Butler v. Balolia, 1st Cir. (2013)

7/26/2019 Butler v. Balolia, 1st Cir. (2013)

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United States Court of AppealsFor the First Circuit

No. 13- 1329

DAVI D BUTLER,

Pl ai nt i f f , Appel l ant ,

v.

SHI RAZ BALOLI A,

Def endant , Appel l ee.

APPEAL FROM THE UNI TED STATES DI STRI CT COURT

FOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. J oseph L. Taur o, U. S. Di st r i ct J udge]

Bef or e

Thompson, Sel ya and Li pez,

Ci r cui t J udges.

Mi chael J . Lamber t , wi t h whom Davi d Hart nagel and SheehanPhi nney Bass + Gr een wer e on br i ef , f or appel l ant .

Laur a L. Car r ol l , wi t h whom J oseph F. Schmi dt , Shef sky &Froel i ch Lt d. , and Bur ns & Levi nson LLP wer e on br i ef , f orappel l ee.

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SELYA, Circuit Judge. Thi s bi - coast al case r equi r es a

Bost on- based f ederal cour t t o make an i nf ormed prophesy as t o

whet her t he Washi ngt on Supr eme Cour t , i f squarel y conf r ont ed wi t h

t he quest i on, woul d r ecogni ze a cause of act i on f or br each of a

cont r act t o negot i at e. Appl yi ng t he met hodol ogy t hat f eder al

cour t s have devel oped t o vat i ci nat e how st at e cour t s are l i kel y to

r ul e on unset t l ed quest i ons of st at e l aw, we f i nd spoor f or t he

cognoscent i and answer t he quest i on bef or e us i n t he af f i r mat i ve.

And because t he compl ai nt pl ausi bl y st at es such a cause of act i on,

we vacat e t he di st r i ct cour t ' s order of di smi ssal and r emand f or

f ur t her pr oceedi ngs consi st ent wi t h t hi s opi ni on.

I. BACKGROUND

I nasmuch as t hi s i s an appeal f r om an or der of di smi ssal

f or f ai l ur e t o st at e a cl ai m upon whi ch r el i ef can be gr ant ed, see

Fed. R. Ci v. P. 12( b) ( 6) , we dr aw t he f act s pr i mar i l y f r om t he

compl ai nt . See Rodr guez- Reyes v. Mol i na- Rodr guez, 711 F. 3d 49,

51 ( 1st Ci r . 2013) . We may suppl ement t hose f actual al l egat i ons by

exami ni ng "document s i ncorporated by r ef er ence i nt o t he compl ai nt ,

mat t er s of publ i c recor d, and f act s suscept i bl e t o j udi ci al

not i ce. " Hal ey v. Ci t y of Bos. , 657 F. 3d 39, 46 ( 1st Ci r . 2011) .

Pl ai nt i f f - appel l ant Davi d But l er i s an i nvent or who has

spent year s r esear chi ng and devel opi ng saf et y t echnol ogy f or

cut t i ng t ool s. Among t he f r ui t s of hi s l abor s i s t he so- cal l ed

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"Whi r l wi nd" t echnol ogy, whi ch r el i es on bot h exi st i ng and pendi ng

pat ent s.

Def endant - appel l ee Shi r az Bal ol i a i s t he pr esi dent of

Gr i zzl y I ndust r i al , I nc. He sought t o pur chase t he Whi r l wi nd

t echnol ogy f r omt he pl ai nt i f f and, af t er some i ni t i al haggl i ng, t he

t wo men si gned a l et t er of i nt ent ( t he LOI ) i n Apr i l of 2012.

The LOI i s not qui t e t hree pages i n l engt h. I t

memor i al i zes t he par t i es' mut ual i nt ent i on " t o negot i at e and ent er

i nt o a separat e Pur chase Agr eement by J une 20, 2012, " descr i bes t he

t echnol ogy t o be pur chased i n some det ai l , and speci f i es a pur chase

pr i ce "payabl e upon cl osi ng. " 1 The LOI al so st i pul at es t hat t he

par t i es " wi l l use t hei r best ef f or t s t o negot i at e and at t empt t o

agr ee to t er ms f or t he Pur chase Agr eement " and t hat t he pl ai nt i f f

wi l l r ef r ai n f r omnegot i at i ng wi t h any ot her pr ospect i ve pur chaser s

bef or e t he si gni ng deadl i ne. Last but f ar f r om l east t he LOI

cont ai ns a choi ce- of - l aw pr ovi si on t hat di r ect s t he appl i cat i on of

Washi ngt on l aw.

For r easons t hat ar e hot l y di sput ed, t he t r ansact i on f el l

t hr ough and no pur chase agr eement was ever si gned. The pl ai nt i f f

bl ames t he def endant : accor di ng to t he compl ai nt , t he def endant

pr of essed t o have di scover ed def i ci enci es i n t he Whi r l wi nd

1 Al ong wi t h t he LOI , t he par t i es execut ed a nondi scl osur eagr eement . I n pur suance t her eof , t he di st r i ct cour t seal ed al lr ef er ences t o the amount of t he pur chase pr i ce.

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t echnol ogy and used t hese "speci ous" def i ci ency cl ai ms as a basi s

f or at t empt i ng t o r enegot i ate t he arr angement .

