                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-15-2005

Massaro Ltd v. Baker & Taylor Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-1523




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                                                 NOT PRECEDENTIAL

        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT


                       No. 04-1462
                       No. 04-1523




 MASSARO LIMITED PARTNERSHIP (PARK WEST TWO),
          a Pennsylvania Limited Partnership

                             v.

         BAKER & TAYLOR INC., a corporation,

                              Appellant, No. 04-1462




 MASSARO LIMITED PARTNERSHIP (PARK WEST TWO),
          a Pennsylvania Limited Partnership,

                              Appellant, No. 04-1523

                             v.

         BAKER & TAYLOR INC., a corporation




ON APPEAL FROM THE UNITED STATES DISTRICT COURT
   FOR THE WESTERN DISTRICT OF PENNSYLVANIA

                District Court No. 00-cv-01234
      District Judge: The Honorable Gary L. Lancaster




                   Argued July 14, 2005
Before: ALITO, VAN ANTWERPEN, and ALDISERT, Circuit Judges

              (Opinion Filed: December 15, 2005 )

                     ANTHONY CILLO (Argued)
                     Cohen & Grigsby, P.C.
                     11 Stanwix Street, 15th Floor
                     Pittsburgh, Pennsylvania 15222

                     HALSEY G. KNAPP, JR.
                     Foltz Martin, LLC
                     Suite 750
                     Five Piedmont Center
                     Atlanta, Georgia 30305

                     THOMAS L. PATTEN
                     RICHARD P. BRESS
                     Latham & Watkins
                     555 11th Street, N.W.
                     Suite 1000
                     Washington, DC 20004

                     Counsel for Baker & Taylor Inc.

                     STANLEY M. STEIN (Argued)
                     BETH S. MILLS
                     Feldstein Grinberg Stein & McKee
                     428 Boulevard of the Allies
                     Pittsburgh, Pennsylvania 15219

                     Counsel for Massaro Limited Partnership (Park
                     West Two)




                  OPINION OF THE COURT




                              2
PER CURIAM:

       Baker & Taylor Inc. (“B&T”) appeals from a final order of the District Court

denying its motion for judgment as a matter of law following a jury verdict against it on a

claim for promissory estoppel. Massaro Limited Partnership (Park West Two)

(“Massaro”) cross-appeals an earlier order, now final, which awarded summary judgment

to B&T on Massaro’s contract claim for breach of the implied covenant of good faith and

fair dealing. Because we write solely for the parties, we need not recite the facts any

further. For the reasons set forth below, we reverse the judgment of the District Court on

the promissory estoppel claim and affirm in all other respects.

                                              I.

       We review an award of summary judgment de novo, applying the same test that the

District Court should have applied. In re Ikon Office Solutions, Inc., 277 F.3d 658, 665

(3d Cir. 2002). Under Federal Rule of Civil Procedure 56(c), summary judgment should

be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of law.” In

applying this test, the Court must draw all reasonable inferences from the evidence in

favor of the nonmoving party and may not weigh the evidence or assess credibility. See

Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999); Petruzzi’s IGA Supermarkets, Inc. v.

Darling-Del. Co., 998 F.2d 1224, 1230 (3d Cir. 1993).



                                               3
       The denial of a motion for judgment as a matter of law also receives plenary

review. See Le v. Univ. of Pa., 321 F.3d 403, 406 (3d Cir. 2003). When the jury has

resolved an issue of fact, the Court’s review is “‘limited to examining whether there is

sufficient evidence to support the verdict, drawing all reasonable inferences in favor of

the verdict winner.’” Id. (quoting Kelly v. Matlack, Inc., 903 F.2d 978, 981 (3d Cir.

1990)). The verdict is supported by sufficient evidence if the record reflects at least the

“minimum quantum” of evidence necessary for a reasonable jury to find for the prevailing

party based on the applicable evidentiary standard. See Starceski v. Westinghouse Elec.

Corp., 54 F.3d 1089, 1095 (3d Cir. 1995).

