject to” language of the parties' December 3, 2009 emails, the district court held that, because the parties did not intend to be bound without additional “consents and documentation,” no binding contract was formed on December 3, 2009, either through the December 3 phone conversation or the parties' subsequent emails. Highland Capital Mgmt., 2011 WL 5428779, at *5. With respect to the promissory estoppel claim, the court held that Highland did not allege a clear and unambiguous promise, nor did it allege reasonable reliance on that promise. Id. at *8. On appeal, Highland argues that the district court's dismissal of Highland's breach of contract claim was erroneous because the court failed to accept Highland's well-pleaded facts as true and, in addition, improperly considered factual issues regarding the contracting parties' intent and industry standards governing the formation of the alleged contract. Highland argues that, taken as true, its well-pleaded facts establish that the December 3, 2009 phone conversation created a binding contract.¹ Highland also argues on appeal that its well-pleaded allegations demonstrate the existence of a clear and unambiguous promise on which Highland relied, thus rendering the district court's dismissal of Highland's promissory estoppel claim erroneous. We address Highland's arguments in turn.

I. Breach of Contract

An enforceable contract requires “a mutual intent to be bound.” Four Seasons Hotels Ltd. v. Vinnik, 127 A.D.2d 310, 515 N.Y.S.2d 1, 5 (1987).² If a contract is unambiguous, then a court may decide the parties' intent as a matter of law, but where the contract is ambiguous, or “cannot be interpreted without resort to extrinsic evidence,” then the factfinder must determine the parties' intent. Brighton Inv., Ltd. v. Har–ZVI, 88 A.D.3d 1220, 932 N.Y.S.2d 214, 216 (2011). Courts use an objective test to determine whether the parties intended to enter into a contract, looking to “the manifestation of a party's intention rather than the actual or real intention.” Vinnik, 515 N.Y.S.2d at 6 (quoting 21 N.Y. Jur.2d, Contracts, § 29). In addition, even if a writing indicates that the parties left certain terms open for further negotiation, the parties are still bound by the contract if the matters left open were not deemed to be material by the parties. Id.

Oral contracts are also valid under New York law, Winston v. Mediafare Entm't Corp., 777 F.2d 78, 80 (2d Cir.1985), but if the parties do not intend to be bound by an oral contract until a writing is signed, then they are not bound until that time, Powell v. Omnicom, 497 F.3d 124, 129 (2d Cir.2007); see also R.G. Grp., Inc. v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir.1984). With respect to oral contracts, whether a contracting party intends to be bound is a question of fact for the factfinder to resolve. Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 576 (2d Cir.1993). Courts generally consider four factors in determining whether parties intend to be bound absent a writing: “(1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.” Powell, 497 F.3d at 129. The circumstances indicating an intent to be bound “may be shown by ‘oral testimony or by correspondence or other preliminary or partially complete writings.’ ” Winston, 777 F.2d at 81 (quoting Restatement (Second) of Contracts § 27 cmt. c (1981)).

Relying on the language in the parties' December 3 emails, the district court held that Highland failed to state a claim for breach of contract “[b]ecause the parties' communications do not reveal an intent to be bound absent additional consents and documentation.” Highland Capital Mgmt., L.P., 2011 WL 5428779, at *5. Specifically, the district court focused on Maidman's email stating that the agreement was “subject to appropriate consents and documentation” and Daugherty's email stating that the parties were “done on this trade subject to agent and borrower consents.” Id. (emphasis omitted). The district court found that these emails clearly show that the parties recognized that “further consents and documentation were necessary to finalize their agreement,” such that there was no intent to be bound, and thus no valid claim for...