Arnold Palmer Golf Co. v. Fuqua Industries

541 F.2d 584 (6th Cir. 1976)

Facts

Palmer (P) decided that it was essential for future growth that they acquire manufacturing facilities to make their products. P and the president of Fuqua (D) met to consider such a relationship. Several more meetings were held and a general outline of the proposed relationship was defined. In 1969, D with P’s assistance and approval acquired Fernquest and Johnson, a California manufacturer of golf clubs. The minutes of a November 3, 1969 board meeting of D reveal that D wanted to participate with P in the manufacturing of golf clubs. The minutes spelled out the ownership interests of each party and how D would transfer its interest in Fernquest to the new corporation as D’s contribution. In November and December 1969, further discussions were held and revised drafts of a memorandum of intent were distributed. The culmination of efforts resulted in a six-page document known as the Memorandum of Intent. The letter stated that the memo was to confirm the general understanding that had been reached between the parties. It contained detailed statements concerning the form of the combination, the manner in which business was to be conducted, loans that D agreed to make to P and warranties and covenants to be contained in the definitive agreement. The letter of intent commanded counsel of each party to prepare an agreement acceptable for both parties and in the last paragraph there was a conditions statement. The condition of fulfillment was subject to the agreement in form and content be satisfactory to both parties and their respective counsel and that the approval of the definitive agreement by the board of D must also be accomplished. The memo of intent was signed and on February 1970, the Chairman of the board of D told the president that he did not want to do the deal. D then informed P that the deal was off. P sued. Three-and-a-half-years later D filed a motion for summary judgment. A year-and-a-half later, the district court granted the motion. The court reasoned that the parties were not subject to any obligations until a definitive agreement satisfactory to both parties and their counsel had been prepared. The court held that the condition of satisfaction means that the parties had in fact elected not to be bound by any of the terms in the Memorandum. P appealed.