IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 92-3832
NEWPORT LIMITED, a Partnership
in Commendam,
Plaintiff-Appellant,
versus
SEARS, ROEBUCK & COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
(October 29, 1993)
Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This case appears before the Fifth Circuit for the second
time. In 1990, the district court granted summary judgment for
Sears, Roebuck and Co., on Newport Limited's civil RICO claim and
dismissed Newport's pendent state law claims. We affirmed the RICO
decision, but instructed the trial court to rule on the pendent
claims given the advanced state of the litigation. On remand, the
court granted summary judgment on Newport's state law claims as
well. We REVERSE the district court order granting summary
judgment and REMAND for further proceedings.
I
As Newport appeals from summary judgment, we view the evidence
in the light most favorable to Newport. Barrett Computer Services,
Inc. v. PDA, Inc., 884 F.2d 214, 216 (5th Cir. 1989).
Newport owns approximately 700 acres at the intersection of
the Mississippi River-Gulf Outlet and the Gulf Intracoastal
Waterway in Orleans Parish. In the early 1980's, Newport began
efforts to develop the property into an industrial park. In May
1983, Sears' subsidiary Coldwell Banker contacted Newport to
discuss locating an import distribution facility at the site.
Sears had several warehouse and distribution centers scattered
around New Orleans, and was interested in consolidating them if
that would result in savings.
Upon Sears' suggestion, Newport retained Goldman, Sachs & Co.
to assist in preparing its proposal. On September 22, 1982,
Newport presented a package outlining plans for the proposed
distribution center. The proposal's price and terms were based
upon the outlined specifications, but Newport invited "Sears [to]
make whatever changes to the existing design it considers
desirable. If the design changes result in cost differences . . .
the lease rates will be adjusted accordingly." The proposal
specified that the lease rates would be adjusted according to a
formula devised by Goldman Sachs and previously used for a Sears
facility in Texas.
In December 1983, Sears officials met with Newport to examine
the proposal. A member of Sears' site selection committee stated
2
that Sears had determined that an import distribution center was
feasible and should be located in New Orleans. A Sears financial
analyst acknowledged the Goldman Sachs formula and noted that Sears
could calculate the rent during development by entering
construction costs into the formula.
Sears then requested design changes. In February 1984,
Newport submitted a revised proposal incorporating those changes.
Newport calculated the rent to be $2.26 per square foot per year.
Upon receiving the revisions, Sears reviewed the rent calculations
and discovered that Newport had made an error. According to the
formula, Sears confirmed that the correct rent for the revised
proposal would be $2.48 per square foot per year.
Sears' interest in the Newport site depended upon its
designation as a Foreign Trade Zone. Sears also insisted upon
infrastructure improvements including better road access. Newport
sought these prerequisites from the necessary governmental
agencies. By March 1984, Newport found that its negotiations with
government agencies could not proceed without a commitment from
Sears. On March 15, 1984, representatives of Sears and Newport met
to review the proposal. Newport informed Sears that a firm
commitment was necessary to accomplish the desired improvements and
to establish trade zone status. Recognizing this need, Sears
decided to review the project thoroughly and make a final decision.
By August 1984, Sears completed a detailed study of the
project. This study recommended locating a 650,000 square foot
import distribution center at Newport's site. A separate Sears'
3
review had previously concluded that the annual rent for the
equivalent warehouse space, scattered about New Orleans, would
total $3.92 per square foot. The review included Newport's
proposed $2.48 rent and noted that foreseeable construction cost
escalations of $1 million would increase the rent to $2.73. The
review estimated that a consolidated center in a foreign trade zone
at Newport's industrial park would produce an annual savings of
over a million dollars.
Sears executives approved the 25-year lease of a 650,000
square foot facility to consolidate New Orleans import distribution
operations. On October 16, 1984, Sears informed Newport of
approval to construct the facility at Newport's site. Sears'
personnel were to define the plans and specifications. Soon after,
Sears formally advised the City of New Orleans of its decision to
locate at Newport. The City then publicized this decision.
In November 1984, Sears informed Newport that new
specifications, upgrading the proposed building, were forthcoming.
Relying upon Sears' good faith and the announced decision, Newport
commenced development. It retained consultants and initiated
detailed discussions with City, State, and Federal agencies, to
gain approval for the trade zone status and infrastructure
improvements Sears requested.
