Cable & Computer Technology Inc. v. Lockheed Sanders, Inc.

Opinion by Judge NOONAN; Dissent by Judge CANBY. NOONAN, Circuit Judge: Cable & Computer Technology, Inc. (CCT) appeals the judgment of the district court in its action for breach of contract and related wrongs against Lockheed Sanders, Inc. (Sanders) and other Lockheed entities (collectively Lockheed or the defendants). We affirm the grant of summary judgment against CCT on its Unfair Business Practice and Cartwright Act claims. On CCT’s other appealed claims, we hold that material issues of fact were in dispute, reverse the district court and remand for trial. In some respects a garden variety contracts dispute, this case is set particularly in the world of defense contracting and draws a clear distinction between mere agreements to agree and agreements to team together to bid a subcontract, so that we think it may be helpful to publish our opinion. BACKGROUND In 1996 Boeing Defense and Space Group (Boeing) was awarded a contract by the United States Air Force to upgrade — 1033 — the computer system for the B-1B bomber. Boeing needed subcontractors to .perform the contract and in May 1996 issued a Request for Information or RFI to, among others, CCT. CCT is a 30-employee California corporation that designs, manufactures, integrates and tests equipment and systems intended to replace existing commercial and military computers. The purpose of the RFI was to alert CCT to Boeing’s needs and to “prequalify” CCT as a bidder for a subcontract from Boeing. CCT had to respond to the RFI in June 1996 and to file its actual bid by November 11,1996. CCT had teamed with Sanders in 1993 in the upgrading of the computer system of the B-52 bomber and in 1994 to produce Futurebus Processor modules for the Lockheed F-22 Simulator. After receiving the RFI, CCT contacted Sanders, a division of Lockheed, to work with it on a bid on the Boeing project. What then happened is disputed. The parties’ differing accounts will be set out below. Suffice it to say here that on October 30, 1996 Sanders withdrew, and, as a consequence, CCT was unable to make a bid for the Boeing subcontract. Boeing ultimately awarded this subcontract to Owego, a wholly owned subsidiary of Lockheed. PROCEEDINGS On June 19, 1997, CCT filed this action in Orange County Superior Court. Lockheed removed it'to the district court on the grounds of diversity. On March 23, 1998, Lockheed moved for summary judgment on CCT’s first claim, which alleged breach of contract. The motion was granted on April 13, 1998. Thereafter, at later times whose dates will be noted as relevant, the district court entered summary judgment against CCT on each of its causes of action. CCT timely appealed to this court. analysis' We will address the propriety of each of the summary judgments in turn, asking the standard questions whether there were material facts in dispute and whether the plaintiff offered some “significant probative evidence tending to support the complaint.” Summers v. A. Teichert & Son, Inc. 127 F.3d 1150, 1152 (9th Cir.1997). We may not, any more than the district court might not, weigh the evidence or determine the truth of the matter. We view the evidence in the light most favorable to the nonmoving party and take account of all inferences in its favor that may be drawn from the facts. In this diversity action we apply the substantive law of California. Breach of Contract. Sanders says that no contract existed, that all the parties did was to try, unsuccessfully, to work out a “teaming agreement,” which Boeing required to be submitted as part of the bid in writing if the bidder was to work with its own subcontractor. CCT says that it had a teaming agreement with Sanders in May 1996. The principal evidence offered by Lockheed is as follows: 1. In the deposition testimony of Michael Starzyk, the project manager for CCT, he repeatedly admitted that he expected there would be a signed, written teaming agreement. 2. Starzyk admitted that a written teaming agreement was required by Boeing to be submitted as part of the bid to Boeing. 3. In Sanders’ Management- Directive and Practice 10.10, effective October 25, 1996,. various officers’ approval of “a written Teaming Agreement” is required. 4. The three previous teaming agreements between CCT and Sanders on other projects were in writing. 5. The Boeing subcontract was worth about $20 million. The division of work between CCT and Sanders on such a large contract required negotiation before a contract could be reached. 6. Starzyk presented the first written draft of the teaming agreement in September 1996. The parties then negotiated 14 — 1034 — separate terms not addressed before that date. 7. CCT in its complaint admitted that as late as October 24, 1996 the parties had not “finalized” the teaming agreement. 8. The written drafts of the teaming agreement did not state that it was a memorial of an oral contract. The drafts declared that the agreement was “effective upon the date of its execution.” 