OPINION
Defendant Konica Medical Corporation appeals the judgment entered by the District Court in favor of Plaintiff, Orchard Group, Inc., and the denial of its post-trial Motion for Judgment as a Matter of Law. OGI eross-appeals the denial of its Motion for PreJudgment Interest. For the following reasons, we REVERSE.
I. INTRODUCTION
This breach of eontract/fraudulent misrepresentation action was filed by the Orchard Group Inc. (“OGI”) against Konica Medical Corporation (“Konica”) on September 3,1992 in the United States District Court Northern District of Ohio Eastern Division. Following discovery, Konica filed a Motion for Summary Judgment on May 27, 1994. The District Court denied that motion on January 8, 1996, and the case proceeded to trial on February 26,1996.
On March 6, 1996, the jury returned a general verdict for OGI on the breach of contract claim for $1,000,000 and found for Konica on the fraudulent misrepresentation claim. The damage award was based on expert testimony regarding profit projections for OGI if Konica had supplied it with x-ray film pursuant to the terms of an April 13, 1992 letter from Konica to OGI.
On March 12, 1996, OGI filed a motion for pre-judgment interest. On March 21, 1996, Konica filed a Fed. R. Civ. Pro. 50 motion for judgment as a matter of law. On May 13, 1996, the District Court denied both motions by Margin Entry Order, without a written opinion. The parties now appeal.
II. FACTUAL BACKGROUND
OGI, an Ohio Corporation, was formed by Drs. Norbert Reich and Frank Seidelman and two businessmen, Kim Bernatz and John Detelich, in early 1992. The company was set up as a buying group for the purpose of offering small non-hospital providers of health care (such as chiropractors and podiatrists) a group discount on medical supplies, such as x-ray film. In return for a fee paid to OGI, members of the group would be permitted to purchase film and medical supplies from a supplier at a discount group rаte to be negotiated by OGI. OGI contacted
During March of 1992, Mr. Kim Bernatz of OGI engaged in discussions with Ms. Barbara Hunter, a Konica sales representative or “Territory Manager” for the Cleveland marketplace. The discussions concerned the possibility of Konica agreeing to supply x-ray film at a discount price. On March 31, 1992, Ms. Hunter sent a letter proposing to offer x-ray film at a 40% discount to OGI members with a rebate, based on percent of gross sales, sent directly to OGI. After orally agreeing to the terms of the letter, Mr. Ber-natz asked if there was anything he needed to sign. Ms. Hunter said this was not necessary, and that the letter was the agreement. Subsequently, Ms. Hunter had the terms of this letter approved by her boss, Mr. Dunn, the Regional Manager. Hunter advised Ber-natz of Dunn’s approval.
Bernatz had known Hunter and Dunn pri- or to these deals. Hunter had made many similar written proposals to Bernatz when he was the Administrative Director of Radiology at Lakewood Hospital. The proposals said nothing to suggest any requirement of further Konica approval of the terms being offered. Konica was aware that Hunter wаs making such proposals. Neither Hunter nor anyone at Konica ever informed Bernatz that Hunter had limited authority.
In early April 1992, Ms. Hunter put Mr. Bernatz in contact with Robert Weaver, Ko-nica’s Regional Manager for the Southwest. Regional managers were two steps removed from the top position in the company and their responsibilities included marketing and sale of Konica film. Mr. Weaver suggested the discount given to OGI be set at 45% to be more competitive. Mr. Weaver then told Ms. Hunter that he had agreed on a 45% discount with Mr. Bernatz. Subsequently, on April 13, 1992, Ms. Hunter personally delivered OGI another letter identical to the earlier letter except that this letter proposed to offer to OGI Konica x-ray film at 45% off list price. The letter offered this discount “in return for a film commitment of 36 months.” Bernatz orally accepted the terms in the letter, and Hunter assured Bernatz that no further approval was necessary. Hunter sent a copy of the letter to Dunn and explained that Weaver changed the discount to 45%. Dunn then told Hunter to “run with it.”