                                             II.

       Massaro argues that the District Court should have admitted evidence of B&T’s

bad faith, but any error has been mooted by the jury’s verdict on Massaro’s contract

claim. When asked whether “the ‘Letter of Intent’ . . . contractually obligated Baker &

Taylor to rent the property,” the jury responded in the negative. App. at 194. Yet

Massaro submits, and we agree, that the Letter of Intent (“LOI”) was a contract imposing

binding obligations on each party. See, e.g., Massaro’s Br. at 14-17; ATACS Corp. v.

Trans World Comms., 155 F.3d 659, 667 (3d Cir. 1998). Viewing these facts in a manner

that gives B&T the benefit of every reasonable inference, we believe the jury found that

B&T’s performance under the LOI never came due because the board approval condition

was never satisfied.



                                              4
       This finding, which is supported by the plain text of the LOI, forecloses Massaro’s

good faith claim because “[i]mplied duties cannot trump the express provisions in the

contract.” John B. Conomos, Inc. v. Sun Co. (R&M), 831 A.2d 696, 706 (Pa. Super. Ct.

2003). No duty to negotiate a final lease in good faith can be inferred from the LOI if the

board approval condition expressly relieved B&T of any duty to lease the premises. Since

this is precisely what the jury found when asked whether the LOI “contractually obligated

Baker & Taylor to rent the property,” Massaro’s good faith claim is foreclosed and

B&T’s award of summary judgment must be affirmed.1




   1
     Having affirmed on the alternative ground afforded by the jury’s verdict, we need not
decide whether Pennsylvania law would read a covenant of good faith and fair dealing
into this particular contract. Compare Parkway Garage, Inc. v. City of Philadelphia, 5
F.3d 685, 701 (3d Cir. 1993) (“[U]nder Pennsylvania law, every contract does not imply a
duty of good faith.”), with Academy Indus., Inc. v. PNC Bank, N.A., Nos. 00-2383 & 00-
0634, 2002 WL 1472342, at *7 (Pa. Ct. Com. Pl. May 20, 2002) (unreported decision)
(declaring that “a covenant of good faith is implied in every contract” and criticizing
contrary decisions on the ground that they confused good faith duties in tort and contract),
and Fremont v. E.I. DuPont DeNemours & Co., 988 F. Supp. 870, 874 (E.D. Pa. 1997)
(questioning the soundness of the precedent underlying Parkway Garage).
        We also need not decide whether Massaro’s endorsement of the magistrate’s report
and recommendation effected a waiver. B&T argues that it did under an old line of
Supreme Court authority, but those cases involved consent decrees. See United States v.
Babbitt, 104 U.S. 767, 768 (1881); Pac. R.R. v. Ketchum, 101 U.S. 289, 295 (1879).
Those cases did not address factors relevant to the operation of the magistrate system,
such as the text of the Federal Magistrates Act, 28 U.S.C. § 636. Cf. Henderson v.
Carlson, 812 F.2d 874, 877-78 (3d Cir. 1987) (concluding, based in part on the text of
§ 636(b)(1)(C), that failure to object to a magistrate’s recommendation does not effect a
waiver). Whether a party’s endorsement of a magistrate’s recommendation results in a
waiver thus remains an open question. Because a waiver would not affect our
jurisdiction, see Ketchum, 101 U.S. at 295; Tabron v. Grace, 6 F.3d 147, 153 n.2 (3d Cir.
1993), we reserve this interesting issue for another day.

                                             5
                                             III.

       We turn to B&T’s motion for judgment as a matter of law. The jury found by clear

and convincing evidence that “Mr. Benjamin promised that Baker & Taylor’s Board’s

approval of the rental agreement was a ‘mere formality’ and thus, Baker & Taylor was

committed to renting the property.” App. at 196. The parties dispute whether the jury

found an express promise and, if not, whether an implied promise could support an

estoppel. Although we tend to believe the evidence, viewed in the light most favorable to

Massaro, could easily support a finding that an express promise had been made, we need

not resolve this issue definitively. Under the facts of this case, even an express promise

would be unenforceable as a matter of law.

