Kisco Co., Inc. v. Verson Allsteel Press Co.

• Decision Date: 30 June 1984
• Docket Number: 83-1755,Nos. 83-1704,s. 83-1704
• Citation: 738 F.2d 290
• Parties: KISCO COMPANY, INC., Appellant/Cross-Appellee, v. VERSON ALLSTEEL PRESS COMPANY, Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 290

738 F.2d 290

KISCO COMPANY, INC., Appellant/Cross-Appellee, v. VERSON ALLSTEEL PRESS COMPANY, Appellee/Cross-Appellant.

Nos. 83-1704, 83-1755.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 13, 1984.

Decided June 29, 1984.

Rehearing Denied June 30, 1984.

Thomas C. Walsh, Daniel R. O'Neill, Mark S. Deiermann, St. Louis, Mo., for appellant/cross-appellee Kisco Co., Inc.; Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., of counsel.

William A. Richter, Stephen H. Rovak, St. Louis, Mo., Sheldon L. Solow, Chicago, Ill., for appellee/cross-appellant; Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, Mo., Schwartz & Freeman, Chicago, Ill., of counsel.

Before ROSS, JOHN R. GIBSON and BOWMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Kisco Company, Inc., obtained a judgment of $110,000 against Verson Allsteel Press Company for furnishing services and information that assisted Verson in preparing a bid for the manufacture of grenade bodies. The district court ¹ found that neither party intended to bind Verson to pay $250,000 for such services and information absent a signed agreement, but that under principles of quasi-contract Kisco was entitled to recover $110,000. On appeal Kisco essentially argues that an oral contract for $250,000 existed between the parties, that it had fully performed, and that Verson was simply attempting to renegotiate. Verson also appeals, arguing that Kisco was not entitled to any more than the $10,000 negotiated for the first phase of services, that the district court erred in awarding Kisco an additional $100,000 on a quasi-contractual basis, and that Kisco should not have been awarded prejudgment interest. We affirm the judgment of the district court on the contract and quasi-contract issues, but remand the case for further consideration of the prejudgment interest issue.

Verson is engaged in designing and manufacturing metal-forming machines and systems. In the fall of 1980 Mason-Chamberlain, Inc., a government contractor, sought bids for the production of machinery and tooling necessary to produce M-42/M-46 grenade bodies. Verson wished to submit a bid, but because of its inexperience in the field attempted to team up with a number of companies, eventually seeking out Kisco. Five key Verson officers visited Kisco's St. Louis plant on October 6, 1980. Verson's vice president for Systems Research, Ken Otsuka, determined that Kisco's experience could be helpful in preparing the bid package.

Robert Hoffman, Kisco's chief engineer, reported to Jerome Holden, Kisco's chairman, that Verson might be interested in securing Kisco's assistance. Holden called its legal counsel and requested that it prepare a "memorandum of understanding." This memorandum was prepared and delivered to Holden on October 10, 1980.

On October 10, Otsuka and Donald Smith, another Verson vice president, met with Holden and Jack Brackbill, Kisco's vice president of marketing. They informed Holden and Brackbill that they wanted Kisco's help badly; Kisco responded that it wanted to be paid for its assistance and information. Brackbill stated that it would not cost much if Verson failed to get the contract, but that the price would be $250,000 if Verson were the successful bidder.

Otsuka discussed the $250,000 suggested fee with Verson's president, who agreed that it was reasonable and authorized Otsuka to negotiate the contract with Kisco. In discussions on October 13 and 14 between Otsuka and Holden, it was agreed that Verson would have access to Kisco's plant, data and technology in return for a fee of $250,000, $10,000 to be paid at the outset and an additional $240,000 to be paid if Verson won the Mason-Chamberlain contract. Otsuka told both Holden and Hoffman that they had a contract and should get started.

There is no dispute that Verson personnel were permitted to come to Kisco's plant the next day and that they began to gather a substantial amount of data. By November 14 they had obtained all, or very nearly all, of the information requested for preparation of the bid.

Hoffman had suggested that the agreement be reduced to writing before any information was turned over to Verson, but Otsuka protested that time was short. Hoffman and Holden testified that Verson would not have been let in the plant had the writing been essential. Otsuka testified, however, that Verson was to be given information during the pendency of negotiations absent a written agreement so that it would be able to prepare its bid in time to meet the deadline.

