Words, Incorporated v. Xerox Corporation ( 2000 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
WORDS, INCORPORATED,
Plaintiff-Appellant,
v. No. 99-1182
XEROX CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Gerald Bruce Lee, District Judge.
(CA-98-1305-A)
Argued: December 1, 1999
Decided: March 2, 2000
Before MOTZ and TRAXLER, Circuit Judges, and
Cynthia H. HALL, Senior Circuit Judge of the
United States Court of Appeals for the Ninth Circuit,
sitting by designation.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Stephen M. Colangelo, MCGUIRE, WOODS, BATTLE
& BOOTHE, L.L.P., McLean, Virginia, for Appellee. ON BRIEF:
Norman H. Singer, NORMAN H. SINGER, P.C., Washington, D.C.,
for Appellant. Robert T. Cahill, MCGUIRE, WOODS, BATTLE &
BOOTHE, L.L.P., McLean, Virginia, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Words, Inc. ("Words") appeals the district court's ruling granting
several motions to dismiss in favor of Xerox Corp. ("Xerox"). Words
had filed suit against Xerox alleging breach of contract, intentional
and negligent misrepresentation and intentional interference with pro-
spective economic advantage. We have jurisdiction pursuant to 28
U.S.C. § 1291, and we affirm.
The facts are known to the parties and we need not recite them
here. In short, Words argues that through its communications and
dealings with Xerox, the two parties entered into a binding contract.
Words refers in particular to Xerox's mailing to Words of a proposed
agreement (the "Proposed Agreement"), that required both parties'
signatures, which Words signed but Xerox did not. This presumed
contract and its breach are the sole factual bases for all of Words'
causes of action against Xerox.
I.
Words argues that it properly stated a claim against Xerox for
Xerox's alleged breaches of the Proposed Agreement. The issue is
whether the unsigned Proposed Agreement can lapse into an operative
contract through means other than Xerox's required signature.
New York law governs any contractual dispute between the two
parties. Under certain circumstances it is not necessary that both par-
ties sign an agreement to make an enforceable contract. See
Newburger v. Am. Surety Co., 242 N.Y. 134, 151 (1926). If the party
against whom the contract is being enforced has indicated through
some unequivocal act or through performance that it intends to adopt
the contract, then a signature by that party is not required for the con-
tract to be binding. See Allen v. National Video, Inc., 610 F.Supp.
2612, 631 (S.D.N.Y. 1985). However, when parties submit to each
other an agreement with the intention that the agreement be signed by
both parties, the agreement is not binding until such signatures are
made. See Scheck v. Francis, 260 N.E. 2d 493, 495 (N.Y. 1970). Sim-
ilarly, if prior correspondence between the parties establishes that all
parties' signatures are required on the contract, the contract will not
exist until the signatures appear on the document at issue. See Longo
v. Shore & Reich, Ltd., 25 F.3d 94, 97 (2d Cir. 1994).
In a September 1997 letter, Xerox explicitly informed Words that
to continue their business relationship, Words and Xerox had to enter
into a new agreement. Xerox mentioned in this letter that "a [Xerox]
manager [would] contact [Words] . . . to discuss the specific contents
of the new contract and the signing process for 1997." The Proposed
Agreement contained two signature boxes at the end of the document,
one of which Xerox never signed. Furthermore, various terms of the
agreement, such as the Reserved Account specifications, were never
finalized by the parties notwithstanding the fact that Xerox's corre-
spondence stated that the specific contents would have to be dis-
cussed.
The dealings between the parties establish that Xerox did not
intend for the Proposed Agreement to become binding considering all
the holes that still remained to be filled. Under similar circumstances,
courts have found that correspondence of a lesser degree between the
parties, was sufficient to put the parties on notice that no binding
agreement would be effectuated until the formal process was adhered
to. See e.g. Scheck, 26 N.E. 2d at 495 (transmittal letter showed intent
not to be bound until contract signed); Longo , 25 F.3d at 96 (same).
