United States Court of Appeals
For the First Circuit
No. 02-2689
BACOU DALLOZ USA, INC.,
Plaintiff-Appellee,
v.
CONTINENTAL POLYMERS, INC.,
Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, U.S. District Judge]
[Hon. Mary M. Lisi, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella, Circuit Judge,
and Baldock,* Senior Circuit Judge.
Steven E. Snow with whom Michael J. Murray and Partridge Snow
& Hahn LLP were on brief for appellant.
John D. Deacon, Jr., with whom Matthew F. Medeiros and Little,
Bulman, Medeiros & Whitney, P.C. were on brief for appellees.
September 8, 2003
*
Of the Tenth Circuit, sitting by designation.
BALDOCK, Senior Circuit Judge. In this diversity case
arising out of a contract dispute, Defendant-Appellant Continental
Polymers, Inc. ("Continental") appeals the district court’s order
granting summary judgment in favor of Bacou Dalloz USA ("Bacou")on
Continental’s breach of contract and good faith and fair dealing
counterclaims. Continental also appeals the district court’s
determination after trial that Continental failed to prove Bacou
made fraudulent misrepresentations to induce Continental’s owners
to sell part of their company to Bacou at a reduced price. We have
jurisdiction pursuant to 28 U.S.C. § 1291. We reverse and remand.
I.
Howard Leight formerly was the sole stockholder and
President of Howard S. Leight & Associates, Inc. d/b/a Howard
Leight Industries (“HLI”). HLI manufactured hearing protection
products, including foam earplugs. In December 1997, Bacou, an HLI
customer, sought to purchase HLI. After several days of
negotiations, Leight declined to sell the company. Shortly after
negotiations fell through, Bacou co-chairman Walter Stepan and
in-house counsel Philip Barr called Leight and HLI’s CEO John Dean
and requested they come to Rhode Island. Stepan and Barr requested
Leight and Dean visit to explain to Bacou’s chairman, Philippe
Bacou, why Leight did not want to sell HLI. Leight and Dean agreed
to the trip in part because Bacou was one of HLI’s biggest
customers.
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Leight and Dean flew to Rhode Island and had dinner with
Bacou, Stepan, and Barr on Saturday, January 10. During this
conversation, Leight informed Bacou he would not sell because the
December 1997 offer was $10 million too low. The parties began
discussing terms for the sale of HLI, but decided that serious
negotiations would be reserved for the next day.
The parties met again on Sunday, January 11. To bridge
the $10 million gap, Stepan proposed a $1 million consulting
contract for Leight, as well as royalty payments, which would cut
the gap in half. The parties then discussed a proposal under which
Bacou would purchase all its requirements for polyurethane
prepolymer, the main raw material for HLI’s foam earplugs, from
Howard Leight Enterprises for five years. Howard Leight
Enterprises, now Continental, was a newly formed corporation owned
by top HLI executives, including Leight and Dean. It was created
in October 1997 for the express purpose of manufacturing
polyurethane prepolymer. Based on the then-current market price
for prepolymer and HLI’s volume of prepolymer, this contract would
bridge the remaining $5 million price gap. The parties agreed to
this arrangement and had a champagne toast.
On January 12th, Stepan and Barr presented to Leight and
Dean a letter drafted by Barr and Bacou’s outside counsel. The
first paragraph of the letter references an asset purchase
agreement between Bacou and HLI. Paragraphs three and four discuss
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Bacou’s agreement to make Leight a Bacou director, as well as
various stock options for Leight. The fourth paragraph provides:
Finally, we understand that you recently
formed a new company named Howard Leight
Enterprises, Inc. ("HLE"), which will
manufacture polyurethane prepolymer, the raw
material used in the production of foam ear
plugs by Howard S. Leight & Associates, Inc.
("HLI") and currently purchased from Hampshire
Chemicals. This will confirm that Bacou USA
Safety, Inc. will enter into a supply
agreement with HLE pursuant to which Bacou USA
Safety, Inc. agrees to purchase its
requirements for polyurethane prepolymer from
HLE for a period of five years provided that
the quality and price of such raw material are
equivalent to that which is then used by HLI
and available from third-party suppliers.
Stepan, Barr, and Leight signed the letter.
In February, the parties met to sign the closing
documents. Continental alleges that at the closing, Dean asked
Stepan to incorporate the January 12th letter agreement in the
asset purchase contract. Stepan allegedly responded that this was
unnecessary because the January 12th letter would stand on its own
and if it did not, then Bacou would not be completing the deal that
day. The parties subsequently signed the asset purchase agreement
without any further memorialization of a supply agreement.
