190 F.3d 556; 1999 U.S. App. LEXIS 21059 (D.C.
Cir. 1999)
Cert. Denied 3/27/00, 2000 LEXIS 2214
Before: WALD, SILBERMAN and GARLAND, Circuit Judges.
GARLAND, Circuit Judge: The plaintiffs brought this diversity action charging breach of contract and defamation in connection with a failed real estate venture in Sofia, Bulgaria. The district court granted summary judgment in favor of defendants on both the contract and defamation claims. For the reasons stated below, we affirm the judgment of the district court.
Plaintiffs Novecon, Ltd. and Novecon Management Company ("Novecon") are private firms engaged in developing business projects in Bulgaria, primarily through the use of joint ventures. Plaintiff Richard Rahn is president of both companies; Ronald Utt is their managing director. Defendant Bulgarian-American Enterprise Fund (BAEF or "the Fund") is a not-for-profit corporation established pursuant to the Support for East European Democracy Act, 22 U.S.C. §§ 5402, 5421. It promotes private sector development and entrepreneurship in Bulgaria through, among other things, grants, loans, and equity investments. Defendant Frank Bauer is the Fund's president and defendant Nancy Schiller is the managing director of its Chicago office.
In 1991, Novecon formed a joint venture with a Bulgarian company to develop a residential and commercial building complex in Sofia, on land owned by the Batsov family. n1 In November 1992, it began negotiating with the Batsovs to transfer title to the land in exchange for a percentage of the project's finished units. Novecon also contacted BAEF and proposed that the Fund provide a construction loan to finance the development of the project. In March 1993, BAEF sent Novecon a letter indicating that the Fund's board of directors had "authorized continued conversations surrounding several real estate projects," including Novecon's.
Between May 20 and June 3, 1993, BAEF and Novecon exchanged a series of four written communications concerning details of the project. The correspondence described the extent of Novecon's responsibilities in connection with the project, set forth a series of project milestones, and described the payments that Novecon would receive upon the completion of each milestone. The correspondence contemplated that the Batsov family would have a 26 percent stake in the building complex. Novecon contends that these four documents created a contract which bound BAEF to provide financing for the project.
The first letter, from Nancy Schiller of BAEF to Ronald Utt of Novecon, was written on May 20, 1993. It stated that the Fund was "prepared to move forward on the terms outlined in this letter." The letter then described a "narrower oversight role" for Novecon than previously anticipated, listed a series of responsibilities that BAEF contemplated for Novecon, and noted that "this list is not exhaustive [but] should provide an overview of the role that [Novecon] will have." Schiller stated that "contingent on the signing of a definitive agreement," the Fund was willing to compensate Novecon with the sum of $ 200,000, "with payment based on timing and project landmarks." The first installment, of $ 25,000, would be made "upon completion of: a) Contract signing, b) Delivery of unencumbered land title for Phase I and II, c) Transfer of the land title, [and] d) Securing and delivery of the zoning amendment." Schiller further stated that she and Mr. Batsov had agreed that the family would receive 26 percent of the building's apartments. She noted that "this document is fairly comprehensive, but undoubtedly there will be some need to clarify certain points now or as we proceed." Finally, Schiller said that the offer made in the letter would expire on June 4, 1993.
On June 1, 1993, Utt sent Schiller a telefax reflecting their telephone conversation of the previous Friday. The fax noted that Schiller had asked Novecon to revise the milestones "to advance the project and conform to Bulgarian law." Novecon's fax contained the revised milestones, as well as a series of revised fees, which Utt said he had "redone ... to better reflect the degree of difficulty in accomplishing the required tasks." He closed by stating that he "looked forward to [BAEF's] response."
On June 3, 1993, Schiller sent Utt a revised fee structure which, she said, would be included "in our request to the Fund's Board for final approval" of the project. Her letter stated, however, that "one important new issue has come up." Although BAEF had previously been told that Mr. Batsov represented all the heirs to the property, Ms. Lilyana Batsova and two relatives had just notified BAEF that they had an ownership interest and that Mr. Batsov did not represent them. "If this is the case," Schiller said, "I am sure you realize that the BAEF will not pursue this investment." In light of these developments, Schiller said that BAEF "will consent to extending our negotiations until June 15, 1993 by which time we will expect certified documentation of the sign off of all heirs." If evidence is not received by that date, she said, "BAEF will rescind its offer to negotiate and terminate its discussions with [Novecon]."
The last of the four communications was a two-paragraph telefax sent by Utt to Schiller on June 3, 1993. "On behalf of [Novecon]," he wrote, "I accept the terms of the Fund's 20 May 1993 offer and the revised fee schedule. I also understand that your offer is contingent upon a resolution of any and all outstanding uncertainties regarding ownership of [the building] sites, and accept the responsibility to resolve the uncertainties to the Fund's satisfaction by the 15 June 1993 deadline." Novecon contends that by accepting the terms of the Fund's May 20th letter and June 3rd revised fee schedule, this telefax "created a binding contract."
On June 14, 1993, Schiller telephoned Utt and requested that he renegotiate the arrangement with the Batsov family to reduce their share in the project from 26 percent to 12 percent. To give Novecon time to negotiate, BAEF extended its deadline to June 28. On that date, however, Novecon advised BAEF that the Batsovs had refused to reduce their share. Novecon sought BAEF's "guidance as to how ... to proceed," and offered to "extend the period of time during which we will not solicit other investors while you attempt to work this out."
Finally, on November 2, 1993, BAEF wrote Novecon that "since our agreement to negotiate the project expired on June 28, 1993, we have decided to terminate negotiations." The letter noted that the local court in Sofia had delayed judgment on Lilyana Batsova's property claim, that BAEF had not received a contract signed by the Batsov family agreeing to turn over the property, and that numerous zoning issues regarding the land remained unresolved. "Basically," BAEF wrote, "the project has proven unfeasible."
