Marcoin, Inc. v. Edwin K. Williams & Co., Inc., 77-2435

• Decision Date: 28 September 1979
• Docket Number: No. 77-2435,77-2435
• Citation: Marcoin, Inc. v. Edwin K. Williams & Co., Inc., 605 F.2d 1325 (4th Cir. 1979)
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: CA 79-3595 MARCOIN, INC., a Virginia Corporation, Edwin K. Williams & Co. East, a Virginia Corporation, Appellants, v. EDWIN K. WILLIAMS & CO., INC., a California Corporation, Appellee.

Page 1325

605 F.2d 1325

CA 79-3595 MARCOIN, INC., a Virginia Corporation, Edwin K Williams & Co. East, a Virginia Corporation, Appellants, v. EDWIN K. WILLIAMS & CO., INC., a California Corporation, Appellee.

No. 77-2435.

United States Court of Appeals Fourth Circuit.

Argued Jan. 10, 1979.

Decided Sept. 28, 1979.

Robert M. Goolrick, Washington, D. C. (Loren Kieve, Steptoe & Johnson, Washington, D. C., Richard E. Dixon, Swinburne & Dixon, Fairfax, Va., on brief), for appellants.

Stuart H. Harris, Washington, D. C. (John S. Kingdon, Howrey & Simon, Washington, D. C., on brief), for appellee.

Before BUTZNER and WIDENER, Circuit Judges, and MILLER, Judge of the United States Court of Customs and Patent Appeals. ^*

WIDENER, Circuit Judge:

The appellants, Marcoin, Inc. and its wholly owned subsidiary, Edwin K. Williams & Co. East (appellants or Marcoin), brought this action against Edwin K. Williams & Co., Inc. (appellee or Williams) for breach of a settlement agreement. Jurisdiction is based on diversity of citizenship. The district court found that Williams' attorney, Donald Smaltz, was not authorized to enter into a binding settlement agreement; that Williams had not approved the settlement; and that a condition precedent to contract formation, a formal written agreement ratified by both companies' boards of directors, had not been executed. Based on these three conclusions, the district court held that no contract had been formed and Marcoin could not recover. Marcoin appeals.

This case is a suit to enforce a claimed agreement of settlement and arises out of efforts to settle litigation between these parties in the United States District Court for the Northern District of California, which was broadened to include litigation in Florida and Georgia. The parties agree that California law applies, although there is no dispute pertinent as to its substance here. A meeting to discuss settlement was held on September 17, 1976 between the major officers of the parties. They were not able to agree on a settlement at that time, but agreed that negotiations would continue through their attorneys. Following this meeting, a number of offers and counteroffers were made which culminated in the events described below.

On November 10, 1976, Marcoin's attorney, Raymond Fisher, sent a letter containing a detailed offer of settlement to Donald Smaltz, Williams' attorney. The letter stated that the offer was to remain open until noon on November 12th. This deadline was extended orally to November 15th, apparently because of the absence of Smaltz at the time the letter was received. Smaltz responded to this letter on November 15th. ^** His letter rejected Marcoin's offer and presented a counteroffer.

On November 20, 1976, Fisher (Marcoin's counsel) telephoned Smaltz (Williams' attorney) and they discussed the settlement. The parties disagree on the substance of the conversation. Fisher's recollection, as reflected in his letter to Smaltz on November 22nd, was that he accepted the counteroffer of the November 15th letter with a small exception which was also agreed to. In a letter to Fisher on November 28th, Smaltz denied that final agreement had been reached. In the meantime, the Ninth Circuit Court of Appeals had issued an order which increased the bond Marcoin had to post in the California litigation which was the subject of the alleged settlement contract. After this order was issued, Williams broke off settlement negotiations with Marcoin in accordance with previous instructions from its principal executive officer. Marcoin claims that the November 20, 1976 phone conversation was an acceptance which created a binding contract. Williams denies that the phone call was an acceptance, and alternatively argues that even if the phone call were an acceptance that Smaltz was not authorized to make the offer and that in any event no contract was formed because the contract was not formally executed and ratified by Williams' officers which Williams claims was a condition precedent to contract formation.

Williams' support for the lack of authorization and condition precedent arguments is based largely on the testimony of Margaret T. Williams (president of Williams) and Smaltz and on the prior history of litigation and settlement negotiations between the parties. Williams and Smaltz both testified that Smaltz only had authority to negotiate, not to bind. Additionally, it was shown that in prior negotiations involving different litigation, settlements were made final in writings executed and ratified by the parties' boards of directors. Of course, the parties disagree on the significance of this past procedure. Marcoin views it simply as a formality or memorialization, while Williams views it as evidence tending to show the establishment of a condition precedent to the formation of a binding contract.

After reviewing the testimony of the parties and the history of negotiations, the district court found that Smaltz had no authority to bind Williams:

Mrs. Williams made it clear to her counsel he could only negotiate and that Williams was to determine the acceptability of any proposals for settlement. Smaltz fully realized the limitation...