Following the sale, Continental purchased property in
Mexico on which it built a manufacturing plant and machinery needed
to manufacture prepolymer. In January 1999, Continental informed
Bacou it had completed construction and was prepared to begin
shipment to Bacou. Continental and Bacou commenced negotiations
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for a supply agreement in February 1999. Thomas Klein, President
of Bacou’s HLI division, represented Bacou. John Dean represented
Continental. The negotiations centered around the four principle
issues of price, quality, volume, and confidentiality.
According to Continental, the price of prepolymer
remained relatively stable, around $2 per pound both at the time of
the January 12th letter and up until February 1999. In October
1998, Bacou requested a price reduction on prepolymer from its
then-current supplier, Dow (formerly Hampshire Chemicals). Dow was
aware of the January 12th letter between Bacou and Continental.
Within days of Dean informing Bacou that Continental was prepared
to ship prepolymer, Dow agreed to reduce its prepolymer price to
$1.56 per pound. According to Continental, Dow did not offer this
price to other customers.
As a result of Dow’s offer, Bacou took the position in
negotiations with Continental that $1.56 was the price "then
available" to Bacou under the January 12th letter. Continental
disputed the $1.56 price. According to Continental, Bacou
artificially reduced the price by telling Dow that if it could
lower the price enough, Continental would not be able to match
Dow’s offer and Dow would remain Bacou’s principal supplier.
The parties also had difficulty agreeing on the quality
term. Bacou requested production of specifications and samples of
Continental’s prepolymer for testing to assure adequate quality.
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Continental refused, arguing Bacou was attempting to impose onerous
testing and sampling requirements that Bacou did not require from
other vendors. The volume of prepolymer which Bacou would
purchase from Continental also became a disputed issue between the
parties. Bacou wanted to purchase a small percentage of prepolymer
from a second source to maintain a backup supplier. Continental
insisted Bacou purchase one hundred percent of its requirements
from Continental. Finally, Bacou insisted Continental enter into
confidentiality agreements. Continental refused.
Based on a breakdown in negotiations between Klein and
Dean, Bacou’s Barr replaced Klein in negotiations. Barr submitted
to Continental an initial purchase order for 10,000 pounds of
prepolymer at $2 per pound. The order informed Continental that a
portion of this lot would be used for testing and upon
qualification the balance would be used in production. The
purchase order proposed that after developing a working
relationship, executives from both companies could meet to work out
a long term supply agreement. Continental did not ship prepolymer
to Bacou in response to this purchase order.
The parties thereafter went through a series of
negotiations on the price, volume, quality, and confidentiality
terms. Bacou sent Continental several draft supply agreements, all
of which Continental rejected. As of May 12, however, Bacou
apparently believed the only sticking point was the confidentiality
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agreements. Barr sent another purchase order to Continental for
10,000 pounds at $2 per pound. The order mentioned that the
parties were still working out a confidentiality agreement, but
that they would not share confidential information until that was
completed. Continental declined to ship any product to Bacou
pursuant to this purchase order. Bacou offered Continental one
last supply agreement in August 1999, but Continental again
refused.
II.
Based on this series of events, Bacou filed suit in Rhode
Island state court seeking a declaratory judgment that Bacou had no
obligations under the January 12th letter. Continental removed to
federal court based on diversity jurisdiction. Continental
counterclaimed that Bacou (1) breached the January 12th agreement;
(2) breached its duty of good faith and fair dealing under the
January 12th agreement; and (3) falsely misrepresented its
intention to enter into a supply agreement with Continental to
induce Leight to sell HLI at a reduced price.
Bacou moved for summary judgment. The district court
granted Bacou’s motion as to the contract claim, holding that under
Rhode Island law, the January 12th letter was an unenforceable
"agreement to agree."1 The court also found the January 12th
1
The Hon. Ernest C. Torres, Chief United States District
Judge, ruled on the motion for summary judgment. The Hon. Mary M.
Lisi, United States District Judge, presided at the trial.
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letter was not a binding contract because it did not set out all
material terms, and no reasonable criteria existed for supplying
the missing terms of quality and price. The district court also
concluded that because no enforceable contract existed, Bacou owed
no duty of good faith and fair dealing. The district court denied
summary judgment as to Continental’s fraudulent misrepresentation
counterclaim, however, concluding Continental presented sufficient
evidence of fraud to proceed to trial.