       Pennsylvania’s doctrine of promissory estoppel is set forth in the Second

Restatement of Contracts, which provides:

              A promise which the promisor should reasonably expect to
              induce action or forbearance on the part of the promisee or a
              third person and which does induce such action or
              forbearance is binding if injustice can be avoided only by
              enforcement of the promise.

Restatement (Second) of Contracts § 90(1) (1981); see also Pittsburgh Baseball, Inc. v.

Stadium Auth., 630 A.2d 505, 509 n.5 (Pa. Commw. Ct. 1993) (“Pennsylvania has

adopted the doctrine of promissory estoppel as it appears in the Restatement . . . .”). As

the last clause of this formulation makes clear, not every promise on which a party

reasonably and foreseeably relies is enforceable. The enforceability of the promise



                                              6
depends on the following factors:

              the reasonableness of the promisee’s reliance, on its definite
              and substantial character in relation to the remedy sought, on
              the formality with which the promise is made, on the extent to
              which the evidentiary, cautionary, deterrent and channeling
              functions of form are met by the commercial setting or
              otherwise, and on the extent to which such other policies as
              the enforcement of bargains and the prevention of unjust
              enrichment are relevant.

Restatement § 90 cmt. b.

       The Pennsylvania Supreme Court applied these factors in Thatcher’s Drug Store of

West Goshen, Inc. v. Consolidated Supermarkets, Inc., 636 A.2d 156 (Pa. 1994). In that

case, the defendant promised the plaintiff that it had no intention of opening a pharmacy

in its store if the plaintiff opened one in a nearby retail space. The plaintiff opened its

pharmacy and then sought to enforce the defendant’s promise when the defendant opened

one in its store. Concluding that the trial court’s findings were unsupportable, the

Pennsylvania Supreme Court denied enforcement of the promise on the grounds that the

plaintiff’s “reliance was unreasonable; nothing was done to formalize the promise; and no

evidentiary, cautionary or deterrent functions were met under the circumstances.” Id. at

160.

       These same factors weigh heavily against enforcement here. Like the words at

issue in Thatcher’s Drug Store, Benjamin’s promise was “indefinite on its face.” 636

A.2d at 160 n.7. The phrase “mere formality” does not actually promise board approval

so much as characterize the process by which board approval will be sought and predict a

                                               7
likely outcome. Indeed, David Massaro admitted that Benjamin’s statement was a

“prediction of future events” and “inherently unreliable.” App. at 436-37. As such, it

could hardly assure Massaro that B&T was “committed” to leasing the premises. Cf.

Josephs v. Pizza Hut of Am., Inc., 733 F. Supp. 222, 226-27 (W.D. Pa. 1989) (concluding

that an estoppel could not be supported by an assurance that execution of a lease was a

“mere formality”).

       Massaro understood the importance of having B&T’s commitments in writing

(which was why it pressed B&T to sign the LOI), yet it did nothing to have Benjamin’s

promise formalized or memorialized. It relied on an oral promise made on the spot

during a telephone call from a “disturbed” David Massaro. App. at 426. As in Thatcher’s

Drug Store, “the record fails to reveal that the parties even so much as shook hands” to

cement their understanding of Benjamin’s promise. 636 A.2d at 161. The omission of

any formality is all the more striking in light of the tension between the promise and the

text of the LOI, which stated without any qualification that the lease was subject to board

approval. Just as the supermarket’s lease gave it “a clear right” to open a pharmacy, id. at

160, the LOI gave B&T a clear right to reject the lease.

