United States Court of Appeals For the First Circuit
No. 19-1377
ARABIAN SUPPORT & SERVICES COMPANY, LTD.,
Plaintiff, Appellant,
v.
TEXTRON SYSTEMS CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Lynch, Selya, and Lipez, Circuit Judges.
Martin F. Gaynor III, with whom Haig V. Kalbian, D. Michelle Douglas, William P. McGrath, Jr., Kalbian Hagerty LLP, Nicholas D. Stellakis, and Hunton Andrews Kurth LLP were on brief, for appellant. John A. Tarantino, with whom Nicole J. Benjamin and Adler Pollock & Sheehan P.C. were on brief, for appellee.
November 20, 2019 LYNCH, Circuit Judge. The international arms trade
provides the background for this appeal. Arabian Support &
Services Co. ("ASASCO"), a Saudi Arabian consulting company, sued
Textron Systems Corporation ("Textron"), a Massachusetts-based
defense contractor, on various Massachusetts state law claims.
Underlying them all was the assertion that Textron represented
that ASASCO's compensation for assisting Textron in securing the
sale of sensor fuzed weapons ("SFWs") to Saudi Arabia would include
payments resulting from ASASCO's efforts to obtain an "offset
waiver" or "offset credits" for Textron associated with that sale.
That payment allegedly would be a fee and/or a percentage of the
final Textron contract with Saudi Arabia.
ASASCO's 2017 amended complaint asserted violation of
Massachusetts General Laws chapter 93A, fraudulent inducement,
intentional misrepresentation, negligent misrepresentation,
quasi-contract/implied contract/promissory estoppel, and quasi-
contract/unjust enrichment/quantum meruit. We affirm the district
court's entry of summary judgment for Textron, relying largely on
the district court's able opinion. Arabian Support & Servs. Co.
v. Textron Sys. Corp., 368 F. Supp. 3d 211 (D. Mass. 2019) (Textron
II).
I.
In recounting the facts, we rely in substantial part on
the district court's opinion and our prior decision, Arabian
- 2 - Support & Services Co. v. Textron Systems Corp., 855 F.3d 1 (1st
Cir. 2017) (Textron I). We describe the key events over the
parties' thirteen-year relationship in chronological order.
A. Facts
Textron was interested in selling SFWs to Saudi Arabia.
The relationship between Textron and ASASCO largely developed
through the interactions of Mansour Al-Tassan, ASASCO's President,
and Avedis Boyamian, Textron's Director of Middle East Business
Development. Starting in 2001, Al-Tassan and Boyamian discussed
various methods of paying ASASCO for its assistance in furthering
a SFW sale, including through a fixed monthly fee or through the
formation of a joint venture.
In March 2004, Textron engaged the International Law
Firm in Riyadh to ensure that its contemplated relationship with
ASASCO would be legal under Saudi law. On July 8, 2004, Robert
Kemp, Textron's General Counsel, inquired about the legality of
paying ASASCO "on a commission basis." The International Law Firm
advised Kemp on September 1, 2004, that such a relationship had a
"significant risk" of being prohibited under Saudi law.
On September 28, 2004, Boyamian and Al-Tassan met in
Cairo. Boyamian told Al-Tassan that Textron was willing to pay
ASASCO up to five percent of the value of the SFW deal but that
the agreement between the companies must conform to U.S. and Saudi
law. ASASCO alleges that on November 6, 2004, at a meeting in
- 3 - Saudi Arabia, Boyamian represented to Al-Tassan that Textron would
use "offsets"1 in order to pay ASASCO lawfully for its services if
Textron obtained the SFW sales contract with Saudi Arabia.
