NUCOR Corp. v. Aceros Y Maquilas de Occidente, S.A. de C.V.

Decision Date24 June 1994
Docket NumberNo. 93-1712,93-1712
Citation28 F.3d 572
Parties23 UCC Rep.Serv.2d 1044 NUCOR CORPORATION, Plaintiff-Appellee, v. ACEROS Y MAQUILAS DE OCCIDENTE, S.A. DE C.V., Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Robert D. MacGill, David F. Hamilton (argued), Andrew J. Detherage, Barnes & Thornburg, Indianapolis, IN, for plaintiff-appellee.

Richard C. Arroyo (argued), Miguel A. Saldana, Brownsville, TX, for defendant-appellant.

Before LAY, * RIPPLE and MANION, Circuit Judges.

RIPPLE, Circuit Judge.

NUCOR Corporation ("NUCOR") filed a diversity action seeking declaratory relief against Aceros Y Maquilas de Occidente, S.A. de C.V. ("Aceros") and United Steel Corporation ("United"). The district court granted NUCOR's motion for summary judgment. Aceros has appealed that decision. For the reasons stated below, we affirm the judgment of the district court.

A. Facts

NUCOR filed its complaint for declaratory relief on July 26, 1991 to clarify the contractual relationship among three businesses: NUCOR, a Delaware corporation that manufactures steel in Crawfordsville, Indiana; Aceros, a Mexican corporation that buys, sells, and processes steel; and United, a Texas corporation that buys steel and sells it for export. 1

In 1991, when Aceros was planning to purchase secondary steel at lower-than-prime prices, Humberto Batiz Rivas ("Batiz"), general manager of Aceros, asked the president of United, Joseph Diaz, to help him locate such steel. After a search, Diaz found that secondary steel was available at NUCOR's Crawfordsville plant. However, NUCOR's sales manager at that plant, James Clinger, told Diaz that he was not interested in selling the steel directly to Aceros, but that he would sell it to United. After Diaz had conversations with Mark Palmer, NUCOR's general manager, and other personnel at the Crawfordsville plant, he and Aceros' Batiz visited the NUCOR plant to view the steel and to discuss the purchase.

During the discussions at the plant on March 6, 1991, Diaz, Batiz, and Clinger considered the quantity of secondary steel to be purchased, the quality specifications, gauges, coil sizes, shipping, and credit terms. They did not discuss specific price terms. Moreover, NUCOR made it clear that it would sell and quote prices only to United, and that United could then sell to Aceros. The parties disputed whether NUCOR had agreed to fill United's order as soon as it received Aceros' "acceptable" line of credit; however, it is clear that there was no written agreement memorializing a sale that day in Crawfordsville.

On March 7, 1991, in United's Houston office, Batiz and Diaz signed a contract stating that United would sell secondary steel to Aceros. The next day United sent a purchase order to NUCOR for the same quantity and quality of secondary steel, but with different terms on price, shipping, and method of payment. On April 2, 1991, United sent NUCOR a transferable letter of credit that Aceros had executed. The parties disagreed about NUCOR's reaction to the letter of credit: United's Diaz reported that NUCOR's credit manager Cindy Beardsley "accepted" the letter and told him that NUCOR would ship the steel. NUCOR, on the other hand, said that, after receiving the letter, it followed up with further communications with United concerning the letter's adequacy and possible shipping terms. According to NUCOR, they also discussed whether NUCOR would actually fill United's order.

On April 22, 1991, United's president called NUCOR general manager Mark Palmer to ask why there was a delay in shipment. Palmer told him that there were problems with the letter of credit. When no steel had been delivered by May 20, 1991, Aceros general manager Batiz called Palmer to inquire about the delay. Batiz reported that Palmer told him that the letter of credit was acceptable and that NUCOR had been trying to ship the steel.

On June 5, 1991, NUCOR received notice that Aceros had canceled the letter of credit. As a result, on June 11, 1991, NUCOR general manager Palmer wrote United's Diaz and stated that United's order, lacking adequate credit support, would be treated as canceled. Shortly thereafter, Aceros general manager Batiz sent United a letter, dated June 17, 1991, stating that United had represented to Aceros that it had authority to bind NUCOR, that NUCOR was bound to the March 7 agreement between United and Aceros, and that NUCOR had failed to perform the contract. It demanded payment of $658,000 in damages within 60 days; failure to comply would lead to litigation under the Texas Deceptive Trade Practices Act ("DTPA"). Instead of responding to that demand, however, NUCOR filed this action for declaratory judgment on July 26, 1991.

