Saxelbye Architects v. First Citizens Bank ( 1997 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SAXELBYE ARCHITECTS,
INCORPORATED, a Florida professional
corporation,
Plaintiff-Appellant,
v.
FIRST CITIZENS BANK & TRUST
COMPANY, a North Carolina
No. 96-2766
chartered institution; CARLOS G.
DELVALLE, an architect with
Rolland, DelValle & Bradley,
Incorporated; ROLLAND, DELVALLE
& BRADLEY, INCORPORATED, a Florida
professional corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
James C. Fox, Chief District Judge.
(CA-96-143-5-F)
Argued: August 12, 1997
Decided: November 3, 1997
Before RUSSELL and HALL, Circuit Judges, and MICHAEL,
Senior United States District Judge for the
Western District of Virginia, sitting by designation.
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Reversed and remanded by unpublished per curiam opinion.
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COUNSEL
ARGUED: Bernard Lawrence Sweeney, BIRCH, STEWART,
KOLASH & BIRCH, L.L.P., Falls Church, Virginia, for Appellant.
Susan Freya Olive, OLIVE & OLIVE, P.A., Durham, North Carolina;
Mark Stanton Thomas, MAUPIN, TAYLOR & ELLIS, P.A., Raleigh,
North Carolina, for Appellees. ON BRIEF: Robert J. Kenney,
BIRCH, STEWART, KOLASH & BIRCH, L.L.P., Falls Church, Vir-
ginia, for Appellant. Bruce Vrana, OLIVE & OLIVE, P.A., Durham,
North Carolina; Donald J. Eglinton, Daniel Lee Brawley, Sr., Robert
E. Futrell, Jr., WARD & SMITH, P.A., New Bern, North Carolina,
for Appellees.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Saxelbye Architects, Inc., appeals the dismissal of its copyright
infringement claims against the First Citizens Bank and Trust
("FCB"), Rolland, DelValle & Bradley, Inc. ("RDB") (another archi-
tectural firm), and RDB's president, and the dismissal of its breach of
contract claim against FCB. We reverse and remand for further pro-
ceedings.
I
The district court dismissed the claims pursuant to Fed. R. Civ. P.
12(b)(6) (copyright) and 12(c) (breach of contract). Therefore, our
review is de novo, and our analysis is limited to the facts alleged in
the complaint, which we assume to be true and which we construe in
the light most favorable to Saxelbye. See Schatz v. Rosenberg, 943
F.2d 485, 489 (4th Cir. 1991) (Rule 12(b)(6) dismissal for failure to
state a claim); George C. Frey Ready-Mixed Concrete, Inc. v. Pine
2
Hill Concrete Mix Corp., 554 F.2d 551, 553 (2d Cir. 1977) (Rule
12(c) dismissal on the pleadings).
In August 1994, FCB solicited Saxelbye and other architectural
firms to submit bids to perform design and planning services for
FCB's proposed $14-20 million operations center in North Carolina.
FCB envisioned that an existing data processing building would be
renovated and that a new building would be constructed nearby. Car-
los DelValle and Sandra Bradley were key members of the Saxelbye
team that put together a multi-phase proposal including architectural
design and construction administration services. Saxelbye was
selected and began work in early October 1994. In February 1995,
FCB vice-president Gary Williams signed three separate documents
-- "Project Understanding," "Scope of Services," and "Fee Schedule"
-- that, taken together, were characterized by Saxelbye in a cover let-
ter as a "revised Agreement." After meeting in early April to discuss
changes to the project, Williams signed revisions of the "Scope of
Services" and "Fee Schedule" documents.
Phase II, "Schematic Design," culminated in a final set of drawings
developed by DelValle that was delivered to FCB on July 7, 1995.
That same afternoon, DelValle, Bradley and Jeffery Rolland (a vice-
president at Saxelbye) quit the firm and established RDB. On July 24,
1995, FCB informed Saxelbye that the bank would complete the proj-
ect with RDB. Saxelbye was paid $256,000 for services rendered to
that point, including the Phase II schematic drawings. By letter dated
July 27, 1995, Saxelbye informed FCB that it considered the drawings
its (Saxelbye's) property and that "no one else has permission or legal
use of any documents Saxelbye prepared as instruments of service for
your project."
In February, 1996, Saxelbye sued FCB, RDB, and DelValle for
copyright infringement for the (intended) use of the drawings devel-
oped while RDB's founders were at Saxelbye. The second cause of
action alleges that FCB's termination of the multi-phase contract con-
stituted a breach.1 The district court ruled that the complaint and
attached exhibits failed to make out a breach of contract claim
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1 Saxelbye also filed a Florida state court action against RDB and its
principals for tortious interference with contract.
