Stewart Lamle v. Mattel, Inc.

394 F.3d 1355, 55 U.C.C. Rep. Serv. 2d (West) 678, 73 U.S.P.Q. 2d (BNA) 1496, 2005 U.S. App. LEXIS 217, 2005 WL 27554

• Court: Court of Appeals for the Federal Circuit
• Decided: January 7, 2005
• Docket: 04-1151
• Status: Published

Opinions

Opinion of the court filed by Circuit Judge DYK. Dissenting opinion filed by Circuit Judge NEWMAN.

DYK, Circuit Judge.

Appellant Stewart Lamle (“Lamle”) appeals from the judgment of the United States District Court for the Central District of California granting summary judgment in favor of Appellee Mattel, Inc. Because we find that there are genuine issues of material fact as to the contract claim, we vacate the grant of summary judgment and remand for further proceedings as to the contract claim. We affirm the district court’s grant of summary judgment as to the other claims.

BACKGROUND

Lamle’s contract claim is at the heart of this appeal. We describe only the relevant facts concerning this claim. The summary judgment record, taken in the light most favorable to Lamle, shows the following:

Lamle is the inventor of Farook, a board game similar in some respects to Tic Tac Toe. In 1994 and 1995, Lamle obtained two patents for Farook from the United States Patent and Trademark Office, U.S. Patent Nos. 5,808,080 and 5,419,564.

From May 1996 to October 1997, Lamle and Mattel, Inc. and its subsidiary J.W. Spear & Sons PLC (collectively “Mattel”) were engaged in negotiations regarding the licensing of Farook by Mattel for distribution outside the United States. Early in these negotiations, Lamle signed Mattel’s standard Product Disclosure Form (the “Disclosure Form”), which contained the following provision:

I understand that ... no obligation is assumed by [Mattel] unless and until a formal written contract is agreed to and entered into, and then the obligation shall be only that which is expressed in the formal, written contract.

(Def.App. at 103.)

During the negotiations, on March 18, 1997, Lamle and Mattel entered into a written agreement where Mattel paid $25,000 for Lamle’s promise not to license Farook to anyone else until after June 15, 1997. The agreement provided that “[t]he payment of U.S. $25,000 would be considered as an advance against royalties if, subsequent to this agreement, a royalty contract for FAROOK is entered into between Mattel and Stewart Lamle.” (Def.App. at 111.)

The negotiations advanced, and a meeting was held in England on June 11, 1997 (the “June 11 meeting”), where the parties discussed the terms of a licensing agreement. At the meeting, Mattel and Lamle agreed on many terms of a license including a three-year term, the geographic scope, the schedule for payment, and the percentage royalty. Mattel asked Lamle to “draft a formal document memorializing ‘The Deal’ ” and “promised [that] it would sign a formal, written contract before January 1,1998.” (Pl.App. at 59.)

Mattel employee Mike Bucher (“Bucher”) subsequently sent Lamle an email entitled “Farook Deal” on June 26, 1997 (the “June 26 email”), that substantially repeated terms agreed to at the June 11 meeting. The email stated that the terms “ha[ve] been agreed in principal [sic] by ... Mattel subject to contract.” (Pl.App. at 158.) The salutation “Best regards Mike Bucher” appears at the end of the email. (Id.)

On August 13,1997, Mattel sent Lamle a fax stating that it was “waiting ... for a draft licensing agreement.” Lamle replied with a draft licensing agreement (the “Draft Agreement”) which he faxed to Mattel on August 19, 1997. He sent a second draft with minor corrections to Mattel on September 13, 1997. Neither was ever signed by Mattel.

In the meantime, Mattel was also preparing Farook for presentation at its Pre-Toy Fair, which was held in Arizona in the August of 1997. The Pre-Toy Fair is a private show that Mattel holds to ascertain interest for potential toys among its “subsidiaries and select customers,” from around the world. (Def.App. at 115.) The purpose of the Pre-Toy Fair is to determine if the subsidiaries and customers are interested in the toy, not to actually sell the product during the fair. (Def.App. at 116.) Lamle provided samples , of fhe Fa-rook game to Mattel for display at the Pre-Toy Fair, which Mattel then displayed.