Af t er t he deal i mpl oded but bef or e t he end of t he

excl usi vi t y per i od, t he pl ai nt i f f sued t he def endant i n a

Massachuset t s st at e cour t . The pl ai nt i f f sought , among ot her

t hi ngs, a decl ar at i on t hat t he LOI was an enf or ceabl e cont r act ,

pecuni ary damages f or br each of cont r act and br each of an i mpl i ed

covenant of good f ai t h and f ai r deal i ng, and damages f or vi ol at i on

of t he Massachuset t s Consumer Prot ect i on Act , see Mass. Gen. Laws

ch. 93A, 2, 11. Ci t i ng t he di ver se ci t i zenshi p of t he par t i es

( t he def endant i s a ci t i zen of Washi ngt on and t he pl ai nt i f f i s a

ci t i zen of Massachuset t s) and t he exi st ence of a cont r over sy i n t he

r equi si t e amount , t he def endant r emoved the case t o f eder al cour t .

See 28 U. S. C. 1332( a) , 1441.

Once t he case was t r anspl ant ed, t he def endant f i l ed a

mot i on t o di smi ss. The pl ai nt i f f opposed t hi s mot i on and, i n

addi t i on, moved f or l eave t o amend hi s compl ai nt . The def endant

obj ect ed t o t he l at t er mot i on.

The di st r i ct cour t grant ed t he mot i on t o di smi ss. See

But l er v. Bal ol i a, No. 12- 11054, 2013 WL 752363, at *2 ( D. Mass.

Feb. 26, 2013) . I t r easoned t hat t he LOI was not an enf or ceabl e

cont r act of any ki nd under Washi ngt on l aw and, t her ef or e, t hat al l

of t he pl ai nt i f f ' s cl ai ms f ai l ed. I d. I n t he same or der , t he

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cour t deni ed t he mot i on t o amend as f ut i l e. I d. Thi s t i mel y

appeal ensued.

II. ANALYSIS

We r evi ew de novo a di st r i ct cour t ' s di smi ssal of a

compl ai nt f or f ai l ur e t o st at e a cl ai m. Rodr guez- Reyes, 711 F. 3d

at 52. I n conduct i ng t hi s t ami sage, "we accept as t r ue al l wel l -

pl eaded f act s al l eged i n t he compl ai nt and dr aw al l r easonabl e

i nf er ences t her ef r om i n t he pl eader ' s f avor . " Sant i ago v. Puer t o

Ri co, 655 F. 3d 61, 72 ( 1st Ci r . 2011) .

I n di ver si t y j ur i sdi ct i on, a f eder al cour t must dr aw t he

subst ant i ve r ul es of deci si on, i ncl udi ng conf l i ct of l aw

pr i nci pl es, f r om t he l aw of t he f or um st at e. See Er i e R. R. Co. v.

Tompki ns, 304 U. S. 64, 78 ( 1938) ; Ar t uso v. Ver t ex Pharm. , I nc. ,

637 F. 3d 1, 5 ( 1st Ci r . 2011) . Her e, however , we need not per f orm

a f ul l - bl own conf l i ct - of - l aw anal ysi s: i t i s t r anspar ent l y cl ear

t hat such an anal ysi s woul d l ead us t o t he choi ce- of - l aw pr ovi si on

i n t he LOI , whi ch r ender s Washi ngt on l aw cont r ol l i ng. 2 See, e. g. ,

Eur eka Br oadband Corp. v. Went wor t h Leasi ng Corp. , 400 F. 3d 62, 67

( 1st Ci r . 2005) ; see al so Rest at ement ( Second) of t he Conf l i ct of

Laws 187 ( 1971) .

The di st r i ct cour t ' s deter mi nat i on t hat t he LOI cannot be

const r ued as a bi ndi ng cont r act of sal e, see But l er , 2013 WL

2 The pl ai nt i f f quest i ons whet her t he choi ce- of - l aw pr ovi si on,as wor ded, ext ends to hi s Chapt er 93A cl ai m. We do not need t or each t hi s quest i on t oday, and we expr ess no opi ni on on i t .

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752363, at *2, i s unar guabl e. By i t s t er ms, t he LOI expr esses t he

par t i es' shar ed i nt ent i on t hat t he t r ansact i on, when f ul l y

negot i ated, wi l l be evi denced by a "separate Pur chase Agr eement "

an agr eement t hat was never execut ed. The cr i t i cal quest i on, t hen,

i s whet her t he pl ai nt i f f has pl ausi bl y al l eged t hat t he LOI i s a

bi ndi ng cont r act t o negot i at e that t he def endant br eached.

Thi s quest i on depends, i n t he f i r st i nst ance, on whether

Washi ngt on woul d recogni ze cont r act s t o negot i at e as enf orceabl e.

The di st r i ct cour t concl uded t hat i t woul d not . I n a shor t passage

and f oot not e, t he cour t anchor ed t hi s concl usi on on t he f act t hat

Washi ngt on has not yet r ecogni zed t he enf or ceabi l i t y of cont r act s

t o negot i at e. But l er , 2013 WL 752363, at *2 n. 23. I n t hi s r egar d,

t he cour t st at ed t hat i t woul d not "ext end" a doct r i ne not yet

expl i ci t l y adopt ed by t he Washi ngt on Supr eme Cour t . I d.