In 2005, Textron and ASASCO executed the first of what
would be five consulting agreements. The first three agreements,
each lasting one year during the time period from 2005 to 2008,
provided ASASCO with a monthly retainer of $10,000 for its services
regarding the sale of Textron's SFWs to the Royal Saudi Air Force.2
Throughout 2006, Boyamian and Al-Tassan further
discussed the opportunity for ASASCO to receive compensation for
1 Offsets are "the practice by which the award of defense contracts by foreign governments or companies is conditioned upon commitments from the defense contractor to provide some form of compensation to the purchaser." Textron I, 855 F.3d at 2 n.1 (internal quotation marks omitted). An "offset waiver" occurs when the purchaser-country agrees to waive the seller-company's offset obligation. See Textron II, 368 F. Supp. 3d at 218. If a waiver does not occur, the seller-company must perform its offset obligation. The district court noted that Saudi regulations appear to require pre-approval by the Saudi government of the seller- company's plan to fulfill its offset obligation before the signing of a supply contract. Id. An "offset credit" is earned by the seller-company when it develops an offset project, which will be performed in the future, that the purchaser-country determines will satisfy the offset obligation. See id. 2 All of the consulting agreements also included a provision stating that "any and all services rendered by CONSULTANT to the COMPANY shall be deemed to have been given pursuant to this Agreement and no additional payments [besides approved travel expenses] shall be due to or paid to CONSULTANT. . . . The parties agree that CONSULTANT shall not receive any compensation or commission based in any manner whatsoever on the volume of sales of the COMPANY products and/or services procured or received" under this Agreement.
- 4 - its assistance with any offset projects. Textron's position with
ASASCO was that "[a]ll such activity must result in Saudi Gov't
approval of offset projects, grant credits/or waive requirement."
In June 2006, Textron sent ASASCO a draft offset provider
agreement.3 Later at deposition, Boyamian described the offset
discussions and the consulting agreements as "totally separate."
On June 26, 2006, Boyamian also forwarded Al-Tassan internal
Textron emails that ordered that ASASCO's business with Textron be
recorded separately as "two books" -- one for the proposed offset
agreement and one for a renewal of the consultant agreement.
Textron and ASASCO never formalized a written offset agreement.
In February 2008, Textron entered into an Offset
Services Agreement ("OSA") with Blenheim Capital Partners
("Blenheim"), a company based in the United Kingdom. If Blenheim
helped Textron (1) obtain an irrevocable waiver within six months
"after the date of the execution of the Supply Contract" or
(2) meet its offset obligations, Textron would pay Blenheim six
3 Under the draft proposed agreement, which was never executed, ASASCO would have been "entitled to receive a fee of X percent (X%) of the value of an Offset Waiver" provided Textron was satisfied that the offset was waived irrevocably, or to "X percent (X%) of the value of an Offset Credit obtained through successful execution of an Offset Project entered into with ASASCO."
- 5 - percent of the contract price.4 Under the OSA, Blenheim could
subcontract with ASASCO, but it needed Textron's written consent
to use any other subcontractor. Boyamian sent Al-Tassan a draft
of this agreement in June 2007, before the agreement's
finalization.
On June 21, 2007, Al-Tassan, Boyamian, Textron's Offset
Manager, and a representative from Blenheim met in Paris. Al-
Tassan asserts that Boyamian represented at this meeting that
ASASCO would receive six percent of the Supply Contract under the
"offset arrangement."
On September 4, 2008, Textron and ASASCO extended the
third consulting agreement, but on a "no-fee basis."5 This
arrangement lasted until August 31, 2009.
On April 6, 2009, Blenheim and ASASCO finalized a
subcontract in which ASASCO would assist Blenheim in securing
either an offset waiver or offset credits. Under the agreement,
ASASCO was only entitled to additional compensation if offset
4 If the final agreement was a government-to-government sale, rather than a contract directly between Textron and the Saudi government, Blenheim would receive two percent. 5 Boyamian explained the decision to extend the agreement on a no-fee basis in an email to Textron employees that stated: "Effective September 1st, 2008, [Textron] stopped paying ASASCO the monthly consultancy fee because, [Textron] through Blenheim, an offset service provider company based in UK, has an offset service providing agreement with ASASCO for [Textron] business offset requirements in Saudi Arabia." The following day, Boyamian forwarded this email to Al-Tassan.