9. The drafts state that the agreement “contains the entire agreement of the parties and cancels and supersedes any previous understanding or agreement related to this Program, whether written or oral.” 10. No agreement was ever reached on what CCT would pay Sanders for its computers and services. 11. No written agreement was ever executed. CCT did not dispute these facts. It offered other facts to show that a contract existed between it and Sanders: 1. The August 7, 1997 deposition of Clark Hollingsworth, president of CCT, stated that in May 1996 he discussed the teaming of CCT and Sanders with Ehtis-ham Siddiqui, a vice-president of Sanders, and that at the conclusion of the discussion, Siddiqui said, “We’ve got a deal.” 2. In his January 7, 1998 deposition, Michael Starzyk stated that CCT and Sanders had an oral agreement “in place” in May 1996 “to go acquire and win the Bl-B business.” 3. In his August 1996 deposition, George Woodruff, Manager of Business Development or the marketing man for Sanders, stated that CCT and Sanders responded in writing in June 1996 to Boeing’s RFI: “CCT is teamed with Sanders, a Lockheed Martin company, and we are both dedicated to obtaining the B-1B computer upgrade award”; that to the best of Woodruffs knowledge this statement was true; and that from June to October 1996, CCT and Sanders “acted like teammates” and made statements to each other and to others “that they were teammates.” 4.CCT, joined by Sanders personnel, hosted Boeing’s inspection of CCT’s facilities in June 1996 as a prelude to submitting the bid to Boeing. Sanders does not dispute these facts. In sum, the district court had before it, when it granted Sanders’ first summary judgment motion in April 1998, facts that were largely undisputed but might be argued in different ways. It was undisputed that the teaming agreement required by Boeing for the bid had to be in writing; both parties expected to have a written agreement, effective on execution; and no such written agreement was in existence. Applying hornbook law, the district court ruled that when parties intend to be bound only by a written agreement, their oral exchanges of assent do not bind them. See Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 315 (9th Cir.1996). Unexceptionable as the district court’s statement of the law is, it avoids the question of whether there was an oral contract to produce the teaming agreement to be submitted as part of the bid to Boeing. Hollingsworth’s and Woodruffs depositions supported the existence of such an oral contract. On this appeal, Sanders argues that CCT did not sue on the oral agreement to work together but on the teaming agreement to be submitted to Boeing. CCT replies that here an agreement to work together to create a mutually acceptable bid and “a teaming agreement” are “the same”; that a distinction between them is “a false dichotomy” or “a phantom.” A teaming agreement is not a phrase with a fixed meaning. The federal government defines a “contractor team arrangement” as an arrangement between “a potential prime contractor” and one or more subcontractors. 48 C.F.R. § 9.601. Arguably, the definition does not include the relationship of two subcontractors. An American Bar Association handbook on government contracting speaks of teaming arrangements as “primarily” including — 1035 — agreements “under which the signatories cooperate to pursue a particular contract”; such agreements generally “anticipate the entry into a separate subcontract or joint venture upon the award of a contract.” Carl J. Peekinpaugh, Government Contracts for Services 89-90 (1997). The Sanders Management Directive and Practice 10.10 says the term teaming agreement includes “joint-venture agreements; memoranda of understanding; memoranda of agreement; collaboration agreements; strategic alliances; joint research and development agreements; joint or co-production agreements; licensing agreements; and all other agreements whose objectives are to take advantage of unique and complementary capabilities of Sanders and another organization outside Sanders.” In short, “teaming agreement” is not a term narrowly fixed in its meaning but varying with different contexts and arrangements. CCT’s first claim in its complaint asserted the existence of a contract “by which Sanders agreed, among other things, to team with CCT to bid for the AP-101F upgrade contract.” The existence of such an oral contract was supported by the Woodruff and Hollingsworth depositions. It was not error for the district court to rule that a formal teaming agreement to be submitted to Boeing did not exist because that agreement had to be in writing. It was error to conclude that there was no significant, probative evidence that CCT and Sanders had orally agreed to teaming to bid for the Boeing subcontract. CCT is mistaken in arguing that such a contract is the same as a final teaming agreement. Sanders is mistaken in arguing that CCT’s complaint does not permit CCT to recover on this contract. No naked agreement to agree constitutes a contract. Autry v. Republic Productions, 30 Cal.2d 144, 151, 180 P.2d 888, 892-93 (1947). If CCT can prove no more than that to a jury, Sanders must prevail. But what CCT offered in evidence to the district court was an exchange of promises, supported by