A. Divining State Law.

The key t o t hi s puzzl e i s whether Washi ngt on' s hi ghest

cour t , i f squar el y conf r ont ed wi t h t he quest i on, woul d r ecogni ze a

cause of act i on f or br each of a cont r act t o negot i at e; t hat i s, an

act i on f or br each of a cont r act t hat bi nds t he par t i es t o some

cour se of conduct dur i ng negot i at i ons. The most r el i abl e gui de t o

t he i nt er pr et at i on of st at e l aw i s t he j ur i spr udence of t he st at e' s

hi ghest cour t . See, e. g. , Kat hi os v. Gen. Mot or s Cor p. , 862 F. 2d

944, 946 ( 1st Ci r . 1988) . But we t hi nk t hat t he di st r i ct cour t

er r ed i n deemi ng t he absence of an on- poi nt opi ni on f r om t he

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st at e' s hi ghest cour t di sposi t i ve. I f such a l acuna exi st s, a

f eder al cour t si t t i ng i n di ver si t y shoul d not si mpl y t hr ow up i t s

hands but , r at her , shoul d endeavor t o pr edi ct how t hat cour t woul d

l i kel y deci de t he quest i on. See, e. g. , I n r e Bos. Reg' l Med. Ct r . ,

I nc. , 410 F. 3d 100, 108 ( 1st Ci r . 2005) .

I n f ashi oni ng such a pr edi ct i on, t he f eder al cour t shoul d

consul t t he t ypes of sour ces t hat t he st at e' s hi ghest cour t woul d

be apt t o consul t , i ncl udi ng anal ogous opi ni ons of t hat cour t ,

deci si ons of l ower cour t s i n t he st at e, pr ecedent s and t r ends i n

ot her j ur i sdi ct i ons, l ear ned t r eat i ses, and consi der at i ons of sound

publ i c pol i cy. See Andr ew Robi nson I nt ' l , I nc. v. Har t f or d Fi r e

I ns. Co. , 547 F. 3d 48, 51- 52 ( 1st Ci r . 2008) . The f eder al cour t

may pay par t i cul ar at t ent i on t o sour ces ci t ed appr ovi ngl y by t he

st at e' s hi ghest cour t i n ot her opi ni ons. I d. at 52. The goal i s

t o r epl i cat e, as wel l as possi bl e, t he deci si on t hat t he st at e' s

hi ghest cour t woul d be l i kel y t o r each.

I n t hi s i nst ance, we agr ee wi t h t he di st r i ct cour t t hat

t he Washi ngt on Supreme Cour t has never r ecogni zed t he

enf or ceabi l i t y of cont r act s t o negot i at e. By t he same t oken,

however , t hat cour t has not r epudi ated such a cause of act i on. The

cl osest t he cour t has come t o ei t her of t hese posi t i ons i s i t s

r esponse t o a cer t i f i ed quest i on f r om t he Ni nt h Ci r cui t Cour t of

Appeal s. See Keyst one Land & Dev. Co. v. Xerox Corp. , 94 P. 3d 945

( Wash. 2004) ( en banc) . There, t he Washi ngt on Supreme Cour t

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decl ared that i t was "unnecessary t o deci de whet her Washi ngt on wi l l

ever enf or ce a cont r act t o negot i at e. " I d. at 950.

Al t hough Keyst one l ef t t he quest i on open, t he cour t

pr ovi ded val uabl e i nsi ght i nt o how i t mi ght vi ew t he i ssue i n t he

f ut ur e. I t s appr oach cr eat es a t axonomy t hat compr i ses t hr ee

di f f er ent t ypes of agr eement s: ( i ) "agr eement s t o agr ee, " whi ch

r equi r e a f ur t her meet i ng of t he mi nds and are, t her ef ore,

nonbi ndi ng; ( i i ) "agr eement s wi t h open t er ms, " i n whi ch t he par t i es

i nt end to be bound to key poi nt s and t o have a cour t or ot her

aut hor i t y suppl y the mi ssi ng t er ms; and ( i i i ) "cont r act s t o

negot i at e, " i n whi ch t he par t i es agr ee t o be bound t o "a speci f i c

cour se of conduct dur i ng negot i at i ons. " Keyst one, 94 P. 3d at 948

( ci t i ng E. Al l an Far nswor t h, Pr econt r actual Li abi l i t y and

Pr el i mi nar y Agr eement s: Fai r Deal i ng and Fai l ed Negot i at i ons, 87

Col um. L. Rev. 217, 253, 263 ( 1987) ) . The enf or ceabi l i t y of t hi s

t hi r d t ype of agr eement , t he cour t concl uded, was an open quest i on

i n Washi ngt on. 3 See i d. ; see al so P. E. Sys. , LLC v. CPI Cor p. , 289

3 Cour t s and schol ar s have used a var i et y of t er ms t o descr i becont r act s t o negot i at e. For exampl e, some use t he t er m Type I Ipr el i mi nary agr eement , see, e. g. , Br own v. Cara, 420 F. 3d 148, 153

( 2d Ci r . 2005) , ot her s use t he ter mbi ndi ng pr el i mi nar y commi t ment ,see, e. g. , Teacher s I ns. & Annui t y Ass' n of Am. v. Tr i bune Co. , 670F. Supp. 491, 498 ( S. D. N. Y. 1987) , and st i l l ot her s use t he t er magr eement t o negot i at e, 1 Ar t hur L. Cor bi n, Corbi n on Cont r act s 2. 8( b) ( J oseph M. Per i l l o r ev. ed. 1993) . For si mpl i ci t y' s sake,we r ef er t hr oughout t o cont r act s t o negot i at e t he nomencl at ur eempl oyed i n Keyst one, 94 P. 3d at 948.

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P. 3d 638, 644 ( Wash. 2012) ( en banc) ( r ef er enci ng r el evant l anguage

f r om Keyst one) .

