Ross Simons of Warwick Inc. v. Baccarat Inc.

• Decision Date: 10 May 2000
• Docket Number: No. 99-2223,ROSS-SIMONS,99-2223
• Citation: 217 F.3d 8
• Parties: (1st Cir. 2000) OF WARWICK, INC., ET AL., PLAINTIFFS, APPELLEES, v. BACCARAT, INC., DEFENDANT, APPELLANT. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 8

217 F.3d 8 (1st Cir. 2000)

ROSS-SIMONS OF WARWICK, INC., ET AL., PLAINTIFFS, APPELLEES, v. BACCARAT, INC., DEFENDANT, APPELLANT.

No. 99-2223

United States Court of Appeals For the First Circuit

Heard May 10, 2000

Decided June 22, 2000

Jeffrey A. Oppenheim, with whom Kane Kessler, P.C., Joseph V. Cavanagh, Jr. and Blish & Cavanagh were on brief, for appellant.

Steven E. Snow, with whom Brian C. Newberry and Partridge, Snow & Hahn Llp were on brief, for appellees.

Before Selya, Circuit Judge, Cyr, Senior Circuit Judge, and Stahl, Circuit Judge.

Selya, Circuit Judge.

A few years ago, we ventured into the high-end retail market for fine crystal and upheld a preliminary injunction issued in favor of a group of affiliated retailers (collectively, "Ross-Simons") against Baccarat, Inc. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12 (1st Cir. 1996) (Ross-Simons I). This appeal, in which Baccarat asks us to dissolve a permanent injunction compelling it to continue dealing with Ross-Simons, requires us to revisit those purlieus. As before, Baccarat fails to make the sale.

I. BACKGROUND

Because we previously rehearsed the pertinent facts, see id. at 14-15, we provide here only a simple sketch, embellished with the new developments relevant to this appeal.

Baccarat distributes a prestigious line of French lead crystal. For its part, Ross-Simons sells a variety of items, including crystal and tableware, at widely dispersed retail stores and through an enormously successful direct-mail catalog. In the fullness of time, Baccarat, apparently disturbed by Ross-Simons's aggressive pricing policies, took steps to block the latter's access to Baccarat's wares. Ross-Simons responded by filing an antitrust suit.

That declaration of war yielded an uneasy peace: the parties settled out of court, executing a written agreement on November 24, 1992 (the "1992 Agreement"). Pursuant to that agreement, Ross-Simons dismissed its action without prejudice. In return, Baccarat appointed Ross-Simons as an authorized dealer "entitled to purchase and resell [Baccarat crystal] at such prices and upon such terms as are available to other authorized dealers." Baccarat also agreed "not [to] terminate Ross-Simons' status as an authorized dealer, nor otherwise discriminate against Ross-Simons in any manner, as a result of any failure or refusal by Ross-Simons to adhere to suggested resale prices or due to Ross-Simons' marketing through direct-mail catalogs." Although the 1992 Agreement contained no durational term, it specifically provided that changed circumstances, in and of themselves, would not suffice as a basis for extinguishment of its covenants and conditions.

In late 1994, shortly after new management assumed control of Baccarat, this fragile relationship shattered. Concerned about maintaining the luster of its name, Baccarat instituted a new authorized dealer program, which, among other things, precluded dealers from advertising Baccarat products in any printed medium that - like the Ross-Simons catalog - promoted a sizeable proportion (more than 25%) of "off-price" items. When Ross-Simons balked, Baccarat refused to fill its orders.

The hostilities resumed: Ross-Simons again filed suit, this time alleging a breach of the 1992 Agreement. Citing diversity of citizenship and the existence of a controversy in the requisite amount, Baccarat removed the case to Rhode Island's federal district court. See 28 U.S.C. §§ 1332(a), 1441. The court, acting through Judge Boyle, issued a preliminary injunction directing Baccarat to supply Ross-Simons pendente lite. We upheld this order. See Ross-Simons I, 102 F.3d at 12.

The battle raged on, and the lower court, this time acting through Judge Lagueux, subsequently rejected Baccarat's motion for summary judgment. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 182 F.R.D. 386 (D.R.I. 1998) (Ross-Simons II). Then, following a three-day bench trial, Judge Lagueux entered a permanent injunction in favor of Ross-Simons. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 66 F. Supp. 2d 317 (D.R.I. 1999) (Ross-Simons III). Baccarat again appeals.

II. ANALYSIS

We take up each tine of Baccarat's three-pronged attack on the lower court's disposition. In doing so, we apply the substantive law of Rhode Island. See, e.g., Fithian v. Reed, 204 F.3d 306, 308 (1st Cir. 2000); Daigle v. Maine Med. Ctr., 14 F.3d 684, 689-90 (1st Cir. 1994).

