168th & Dodge, Ltd. P'ship v. Rave Reviews Cinemas, Ltd. Liab. Co. - 501 F.3d 945 (8th Cir. 2007)

Rule:

A contract is not formed if the parties contemplate that something remains to be done to establish contractual arrangements or if elements are left for future arrangement.

Facts:

In March 2002, RED submitted a request for plat approval to the Omaha City Planning Department to begin development of Village Pointe, an outdoor shopping center, located near 168th and Dodge Street in Omaha, Nebraska. The Omaha City Planning Board recommended conditional approval of the plat. At that time, the plat did not include plans for a movie theater complex. In April 2002, Rave contacted RED about a proposal to build a theater complex at Village Pointe. From March through June 2002, RED and Rave exchanged plans and discussed the proposal to build the theater complex. In September 2002, RED revised and submitted to the Omaha City Planning Board a Village Pointe plat that included a movie theater complex. On September 18, 2002, RED bought an additional 14.67 acres of land to incorporate the movie theater complex into Village Pointe. The sales agreement provided that RED had a 90-day due diligence period to "inspect and review the Due Diligence items." Additionally, the agreement obligated RED to "obtain written evidence that the City of Omaha has adopted . . . a comprehensive zoning ordinance allowing the use of the Real Estate for retail purposes . . . and that the Real Estate has received final plat approval from the Omaha City Council . . . ." On October 3, 2002, at Rave's request, RED faxed Rave the June 25, 2002 letter of intent. In a follow-up letter from Painter to RED dated October 29, 2002, Painter expressed his belief that Rave was "in agreement on most of all of the major issues" set forth in the June 25, 2002 term sheet. Painter concluded the letter by stating, "I look forward to moving on to the completion of the lease documentation, which we can then take to our Board for final discussion and approvals--which, as you know from Jefferson Pointe, is our final step in the approval process." On November 13, 2002, RED sent the "Letter of Intent" to Rave detailing the proposed terms of a lease between the parties. On November 26, 2002, the parties executed the letter of intent. The introductory paragraph provided in part that, “Although this letter is binding on the parties as to terms herein detailed, should the transaction contemplated occur, this shall not be construed as either a lease agreement or an option to lease. Until a definitive agreement (the "Lease") is executed, this shall serve only to detail the terms and conditions which would control these parties in a subsequent agreement should one be executed.” On November 26, 2002, Painter also sent a letter to Rehorn, a RED principal, which accompanied the signed letter of intent. The letter provided, in relevant part, that “I have also sent a copy [of the letter of intent] to [our attorney] and told him that we all agree that this lease should basically mirror the Jefferson Pointe lease and that he should expect some communications from Richard Katz to begin the drafting of the lease for Omaha as soon as possible.” Following a public hearing on December 4, 2002, the Omaha City Planning Board recommended approval of RED's rezoning plan and revised plat, which included the movie theater complex. At a December 30, 2002 meeting between Rehorn and Stephenson, Rehorn, on behalf of RED, advised Stephenson of the approved plat. Rehorn also told Stephenson that RED was going to incur additional significant expenses to accommodate a Rave theater complex at Village Pointe. These expenses included purchase of the additional property and $ 594,616 for removal of a gas line. Stephenson, for Rave, replied to Rehorn that the Village Pointe project was a "done deal." By mid-January 2003, the deal was not done--no written lease had been executed. RED pushed Rave to close the deal. When Rave asked about the urgency of signing the lease, RED indicated that its financing package depended on obtaining a signed lease with Rave. The parties continued negotiations in February and March 2003. During this time, RED began talks with Douglas Theaters as a possible replacement for Rave. On March 22, 2003, Rave informed RED that it did not intend to build and lease a theater at Village Pointe and that Rave's board had rejected the agreement. In August 2003, RED entered into a contract with Douglas Theaters for construction of the movie theater complex. RED subsequently sued Rave alleging breach of express contract, breach of implied contract, and promissory estoppel. The district court dismissed the express contract claim and granted summary judgment in favor of Rave in relation to the implied contract claim and promissory estoppel claim.

Issue:

Did the letter of intent bound Rave to the terms set forth in the letter?

Answer:

No.

Conclusion:

The letter of intent expressly stated that it "shall not be construed as either a lease agreement or an option to lease." The letter of intent was not definite, as it contemplates that a "definitive agreement" may be executed in the future. Furthermore, the letter was expressly conditional, as it stated that the terms and conditions detailed in the letter would control the parties "in a subsequent agreement should one be executed." This same language also indicated, as did the letter of intent in Viking, that an agreement might not be consummated at all. Also, as in Empro, Painter's letter accompanying the signed letter of intent indicated that board approval was necessary before Rave could enter a definitive agreement. In the absence of such a definitive lease agreement, no express contract exist.