Asia Strategic v. General Electric

• Court: Court of Appeals for the Tenth Circuit
• Decided: November 24, 1998
• Docket: 97-3236
• Status: Unpublished

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS NOV 24 1998 TENTH CIRCUIT PATRICK FISHER Clerk

ASIA STRATEGIC INVESTMENT ALLIANCES, LTD.,

Plaintiff-Appellant/Cross- Appellee, Nos. 97-3236 & 97-3259 (D. Ct. No. 95-2479-GTV) v. (D. Kan.)

GENERAL ELECTRIC CAPITAL SERVICES, INC. and EMPLOYERS REINSURANCE CORPORATION,

Defendants- Appellees/Cross- Appellants.

ORDER AND JUDGMENT *

Before TACHA, McWILLIAMS, and LUCERO, Circuit Judges.

Plaintiff Asia Strategic Investment Alliances (“Asia”), an Australian

corporation, sued General Electric Capital Services (“GE Capital”) and Employers

Reinsurance Corporation. (“ERC”) in the United States District Court for the

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. District of Kansas for allegedly violating a business agreement between the

parties to pursue an insurance investment opportunity in China. The district court

granted summary judgment for the defendants. We exercise jurisdiction pursuant

to 28 U.S.C. § 1291 and affirm.

I. Background

In 1993, Asia executives developed an alternative way for western

companies to gain access to the heavily regulated Chinese insurance market.

They envisioned forming an insurance joint venture between western insurance

companies and the state-owned People’s Insurance Company of China (“PICC”).

The joint venture would be structured as a subsidiary of PICC, with western

companies providing capital and holding a minority interest in the subsidiary. By

taking advantage of PICC’s existing license, western companies could bypass the

Chinese government’s multi-year waiting period for new licenses. Asia believed

that the Chinese insurance market provided a good investment opportunity for

western companies.

Asia identified GE Capital, a financial services company, and ERC, a

reinsurance company and indirect subsidiary of GE Capital, as promising

investors and approached them with the PICC joint venture idea. From July 1994

through early 1995, executives from the three companies met numerous times to

discuss the proposed joint venture. GE Capital and ERC decided to end their

-2- involvement with the project in the Spring of 1995. Asia filed suit on October 20,

1995, alleging breach of contract and claiming $61.23 million in damages. On

February 5, 1997, Asia sought leave to amend its complaint to add a breach of

fiduciary duty claim. The motion was referred to a magistrate judge who denied

the request because it was untimely.

On January 15, 1997, after completion of discovery, the defendants moved

for summary judgment. They assumed, for the purposes of the motion only, the

existence of an agreement between the parties and argued that the relationship

was a single joint venture “to pursue and participate in the proposed joint venture

company.” Appellant’s App. at 51. Defendants asserted that the joint venture

agreement was for an indefinite period of time and was therefore, under Kansas

law, terminable at will. Defendants also argued that Asia’s damage claims were

not compensable as a matter of law.

Asia responded to the defendants’ motion by asserting that the deal actually

comprised two joint ventures: one between Asia, GE Capital, and ERC to pursue

the deal with PICC, and the second between these companies and PICC to conduct

insurance business in China. Asia argued the parties created the first joint

venture specifically to pursue an agreement with PICC, and, under Kansas law, it

was terminable only when they completed that purpose. Alternatively, Asia

argued that, under defendants’ single joint venture theory, the joint venture

-3- between the parties was governed by Chinese law, which limits the duration of

joint ventures to thirty years. Thus, because the joint venture had a fixed time

period, it was not terminable at will. Finally, Asia asserted that its damages were

legally compensable.

Defendants addressed Asia’s “two joint venture” theory in their reply brief,

contending that the parties’ relationship failed to meet the definition of joint

venture under Kansas law and that defendants were entitled to summary judgment

under this theory as well. Asia did not object to defendants’ argument for

summary judgment on the two joint venture theory or request leave to reply to this

argument.

