On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 01-cv-01333) District Judge: Honorable James McGirr Kelly
Before: Scirica, Chief Judge, Ambro and
Garth, Circuit Judges
The opinion of the court was delivered by: Garth, Circuit Judge
Argued: Thursday, April 24, 2003
This case involves a dispute between two businessmen, John J. Edwards, the plaintiff-appellant, and A. Wesley Wyatt, the defendant-appellee, concerning control over Pilot Air Freight Corporation ("Pilot"), an air freight forwarding company.
Edwards and Wyatt were introduced to one another by a Philadelphia attorney, Richard Phillips, who represented both businessmen separately. Phillips became involved in the business as well, and a conflict over the company's management and control ensued. The dispute has been marked by shifting alliances and agreements among these three individuals.
This appeal arises from Edwards' action against Wyatt for breach of an oral contract. Edwards appeals from the district court's judgment in favor of Wyatt after a non-jury trial. The district court held that, though there was a contract, Wyatt had established a defense of anticipatory repudiation.
Edwards has argued, however, that Wyatt waived any defense of repudiation and denies, in any event, that an anticipatory repudiation occurred. Of even greater significance, Edwards contends that the district court did not consider the evidence of events that took place after a July 31, 1998 letter, which the district court held had constituted Edwards' repudiation of the agreement with Wyatt. These events, Edwards claims, either nullified any "repudiation" or reconstituted an agreement between Edwards and Wyatt.
Finally, Edwards complains that the district court failed to address or resolve Edwards' alternative claim that he was entitled to relief against Wyatt based on the doctrine of promissory estoppel. That claim was pleaded in Count Two of Edwards' Complaint.
Our review leads us to conclude that, indeed, the district court did not consider material trial evidence — or if it did, it failed to refer to any such evidence in its opinion. Nor did the district court make findings of fact relating to that evidence, which pertained to events that took place after July 31, 1998. Moreover, the district court failed in its opinion to express its reasoning or findings having to do with the alternate count which Edwards pleaded — the promissory estoppel count. It is for these reasons that we will reverse the district court's judgment and remand for a new trial.
These parties have had a long and convoluted relationship. At various times, Edwards aligned himself with Wyatt and against Phillips. At other times, Wyatt aligned himself with Phillips and against Edwards. At still other times, Edwards and Wyatt were aligned with one another against Phillips. In each instance, the efforts were designed to gain control of Pilot. These shifting alliances did little credit to any of these three individuals. Eventually, however, Edwards' and Wyatt's meetings came down to an April 1998 oral agreement, known as the "Handshake Agreement."
Therefore, we will first describe, as briefly as possible, the relevant events that occurred prior to the formation of the Handshake Agreement. We will then discuss in fuller detail the Handshake Agreement, followed by Edwards' purported repudiation of that agreement on July 31, 1998, and then the events that took place following the "repudiation."*fn1
A. Activities Prior to the Handshake Agreement
Edwards was the president of Pilot, and owned one-third of the one hundred total issued shares of stock in Pilot. The remaining shares were owned by Edwards' cousins. Edwards v. Wyatt, No. 01-cv-1333, 2002 WL 1832814, at *1 (E.D. Pa. Aug. 5, 2002) (Findings of Fact ¶¶ 4, 5). In 1993, Phillips, who was counsel to both Edwards and Wyatt, introduced the two, because he believed that Wyatt might be able to help Edwards and Pilot by investing in Pilot. Id. (Finding of Fact ¶ 6). Both Wyatt and Phillips invested in Pilot, and Phillips became Pilot's chairman.
Shortly thereafter, "Edwards decided to adopt an exit strategy from Pilot because of Phillips' approach to running it." Id. (Finding of Fact ¶ 10). At first, Wyatt and Edwards agreed to push Mr. Phillips out of Pilot. Wyatt, however, changed his mind, and in April 1995 realigned "with Phillips to vote Edwards out of Pilot and put Phillips back in charge of the company." Id. at *2 (Finding of Fact ¶ 15).
Following his removal from Pilot, Edwards filed for bankruptcy. The assets of Edwards' bankruptcy estate included his one-third interest in Pilot as well as claims Edwards had against Wyatt, Pilot and Phillips. Id. (Finding of Fact ¶ 18).
Edwards, who had been acting pro se, retained Stephen L. Braga as counsel to represent him in the bankruptcy proceeding.*fn2 JA 685 (Stipulation of Facts ¶ H).