We f i nd i t hel pf ul t hat t he Keyst one cour t went on t o

enumer at e cer t ai n bedr ock pr i nci pl es of cont r act l aw t hat woul d

appl y to any anal ysi s i t mi ght l at er make of cont r act s t o

negot i at e. See Keyst one, 94 P. 3d at 948- 49. For one t hi ng, t he

cour t emphasi zed t hat agr eement s ent er ed i nt o by wi l l i ng par t i es,

whi ch do not of f end publ i c pol i cy, ar e gener al l y enf or ceabl e. See

i d. at 948. For anot her t hi ng, Keyst one conf i r med t hat "Washi ngt on

f ol l ows t he obj ect i ve mani f est at i on t est f or cont r act s, " under

whi ch par t i es f or ma cont r act by mani f est i ng t hei r mut ual assent t o

be bound. I d. at 949. The obl i gat i ons of t he par t i es "must be

suf f i ci ent l y def i ni t e" t o al l ow cour t s to f i x l i abi l i t y, and t he

exchange of pr omi ses "must be support ed by consi der at i on. " I d.

Even t hough t he Washi ngt on Supr eme Court has not spoken

def i ni t i vel y t o t he i ssue, t he st at e' s i nt er medi at e appel l at e cour t

has r ecent l y enf or ced a cont r act t o negot i at e. See Col umbi a Par k

Gol f Cour se, I nc. v. Ci t y of Kennewi ck, 248 P. 3d 1067, 1076 ( Wash.

Ct . App. 2011) . But t he st r engt h of t hi s pr ecedent i s suspect

because t he appel l ant t her e appar ent l y di d not di sput e the

enf or ceabi l i t y of such cont r act s but , i nst ead, mer el y appeal ed t he

damages award. See i d. at 1074. Consequent l y, we gi ve t hi s

pr ecedent l i t t l e wei ght .

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The case l aw el sewhere i s a mi xed bag. Wi t hal , t wo

t hi ngs seemcl ear . Fi r st , many mor e j ur i sdi ct i ons have r ecogni zed

t he enf or ceabi l i t y of cont r act s t o negot i at e t han have r epudi at ed

t hat doct r i ne. Compare, e. g. , Br own v. Car a, 420 F. 3d 148, 156- 59

( 2d Ci r . 2005) ( const r ui ng New Yor k l aw) , Vent ur e Assocs. Cor p. v.

Zeni t h Dat a Sys. Corp. , 96 F. 3d 275, 277- 78 ( 7t h Ci r . 1996)

( const r ui ng I l l i noi s l aw) , Newhar bor Par t ner s, I nc. v. F. D. Ri ch

Co. , 961 F. 2d 294, 298- 99 ( 1st Ci r . 1992) ( const r ui ng Rhode I sl and

l aw) , Channel Home Ct r s. v. Gr ossman, 795 F. 2d 291, 299 ( 3d Ci r .

1986) ( const r ui ng Pennsyl vani a l aw) , Copel and v. Baski n Robbi ns

U. S. A. , 117 Cal . Rpt r . 2d 875, 879- 85 ( Cal . Ct . App. 2002) , SI GA

Techs. , I nc. v. PharmAt hene, I nc. , 67 A. 3d 330, 343- 47 ( Del . 2013) ,

and Logan v. D. W. Si ver s Co. , 169 P. 3d 1255, 1258- 60 ( Or . 2007) ( en

banc) , wi t h, e. g. , Kni ght v. Shar i f , 875 F. 2d 516, 525 ( 5t h Ci r .

1989) ( const r ui ng Mi ssi ssi ppi l aw) and Mi dAmer i can Di st r i but i on,

I nc. v. Cl ar i f i cat i on Tech. , I nc. , 807 F. Supp. 2d 646, 668 ( E. D.

Ky. 2011) ( const r ui ng Kent ucky l aw) . Second, t he t r end l i ne

appear s t o be movi ng st eadi l y i n f avor of r ecogni zi ng a cause of

act i on f or br each of a cont r act t o negot i at e. See, e. g. , Keyst one

Land & Dev. Co. v. Xerox Corp. , 353 F. 3d 1093, 1097 ( 9t h Ci r . 2003)

( di scussi ng t he "moder n t r end" and col l ect i ng numer ous case,

t r eat i se, and l aw r evi ew ci t at i ons) ; Bur bach Br oad. Co. of Del . v.

El ki ns Radi o Cor p. , 278 F. 3d 401, 408- 09 ( 4t h Ci r . 2002) ( ci t i ng

"moder n t r end i n cont r act l aw" and recogni zi ng doct r i ne under West

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Vi r gi ni a l aw) ; 1 E. Al l an Far nswor t h, Far nswor t h on Cont r act s

3. 26b ( 3d ed. 2004) ( descr i bi ng doct r i ne as havi ng "gai ned a

subst ant i al f ol l owi ng") ; Al an Schwar t z & Rober t E. Scot t ,

Pr econt r act ual Li abi l i t y and Pr el i mi nar y Agr eement s, 120 Har v. L.

Rev. 661, 675 ( 2007) ( descr i bi ng r ecogni t i on of cont r act s t o

negot i at e as t he "new def aul t r ul e" ) .

