Oki America, Inc. v. Microtech International, Inc.

872 F.2d 312, 13 Fed. R. Serv. 3d 731, 1989 U.S. App. LEXIS 4645, 1989 WL 31356

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 7, 1989
• Docket: 88-1561
• Status: Published

Opinions

PER CURIAM:

The trial court granted Oki summary judgment on Microtech’s counterclaim for the bad faith denial of the existence of a contract. Microtech appeals, claiming a genuine dispute of material fact exists as to whether Oki denied the existence of the contract.

The elements of this tort are: (1) the denial of the existence of a contract (2) in bad faith, and (3) without probable cause. Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., 36 Cal.3d 752, 769, 206 Cal.Rptr. 354, 686 P.2d 1158 (1984). Mere denial of liability under a contract does not suffice; the defendant must deny the existence of the contract. Quigley v. Pet, Inc., 162 Cal.App.3d 877, 890-92, 208 Cal.Rptr. 394 (1984).

Summary judgment is reviewed de novo. Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). We must determine, viewing the evidence in the light most favorable to Microtech, whether any genuine issue of material fact exists and whether Oki was entitled to judgment as a matter of law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986).

First, Microtech notes Oki asserted as an affirmative defense that “[tjhere was no contract entered into between the parties.” Although pleadings may give rise to authorized admissions under Fed.R.Evid. 801(d)(2)(C) and be considered despite the hearsay rule, 4 D. Louisell & C. Mueller, Federal Evidence § 425, at 302 (1980), this pleading is not an admission. Oki alleged three mutually inconsistent affirmative defenses: (1) no contract existed, (2) course of dealing and usage of trade permitted it to “cancel its performance at any time pri- or to 30 days before shipment date,” and (3)performance was legally impossible.

Such inconsistent pleading is permissible under Fed.R.Civ.P. 8(e)(2). Therefore, as the Fifth Circuit has ruled, “one of two inconsistent pleas cannot be used as evidence in the trial of the other” because a contrary rule “would place a litigant at his peril in exercising the liberal pleading ... provisions of the Federal Rules.” Continental Ins. Co. v. Sherman, 439 F.2d 1294, 1298-99 (5th Cir.1971); see also 4 D. Loui-sell & C. Mueller § 425, at 306 & n. 75. In addition, this pleading is not sufficient to establish the elements of the tort: “once litigation has commenced, the actions taken in its defense are not ... probative of whether [a] defendant in bad faith denied the contractual obligation prior to the lawsuit.” Palmer v. Ted Stevens Honda Inc., 193 Cal.App.3d 530, 539, 238 Cal.Rptr. 363 (1987).

Second, Microtech relies on Oki’s affirmative defense that there existed between the two parties “a course of dealing which allowed the party issuing a purchase order to cancel its performance at any time prior to 30 days before shipment date.” This evidence fails for the same reasons as Microtech’s reliance on Oki’s affirmative defense that there was no contract between the two parties. In addition, an assertion the terms of a contract preclude relief is not a denial of the existence of the contract.

Third, Microtech points to testimony of Oki’s Vice President of Sales that he believed Oki or Microtech could unilaterally cancel the contract at any time for any reason. This, too, is evidence of Oki’s view of the meaning of contract terms rather than of its refusal to acknowledge the contract.

Fourth, Microtech relies on the underscored portion of the following quotation from a letter Oki’s president wrote Micro-tech:

While I appreciate your belief that you have a binding contract, I must also respectfully argue that our agent, Advanced Design Group, clearly described our pricing dilemma on its quote of December 9, 1985. As you have acknowledged, you accepted our quote in your purchase order and this note was a prominent and in fact crucial part of that quote. Therefore we feel strongly that you accepted the price renegotiation language.

Read in context, this letter provides no support for Microtech’s assertion Oki denied the existence of the contract. Rather, the letter disputes Microtech’s view of the terms of the contract.

Finally, Microtech offers the testimony of a third party that an Oki sales manager told him “Oki had no intentions o[f] delivering the product at the prices that they agreed upon” and that “Oki never had a written contract stating the firm prices over the schedule of the contract.” This conceded hearsay, Microtech submits, is admissible under Fed.R.Evid. 801(d)(2)(D) as the admission of a party’s agent.

As proponent of this evidence, Microtech must demonstrate it is “a statement by [Oki’s] agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship.” Fed.R.Evid. 801(d)(2)(D); Breneman v. Kennecott Corp., 799 F.2d 470, 473 (9th Cir.1986). This Microtech failed to do. On the contrary, the sales manager testified “Microtech was not in my geography. I knew nothing about Mi-crotech as a customer with regard to anything.” Since the sales manager’s statement did not concern a matter within the scope of his employment as Rule 801(d)(2)(D) requires, see Breneman, 799 F.2d at 473, testimony regarding his statement is inadmissible.

Microtech failed to identify any admissible evidence that Oki denied the existence of the contract. Summary judgment for Oki was therefore appropriate.

AFFIRMED.