UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LONGWOOD ELASTOMERS,
INCORPORATED,
Plaintiff-Appellant,
                                                                   No. 95-3124
v.

AEROQUIP CORPORATION,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
Jackson L. Kiser, Senior District Judge.
(CA-93-988-R)

Argued: July 10, 1996

Decided: October 29, 1998

Before RUSSELL* and WIDENER, Circuit Judges,
and HALL, Senior Circuit Judge.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Arthur D. Grossman, FOX & FOX, Newark, New Jersey,
for Appellant. William R. Rakes, GENTRY, LOCKE, RAKES &
_________________________________________________________________
*Judge Russell heard oral argument in this case but died prior to the
time the decision was filed. The decision is filed by a quorum of the
panel. 28 U.S.C. § 46(d).
MOORE, Roanoke, Virginia, for Appellee. ON BRIEF: Gregory J.
Haley, GENTRY, LOCKE, RAKES & MOORE, Roanoke, Virginia,
for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

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OPINION

PER CURIAM:

Plaintiff-appellant Longwood Elastomers Inc. (Longwood), a Vir-
ginia corporation, appeals the district court's entry of an adverse judg-
ment in a fraud and breach of contract action against defendant
Aeroquip Corporation (Aeroquip). The suit arose from the November
1991 sale by Aeroquip to Longwood of Aeroquip's manufacturing
plant in Wytheville, Virginia. Longwood's appeal pertains only to the
disposition of those claims relating to the weld fittings product line
at the plant, namely: (1) breach of contract; (2) fraud; (3) negligent
misrepresentation; and, (4) breach of duty of good faith and fair deal-
ing. The district court entered a final judgment incorporating its Feb-
ruary 24, and August 30, 1995 interlocutory orders granting
Aeroquip's motion for summary judgment on the foregoing claims
and denying Longwood's motion for reconsideration. Longwood
Elastomers, Inc. v. Aeroquip Corp., C.A. 93-0988-R (W.D. VA. Nov.
14, 1995). See also Longwood Elastomers, Inc. v. Aeroquip Corp.,
C.A. 93-0988-R Mem. Op. (W.D. VA. Feb. 24, 1995). We affirm.

In or about 1990 Aeroquip decided to sell its plant in Wytheville,
Virginia. The Wytheville plant manufactured and sold molded rubber
products, primarily for transportation related industries, included in
which was Aeroquip's Railroad Products Group. In preparation for
the anticipated sale, and in order to round-out the railroad group, in
1990 Aeroquip relocated its weld fitting production from its Cary,
Illinois plant to Wytheville. The weld fittings were sold by Aeroquip
to railroads to be utilized in brake assemblies.

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Aeroquip retained investment bankers Goldsmith Agio & Co. to
prepare an Offering Memorandum, which was completed in August
1990. The most relevant aspects of the Offering Memorandum are as
follows. It stated that the Wytheville weld fittings operation generated
about $1 million in sales each year and that the other railroad products
yielded $4.3 million annually. It otherwise included the weld fittings
within the railroad group, including for the purposes of providing his-
torical financial information and financial projections. The Offering
Memorandum projected that the railroad products line, thirty percent
of the Wytheville business, would increase by nine percent. It did not,
however, make any projections for the weld fittings line itself, which
constituted twenty percent of the railroad products line. Finally, the
Offering Memorandum specifically disclaimed liability on the part of
Goldsmith or Aeroquip as to the accuracy and completeness of the
Memorandum, and disavowed any liability for representations or
omissions in it or any other written or oral communications provided
during the recipient's evaluation of the company.*

Longwood, based in part on the Offering Memorandum and after
what it calls "extensive presentations by Wytheville personnel on all
aspects of the business including a discussion of product lines,"
expressed an interest in purchasing the plant. Shortly thereafter, on
November 21, 1990, Longwood signed a letter of intent to purchase
the business for $15.5 million. Longwood then engaged in a thorough
12 month due diligence investigation. Although Longwood was
required to direct all its inquiries to four of the Aeroquip managers,
the district court noted that both of the principal officers of Longwood
_________________________________________________________________
*Specifically, the Memorandum provided:

          neither Aeroquip nor GAC makes any representation or warranty
          as to the accuracy or completeness of this Memorandum and
          shall have no liability for any representations (expressed or
          implied) contained in, or for any omissions from, this Memoran-
          dum or any other written or oral communications transmitted to
          the recipient in the course of the recipient's evaluation of the
          Company.

