FILED
NOT FOR PUBLICATION
MAY 06 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ACP, INC., a Delaware corporation, No. 13-16840
Plaintiff - Appellant, D.C. No. 4:13-cv-01572-PJH
v.
MEMORANDUM*
SKYPATROL, LLC, a Florida limited
liability company; GORDON HOWARD
ASSOCIATES, INC., DBA PassTime
USA, a Colorado corporation,
Defendants - Appellees.
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, Chief District Judge, Presiding
Argued and Submitted November 18, 2015
San Francisco, California
Before: McKEOWN, RAWLINSON, and PARKER,** Circuit Judges.
Judges McKeown and Rawlinson join as to Part I. Judges McKeown and Parker join
as to Part II. Judge Parker dissents as to Part I, and Judge Rawlinson dissents as to
Part II.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Barrington D. Parker, Jr., Senior Circuit Judge for the
U.S. Court of Appeals for the Second Circuit, sitting by designation.
ACP, Inc. (“ACP”) challenges the district court’s dismissal of its complaint
against Gordon Howard Associates, Inc. (“Gordon Howard”) and Skypatrol, LLC
(“Skypatrol”). ACP contends that the district court erred in holding that ACP failed
to sufficiently allege that Gordon Howard and Skypatrol entered into a unilateral
contract requiring reimbursement for ACP’s investigation of a potential investment.
ACP also maintains that the district court abused its discretion in denying leave to
amend so that ACP could allege additional facts in support of its breach of unilateral
contract claim and a promissory estoppel claim.
I. The Unilateral Contract
Under California law, a promisor may not seek enforcement of a unilateral
contract. See Faigin v. Signature Grp. Holdings, Inc., 150 Cal. Rptr. 3d 123, 135
(Cal. Ct. App. 2012) (articulating that “[a] unilateral contract is one in which there is
only one promisor. Any act or forbearance by the promisee may constitute
consideration for the promise and an acceptance of the offer” (citation omitted)); see
also Asmus v. Pac. Bell, 999 P.2d 71, 75 (Cal. 2000) (observing that “[i]n a unilateral
contract, there is only one promisor, who is under an enforceable legal duty. The
promise is given in consideration of the promisee’s act or forbearance” (citation
omitted)). The district court correctly held that ACP was the promisor under the letter
agreement because ACP, using its own letterhead, conveyed an offer to Gordon
2
Howard and Skypatrol concerning a potential acquisition. ACP’s performance of the
agreement did not create a binding unilateral contract. See Faigin, 150 Cal. Rptr. 3d
at 135. Thus, the district court properly dismissed ACP’s contract claim.
The district court did not engage in impermissible fact-finding in dismissing
ACP’s complaint. The district court took judicial notice of the letter agreement relied
on in the complaint and correctly concluded that ACP was the promisor after
considering the terms of the agreement. See Gonzalez v. Planned Parenthood of Los
Angeles, 759 F.3d 1112, 1115 (9th Cir. 2014) (explaining that “[a]lthough we
normally treat all of a plaintiff’s factual allegations in a complaint as true, we need not
accept as true allegations that contradict matters properly subject to judicial notice or
by exhibit” (citations, alteration, and internal quotation marks omitted)). Any leave
to amend this claim would have been futile.
II. Dismissal Without Leave to Amend
ACP also sought leave to amend its complaint to add a claim for promissory
estoppel. The district court denied ACP’s motion to amend its complaint; the majority
reverses that ruling. Given the liberal rules of amendment endorsed by the Supreme
Court and this circuit, see Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048,
1052 (9th Cir. 2003) (quoting Forman v. Davis, 371 U.S. 178, 182 (1962)), ACP
should have been afforded that opportunity.
3
To state a claim for promissory estoppel, a plaintiff must show: “(1) a promise
clear and unambiguous in its terms; (2) reliance by the party to whom the promise is
made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party
asserting the estoppel must be injured by his reliance.” Aceves v. U.S. Bank, N.A., 120
Cal. Rptr. 3d 507, 514 (Cal. Ct. App. 2011) (internal quotation marks omitted)
(quoting Advanced Choices, Inc. v. State Dep’t of Health Servs., 107 Cal. Rptr. 3d
470, 479 (Cal. Ct. App. 2010)). Indeed, the unamended complaint already comes
close to pleading the necessary elements.
ACP’s complaint sufficiently alleged a “clear and unambiguous” promise and
that ACP was injured by its reliance on that promise by incurring expenses pursuing
the transaction. The missing elements—reasonableness and foreseeable reliance—in
fact are alluded to in the original complaint, which alleges that the promise to
reimburse served as an “inducement to ACP’s investigation of the potential
transaction.” To the extent these elements are not inherently obvious, there is no
reason they cannot be added in an amended pleading, and such a claim would not have
been futile. For these reasons, leave to amend should not have been denied.
