Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 92-cv-05064)
Before: Scirica, Nygaard and Seitz, Circuit Judges
The opinion of the court was delivered by: Seitz, Circuit Judge.
(Opinion filed: September 8, 1998)
This appeal and cross-appeal primarily present two novel issues for review. The first question is whether the parties entered into a legally enforceable "teaming agreement." If the answer is in the affirmative, we must address how to calculate, if at all possible, the damage resulting from a breach of that agreement. The district court exercised diversity jurisdiction pursuant to 28 U.S.C. § 1332, and our jurisdiction arises under 28 U.S.C. § 1291 to consider the district court's final orders. The parties agree that the substantive contract law of Pennsylvania governs the issues raised in this case.
A. The Parties and Related Entities
For the most part, the parties do not dispute the relevant facts as described by the district court in its detailed findings of fact set forth on May 28, 1997 after a bench trial. To summarize, ATACS Corporation and AIRTACS Corporation ("plaintiffs") engaged in the business of integrating or customizing mobile enclosures with communications or other equipment for military use. Trans World Communications ("defendant") is a subsidiary of Datron, Inc., a publicly traded company. Defendant engages in designing, manufacturing, and selling of high frequency radio equipment into communications shelters and for other uses.
B. The Greek Request for Proposal and the Parties' Agreements
The history underlying the transactions subject to dispute in this case begins in October of 1989, when the Greek government opened bidding to manufacture 61 communication shelters for the Hellenic Army General Staff. A Request for Proposal ("RFP") prepared by the Greek government outlined various specifications for the communications shelters as well as certain financial requirements for all bidders. Plaintiffs considered bidding on the contract as the prime contractor, but they lacked the requisite assets to meet the financial obligations enumerated in the Greek RFP. Defendant also investigated bidding on the project as prime contractor, but it did not command significant technical experience in this particular field and generally lacked foreign government contracting knowledge to bid and perform the contract on its own.
Given the comparative strengths of the parties, a strategic alliance was born on February 26, 1990, where defendant wrote plaintiffs stating that "[t]his letter will serve as confirmation that Trans World Communications intends to team with ATACS Corporation on the Greek Shelter program." App. at 1671. While defendant professed that the "details need[ed] to be worked out," and that "this [letter] is only a preliminary look at our various responsibilities," defendant sought a commitment from plaintiffs before any quotations were issued. Id. Further Discussions proved fruitful, and the parties agreed that defendant would bid for the Greek RFP as the prime contractor and plaintiffs would be the major subcontractor. App. at 1913. By April 25, 1990, defendant communicated to plaintiffs a basic outline for the new arrangement whereby defendant agreed to assume the role of prime contractor, assume complete responsibility for the financial requirements of the Greek RFP, and give plaintiffs a subcontract for the shelter and generator systems. In return, plaintiffs were expected to "assist in the final proposal preparation," submit a price quotation on their portion of the program, and introduce defendant to their Greek agent who would facilitate the bid. App. at 1913. The parties agreed to circulate a draft contract and initiate the process of formalizing this agreement.
For the next three months, the parties circulated draft subcontracts, none of which were executed. In the exchange of drafts, however, the parties had substantially agreed to the basic understanding of the transaction. In particular, the parties agreed that:
1. Transworld will be the Prime Contractor and will assume complete responsibility for the Program including any Letters of Credit which may be required. ATACS will be a sub-contractor to Transworld and will be responsible for the shelters and generators.*fn1
2. Axon Inc. will be the sole agent for this program. ATACS will introduce Transworld to Axon May 1, 1990 . . . .*fn2
3. ATACS has accomplished significant work developing a Technical Proposal. In addition, ATACS has also reviewed the agent's Consulting Agreement and the Offset Agreement. This information will be made available to Transworld. Transworld will reimburse ATACS for their cost associated with our Technical Proposal and for legal expenses associated with the review of Offsets and Consulting Agreements.*fn3
4. ATACS will submit a quotation to Transworld for the shelters and generators. It is agreed that Transworld will flow down to ATACS no less favorable payment terms and conditions than it receives from the Greek Government. ATACS will in turn flow down these same terms and conditions to its Prime vendors.
5. ATACS agrees to work exclusively with Transworld on this project. Transworld agrees to work exclusively with ATACS relative to the ATACS Scope of Work set forth in paragraph 1 above.
7. ATACS agrees to assist Transworld as needed in the final proposal preparation.
App. at 1914-15; see also App. at 1948-49, 1966-69, 2047- 50, 2059-62. In accordance with their understanding, plaintiffs introduced defendant to their Greek agent who ultimately proved to be influential in getting defendant the final contract.
After more draft subcontracts and price quotations, none of which were executed by the parties, plaintiffs submitted their final price proposal to defendant, which totaled approximately $3.8 million. On July 16, defendant submitted its own proposal to the Greek government. As the prime contractor bidding for the Greek RFP, defendant represented that plaintiffs would be "the primary subcontractor in our proposal," as well as a member of the "team" working on the project. App. at ...