Inasmuch as we are reversing the district court's judgment and remanding for a new trial, the parties may produce evidence of these events at the new trial for the district court's edification. Hence, we do not mean, by our abbreviated recitation of the evidence adduced at trial, to indicate that these discussions and dealings may not be relevant before the district court on remand.
Because of the bankruptcy proceeding, the control of Pilot stock, as it stood by the fall of 1997, was as follows: "Wyatt owned forty-five percent of the issued and outstanding stock of Pilot, Edwards' Chapter 7 Trustee controlled his thirty-three and one-third percent of Pilot's stock, and the balance of Pilot's stock was owned or controlled by Phillips, who also served as Pilot's President and Chief Executive Officer." Edwards, 2002 WL 1832814, at *2 (Finding of Fact ¶ 22). Therefore, Wyatt or Phillips could secure control of Pilot if they were able to obtain control over Edwards' stock in Pilot.
In December 1997, one of Wyatt's lawyers, Jay Ochroch, met with Edwards' lawyer, Braga, "to discuss a potential alignment between Edwards and Wyatt and the possibility of trying to effect a sale of Pilot." Id. (Finding of Fact ¶ 23). Following this meeting, Braga testified that a dinner meeting was held in Philadelphia in early January 1998 among Wyatt; his counsel, Ochroch; and Braga. JA 949. At this meeting, Braga sought to determine "why Mr. Edwards should trust" Wyatt given Wyatt's switch to side with Phillips in April 1995. Id.
Braga then arranged for a face-to-face meeting between Edwards and Wyatt. Edwards testified that, at that meeting, Wyatt explained his reasons for seeking to realign with Edwards. JA 755-56.
Following this meeting, Edwards and Wyatt entered into a Settlement Agreement on February 18, 1998. Edwards, 2002 WL 1832814, at *2 (Finding of Fact ¶ 25). The Settlement Agreement provided that Edwards and Wyatt "use their best efforts to cause Pilot to sell either all or substantially all of the assets of Pilot, the stock of Pilot, or cause an initial public offering [IPO] of the Pilot stock," and required that Edwards and Wyatt "attempt" to file a "Joint Motion" to secure the sale or initial public offering of Pilot or the conversion of the bankruptcy case to a Chapter 11 case. JA 30.*fn3
After the Settlement Agreement was reached, Edwards and Wyatt made concerted efforts to secure the Trustee's backing for an IPO of Pilot. The Trustee rejected the proposal, and the district court denied Edwards' and Wyatt's joint motion for the bankruptcy court to approve the IPO proposal. See Edwards, 2002 WL 1832814, at *3 (Findings of Fact ¶¶ 28, 30).
Instead, the Trustee determined that Edwards' stock in Pilot should be sold to Phillips: "On March 12, 1998, the Trustee filed her... 'Sale Motion'.... [T]he Trustee sought the sale of Edwards' Pilot stock to Phillips for $3.4 million and mutual releases by the estate and Pilot for various claims pending between the estate and Pilot." Id. (Findings of Fact ¶¶ 31-32).
B. The Unwritten "Handshake Agreement"
Following these events, Edwards and Wyatt entered into an unwritten "Handshake Agreement" on April 30, 1998, which Edwards claims Wyatt has breached.
[W]hen it became apparent that Wyatt and Phillips were now involved in a bidding contest for Edwards' stock to avoid being in a minority position, Wyatt and Edwards agreed that neither would enter into any agreement with Phillips to settle the bankruptcy sale proceeding without the participation of the other party (the "Handshake Agreement").
Id. (Finding of Fact ¶ 33). This agreement "was never reduced to writing." Id. (Finding of Fact ¶ 35). The motivation for the Handshake Agreement differed from the purpose of the Settlement Agreement:
The Handshake Agreement was totally different from the February 18th written [S]ettlement [A]greement. As Braga put it at trial: "By the time of the [H]andshake [A]greement, it was clear the two options in the written agreement, the IPO motion and [a] Chapter 7 to 11 conversion motion, were not going to work, so the written agreement... was fulfilled by that point in time. The [H]andshake [A]greement was an additional agreement made in light of the changed circumstances that those two things didn't work."
Id. (Finding of Fact ¶ 36). The Handshake Agreement involved a mutual exchange of promises: "The mutual consideration underlying this new agreement was: Wyatt did not want Edwards to reach an agreement with Phillips any more than Edwards wanted Wyatt to reach an agreement with Phillips. By standing together, they were each stronger. " Id. (Finding of Fact ¶ 37) (emphasis added).
