Retrofit Partners v. Lucas Indus.

• Decision Date: 01 August 1999
• Docket Number: Docket No. 99-7517
• Citation: 201 F.3d 155
• Parties: (2nd Cir. 2000) RETROFIT PARTNERS I, L.P. and ADVANCED EXECUTIVE AIRCRAFT, INC., Plaintiffs-Appellants, v. LUCAS INDUSTRIES, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 155

201 F.3d 155 (2nd Cir. 2000)

RETROFIT PARTNERS I, L.P. and ADVANCED EXECUTIVE AIRCRAFT, INC., Plaintiffs-Appellants, v. LUCAS INDUSTRIES, INC., Defendant-Appellee.

Docket No. 99-7517

August Term, 1999

UNITED STATES COURT OF APPEALS SECOND CIRCUIT

Argued: Oct. 28, 1999

Decided: Jan. 5, 2000

Appeal from a judgment of the United States District Court for the District of Connecticut (Gerard L. Goettel, Judge) granting the defendant's motion for summary judgment.

Affirmed.

WILLIAM M. BLOSS, Jacobs, Grudberg, Belt & Dow, P.C. (David L. Belt, of counsel), New Haven, CT, for Plaintiffs-Appellants.

RODNEY M. ZERBE, Dechert Price & Rhoads (Robert A. Cohen, of counsel), New York, NY, for Defendant-Appellee.

Before: FEINBERG, CARDAMONE, and SACK, Circuit Judges.

SACK, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the District of Connecticut (Gerard L. Goettel, Judge) granting the defendant's motion for summary judgment. See Retrofit Partners I, L.P. v. Lucas Indus., Inc., 47 F. Supp. 2d 256 (D. Conn. 1999).

The plaintiffs and the defendant entered into a written agreement pursuant to which the plaintiffs would give the defendant information that it could use in considering whether to invest or otherwise participate in a business project proposed by the plaintiffs. In granting the defendant's motion for summary judgment made after the completion of substantial discovery, the district court concluded that there was no material triable issue of fact as to the plaintiffs' claim that the defendant's failure to decide in a timely fashion whether or not to make such an investment constituted a breach of contract. Because the district court found that the defendant was not obligated to make an investment decision, the court further concluded that there was no breach of the covenant of good faith and fair dealing implied under applicable Connecticut law. The district court also rejected a misrepresentation claim made by the plaintiffs because it found that the plaintiffs could not prove that they had reasonably relied on any misrepresentations to their detriment. Finally, the district court held that the plaintiffs' claim under the Connecticut Unfair Trade Practices Act ("CUTPA") failed because that claim simply incorporated the previous allegations on which summary judgment for the defendant was to be granted. The district court therefore granted the defendant's motion for summary judgment on all of the plaintiffs' claims. The plaintiffs appealed.

We affirm, writing at some length because our grounds for doing so are somewhat different from those relied upon by the district court.

BACKGROUND

Plaintiff Advanced Executive Aircraft, Inc., ("AEA") is a Delaware corporation whose sole shareholder is Thomas M. Donegan. Plaintiff Retrofit Partners I, L.P., ("Retrofit") is a Delaware limited partnership in which AEA is the sole general partner and Donegan is the sole limited partner. Defendant Lucas Industries, Inc., ("Lucas Industries") is a Michigan corporation with its principal place of business now in New York, but in Virginia for the period at issue here. Lucas Aerospace, Inc., ("Lucas Aerospace") was a Michigan corporation with its principal place of business in California. It was a wholly owned subsidiary of Lucas Industries until December 31, 1993 when it merged into Lucas Industries. Lucas Aviation, Inc., ("Lucas Aviation") was in turn a wholly owned subsidiary of Lucas Aerospace. (The three entities are collectively referred to as "Lucas.")

From 1966 until 1983, Dassault Aviation, SA, a French corporation, manufactured the Falcon 20, a corporate jet. The Falcon 20 was equipped with two General Electric engines but apparently, as so equipped, was underpowered. In 1986 a company named Garrett Airline Services joined with Dassault to re-equip the Falcon 20 with engines manufactured by Garrett. Completion of the retrofitting of Falcon 20 aircraft under this project began in June 1989. At about the same time, a company named Volpar, Inc., announced its own program to retrofit the Falcon 20 with two Pratt & Whitney Canada ("P&WC") 305 engines. Donegan was a consultant on Volpar's program at the time.

After Donegan's relationship with the Volpar program ended in 1989, he embarked on his own project for reengining the Falcon 20. His plan, which he coined the "Vantage 305 program," like Volpar's, called for the replacement of the Falcon 20's engines with P&WC 305 engines. Although Donegan personally retained proprietary rights to his Vantage 305 program, he sought to develop this perceived business opportunity through his corporation, AEA, and his partnership, Retrofit.