After the Pre-Toy Fair, however, Mattel concluded that it did not wish to license Farook. Thereafter, Mattel attempted to notify Lamle by email on October 1, 1997.

■However,. Mattel could not reach Lamle by email., On October 8, 1997, Mattel notified Lamle of its decision by fax sent to Lamle at the office of Jake Sobofka, a business associate of Lamle’s. The fax arrived while Lamle was present at the Sobotka office attending a meeting with potential investors.

Lamle filed this action, in the United States District Court for the Central District of California on October 8, 1999, asserting, inter alia, claims of breach of contract, patent infringement, and intentional interference with economic relations. Lámle’s later motion for leave to amend his complaint to add a claim of fraud was denied. The district court granted summary judgment in favor of Mattel on all claims on August 28, 2001. On May 6, 2003, we vacated that grant of suihmary judgment and remanded to the district court because we could “neither discern the grounds on which the district court granted summary judgment nor be certain that there [were] no genuine disputes of material fact.” Lamle v. Mattel, Inc., 65 Fed.Appx. 293, 293 (Fed.Cir.2003). In that opinion,- we stated:

We do not hold that any of the above are actually genuine disputes of materiál fact that preclude summary judgment. But neither can we confidently conclude that Lamle has presented no evidence that-would entitle him to a trial on any of his three articulated theories of relief. While we think some of Lamle’s arguments are more meritorious than others, we will not usurp, the role of the district court by imposing our own views about which, if any, of Lamle’s claims necessitate further factual development or a trial on the merits.

Id. at 296.

The district court on remand again granted summary judgment in favor of Mattel on all claims. Its order and judgment listed six grounds for its decision, each being one sentence long, with no citations to any case or to the record, and providing no explanation as to the facts or law upon which it was relying. Lamle v. Mattel, Inc., 99-CV-10410 (C.D.Cal. Nov. 25, 2003). Lamle appeals again to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

Lamle’s claim for breach of contract was rejected by the district court. The district court found that no reasonable juror could find that a contract existed between the parties, and that, in any event, the contract claim was barred by the California Statute of Frauds, Cal. Civ.Code § 1624 (2004). We disagree.

I

On procedural issues not unique to this circuit’s jurisdiction, we apply the law of the regional circuit. Genentech, Inc. v. Amgen, Inc., 289 F.3d 761, 768 (Fed.Cir.2002). The grant of summary judgment for breach of" contract claims is reviewed without deference. Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.2001). We view-the evidence in the light most favorable to the nonmoving party, here being Lamle. Summers v. A. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir.1997).

We apply the substantive contract law of California, including the choice of law rules. A choice of law analysis is unnecessary here, however, because both parties argued the motion for summary judgment in the district court under California contract law.¹ Therefore, we proceed on the basis that California common law of contract applies, as modified by statute.²

II

We conclude that a genuine issue of material fact exists as to whether the parties agreed to a contract at the June 11 meeting. Whether a contract is formed depends on the mutual assent of the parties as determined by the objective expressions of the parties. Zurich Gen. Accident & Liab. Assurance Co. v. Indus. Accident Comm’n, 132 Cal.App. 101, 22 P.2d 572, 573 (1933). In his affidavit, Lamle asserts that the June 11 meeting was to “finalize ‘the deal’ ” and that at the meeting, “Bucher, Vice President of Mattel, who stated that he was acting for Mattel, made an oral agreement with [Lamle] to license Farook .... [The parties] agreed that there were no material points left to be negotiated and shook hands on ‘The Deal.’ ” (Pl.App. at 59 (emphasis in original).) The “deal” allegedly concluded at the June 11 meeting is said to include an agreement to manufacture and market Fa-rook to Europe and other territories such as Australia and New Zealand, with a guarantee of 200,000 sales per year for three years, and for Mattel to manufacture Farook for Lamle to distribute in territories including the United States. The “deal” is also alleged to include an agreement that Mattel would pay $150,000 at the time of the signing of a written contract and an additional $200,000 advance by the end of January 1998, against a royalty rate of 15%.