Ther e i s, mor eover , abundant suppor t f or t he enf or cement

of cont r act s t o negot i at e i n ot her sour ces t hat t he Washi ngt on

Supr eme Cour t woul d be apt t o f i nd per suasi ve. From f i r st

pr i nci pl es, a cont r act i s mer el y an exchange of pr omi ses t hat t he

l aw wi l l enf or ce. See Rest at ement ( Second) of Cont r act s 1

( 1981) . A cont r act i s f or med when t he par t i es obj ect i vel y mani f est

t hei r i nt ent i on t o be bound and consi der at i on exi st s. See i d. at

17; see al so Keyst one, 94 P. 3d at 949. The basel i ne r ul e ( absent

some af f r ont t o publ i c pol i cy) i s f or cour t s t o honor par t i es'

expr essed i nt ent i ons i n st r uct ur i ng t hei r cont r act ual af f ai r s. See

Hodge v. Evans Fi n. Cor p. , 707 F. 2d 1566, 1568 ( D. C. Ci r . 1983) ( "A

basi c pr i nci pl e of cont r act l aw i s t he concept of f r eedom of

cont r act t he r i ght of t he cont r act i ng par t i es t o st r uct ur e t hei r

t r ansact i ons i n accor dance wi t h t hei r wi shes. " ) ; see al so Keyst one,

94 P. 3d at 948 ( ci t i ng Far nswor t h, Pr econt r act ual Li abi l i t y, supr a,

at 267) .

A cont r act t o negot i at e, i n whi ch t he par t i es' pr omi ses

normal l y embody t he dut y to negot i ate i n good f ai t h, pr esent s no

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obvi ous except i on t o t hi s basel i ne r ul e. See Newhar bor , 961 F. 2d

at 298- 99. The mani f est ed i nt ent i on of t he par t i es i s t he

l odest ar . See Channel Home, 795 F. 2d at 299; Teacher s I ns. &

Annui t y Ass' n v. Tr i bune Co. , 670 F. Supp. 491, 499 ( S. D. N. Y.

1987) ; see al so 1 Ar t hur L. Cor bi n, Cor bi n on Cont r act s 2. 9

( J oseph M. Per i l l o r ev. ed. 1993) .

Schol ar l y works and case l aw descr i be compel l i ng r easons

bot h as t o why par t i es may desi r e t o exchange such bi ndi ng pr omi ses

and as t o why cour t s may deem i t soci al l y benef i ci al t o enf or ce

t hem. Moder n t r ansact i ons of t en i nvol ve si gni f i cant up- f r ont

i nvest ment s i n deal st r uct ur i ng and due di l i gence, and par t i es may

wi sh t o pr ot ect t hose i nvest ment s i n some measur e. See Schwar t z &

Scot t , Pr econt r act ual Li abi l i t y, supr a at 665- 67. Wi t hout any such

pr otect i on, a r apaci ous count er - part y may at t empt t o t ake advant age

of t he ot her par t y' s sunk i nvest ment by t r yi ng t o ret ool t he deal

at t he l ast mi nut e. See Vent ur e Assocs. , 96 F. 3d at 278.

To f or est al l such gamesmanshi p, par t i es may wi sh t o bui l d

i n saf eguar ds t hat wi l l oper at e ear l y i n t he bar gai ni ng pr ocess.

Thi s can be accompl i shed by bi ndi ng t hemsel ves suf f i ci ent l y such

t hat t hey f eel comf or t abl e i nvest i ng r esour ces i nt o t he deal , but

wi t hout i next r i cabl y commi t t i ng t hemsel ves t o a t r ansact i on t hat i s

st i l l i nchoat e. Cont r act s t o negot i at e can sat i sf y t hi s need.

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To be sure, t here ar e some consi derat i ons t hat may

counsel agai nst adopt i ng a r ul e t hat cont r act s t o negot i at e ar e

enf or ceabl e. Thr ee such consi der at i ons ar e wor t hy of ment i on.

Fi r st , cour t s ar e under st andabl y hesi t ant t o enf or ce

agr eement s whose ter ms ar e t oo i ndef i ni t e t o al l ow easy and

obj ect i ve i dent i f i cat i on of a br each. See Rest at ement ( Second) of

Cont r act s 33 ( 1981) ; see al so Keyst one, 94 P. 3d at 949. Wi t h

r espect t o cont r act s t o negot i at e, i t can be ar gued t hat cour t s

wi l l st r uggl e bot h t o def i ne "negot i at i ng i n good f ai t h" and t o

i dent i f y a par t y' s f ai l ur e t o do so. See 1 Cor bi n on Cont r act s,

supr a, 2. 8. But i n t he mai n, cour t s have f ound t hi s obst acl e

sur mount abl e. See, e. g. , Teacher s, 670 F. Supp. at 506; Logan, 169

P. 3d at 1259- 60; see al so A/ S Apot heker nes Labor at or i um f or

Speci al pr aepar at er v. I . M. C. Chem. Gr p. , I nc. , 873 F. 2d 155, 158- 60

( 7t h Ci r . 1989) ( f i ndi ng no br each of obl i gat i on t o negot i at e i n

good f ai t h) .

Moreover , cour t s r out i nel y make j udgment s as t o part i es'

good f ai t h ( or t he l ack of i t ) i n anal ogous cont ext s. See, e. g. ,

O' Tool v. Genmar Hol di ngs, I nc. , 387 F. 3d 1188, 1197- 1203 ( 10t h

Ci r . 2004) ( di scussi ng i mpl i ed dut y of good f ai t h and f ai r deal i ng

under Del aware l aw) ; Mathi s v. Exxon Corp. , 302 F. 3d 448, 453- 59

( 5t h Ci r . 2002) ( di scussi ng Uni f or mCommer ci al Code dut y t o act i n

good f ai t h when f i xi ng open pr i ce t er ms) ; Peckham v. Cont ' l Cas.

