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Sitkin Smelting & Refining Co. v. FMC Corp.

filed: April 13, 1978.


On Appeal from the United States District Court for the Eastern District of Pennsylvania.

Seitz, Chief Judge, and Gibbons and Weis, Circuit Judges. Gibbons, Circuit Judge, dissenting.

Author: Seitz


SEITZ, Chief Judge.

Plaintiffs Sitkin Smelting & Refining Co., Inc. and Monongahela Iron & Metal Co., Inc. ("plaintiffs"), sued FMC Corporation ("defendant") in the district court. In Count 1, plaintiffs' diversity claim alleged that by awarding to Joseph Krentzman and Sons ("Krentzman") a contract to dismantle defendant's Lewistown rayon facility after allowing Krentzman to see plaintiffs' bid, FMC breached contractual obligations it owed plaintiffs. In Count 2, plaintiffs alleged a violation of Section 1 of the Sherman Act in that defendant conspired with Krentzman, who was not named as a defendant, to commit two per se violations of the antitrust laws: an illegal boycott and price fixing.

The court submitted Counts 1 and 2 to the jury on special interrogatories.The jury's answers favored plaintiffs. The court then entered judgment against defendant on both counts. Defendant filed motions for judgment notwithstanding the verdict with respect to both the contract and antitrust claims and also filed a motion for a new trial. The district court denied the motion for judgment n.o.v. and denied the motion for a new trial on Count 1, the contract claim. It granted defendant's motion for judgment n.o.v. and entered judgment in its favor on Count 2, the Sherman Act claim.

Defendant appealed from the judgment of $700,000 entered for plaintiffs on the contract claim and from the denial of the motion for a new trial. Plaintiffs appealed from the entry of judgment in favor of defendant on the antitrust claim.

We turn to the factual setting out of which the dispute arose. In view of the jury's answer to the interrogatories, we set forth the facts in a light most favorable to plaintiffs.

Defendant owned a large manufacturing facility in Lewistown, Pennsylvania. In the summer of 1972, the facility was damaged extensively by a hurricane. Thereafter, defendant decided to close the plant and to sell or otherwise dispose of it. In addition to the land and the buildings, the assets included salvageable scrap metal, machinery, equipment, and inventory. Defendant's agent solicited Sitkin to submit a bid for the plant and its contents. Plaintiffs submitted such a bid which, by its terms, was to expire October 20, 1972. Krentzman was the only other bidder.

After the two bids were received, defendant altered its plans and did not accept either bid. It decided to donate the land and buildings at the plant site to a public authority. In the words of plaintiffs' counsel, defendant then "started all over again." Thus, in July, 1973, defendant prepared elaborate bidding documents with respect to the sale of the scrap. Those documents contained various options including possible participation by defendant in the proceeds of the sale of the property. Invitations to bid were sent to approximately 50 prospective bidders throughout the United States. The invitations explicitly reserved the right to reject any and all bids. They also stated: "No revision of bids will be accepted after the bid has been submitted; your best bid must be submitted first." Bids were to be submitted by October 22, 1973.

Sitkin submitted a bid jointly with its co-plaintiff. Krentzman also submitted a bid, as did many other invitees.

After the October 22 deadline, individal clarification meetings were held with certain of the bidders, including plaintiffs and Krentzman. Subsequent to one of these clarification meetings between defendant's agents and Krentzman, Krentzman submitted a bid higher than plaintiffs, and Krentzman's bid was eventually accepted. This lawsuit followed.


Plaintiffs contend that among the original bids submitted in 1973, theirs was the highest. They argue that in awarding the scrap contract to Krentzman after Krentzman had seen plaintiffs' bid and then revised its own, the defendant breached its commitment made in 1972 to plaintiffs and carried forward to 1973, that if plaintiffs bid, defendant would not disclose their bid or use it to negotiate a higher bid, and would award the bid to plaintiffs if plaintiffs were the high bidder. We turn to the details of the evidence.