In relevant part, the April 13, 1992 letter stated:
Thank you for your continued support of Konica. Listed below are the terms of the agreement that you and I discussed for [OGI],
DISCOUNT: 45% off list price on medical x-ray films
REBATE: To be paid as administrative fee, semi-annually. Percentages are based on net purchases made by members of [OGI],
$ 0 — $300,000. 10%
$300,000 — $750,000. 11%
$750,000 — $1,000,000. 13%
$1,000,000 — and over. 14%
AGREEMENT: [Konica] is pleased to offer these terms in return for a film commitment of 36 mos.
EQUIPMENT: [Konica] equipment will be offered at a 25% discount off list price, with 5% administrative fee to [OGI],
PRICING: Per 100 sheet box listed on p. 2
Once again, thank you for your time and consideration.
Thereafter, OGI began to advertise for Sales Representatives. Hunter supplied OGI with free samples of film and packaging kits for their use in signing OGI members to purchase Konica film. Dunn approved the supply of these samples. Hunter knew that OGI was soliciting prospective alliance members. Weaver introducеd OGI to Intra-Trade, so it could serve as OGI’s distributor on the West Coast. Weaver told IntraTrade that Konica had agreed to give OGI members a 45% discount on x-ray film.
On May 6, 1992, three weeks after Ms. Hunter’s April 13 letter, Konica informed OGI it did not and would not approve the
As indicated, following the close of discovery, Konica moved for summary judgment arguing that the alleged contract with OGI was not a valid “requirements contract” and, because the contract did not have a stated quantity term, it did not comply with the Uniform Commercial Code’s Statute of Frauds and was, therefore, not enforceable. The District Court denied this motion. The case proceeded to trial, and after the jury returned a verdict in favor of OGI, Konica moved for judgment as a matter of law, reasserting its requirements contraet/Statute of Frauds arguments and also arguing that the Konica representatives lacked the authority to bind the corporation to the alleged contract. This post-judgment motion was also denied, as was OGI’s post-judgment motion for pre-judgment interest. The parties now appeal the District Court’s denial of these motions.
III. ISSUES PRESENTED
The parties’ appeal and cross-appeal require resolution of the following issues:
1. Whether the representatives of Konica had actual or apparent authority to bind Konica to the contract with OGI?
2. Whether the April 13, 1992 letter from Konica to OGI satisfies the quantity requirement set out in § 2-201 Statute of Frauds of the Uniform Commercial Code, and is an enforceable “requirements contract” under § 2-306 of the Uniform Commercial Code as adopted by Ohio law? and
3. Whether the District Court erred when it denied OGI’s motion for prejudgment interest?
IV. ANALYSIS
A. STANDARD OR REVIEW
As noted, Konica seeks review of both the denial of its motion for summary judgment regarding whether there was a requirements contract and the denial of its motion for judgment as a matter of law regarding whether there was a requirements contract and whether there was apparent authority to bind Konica. This Court recently stated that:
“Reviewing a Rule 50 determination is preferable to reviewing a summary judgment decision because the Rule 50 decision is based on the complete trial record and not the incomplete pretrial record available at summary judgment.” Therefore, we hold that in cases where an appellant made a Rule 56 motion for summary judgment that was denied, makes those same arguments in a Rule 50(a) motion at the close of evidence that was also denied, lost in front of a jury, then renewed its arguments in a rejected Rule 50(b) motion after the entry of judgment we will review only the denial of the Rule 50(b) motion.
K & T Enterprises, Inc. v. Zurich Ins. Co.,
Konica’s Motion for Judgment as a Matter of Law presents questions of Ohio contract law, specifically whether the alleged contract was entered into on behalf of Konica by a person with apparent authority to bind the corporation, and whether, as a matter of law the contract is an enforceable requirements contract and, therefore, complies with the Statute of Frauds. The standard of review in these circumstances was also outlined in K & T Enterprises:
[Wjhen sitting in diversity, we review denial of a Rule 50 motion using the same standards applicable under the law of the forum state ... [Nevertheless,] [w]e holdthat in diversity eases, a state law standard of review is applicable only when a Rule 50 challenge is mounted to the sufficiency of the evidence supporting a jury’s findings. No deference is appropriate in diversity cases to a trial сourt’s resolution of legal questions....