As part of these efforts, Newport pursued an Urban Development
Action Grant from the United States Department of Housing and Urban
Development. This Grant would subsidize the City's infrastructure
improvements. To assist in obtaining the Grant, Newport requested
4
evidence of Sears' commitment. On November 30, 1984, Sears'
territorial real estate manager wrote a letter expressing Sears'
intention to enter into a build-to-suit transaction with Newport.
This letter had been reviewed and revised by Charles Houk, an in-
house attorney working on the transaction for Sears.
The November 30 letter did not satisfy HUD officials because
it left uncertain Sears' commitment to carry out the project.
Newport requested written evidence of Sears' firm commitment.
Newport informed Sears' counsel Houk that the necessary document
must demonstrate actual commitment by Sears to the Newport project.
Newport sent Sears a proposed agreement, with a cover letter
stating that it duplicated the November 30 letter of intent "with
the additional items required by HUD."
On January 4, 1985, representatives of Newport and Sears again
conferred regarding the draft document sent by Newport. They
negotiated and revised its provisions. In particular, they
discussed its reference to rent. Newport's representative believed
that both parties understood that this provision implicitly
required use of the Goldman Sachs formula. Thus, although the
draft allowed Sears to propose design changes that would increase
construction costs, the rent adjustment referred to in the draft
could be calculated. At the end of this discussion, Sears'
representative stated that he would review the document and present
it to Sears' officials for approval. Ron Stafford and A.H. (Art)
Ruff of Sears reviewed the document and Ruff executed it on January
5
9, 1985. Newport accepted the terms of the agreement the following
day.
On January 24, 1985, Sears' counsel spoke to a HUD official
and confirmed Sears' agreement to proceed with the project. Sears'
counsel told the official that no other corporate approval for the
project was required and that Sears would proceed under the terms
of the January 9, 1985 document. Stafford also later testified
that after January 9 the Newport project was a "done deal."
The January 9 document appears on Sears letterhead and reads,
in pertinent part:
We have analyzed the proposal offered by you for the
construction of a new import/export warehousing facility to be
located within the Newport Industrial Park, New Orleans,
Louisiana, such construction to be on a build-to-suit basis.
Based upon our analysis and subject to the preparation of
mutually agreeable legal documentation, we are prepared to
enter into the transaction on substantially the following
terms and conditions.
. . .
2. We have revised your proposal to provide that the
facility shall initially be an approximately 650,000 square
foot building with related improvements to be constructed by
Newport, and is designed to accommodate additional expansion
of approximately 300,000 square feet. . . .
. . .
4. It is our understanding that Newport Limited is
working with the City of New Orleans in its request for a HUD
Urban Development Action Grant in the amount of $8,000,000 to
fund the public infrastructure described in item 3 above. Our
commitment to this transaction is contingent upon the said
infrastructure being provided.
5. The initial lease term shall be 25 years with the
lease containing six five-year renewal options.
. . .
7. During the initial term of the lease, the annual rent
per square foot will be $2.48, to be adjusted to reflect the
value engineering currently in progress, Tenant changes and
increases due to inflation factors.
. . .
It is to be understood that the matters contained in this
letter will form the basis of a much more detailed document,
the terms and conditions of which are subject to the mutual
6
agreement of the parties. It is therefore not intended to be
a comprehensive statement of our respective rights, duties and
obligations which will be fully set forth in said document.
. . .
The undersigned has the authority to execute this letter
agreement with Newport Limited.
/s/ A.H. Ruff
Regional Real Estate Manager
Sears executed this document, which provides that the rent
figure of $2.48 per square foot was to be adjusted. In deposition,
four Sears officials--Ruff, Reaves, Hosch, and Tidmarsh--testified
that Sears never intended to pay more than $2.48 as a final rent.
Sears did not inform Newport of this intention.
After the January 9 agreement, Newport continued developing
the project. Actual construction could not begin, however, until
Sears provided more specifications. On June 20, 1985, the parties
met to discuss these matters. Sears agreed to provide building
plans and specifications within two weeks of the June 20 meeting.
The bid package was to be completed by September. In fact, Sears
never delivered the necessary information.
Eleven days later, on July 1, 1985, Charles Reaves became
Sears' Vice President of Distribution. Reaves was chairman of a
task force studying Sears' distribution system. By the summer of
1985, Reaves concluded that Sears had excess warehouse and
distribution space--without the Newport facility. Sears therefore
decided that it neither needed nor wanted to lease more space at
Newport. Subsequently, the company issued a moratorium on all
major warehouses.
