This section contains the nature of the case and procedural background.

Ds owned and operated two apparel businesses, which they sold to McNaughton in April 1998. Ds received McNaughton's promissory notes for $ 69 million. Ds engaged GRS, which acted through its principal, Glen Rauch. Rauch contacted RBC as a potential purchaser. Before beginning negotiations in earnest over the sale of the notes, RBC and Rauch executed a Letter Agreement outlining the terms of the negotiations. Ds engaged GRS, which acted through its principal, Glen Rauch. Rauch contacted RBC as a potential purchaser. Before beginning negotiations in earnest over the sale of the notes, RBC and Rauch executed a Letter Agreement outlining the terms of the negotiations. The agreement stated: RBC understands that Glen Rauch Securities, Inc. (GRS) represents Ds in the possible resale of some or all of the Notes. We both understand that the consummation of any transaction remains in the sole discretion and satisfaction of the Ds and RBC, including, without limitation, with respect to price. RBC intended to purchase the notes, incurring only minimal risk by, prior to purchase, arranging to resell them to a third party at a markup over its own purchase price. RBC received bids for the notes from P and another firm. Negotiations were conducted by telephone between Kenneth Ambrecht of RBC and Rauch. There were doubts about McNaughton's solvency, and discounts between 35-60% from the face value of the notes were proposed. RBC routinely recorded all telephone calls through its trading desk. The recordings show that in accordance with the Letter Agreement, Rauch always sought authorization from Ds before making any firm proposal to RBC and always made clear to RBC that any proposed terms required Ds' approval. On March 12, Ambrecht made an offer at 50.5. Rauch replied, 'I'm going to have to reflect back because the last thing I told Ds was fifty-one is firm, and now I've got to go back and tell them fifty and a half.' Ambrecht said he would attempt to raise the price to fifty-one, but Rauch told him, 'No, at this point, now, they're not going to do anything for a day and a half.' On March 13, Rauch still thought 'they'll probably trade them all at fifty-one.' He told Ambrecht, 'You know we're not haggling we're done at fifty-one if it gets done and it will probably be tomorrow morning.' Ds had received information from McNaughton that significantly altered prospects for payment of the notes. On March 9, McNaughton informed Ds' attorneys that it had received an inquiry from another company about the purchase of McNaughton. The attorneys contacted D the same day, and advised him that 'something good was happening with McNaughton.' On March 13, Ds met with the attorneys, who 'talked about the possibility . . . of a merger or an acquisition of McNaughton . . . and that if that happened, that the notes would . . . be paid 100 cents on the dollar.' On March 14. Rauch and Ambrecht had two recorded phone calls that day. Approximately ten minutes after the second recorded call, RBC called Rauch back, in an effort to 'pin Mr. Rauch down.' This call was not recorded because it was made from the office of Max Holmes, Co-Head of RBC's High-Yield Group, and not from RBC's trading desk. P contends that during the unrecorded call, RBC and Rauch, on behalf of Ds, formed a contract for the sale of the notes at fifty-one. Rauch learned soon after the unrecorded call that Ds had lost interest in selling the notes. On the night of March 14, Ds' attorney, Jim Alterbaum, left a message for Rauch telling him that Alterbaum was 'not sure Ds want Rauch to proceed with phone calls' to RBC and advising Rauch not to 'spin his wheel.' Ds then told Rauch they had decided to put on hold any sale of the notes. On March 20, D told Ambrecht, 'Nothing is going to happen with the bonds probably for five weeks.' RBC and P sued Ds. Ds denied that Rauch had actual authority to make a sale, that no apparent authority for the transaction was ever communicated to the buyers, or that Rauch never agreed to sell the notes. The jury found against Ds and awarded damages for breach of contract totaling approximately $40 million to RBC and P. The district court denied Ds' motion for judgment as a matter of law (JMOL) and Ds appealed.

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