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Computer Systems of America v. IBM

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Citation Edit

Computer Sys. of America, Inc. v. International Bus. Mach. Corp., 578 F. Supp. 558 (D. Mass. 1983) (full-text).

Factual Background Edit

In April of 1977, the St. Regis Paper Company (“St. Regis”) placed an order to purchase a computer system from International Business Machines Corporation (“IBM”). Due to high demand, the computer delivery date was scheduled for September of 1979. By the fall of 1978, with IBM’s blessing, St. Regis began looking for other companies to lease a computer from. Computer Systems of America, Inc. (“CSA”) contacted St. Regis and began negotiating for the lease of a computer to be delivered in mid-May of 1979. On April 20, representatives for both companies agreed to a monthly rent, a lease term of 48 months and a delivery date of July 15 for the computer system.

On April 20, CSA requested a letter from St. Regis confirming that it “would lease the computer from CSA subject to contracts being acceptable to both parties.” On April 23, St. Regis sent the letter which stated: “Confirming our conversation on Friday, April 20, we propose to lease for a four-year term a 3033-U8 with 12 channels at a monthly rate of $66,805. This lease is dependent upon satisfactory contractual arrangement.”

In the following weeks, disputes between St. Regis and CSA arose surrounding whether or not a precommencement rental fee was to be paid. At this point, attorneys for each side had exchanged drafts of the proposed lease and negotiated over specific provisions, but the lease had yet to be finalized and signed. CSA had already informed IBM that St. Regis would “be the recipient of the computer it had on order, and it had taken steps toward the installation and modification of the equipment.”

On April 30, following CSA’s notification to IBM that St. Regis would receive the computer on order, IBM offered St. Regis an improved delivery date on its original April 1977 order. An IBM representative went to the St. Regis offices and confirmed that the computer would be delivered by June of 1979. St. Regis formally terminated negotiations with CSA on May 11.

CSA filed suit against St. Regis and IBM. In its suit against St. Regis, CSA claimed breach of contract and promissory estoppel. In its suit against IBM, CSA claimed interference with contractual relations and interference with prospective business relationship. IBM and St. Regis moved for summary judgment on all claims.

District Court Proceedings Edit

St. Regis made three arguments in support of summary judgment on Count I alleging breach of contract. First, it claimed that there was no contract because there was no agreement on its essential terms. Second, it contended that even if there was an agreement on all terms, the contract was conditioned upon the execution of a written document. Finally, St. Regis argued that any contract which did exist is not enforceable under the statute of frauds.

As to the first argument, the court found that whether parties to a purported contract agree on all essential terms is a question of fact for the jury, and therefore, summary judgment is inappropriate. Regarding the second argument, the court found that because the agreement was expressly contingent on a written lease which was never executed, no contract existed. Therefore, the court granted St. Regis' motion for summary judgment on Count I.

Because the court found that there was no contract in the first place, summary judgment was granted on Count II, which alleged promissory estoppel — a doctrine not applicable in this case because the promise was contingent on the written execution of the contract which never happened.

Count III accuses IBM of interfering with contractual relations. However, the existence of a contract is an essential element of this claim and because the court found that there was no contract between CSA and St. Regis, there was nothing IBM could interfere with. Therefore, the court granted summary judgment for Count III.

As to Count IV alleging interference with prospective business relations, the court concluded that summary judgment was not appropriate because there was a genuine issue of material fact. There is evidence that IBM knew of the negotiations between CSA and St Regis. Also, the evidence was inconclusive as to how, why or under what circumstances IBM was able to change its delivery date to St. Regis. The court found that the mere sequence of events in this case was enough to give rise to an inference that IBM wrongfully interfered and such issues were to be resolved at trial, making summary judgment inappropriate.

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