To promote clarity in the standards of review applicable to Rule 50 motions we summarize our survey of the different types of cases ... as follows: Legal determinations, whether made in a diversity case or in a federal question case, will always be reviewed de novo. Questions of evidence sufficiency will be reviewed as the forum state would review them in diversity cases....
B. KONICA’S AGENTS HAD APPARENT AUTHORITY TO BIND KONI-CA
Konica appeals the District Court’s denial of its Motion for Judgment as a Matter of Law on the apparent authority of Konica’s agents to bind it to a contract with OGI. Konica contends that OGI’s claim to a “contract” relies exclusively on communications between OGI and Konica employees who lacked the authority to bind Konica to the alleged “nationwide” contract. OGI counters that Hunter, Weaver, and/or Dunn were capable of binding Konica pursuant to: (1) express or implied actual authority or (2) apparent authority.
When deciding a diversity case, a federal court must apply the substantive law of the state’s highest court.
Erie R.R. v. Tompkins,
With respect to the issue of express or implied actual authority, the Ohio Supreme Court has stated:
If a party by his words or conduct, reasonably interpreted, has caused one, assuming to act as agent for such party in the making of a contract, to believe that such one had the necessary authority to make the contract, such party will be bound by the contract ... In such instances, the terms “implied authority” or “actual implied authority” are often used to describe or label what is so treated as the equivalent of authority.
Miller v. Wick Building Co.,
In Master Consolidated, supra, the Ohio Supreme Court also articulated what the evidence must show to bind the principal based on the agent’s apparent authority. To bind a principal on this basis, it must be shown that:
1) the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question, or knowingly permitted him to act as having such authority, and
2) the person dealing with the agent knew of the facts and acting in good faith had reason to believe and did believe that the agent possessed the necessary authority. The apparent power of an agent is to be determined by the act of the principal and not by the acts of the agent: a principal is responsible for the acts of an agent within his apparent authority only where the principal himself by his acts of conduct has clothed the agent with the appearance of the authority and not where the agent’s own conduct has created the apparent authority.
Relying on the rule set out by the Ohio Supreme Court in
Master Consolidated,
in
General Electric Company v. G Siempelkamp GmbH & Company,
In this case, the jury here necessarily determined that Konica was bound to the April 13, 1992 letter, although there is no basis for determining whether the jury found actual, implied authority or apparent authority. 1 It is clear from the record and from this Court’s decision in General Electric, supra, however, that the most obvious conclusion is that Koniea’s agents had apparent authority.
The facts in General Electric are analogous to the present case in several aspects, the most prominent of which is the fact that Barbara Hunter, Konica’s “Territory Manager” for the Cleveland area, had previously concluded similar deals with Kim Bernatz, before Bernatz came to OGI, when he worked for his former company. In the entire history of Hunter’s dealings with Ber-natz, Konica never indicated that Hunter did not have authority to bind Konica. Similar to the letter sent by Siempelkamp to GE pointing to the confirmation letter аs the contract, Bernatz asked Hunter if there was anything he needed to sign to conclude the deal with Konica, and Hunter answered in the negative, indicating that oral acceptance of Konica’s proposal letter was enough. It was Konica’s procedure that its customers’ only source for confirmation of a deal was through Konica representatives such as Hunter. Finally, Hunter sending the April 13 letter changing the 40% discount from the earlier proposal to 45% after Bernatz had negotiated this with Robert Weaver, Konica’s Regional Manager, is analogous tо the facts in General Electric where Carbone continually signed modifications to the contract GE had with Siempelkamp.
Nevertheless, we should note that in a similar ease years ago, this Court found that a salesman for a flour company lacked apparent authority to bind the principal to a contract with a bread company.
Dayton Bread Co. v. Montana Flour Mills Co.,
The reasoning for the decision distinguishes Dayton Bread from the case at bar. The court’s decision in Dayton Bread was influenced by an Ohio law forbidding the sale of commodities with intent to merely speculate on the rise or fall of prices, without intending delivery. Id. at 259. Applying the law on apparent authority, the court ruled “there can be little doubt that the Montana Company’s agent transgressed his instructions and that his apparent authority did not extend to the making of a conditional sale, or one in violation of the statutory laws of Ohio.” Id. (Emphasis added.)