The district court subsequently held a bench trial on the
fraudulent misrepresentation counterclaim. During trial,
Continental sought to introduce testimony from ex-Bacou employee
Rex Lowery concerning statements made by senior Bacou management
that they never intended to enter into a supply agreement with
Continental. Upon Bacou’s objection, the district court struck the
testimony as hearsay.
At the conclusion of trial, the district court entered
judgment in Bacou’s favor. The district court found Bacou
negotiated in good faith, and the only reason the parties did not
enter into a supply agreement was because Continental’s Dean
thwarted negotiations. Continental now appeals, arguing (1) the
January 12th letter was an enforceable contract; (2) the court
erroneously struck Lowery’s evidence as hearsay; and (3) the
district court erroneously concluded Bacou’s in-house counsel Barr
did not violate Rhode Island’s Rules of Professional Conduct.
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III.
Continental first argues the district court erred by
granting summary judgment in favor of Bacou on Continental’s breach
of contract and good faith and fair dealing counterclaims. In
granting summary judgment, the district court made two holdings.
First, the court concluded that, under Rhode Island law, an
"agreement to agree" is unenforceable. Second, the court concluded
the January 12th letter also was unenforceable because it omitted
two material terms, price and quality.
We review de novo the district court’s grant of summary
judgment. Gonzalez v. El Dia, Inc., 304 F.3d 63, 68 (1st Cir.
2002). Summary judgment is appropriate if the pleadings,
affidavits, admissions, answers to interrogatories, and other
materials, viewed in the light most favorable to the nonmoving
party, reveal no genuine issue of material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56. Where, as here, federal jurisdiction is based on diversity,
the court applies the substantive law of the forum state. Crellin
Tech. Inc. v. Equipmentlease Corp., 18 F.3d 1, 4 (1st Cir. 1994).
The parties agree Rhode Island law controls.
A.
The district court concluded the parties did not manifest
a present intent to be bound to a supply agreement in the January
12th letter. Rather, the district court held the January 12th
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letter was an “agreement to agree” to enter into a supply agreement
in the future. The district court relied on Centerville Builders,
Inc. v. Wynne, 683 A.2d 1340 (R.I. 1996), to conclude such
agreements are unenforceable under Rhode Island law.
In Centerville Builders, a prospective buyer entered into
an agreement with the seller for the sale of a tract of land. In
a document captioned “Offer to Purchase,” the buyer deposited
$5,000 towards the purchase of the property with a total deposit of
five percent of the sale price due upon signing the purchase and
sales agreement. The seller signed the Offer to Purchase after
deleting the ninth condition, which would have prohibited the
seller from negotiating with any other parties for the sale of the
property. The agreement’s sixth provision provided: ”SUBJECT TO
SATISFACTORY PURCHASE & SALES AGREEMENT BETWEEN SELLER AND BUYER.”
Subsequently, the seller sent the buyer an unsigned
purchase-and-sales agreement form. The buyer signed the agreement
and returned it to the seller. The seller later notified the buyer
that the seller wanted to “get more money” for the property and
would therefore put the property back on the market. The buyer
filed an action for breach of contract. The Rhode Island Supreme
Court held no enforceable contract existed because there was no
mutuality of obligation. In reaching this conclusion, the Rhode
Island Supreme Court stated that–
[W]hen the promises of the parties depend on
the occurrence of some future event within the
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unilateral control of the promisors, the
promises are illusory and the agreement is
nonbinding. . . . In the instant case, . . .
their promises were illusory since each party
reserved the unfettered discretion to thwart
the purchase and sale by unilaterally invoking
condition 6 of the offer-to-purchase agreement
and rejecting any purchase-and-sale agreement
as “unsatisfactory.”
Although it is true that the seller
displayed an intent to be bound by the offer-
to-purchase agreement when he signed the
document and agreed to sell the property
subject to the conditions specified, the
inclusion of condition 6 made this an illusory
promise because its occurrence depended solely
on the subjective will of either party. . . .
The seller’s deletion (with the buyer’s
consent) of the ninth condition further
evidenced the lack of mutuality of obligation.
Because the seller was allowed to negotiate
with other prospective buyers, the offer to
purchase amounted to little more than an
agreement to see if the parties could agree on
a purchase-and-sale agreement at some point in
the future. As such, it was not an
enforceable bilateral contract.
Id. at 1341-42.
