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Hershey Foods Corp. v. Ralph Chapek Inc.

argued: April 10, 1987.

HERSHEY FOODS CORPORATION, APPELLEE
v.
RALPH CHAPEK, INC., APPELLANT



On Appeal from the United States District Court for the Middle District of Pennsylvania, D.C. No. 84-0598.

Sloviter, Becker and Garth, Circuit Judges.

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge

This is an appeal from a grant of summary judgment by the district court in favor of Hershey Foods corporation and against Ralph Chapek, Inc. We affirm.

I.

On August 13, 1981, Ralph Chapek, Inc. (Chapek), a marketing consulting firm, sent an unsolicited, seven-page licensing proposal to Hershey Foods Corporation (Hershey). in which Chapek proposed to assist Hershey in assessing the feasibility of marketing Hershey's chocolate milk and ice cream. App. 59-66. The proposal outlined various studies to be undertaken by Chapek, as well as marketing plans and research. App. at 62. The August 13, 1981 licensing proposal suggested two option by which Chapek would be compensated. "Option One" involved individual research studies to be conducted by Chapek. It also provided that Chapek would receive 15% of the first five years royalties and fees receive by Hershey Foods Corporation "for the licensing of the Hershey Chocolate brand for use in the manufacture and sale of Hershey chocolate Milk and ice cream, during the first five years."*fn1 App. at 65. Under "Option Two" Chapek would become the licensee of the Hershey Chocolate trademark for use in the manufacture, sale and store-door delivery of Hershey chocolate milk and ice cream. Under this option, Chapek would negotiate and pay to Hershey a royalty for all dairy products sold with the Hershey chocolate brand name to Chapek for sublicensing to local dairies. Id.

On October 27, 1983, Ralph Chapek, the president of Chapek, met in New York with Hershey's Director of New Products, Anthony Pingitore, to discuss Chapek's proposal. Only the two individuals were present. Chapek, contends that at that initial meeting, Pingitore orally agreed, on Hershey's behalf, to "Option One" and committed Hershey to the 15% commission compensation arrangement as it pertained to Hershey's chocolate milk. In return, Chapek claims that it agreed to undertake the three specific research studies proposed in the August 13 proposal, i.e., the fresh chocolate milk and ice cream industry study, the brand impression and attitude and usage study, and a marketing research study with respect to six focus groups. App. at 65.

Three days later, on October 30, 1981, Chapek wrote to Pingitore and, referring to their October 27th meeting, set forth in its letter, an agreement into which Chapek and Hershey had entered. The agreement essentially provided that Chapek would perform a chocolate milk study for Hershey and Hershey would compensate Chapek in the sum of $17,500. The instant dispute between Chapek and Hershey focuses on this agreement: Chapek claiming that this, the October 30th agreement, is only partially integrated agreement; Hershey claiming that it is the complete integrated agreement of the parties.

In addition to the August 13, 1981 licensing proposal for chocolate milk and ice cream which Chapek sent to Hershey, and the October 30, 1981 agreement involving the dairy industry and chocolate milk industry study for which Hershey paid $17,500, the record reveals other proposals and agreements. Chapek submitted six additional proposals to Hershey, each of which involved different research projects. Chapek was directed to proceed with three of these additional research projects. As to each, a separate agreement was negotiated. The other six written proposals made by Chapek were:

Consumer marketing research, Not accepted by Hershey

chocolate milk (1/20/82)

(App. at 81)

"50 Metro" proposal Accepted by Hershey

(10/7/82) (App. at 96-100) for which Hershey paid

(referred to as the Licensing $50,000

strategy proposal or "major

market" study)

In depth market analysis Accepted by Hershey and

(1/31/83) (App. at 114) for which Hershey paid

("broad scope study" portion) $23,825

Baked sweet goods proposal Accepted by Hershey and

(4/20/83)(App. at 122-24) for which Hershey paid

("broad scope study" portion) $20,125 (expenses included)

Frozen novelties Not accepted by Hershey

(1/31/83) (App. at 140-42)

Chocolate chip cookies Not accepted by Hershey

(4/20/83) (App. at 143-57)

On August 22, 1982, Chapek wrote to Hershey claiming a commission calculated on "fifteen percent of the first five years' royalties and fees received by Hershey for the licensing of the Hershey Chocolate brand for use in the manufacturing and sale of Hershey Chocolate Milk to the dairy industry." Supp. App., Plaintiff's Ex. 20. Hershey rejected Chapek's claim and ultimately brought this action in the Middle District of Pennsylvania for declaratory relief on April 27, 1984. Hershey sought a declaration relief on April 27, 1984. Hershey sought a declaration that it was not obligated to Chapek, under any legal or equitable theory, for commission calculated on chocolate milk licensing royalties and fees. Chapek counterclaimed for breach of contract; for an award in quantum meruit; for faith and fair dealing; and for damages for "false promise".

On April 5, 1985, Hershey moved for summary judgment. Hershey argued that the breach of contract claim should be dismissed because Chapek's proof of an oral agreement would be barred by the parol evidence rule. It asked for dismissal of the good faith and fair dealing claim as not recognized by Pennsylvania law. It sought dismissal of the quantum meruit and fraudulent misrepresentation claims because the material facts of the case would not support such causes of action. Hershey sought a judgment declaring Hershey free from any express or implied claims of Chapek.

The magistrate held that the October 30, 1981 letter written by Chapek as a result of the October 27th meeting and accepting by Hershey, integrated and incorporated every agreement between the parties as of that date. The magistrate further held that Chapek's good faith claim could not be sustained under Pennsylvania law, which was deemed to be applicable, and that the "false promise" count failed because there was no evidence that there was fraudulent intent on the part of Hershey and because it would negate Pennsylvania's parol evidence rule. As to the quantum meruit count, the magistrate ruled in favor of Hershey with two exceptions. Ultimately, those "exceptions" were removed from the case by a stipulation effected between Hershey and Chapek.*fn2 See App. at 445.

The district court approved the magistrate's report and recommendation, but modified the magistrate's holding, stating that "giving Chapek the benefit of all favorable inferences that might reasonably be drawn from the evidence, there is a reasonable basis for this court to conclude that the October 30, 1981 written contract integrates and incorporates in every agreement between the parties as of that date." App. 408. In its own opinion, the district court agreed with Hershey that the oral agreement of October 27, 1981, which Chapek claimed was a part of its agreement with Hershey, was proscribed by the parol evidence rule because it was offered by Chapek to vary, contradict, or otherwise attack the terms of the October 30, 1981 letter.

On September 9, 1986, the district court entered a judgment declaring that "Hershey Foods Corporation has no liability to Defendant Ralph Chapek Inc., and the Counterclaims of Defendant Ralph Chapek Inc. are dismissed." App. at 451.

Chapek appealed, but on appeal abandoned the implied covenant of good faith issue and the ...


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