- 6 - credits or an offset waiver were achieved pursuant to the OSA.6
In August 2009, Textron and ASASCO entered a fourth consulting
agreement effective September 1, 2009, through August 31, 2011,
which gave ASASCO a $500 monthly retainer.
In May 2011, Textron's new Director of Business Offsets,
Stephen Fogarty, advised Textron to terminate the OSA with
Blenheim, describing the six percent fee as "excessive." By this
time, Al-Tassan had left Saudi Arabia because a Saudi civil
judgment had entered against him and a subsequent civil warrant
had issued in June 2010 for his arrest in Saudi Arabia.
While the OSA was still in effect in July 2011, Textron
submitted a proposed offset project, developed by ASASCO, to the
Saudi Economic Offset Committee. A Saudi official responded the
next day rejecting the proposal, stating that it did not align
with the Committee's priorities and did not provide sufficient
detail.
It is undisputed that, after this rejection, ASASCO
never completed another formal offset project proposal for
Textron. In the fall of 2011, Textron and Al-Tassan continued to
6 The agreement between Blenheim and ASASCO stated that if Textron paid a fee into "the Escrow Account" pursuant to the OSA, then ASASCO would be entitled to 75% of that fee. (Only the agreement between ASASCO and Blenheim referred to an escrow account -- the OSA did not specify that Textron had to pay the fees into an escrow account.) The agreement would be terminated when the OSA "terminated for any reason."
- 7 - discuss possible offset projects over email, but no formal proposal
ever materialized.
Textron and ASASCO also entered into a fifth consulting
agreement, effective September 1, 2011, which contained an
integration clause.
In November 2011, Textron sent Blenheim a letter stating
that the parties had agreed to mutually terminate the OSA.
Blenheim signed the letter on January 12, 2012.7
On January 3, 2012, Boyamian emailed Al-Tassan to inform
him that the U.S. government and Saudi Arabia had executed a
"Letter of Offer and Acceptance," which finalized the terms of the
sale of the SFWs, and to offer a "[congratulations] to all of us."
No formal contract entered at this time. Through 2012, Textron
continued working with ASASCO to set up meetings with Saudi
officials. On August 16, 2012, Textron and ASASCO extended the
fifth consulting agreement, including its integration clause,
through August 31, 2013.
On August 20, 2013, the U.S. Department of Defense
announced that Textron had been awarded the contract to provide
SFWs to Saudi Arabia for a total price of $640,786,442. The
7 Textron asserts that in February or March 2012, a Textron employee informed Al-Tassan that the OSA had been terminated. ASASCO, however, asserts that Al-Tassan was not informed by Textron until September 2013. Despite this assertion, on May 30, 2012, Al-Tassan emailed his assistant and noted that "Blenheim is out of the picture."
- 8 - announced contract terms included $89,222,000 for Textron in
offset costs. On August 29, 2013, Textron emailed ASASCO that it
would not renew the fifth consulting agreement and stated that
Textron was "not aware of any outstanding obligations between the
parties."
Textron signed a Letter of Agreement ("LOA") with the
Saudi Arabian Economic Offset Program on June 9, 2014, agreeing
that Textron's offset obligation would be 40% of the SFW contract.
The LOA further stated that Textron's commitment of 40% would be
included in the "Offset Memorandum of Agreement which will be
signed by Textron" and the Economic Offset Program.
By the time of this appeal, Textron and Saudi Arabia had
not entered into an Offset Memorandum of Agreement, and Textron
had kept the $89.2 million it received for offset costs. Saudi
Arabia had not waived the offset requirements. And ASASCO had
never delivered an offset project that was approved by Saudi
Arabia.
B. Procedural History
ASASCO filed suit against Textron on July 15, 2015,
alleging breach of contract, tortious interference, and violation
of Massachusetts General Laws chapter 93A. The district court
granted summary judgment to Textron on all counts and the First
Circuit affirmed as to the breach of contract and tortious
- 9 - interference counts but vacated the summary judgment as to ASASCO's
chapter 93A claim. Textron I, 855 F.3d at 3.