7
On September 16, 1985, Reaves and other Sears officials met to
develop a strategy regarding Newport. After the meeting, on
September 18, Ruff circulated a memorandum summarizing the options
that had been considered. According to Ruff, these were (1)
candidly advise Newport that Sears would not proceed and desired to
cancel the project; (2) proceed with the project to avoid legal
consequences and protect Sears' credibility; (3) proceed but take
"an extremely hard nosed position" in negotiations with the
acknowledged possibility that such an approach might cause Newport
to abandon the project; and (4) request to stay the project for
several months pending reconsideration by Sears of whether to
proceed, downsize, or cancel the project. Ruff stated that the
consensus of the September 16 meeting was to recommend the fourth
option to senior management.
Six months later, Newport requested design information from
Sears and suggested a schedule for the construction. On March 14,
1986, Ruff circulated a memorandum discussing this schedule. It
began by stating, "The officers of the company have decided to
proceed with the leasing and development of the 650,000 square foot
IDC in New Orleans with Newport Enterprises." On a copy of this
memorandum, Vice President Dan Reaves added the handwritten
notation, "there is no way we could work with these dates and even
if we could we would still stay with our original plan, i.e. 'drag
our feet'!"
After the September 1985 Sears meeting, Sears had ceased
providing information to the Newport project developers. Sears'
8
supervisor of construction planning was informed that the project
was discontinued. Other Sears employees referred internally to the
project being on hold.
At meetings in October and November 1985, Sears requested that
Newport agree to a six month delay so that Sears could complete a
study of its distribution practices. Newport examined the impact
of this request, particularly upon the HUD Grant. On December 4,
1985, Sears officials including Reaves, Ruff, and Houk met with
Newport personnel. Newport informed Sears that the requested delay
would endanger the Grant, and so Newport refused. A Sears official
suggested that the project be reduced in size. Newport declined,
citing the January 1985 agreement to 650,000 square feet and noting
that a reduction would also jeopardize the Grant. Finally, Ron
Ruth stated that Sears would honor its commitments.
At this time, Newport proposed a bid package for one design of
the facility. Sears agreed to review the proposal and provide
suggestions or approve it or both. Sears did not do so.
In January 1986, Sears requested that Newport respond in
writing to a proposal to downsize the facility. On January 15,
1986, Newport declined this proposal. Newport noted that the HUD
Grant had been awarded on the basis of the original proposal, and
would be jeopardized by a reduction. Other government agencies had
made plans and commitments based on the original size as well.
In February 1986, Ruff wrote a letter for Sears confirming
that Sears' officers had decided "to move forward with the leasing
of the 650,000 square foot facility." This letter stated that the
9
rent was "not to exceed $2.48 a square foot." When a Newport
employee called to discuss rent, Sears stated that $2.48 was "non-
negotiable."
Meanwhile, Sears had advised Newport that it would make design
changes, but did not respond to Newport's proposed bid package.
Changes proposed by Sears might have increased construction costs.
In March 1986, Sears delivered a draft lease to Newport. Like
the February letter, the draft lease set the "non-negotiable"
annual rent at $2.48 per square foot. The draft lease also allowed
Sears to make changes to the building prior to construction,
without affecting the rent. Finally, contrary to previous
negotiations, the lease provided that Newport would pay for
insurance on the facility.
II
Newport sued Sears in June 1986 alleging breach of contract,
civil RICO, and deceptive trade practices. In 1990, the district
court dismissed the RICO claims on the merits and dismissed the
pendent state law claims without prejudice. Newport Ltd. v. Sears,
Roebuck & Co., 739 F. Supp. 1078 (E.D. La. 1990). Newport
appealed, and we affirmed the dismissal of the RICO claim but
vacated the dismissal of the pendent claims. Newport Ltd. v.
Sears, Roebuck & Co., 941 F.2d 302 (5th Cir. 1991). On remand,
Sears once more sought summary judgment on the state law claims,
which the district court granted. Newport again appeals.
III
10
A
We review the district court's grant of summary judgment de
novo, applying the same standard as the district court. Hanks v.
Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir.