In 1972, prior to the submission of plaintiffs' first bid, Charles Kline, an employee of defendant, held a conversation with Lewis Sitkin, president of one of the plaintiffs, Sitkin, concerning a possible bid by Sitkin to purchase the Lewistown assets. Because Sitkin had not succeeded in doing business with defendant in the past, it sought assurances of good faith treatment by defendant should it bid for such assets. Sitkin was assured that if it submitted a bid to purchase defendant's Lewistown facility, defendant would not disclose that bid to any other bidder, would not use the bid to negotiate higher bids from other bidders, and would, if it accepted a bid, accept the "high" bid.

Plaintiffs do not contend that there was any breach of these assurances insofar as the 1972 bidding was concerned. What they do contend is that the 1972 assurances carried over to the 1973 bidding, and that those assurances were violated when defendants disclosed plaintiffs' bid to Krentzman, thereafter permitted Krentzman to submit a higher bid, and then accepted Krentzman's altered bid. Accordingly, at the trial below plaintiffs sought damages for breach of contract arising from the defendant's failure to award the contract to them on the theory that, since the 1972 high bid assurance carried over to 1973, and since plaintiffs submitted the original high bid in 1973, defendant was contractually obligated to accept it.*fn1

The defendant contends, inter alia, that there was insufficient evidence as a matter of law to submit to the jury the issue as to whether the 1972 high bid assurance carried over to 1973.

We think the evidence warranted the jury in finding that the assurances alleged by plaintiffs were given in connection with the 1972 solicitation of bids. It is important to analyze the legal consequences of the high bid assurance, however, because it is basic to plaintiffs' breach of contract claim arising out of defendant's failure to award the contract to plaintiffs in 1973.

In plaintiffs' view the 1972 agreement to award the contract to only the high bidder endured as long as the parties intended it to endure. Plaintiffs argue that was until a contract for the disposal of the machinery and equipment was awarded in a bidding procedure. They say that there was sufficient evidence to require the submission of that issue to the jury.

It is not clear to us whether plaintiffs characterize the 1972 high bid agreement as a bilateral contract or a unilateral contract, or whether they rely on an estoppel theory of induced reliance. But no matter how classified, the same issue is presented as to whether the 1972 agreement embraced the 1973 bidding, at least as to the high bid assurance. We proceed to consider seriatim the evidence which plaintiffs contend created a jury issue as to the 1973 bidding.

The plaintiffs emphasize that the only two bidders in 1972 were metal dealers, not real estate brokers. They say this shows that defendant knew that the real value of the assets was in the metals which alone were the subject of the 1973 bidding. This appears to be the only 1972 evidence offered by plaintiffs in support of their contention that the parties intended this high bid agreement to be effective until the metal was sold. Such evidence is neutral at best as to the parties' intent with respect to the duration of the oral assurance to award the contract to the original high bidder.

Plaintiffs next point to several pieces of evidence consisting of events occurring in 1973 which, they contend, justified the submission of the intention issue to the jury:

1. In 1973, after defendant had decided to donate the real estate to the community, Kline informed another employee of defendant, one Bisio, of the high bid assurance Kline had given Sitkin in 1972.

2. When Kline met with Sitkin numerous times in 1973 concerning the sale of the scrap, Kline never informed Sitkin that the 1972 high bid assurance was inoperative.

3. Communications to Sitkin concerning bidding in 1973 came from Kline or through his direction.

4. Both the July, 1973, communication and the September, 1973, invitation to bid confirmed the 1972 high bid assurance. Plaintiffs so conclude because the communication stated "not subject to escalation," and because the invitation stated that "no revision of bids will be accepted . . .; your best price must be submitted first."

5. The secretiveness of defendant in its dealings with Krentzman in 1973 exhibited an awareness of a mutual intent in 1972 that the 1972 high bid commitment extend to any awarding ...

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