On the other hand, Bucher’s email on June 26 outlining these agreed terms stated that they were “agreed in principal [sic] by ... Mattel subject to contract.” (PL App. at 153.) Bucher submitted an affidavit stating that “the purpose of the June [11] meeting was to develop new packaging and marketing approaches for the game,” that the parties only “discuss[ed] possible terms for a licensing agreement,” and Bucher repeatedly informed Lamle that “such licensing agreements take time to be finalized,” the parties were only “begin[ing] the negotiations, ... the terms of the licensing agreement would have to be approved,” and “whether ... Mattel entered into a licensing agreement depended] on whether the Mattel affiliates were interested in distributing Farook.” (Def.App. at 107-08.)

We think that there is a genuine issue of material fact. A jury may reasonably conclude that, had Bucher made such representations as Lamle alleges, and not as Mattel contends, there -would be a sufficient objective manifestation of mutual assent to support an oral contract. Contrary to- the dissent, we do not suggest that the June 26 email itself qualifies as an agreement. Rather, the question is whether an agreement was reached during the June 11 meeting.. >

Neither the fact that the Disclosure Form could be construed as requiring that future agreements be in writing nor the fact that the parties contemplated executing a formal writing after the June 11 oral agreement is conclusive as to the parties’ intent. Parties may abrogate a prior written agreement with a subsequent oral one, if they so mutually intend. McKeon v. Giusto,, 44 Cal.2d 152, 280 P.2d 782, 783-84 (1955) (42 Pa.C.S.A. § 45021955); Pearsall v. Henry, 153 Cal. 314, 95 P. 159, 160 (1908).³ Under California law it is well settled that the intent to abrogate an earlier written agreement can be inferred from the fact of a later oral agreement. McCreary v. Mercury Lumber Distributors, 124 Cal.App.2d 477, 268 P.2d 762, 768 (1954) (“[Rescission by mutual agreement máy be inferred from ... testimony that a new agreement was reached.”). So too it is clear that the fact that an ultimate written agreement was contemplated at the time of the oral agreement is not dispositive. The principle is succinctly stated by Banner Entertainment, Inc. v. Superior Court of Los Angeles County, 62 Cal.App.4th 348, 72 Cal.Rptr.2d 598, 603-04 (1998):

When it is clear ... that both parties contemplated that acceptance of the contract’s terms would be signified by signing it, the failure to sign the agreement means no binding contract was created.... On the other hand, if the respective parties orally agreed upon all of the terms and conditions of a proposed written agreement with the mutual intention that the ■ oral agreement should thereupon become binding, the mere fact that •a formal written agreement ... has not yet been signed does not alter the binding validity of the oral agreement.

(citations omitted); see also Tiburzi v. Dep’t of Justice, 269 F.3d 1346, 1352 (Fed.Cir.2001). “The question as to whether an oral agreement, including all the essential terms and conditions thereof, which according to the mutual understanding of the parties is to be subsequently reduced to writing, shall take effect forthwith as a completed contract depends on the intention of the parties, to be determined by the surrounding, facts and circumstances of a particular case.” Thompson v. Schurman, 65 Cal.App.2d 432, 150 P.2d 509, 513 (1944) (emphasis in original). In this case we do not hold as a matter of law that the earlier Disclosure Form agreement was abrogated or that a binding oral agreement was reached on June 11. - We hold only that a trial is required' to determine the parties objectively manifested intent in these respects.⁴

Ill

A.

Mattel also contends, and the district court held, that any oral agreement made during the June 11 meeting cannot be enforced because of the California Statute of Frauds, Cal. Civ.Code § 1624(a)(1).

There is no question that the alleged oral agreement for a three year license was one that, by its terms, could not be “performed within a year from the making thereof.” Id. The only question, therefore, is whether there is a writing to evidence the agreement or an applicable exception to the Statute of Frauds.⁵ To satisfy the Statute of Frauds, a writing-must contain all the material terms of the contract. Citizens for Covenant Compliance v. Anderson, 12 Cal.4th 345, 47 Cal.Rptr.2d 898, 906 P.2d 1314, 1323 (1995). The writing must also be signed by the party against whom enforcement is sought. Cal. Civ.Code § 1624(a). Lamle argues that the June 26 email from Bucher satisfied both requirements.