I ns. Co. , 895 F. 2d 830, 834- 35 ( 1st Ci r . 1990) ( di scussi ng

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i nsur er ' s dut y t o negot i at e set t l ement s i n good f ai t h) . And wi t h

speci f i c r ef er ence t o cont r act s t o negot i at e, Pr of essor Far nswor t h

has suggest ed t hat bad f ai t h i n negot i at i ons can be separ at ed i nt o

seven subset s: "r ef usal t o negot i at e, i mpr oper t act i cs,

unr easonabl e pr oposal s, nondi scl osur e, negot i at i on wi t h ot her s,

r enegi ng, and br eaki ng of f negot i at i ons. " 1 Far nswor t h on

Cont r act s, supr a, 3. 26c; see al so Far nswor t h, Pr econt r act ual

Li abi l i t y, supr a, at 269- 85. Thi s r ef i nement makes t he

def i ni t i onal t ask easi er .

Second, cour t s and schol ars have qui bbl ed about t he

appropr i at e measur e of damages when a cont r act t o negot i at e has

been br eached. I n t he opi ni on of some, damages shoul d be l i mi t ed

t o t he sums spent i n r el i ance on t he br oken pr omi se. See, e. g. ,

Copel and, 117 Cal . Rpt r . 2d at 885; Logan, 169 P. 3d at 1263. I n

t he opi ni on of ot hers, expect ancy damages may be avai l abl e. See,

e. g. , Vent ur e Assocs. , 96 F. 3d at 278- 79; Col umbi a Par k, 248 P. 3d

at 1076- 78. Thi s uncer t ai nt y, however , does not speak t o t he

vi abi l i t y of a cause of act i on f or br each of a cont r act t o

negot i at e. I t speaks onl y t o t he nat ur e of t he pr oper r emedy.

Thi r d, some j udges have wor r i ed about t he mani f est need

f or cour t s char ged wi t h enf or ci ng cont r act s t o negot i at e t o t r ead

car ef ul l y l est t hey "t r ap[ ] par t i es i n sur pr i se cont r actual

obl i gat i ons t hat t hey never i nt ended. " Teacher s, 670 F. Supp. at

497. But t hi s concern was not ed and di scount ed i n Keyst one, where

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t he Washi ngt on Supr eme Cour t concl uded t hat t he st at e' s f undament al

r equi r ement s f or cont r act f or mat i on wer e suf f i ci ent t o addr ess i t .

Keyst one, 94 P. 3d at 949.

I n t hi s case, al l r oads l ead t o Rome. Af t er surveyi ng

t he rel evant l egal l andscape i n Washi ngt on and beyond and wei ghi ng

t he per t i nent pol i cy consi der at i ons, we concl ude t hat t he

Washi ngt on Supr eme Cour t wi l l i n al l pr obabi l i t y recogni ze t he

enf or ceabi l i t y of cont r act s t o negot i at e when i t squar el y conf r ont s

t hat i ssue.

B. The Merits.

Havi ng made our i nf or med pr ophecy about Washi ngt on l aw,

we move f r om t he gener al t o t he speci f i c. To sur vi ve a mot i on t o

di smi ss, a compl ai nt must "st at e a cl ai m t o r el i ef t hat i s

pl ausi bl e on i t s f ace. " Bel l At l . Cor p. v. Twombl y, 550 U. S. 544,

570 ( 2007) . The quest i on her e i s whet her t he compl ai nt pl ausi bl y

al l eges t he exi st ence and br each of a cont r act t o negot i at e.

Bef or e del vi ng i nt o pl ausi bi l i t y, we pause t o put t o r est

a cl ai mof pr ocedur al def aul t . The def endant t r i es t o head of f t he

pl ausi bi l i t y i nqui r y by suggest i ng t hat t he pl ai nt i f f di d not

adequat el y r ai se t he "cont r act t o negot i at e" t heory bel ow. As we

expl ai n i n t he f ol l owi ng pages, however , t he compl ai nt adequat el y

pl eaded t hi s t heor y. What i s mor e, t he pl ai nt i f f ar gued i t i n

opposi t i on t o the mot i on t o di smi ss, and t he di st r i ct cour t had

suf f i ci ent not i ce t hat i t f el t t he need t o addr ess t he t heor y

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squar el y i n i t s deci si on. But l er , 2013 WL 752363, at *2 n. 23. We

t her ef or e deem t he cl ai m of er r or pr eser ved. Cf . Uni t ed St at es v.

Par i di s, 351 F. 3d 21, 28- 29 ( 1st Ci r . 2003) ( t r eat i ng an i ssue onl y

arguabl y al l uded t o by gover nment as pr eserved when addr essed by

di s t r i ct court ) .

I n t he case at hand, we bel i eve t hat t he compl ai nt ' s

f act ual cont ent i s enough, i f bar el y, t o pr opel i t across t he

pl ausi bi l i t y t hr eshol d. Pl ausi bi l i t y does not demand a showi ng

t hat t he cl ai m i s l i kel y t o succeed. I t does, however , demand a

showi ng of "mor e t han a sheer possi bi l i t y" of success. Ashcr of t v.