On June 21, 2017, ASASCO filed an amended complaint
making the claims described earlier. On March 19, 2019, the
district court granted Textron's motion for summary judgment on
all counts.
II.
We review the district court's entry of summary judgment
de novo. Town of Westport v. Monsanto Co., 877 F.3d 58, 64 (1st
Cir. 2017). Summary judgment is appropriate when there is no
genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law. Fed. R. Civ. P. 56(a). As a
federal court sitting in diversity, we apply Massachusetts
substantive law. Mulder v. Kohl's Dep't Stores, Inc., 865 F.3d
17, 20 (1st Cir. 2017). We conclude that the district court
correctly entered summary judgment for Textron, and we affirm based
largely on its analysis. We add the following additional comments
as to several aspects of the appeal.
A. Mass. Gen. Laws Ch. 93A Claim
ASASCO argues that the district court erred in granting
summary judgment to Textron on its chapter 93A claim for two
different reasons. First, ASASCO argues that the district court
"misapplied the legal standard" as articulated by the
Massachusetts Supreme Judicial Court (SJC) in Kuwaiti Danish
- 10 - Computer Co. v. Digital Equipment Corp., 781 N.E.2d 787 (Mass.
2003). It says that a case relied on by the district court, Roche
v. Royal Bank of Canada, 109 F.3d 820 (1st Cir. 1997), is
inconsistent with the SJC's later Kuwaiti Danish decision. ASASCO
secondly argues the district court mistakenly concluded that the
"core of the misleading conduct" did not occur "primarily and
substantially within the commonwealth." Mass. Gen. Laws ch. 93A,
§ 11. In the circumstances of this appeal, this inquiry is a
question of law. Kuwaiti Danish, 781 N.E.2d at 797.
In Kuwaiti Danish, the SJC stated that "a judge should,
after making findings of fact, and after considering those findings
in the context of the entire § 11 claim, determine whether the
center of gravity of the circumstances that give rise to the claim
is primarily and substantially within the Commonwealth." Id. at
799. ASASCO focuses on the SJC's language that this analysis
"should not be based on a test identified by any particular factor"
because use of a factor-based test tends "to shift the focus of
inquiry away from the purpose and scope of c. 93A." Id.
ASASCO argues that the district court erred when it cited
to the factors outlined in this court's earlier decision in Roche.
The Roche factors look to where the defendant committed the alleged
deception, where the plaintiff was deceived and acted upon the
deception, and where the plaintiff was harmed. Roche, 109 F.3d at
829-31. The district court did not apply Roche in a manner
- 11 - inconsistent with Kuwaiti Danish. Rather, it carefully considered
the nature of each alleged instance of misconduct, as well as the
number of alleged instances, in the context of the entire claim
and in doing so, performed the "fact intensive" analysis required
by the SJC. Kuwaiti Danish, 781 N.E.2d at 798. Contrary to
ASASCO's argument, the district court did not "narrowly and rigidly
construe[] the facts."
Secondly, there was no error when the district court
concluded that Massachusetts was not the "center of gravity."
ASASCO points to evidence that Textron itself is in Massachusetts
and that the email communications to Al-Tassan and ASASCO
originated in Massachusetts. The cases ASASCO relies on are easily
distinguished.8 Unlike those cases, this case involves alleged
8 ASASCO relies on three cases where courts have rejected defendants' arguments that the allegedly deceptive conduct in the case did not occur "primarily and substantially within the commonwealth." These cases are factually dissimilar from the present case. See Controlled Kinematics, Inc. v. Novanta Corp., No. 17-cv-11029, 2017 WL 5892200, at *1-3, *5 (D. Mass. Nov. 29, 2017) (denying defendant's motion to dismiss where the allegedly deceptive practices and communications originated in Massachusetts and plaintiff was harmed in California but where plaintiff did not allege that misleading conduct occurred anywhere besides these two locations); Auto Shine Car Wash Sys., Inc. v. Nice 'N Clean Car Wash, Inc., 792 N.E.2d 682, 686 (Mass. App. Ct. 2003) (concluding that trial judge correctly found that Massachusetts was the center of gravity because both the deception and harm occurred in Massachusetts); Trematerra v. Major League Lacrosse, LLC, No. SUCV201701140BLS2, 2017 WL 6601553, at *1-2, *4 (Mass. Super. Ct. Oct. 13, 2017) (denying defendant's motion to dismiss where defendant's headquarters and the source of the alleged misrepresentations were in Massachusetts but where defendant did
- 12 - deceptions that occurred almost entirely outside of Massachusetts.
