The opinion of the court was delivered by: Kram, District Judge.
Mr. Deligiannis testified that at the time of this
conversation, he "understood what Jeff was telling him" (R.
Deligiannis Tr. 656), and that Cone sent him a handwritten note
that set forth "the reason why we should not sign the letter of
intent with Texarkana, for the acquisition of it." (R.
Deligiannis Tr. 33: R. Deligiannis Ex. 27.) As Mr. Deligiannis
understood the note, Mr. Cone was advising him that the assets
to be retained by Mr. Buchanan "should have been deducted" from
the purchase price rather than added to it. (R. Deligiannis Tr.
653.) Mr. Deligiannis agreed that this was sound advice and
testified that he would not sign the letter of intent "if there
was an error in it, I would not sign it the way it was." (R.
Deligiannis Tr. 658-59.)
Mr. Deligiannis never brought the error to Mr. Buchanan's
attention. Mr. Deligiannis testified that Mr. Buchanan called
him again, on July 1, reaching him in Pittsburgh where he was
attending the first of two closing meetings held in connection
with the Deligiannises' sale of the Franklin Bottling Company.
According to Deligiannis:
(R. Deligiannis Tr. 675.) Mr. Deligiannis further testified
that in response to his query as to whether or not Buchanan
would place Buchanan Enterprises back on the market, Mr.
Buchanan responded "Yes, call my [sic] the first of September.
. . ." (R. Deligiannis Tr. 684.) According to Mr. Deligiannis,
Mr. Buchanan called him once again after July 1, on either July
10 or 11, to reiterate that because Deligiannis had failed to
sign the letter of intent his company was being taken off the
testified, "I just asked him if he would reconsider and he said
to me that `You have dragged this thing on long enough. You
have not in good faith kept this thing going and at this time
it is off the market,' and that was it." (R. Deligiannis Tr.
689-90.) Mr. Deligiannis again did not advise Buchanan that he
believed there was an error in the purchase price. Robert
Deligiannis' brother Michael testified that at the time of, and
prior to, the Franklin closing on or about July 15, 1985, it
was his understanding that Buchanan had taken Texarkana off the
market. (M. Deligiannis Tr. Vol. II at 209-10.)
Robert and Constantine Deligiannis both testified that,
notwithstanding Mr. Buchanan's pronouncements, they believed
that he would still sell to them at some future date and simply
dismissed the possibility that he might not. (C. Deligiannis
Tr. 330-31; R. Deligiannis Tr. 684-85.)
Discussion With PepsiCo
On March 28, 1985, while the Deligiannis group was in the
process of acquiring the Jennings/Lake Charles bottling
company, a meeting was held in Franklin, Pennsylvania, attended
by the Deligiannis family, their accountant/consultant Henry
Burkhalter, and three PepsiCo employees — James Mangold, Jeff
Cone and Richard Westelman. Among the topics discussed at the
meeting was the means for financing prospective acquisitions —
including the possibility of raising cash by selling Franklin.
(R. Deligiannis Tr. 222-23, 226-31; Burkhalter Tr. 16-17,
At this meeting, PepsiCo is alleged to have entered into a
binding contract with the Deligiannises to consummate one of
two transactions: Either (a) the Deligiannis group would sell
the Franklin Bottling Company to PepsiCo or to one of its
subsidiaries, and PepsiCo would assist the Deligiannis group in
arranging financing to enable them to acquire Buchanan
Enterprises directly from Sam Buchanan or (b) PepsiCo would
only acquire the business comprising the Texarkana territory of
Buchanan Enterprises, and swap it for the Franklin Bottling
Company, at which time the Deligiannis group would acquire the
business comprising Camden and Mount Pleasant directly from
Buchanan. (R. Deligiannis Tr. 4, 6; C. Deligiannis Tr. 39-45;
Burkhalter Tr. at 74-77; see also R. Deligiannis Ex. 26 at 29.)