The judgment of the district court is affirmed as to dismissal of the unilateral
contract claim and reversed with respect to the denial of leave to amend to add a
4
promissory estoppel claim. On remand, ACP should be permitted to amend its
pleadings with respect to promissory estoppel.
Each party shall bear its own costs on appeal.
AFFIRMED in part, REVERSED in part, and REMANDED.
5
FILED
ACP Inc v Skypatrol et al 13-16840
MAY 06 2016
PARKER, J., dissenting as to Part I: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
Because the complaint plausibly alleges that Appellees Gordon Howard
Associates and Skypatrol, LLC (the “Companies”) promised to reimburse
Appellant ACP, Inc. for the expenses it incurred in pursuit of the proposed
transaction and failed to do so, I respectfully dissent. The majority correctly
concludes that a unilateral contract only binds the promisor, and thus only the
promisee, once it has performed, can seek to enforce the contract. But at this
point, I part ways with the majority because the fact that the transaction may have
been proposed by ACP does not mean that ACP was the promisor. Rather, the
language of the letter agreement—and even the arguments of the parties—indicates
that the Companies were the promisors, and ACP the promisee. Once ACP
performed, the Companies were bound and, having failed to pay, are liable to ACP.
Consequently, ACP’s complaint, which contains these assertions, states a claim
that should not have been dismissed under Rule 12(b)(6).
Although we assume that the parties are familiar with the relevant facts, I lay
out some of the key ones alleged by ACP. The dispute arises from a letter
agreement sent by ACP to the Companies in January 2012. The letter references
an “indication of [ACP’s] interest” in the “potential acquisition of [the
Companies].” The final paragraph of the letter clarifies that the “letter agreement
is an expression of mutual intent only and is non-binding, except for the terms
related to Exclusivity and Expenses, which will be binding upon each of the
undersigned.” The “Expenses” provision, which frames the dispositive issue in
this litigation, provides that the Companies “shall reimburse [ACP] for its actual
out-of-pocket expenses incurred in pursuit of the Transaction.” It is undisputed
that the Companies signed and returned the letter.
The complaint alleges that although ACP undertook an investigation into the
transaction, thus triggering the Companies’ promise to reimburse ACP, the
Companies refused to honor that promise. ACP argued below and on appeal that
the letter agreement is a unilateral contract and that the Companies promised to
reimburse ACP in exchange for the investigation it conducted in pursuit of the
transaction. The Companies argue that the contract is an unenforceable unilateral
contract because ACP, the offeror, offered no consideration. But this argument is
an incorrect one that is not consistent with basic contract principles.
In a unilateral contract, the promisor makes a promise in exchange for
performance by another party, the promisee. Sateriale v. R.J. Reynolds Tobacco
Co. 697 F.3d 777, 785 (9th Cir. 2012). The majority is correct in its fundamental
premise that only the promisor in a unilateral contract is under an enforceable legal
duty to perform and that the promisor’s obligation to fulfill its promise is triggered
2
once the promisee renders performance. Asmus v. Pac. Bell, 999 P.2d 71, 75 (Cal.
2000). The majority also correctly recognizes that the pertinent inquiry is which
party is the “promisor” (and thus bound by an enforceable legal duty), and which
party is the “promisee” (and thus free of any legal duty to perform).1 The majority
errs, however, in concluding that ACP must be the promisor merely because it
initiated the transaction and proposed the agreement.
The majority summarily concludes that ACP was the promisor, and thus
may not seek enforcement of the contract, reasoning that “ACP was the promisor
under the letter agreement because ACP, using its own letterhead, conveyed an
offer to Gordon Howard and Skypatrol concerning a potential acquisition.” Maj.
Op. at 2–3. But this conclusion is wrong because it is irrelevant which party
initially proposed the transaction. The dispositive question under California law is
which party made a promise to perform. Here, indisputably, the Companies did so.
1
The district court and the parties focus intensely on the identity of the
offeror. But neither the district court nor the Companies provide support for the
proposition that the identity of the offeror has any bearing on whether a contract
was properly formed, and the majority notably abandons that rhetoric, asking
instead which party was the promisor. At any rate, the purpose of examining the
offeror/offeree relationship is to determine whether there is “mutual assent,” a
necessary element of any contract. Donovan v. RRL Corp., 27 P.3d 702, 709 (Cal.
2001). We see no credible argument that the Companies, in signing a letter that
unambiguously bound them to reimburse ACP for its due diligence costs, failed to
assent to the formation of the agreement.
