Unpublished Disposition, 933 F.2d 1013 (9th Cir. 1988)

No. 90-35084.

United States Court of Appeals, Ninth Circuit.

Before HUG and D.W. NELSON, Circuit Judges, and Carroll^*  District Judge.

MEMORANDUM^** 

Fort Vancouver Broadcasting Corporation ("FVBC") appeals from the district court's order granting summary judgment in favor of the defendant, Fouce Amusement Enterprises ("Fouce"), in FVBC's breach of contract suit. In the suit, FVBC alleged Fouce had entered into an enforceable contract to purchase two radio stations from FVBC and then breached the contract by refusing to go forward with the sale. Fouce moved for summary judgment arguing no binding contract was ever formed. The district court granted Fouce's motion, finding there was no genuine issue of material fact regarding the lack of formation of a contract. FVBC contends the district court erred in concluding that no reasonable trier of fact could find a contract had been formed.

FACTS

In August 1987, FVBC and Fouce entered into negotiations for the sale to Fouce of two radio stations owned by FVBC. On September 4, 1987, representatives for the parties signed a non-binding letter of intent contemplating the sale of the radio stations to Fouce for eight million dollars. On November 10, 1987, Fouce signed a second letter of intent expressing Fouce's intent to purchase the outstanding shares of FVBC for eight million dollars and to pay $500,000 into an earnest money escrow account "upon execution of the definitive purchase agreement." The earnest money either was to be applied toward the purchase price or retained by FVBC in the event that Fouce breached "its obligations under the purchase agreement." The letter acknowledged that the "best way to accomplish the transaction will be as part of a plan of reorganization under Chapter 11 of the Federal Bankruptcy Code" and required that the closing take place no later than April 1, 1988. The letter also stated the following:

[t]he terms recited above shall not be binding upon either of us until the approval of the transaction by the Board of Directors of [FVBC] and the execution of the definitive binding purchase agreement by the parties.

Fouce signed this second letter of intent, but FVBC never did. FVBC's Chief Executive Officer (CEO), however, acknowledged that the letter accurately reflected the parties' negotiations as of November 10, 1987.

Sometime after November 10, 1987, the contemplated structure of the sale changed from a stock purchase to an asset purchase due to anticipated changes in the tax laws. Under this new structure, FVBC's net operating losses ("NOL") could not be transferred to Fouce. Without the NOL, which Fouce could have used to offset income from other sources, the value of the transaction was reduced. Fouce and FVBC agreed that the purchase price would have to be adjusted downward to reflect the unavailability of the NOL tax benefits.

On November 20, 1987, the Federal Communications Commission ("FCC") informed FVBC that it was investigating allegations of an unauthorized transfer of control of the radio stations from FVBC to a third party. FVBC eventually filed Chapter 11 bankruptcy. At about this same time, FVBC began to receive pressure from its principal creditor, the Bank of New England ("Bank"), to either conclude an agreement with Fouce or put the radio stations on the market.

On December 29, 1987, the parties exchanged drafts of an asset purchase agreement, which modified the stock purchase agreement drafted earlier. FVBC's Bank reviewed this draft and raised a number of objections, finding that "the draft indicates quite clearly that there remains a long way to go before a deal with Fouce can be signed," and urging FVBC to place the stations on the market.

On January 6, 1988, Fouce informed FVBC that it would not purchase the stations stating the decision not to go through with the sale was based, upon other things, the potential for the FCC investigation to drag on long past the April 1, 1988 closing.

FVBC eventually sold the stations to another buyer for a lower price and sued Fouce for the difference. The district court granted Fouce's motion for summary judgment, finding that no genuine issue of material fact existed as to the lack of a binding contract. FVBC timely appeals.

STANDARD OF REVIEW

This court reviews de novo the district court's grant of summary judgment. See, Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 110 S. Ct. 3217 (1990).

DISCUSSION

FVBC contends the district court erred in granting summary judgment because a trier of fact could reasonably conclude that a binding contract was formed when Hamstreet, FVBC's CEO, orally accepted Fouce's written offer of December 22, 1987.

Summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Tzung v. State Farm & Casualty, 873 F.2d 1338; 1339-40 (9th Cir. 1989). Here, the existence of an enforceable contract is an essential element of FVBC's breach of contract claim upon which FVBC has the burden of proof. Thus, summary judgment was appropriate, viewing the evidence in the light most favorable to FVBC, the non-moving party, if there are no genuine issues of material fact regarding the lack of formation of an enforceable contract between FVBC and Fouce. See Tzung, 873 F.2d at 1339-40.

An enforceable contract is formed by a clear and unequivocal acceptance of a certain and definite offer. See Estey & Assoc. Inc. v. McCulloch Corp., 633 F. Supp. 167, 173 (D. Or. 1986) (applying Oregon law).¹  In Bretz v. Portland General Elec., 882 F.2d 411, 414 (9th Cir. 1989), this court stated that in determining whether a document constitutes a definite offer, a court "must ask whether the document at issue, in light of prior negotiations and the expectations of both parties, reasonably led the recipient to believe it was within his power to close the deal by acceptance." 882 F.2d at 414. The offer and acceptance must contain the essential terms of the contract. See Steel Prod. Co. of Oregon, Inc. v. FMD Corp., 282 Or. 513, 519, 579 P.2d 855, 858 (1978) ("normally no contractual relationship is brought about as the result of discussion unless it is carried on to such an extent that the minds of the parties meet upon all the essential terms. The district court found that the parties' two previous letters of intent indicated that it was their intent not to be bound until the execution of a final purchase agreement. The first letter of intent was signed by both parties on September 4, 1987 and stated that the parties were "looking toward a more formal letter of intent and total and final contract." The second letter of intent was drafted on November 10, 1987 and was signed by Fouce, but not by FVBC. Hamstreet, FVBC's CEO, however, acknowledged that the letter accurately reflected the parties' negotiations as of November 10, 1987. The letter stated the following:

[t]he terms recited above shall not be binding upon either of us until the approval of the transaction by the Board of Directors of [FVBC] and the execution of the definitive binding purchase agreement by the parties.

The district court found that it was clear from these letters that it was the parties' expectation that no binding contract was to be formed until the execution of a final purchase agreement.² 

The district court found that the parties could not have formed a binding contract as of December 23, 1987, in part because the parties continued to "negotiate over material terms." The district court observed that the drafts of the asset purchase agreement exchanged by the parties after December 23, 1987 altered the "duration and scope of the warranties and the deadline for seeking FCC approval."

Moreover, FVBC's Bank reviewed the December 29, 1987 draft and raised a number of objections, finding that "the draft indicates quite clearly that there remains a long way to go before a deal with Fouce can be signed" and urging FVBC to place the stations on the market. The district court characterized this exchange as FVBC's seeking "approval for the draft purchase agreements," and found it to be a further indication that FVBC could not have reasonably concluded that a binding agreement had been reached.

CONCLUSION

Therefore, it cannot be said that the District Court erred by ruling that a reasonable trier of fact could not have concluded that it was within the contemplation of the parties for the letter of intent to serve as the contractual document. The district court properly found that the parties were looking forward to a formalized agreement.

AFFIRMED.