Robert and Constantine Deligiannis and Mr. Burkhalter all
testified that the contemplated "swap" was a firm deal,
consummated during the discussions which took place at the
March 28, 1985 meeting. The two other plaintiffs, however, had
no such impression of a deal being struck. Niki Deligiannis,
mother of Robert, Constantine and Michael, testified that no
PepsiCo representative made any representation that the
Deligiannis family would get Texarkana. (Deposition of Niki
Deligiannis ["N. Deligiannis Tr."] at 154-55.) And Aristomenis
Deligiannis, the father, did not remember any PepsiCo offer for
Franklin at the March 28 meeting. (Deposition of Aristomenis
Deligiannis ["A. Deligiannis Tr."] at 69-70.) Despite earlier
testimony about how a "firm deal" had been struck, Mr.
Burkhalter later testified that after the March 28 meeting,
"[a] decision was to be made by the Deligiannis[es] whether
they wanted to do it or not" (Burkhalter Tr. 30).
In May 1985, the Deligiannis group entertained a competing
offer for the Franklin Bottling Company made by Santa Fe
Associates. Santa Fe's offer was higher than PepsiCo's offer,
but Robert Deligiannis, seeing a "bidding war" developing (R.
Deligiannis Tr. 382), subsequently went back to PepsiCo's James
Mangold, and PepsiCo responded by raising its offer. (C.
Deligiannis Tr. 286-87; Mangold Tr. 109; M. Deligiannis Tr.
Vol. II at 129.)
Constantine Deligiannis testified that the March 28
"agreement" with PepsiCo precluded dealings with Santa Fe. He
testified that, despite the absence of any agreement with
PepsiCo on financial terms, he could not have accepted the
Santa Fe offer by virtue of a prior "commitment" to PepsiCo.
(C. Deligiannis Tr. 206, 216-17.) His brother, Robert, in
contrast, maintained that he and PepsiCo only had a "proposed
deal" at that time. Robert Deligiannis testified:
Q. Did you understand before you went back to
Mr. Mangold that you and PepsiCo had a deal?
A. We had a proposed deal.
(R. Deligiannis Tr. 322-23.) Plaintiff Aristomenis felt free to
accept the Santa Fe offer despite the "promises" that had gone
Q. Did you regard yourself as free to accept the
Santa Fe offer if PepsiCo had not met it or
Q. Were there any promises between you and
PepsiCo before the Santa Fe offer regarding
Franklin and Texarkana?
A. I believe so, yes.
(A. Deligiannis Tr. 64-65.) Plaintiff Niki testified:
Q. At the time of this meeting with your family,
in connection with the Santa Fe offer, did you
have a point of view, whether you expressed it or
not, that you could not accept the Santa Fe offer
because you had a binding contract which you had
made previously with PepsiCo concerning Franklin
A. It wasn't really a binding contract we had
with them to my point of view.
(N. Deligiannis Tr. 131.) And Michael Deligiannis, a non-party
Q. Am I correct that at the time you were
considering a bid from Santa Fe, you had not made
a binding commitment with regards to the sale of
Franklin to PepsiCo?
A. To my knowledge that's true. We did not make
a — or, we did not receive a bid from Santa Fe
when there is a binding commitment to PepsiCo.
Q. In other words, you were free to — you felt
free to accept a Santa Fe bid, presuming it was
otherwise satisfactory to you; is that correct?
Q. You now had a higher bid from Santa Fe than
the Pepsi bid, what was your position on the
A. The only position I can see it would be would
be to let Pepsi-Cola know and see if they had an
interest in pursuing the franchise further.
(M. Deligiannis Tr. Vol. I at 102, Vol. II at 128.)
The testimony of Robert Deligiannis is to the same effect: On
April 30, 1985, one month after the March 28, meeting, Mr.
Mangold inquired whether the Deligiannis group was prepared to
proceed with the sale of Franklin, and "I said that we would
let him know in a short period of time, but we could not give
him an answer at that particular time." (R. Deligiannis Tr.
The parties do not dispute that through May 24, 1985, no
agreement concerning Franklin or Texarkana had been put in
writing. On May 24 PepsiCo submitted a written offer to acquire
the stock of Franklin Bottling Company in response to the Santa
Fe bid. That offer contained no reference to the Texarkana
bottling company. After certain revisions, the Deligiannis
group signed the preliminary agreement as of May 29, 1985
— which still contained no reference to Texarkana.
