Video Central, Inc. v. Data Translation, Inc.
Decision Date | 22 April 1996 |
Docket Number | 94-CV-11537. |
Citation | 925 F. Supp. 867 |
Parties | VIDEO CENTRAL, INC., Plaintiff, v. DATA TRANSLATION, INC., Defendant. |
Court | U.S. District Court — District of Massachusetts |
Peter A. Biagetti, Joseph P. Messina, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, MA, for Video Central, Inc., Plaintiff.
Richard D. Batchelder, Jr., Ropes & Gray, Boston, MA, for Data Translation, Inc., Defendant.
Video Central, Inc. sues Data Translation, Inc. (DTI) for breach of contract and a declaratory judgment that it is no longer bound by the restrictive covenant contained in a written agreement between the parties. Video moves for summary judgment on the issue of liability.
Because a fact question as to whether the parties intended to be bound by the Letter of Intent exists, Video's motion for summary judgment is denied. While Video makes a strong argument that the Letter of Intent is binding as a matter of law, the ambiguous language of paragraph 14 and the Harpin and Travis affidavits, which unconditionally deny DTI's intent to be bound, tip the balance. It is impermissible, because it is not possible, to test the credibility of affiants who have not been subjected to cross examination. At trial, however, the finder of fact will have the opportunity to determine the credibility of the witnesses and whether there was a meeting of the minds as to the parties' intent regarding paragraph 14 of the Letter of Intent. However, because this case presents a good opportunity to clarify the law with respect to whether letters of intent are binding, this opinion details the reasons for denial of summary judgment.
Video is a distributor of products for broadcast and business video production. DTI develops, manufactures, and markets a variety of electronic equipment, including the Media 100, a high-performance video post-production computer board.
On August 2, 1993, Yosef Yosifove, President of Video Central, Inc., contacted Mike Travis, DTI's Director of International Sales and Marketing, to discuss the possibility of Video's becoming a distributor for the Media 100 in Argentina.
Pursuant to a two-page agreement titled "Letter of Intent" signed by Yosifove and Ellen Harpin, DTI's Vice President of Finance and Administration, on November 10, 1993, DTI granted to Video "the rights of exclusive resale in Argentina for the Media 100." The Letter of Intent set forth the following terms: the duration period of two years from the date of signature, the discounted price of each Media 100 unit, the minimum volume of sales required of Video, and the restriction that Video "sell Media 100 only to Argentine customers in Argentina, and not to other countries." Paragraph 14 of the Letter of Intent states: "The parties agree to sign a contract formalizing these points no later than 60 days after the signature of this Letter of Intent."
Between November 10, 1993 and July 5, 1994, Video acted as a distributor for the Media 100 for thirteen customers in Argentina and one in Paraguay.
In January of 1994, DTI prepared and forwarded to Video two drafts of a formal contract appointing Video as an exclusive distributor for the Media 100. On February 21, 1994, DTI forwarded a third draft of the contract to Video, whereupon "Yosifove advised Travis that Video Central would sign the third draft of the Distribution Agreement." Video alleges that none of the draft contracts was ever signed by the parties because DTI "never delivered the document for execution"; DTI denies the allegation. (Compl. & Ans. ¶¶ 30.) Each of the three drafts of the formal contract was the subject of negotiations between Yosifove and Travis, and each draft contained a cure provision.1
On March 11, 1994, DTI faxed a "memorandum" to Video, stating that Video claims that "after it received DTI's admonishment, it unilaterally cancelled the remaining orders it had booked for customers in Paraguay."
On July 5, 1994, DTI sent a letter to Video terminating the "distribution agreement for Argentina as set forth in the Letter of Intent" because Video had made sales outside of Argentina "on at least one occasion ... in violation of the Agreement."
A. Was the Letter of Intent a binding agreement?
Video argues that the Letter of Intent included the "essential terms" of the agreement: that is, that Video would be a distributor of a DTI product (Media 100); in a particular area (Argentina); for an agreed upon term (two years); at a specified purchase price per unit (discounted 35 percent from the U.S. list price); and meeting a certain volume of sales to maintain its exclusive distributorship.
Under Massachusetts law, a letter of intent may be binding if it includes "all material terms," even if the instrument indicates that the parties intend to execute a more detailed, formal agreement in the future:
Language looking to the execution of a final written agreement justifies a strong inference that significant items on the agenda of the transaction are still open and hence, that the parties do not intend to be bound. If, however, the parties have agreed upon all material terms, it may be inferred that the purpose of a final document which the parties agree to execute is to serve as a polished memorandum of an already binding contract.
Goren v. Royal Investments, Inc., 25 Mass. App.Ct. 137, 140, 516 N.E.2d 173 (1987), appeal denied, 401 Mass. 1104, 519 N.E.2d 595 (1988). Whether the Letter of Intent is binding upon DTI depends, therefore, upon whether the agreement included "all material terms" or whether the negotiations between the parties were in a state of "imperfect negotiation." Id. at 140, 516 N.E.2d 173; see also Novel Iron Works, Inc. v. Wexler Constr. Co., 26 Mass.App.Ct. 401, 407-408, 528 N.E.2d 142, rev. denied, 403 Mass. 1104, 530 N.E.2d 797 (1988) ( ).
The Letter of Intent in the present case was signed by both parties and specified the rights granted by the instrument, the duration of the agreement, the price of the units to be distributed, the geographic limits of the distributorship, the minimum volume of sales required to maintain exclusive distributorship rights. It included sufficient material terms such that "the transaction could, if necessary and finally determined to be appropriate, be consummated solely on the basis of the letter." Rand-Whitney Packaging Corp. v. Robertson Group, 651 F.Supp. 520, 534 (D.Mass.1986); accord Labrecque v. Niconchuk, 442 F.2d 1094, 1097 (1st Cir. 1971) ( ).
A different finding was made in Gel Systems v. Hyundai Eng'g & Constr. Co., 902 F.2d 1024, 1026 (1st Cir.1990), where the district court held that a letter of intent signed by both parties was not binding because 1) the letter expressed no more than future intention to purchase; 2) the letter referred to a formal contract to be executed in the future and stated: "Terms and conditions in detail will be further discussed when a formal contract is made"; and 3) the court perceived that "room existed for further negotiation and disagreement."
The Letter of Intent in the present case, however, is distinguishable from the agreement at issue in Gel Systems: It uses language in the present tense; it clearly spells out the terms under which DTI agreed to "assign the right of exclusive resale in Argentina for Media 100 ... to Video Central"; and there is no evidence to suggest that the Letter of Intent was signed at a point of "imperfect negotiation" between the parties.
DTI has not alleged that there were any "sticking points" in the negotiations over the Letter of Intent. E.g., Mass Cash Register, Inc. v. Comtrex Systems Corp., 901 F.Supp. 404, 417 (D.Mass.1995) ( ). While Travis asserts that "during the negotiations ... over the terms of the draft contracts, several disagreements arose between the parties," these disagreements arose after the Letter of Intent was signed and involved matters not addressed in the Letter of Intent.
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