The district court granted defendants’ motion for summary judgment. It

adopted the two joint venture theory and found no evidence of a first joint venture

between Asia, GE Capital, and ERC. Asia appealed, alleging four grounds for

error: (1) inadequate notice that the district court would rule on the two joint

venture theory, which defendants did not raise in their initial motion; (2) failure

of the district court to consider Asia’s claim that it had an implied contract, not a

joint venture agreement, with GE Capital and ERC; (3) the district court’s

misinterpretation of Kansas joint venture law; and (4) the inability of the

magistrate judge to rule on Asia’s motion to amend its complaint because the

ruling involved a dispositive motion.

-4- II. Discussion

We review the district court’s grant of summary judgment de novo,

applying the same legal standard used by the district court. See Seymore v.

Shawver & Sons, Inc., 111 F.3d 794, 797 (10th Cir. 1997), cert. denied, 118 S.

Ct. 342 (1997). Summary judgment is appropriate “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if

any, show there is no genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). An issue

of material fact is genuine if a reasonable jury could return a verdict for the

nonmovant. See Seymore, 111 F.3d at 797. We examine the factual record and

reasonable inferences therefrom in the light most favorable to the nonmoving

party. See id.

A. Inadequate Notice

It is well-settled that a district court may grant summary judgment on

grounds other than those raised in the motions as long as the nonmoving party had

adequate notice that it would have to come forward with its evidence on the issue.

See Howell Petroleum Corp. v. Leben Oil Corp., 976 F.2d 614, 620 (10th Cir.

1992); see also Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986) (noting that

“district courts are widely acknowledged to possess the power to enter summary

judgments sua sponte, so long as the losing party was on notice that she had to

-5- come forward with all of her evidence”); Sports Racing Servs., Inc., v. Sports Car

Club of Am., Inc., 131 F.3d 874, 892 (10th Cir. 1997) (same). Asia contends that

it had insufficient notice that the court would decide the case on the two joint

venture theory because defendants did not include the theory in their opening

brief. We find Asia had adequate notice.

Asia itself introduced the two joint venture theory in its memorandum in

support of its opposition to summary judgment. This fact distinguishes this case

from those cited by Asia where the movant raised an issue for the first time in a

reply brief, denying the nonmovant an opportunity to address the issue. Indeed,

this is a case where the “[p]laintiff may not be heard to complain that [it] did not

receive ‘an adequate opportunity to respond to [a] new issue.’” Jarvis v.

Nobel/Sysco Food Servs. Co., 985 F.2d 1419, 1424 (10th Cir. 1993) (quoting

Prospero Assocs. v. Burroughs Corp., 714 F.2d 1022, 1028 (10th Cir. 1983)

(McKay, J., dissenting)).

Asia argued that the evidence it had produced concerning the dealings

between the parties established material issues of fact regarding the existence of a

“first” joint venture. Asia’s submitted voluminous evidence consisting of

thousands of pages of documents and transcripts. Because Asia based its case on

the two joint venture theory and produced its evidence accordingly, we find that

Asia had ample notice and opportunity to come forward with its evidence on this

-6- theory. See Howell Petroleum, 976 F.2d at 620 (holding plaintiff had notice of

issue when plaintiff implicitly raised it in motion for partial summary judgment

and defendant responded with winning argument); cf. Sports Racing Servs., 131

F.3d at 892-93 (suggesting that, where moving party mistakenly interpreted

franchise law requirements in its motion for summary judgment, nonmoving party

had notice that application of the law was in question, and court’s ruling based on

the correct interpretation was therefore proper); Madewell v. Downs, 68 F.3d

1030, 1048 (8th Cir. 1995) (finding nonmovant had notice that Rule 12(b)(6)

motion would be converted to Rule 56 motion when he offered materials outside

the pleadings in response to a 12(b)(6) motion). In addition, we find the parties

have fully developed the facts in this case and that Asia suffered no prejudice.