3
because there was never a sufficiently definite agreement as to price;
therefore, the alleged contract for the complete project was merely an
"agreement to agree." The court also ruled that Saxelbye had failed
to state a copyright infringement claim because FCB had an implied
nonexclusive license to use the drawings for which it had paid Saxel-
bye in full. Saxelbye appeals.
II
We turn first to the contract claim. The district court examined the
"fee schedule" attachment to the April 1995 agreement and found the
pricing formulas to be too vague. For instance, only one of the pro-
jected phases had a definite dollar estimate attached; other costs were
estimated on a lump sum basis, square foot basis or a per-
man-per-day-per-report basis. . . . In short, although the par-
ties well may have contemplated a long-term relationship,
the written documents which Saxelbye itself prepared and
has pled constitute the formal memorialization thereof are
not sufficiently definite as to the price term to amount to an
enforceable contract; this "contract" for personal services is
incapable of enforcement or of reduction to judgment. It is
an agreement to agree.
Saxelbye Architects, Inc. v. First Citizens Bank & Trust Co., No.
5:96-CV-143-F(1) at 5 (E.D.N.C. Oct. 26, 1996) ("Order")2 (hereinaf-
ter "June order"). We believe, however, that the fee schedule is suffi-
ciently definite to permit the contract claim to survive a Rule 12(c)
motion to dismiss.
Florida follows the black-letter rule that the intent of the parties
controls and that this intent should be determined from the language
of the alleged contract if that language is unambiguous. See
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2 Although the district court dismissed all claims against FCB by order
dated June 10, 1996 ("June order"), the court's analysis of the breach of
contract issue is expanded upon in the October 26, 1996 order containing
the rulings on DelValle and RDB's motion to dismiss the copyright
claims against them.
4
Robbinson v. Central Properties, Inc., 468 So.2d 986, 988 (Fla. 1985).3
But price, an essential element, need not be a definite amount in order
for the contract to be enforceable. "If the parties provide a practicable,
objective method for determining this price or compensation, not
leaving it to the future will of the parties themselves, there is no such
indefiniteness or uncertainty as will prevent the agreement from being
an enforceable contract." Corbin on Contracts, Vol. I (1963), § 97, at
424 (quoted in Blackhawk Heating & Plumbing Co., Inc. v. Data
Lease Financial Corp., 302 So.2d 404, 409 (Fla. 1974)). Moreover,
"[t]he courts should be extremely hesitant in holding a contract void
for indefiniteness . . . . The contract should not be held void for uncer-
tainty unless there is no other way out." Blackhawk at 408-09. With
these principles in mind, we turn to the relevant portions of the
alleged contract.
As the various options were presented to the bank and changes to
the project design were made, the scope of the project changed, and
the price necessarily remained somewhat fluid.4 FCB makes no
attempt to explain how such a project could proceed otherwise, and,
inasmuch as the case was decided on the pleadings, we have no evi-
dence about the usual industry practice. However, it is apparent that
the nature of a large project such as this one makes it difficult to come
up with firm dollar figures at the outset. Most phases of the Saxelbye
plan included a fairly definite method for arriving at Saxelbye's fees,
usually based on a dollar figure multiplied by the size of the area cov-
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3 Although FCB argued below that North Carolina substantive law
should govern the breach of contract claim, the district court disagreed,
and FCB has made no effort on appeal to convince us that the district
court's choice of Florida law was incorrect. See Kaiser Foundation
Health Plan v. Clary & Moore, P.C., 123 F.3d 201 (4th Cir. 1997)
("[B]ecause neither party questions the applicability of Virginia law, we
will assume without deciding that it properly controls our decision").
4 Saxelbye sent FCB a letter accompanying the proposal stating that the
architectural firm would send a standard AIA owner/architect contract
for FCB's approval to serve as the "basic contract to be amended as sub-
sequent phases are negotiated and Saxelbye is authorized to proceed,"
although no such standard contract was ever executed. That future writ-
ings may have been contemplated does not of itself necessarily preclude
a finding that the parties had already entered into a contract.
5
ered by the particular phase. For instance, Phase V included the
design of plans for the interior of the proposed new building, and the
fee schedule called for a lump sum of $9,500 for the first 10,000
square feet of office space and 83¢ per square foot thereafter. The size
of the building was ultimately up to FCB, but once it was determined,
the price could be arrived at by simple multiplication. Most of the fee
schedule contained similar formulas.
The costs associated with the renovation of the existing building
were left open because the scope of that portion of the project
depended on the completion of the first three phases of the project.5
Inasmuch as the renovation portions of the plan are easily separable
(if necessary) from the rest of the project, the indefiniteness of the
fees for the renovation is an inadequate basis upon which to dismiss
the contract claim at this early point in the proceedings.