Xerox indicated a requirement of both parties' signatures on the
Proposed Agreement for this to take binding effect. Its letter stating
the necessity to discuss the signing process with Words along with the
dual signing boxes on the Proposed Agreement itself indicate this.
Barely one month after Words' signature Xerox terminated its rela-
tionship with Words. The one month gap is a lesser period than the
year that elapsed in Scheck, and the three months that elapsed in
Longo, which still constituted insufficient performance to rebut the
presumption established by the letters of intent not to be bound until
the signing process was fully complete.
3
Words relies on Allen to contend that Xerox's supposed part per-
formance of the Proposed Agreement brought the contract into being.
Allen is inapposite because, unlike the facts of this case, the parties
in that case had fully performed their proposed agreement. Therefore,
the outcomes of Scheck and Longo compel the conclusion that the
1997 agreement never came into being.*
II.
Words claims that Xerox breached its 1996 Agreement with
Words. This claim consists in its entirety of an allegation that Xerox
sold products in the markets that were covered by Words.
The 1996 Agreement explicitly allows Xerox to "market products
in the Territory directly or indirectly without restriction." Words says
that even if the 1996 Agreement allows Xerox to sell to other custom-
ers, Xerox still owes Words commission payments, and service and
supply commissions, for sales made by Xerox within Words' terri-
tory. The 1996 Agreement makes no mention of any type of commis-
sion Xerox would owe Words for any sale made by Xerox within
Words' territory. Words is unable to point to any such provision.
Therefore Xerox was operating regularly under the terms of the 1996
Agreement and committed no breach of that contract.
III.
Words contends that its fraud-based claims are governed by Vir-
ginia law. Virginia law states that causes of action sounding in tort
will be covered under the law of the place where the tort took place.
See Milton v. IIT Research Institute, 138 F.3d 519, 521 (4th Cir.
1998). However, when the alleged torts are not distinct from any pre-
existing contract between the parties, any choice of law provisions
within the contracts shall determine the applicable law. See Paul
Business Sys., Inc. v. Cannon U.S.A., Inc., 397 S.E.2d 804, 807-08
(Va. 1990).
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*In light of this conclusion we do not reach Xerox's argument that the
Virginia statute of frauds prevents the Proposed Agreement from becom-
ing binding on Xerox.
4
All Words' allegations against Xerox are premised on the contrac-
tual relationship between the two parties. Words' claim that any mis-
representations regarding the Proposed Agreement cannot arise from
a contractual relationship because no agreement was finalized is
incorrect in light of the fact that this was a renewal of a long-existing
business venture. Therefore, the choice of law provisions within the
contracts between the two parties govern which law applies in this
instance. All relevant documents between the two parties delegate the
resolution of any dispute "related to" the contract to the law of New
York state and thus, New York law governs Words' fraud-based
claims.
IV.
Words contends that it has properly asserted its fraud-based claims.
When the fraud claim is a failure to perform a future act tied to a con-
tract, then that claim will sound in contract and not in tort. See Tesoro
Petroleum Corp. v. Holborn Oil Co., Ltd., 484 N.Y.S.2d 834, 835
(N.Y. App. Div. 1985). However, if the fraud-based claim finds its
root in a common law duty of care then the claim is properly asserted
as a fraud action. See Bridgestone/Firestone, Inc. v. Recovery Credit
Services, Inc., 98 F.3d 13, 20 (2d Cir. 1996). A plaintiff is prohibited
from transforming a contract claim into a fraud claim by simply alleg-
ing that the other party failed to live up to its end of the bargain. See
Sudul v. Computer Outsourcing Services, 868 F. Supp. 59, 62
(S.D.N.Y. 1994).
Words' allegations, though very detailed, do not arise indepen-
dently of the contracts that the parties had with each other. Nor does
Words allege an independent tort founded on a separate duty of care.
The foundation for all of the fraud-based causes of action is the con-
tractual relationship and when this relationship is removed, the tort
causes of action collapse.
AFFIRMED
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