1992). Summary judgment is proper only if the record discloses
that there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law. Harbor
Ins. Co. v. Trammell Crow Co., 854 F.2d 94, 98 (5th Cir. 1988)
(quoting Fed. R. Civ. P. 56(c)), cert. denied, 489 U.S. 1054
(1989). We indulge every reasonable inference from the facts in
favor of the non-movant. Powers v. Nassau Development Corp., 753
F.2d 457, 462 (5th Cir. 1985).
B
Before reaching the merits, we must determine which documents
in the record should be considered. Specifically, Sears has moved
to strike Newport's references to three documents prepared by Houk,
an in-house attorney at Sears. We have carried that motion with
the case.
On May 18, 1990, the district court entered an order holding
that these documents were subject to the attorney-client privilege.
That order, in effect, struck them from the record. In the prior
appeal, this court affirmed that order. Newport Ltd. v. Sears,
Roebuck & Co., 941 F.2d 302, 308 n.10 (5th Cir. 1991). Our
decision, however, noted that the district court's evidentiary
ruling may have been influenced by its contemporaneous dismissal of
the action, which this court vacated. Our opinion stated that "the
11
district court is free to revisit that issue, should it choose to
do so, as it may apply to the state-law claims" that we reinstated.
Id.
Newport does not contend that the district court reconsidered
its ruling on this issue. Nor did Newport request reconsideration.
It explains this omission by referring to the district court's
order on remand that "pre-trial motions shall not be filed without
leave of it." This does not explain, however, why Newport did not
seek leave to move for reconsideration. Moreover, Newport's
responses to Sears' motion for summary judgment did not request
consideration of these documents--indeed, Newport did not mention
the documents. Nonetheless, Newport refers to these documents in
its briefs to this court. It contends that they remained part of
the record that we may consider, or that we may rule on their
admissibility ourselves.
We conclude that we are unable to consider these documents in
our determination. Privileged documents are inadmissible and thus
may not defeat summary judgment. See Howell Hydrocarbons, Inc. v.
Adams, 897 F.2d 183, 192 (5th Cir. 1990). Newport did not seek
reconsideration of the district court's evidentiary decision and
the court did not choose to revisit the issue sua sponte. Having
once affirmed the district court's ruling, we will not revisit the
issue where the district court has not done so.1
1
Sears' request for sanctions against Newport is denied.
Given our remand on the merits, we once more note that the
district court may revisit the issue, if it so chooses.
12
Sears' motion to strike also refers to documents prepared by
Ruff, Sears' regional real estate manager. The district court held
that these materials were not privileged and they remain part of
the summary judgment record on appeal.
IV
Evidence in the record supports conflicting understandings of
the relationship between Newport and Sears. Giving credence to the
inferences most favorable to Newport, the non-movant, we conclude
that Sears is not entitled to judgment as a matter of law regarding
any of Newport's claims.
A.
1.
Newport maintains that a binding agreement came into effect
when both parties executed the letter dated January 9, 1985. The
developer argues that Sears intended to commit to the project and
agreed on all its essential terms. Sears denies that the letter
was meant as an enforceable agreement; it claims to have executed
the letter only to facilitate the HUD grant. To support its
position, Sears points to language referring to terms and
conditions to be agreed upon in the future.
Although there is little authority, Louisiana law appears to
recognize the enforceability of preliminary agreements.
The settled jurisprudence of this State is that an
agreement between parties, where their minds have met
upon all essentials, constitutes a contract between them
and binds them at once although they may have agreed that
they would thereafter execute a formal instrument
containing the terms of their present agreement.
13
Mermelstein v. Schwab, 64 So. 2d 37, 38 (La. Ct. App. 1953)
(citations omitted). A so-called preliminary agreement may be
binding, even though it refers to a future written agreement
finalizing its contents. Chevron U.S.A., Inc. v. Martin
Exploration Co., 447 So. 2d 469 (La. 1984). In Martin Exploration,
the Louisiana Supreme Court noted that use of the word preliminary
"does not preclude the agreement from being final until later
agreements are reached, or from being the only agreement in the
event no other agreements are confected." Id. at 472. Moreover,
the court found that the reference to a document "finalizing the
points listed above" did not evince an intent to be bound only upon
the execution of a later instrument. Id. Nor did an allusion to
future "negotiations" render the preliminary agreement non-binding.
To the contrary, the Supreme Court of Louisiana held that the
document was binding as that interpretation most accurately
reflected the intentions of the parties. Id.