Other than price, the allegations in the complaint clearly support
Saxelbye's argument regarding the formation of the contract. For
instance, Saxelbye alleges that the presentations to FCB always
included a comprehensive plan and schedule for completing the proj-
ect and that FCB told the architectural firm that it had been selected
to provide the full range of proposed services. See complaint, ¶¶ 19
& 20. We hold, therefore, that the district court erred in dismissing
the breach of contract claim for failing to state a claim on the basis
of the price factor, and we reverse that portion of the court's judgment
and remand for further proceedings.
III
We will assume for purposes of this appeal that Saxelbye owned
the copyright in the Phase II drawings. See complaint ¶ 50. Infringe-
ment of that copyright requires a showing that the copyrighted work
was "copied," i.e. that one of the exclusive rights conferred by a copy-
right on Saxelbye was encroached upon. See Avtec Systems, Inc. v.
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5 The fee schedule for phases IV and V contained the following note:
"Fee cannot be provided for existing data center building renovation until
phases I, II and III are completed and scope of work is clearly defined.
Fee shall be provided at that time either as a percentage of construction
cost or on a lump sum basis."
6
Peiffer, 21 F.3d 568, 571 (4th Cir. 1994). As a rule, transfers of exclu-
sive copyright interests must be in writing to be valid. See 17 U.S.C.
§ 204(a). The district court, however, grounded its dismissal of the
copyright claims on an exception to this general rule.
A "nonexclusive license" is the permission to use a copyrighted
work in a particular specified manner, and, by statutory definition,
"nonexclusive licenses" need not be in writing. See 17 U.S.C. § 101.
This permission may be implied from the conduct of the parties. Mel-
ville B. Nimmer and David Nimmer, 3 Nimmer on Copyright
§ 10.03[A], at 10-38 (1994). Such a license is granted when the
licensee requests the creation of the work and the licensor creates it
and delivers it to the licensee with the intent that the licensee copy
(use) it.
The district court held that the absence of an express agreement
that the drawings could not be used amounted to implied permission
that they could be:
In the absence of explicit or implicit limitations to the con-
trary, a party who purchases architectural services is entitled
to use the drawings produced in conjunction therewith for
the construction project for which the drawings were pre-
pared. That is, absent an agreement to the contrary, an
implicit non-exclusive license, limited to the particular proj-
ect, is created for the owner by implication.
October order at 6.
The district court's copyright ruling was based on I.A.E., Inc. v.
Shaver, 74 F.3d 768 (7th Cir. 1996), which it found to be "persuasive
authority and, as to material facts, essentially indistinguishable." June
order at 2. Shaver is distinguishable in several significant respects,
and we disagree that the existence of such a license can be established
on the basis of this complaint.
In Shaver, the firm that had the design/construction contract sub-
contracted with Shaver for schematic drawings (the first of four
planned design phases) for $10,000; nothing more was said to Shaver
7
about the remainder of the project. After the drawings were delivered
and Shaver was paid, the firm hired another architect for the remain-
der of the project, and Shaver sued for infringement. In affirming the
summary judgment dismissing the infringement claims, the court of
appeals found no "objective foundation" for Shaver's contention that
he reasonably believed that he would be the architect throughout the
project. Id. at 776. The appeals court found the contract for the draw-
ings to be unambiguous, and the court also noted that Shaver gave the
drawings without any warning that any further use would constitute
infringement. Id. at 776-77. Under these circumstances, the court held
that the law would imply a license to use the drawings and that the
scope of the use -- for the intended structure only -- did not exceed
the scope of the license.
Shaver clearly did not have a contract for any portion of the overall
project beyond the initial design phase drawings; he had, instead, a
mere expectation that he would get further contracts for additional
phases once his initial drawings were approved. Id. at 771. Saxelbye,
on the other hand, might (as we discuss above in Part II) indeed have
a contract for the completion of the entire project. If, as Saxelbye con-
tends, the drawings were submitted solely for the bank's approval and
comments, then the drawings were not an end-product for use by FCB
but, rather, a tool to be used by Saxelbye to complete the project.
The implied-license exception to the requirement of a writing is a
limited one. See Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558
(9th Cir. 1990). There is certainly no evidence at this point that such
a license was given orally by Saxelbye. As we explain in Part II, the
complaint sufficiently alleges that the parties always intended that
Saxelbye complete the entire project and that the delivery of the
drawings was simply the agreed upon practice to obtain further
approval to move on to the next phase; The two issues -- contract
formation and implied license -- are intertwined, and factual issues
remain about the parties' intentions as to the use of the Phase II plans
by FCB. See Johnson v. Jones, 885 F. Supp. 1008, 1014 (E.D. Mich.
1995) ("[A]ll of the circumstances surrounding the negotiations made
between the parties must be considered to determine if and to what
extent an implied license was granted"). We reverse the dismissal of
8
the copyright claims and remand to the district court for further
proceedings.6
REVERSED AND REMANDED
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6 In light of our rulings, we do not reach the issue of the denial of Sax-
elbye's motion to file an amended complaint.
9