For obvious reasons, the current case can be distinguished from Dayton Bread. The representatives of Konica were in no way executing an agreement forbidden by state law. In Dayton Bread it should have been clear to the President of Dayton that a salesman would not be given authority to bind Montana Flour to an agreement for which the officers of the company could be fined and or imprisoned. In the instant action, it was not so irresponsible for Bernatz to have believed Hunter had the authority to bind Konica particularly since he also had negotiated directly with Robert Weaver, a Regional Manager, and the contract he received from Hunter mirrored his agreement with Weaver.
Applying Ohio law to the current case, it is clear to us that Hunter had the apparent authority to bind Konica to a contract with OGI for the sale of film. Hunter’s prior dealings with Bernatz in concluding contracts without any further approval is evidence that Konica held Hunter out as having such authority. Konica knew about Hunter’s business practicеs, and at no time gave Bernatz any indication that Hunter did not have the authority to bind Konica. Moreover, combining Bematz’s previous dealings with Hunter’s sending him a proposal and later modifying its terms after further negotiations also gave Bernatz good reason to believe that Hunter had the authority to negotiate and bind Konica to such agreements.
C. THE OGI-KONICA CONTRACT IS NOTA VALID ENFORCEABLE “REQUIREMENTS CONTRACT”
Konica also argues that Barbara Hunter’s April 13, 1992 letter to Kim Bernatz cannot be a “requirements contract” because there is nothing in the letter that identifies how a quantity term could be calculated or implied since no estimatеs are stated and OGI, as a new company experimenting with a new concept and having no established customers, had no prior course of dealings with Konica or any other supplier of x-ray film. OGI counters that the letter is a requirements contract because in it, OGI agrees to rely exclusively on Konica for its x-ray film needs and Konica agrees to supply OGI with whatever x-ray film OGI needs in the good-faith course of its business.
Although the Ohio Supreme Court has ruled on requirements contracts, it has not specifically ruled on the issue of a new business entering into a requirements contraсt without a stated numeric quantity term included in the contract. When the state’s highest court has not decided the applicable law, then the federal court must ascertain the state law from “all relevant data.”
Garden City Osteopathic Hosp. v. HBE Corp.,
The Uniform Commercial Code’s Statute of Frauds, UCC § 2-201, codified in Ohio as Ohio Rev.Code § 1302.04, provides that a contract for the sale of goods for the price of $500 or more is not enfоrceable
unless there is some writing sufficient to indicate that a contract has been made between the parties and signed by the party against who enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable underthis division beyond the quantity of goods shown in such writing.
UCC § 2-201(1), Ohio Rev.Code Ann. § 1302.04(A) (emphasis added). Typically, therefore, if a contract lacks a quantity term, it is runs afoul of the Statute of Frauds and is not enforceable. The April 13, 1992 letter from Hunter does not on its face contain any quantity term. However, OGI contends that it is nеvertheless an enforceable contract because it is a “requirements contract”.
This Court had the opportunity to discuss Ohio requirements contracts in
Cyril Bath Co. v. Winters Industries,
A requirements contract is a contract which calls for one party to furnish materials or goods to another party to the extent of the latter’s requirements in business. UCC 2-306(1), as adopted by Ohio, sets forth the standard for a requirements contract:
A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quаntity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
Cyril Bath,
The April 13,1992 letter from Konica lacks a stated estimate and there is no “normal or otherwise comparable prior output or requirements” because OGI is a new company without prior dealings with Konica or any other film supplier, or with any customers for that matter. Rather, the letter only has a rebate schedule based on the quantity of film рurchased by OGI from 0 units to in excess of 1,000,000 units. Therefore, in this context, the letter here on its face fails as a requirements contract because it lacks a specific quantity term — estimate or otherwise — and there is no prior course of dealings from which a quantity term could be implied.