           This Memorandum contains certain statements, estimates and
          projections . . . which assumptions may or may not prove to be
          correct. No representations are made as to the accuracy of such
          statements, estimates or projections.

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testified that all their requests for information were fulfilled and
answered satisfactorily. Further, over the course of the year, it became
apparent to everyone that Aeroquip's sales projections has been
overly optimistic. Additionally, Longwood had the benefit both of
financial projections by two of its lenders, Chase Manhattan Bank and
Chemical Bank, and what is called a businessman's review by Ernst
& Young prepared in April 1991.

As Longwood's investigation wound to a close, the parties negoti-
ated a Purchase Agreement, in which Aeroquip agreed to a $400,000
reduction in the sales price. The deal was closed on November 26,
1991, after which Longwood employed two of Aeroquip's top Wythe-
ville managers, Richard Dickerson (general manager) and Paul
Coman (product manager). Both of these managers not only made
substantial equity investments in Longwood, as required by subscrip-
tions negotiated prior to closing, they both certified that the represen-
tations and warranties in both the purchase agreements and exhibits
were true and accurate.

Longwood's claims for fraud and breach of contract underlying
this appeal arise from Aeroquip's alleged failure to disclose material
information regarding the market for the weld fittings products. Long-
wood asserted that Aeroquip was aware "that the weld fitting market
was about to undergo a precipitous and permanent decline." As the
district court noted, Longwood relied primarily on a memorandum of
March 27, 1991 to General Manager Dickerson from Wytheville
Sales Manager Coman. That memorandum discusses the effect of
Rule 88 in the Interchange Field Manual of the American Association
of Railroads. The rule, enacted almost 20 years earlier, requires that
all new and officially rebuilt railroad cars have welded brakepipe fit-
tings, instead of grip seal fittings. The district court noted that the
market for retro-fitting existing cars was a closed-end one, and by
1991 the demand for this one-time modification was nearing an end.
Longwood cited the fact that the memorandum in question discussed
the effects of Rule 88, and projected the sales of weld fittings as
declining to $615,000 in 1994 as evidence that Aeroquip knew that
the decline in sales during the preclosing period was not merely an
effect of a temporary recession. Dickerson testified that he told Aero-
quip manager Rick Morgan to notify Longwood of the predicted
decline and that Morgan rebuffed the suggestion as unnecessary.

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Longwood also highlights that two other Aeroquip internal memo-
randa each differed with the growth predictions of the Offering Mem-
orandum. First, an October 30, 1990 memorandum from Aeroquip's
controller, R.C. Copple, to Morgan used a "pessimistic growth sce-
nario" of five percent, not nine. Second, on a memorandum to Coman
describing the effects of Rule 88, T.S. Olsen, the product manager,
stated "we are presently at or close to the top of a curve representing
the requirements for fittings to be supplied to repaired cars. I expect
this curve to plummet sharply."

Longwood argued that Aeroquip's alleged failure to reveal its
knowledge of the Rule 88 effect on the sale of weld fittings consti-
tuted fraud, negligent misrepresentation, or at least breach of duty of
good faith. Further, Longwood argued that this alleged concealment
or nondisclosure violated one or several sections of the Purchase
Agreements, namely: § 4.4 "No Material Adverse Changes"; § 4.18
"Full Disclosure"; § 4.19 "Conduct of the Wytheville Business"; § 6.2
"Access"; and, § 6.4 "Updating of Information." Longwood claims
that as a result of Aeroquip's alleged fraud, Longwood believed that
the profit from weld fittings sales through the year 2001 would be
higher by between $2,421,825 and $4,338,78 than Longwood now
projects. Accordingly, Longwood is suing for these damages.