B. Procedural History

NUCOR sought a declaratory judgment that (a) NUCOR had no contractual obligations to Aceros or United Steel as a result of any negotiations with those parties about any proposed sale of steel; (b) United Steel was not an agent of NUCOR with authority to bind NUCOR to a contract for the sale of steel; and (c) NUCOR was not subject to and had not violated the Texas DTPA in its dealings with Aceros and United Steel. Order of Feb. 23, 1993, at 5.

The district court first determined that Indiana law governed each of NUCOR's three claims. Following Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the district court applied the law of Indiana, the state within which it sits. It therefore looked to Indiana's choice of law rules to determine which state's law governs. In contract actions, the court found, Indiana follows the "most intimate contacts" or "center of gravity" test. W.H. Barber Co. v. Hughes, 223 Ind. 570, 63 N.E.2d 417 (1945). It then determined that, because all negotiations and representations upon which Aceros based its claims against NUCOR occurred in Indiana, and the steel at issue was in Indiana, the substantive law of Indiana must govern the merits of the litigation. Order of Feb. 23, 1993, at 8-10.

The court then found that NUCOR was not liable to Aceros under the March 7, 1991 contract. Id. at 20. A contract between Aceros and United would bind NUCOR, it stated, only if United had authority to bind NUCOR. Since NUCOR's sales manager Clinger and United's general manager Diaz denied there was an actual agency relationship, and there was no evidence of one, the court concluded that the only issue remaining was whether United had apparent authority to bind NUCOR. Following Indiana caselaw, the court found that, in this case, it was not reasonable to conclude that United had apparent authority to act on NUCOR's behalf. No one at the NUCOR plant in Crawfordsville told Batiz, directly or indirectly, that United had such authority when the March 7, 1991 contract was executed. Furthermore, Batiz testified that he clearly understood that NUCOR would sell to United and that United would then sell to Aceros in a separate transaction. Id. at 17-20.

The district court also found that NUCOR was not liable as a result of the March 6, 1991 meeting. The negotiations at that meeting concerned the sale of secondary steel, which qualifies as "goods" under Indiana Code Sec. 26-1-2-105(1). Because the minimum value of that sale would have exceeded $500, the UCC's statute of frauds applies to the transaction. The statute requires that the contract be in writing, state a quantity, and be signed by an authorized NUCOR employee. The court found that these written requirements were simply not met. Id. at 21. The court examined the May 21, 1991 letter from NUCOR comptroller Tracy Shellabarger to United's Diaz 2 and United's March 8, 1991 purchase order sent to NUCOR 3 to determine whether the two could be read together to constitute a "writing" signed by a NUCOR agent. The court found that those documents reflected an agreement between NUCOR and United, but did not evidence a contract between NUCOR and Aceros. Id. at 23. After finding that Aceros could not rely upon promissory estoppel in opposing NUCOR's motion because it did not raise the issue in its answer, id. at 24-26, and that Aceros could not bring a DTPA claim under Texas law because Indiana law governed this action, id. at 26-27, the court granted summary judgment in favor of NUCOR. Id. at 28. It declared that NUCOR had no obligation to Aceros or to United under contract or agency law, or under the Texas DTPA.

A. Declaratory Judgment Act

We begin by considering the district court's decision to entertain the merits of NUCOR's declaratory judgment claim. 4 The district court's authority to decide an action seeking declaratory judgment arises under the Declaratory Judgment Act, 28 U.S.C. Sec. 2201 (1986). 5 Its purpose "is 'to avoid accrual of avoidable damages to one not certain of his rights and to afford him an early adjudication, without waiting until his adversary should see fit to begin suit, after damage had accrued.' " Cunningham Bros., Inc. v. Bail, 407 F.2d 1165, 1167 (7th Cir.), cert. denied, 395 U.S. 959, 89 S.Ct. 2100, 23 L.Ed.2d 745 (1969) (quoting E. Edelmann & Co. v. Triple-A Specialty Co., 88 F.2d 852, 854 (7th Cir.), cert. denied, 300 U.S. 680, 57 S.Ct. 673, 81 L.Ed. 884 (1937)). Under the Act, however, a district court ought not grant declaratory relief unless there is an actual, "substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941), quoted in Oneida Tribe of Indians v. State of Wisconsin, 951 F.2d 757, 760 (7th Cir.1991). The decision of the district court to grant declaratory relief is discretionary. Reno v. Catholic Social Servs., Inc., --- U.S. ----, ----, 113 S.Ct....

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