ASASCO asserts that it was misled at meetings with Textron
officials in Egypt, France, and Saudi Arabia. We see no error in
the district court's analysis. The chapter 93A, section 11 claims
were properly disposed of on summary judgment.
B. ASASCO's Other Claims
As to ASASCO's claims of error in entry of judgment
against its fraudulent inducement, intentional misrepresentation,
negligent misrepresentation, and quasi-contract/implied
contract/promissory estoppel claims, we affirm the entry of
summary judgment based on the district court's reasoning. A few
bedrock principles of Massachusetts contract law require this
result. First, the district court correctly stated that "ASASCO
cannot now assert that it reasonably relied on promises of
compensation in the form of a commission for assisting in selling
the cluster bombs," Textron II, 368 F. Supp. 3d at 227-28, when
the terms of all five written consulting agreements flatly
prohibited any payment to ASASCO based on commission from the
weapons sale. See Masingill v. EMC Corp., 870 N.E.2d 81, 89 (Mass.
2007) ("It is unreasonable as a matter of law to rely on prior
oral representations that are (as a matter of fact) specifically
contradicted by the terms of a written contract.").
not make any in-person misrepresentations to plaintiff in any other location).
- 13 - As to ASASCO's alternate claims that, apart from
commission, it was entitled to compensation as to offset
provisions, the district court correctly concluded that "there is
no evidence in the record that Al-Tassan was promised compensation
of six percent of the total SFW sale . . . even if ASASCO did not
acquire a waiver or offset credits." Textron II, 368 F. Supp. 3d
at 228 (emphasis added). The court properly found Textron never
represented to ASASCO that ASASCO would receive offset-related
compensation even if ASASCO did not secure from the Saudi
government an offset waiver or offset credits. Going beyond that,
it is undisputed that ASASCO never obtained a waiver or secured
Saudi government approval for an offset project, nor did it even
complete a formal offset project proposal after the 2011 rejection.
ASASCO reframes its argument in terms that a jury could
conclude that Textron denied ASASCO the "opportunity" to provide
offset services or secure a waiver, quoting our earlier opinion in
Textron I. Textron I, 855 F.3d at 8 n.9. ASASCO argues that
because it put forth "several offset proposals that [Textron] could
have used once the Supply Contract was signed," the parties
"understood and intended that ASASCO would not be able to perform
any of those proposals and be paid for them until the Supply
Contract was signed," and Textron then declined to extend the
consulting agreement once it signed the Supply Contract, Textron
deprived ASASCO of this "opportunity."
- 14 - ASASCO was not denied the "opportunity" to secure offset
services. ASASCO's own evidence is that Textron gave it the
opportunity to discuss proposed offset projects with Textron. But
the Saudi government has never approved any of these offset
proposals. Further, ASASCO does not dispute that it failed to
come up with any formal offset proposals after its 2011 proposal
was rejected by the Saudi government.
The unjust enrichment/quantum meruit claim goes nowhere.
Under Massachusetts law, courts generally "will not grant quantum
meruit recovery arising from a contingent fee contract where the
contingency has not occurred." Liss v. Studeny, 879 N.E.2d 676,
683 (Mass. 2008). Here, the two contingencies were (1) the signing
of the Supply Contract and (2) ASASCO's achievement of a waiver or
offset credits. The second, necessary contingent event never
happened.
Affirmed. Costs are awarded to Textron.
- 15 -