The record indicates no other writing in which PepsiCo
promised to sell Texarkana to the Deligiannis group, to "get"
Texarkana for the Deligiannis group or somehow to separate out
the Texarkana part of Buchanan Enterprises and sell it or get
it for the Deligiannis group. Although plaintiffs claim to have
specifically demanded such a writing, none was provided. The
Deligiannises decided to proceed without one, despite advice
from their attorneys and accountants that they should not
proceed with the sale of the Franklin Bottling Company without
securing such a writing from PepsiCo. Robert Deligiannis
testified that he "was told by counsel that we should get this
thing in writing because we are dealing with a very risky
situation." (R. Deligiannis Tr. 15.) According to Robert
Deligiannis, PepsiCo, through Mr. Mangold, stated that "there
is no way that they could put in writing the deal with
Texarkana." (R. Deligiannis Tr. 7.) Mr. Deligiannis further
Jim Mangold told me that there was no way that he
could put in writing to guarantee that Texarkana
it would be an antitrust violation because they
did not own the Texarkana franchise at that time.
(R. Deligiannis Tr. 12; see also id. at 18; N. Deligiannis Tr.
Plaintiffs concede that the Dr. Pepper Company's approval of
licenses for Dr Pepper in the Buchanan Enterprises territories
was an indispensable condition of Texarkana's acquisition since
Texarkana would not have been a "viable" investment without the
licenses. Without Dr Pepper's approval "[t]he deal would not
have closed." (R. Deligiannis Tr. 565.) Yet there was no
certainty that the Deligiannis group would receive these
licenses, particularly since the Dr Pepper company was pursuing
a policy at that time of granting licenses to Coca-Cola
bottlers whenever practical (C. Deligiannis Tr. 236-37;
Affidavit of Donald L. Antle, sworn to on November 20, 1989
["Antle Aff."], at ¶ 4). The Deligiannis group never submitted
to Dr Pepper a formal proposal for the acquisition of such
licenses. (Antle Aff. at ¶ 6-7.)
The Franklin Closing
On July 15, 1985, the Deligiannises signed a Stock Purchase
Agreement for the sale of the Franklin Bottling Company which
contained no representations or promises concerning the
Texarkana bottling company. The Stock Purchase Agreement did
contain a formal integration clause, section 6.4, entitled
This agreement, together with all the Schedules
hereto and the documents and instruments being
delivered in connection herewith, contains the
entire understanding of the parties hereto with
respect to the transactions contemplated hereby
and may be amended, modified, supplemented or
altered only by a writing duly executed by all of
the parties hereto, and any prior agreements or
understandings, whether oral or written, are
entirely superseded hereby.
(R. Deligiannis Ex. 14 [tab 3].) Plaintiffs were at all times
represented by counsel, who are asserted to have known of
plaintiffs' contentions concerning Texarkana and to have
advised plaintiffs to obtain a written commitment for Texarkana
in connection with closing the sale of Franklin.
Just prior to the July 15, 1985 Franklin closing, plaintiffs
transferred the stock of Natchez/McComb and Jennings/Lake
Charles, together with their liabilities, to their newly formed
corporation, Deep South. At the closing, plaintiffs received
from PepsiCo the following cash payments, out of which they
paid certain amounts to reduce the outstanding debt to Mellon
Bank which had arisen out of their earlier Natchez/McComb and
Jennings/Lake Charles acquisitions:
Plaintiff Deligiannis Stock Sale
Proceeds Payment to
Aristomenis $1,573,206 $1,045,000
Niki 2,768,046 1,795,000
Robert 1,871,916 1,480,000
Constantine 1,871,916 1,480,000
(R. Deligiannis Ex. 17.) Although the $5,800,00 Mellon Bank
repayments were reflected on the Deep South books as loans and
equity contributions to Deep South, none of the money actually
went to Deep South but instead was used to pay down the Mellon
Bank debt, which the Deligiannises had personally guaranteed.