The June 26 email specified the term of the license, the geographic scope, the percentage royalty, and the total advance and minimum amount to be' paid under the contract. Bucher stated that these terms had “been agreed in principal [sic] by [his] superiors at Mattel subject to contract” and that the email message “covers the basic points.” (Def.App. at 112.)

California law is clear that “a note or memorandum under the statute of frauds need not contain all of the details of an agreement between the parties.” Gold Seal Prods., Inc. v. RKO Radio Pictures, Inc., 134 Cal.App.2d 843, 286 P.2d 954, 967 (1955) (quoting Gibson v. De La Salle Inst., 66 Cal.App.2d 609, 152 P.2d 774, 784 (1944)). Rather, the statute only requires that “every material term of an agreement within its provisions be reduced to written form.” Burge v. Krug, 160 Cal.App.2d 201, 325 P.2d 119, 123 (1958). “If the court, after acquiring knowledge of all the facts concerning the transaction which the parties themselves possessed at the time the agreement was made, can plainly determine from the memorandum the identity of the parties to the contract, the nature of its subject matter, and its essential terms, the memorandum will be held to be adequate.” Kaneko v. Okuda, 195 Cal.App.2d 217, 230, 15 Cal.Rptr. 792 (1961) (citing Brewer v. Horst & Lachmund Co., 127 Cal. 643, 60 P. 418, 419 (1900)). What is an essential term ‘‘depends on the agreement and its context and also on the subsequent conduct of the parties.” Seaman’s Direct Buying Serv., Inc. v. Standard Oil Co., 36 Cal.3d 752, 206 Cal.Rptr. 354, 686 P.2d 1158, 1162 (1984), overruled on other grounds by Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal.4th 85, 44 Cal.Rptr.2d 420, 900 P.2d 669 (1995).

Mattel correctly points out that the June 26 email does not contain all the terms that Lamle asserts are part of the oral contract. In particular, Mattel correctly notes that Lamle alleges that Mattel (1) guaranteed to sell 200,000 units of Farook each year; (2) promised to sell Fa-rook units to Lamle at cost; and (3) promised Lamle the right to approve or disapprove the design and packaging of Farook units. None of these terms appears in the June 26 email. Again, we think that there is a genuine issue of material fact as to the materiality of these terms. The Ninth Circuit, interpreting California law, has stated that “the subject matter, the price, and the party against whom enforcement is sought” are the “few terms deemed essential as a matter of law by California courts.” Levin v. Knight, 780 F.2d 786, (9th Cir.1986). A jury could well conclude that these omitted terms allegedly agreed to at the meeting but not reflected in the writing were not material.

A more difficult question is perhaps raised by Lamle’s allegation of a provision bundling the computer version of Farook with the physical version. Lamle in his brief to this court (though not in his affidavit submitted in opposition to Mattel’s summary judgment motion) appears to view it as significant,- since he claims that, ■inter alia,' Mattel’s alleged promise to bundle was a ■ “material misrepresentation:” See (Br. of Appellant at 11, 32-34, 42.) Mattel, on the other hand, stated to Lamle that it was “not an obvious problem.” (Def.App. at -112.) Again, we think that the materiality of this provision is not an issue susceptible to summary judgment.

PQ

There remains the issue of whether an email is a writing “subscribed by the party to be charged or by the party’s agent.” Cal. Civ.Code § 1624. The party to be charged in this case is Mattel, and the June 26 email was written by Bucher, an employee of Mattel, and his name appears at the end of the email, which concludes with “Best regards Mike Bucher.” (Def.App. at 112.) - Mattel has not disputed the agency authority of Bucher to bind it. Therefore, the only question is whether Bucher’s name on an email is a valid writing and signature to satisfy the Statute of Frauds.

If the email had been sent after January 1, 2000, there would be no question of its sufficiency under the Statute of Frauds because the Uniform Electronic Transactions Act, Cal. Civ.Code § 1633.7 (2004), provides that a “record or signature may not be denied legal effect or enforceability solely because, it is in electronic form.” However, because the email was sent in 1997, we must evaluate its validity under California common- law. ■ The California Supreme Court has noted that decisions from other states “have relaxed the signature requirement [of the Statute of Frauds] considerably to accommodate various forms of electronic communication.” Donovan v. RRL Corp., 26 Cal.4th 261, 109 Cal.Rptr.2d 807, 27 P.3d 702, 713 (2001). Nonetheless, the Supreme Court of California has never definitively decided whether email and electronic signatures made prior to 2000 satisfy the Statute -of Frauds.