In June 1995, Novecon (and Rahn) filed suit in
the United States District Court for the District of Columbia, asserting
jurisdiction based on the diversity of the parties' citizenship. The complaint
alleged three contract-related claims: breach of contract, promissory estoppel,
and quantum meruit. It contended that by accepting the terms of the Fund's
May 20th letter and June 3rd revised fee schedule, Novecon's June 3rd telefax
created a binding contract, and that the Fund's insistence on renegotiating
the Batsov family's share breached the contract and caused the project
to collapse.
***
Under the law of the District of Columbia, "for an enforceable contract to exist there must be both (1) agreement as to all material terms; and (2) intention of the parties to be bound." Jack Baker, 664 A.2d at 1238. The party asserting the existence of an enforceable contract bears the burden of proof on the issue of contract formation. See id.; Ekedahl, 1999 WL 550970 at *3. "Where the parties contemplate a subsequent written contract, this burden is particularly onerous." Jack Baker, 664 A.2d at 1238.
Plaintiffs contend that the four corners of the contract between Novecon and BAEF may be found in the four communications the parties exchanged between May 20th and June 3, 1993. Novecon Br. at 18. Specifically, Novecon contends that by accepting the terms of the Fund's May 20th letter and June 3rd revised fee schedule, Novecon's June 3rd telefax "created a binding contract." n4 Having searched those four corners, we do not find a contract within them.
Novecon's first letter, dated May 20, 1993, stated that the terms it contained provided an "overview" but were not "exhaustive," and that "undoubtedly there will be some need to clarify certain points now or as we proceed." The first payment would be made, the letter said, only "upon completion of: a) Contract signing, b) Delivery of unencumbered land title for Phase I and II, c) Transfer of the land title, [and] d) Securing and delivery of the zoning amendment." The Fund's willingness to compensate Novecon, it stressed, was "contingent on the signing of a definitive agreement."
BAEF's second letter, dated June 3, 1993, was no more definitive. . First, it said that a "revised fee structure" would be "included in our request to the Fund's Board for final approval," thus indicating that there was at least one more stage required before BAEF could enter into a contract. Second, BAEF made clear that its offer would be rescinded unless it received "certified documentation of the sign off of all [Batsov] heirs by June 15, 1993." Finally, and most significant, BAEF expressly characterized its offer as an "offer to negotiate."
In light of the plain language of these letters, and BAEF's own characterization of its offer, we agree with the district court's conclusion that "BAEF extended only an 'offer to negotiate,' " and that when Novecon accepted that offer on June 3rd it created "nothing more than an agreement to continue negotiations." 967 F. Supp. at 1389; see generally Bender v. Design Store Corp., 404 A.2d 194, 197 (D.C. 1979) ("All that was promised was that appellee would bargain in good faith."). The letters made clear that they did not contain all terms material to an agreement, and that those terms would be contained in a "definitive agreement" to be finalized at the "contract signing" expressly contemplated in the May 20th letter. See 967 F. Supp. at 1387. In the District of Columbia, "parties will not be bound to a preliminary agreement unless the evidence presented clearly indicates that they intended to be bound at that point." Jack Baker, 664 A.2d at 1239. There is no such evidence here.
There are other significant indications of nonfinality as well. One is the June 3rd letter's reference to the fact that the terms would have to be submitted to the Board for "final approval." See Jack Baker, 664 A.2d at 1237, 1241 (describing requirement that Philippine embassy construction contract "will be subject to the approval of the Philippine Department of Foreign Affairs" as "striking" indication of nonfinality). A second is that this was the sort of complex, expensive, multi-stage transaction in which a subsequent formal contract would ordinarily be expected. See id. at 1240-41; see also R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir. 1984).
Finally, BAEF's letter made clear that there were a number of key contingencies that would have to be satisfied before the agreement could be concluded. First among these was the transmission of "certified documentation of the sign off of all [Batsov] heirs." Indeed, in accepting "the terms of the Fund's" offer on June 3rd, Novecon acknowledged its understanding that agreement was "contingent upon a resolution of any and all outstanding uncertainties regarding ownership of [the building] sites," and "accepted the responsibility to resolve the uncertainties to the Fund's satisfaction by the 15 June 1993 deadline." Yet, as Novecon notes in its brief, those uncertainties were never resolved.
In sum, we agree with the district court that no reasonable trier of fact could conclude that the exchange of communications between Novecon and BAEF constituted an agreement by both parties to be bound by their terms. Rather, the letters were "merely a part of the preliminary negotiations looking toward the execution of a contract in writing and by [their] own terms negated the idea that [they] were intended as an offer which thereafter could be accepted ... without the necessity of a formal written document covering all the terms." Simplicio v. National Scientific Personnel Bureau, Inc., 180 A.2d 500, 502 (D.C. 1962).
FOOTNOTES
1 Novecon formed the joint venture, known as Southern Park Development, with Mirpex Co., a Bulgarian limited liability company. Southern Park Development has assigned its rights in this litigation to Novecon, and we refer to the joint venture as "Novecon" for ease of reference.
4 The remaining communication, the June 1st fax from Novecon to BAEF, proposed a revision of the fee schedule originally contained in the Fund's May 20th letter.
1. Who is the plaintiff?
2. What court is hearing the case?
3. What's the basis for subject matter jurisdiction in this case?
4. Why is this case being heard in Washington, D.C.?
5. What are the key documents alleged to be a contract?
6. What are the legal requirements to form a contract?
7. Who wins?
8. Why? Hint: make a time line of events in the negotiations.