A. Duration of the 1992 Agreement.

The centerpiece of Baccarat's appeal is its contention that the district court erred by not placing a finite temporal limit on the decree. This contention springs from the concept that the 1992 Agreement, if it has not already expired, will become terminable after the passage of a commercially reasonable period of time. The district court rejected this contention, ostensibly relying on the plain language and purpose of the contract. See Ross-Simons III, 66 F. Supp. 2d at 325-26. Importantly, however, the court also found as a fact that when the parties entered into the 1992 Agreement, they intended to establish a long-term relationship. See id. at 320.

We generally review the grant or denial of injunctive relief for abuse of discretion. See Ross-Simons I, 102 F.3d at 16. Withal, the standard of review is multi-dimensional and may vary depending on the specific issue under consideration. See Langlois v. Abington Housing Auth., 207 F.3d 43, 47 (1st Cir. 2000). Here, we review the lower court's interpretation of the language and purpose of the contract de novo and its findings of fact for clear error. See United States Liab. Ins. Co. v. Selman, 70 F.3d 684, 687 (1st Cir. 1995). Moreover, we do not consider ourselves bound by the trial court's rationale, but may affirm its judgment for any valid reason that finds support in the record. See Phillips Exeter Academy v. Howard Phillips Fund, Inc., 196 F.3d 284, 288 (1st Cir. 1999); Garside v. Osco Drug, Inc., 895 F.2d 46, 48-49 (1st Cir. 1990).

The district court's reasoning spans its two most recent published opinions. At the summary judgment stage, the court rejected Baccarat's argument that the 1992 Agreement was too indefinite to be enforceable, holding instead that the agreement fell into the category of contracts terminable upon the happening of a specific event. See Ross-Simons II, 182 F.R.D. at 395-97. In reaching this conclusion, the court relied heavily on Payroll Express Corp. v. Aetna Cas. & Sur. Co., 659 F.2d 285 (2d Cir. 1981). The relevant insurance contract in that case did not specify a duration but stated only that it was terminable by the insurer for nonpayment of premiums. See id. at 288-89. New York's policy against perpetual commitments notwithstanding, the Second Circuit held that the insurer could not cancel the policy as long as the insured continued to pay the premium. See id. at 292. Embracing the logic of Payroll Express, the court below determined that the 1992 Agreement, by committing Baccarat to sell to Ross-Simons "at such prices and upon such terms as are available to other authorized dealers," implicitly provided for termination upon the occurrence of a particular event, i.e., Ross-Simons's breach of these standard terms. See Ross-Simons II, 182 F.R.D. at 396. Thus, the 1992 Agreement was sufficiently definite to be enforceable. See id. at 396-97.

The difficulty with this reasoning is that every enforceable contract involves a bargained-for exchange of obligations, the material breach of which by one party gives the other party a right to terminate. See, e.g., Ahearn v. Scholz, 85 F.3d 774, 783 (1st Cir. 1996); Pelletier v. Masse, 143 A. 609, 610 (R.I. 1928); see also Restatement (Second) of Contracts § 237 (1981). If the existence of an affirmative commitment, without more, automatically converts a contract of indefinite duration into a contract terminable upon the happening of a specific event, then the presumption against perpetuity becomes illusory. Broadly postured, this would conflict with Rhode Island law, as that state's courts are quite clear that, in the employment context at least, a contract silent as to duration is terminable at will. See Salisbury v. Stone, 518 A.2d 1355, 1360 (R.I. 1986); Booth v. National India-Rubber Co., 36 A. 714, 715 (R.I. 1897).

Of course, the 1992 Agreement was an agreement for the settlement of a lawsuit, not an employment agreement - a distinction upon which the district court expressly relied. See Ross-Simons III, 66 F. Supp. 2d at 324-26; Ross-Simons II, 182 F.R.D. at 395-97. The central goal of a settlement agreement is to fashion a final and permanent resolution of a dispute, see City of Homestead v. Beard, 600 So. 2d 450, 454 (Fla. 1992); cf. Mathewson Corp. v. Allied Marine Indus., 827 F.2d 850, 857 (1st Cir. 1987) ("There is an institutional interest in the solemnity of [settlement] agreements, in bringing certainty to the process, and in minimizing the opportunities for lawyers and litigants alike to act as Monday morning quarterbacks."), so applying the presumption against perpetual obligations to settlement agreements would be an extremely awkward fit. Limited to this one small corner of contract law, the district court's "implied termination clause" rationale might well be appropriate.

We need not resolve this question here. After all, it is common ground that where the presumption against perpetuity applies, it can be rebutted by evidence that the parties intended a permanent arrangement. See 1 Samuel Williston & Walter H.E. Jaeger, A Treatise on the Law of Contracts § 38, at 113 (3d ed. 1957) (stating that "unless the circumstances show a contrary intention, [courts will] interpret a promise which does not... state the time of performance as intending performance in a reasonable time") (emphasis supplied); see also School Comm. v. Board of Regents for Educ., 112 R.I. 288, 308 A.2d 788 790 (1973) (explaining that the parties' intentions - as gleaned from the course of...