Thus, whether a binding obligation existed upon the execution
of the letter of intent of January 9, 1985, or only upon the
execution of a later, more comprehensive document, depends upon the
intentions of the parties. Courtin v. Sharp, 280 F.2d 345, 349
(5th Cir. 1960), cert. denied, 365 U.S. 814 (1961) (citing
Mermelstein); cf. La. Civ. Code Art. 1947 (West 1987) (certain form
of contract execution required if contemplated by the parties).
The parties' intent is a question of fact. See Trinity Carton Co.
v. Falstaff Brewing Corp., 767 F.2d 184, 190 (5th Cir. 1985), cert.
denied, 475 U.S. 1017 (1986); see also Texaco, Inc. v. Pennzoil,
14
Co., 729 S.W.2d 768, 788 (Tex. App.--Houston [1st Dist.] 1987, writ
ref'd n.r.e.) (New York law), writ ref'd n.r.e., cert. dismissed,
485 U.S. 994 (1988).
Newport argues that a reasonable person, examining the summary
judgment evidence, could find that Sears and Newport intended to be
bound by the January 9, 1985 letter agreement. We agree. There is
ample evidence to support this conclusion.
The Supreme Court in Martin Exploration considered the actions
of the parties taken subsequent to the agreement in dispute as a
basis for inferring the parties' intentions. Martin Exploration,
447 So.2d at 472. That approach proves useful in the present case.
Sears' actions subsequent to the letter of intent indicate that it
considered itself bound. In particular, when Sears officials
became uncertain as to the need for the warehouse which Newport
would provide, they requested to stay the project. The two parties
characterize Sears' actions differently. Newport claims that Sears
attempted to frustrate Newport's efforts to implement the agreement
and that Sears therefore acted in bad faith. Sears responds that
it intended to complete the transaction but disagreed with Newport
on some of the terms. The claims of the two parties support the
same conclusion, that is, that Sears considered the agreement
binding. If Sears were not bound, it would not have required
Newport's permission to suspend the project.
The letter of January 9, 1985 offers some basis for concluding
that Sears bound itself to the project. Thus, for example, Sears
designated the document a "letter agreement" and expressed an
15
intent "to enter into the transaction on substantially the... terms
and conditions" contained in the letter. This language indicates
that the parties had settled on the essential terms of the
transaction. Other aspects of the letter, however, are more
ambiguous. The qualification that the letter was not a
"comprehensive statement of [the parties'] rights, duties and
obligations" is representative in this regard. That claim
suggests, on the one hand, that the parties had established in the
letter certain rights, obligations and duties but, on the other
hand, that other such terms would follow. It leaves unclear
whether any of the essential elements of the deal had yet to be
resolved.
Other evidence is probative of Sears's intent in signing the
letter. Thus, for example, after Newport signed the letter, Sears
officials stated that the deal was consummated. We need not
conclude with certainty, however, that Sears intended that the
letter serve as a contract. We hold only that based on the record,
a reasonable jury could reach that conclusion.
2.
Sears maintains that, regardless of intent, the January 9,
1985 letter is legally insufficient as a lease instrument. Under
Louisiana law, the confection of a lease obligation must meet three
requirements. It must indicate: the object of agreement, its
price, and the parties' consent. Trinity Carton, 767 F.2d at 190
(citations omitted). See also La. Civ. Code art 2670 (West 1993).
16
Sears first notes that the letter of January 9, 1985 is
unclear about the amount of rent to be paid. It provides for
annual rent of $2.48 per square foot "to be adjusted." Sears could
make design changes, giving it control over one adjustment factor.
Sears relies on Louisiana state law suggesting that, for a lease to
be valid, the factors that determine rent must not be within the
control of the parties. See, e.g., Sealy (Pines Rd.) v. Physicians
& Surgeons Hosp., Inc., 480 So.2d 832, 837 (La. App. 2 Cir. 1985),
writ denied, 483 So.2d 1024 (La. 1986) (finding rent determinable
where it was implicitly renewed at a rate agreed upon in the past
because it was "beyond control of the parties"). The law merely
requires, however, that the parties have completed negotiating the
amount of the rent, although the parties' decisions or actions may
influence the rent owed. See, e.g., Mouton v. P.A.B., Inc., 450
So.2d 410, 412 (La. App. 3 Cir. 1984), write denied, 458 So.2d 118
(La. 1984) (rent made contingent on profit's earned by lessee, over
which lessee had control, was nevertheless determinable). Newport
offers evidence that the Goldman Sachs formula would govern the
adjustments made to the rent. Indeed, at one point, Sears relied
on the formula to correct an error that Newport had made in a
provisional calculation of the rent. Testimony suggests that the
formula would reflect any changes Sears might require. Thus, if a
jury were to accept that the contract incorporates the Goldman
Sachs formula, the rent is determinable.