consideration, to be a team with Sanders and as a team submit a bid to Boeing. If believed, that evidence established an oral contract. Unlike an agreement to agree, an agreement to use best efforts to achieve a common objective is a closed, discrete, and actionable proposition. Channel Home Centers v. Grossman, 795 F.2d 291, 299 (3d Cir.1986) (Becker, J.). As might be expected, the law of California is no different from this statement by Judge Becker of what is the law of other American jurisdictions. See Racine & Laramie, Ltd. v. California Dep’t of Parks and Recreation, 11 Cal.App.4th 1026, 1035, 14 Cal.Rptr.2d 335, 341 (Cal.App.1992). CCT may show that the course of conduct of the parties, both in its earlier arrangements with Lockheed and in its June to October 1996 dealings with Sanders, supports its evidence of an exchange of oral promises in May 1996. The evidence offered by CCT may be disbelieved by a jury, or Sanders may convince the jury that the agreement to team had no content. In that case, Sanders will prevail at trial. What cannot be determined by a court as a matter of law is whether or not CCT and Sanders entered what we note the ABA handbook on government contracts speaks of as customary — an agreement “to cooperate to pursue a separate subcontract or joint venture upon the award of a contract.” Peckinpaugh, op. cit., 89-90. Sanders points to two statements of CCT employees that it says are inconsistent with this interpretation of the oral contract, viz. that the contract was not “merely an agreement to submit a proposal” and that the parties “were a team to do the contract,” that is, the Boeing subcontract. These statements may indeed be inconsistent with the position that an oral contract to work together was made, but they are not necessarily inconsistent with that position. It cannot be said as a matter of law that these statements disproved or disavowed the oral contract put into contention by the Hollingsworth and Woodruff declarations. — 1036 — Sanders amplifies its argument by-saying that CCT sued to recover the amount it believed it would have earned if CCT and Sanders had agreed on a bid, submitted it, and won the subcontract. The difference between what CCT would recover on these assumptions and what it would recover if it proved an oral contract to work in good faith to submit a competitive bid is only a difference in the likelihood of success — the likelihood that a good faith effort would have resulted in agreement on a competitive and then winning bid is less than the likelihood that agreement on a competitive bid would have led to the award. The difference does not affect the existence of an oral contract; nor does it defeat CCT’s cause of action. CCT overstates its case when it argues that the oral agreement was “the same” as what the final written teaming agreement would have been, and that the latter would have been a mere memorial of the former. Overkill of this kind has not been helpful to its cause and no doubt contributed to the confusion of the district court. On balance, however, we do not think that CCT should be barred from trial on an oral contract of whose existence it furnished evidence, even though it has tried to present this contract as though it were the agreement to be submitted on the bid. The Statute of Frauds, advanced by Sanders as a defense, has no application to this contract, which had to be completed by the November deadline for the bid. CCT is accordingly entitled to a trial on whether it had a valid oral agreement with Sanders to work out a competitive bid to be submitted to Boeing. At trial, of course, the evidence now to be considered, which was not before the district court at the time of the first motion for summary judgment, may be introduced. The Declarations of George E. Wood-ruff, Kirk Hollingsworth, Michael Star-zyk, and David W. Jackson. All of these declarations were obtained before the later summary judgment motions and were before the court when it ruled on those motions. We begin with the declaration of Woodruff made July 3,1998. Woodruff identified himself as Manager of Business Development for Sanders since March 1, 1993 and as having worked in that capacity with employees of CCT to obtain B-1B mission computer upgrade business “for CCT and Sanders.” In particular, he declared under oath: 8. In May 1996, while working on the RFI Response, Dr. Siddiqui authorized and told me to reconfirm our teaming agreement with CCT management, that required CCT and Sanders to take all steps necessary to compete on and win the B-1B mission computer upgrade contract from Boeing. I personally transmitted that message to Kirk or Clark Hollingsworth of CCT, or both of them. Dr. Siddiqui also directed me to: a. tell CCT that Sanders would put our oral teaming agreement in writing as soon as Lockheed Martin, internally, resolved a potential conflict of interest arising from multiple Lockheed Martin business units competing for the B-1B mission computer upgrade contract. b. tell CCT that Sanders would provide CCT with STAR processors for the B-1B mission computer upgrade contract; and c. tell CCT that Sanders would provide support engineering services such as radiation hardening and sustaining engineering for the STAR processor. 