California law does provide, however, that typed names appearing on the end of telegrams are sufficient to be writings under the Statute of Frauds. McNear v. Petroleum Export Corp., 208 Cal. 162, 280 P. 684, 686 (1929); Brewer, 60 P. at 419. California law also provides that a typewritten name is sufficient to be a signature. Marks v. Walter G. McCarty Corp., 33 Cal.2d 814, 205 P.2d 1025, 1028 (1949). We can see no meaningful difference between a typewritten signature on a telegram and an email. Therefore,. we conclude that under California law the June 26 email satisfies the Statute of Frauds, assuming that there was a binding oral agreement on June 11 and that the email includes all the material terms of that agreement.

CONCLUSION

To prove a contract with Mattel, Lamle must prove that the parties objectively intended to be immediately bound by an oral contract on June 11; that the June 26 email contains the material terms of that oral contract; and that Bucher had actual or apparent authority to sign for Mattel. Reviewing the record, Lamle has presented sufficient evidence to create genuine issues of material fact on these points. This is not to say that Lamle should prevail at trial. Indeed, among other things, Lamle faces a difficult burden persuading the jury that, despite Mattel’s stating that it would sign a formal contract later, the objective intention of both parties was to be immediately bound by the oral contract, and to abrogate a prior written agreement to the contrary.

We have reviewed the record and find Lamle’s remaining claims to be without merit.⁶ Therefore, we vacate the grant of summary judgment with respect to the breach of contract claim, affirm the grant of summary judgment with respect to all other claims, and remand for further proceedings consistent with this opinion.

AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED

COSTS

No costs.

1 . Lamle now argues on appeal that New York contract law governs this case under a choice of law provision in the draft contract he submitted to Mattel. Appellant Br. at 28-29. Because Lamle first raised this issue on motion for reconsideration in the district court, the choice of law issue is waived. Intercontinental Travel Mktg. v. FDIC, 45 F.3d 1278, 1286 (9th Cir.1994) ("Raising an issue for the first time on motion to reconsider is not considered adequate preservation of the issue at a summary judgment stage.”); see also Brazil v. United States Dep’t of the Navy, 66 F.3d 193, 198-99 (9th Cir.1995) (argument not raised below is waived, even where party is acting pro se).

2 . Lamle argues that the Uniform Commercial Code applies because the licensing of Farook is a contract for the sale of "goods” under U.C.C. § 2-102. This is manifestly incorrect, since a license for intellectual property, including a license for a patent, is not a sale of goods. Novamedix, Ltd. v. NDM Acquisition Corp., 166 F.3d 1177, 1182 (Fed.Cir.1999).

3 . We note in this respect that the parties are not free to modify their prior written contract by a subsequent oral one. Cal. Civ.Code § 1698 (2004). Therefore, to prevail, Lamle .must prove that the parties agreed to completely abrogate their prior written agreement.

4 . There may also be a question as to whether the Disclosure Form agreement was intended to bar all subsequent oral agreements, or only oral agreements concerning the "submission” of the idea. See (Def.Appi at 103.)

5 . Lamle argues that the Draft Agreement he sent to Mattel contained a termination clause that permitted the agreement to be performed within one year. Whether or not invoking a termination clause counts as "performance” of a contract we need not address because the Draft Agreement is not what is at issue. Lam-le has presented no evidence that the oral agreement that he seeks to prove could have been performed within one year.

6 . Specifically: We reject Lamle's patent infringement claim on the basis that Lamle has presented no evidence that Mattel's activities were not authorized. We reject Lamle’s intentional interference with economic relations claim on the basis that Lamle has produced no evidence of a wrongful act or wrongful intent by Mattel. We reject Lamle's Lanham Act claim as it was not raised below. We reject Lamle's RICO claim as it was not raised below. We reject Lamle’s fraud claim because the theory presented on appeal (that Mattel should have disclosed its concerns about the bundling provision) was not raised below; as to the fraud claim rejected below (that breaching the alleged contract was itself fraud), it is now abandoned as it was not briefed on appeal.