I qbal , 556 U. S. 662, 678 ( 2009) . Thi s det er mi nat i on i s i ndependent

of what ever unsuppor t ed concl usi ons may be embedded i n t he

compl ai nt . See i d. at 678- 79. Thus, "[ t ] hr eadbar e r eci t al s of t he

el ement s of a cause of act i on" wi l l not suf f i ce t o show

pl ausi bi l i t y. I d. at 678.

We concede t hat t he pl ai nt i f f ' s compl ai nt i s not a model

of cl ar i t y. Al t hough i t al l eges t hat t he LOI i s a bi ndi ng

cont r act , i t i s l ess t han pel l uci d as t o whet her t hat cont r act i s

t hought t o be a f i nal cont r act of sal e or a cont r act t o negot i at e.

The al l egat i ons can be r ead ei t her way and t here i s not hi ng wr ong

wi t h t hat . See Fed. R. Ci v. P. 8( d) ( 2) ( per mi t t i ng al t er nat i ve

pl eadi ng) .

On a mot i on t o di smi ss, t he aver ment s of t he compl ai nt

must be t aken i n t he l i ght most f avor abl e t o t he pl ai nt i f f . See

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SEC v. Tambone, 597 F. 3d 436, 441- 42 ( 1st Ci r . 2010) ( en banc) .

Si nce t he LOI pl ai nl y i s not a bi ndi ng agr eement t o pur chase, we

r ead t he al l egat i ons of t he compl ai nt consi st ent wi t h t he

pl ai nt i f f ' s al t er nat i ve t heor y t hat t he LOI i s a bi ndi ng cont r act

t o negot i ate, whi ch t he def endant br eached.

The LOI , whi ch i s t he f ocal poi nt of t he compl ai nt , can

pl ausi bl y be r ead as a cont r act t o negot i at e. I t cont ai ns a

speci f i c pr ovi si on cal l i ng f or t he par t i es' "best ef f or t s to

negot i at e and at t empt t o agr ee" t o a f i nal t r ansact i on. I t al so

cont ai ns covenant s of conf i dent i al i t y and excl usi vi t y covenant s

t hat f i t comf or t abl y under t he car apace of a cont r act t o negot i at e.

See, e. g. , Fel dman v. Al l egheny I nt ' l , I nc. , 850 F. 2d 1217, 1220- 21

( 7t h Ci r . 1988) .

What i s mor e, t he compl ai nt al l eges f act s t endi ng t o show

t hat bot h par t i es consi der ed t he LOI bi ndi ng. The compl ai nt

al l eges t hat t he pl ai nt i f f , i n def er ence t o t he LOI ' s excl usi vi t y

pr ovi si on, decl i ned i nqui r i es f r omot her pot ent i al buyer s. Such a

cour se of conduct t ends t o i ndi cat e t hat t he pl ai nt i f f consi der ed

t he LOI t o be a bi ndi ng cont r act . See, e. g. , Teacher s, 670 F.

Supp. at 502.

Si mi l ar l y, t he compl ai nt al l eges t hat t he def endant

sought t o " r esci nd" t he LOI . Thi s at t empt t o r esci nd t ends to

i ndi cat e t hat t he def endant t oo consi der ed t he LOI t o be a bi ndi ng

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agr eement . Af t er al l , a par t y woul d be unl i kel y t o seek r esci ssi on

of an agr eement t hat he di d not bel i eve t o be bi ndi ng.

The shor t of i t i s t hat t he LOI , const r ued as a cont r act

t o negot i at e, i s an agr eement ent er ed i nt o bet ween f r eel y

cont r act i ng par t i es. I t does not of f end publ i c pol i cy. And,

f i nal l y, t her e i s enough i n t he compl ai nt t o per mi t an i nf er ence

t hat t he par t i es have obj ect i vel y mani f est ed t hei r mut ual i nt ent t o

be bound. Under Washi ngt on l aw, as we envi si on i t , t hat i s enough.

See Keyst one, 94 P. 3d at 949.

The pl ai nt i f f , of cour se, must show mor e t han t hat t he

compl ai nt pl ausi bl y l i mns t he exi st ence of a cont r act t o negot i at e.

He must al so show t hat i t pl ausi bl y al l eges a br each of t hat

cont r act . Wi t h r espect t o t hat i ssue, t he f act ual al l egat i ons of

t he compl ai nt ar e qui t e amenabl e to the cont r act t o negot i at e

t heor y.

The compl ai nt al l eges t hat t he def endant spur i ousl y

i dent i f i ed def i ci enci es wi t h t he Whi r l wi nd t echnol ogy and used

t hose canar ds as a pr et ext t o renegot i at e t he pr i ce, and t hat t he

def endant f ai l ed t o negot i at e at al l dur i ng cri t i cal per i ods. 4

4 We not e, moreover , t hat i n t he proposed amended compl ai nt ,

t he pl ai nt i f f al so al l eges t hat t he def endant wr ot e an e- mai l t ohi s counsel , mi st akenl y t r ansmi t t ed t o t he pl ai nt i f f , seeki ngadvi ce about a seemi ngl y di si ngenuous pl an t o st onewal l t hepl ai nt i f f as t he dat e ar r i ved f or si gni ng a bi ndi ng agr eement f orsal e. Si mi l ar l y, t he pr oposed amended compl ai nt al l eges t hat t hedef endant r ef used t o wai ve t he excl usi vi t y pr ovi si on even af t ernegot i at i ons br oke down.