9. In late June 1996, during a meeting in my office, Dr. Siddiqui authorized me to tell CCT that no potential conflict of interest existed that would prevent Sanders from putting the oral teaming agreement in writing. He also told me to continue moving forward with CCT. I understood that Dr. Siddiqui considered a written teaming agreement as a mere formality. In response to concerns made to me by CCT, Dr. Siddiqui told me at least two times that putting the — 1037 — oral teaming agreement into writing would “get done.” Woodruff further swore: Dr. Siddiqui seemed to have an unusually close business relationship with Jim Scanlon, the head of Lockheed Martin at Johnson City, NY. On May 22, 1996, immediately after a meeting between Sanders and other affiliates of Lockheed in Nashua, NH concerning the B-1B mission computer upgrade competition, Mr. Ron DeYoe and I approached Dr. Siddiqui and told him that I had failed to secure the Sanders lead position that he had requested me to try to obtain earlier that day. Dr. Siddiqui took Mr. DeYoe and me into his office and called Jim Scanlon. During that conversation, Dr. Siddiqui told Mr. Scanlon: It happened just the way we planned: you’re going to lead and we’re going to support you. It was clear to both Mr. DeYoe and me what Dr. Siddiqui meant. He wanted to sell STAR processor boards to Johnson City and not to CCT. By concealing that information from CCT, it seemed to me that Sanders hoped to enhance Johnson City’s chances of winning the B-1B competition with Owego by stringing along CCT until it was impossible for CCT to find a substitute teammate. On October 30, 1996, when Dr. Siddi-qui directed Sanders personnel to quit the proposal development efforts at CCT, I objected and told Dr. Siddiqui that his decision was wrong, and probably illegal, because it would prevent CCT from bidding on the B-1B mission computer upgrade contract. I told Dr. Siddiqui that, at a minimum, he should authorize the sale of existing STAR processor boards to CCT — no matter the price — so that CCT could complete its proposal and submit its bid. Dr. Siddi-qui, without explanation, refused my request. Woodruffs declaration gave the motivation for his statement: “I prepared this Declaration because I am embarrassed by the conduct of Lockheed Martin, Owego, Johnson City and Sanders, as well as the tactics of their outside lawyers.” Wood-ruff ended his statement with a reckoning of the risk he took in making it: “Lockheed Martin will clearly get rid of me because of this Declaration.” In Kirk Hollingsworth’s declaration of July 8, 1998, he swore that he was and had been the Vice-President of Marketing for CCT, responsible in that capacity for “pursuing and securing new contracts”; that in May 1996 Woodruff had offered “to have Sanders team with CCT to submit a joint bid for the B-1B program”; that he, Holl-ingsworth, accepted the “invitation”; that it was agreed that CCT would be the lead contractor because, as Woodruff explained, Owego would also be bidding and only one Lockheed entity could have the lead role; that Woodruff promised that Sanders would provide all the STAR processors necessary for CCT to use in the B-1B upgrade; that Woodruff promised that Sanders “would formally document the agreement after the CCT team made the bidders’ short list”; that, in late June or July, Woodruff told' him that Owego regarded the CCT-Sanders team as “a real threat” but that Owego’s rivalry would not endanger their relationship; that in reliance on Woodruffs promises, CCT did not seek another supplier; and that, in reliance on those promises, CCT spent $2.1 million “in developing the technical solution with Sanders for the B-1B upgrade.” The July 8, 1998 declarations of Starzyk, the CCT project manager, and of David W. Jackson, CCT’s chief financial officer, provided evidence that CCT spent approximately $2.1 million “in efforts to cooperate with Sanders” on the B-1B bid. We now review the causes of action as to which , all four declarations were available at summary judgment. Promissory Estoppel. As a second string to its contract bow, in case its oral contract theory did not succeed, CCT contended that Sanders had made a promise, or promises, on which CCT reasonably relied, thereby creating a contract under — 1038 — Restatement (Second) of Contracts, § 90 (1981) and California law incorporating this principle. See C & K Engineering Contractors v. Amber Steel Co., Inc., 23 Cal.3d 1, 6-7, 151 Cal.Rptr. 323, 325-326, 587 P.2d 1136, 1138-1139 (1978). The district court, however, granted Sanders’ motion for summary judgment on this claim. The district court reasoned that if parties agree to be bound only by a writing, promissory estoppel cannot effect an end run and create a contract where none was intended. Rennick, 77 F.3d at 316-317. The district court’s reasoning was unimpeachable on the basis of its earlier ruling that no contract had been intended. But on this new motion for summary judgment it had new evidence — the Woodruff and Hollingsworth declarations — that should have