3
Both parties invoke the “Brooklyn Bridge” example of a unilateral contract
well known to all first year law students. The promisor tells the promisee, “I will
pay you $100 if you walk across the Brooklyn Bridge.” The promisee walks
across the Brooklyn Bridge, and is now entitled to her $100. But the respective
obligations would be no different merely because it was the promisee who
proposed the transaction. For example, the promisee asks the promisor, “Will you
pay me $100 if I cross the Brooklyn Bridge?” The promisor says, “Yes, I will pay
you,” and the promisee walks across the Brooklyn Bridge. The promisee, by
soliciting the promise, is no less the promisee, and is no less entitled to the $100
reward.
The confusion stems from the mistaken belief by the parties and the majority
that offeror and promisor are synonymous terms. They are not. It may very well
be the case, as it was here, that the party proposing the transaction did so by
soliciting a promise conditioned on its performance of some act. If the other party
agrees and makes a promise, a unilateral contract is formed. In none of the cases
cited by the majority or the Companies have California courts suggested that a
promisee in a unilateral contract is not entitled to enforce the contract merely
because he solicited the promise, rather than waiting for one to arrive at his
doorstep.
4
The simple facts of this transaction have not been lost on the parties.
Indeed, the Companies admit that by receipt of the letter agreement, “the
Companies were asked to make a promise.” Later, the Companies assert that “[i]f
the sale had gone through, we would not be here today,” suggesting that their
promise to reimburse ACP would be enforceable if the Companies had been
satisfied with the result of the investigation.2 In any event, the terms of the
promise were clear: As alleged in the complaint, the Companies promised to
reimburse ACP for expenses incurred in investigating the transaction.
The Companies and the majority stop short of considering the practical
implications of failing to enforce a garden variety contract such as this one.
Intercompany transactions take place only because each side has made a calculated
decision that the potential benefit of the transaction outweighs the costs—legal
fees, due diligence, efforts to obtain financing, etc. But a party can induce a
counterparty to consider a transaction that would ordinarily be undesirable by
agreeing to displace some of those costs. These types of commercial agreements
are quite common, and allow parties who otherwise would be uninterested in a
2
This assertion also illuminates the Companies’ motivation for objecting to
the reimbursement—they are simply unhappy that the transaction did not go
through. Neither the majority nor the Companies point to any language in the
letter agreement suggesting that the Companies’ obligation was only enforceable if
the transaction closed.
5
joint transaction to reallocate costs such that the transaction has the potential to be
mutually beneficial.
That is the situation contemplated here: ACP was apparently drawn to the
transaction in part because it knew that the costs would be partially borne by the
Companies. It drafted (allegedly with the Companies’ input) an agreement
reflecting an allocation of costs under which the Companies’ promise to pay arose
when ACP undertook the investigation. The Companies contend that as the
transaction proceeded, they became dissatisfied with the level of the costs and the
quality of the investigation, and once the transaction did not close, they were
unwilling to absorb those costs. But while this dissatisfaction may at some point
cause the parties to litigate the issue of damages, it has nothing to do with the
existence of an enforceable contract. In sum, whatever the law of contract may say
about the offeror/offeree relationship, the fundamental goal of contract law “is to
give effect to the mutual intention of the parties.” Powerine Oil Co., Inc. v. Super.
Ct., 118 P.3d 589, 597–98 (Cal. 2005). ACP—and the Companies—are entitled to
have that intention given effect.
6
FILED
ACP Inc v Skypatrol et al 13-16840
MAY 06 2016
RAWLINSON, J., dissenting as to Part II: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
The district court did not abuse its discretion in denying leave to amend
because any amendment premised on a promissory estoppel claim would have
been futile. See Chinatown Neighborhood Ass’n v. Harris, 794 F.3d 1136, 1144
(9th Cir. 2015) (“Although leave to amend shall be freely given when justice so
requires, it may be denied if the proposed amendment either lacks merit or would
not serve any purpose because to grant it would be futile in saving the plaintiff’s
suit. . . .”) (citation and internal quotation marks omitted).
Under California law, “promissory estoppel is an alternative theory of
recovery that enforces promises because the promisee has justifiably and
foreseeably relied on the promise . . .” Douglas E. Barnhart, Inc. v. CMC
Fabricators, Inc., 211 Cal. App. 4th 230, 243 (2012) (citation and internal
quotation marks omitted) (emphasis added). Only the promisor is bound on a
promissory estoppel claim. See Garcia v. World Sav., FSB, 183 Cal. App. 4th
1031, 1041 (2010). As discussed in Part I, ACP was the promisor in the letter
agreement rather than the promisee. Accordingly, ACP could not have been
induced to its detriment as a promisee, as required to state a promissory estoppel
claim. See Douglas E. Barnhart, Inc., 211 Cal. App. 4th at 243. Because ACP
cannot, consistent with the facts, assert that it is a promisee under the letter
agreement, amendment would have been futile. See Chinatown Neighborhood
Ass’n, 794 F.3d at 1144. I would affirm the district court decision in its entirety.
2