       Massaro argues that its reliance was reasonable in light of its ongoing relationship

with B&T, but the parties’ relationship is largely beside the point. Though equitable in

origin, the doctrine of promissory estoppel serves as a consideration substitute. See Fried

v. Fisher, 196 A. 39, 41-42 (Pa. 1938); Robert Mallery Lumber Corp. v. B. & F. Assocs.,



                                             8
Inc., 440 A.2d 579, 583 (Pa. Super. Ct. 1982). It operates to protect a promisee whose

reliance cannot be secured by contract because the promise on which he relied was

unsupported by consideration. See Carlson v. Arnot-Ogden Memorial Hosp., 918 F.2d

411, 416 (3d Cir. 1990); Blue Mountain Mushroom Co. v. Monterey Mushroom, Inc., 246

F. Supp. 2d 394, 408 (E.D. Pa. 2002); Fried, 196 A. at 41. As one Court explained, it is

“an equitable remedy to be implemented only when there is no contract; it is not designed

to protect parties who do not adequately memorialize their contracts in writing.” Iversen

Baking Co. v. Weston Foods, Ltd., 874 F. Supp. 96, 102 (E.D. Pa. 1995).

       If anything, Massaro’s relationship with B&T militates against enforcement. At

least the plaintiff in Thatcher’s Drug Store could claim that it never incorporated the

promise into the parties’ written agreement because there was no agreement. Massaro, by

contrast, was in the course of negotiating the LOI at the time the promise was made. Had

it wished to rely on Benjamin’s assurance that board approval was a “mere formality” and

that B&T was committed to leasing the premises, it could have bargained to have this

language included in the LOI. See Kreutzer v. Monterey County Herald Co., 747 A.2d

358, 362 (Pa. 2000) (observing that “persons of ordinary prudence will modify a writing

with another writing in any matter of importance”). Since Massaro’s loss could have

been avoided by including Benjamin’s promise in the parties’ agreement, equitable

enforcement of the promise was not necessary to avoid injustice. Cf. Restatement

§ 90(1).



                                             9
       Finally, the indefinite character of Massaro’s reliance counsels against

enforcement. There was no question in Thatcher’s Drug Store that all of the plaintiff’s

damages were incurred in reliance on the defendant’s promise. The undisputed record

here shows just the opposite. Massaro faxed a letter to Equitable Resources Marketing

Group (“Equitable”) on March 16, 2000, offering to terminate its lease for $200,000.

Massaro does not dispute that this offer satisfied the Statute of Frauds for any

modification of the parties’ interests in the property. See, e.g., 68 Pa. Cons. Stat.

§ 250.202; Target Sportswear, Inc. v. Clearfield Found., 474 A.2d 1142, 1149 (Pa. Super.

Ct. 1984). Had Equitable accepted the offer by return fax that day, Massaro would have

had a binding obligation to terminate the lease. See Taylor v. Stanley Co. of Am., 158 A.

157, 158 (Pa. 1932). The record thus leaves no doubt that Massaro was prepared to

release Equitable on March 16, 2000 – five days before the LOI was signed. Since the

LOI served as the predicate for Benjamin’s promise that board approval was a “mere

formality” and that B&T was committed to a lease, any action prior to its signing could

not have been taken in reliance on Benjamin’s promise.

       Even if Massaro relied on Benjamin’s promise in releasing US Airways, Inc., the

remaining Restatement factors do not justify the recovery of this piecemeal reliance. For

the reasons given above, those factors weigh against enforcement at least as heavily here

as they did in Thatcher’s Drug Store. No reasonable factfinder could conclude that

enforcement of Benjamin’s promise is necessary to avoid an injustice; indeed, we believe



                                              10
enforcement is likely to perpetrate an injustice. B&T was entitled to judgment as a matter

of law, and the judgment of the District Court is accordingly reversed.

                                            IV.

       In sum, we conclude that B&T was entitled to summary judgment on Massaro’s

claim for breach of an implied covenant of good faith and fair dealing, and we affirm that

portion of the District Court’s judgment. We also conclude that B&T was entitled to

judgment as a matter of law on Massaro’s claim for promissory estoppel and that the

District Court erred in denying its motion. Because we reverse that portion of the

judgment, we need not resolve the parties’ dispute over the proper calculation of

Massaro’s damages. On remand, an appropriate judgment shall be entered for B&T.




                                            11