Thus, the district court appropriately granted summary judgment on the two joint

venture theory. See Wilder v. Prokop, 846 F.2d 613, 626 (10th Cir. 1988)

(finding district court ruling against nonmoving party on claim arguably not

raised in summary judgment motions proper because facts were fully developed

and the nonmoving party suffered no prejudice). We find the district court

committed no procedural error by basing its ruling on the two joint venture

theory.

B. Asia’s Claim of Implied Contract

Appellants argue the district court erred by failing to decide whether an

-7- implied contract existed between the parties. Asia may have arguably raised the

simple “implied contract” argument in its initial complaint and in the pretrial

order. However, Asia failed to raise the implied contract theory in its

memorandum in support of its opposition to defendants’ motion for summary

judgment. In opposing summary judgment, Asia alternatively relied on the “two

joint venture” theory and the “one continuing joint venture” theory. It never

argued on summary judgment that the agreement with GE Capital and ERC

constituted a simple contract. Instead, it consistently referred to the parties’

alleged agreement as one for a joint venture.

Appellate courts will not consider points raised below but not argued or

pursued in the district court, except in cases involving jurisdiction, sovereign

immunity, manifest injustice, or other exceptional circumstances. See, e.g.,

Rademacher v. Colorado Ass’n of Soil Conservation Dists. Med. Benefit Plan, 11

F.3d 1567, 1571-72 (10th Cir. 1993); Lyons v. Jefferson Bank & Trust, 994 F.2d

716, 721-22 (10th Cir. 1992). Underlying this rule are serious concerns about

finality of judgments and judicial economy. See Okland Oil Co. v. Conoco Inc.,

144 F.3d 1308, 1314 n.4 (10th Cir. 1998); Lyons, 994 F.2d at 721. The rule

applies not only to the failure to raise issues at trial, but also the failure to raise

issues on summary judgment or in opposition to a motion for summary judgment.

See Geoffrey E. Macpherson, Ltd. v. Brinecell, Inc., 98 F.3d 1241, 1246 (10th

-8- Cir. 1996); Rademacher, 11 F.3d at 1571.

Asia’s failure to press its implied contract theory at the summary judgment

stage precludes it from asserting that claim now. Even construing Asia’s

summary judgment filings generously, we find no direct reliance on the simple

implied contract theory. The best we can say is that the implied contract

argument lurks somewhere beneath the surface of Asia’s memorandum. However,

“vague, arguable references to [a] point in the district court proceedings do not . .

. preserve the issue on appeal.” Lyons, 994 F.2d at 721 (quoting Monarch Life

Ins. Co. v. Elam, 918 F.2d 201, 203 (D.C. Cir. 1990). In addition, the fact that

Asia may have raised the issue in its complaint or could have argued it at trial is

not dispositive. Failure to raise an issue on summary judgment constitutes waiver

of that issue. See Grenier v. Cyanimid Plastics, Inc., 70 F.3d 667, 678 (1st. Cir.

1995) (“Even an issue raised in the complaint but ignored at summary judgment

may be deemed waived.”); Vaughner v. Pulito, 804 F.2d 873, 877 n.2 (5th Cir.

1986) (“If a party fails to assert a legal reason why summary judgment should not

be granted, that ground is waived and cannot be considered or raised on appeal.”);

Lazarra v. Howard A. Esser, Inc., 802 F.2d 260, 269 (7th Cir. 1986) (“A

contention included in an answer, but not pressed before the district court, may

not be presented on appeal as a ground for reversal.”). We find this case does not

present the kind of manifest injustice or other exceptional circumstances that

-9- would excuse Asia’s waiver. Thus, we will not review the merits of its implied

contract claim.

C. Joint Venture

The district court found that, under Kansas law, no evidence supported the

existence of a joint venture agreement between Asia, GE Capital, and ERC. Asia

asserts that the district court erred in its interpretation of Kansas joint venture law

and that, under the correct legal standard, there is sufficient evidence for a

reasonable jury to find the existence of a joint venture.