Michael Deligiannis received approximately $1,871,916 at the
Franklin closing but decided to leave his family's soft drink
business and not participate in the family's ownership of
Natchez/McComb and Jennings/Lake Charles as transferred to Deep
South. Michael determined that in surrendering his interest in
the continuing operations
he would be entitled to no additional compensation from his
family members since his share of the Franklin closing proceeds
more than compensated him for his interest in the family's
enterprise, including the operations that the plaintiff family
members were continuing. (M. Deligiannis Tr. Vol. II at
190-93.) Plaintiffs agreed with his assessment. (R. Deligiannis
Tr. 855-56; N. Deligiannis Tr. 132.)
At the time of the Franklin closing, Mellon Bank entered into
a Restructuring Agreement with plaintiffs, restructuring the
debt owed by the Deligiannis companies. Affidavit of Edward A.
Bittner, Jr., sworn to on July 25, 1990 ("Bittner Aff."), Ex.
48.*fn5 In connection with that restructuring, Mellon Bank
required plaintiffs to compile various reports disclosing their
existing obligations and forward commitments. The papers
submitted disclosed no forward commitments or material
obligations incurred since July 31, 1984 except those assumed
in connection with the prior acquisition of Jennings/Lake
Charles in April 1985. Affidavit of Nancy J. Shurlow, sworn to
on July 24, 1990 ("Shurlow Aff.") Ex. 1, ¶¶ 3.12, 6.05, Ex. 18;
Bittner Aff. Ex. 64.)
In November 1985 at the meeting of the National Soft Drink
Association in Anaheim, California, Sam Buchanan spoke with Al
Burke of Mid-South Bottling Company, another PepsiCo licensed
bottler with territories adjacent to those of Mr. Buchanan.
Burke soon thereafter visited Buchanan in Texarkana and within
two weeks had negotiated the sale of Buchanan Enterprises to
Mid-South for approximately $21 million. Mr. Buchanan
[W]hen I arrive at something I think is fair, then
it seems to me, like the guy on the other side of
the table says yes or no, and we go on and remain
friends. Burke was in a position to respond . . .
and he did respond, and he met my deal, and we
signed off, it's that simple.
(Buchanan Tr. 40.) In describing PepsiCo's role in the
transaction, Mr. Buchanan testified as follows:
Q. Did PEPSICO participate in your negotiations
with Mr. Burke?
A. No, other than, I asked Mangold on the phone,
when, I don't know, probably after Anaheim, if Al
[Burke] would be approvable in his opinion. And,
he said, "yeah, Al or Bob."
Q. Did you understand that to mean Bob
Q. Did anyone from PEPSICO ever pressure you to
sell to Mr. Burke's group?
A. No one from Pepsi ever pressured me to do
anything, except sell more Pepsi.
(Buchanan Tr. 45.)
In or about December 1985, Robert Deligiannis learned that
Mr. Buchanan had reached an agreement with Mid-South. He
subsequently asked PepsiCo to reject Mid-South as a licensee
for the Buchanan Enterprises territories, so that Buchanan
would be forced to sell to the Deligiannises instead. (R.
Deligiannis Tr. 755.) PepsiCo refused. (Mangold Tr. 163-70.)
Soon after, Mid-South closed on the acquisition of Buchanan
Enterprises and was issued PepsiCo licenses for Texarkana and
Camden, the two PepsiCo territories which had been served by
The Contemplated Sale of Deep South
By late 1986, despite an earlier report to their bankers
stating that Deep South's Natchez/McComb operation had
exhibited a positive growth trend, that Jennings/Lake Charles
indicated a great potential for growth and that there was "good
potential" for Deep South's "financial condition to improve
considerably over the next several years," the Deligiannis
family, behind in their commitments to Mellon Bank, decided to
offer Deep South for sale at the asking price of $21 million.
By January 1987, the Deligiannises had received offers for
almost that amount: an
offer of $20.5 million for both Natchez/McComb and
Jennings/Lake Charles from Mid-South, and a combined offer of
$19.5 million — $10.5 million for Natchez/McComb from the
Brown group, and about $9 million for Jennings/Lake Charles
from the Gantz group. The Deligiannises rejected these and
other offers and continued to run their business.