Cf. Fuchs v. United Motor Stage Co.,
In response to this deficiency, OGI counters that the April 13 letter is exclusive because the letter states that: “[Konica] is pleased to offer these terms in return for a film commitment of 36 mos.” OGI argues that, because the alleged agreement is exclusive, the implied UCC term of fair dealing-binds OGI to purchase some quantity of film. Here, OGI relies on the UCC § 2-306 Official Comment 2 which provides that the party who will determine quantity is required to conduct business in good faith according to commercial standards of fair dealing in the trade so that his requirements will approximate a reasonably foreseeable figure. See also, UCC § 1-203 (implied contract term of good faith).
In support of this argument, OGI directs our attention to two cases which hold that exclusive agreements without quantity terms are enforceable requirements contracts.
In
O.N. Jonas Co., Inc. v. Badische Corp.,
A few months later, Jonas placed an additional order for yarn with Badische. A dispute subsequently arose and the carpet manufacturer sued for damages for breach of contract. The district court held in entering a directed verdict in favor of Badische that the evidence failed to show that the oral
The Third Circuit, relying in part on
O.N. Jonas,
has also noted that “exclusive requirements contracts satisfy the quantity requirements of the statute of frauds, albeit no specific amount is stated.”
Advent Systems Limited v. Unisys Corporation,
The reasons for excepting exclusive requirements contracts from the strictures of the statute of frauds are strong. The purchasing party, perhaps unable to anticipate its precise needs, nevertheless wishes to have assurances of supply and fixed price. The seller, on the оther hand, finds an advantage in having a steady customer. Such arrangements have commercial value. To deny enforceability through a rigid reading of the quantity term in the statute of frauds would run contrary to the basis thrust of the Code — to conform the law to business reality and practices.
Advent, supra,
Thus, it is critical to OGI’s argument that the April 13 letter be found to create an exclusive relationship between it and Konica. Indeed, OGI concedes as muсh by arguing that non-exclusive requirements contracts require a specific numeric term.
See City of Louisville v. Rockwell Mfg. Co.,
In urging us to find exclusivity, OGI directs our attention to the following phrase in the April 13,1992 letter: “[Konica] is pleased to offer these terms in return for a film commitment for 36 mos.” It is OGI’s contention that this phrase reflects the intent of the parties to enter into an exclusive relationship. There is nothing in the language itself on its fact which even remotely suggests exclusivity. (Nor is there any indication, either in the letter or in the evidentiary record of an exclusive relationship or the kind of joint venture or distributorship relationships that the courts considered in Advent and O.N. Jonas.) But perhaps more conclusively, any optimistic notion of exclusivity here is completely foreclosed by the open-ended nature of this letter — the letter itself indicatеs that OGI could simply order 0 units from Konica and be in compliance with its terms.
No doubt recognizing the problems presented by the language of the letter, OGI attempts to offer parole evidence to counter the force of its plain language. However, parole evidence is only admissible when the contract language is itself ambiguous as to its terms.
See, e.g., Thomas J. Kline, Inc. v. Lorillard, Inc.,
Furthermore, even if we were to allow parole evidence, as noted, there is no record evidence in this case that establishes or suggests exclusivity or that the parties intended, or even contemplated, an exclusive relationship.
Therefore, because the April 13, 1992 letter from Konica to OGI is not exclusive and lacks any identifiable quantity term, or one that may be implied from a prior course of dealings, we hold that it is not a requirements contract as a matter of law.
V. CONCLUSION
For all of the foregoing reasons, wе REVERSE the District Court and enter judgment in favor of Defendant Konica Medical Corporation. 3
Notes
. While apparent authority is a legal conclusion, its elements are chiefly factual matters that are for the jury.
See Shaffer v. Maier,
. OGI suggests that these cases are no longer good law because they pre-date the UCC. However, Ohio’s adoption of the UCC states that "unless displaced by the particular provisions of [codification of the UCC], the principles of law and equity, including ... the law relative to capacity, principal, and agent, ... or other validating or invalidating cause shall supplement their provisions.” Ohio. Rev.Code Ann. § 1301.03.
. Because we hold the contract invalid, we need not reach the issue of pre-judgment interest.