been taken into account as to whether an oral contract had been made. The law of the case as established by the ruling on the first summary judgment motion was not so inflexible as to preclude a second look. See generally Preaseau v. Prudential Ins. Co. of America, 591 F.2d 74, 79-80 (9th Cir.1979). Moreover, as we have now held, there was sufficient evidence to go to the jury on the contractual intentions of the parties in May 1996. Consequently, it was open to CCT to prove promissory estoppel. The declarations of Starzyk and Jackson provided evidence of detrimental reliance by CCT sufficient to withstand summary judgment. CCT is entitled to go to trial on its claim of promissory estoppel precluding Sanders from denying its obligation to take the steps necessary to submit a team bid to Boeing. Separate promises by Sanders, as to which the Woodruff and Hollingsworth declarations provide enough support to survive summary judgment, are the alleged promises by Sanders to supply the STAR processors and to furnish radiation hardening. The declaration of Starzyk is evidence of CCT’s reliance on these assurances. Fraud. Alternative to its claims of contract is a darker scenario advanced by CCT, to wit that Sanders made promises it had no intention of keeping with the purpose of ultimately disabling CCT as a competitor for the Boeing subcontract. Woodruffs July 3, 1998 declaration was prime support for this contention. The district court, however, ruled it insufficiently particular. The district court objected that Woodruff did not identify whether, when he reconfirmed the agreement on behalf of Sanders, he spoke to Kirk or to Clark Hollingsworth. But it was not material whether he spoke to the one or the other. He was the representative of Sanders conveying a message to CCT. The district court, in addition, appears to have inappropriately applied Fed. R.Civ.P. 9(b), requiring particularity in the pleading of fraud, to a summary judgment motion where evidence, not pleading, was to be considered. We have already quoted portions of Woodruffs declaration which, if believed by the jury, would permit the jury to know with sufficient certainty what fraud Sanders had engaged in. To the extent that the district court relied on its first ruling that there was no evidence that Sanders had made promises, the error was double. As we have said, there was evidence of promises, and the Woodruff declaration, now before the court, had to be considered before summary judgment on the fraud claim could be given. This judgment, too, must be reversed. Intentional Interference With Prospective Advantage. Another tort alleged by CCT was that the Lockheed defendants deliberately prevented CCT competing successfully for the award from Boeing. The district court decided this issue on summary judgment on the ground that Sanders had never been contractually bound to CCT, so that pulling Sanders out of its work with CCT was not interference with a contract. As we have held that there was evidence for a contract to cooperate with CCT, the court’s ruling was incorrect. CCT has presented evidence requiring a trial on this issue. — 1039 — Breach of Confidentiality. In charging that Sanders had committed this tort, CCT relied in part on an earlier written Non-Disclosure Agreement between CCT and Sanders that ran from June 15, 1993 to. June 15, 1996. This agreement does not appear to cover the period when disclosure of CCT’s confidential information may have occurred. The district court treated the agreement as the exclusive source of any obligation to maintain confidentiality. In doing so, the court overlooked Kirk Hollingsworth’s declaration stating that Woodruff had promised on behalf of Sanders that the information to be furnished on the Boeing bid would be confidential. A triable issue of material fact existed. The district court also ruled that CCT had not and could not establish any damage from disclosure of the information by Sanders, because CCT withdrew from the bidding. But there was evidence that CCT’s data were provided by Sanders to Owego, helping Owego to make the winning bid, and that Owego knew of Sanders’ relation to CCT. As a remedy for the tort, if it is proved to have occurred, the court may order Owego to disgorge its profit. Gray v. Sutherland, 124 Cal.App.2d 280, 289, 268 P.2d 754, 761 (Cal.App.1954); Restatement of Restitution (1937) § 138. Unfair Business Practices. CCT sought relief under California Business and Profession Code §§ 17200-208. It is not disputed that damages are not available under the statute. Antitrust Violation. CCT alleged that Owego conspired with other Lockheed companies to violate the Cartwright Act, Cal. Bus. and Prof.Code ■ § 16700-16758. The conspiracy allegedly inflated the price paid by Boeing. Such inflation was. no injury to CCT. The district court correctly gave summary judgment against it on this claim. Conclusion. For the reasons stated, the judgment of the district court is AFFIRMED on CCT’s eighth and ninth claims, and the judgment of the district court is REVERSED on CCT’s first, second, third, fourth, fifth, sixth and seventh claims, and the case REMANDED for trial.