We believe the district court read Centerville Builders
too broadly in ruling that all agreements to agree are
unenforceable in Rhode Island. The Rhode Island Supreme Court’s
comment that the Offer to Purchase was nothing more than agreement
to agree and as such was unenforceable must be viewed in the
context in which it was made. The court’s main concern was that
the parties made illusory promises resulting in a lack of mutuality
of obligation.
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The January 12th letter contains no such infirmities.
The letter does not condition the parties’ obligations on the
illusory promise that the future supply agreement be “satisfactory”
to either party. The letter set forth reciprocal promises in the
form of the supply agreement’s material terms. Such promises are
sufficient to establish mutuality of obligation. Id. at 1341
(noting that a bilateral contract requires mutuality of obligation
which is achieved through the making of reciprocal promises). The
actual supply agreement could and likely would contain payment
terms, delivery terms, and other similar provisions not contained
in the letter. But the fact that the parties were to negotiate
these details at a future date does not render illusory the
obligation incurred under the January 12th letter. The parties
clearly agreed to enter into a supply agreement consistent with the
terms outlined in the January 12th letter.2 As discussed below,
2
While we find the obligations sufficient to form an agreement
to agree, we do not hold the January 12th letter was itself the
supply agreement. In Continental’s original counterclaim, it did
not assert that the January 12th letter was itself the supply
agreement. Rather, Continental contended it was the third party
beneficiary of an agreement to enter into a subsequent supply
contract. After the close of discovery and after Bacou filed its
motion for summary judgment, Continental moved to amend its
counterclaim to assert the January 12th letter was an enforceable
supply agreement. The magistrate judge denied the motion to amend
as untimely and prejudicial to Bacou. Continental appealed this
ruling to the district court, which affirmed the magistrate judge.
Continental did not appeal the denial of its motion to amend to
this Court.
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those terms were not so indefinite as to preclude enforcement of
the letter.
B.
The district court alternatively held the January 12th
letter was unenforceable because it lacked sufficiently definite
material terms of price and quality. The letter describes the
price and quality as follows: "the quality and price of such raw
material are equivalent to that which is then used by HLI and
available from third-party suppliers." The district court found
this terminology too vague to provide a reasonably certain basis
for giving an appropriate remedy. See Restatement (Second) of
Contracts § 33 (1981) (endorsing the view that where the parties
have intended to make a contract and there is a reasonably certain
basis for granting a remedy, the court should grant that remedy).
The court contended Bacou unilaterally could control the raw
material HLI was using at any particular time, thus making its
promise illusory.
We disagree with the district court that the price term
was too vague to form an enforceable contract. The letter
describes the price term as the price then available from
third-party suppliers. The price term thus is readily discernible
by obtaining quotes from other vendors or other evidence of the
prevailing market price. Indeed, Bacou’s position in negotiations
with Continental was not that the price term in the January 12th
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letter was too vague, but that the then-available price was $1.56
per pound, Dow’s last price quote to Bacou. Whether this price was
artificially deflated as Continental argues is a matter for the
trier of fact. Simply because the parties disagree on the factual
issue of what the then-available price actually was does not mean
that the price term in the January 12th letter was vague as a
matter of law. A term specifying market price or the currently
available price provides a sufficiently definite basis to provide
a remedy. See The Edward S. Quirk Co., Inc. v. National Labor
Relations Bd., 241 F.3d 41, 44 (1st Cir. 2001) (“[I]f a contract
for a commodity provided that a price would be ‘the current market
price’ for the good, this might well be a figure precise enough for
a court or arbitrator to enforce.”).
Likewise, the quality term is not indefinite or illusory.
The January 12th letter specifies that the quality must be as good
as the prepolymer then used by HLI and available from third party
vendors. The comparability to products available from third party
vendors creates an objective and reasonably definite measure of
quality. And to the extent the district court believed HLI could
manipulate their prepolymer needs, under Rhode Island law,
"virtually every contract contains an implied covenant of good
faith and fair dealing between the parties." Crellin, 18 F.3d at
10. Because Bacou would have a contractual duty to determine in
good faith the quality of Continental’s product as compared to
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third party vendors, the quality term was not illusory.
Consequently, we reverse the district court’s grant of summary
judgment in favor of Bacou on Continental’s contract claim.3
IV.
Continental also argues the district court erroneously
and prejudicially excluded admissible material evidence during the
bench trial on Continental’s fraudulent misrepresentation
counterclaim. At trial, Continental sought to introduce testimony
from Rex Lowery, HLI’s former security, safety, and facilities
manager, concerning statements made by senior Bacou management that
they never intended to enter into a supply agreement with
Continental.