Kansas law defines a joint venture as “an association of two or more

persons or corporations to carry out a single business enterprise for profit; it may

be found in the mutual acts and conduct of the parties.” Modern Air

Conditioning, Inc. v. Cinderella Homes, Inc., 596 P.2d 816, 823 (Kan. 1979); see

also George v. Capital S. Mortgage Invs., Inc., 961 P.2d 32, 44 (Kan. 1998);

Goben v. Barry, 676 P.2d 90, 96 (Kan. 1984). Kansas law does not define

precisely the requirements of a joint venture. Instead, it merely lists various

factors, none of which is singularly controlling, that are indicative of a joint

venture. See Modern Air Conditioning, 596 P.2d at 823. These factors are:

(1) the joint ownership and control of property; (2) the sharing of expenses, profits and losses, and having and exercising some voice in determining the division of the net earnings; (3) a community of control over and active participation in the management and direction of the business enterprise; (4) the intention of the parties, express or implied; and (5) the fixing of salaries by joint agreement.

- 10 - Id.

Asia contends that the negotiations and meetings of the parties between

July and December of 1994 created an implied agreement to operate as a joint

venture, and it cites various facts that it claims provide enough evidence for a

reasonable jury to conclude a joint venture was formed. Asia’s facts are as

follows: (1) GE Capital and ERC asked for and received a ninety day exclusivity

agreement from Asia at the end of July 1994; (2) Asia funded all project efforts

during the period in question; (3) ERC agreed, at a November 3, 1994 meeting, to

begin funding Asia’s expenses, provided Asia could arrange a meeting between

ERC and a high-level PICC official to satisfy ERC that PICC was serious about

its support for the project; (4) Asia prepared and presented to ERC a detailed

business plan which ERC then forwarded to PICC along with a letter expressing

ERC’s and GE Capital’s commitment in principle to the project; (5) the business

plan provided for Asia to have an equity share of the insurance joint venture; (6)

Asia, ERC, and GE Capital discussed strategy and kept each other apprised of

their dealings regarding the project; and (7) each party contributed something

different to the deal. Even taking all this evidence as true and viewing it in the

light most favorable to Asia, we agree with the district court that a reasonable

jury could not have found the existence of a joint venture under Kansas law.

The record indicates that, even if the parties had formed an agreement to

- 11 - work toward the insurance joint venture, that agreement did not itself constitute a

joint venture. Applying the Modern Air Conditioning factors, there was no joint

ownership or control of property, nor was there joint fixing of salaries. In

addition, the parties did not share expenses. Asia admits that it funded all project

efforts, and ERC’s November 3 agreement to fund Asia’s future expenses was, in

Asia’s own words “subject to [ERC] being satisfied of the serious intent of PICC

to support the insurance joint venture.” Appellant’s Addendum at 39. Asia

arranged for a meeting with a PICC official on December 5, 1994, but after that

meeting, ERC was not sufficiently satisfied to commit to the cost sharing, as it

indicated in a January 17, 1995 letter to Asia. GE Capital and ERC broke off

further discussions with Asia soon after this letter. Because of the conditions set

forth at the November 3 meeting, the parties clearly had no agreement to share

expenses prior to the December 5 meeting with the PICC official. Furthermore,

ERC’s actions suggest that it never agreed to share expenses after the December 5

meeting either. Even if we give Asia the benefit of the doubt and find an

agreement to share expenses after the December 5 meeting, this by itself is not

enough to establish a joint venture. See PulseCard, Inc. v. Discover Card Servs.,

Inc., 917 F. Supp. 1478, 1485 (D. Kan. 1996) (finding that sharing of expenses

alone will not suffice to establish a joint venture between parties to a business

contract).

- 12 - Asia also provides no evidence of agreement to share profits and losses or

of joint participation in the management and direction of the business enterprise.