In response, both at trial and in its brief, defendant Aeroquip
stressed the existence of other documents discussing the decline dur-
ing the due diligence investigation throughout 1991. In particular, a
memorandum sent by Dickerson to Morgan on July 11, 1991 attri-
buted the decline to the 1991 recession. Dickerson also sent a copy
of that memorandum to Longwood's Chief Executive Officer Hart-
nett. Dickerson testified that the weld fitting information in the mem-
orandum was accurate at the time to the best of his knowledge, and
that he "did not at that time consider any of Rule 88 information as
part of that decline."

Additionally, Aeroquip notes that Coman, in a telling May 5, 1993
memorandum to Dickerson, almost 18 months after the closing date,
indicated his belief that Rule 88 had not been a"major factor" in the
business in several years. Significantly, Coman stated that "the slip in
1991 was due to recessionary reasons - not Rule 88" and that he was
"unable to define any loss of business - if any."

                    5
The district court ruled that Aeroquip had met its burden for sum-
mary judgment on these issues in accordance with the standard set
forth by Federal Rule of Civil Procedure 56(c), Charbonnages de
France v. Smith, 597 F.2d 406 (4th Cir. 1979), and Shaw v. Stroud,
13 F.3d 791, 798 (4th Cir.), cert. denied, 513 U.S. 813 (1994).

The district court granted summary judgment dismissing the claim
of fraud on the grounds that Longwood did not show the elements set
forth in Van Deusen v. Snead, 441 S.E.2d 207, 209 (Va. 1994). The
court found there was neither a representation specific to weld fit-
tings, nor an actionable nondisclosure. Additionally, the court found
that the sales predictions cited by Longwood were opinions or
assumption, not existing facts, and that these predictions were accom-
panied by an express disclaimer, such that reliance was not justified.
Finally, the court noted that Longwood's independent investigation
precludes a finding of reliance by Longwood on Aeroquip's state-
ments.

The court similarly granted summary judgment as to the breach of
contract claim. The court refused to indulge Longwood's argument
that certain sections of the contract required Aeroquip to volunteer
information about the decline of future weld fittings sales. The court
found that on its face the Purchase Agreement did not address future
sales of weld fittings, and that the Agreement's integration clause pre-
vented the projections of the earlier and separate Offering Memoran-
dum from falling within the ambit of the Purchase Agreement.

The court granted judgment as a matter of law on the issues of neg-
ligent representation and breach of duty of good faith. The court fol-
lowed Haigh v. Matsuhita Electric Corp., 676 F. Supp. 1332, 1349-50
(E.D. Va. 1987), which held that the courts of Virginia have refused
to adopt the tort of negligent misrepresentation. Likewise, A&E Sup-
ply Co. v. Nationwide Mutual Fire Ins. Co., 798 F.2d 669, 671-72
(4th Cir. 1986), cert. denied, 479 U.S. 1091 (1987), reaffirmed that
this court ordinarily rejects, an independent cause of action, tort
claims under Virginia law for breach of contract, even where an
improper motive on the part of the breaching party is alleged.

We affirm the district court's grant of summary judgment on the
claims relating to the weld fitting for the reasons stated in the district

                     6
court's opinion. In oral argument Longwood agreed that not only did
it profit from this arms-length deal, but that it got a "good deal," and
did not want the transaction set aside. It is not an exaggeration to
remark that, despite its awareness during the investigation period that
weld fittings sales were below the predictions of the Offering Memo-
randum, Longwood now seeks an interpretation of the Purchase
Agreement so that something even better is realized. We decline the
invitation.

The judgment of the district court is accordingly

AFFIRMED.

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