The district court found that, according to the testimony of Ira B. Silverstein, one of Wyatt's attorneys, "under the Handshake Agreement, if either Wyatt or Edwards took an unreasonable position, the other party would no longer be bound by the Handshake Agreement." Id. (Finding of Fact ¶ 34).
Wyatt testified that the Handshake Agreement meant that Wyatt "would not settle the matter behind" Edwards' "back." JA 900. The district court then held that the Handshake Agreement was binding, and that "[t]he facts at trial established that Wyatt's agreement with Phillips, without the participation of Edwards, would have been a breach of the Handshake Agreement." Edwards, 2002 WL 1832814, at *5 (Conclusion of Law ¶ 2) (emphasis added).
C. Wyatt and Phillips Make Competing Bids for Edwards' Stock
In early May 1998, Wyatt tendered a bid of $3.6 million for Edwards' assets, but, as noted, the Trustee favored and supported Phillips' $3.4 million bid. Id. at *3 (Findings of Fact ¶¶ 38-39).
Over Edwards' objection, the bankruptcy court established procedures for a sale to go forward, and Wyatt submitted a new bid of $5 million. Id. at *3-*4 (Findings of Fact ¶¶ 40-41).
D. The Bankruptcy Court Hearing of July 29, 1998
The Bankruptcy Court set a hearing date for July 29, 1998, for the purpose of selling Edwards' Pilot stock. Braga testified that, two days prior to the hearing, an attorney, Alan Davis, had entered the case. Davis represented Pilot's franchisees and employees and managers of Pilot (including Phillips). JA 1020-21. Braga further testified that on July 28th, he received a call from Silverstein, Wyatt's counsel, in which Silverstein told him that Davis sought agreement of a continuance of the next day's hearing "so they could pursue global settlement talks." JA 1021. According to Braga, Silverstein asked Braga to agree to the continuance at the bankruptcy hearing, and Braga agreed to do so "because Mr. Wyatt and Mr. Edwards were aligned." JA 1021-22.
Phillips, in collaboration with Pilot's franchisees, offered a bid of $5.1 million. Edwards, 2002 WL 1832814, at *4 (Finding of Fact ¶ 42).
The bankruptcy court issued a continuance at the request of counsel for the Pilot franchisees and of Braga. Id. (Finding of Fact ¶ 43); see also JA 1478-80 (Tr. of Bankruptcy Court Hearing of July 29, 1998).
Edwards argues that this continuance request triggered new fissures in the relationship between Wyatt and him. According to the testimony of Kevin Brinkworth (Edwards' associate), Wyatt, who was present at the bankruptcy court hearing, "seemed somewhat confused," and said, " 'Why is this happening? Why is there a continuance? I wasn't aware of this. I wanted to buy this stock today.' " JA 840. Brinkworth testified that he informed Braga of Wyatt's reaction. Id. As Braga testified, "I was approached by Kevin Brinkworth who told me that he had just had a very disturbing conversation with Mr. Wyatt, who was upset about my agreeing to the continuance and blaming me for his inability for buying the shares that day." JA 1022.
Wyatt testified that he did not agree completely with Brinkworth's account of the meeting:
My recollection is, I was confused by the continuance and still am and didn't understand why the continuance happened, but I do not recall speaking with you [Braga] and telling you that you ruined everything. I don't recall that conversation at all. I am not saying it didn't take place, but I don't recall that....
What I said to Mr. Brinkworth is I didn't understand the procedure that was taking place. I didn't understand what was going on.
Edwards testified that, at some time following the hearing, Wyatt
told me that he was fully prepared to bid on the stock. That he had authorized his attorney, Mr. Ochroch, to bid up to $10 million and that he told me that he had a facility at Republic Bank for another $20 million and that the bidding didn't take place because he [Braga] screwed it up.
The district court found that "[a]lthough Braga claims there was some confusion over Wyatt's understanding of the July 29th continuance, Braga admitted at the time that Edwards would not have been prejudiced as a result of the continuance so long as the bids in place at the time were made irrevocable." Edwards, 2002 WL 1832814, at *4 (Finding of Fact ¶ 44). The district court also found that, as Edwards testified, "Wyatt had authorized Ochroch to bid up to $10 million for the Pilot stock." Id. (Finding of Fact ¶ 45).
E. Braga's Letter of July 30
On July 30, 1998, Braga wrote to Ochroch and Silverstein expressing his concern about the relationship between Wyatt and Edwards because, "as a result of the July 29th hearing... Mr. Silverstein had instructed Mr. Wyatt not to talk to Mr. Edwards anymore and it's hard for two people ...