Sears also claims that the premises were not adequately
defined to support a lease. In response, Newport points to the
17
letter's description of a 650,000 square foot facility and
improvements to be made at the site to establish that the lease was
sufficiently determinate. The Supreme Court of Louisiana has held
that, where the plans and specifications of premises to be leased
have yet to be negotiated, no enforceable lease exists. Sig Hass
& Son v. Bernhardt, 81 So. 402, 403 (La. 1919) (finding an oral
lease unenforceable where its terms were insufficiently definite).
In reaching that conclusion, however, the court indicated that had
the unresolved aspects of the lease lay within the control of one
of the parties, the lease might have been enforceable. Id.
("Plaintiffs do not allege that they alone were to decide upon the
plans and specifications... "). See also Arata v. Louisiana
Stadium and Exposition District, 225 So.2d 362, 366-67 (La. 1969),
cert. denied, 396 U.S. 279 (1970) (finding a sufficiently defined
"thing" where the site of a stadium was subject to possible change
upon mutual agreement). Newport claims that Sears reserved the
right to change the specifications and plans for the storage
facility and that the Goldman Sachs formula for determining the
rent would reflect the cost of such changes. If the jury were to
accept this contention, it could find that a sufficiently
determinate lease existed to bind the parties. We are not prepared
to deny the jury that opportunity.
3.
Sears invokes the doctrine of error, arguing that any consent
it gave in January 1985 was ineffective because Newport misled it.
Under the Louisiana Civil Code, a party is not bound by a contract
18
which it entered as a result of error, fraud or duress. La. Civ.
Code art. 1948 (West 1993). More precisely, if a party would not
have entered a contract had it not held a mistaken belief, and the
other party was or should have been aware of this mistake, the
party is not bound by that contract. La Civ. Code art. 1949 (West
1993). Sears' reliance on this doctrine is misplaced.
Sears maintains that its reason for signing the letter was to
allow Newport to secure a grant. Newport claims that Sears
committed itself to the transaction through the letter. These two
views are not inconsistent. In order for Newport to secure a HUD
grant, it needed a statement from Sears indicating Sears'
commitment to the project. That Sears bound itself when it did, if
it did, in order to enable Newport to pursue the grant does not
preclude the possibility that the letter constituted a contract.
Sears wanted Newport to build a warehouse. Newport desired Sears
as its primary tenant. Thus, Sears and Newport had complementary
interests which could serve as the basis for a contract. That the
desire to secure a grant prompted the formation of the contract
would not make it any less binding. A reasonable jury could find
that a contract existed.
B.
Newport claims that Sears committed fraud on several
occasions. It pursues these claims under Louisiana Civil Code
articles 1953 and 2315.
19
1.
To recover under article 1953, Newport must demonstrate the
existence of a contract. See Pedalino v. Pitre, 431 So.2d 20, 21
(La. App. 1 Cir. 1983) (Article 1953 pertains only to parties to a
contract); State Farm Fire & Casualty Co. v. Williams, 453 So.2d
309, 311 (La. App. 1 Cir. 1984) (same). Assuming Newport meets
this burden, it must then show, first, that Sears misrepresented or
suppressed the truth with the intention of either gaining an unjust
advantage or causing Newport to suffer a loss and, second, that
this misrepresentation or suppression of the truth caused actual or
probable damages to Newport. Dutton & Vaughan, Inc. v. Spurney,
600 So.2d 693, 698 (La. App. 4 Cir.), writ denied, 601 So.2d 663
(La. 1992). Newport predicates its claim under article 1953 on the
letter Sears executed in January 1985. Assuming, without deciding,
that the letter constituted a contract, we find that Newport has
raised a genuine issue of material fact as to whether Sears
intentionally misled Newport in order to gain a strategic
advantage.