Specifically, Lowery testified about comments made to him
by HLI President Thomas Klein to the effect that Bacou co-Chairman
Walter Stepan told Klein that Stepan never intended to purchase any
prepolymer from Continental, that under no circumstances was Klein
to buy it, and that he had to source the product elsewhere,
regardless of the cost, even if the alternative source was an
inferior product. Lowery also testified that HLI Vice President
3
The district court also granted summary judgment in favor of
Bacou on Continental’s good faith and fair dealing counterclaim,
holding that because no enforceable contract existed between the
parties, Bacou owed no duty of good faith and fair dealing. See
Crellin, 18 F.3d at 10. Because we hold the January 12th letter
agreement was an enforceable contract, the district court erred by
granting summary judgment in favor of Bacou on the good faith and
fair dealing counterclaim.
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Thomas Wagner told Lowery that Stepan instructed Wagner "to source
the polymer substance from somewhere other than Mr. Dean, Mr.
Leight, and Mr. Hanover’s company, no matter what it cost and if
it was inferior or not." Finally, Lowery testified that Wagner
told him Stepan wanted to put Continental out of business. Upon
Bacou’s objection, the court struck all of this testimony as
hearsay.
We review the district court’s evidentiary rulings for an
abuse of discretion. Willhauk v. Halpin, 953 F.2d 689, 717 (1st
Cir. 1991). Bacou concedes the district court erroneously struck
the testimony as hearsay. See Appellee’s Resp. Br. at 31
("Although the stated ground of hearsay may not have been proper
ground for exclusion of Lowery’s testimony..."). Bacou makes no
attempt to rebut Continental’s arguments that the statements are
admissible as party admissions under Fed. R. Evid. 801(d)(2)(D).4
On the record before us, and because Bacou does not assert
Continental failed to establish the statements were admissions, we
4
Pursuant to Fed. R. Evid. 801(d)(2)(D), a statement is an
admission, and thus not hearsay, if it is made by a party’s agent
concerning matters within the scope of the agency, made during the
existence of the agency relationship. Lowery’s testimony described
statements by Bacou employees concerning Bacou’s intentions
regarding contractual relations with Continental. These alleged
statements were made during the course of the employment
relationship. Although some of Lowery’s testimony contains
multiple levels of hearsay, Fed. R. Evid. 805 permits the
introduction of hearsay-within-hearsay if each statement falls
within an exception to hearsay.
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conclude the district court abused its discretion by excluding
Lowery’s testimony as inadmissible hearsay.5
Having demonstrated the district court erred, Continental
also must demonstrate the error was harmful. Ahern v. Scholz, 85
F.3d 774, 786 (1st Cir. 1996). "A trial court’s error in an
evidentiary ruling only rises to the level of harmful error if a
party’s substantial right is affected." Id. To determine whether
an error affects the party’s substantial rights, "the central
question is whether this court can say with fair assurance . . .
that the judgment was not substantially swayed by the error. . . .
Factors we must consider . . . include both the centrality of the
evidence and the prejudicial effect of its exclusion or inclusion
. . . ." Id. (internal citations and quotations omitted). We
weigh these factors in the context of the whole record. Id.
Bacou argues any error was harmless given the following
findings made by district court:
I find that Bacou did enter into good
faith negotiations with [Continental] to
develop the supply agreement that the parties
had discussed back in January of ‘98. I find
that there is no agreement in this case
because of [Continental]’s refusal to
negotiate in good faith. I further find that
5
Our conclusion does not relieve Continental from its burden
on retrial to lay the factual predicate that the statements were
made by an agent, concerning a matter within the scope of the
agency, made during the agency relationship as required by Rule
801. Should Continental fail to make the necessary showing, Bacou
is free to object that Continental has failed to establish the
statements are admissible under Rule 801.
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John Dean bears the responsibility here for
the breakdown in negotiations.
. . . . Mr. Dean, in my estimation,
is the reason why these parties do not have a
supply agreement today.
Bacou contends that, based on these findings, the district court’s
exclusion of Lowery’s testimony is harmless error because even if
Bacou made fraudulent misrepresentations, the district court
specifically found Dean, not Bacou, proximately caused the injury.
Thus, Bacou argues Continental cannot establish the causation
element of its fraudulent misrepresentation counterclaim.