In fact, there were no profits to be had from the alleged first joint venture because

its objective was simply the pursuit of a second joint venture. As for the

management of the alleged business venture, the record shows that the parties

discussed strategy, but we find no indication of joint decisions other than the

November 3 decision to pursue a meeting with PICC and the November 3 letter

from ERC to PICC expressing commitment in principle to the project. We hold

that this evidence is inadequate to prove the existence of a joint venture.

Perhaps most importantly, we find insufficient evidence of the intent of the

parties to form a joint venture. Asia theorizes that we must infer intent from the

actions of the parties. However, those actions indicate negotiations, not

agreement. No actions of the parties prior to November 3 can reasonably be

construed as creating a joint venture. The initial meetings, exclusivity agreement,

and efforts by both sides to keep the other informed are the kind of actions parties

typically take in evaluating and negotiating a potential business deal. Asia

contends that the November 3 meeting, ERC’s conditional agreement to fund

Asia’s efforts, ERC’s approval of the business plan, 1 and its letter to PICC show

1 We note that the business plan only addressed the second joint venture with PICC, not the alleged first joint venture with Asia.

- 13 - an agreement. We disagree. Although support for a proposal and a commitment

in principle may show ERC’s interest in the project, they hardly evidence an

agreement to go forward in a joint venture relationship with Asia.

When we construe the evidence in the light most favorable to Asia, we find

that, at best, the parties might have legally agreed to pursue the insurance joint

venture and to ERC’s payment of Asia’s costs after December 5, 1994. No

reasonable jury could find this agreement rose to the level of a joint venture. In

the absence of any joint ownership, sharing of profits, joint management of the

enterprise, fixing of salaries, and clear intention of the parties, we find no error in

the district court’s grant of summary judgment. See Southwest Nat’l Bank of

Wichita v. ATG Constr. Management., Inc., 736 P.2d 894, 897 (Kan. 1987)

(upholding trial court’s finding that no joint venture existed between bank and

general contractor where parties did not agree to share property ownership or

profits); Flight Concepts Ltd. Partnership v. Boeing Co., 38 F.3d 1152, 1158

(10th Cir. 1994) (applying Kansas law and affirming summary judgment on the

grounds that no joint venture was formed where parties did not jointly own

property, fix salaries, share expenses or control of the project); Nature’s Share,

Inc. v. Kutter Prods., Inc., 752 F. Supp. 371, 383 (D. Kan. 1990) (granting

summary judgment motion and finding no joint venture where parties to business

contract had no agreement to share profits).

- 14 - D. Motion to Amend the Pleadings

Finally, Asia claims that the assignment of its February 5, 1997 Motion for

Leave to Amend Complaint to a magistrate judge constitutes reversible error

because the motion was dispositive and therefore beyond the magistrate’s

jurisdiction as set forth in Federal Rule of Civil Procedure 72 and 28 U.S.C. §

636(b)(1)(A). The magistrate denied Asia’s motion, and Asia filed no objection

to the ruling with the district court. Asia’s argument is foreclosed by this court’s

rule that failure to timely object to a magistrate’s authority constitutes waiver.

See In re Griego, 64 F.3d 580, 583 (10th Cir. 1995); Clark v. Poulton, 963 F.2d

1361, 1366-67 (10th Cir. 1992). 2 In Clark, this court determined that a

magistrate’s “jurisdiction” to hear a case was not the same as nonwaivable subject

matter jurisdiction and that objections to this jurisdiction are waived if not

properly raised with the district court. See 963 F.2d at 1367. Asia admits that it

made no objection to the district court. Therefore, Asia has waived its right to

2 Asia erroneously relies on Clark v. Poulton, 914 F.2d 1426 (10th Cir. 1990), to support its contention that magistrate jurisdiction is nonwaivable. That decision was vacated and replaced by the current rule in Clark v. Poulton, 962 F.2d 1361 (10th Cir. 1992).

- 15 - raise the issue of the magistrate’s authority before this court.

AFFIRMED.

ENTERED FOR THE COURT,

Deanell Reece Tacha Circuit Judge

- 16 -