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Accept ed as t r ue, t hese al l egat i ons pl ausi bl y suggest a f ai l ur e t o

use best ef f or t s t o br i ng t he t r ansact i on t o f r ui t i on. See Vent ur e

Assocs. , 96 F. 3d at 279- 80 ( di scussi ng ci r cumst ances i n whi ch l ast -

mi nut e pr i ce change woul d be i ndi cat i ve of bad f ai t h) ; Teacher s,

670 F. Supp. at 505 ( descr i bi ng "r ef us[ al ] t o negot i at e" as

i ncompat i bl e wi t h good f ai t h) .

To ci nch mat t er s, " t he pl ausi bi l i t y i nqui r y proper l y

t akes i nt o account whether di scover y can reasonabl y be expect ed to

f i l l any hol es i n t he pl eader ' s case. " Gar c a- Cat al n v. Uni t ed

St at es, ___ F. 3d ___, ___ ( 1st Ci r . 2013) [ No. 12- 1907, sl i p op. at

10] . To cl ear t he pl ausi bi l i t y hur dl e, a compl ai nt must cont ai n

"enough f act [ s] t o r ai se a r easonabl e expect at i on t hat di scover y

wi l l r eveal evi dence" suf f i ci ent t o f l esh out a vi abl e cl ai m.

Twombl y, 550 U. S. at 556. Her e, t he compl ai nt sat i sf i es t hat

cr i t er i on.

Let us be per f ect l y cl ear . We do not hol d ei t her t hat

t he LOI i s an enf or ceabl e cont r act t o negot i at e or t hat , i f i t i s,

t he def endant br eached i t . Those mat t er s remai n subj ect t o pr oof .

See Gar c a- Cat al n, ___ F. 3d at ___ [ No. 12- 1907, sl i p op. at 7]

( di scussi ng di f f er ence i n bur dens at summar y j udgment and t r i al as

opposed t o l esser bur den at Rul e 12( b) ( 6) st age) . We do hol d,

however , t hat as a mat t er of pl eadi ng t he compl ai nt pl ausi bl y

al l eges t hat such a cont r act was f ormed and t hat t he def endant

br eached i t .

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We of f er yet another caveat . Ther e i s no pr esent need

f or us t o det ermi ne exact l y how t he Washi ngt on Supreme Cour t woul d

conf i gur e t he cont our s of t he cause of act i on assert ed. The cor e

t heor y of a cause of act i on f or br each of cont r act t o negot i at e has

been more and more r eadi l y accept ed by cour t s. That cor e t heory

i nevi t abl y hi nges on whet her t he par t i es i nt ended t o ent er a

bi ndi ng cont r act t o negot i at e and whet her t hey obj ect i vel y

mani f est ed t hat i nt ent i on. See Keyst one, 94 P. 3d at 949- 50. To

t hi s ext ent , t he compl ai nt set s f or t h a pl ausi bl e cl ai m.

We acknowl edge that t he cont our s of t he "cont r act t o

negot i at e" t heor y, at t he mar gi ns, di f f er f r omst at e t o st at e. See

gener al l y Br owni ng J ef f r i es, Pr el i mi nar y Negot i at i ons or Bi ndi ng

Obl i gat i ons? A Framewor k f or Det er mi ni ng t he I nt ent of t he

Par t i es, 48 Gonz. L. Rev. 1, 22- 35 ( 2012) ( descr i bi ng di f f er ences

bet ween j ur i sdi ct i ons) . Her e as woul d be t r ue of vi r t ual l y any

case at t he mot i on t o di smi ss st age t he r ecor d i s skel et al and

many of t he f act ual det ai l s ar e obscur e. Thi s undevel oped r ecor d

does not enabl e us t o gi ve much gui dance t o t he di st r i ct cour t

about t he pr eci se cont our s of t he l aw t hat i t must appl y t o t he

f act s t hat ar e yet t o be devel oped. I f , as t he case pr ogr esses,

t he di st r i ct cour t concl udes t hat i t i s appr opr i at e, i t r emai ns

f r ee t o cer t i f y speci f i c quest i ons t o t he Washi ngt on Supr eme Cour t .

See Wash. Rev. Code 2. 60. 020.

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Our j our ney i s not yet at an end. I n addi t i on t o

di smi ssi ng t he br each of cont r act cl ai m, t he di st r i ct cour t al so

di smi ssed t he pl ai nt i f f ' s i mpl i ed covenant of good f ai t h and

Chapt er 93A cl ai ms and deni ed hi s mot i on f or l eave t o amend. See

But l er , 2013 WL 752363, at *2. Al t hough t hese r ul i ngs i mpl i cat e

di f f er ent l egal t heor i es and st andar ds, t he ent i r e deci si on of t he

cour t bel ow r est ed on i t s err oneous det er mi nat i on t hat no

enf or ceabl e cont r act exi st ed bet ween t he par t i es. See i d. Because

our hol di ng t hat t he compl ai nt pl ausi bl y st at es a cl ai m f or br each

of a cont r act t o negot i at e under mi nes t he di st r i ct cour t ' s

r easoni ng, we bel i eve t hat al l t he component s of t he deci si on must

be r evi si t ed.

III. CONCLUSION

We need go no f ur t her . For t he r easons el uci dat ed above,

we vacat e t he j udgment bel ow i n i t s ent i r et y and r emand f or f ur t her

pr oceedi ngs consi st ent wi t h t hi s opi ni on.

Vacated and remanded. Costs shall be taxed in favor of the

plaintiff.

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