We cannot say with fair assurance that the judgment was
not substantially swayed by the error. Ahern v. Scholz, 85 F.3d at
786. Lowery’s testimony was Continental’s only direct evidence of
Bacou’s alleged fraudulent intent not to enter into a supply
agreement as Bacou represented to Continental. Testimony that
senior Bacou officials never intended to enter a supply contract
with Continental as represented during negotiations and as
reflected in the January 12th letter is central to Continental’s
fraudulent misrepresentation claim. See Kelly v.
Tillotson-Pearson, Inc., 840 F. Supp. 935, 940 (D.R.I. 1994)
(listing as elements of fraudulent misrepresentation under Rhode
Island law that the defendant made a false representation of
material fact and that the defendant intended thereby to deceive
the plaintiff).
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The exclusion of Lowery’s testimony also prejudiced
Continental. Lowery’s testimony, if believed, may have changed the
fact finder’s view of Bacou’s alleged good faith and Dean’s
motivations. Continental presented circumstantial evidence that
Bacou never intended to enter into a supply agreement. For
example, Continental presented evidence Bacou negotiated a price
reduction with Dow just as Continental’s prepolymer plant was
coming online. Continental argued Bacou was encouraging Dow to set
the price so low Continental could not match it, thereby allowing
Bacou to avoid its contract with Continental. Continental also
argued Bacou’s numerous supply agreement offers constituted a
continuous retreat from the January 12th letter’s terms.
Continental also argued Dean was determined not to let Bacou renege
on the January 12th letter and was unwilling to agree to what he
believed was an artificially low price.
In sum, Lowery’s testimony, the only direct evidence of
Bacou’s alleged fraud, combined with other circumstantial evidence,
may have led a reasonable fact finder to make a different
conclusion about which party was acting in good faith, and which
party caused the failure to enter into a supply agreement. Because
we cannot say with fair assurance the result of the trial was not
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substantially swayed by the error, we reverse and remand for a new
trial.6
V.
For the reasons stated above, we REVERSE the district
court’s grant of summary judgment in favor of Bacou on
Continental’s contract counterclaim. We also REVERSE AND REMAND
FOR A NEW TRIAL on Continental’s fraudulent misrepresentation
claim.7
6
Bacou also argues the testimony should be stricken under Fed.
R. Civ. P. 37 as sanctions for failure to comply with discovery
because Continental allegedly withheld Lowery’s identity until
late in discovery. Whether to impose sanctions, particularly a
sanction involving the exclusion of material testimony, is a
question for the district court in the first instance. Applewood
Landscape & Nursery Co. v. Hollingsworth, 884 F.2d 1502, 1507 (1st
Cir. 1989) (“The power to impose sanctions for violations of
discovery rules and pretrial orders lies in the district court, not
this court.”). We are not equipped to make a fact finding about
Continental’s alleged bad faith and failure to comply with
discovery obligations. We decline to uphold the district court’s
erroneous evidentiary ruling on this basis.
7
Continental also argues the district court erred by finding
that Bacou’s in-house counsel, Philip Barr, did not violate Rule
4.2 of the Rhode Island Rules of Professional Conduct. Continental
argued below that Barr knew Leight and Dean were represented by
counsel at the time Barr contacted them in early 1998 to lure them
out to Rhode Island. Barr did not contact Leight and Dean’s
counsel to request permission to contact Leight and Dean directly.
This conduct, Continental argues, violated Rule 4.2 of the Rhode
Island Rules of Professional Conduct. Rule 4.2 provides–
In representing a client, a lawyer shall not communicate
about the subject of the representation with a party the
lawyer knows to be represented by another lawyer in the
matter, unless the lawyer has the consent of the other
lawyer or is authorized by law to do so.
Continental contends Barr’s willingness to violate the Rules
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of Professional Conduct is evidence of Bacou’s fraud and
overreaching. The district court rejected this inference at trial.
In making its findings of fact, the district court found that
during the negotiations, Barr was acting as Stepan’s "number two
man" and not as Bacou’s in-house counsel. The court stated that
Barr’s involvement in the negotiations was "a red herring" as to
the issue of fraud. Counsel’s alleged willingness to violate a
Rule may be relevant to Bacou’s “fraudulent intent and
overreaching” as Continental asserts, but the weight to be given
this evidence is an issue for the fact finder.
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Bacou Dalloz USA, Inc. v. Continental Polymers, Inc.
Court: Court of Appeals for the First Circuit
Date filed: 2003-09-08
Citations: 344 F.3d 22
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