In the letter of January 1985, Sears stated that it would pay
rent at an annual rate of $2.48 per square foot to be adjusted to
reflect, among other considerations, "the value [of] engineering"
in progress at the time. In an internal review in 1984, Sears
noted that the then prospective engineering could increase the
monthly rent by as much 10%, up to $2.73. Several Sears officers
testified, however, that Sears never intended to pay more than
$2.48 per square foot per year for the leased space. Newport
20
claims that this contradiction supports the inference that the
January 1985 letter was deliberately misleading. Sears hoped,
according to Newport, to effect engineering changes only later to
refuse to accept any increase in the cost of rent. Newport's
investment in reliance on the letter would by then have placed
Sears in an advantageous bargaining position.
Newport's evidence supports its contention that Sears took
deliberately misleading actions in order to secure a bargaining
advantage. If the lease incorporates the Goldman Sachs formula, as
it must to be sufficiently definite, Sears' proposed changes could
have increased the rent to more than $2.48. Sears' apparent intent
from the outset to refuse to pay the augmented amount is curious.
Moreover, Sears' officers decided to adopt a deliberately "hard
nosed position" in forcing Newport to choose between accepting the
$2.48 in rent or abandoning the project. Thus, Sears gained a
tactical advantage from Newport's reliance on Sears' commitment, if
Sears in fact made one, to abide by the Goldman Sachs formula.
Sears' claim that it never believed that it had committed itself is
plausible. Nevertheless, the inference is fair that Sears
anticipated and even intended the benefit it received by misleading
Newport. We therefore find that Newport has raised a genuine issue
of material fact as to its first allegation of fraud.
2.
Newport also proceeds on a charge of delictual fraud pursuant
to Civil Code article 2315. The elements of this cause of action
are: "(1) a misrepresentation of a material fact, (2) made with
21
the intent to deceive, and (3) causing justifiable reliance with
resultant injury." Abell v. Potomac Ins. Co., 858 F.2d 1104, 1131
n.33 (5th Cir. 1988) vacated on other grounds, 492 U.S. 914, 109
S.Ct. 3236 (1989) (citing La.Civ.Code arts. 1847, 2315; Silver v.
Nelson, 610 F.supp. 505, 521 (E.D.La. 1985)). To recover under
article 2315, Newport need not prove the existence of a contract.
Id. (citing Restatement (Second) of Torts as referred to in Dousson
v. South Cent. Bell, 429 So.2d 466, 468 (La. App. 4th Cir.), writ
not considered, 437 So.2d 1135 (La. 1983)). Newport bases this
cause of action on several statements by officers of Sears that it
wished to continue development of the warehouse. These statements
persisted after a meeting in which Sears officers considered
several possible courses of action. A memorandum that one of the
officers circulated after the meeting summarized these options.
They included: (1) candidly informing Newport that Sears would not
proceed with the project; (2) proceeding with the project to avoid
legal consequences and to protect Sears' credibility; (3)
proceeding but taking "an extremely hard nosed position" with the
acknowledged possibility that Newport might abandon the project;
and (4) requesting to stay the project pending reconsideration of
whether to proceed with, downsize, or cancel the project. One of
the officers, Ruff, later circulated a memorandum expressing a
general agreement to proceed under option four. Six months later,
however, when Newport submitted a request for design specifications
and suggested a schedule to begin construction, Vice President Dan
Reaves wrote on his copy of a memorandum discussing the request
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that "there is no way we could work with [Newport's proposed
schedule] and even if we could we would still stay with our
original plan, i.e. 'drag our feet'!" Sears never submitted to
Newport the requested specifications.
This evidence, and evidence indicating that Sears did not wish
to proceed with the warehouse, together suggest that Sears
deliberately misled Newport as to its intentions. Sears' allegedly
refused to acknowledge its desire to abort the project in the hope
that Newport would despair of its completion. As Sears' memorandum
indicates, if Sears forthrightly abandoned the project Newport
would likely take legal action, whereas a successful effort at
stalling might leave Newport with the impression that the endeavor
simply failed. This, at any rate, is Newport's argument. Sears'
claim that it negotiated in good faith is plausible. A reasonable
jury could find, however, that Sears misrepresented its intentions
in order to avoid liability. As Newport has raised this genuine
issue of material fact, we reverse the district court's grant of
summary judgment to Sears.
C.
Newport also seeks recovery under Louisiana Civil Code article
1967, which provides in pertinent part:
A party may be obligated by a promise when he knew or should
have known that the promise would induce the other party to
rely on it to his detriment and the other party was reasonable
in so relying. Recovery may be limited to expenses incurred
or the damages suffered as a result of the promisee's reliance
on the promise. Reliance on a gratuitous promise made without
required formalities is not reasonable.