On October 15, 1980, Holden sent a draft of a memorandum of agreement to Verson. Walter Johnson, Verson's vice president of systems marketing, was assigned to analyze the draft. On October 22, having not been returned the agreement, Holden noted in his daybook that he needed a letter of intent. The next day Holden and Brackbill met with Johnson and stated that a signed letter of intent was required.

On October 27, Verson sent Kisco a revised memorandum of agreement that required Kisco to warrant that it had the right to furnish Verson the information it was selling and further to warrant that to Kisco's knowledge its process did not infringe upon any U.S. patents. The warranties were deemed material consideration for the contract.

On October 29, Holden determined that the requested warranties were too broad and refused to sign. He prepared yet another revised draft warranting only that Kisco had the right to make use of the "tooling and know-how" and that they belonged to Kisco. The draft also expressed an opinion that the "tooling and know-how" did not infringe one specific patent, but expressly made no warranty that they did not "infringe any patent." This revised draft was mailed on October 31 and received by Verson November 3.

On November 14, Verson informed Kisco that it would not enter into an agreement but would, and eventually did, pay Kisco $10,000 for its assistance to that date. Specifically, Smith told Holden that it was terminating the agreement because it had determined that Kisco's technology was neither innovative nor useful. Holden replied that Kisco would continue to make itself and its knowledge available and that it expected to be paid if Verson won the Mason-Chamberlain contract.

Verson was awarded the Mason-Chamberlain contract. The district court found that Verson independently designed its system and did not incorporate any portion of the Kisco system.

In its order the district court summarized the negotiations between the parties as follows:

After arriving at the foregoing understanding, Holden and Otsuka agreed that a written contract covering all the terms deemed necessary would be prepared by Holden and submitted to Verson for approval. It was further agreed that because of the time restraints creating an urgency as to phase one, Verson's personnel could continue their visits to the Kisco plant and obtain further background information while the parties were engaged in hammering out a definitive written agreement. Such a visit took place on October 15. It is obvious that as of that time and for several weeks thereafter neither party doubted that a written agreement would be arrived at and executed on mutually satisfactory terms.

Kisco Co. v. Verson Allsteel Press Co., 564 F.Supp. 154, 156 (E.D.Mo.1983).

The district court further recognized that Mason-Chamberlain would require the successful bidder to indemnify it against liability for patent infringement. Thus, the warranties requested by Verson were of considerable significance. The district court discussed the added complication arising from the fact that the Kisco equipment had been manufactured by Waterbury-Farrell, one of Verson's competitors, and had been jointly developed using both Kisco's and Waterbury-Farrell's proprietary information. Their agreement stated that the equipment purchased by Kisco from Waterbury-Farrell was Kisco's property but that Waterbury-Farrell had the right to sell equipment that utilized a combination of Waterbury-Farrell and Kisco's proprietary fabrication information. The district court found, however, that "the language employed did not clearly, if at all, cover Kisco's right to sell the proprietary information owned and utilized by Waterbury Farrell in the manufacture of the process." Id. at 157 (emphasis in original).

The district court made the following findings concerning the question of whether a written contract had been contemplated by the parties:

Our examination of the facts in evidence and weighing the credibility of the witnesses has left us with the firm conviction that as of October 14, 1980 and until Verson terminated the negotiations, neither party intended to bind Verson to pay $250,000 absent a signed agreement in writing spelling out all the precise terms to which the parties were to be bound followed by a purchase order. That the parties did not then contemplate they would have any problem in drafting the writing does not alter our conclusion.

Id. at 158. The district court then pointed to particular evidence demonstrating Kisco's strong desire to have a written agreement. The district court found that the parties had orally agreed to the amount of compensation and the general nature of the assistance to be provided, but had not agreed to specifics, including the what, when and how of the items to be furnished, as well as Kisco's warranty of its right to sell its technology and its warranty of non-infringement. While these warranties were not of relevance as to the pre-bid phase, i.e., "phase one," they "directly affected Verson's right to copy Kisco's process as it contemplated on phase two...." Id. The court further found that it was Kisco's reluctance to assent to the agreement with the requested warranty that ultimately led to the termination of the relationship. Id.

The district court proceeded to find that Verson had received far more information than called for in phase one and that...