In order to proceed with their program to retrofit Falcon 20 aircraft, the plaintiffs were required to obtain certification from the Federal Aviation Administration. Donegan therefore enlisted a company named Aerotest, Inc., to perform the required engineering work. Meanwhile, Donegan hired Kidder, Peabody & Company ("Kidder"), an investment banking firm, to raise $12 million in capital for the venture. In pursuit of this endeavor, Kidder prepared an offering memorandum for Retrofit.

In late 1991, dissatisfied with the results of Kidder's efforts, Donegan tried to attract investors himself. He was largely unsuccessful. Because Donegan failed to raise sufficient funds, the plaintiffs never made any payment to Aerotest and Aerotest never performed any of the agreed upon work for the plaintiffs.

Then, in August or September 1992, the plaintiffs approached Lucas Aerospace to see whether it would be interested in providing engineering services to or making an investment in the plaintiffs' project. In connection with those discussions, on September 4, 1992, Lucas Aerospace and Retrofit entered into what was termed a "Confidentiality and Non-Circumvention Agreement" (the "1992 Agreement"). It provided that the plaintiffs would make available to Lucas the offering memorandum prepared by Kidder and other information proprietary to the plaintiffs bearing on the Vantage 305 program in order to enable Lucas to evaluate the possibility of providing the engineering services for or making a monetary investment in the program.

The 1992 Agreement, drafted by Donegan without the assistance of legal counsel and signed by a Lucas Aerospace representative in the form presented to him, provided in part that AEA, Retrofit,

and their financial advisers . . . will provide proprietary information including an Offering Memorandum prepared by Kidder, to Lucas Aerospace, in connection with the consideration of a possible investment by it in Retrofit Partners.... The materials and information ... will be provided to you exclusively for the purpose of evaluating your investment interest in Retrofit Partners and to consider providing engineering and other technical services relating to our Vantage 305 re-engining program for the Falcon 20 aircraft.

The document recited confidentiality and non-circumvention requirements with respect to those "materials and information." It concluded:

You [Lucas Aerospace] hereby recognize and agree that "time is of the essence" and any delay caused by you may result in fatal harm to Retrofit Partners. You hereby agree that you will be responsible for all damages caused by any such delay, and will indemnify Retrofit for all such damages . . . caused by your actions, or the lack thereof . . . .

While Lucas was evaluating the project, Donegan approached yet another entity called Dalfort Aviation about the possibility that it would purchase or lead the Vantage 305 program. According to Donegan, Dalfort expressed interest but lacked the necessary engineering capability and therefore wanted to secure the involvement of Lucas, which had sufficient expertise. A meeting among Donegan and representatives of Lucas, Dalfort and P&WC was held at Lucas's Santa Barbara, California facility in October 1992. Following the meeting, Lucas Aviation submitted a proposal to Dalfort detailing the engineering services it could provide if Dalfort purchased the plaintiffs' program. Donegan testified that he considered this proposal to be satisfactory.

Dalfort's purchase of the Vantage 305 program was never consummated. P&WC, whose engines were to be installed on the aircraft under the program, refused to do business with Dalfort because of pending litigation between a Dalfort shareholder and a P&WC Connecticut affiliate. There is no claim that Lucas was in any way responsible for the failure of the Dalfort deal.

Despite the disappearance of Dalfort, Lucas remained interested in the project. The plaintiffs and Lucas both anticipated that Lucas would analyze the feasibility of taking over Dalfort's role in the aborted deal. In the following months, the parties met on many occasions to discuss various issues relating to the project.

On July 19, 1993, representatives of Lucas and P&WC met without Donegan to discuss the program's marketability. The two agreed to conduct further investigations into the feasibility of the project and to share their costs in doing so.

Nine days later, Donegan, on behalf of AEA, and William Ashworth, on behalf of Lucas Aviation, signed a "Consultant Agreement" under which AEA was to be paid a monthly fee for providing advice while Lucas Aviation continued to consider whether to invest or otherwise become involved in the Vantage 305 program. Lucas Aviation paid AEA under the Consultant Agreement until it was terminated in accordance with its terms in March 1994.

Meanwhile, on February 22, 1994, after yet more meetings between Lucas and P&WC, Lucas wrote to Donegan informing him that Lucas and P&WC had decided not to proceed with the project because "at the end of the day the deal simply did not make economic sense." The plaintiffs responded by filing this lawsuit in Connecticut Superior Court on July 29, 1996. The defendant removed the action to the United States District Court for the...