23
To recover under article 1967, Newport must establish that Sears
made a promise on which Newport relied justifiably and to its
detriment. See Breaux v. Schlumberger Offshore Services, 817 F.2d
1226, 1229 (5th Cir. 1987); South Central Bell Telephone Co. v.
Rouse Co., 590 So.2d 801, 804 (La. App. 4 Cir. 1991). Newport need
not prove the existence of a contract to establish its claim of
detrimental reliance, even in a context where a contract would
normally govern. See Morris v. People's Bank & Trust Co., 580
So.2d 1029, 1036 (La.App. 3 Cir.), writ denied, 588 So.2d 101, 102
(La. 1991) (allowing a plaintiff to proceed to trial under
detrimental reliance) and Morris v. People's Bank & Trust Co., 580
So.2d 1037, 1043 (La.App. 3 Cir. 1991) (holding that the statute of
frauds barred the plaintiff from pursuing the same claim in
contract).
Newport predicates this claim on various of Sears' statements.
The most notable of these include two letters of intent, the second
arguably constituting a contract, that Sears sent Newport in
November 1984 and January 1985. Sears expressed in the first
letter its "intention to enter into [the] transaction" and stated
in its second letter that it was "prepared to enter into the
transaction." Both letters contained the essential terms under
which Sears would lease a warehouse from Newport. Moreover,
officers of Sears later acknowledged a commitment, both by
recognizing in internal memoranda, as one officer expressed the
matter, that "Sears ha[d] a moral obligation and possibly a legal
obligation either to proceed or to reimburse the developer's
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costs," and, later, by requesting that Newport allow Sears to stay
the project for a period of several months. If Newport had no
reasonable basis for believing that Sears had committed itself to
the project, Sears would not have needed Newport's permission for
this delay.
In Breaux, this court upheld a plaintiff's recovery under
detrimental reliance on a claim similar in nature to Newport's.
Breaux, 817 F.2d at 1230. The parties in Breaux had agreed on the
terms under which the defendant would lease the plaintiff's office
space. In contrast to the present case, the agent for the
defendant who arranged the transaction had stated clearly that
commitment would have to await the approval of his superior.
Nevertheless, on the basis of a letter from the agent expressing
the defendant's "intention to enter a rental agreement," the
plaintiff ceased making any other efforts to let the space.
Subsequently, when the market changed, the defendant decided not to
abide by the original terms of the transaction. Id. at 1228-29.
This court affirmed the district court's order allowing the
plaintiff to recover for rent lost in reliance on the defendant's
stated commitment. Id. at 1233.
Sears sent Newport its letter in January 1985 for the specific
purpose of confirming its commitment to the transaction. Sears
subsequently acknowledged the possible moral and legal obligations
it had incurred as a result of the actions that Newport had taken.
A jury could find that Newport had expended considerable time and
effort, and had foregone other lucrative possibilities, in
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reasonable reliance on the commitment Sears expressed to lease the
warehouse space.
D. Damages
Finally, to recover under any cause of action, Newport must
establish the damages it suffered as a result of Sears's actions.
To defeat summary judgment, Newport must raise a genuine issue of
material fact in regard to the damages it claims. Toward this end,
Newport offers the testimony of its expert witness.
Newport's offer of summary judgment evidence in support of its
claims for damages is admittedly thin. Ordinarily, it is the
province of the jury to gauge the credibility of an expert witness
and the reliability of the expert's data. See Dixon v.
International Harvester Co., 754 F.2d 573, 580 (5th Cir. 1985)
(citing Grenada Steel Industries v. Alabama Oxygen Co., 695 F.2d
883, 889 (5th Cir. 1983)). In particular, Newport offered an
expert's statement as to the amount of damages it suffered in out-
of-pocket costs, lost public monies, and lost profits. Moreover,
in Newport's submissions to the court, Newport appended the
calculations upon which the estimate of lost profits was based.
Without now deciding on the appropriateness of compensating Newport
for these categories of damages, we hold that Newport's evidence,
which Sears failed to rebut, raised a genuine issue of material
fact.
Conclusion
Newport has raised genuine issues of material fact on its
claims for breach of contract, fraud and detrimental reliance. As
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a result, we REVERSE the decision of the district court and REMAND
for further proceedings.
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