During January through April 1987, plaintiffs took Deep South
off the market while pursuing financing in the hope of keeping
Deep South. In April 1987, unable to raise more money, the
Deligiannises renewed the bidding process for Deep South but
rejected successive renewed offers from the Brown and Gantz
groups. Ultimately, Deep South was forced into bankruptcy and
was sold to the Brown group during the course of the bankruptcy
On December 9, 1987, Deep South and the four individual
plaintiffs, the brothers Robert and Constantine Deligiannis,
and their parents, Aristomenis and Niki Deligiannis, commenced
this action in the United States District Court for the Western
District of Pennsylvania. The defendants originally were
PepsiCo, Metro and James Mangold, who then was employed by
PepsiCo. The complaint alleged antitrust violations, breach of
contract and fraudulent misrepresentation.*fn6
Defendants moved to transfer the case to the Southern
District of New York pursuant to 28 U.S.C. § 1404(a), and moved
for an order dismissing the complaint for failure to state a
claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Mr. Mangold filed a separate motion to dismiss. On
June 16, 1988, the Court (Mencer, J.) granted Mangold's motion
to dismiss and transferred the rest of the case to the Southern
District of New York. See Deep South Pepsi-Cola Bottling Co.,
Inc. v. PepsiCo, Inc., No. 87-346, slip op. (W.D.Pa. June 16,
1988). In December 1988, plaintiffs moved to transfer the case
again, this time to Mississippi.
This Court denied both motions. See Deep South Pepsi-Cola
Bottling Co., Inc. v. PepsiCo, Inc., 88 Civ. 6243, slip op.,
1989 WL 48400, 1989 U.S.Dist. LEXIS 4639 (S.D.N.Y. May 2, 1989)
(Leisure, J.) (hereinafter "Opinion"). The Court dismissed the
corporation, Deep South, as a plaintiff and dismissed the
antitrust claims. The Court also denied plaintiffs' motion to
re-transfer the case. The Court concluded that the two
remaining claims, for breach of contract and fraudulent
misrepresentation, could not be dismissed on a 12(b)(6) motion,
without any discovery, because one could hypothesize a set of
facts under which the complaint might set forth a claim upon
which relief could be granted. Opinion at 22-24.
I. Summary Judgment Standard
The parties have completed discovery and defendants now move
for an order, pursuant to Rule 56(b) of the Federal Rules of
Civil Procedure, granting them summary judgment dismissing all
claims against them.
Summary judgment is appropriate where "the pleadings,
depositions, answers to interrogatories and admissions on file,
together with affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
In testing whether the movant has met this burden, the Court
must resolve all ambiguities against the movant. Lopez v. S.B.
Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir. 1987) (citing United
States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994,
8 L.Ed.2d 176 (1962)).
The moving party bears the initial burden of demonstrating
the absence of a genuine issue of material fact. Adickes v.
S.H. Kress and Co., 398 U.S. 144, 157, 90
S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The movant may
discharge this burden by demonstrating to the Court that there
is an absence of evidence to support the non-moving party's
case on which that party would have the burden of proof at
trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct.
2548, 2552, 91 L.Ed.2d 265 (1986).*fn7 The non-moving party
then has the burden of coming forward with "specific facts
showing that there is a genuine issue for trial." Fed.R.Civ.P.
56(e). The non-movant must "do more than simply show that there
is some metaphysical doubt as to the material facts."
Matsushita Electric Industrial Co. v. Zenith Radio Corp.,
475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
Speculation, conclusory allegations and mere denials are not
enough to raise genuine issues of fact. To avoid summary
judgment, enough evidence must favor the non-moving party's
case such that a jury could return a verdict in its favor. See
Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505,
2510, 91 L.Ed.2d 202 (1986) (interpreting the "genuineness"
requirement). For the reasons set forth below, defendants'
motion for summary judgment should be granted and the
complaint's remaining claims dismissed.
II. Plaintiffs' Contract and Fraud Claims
A. The Parol Evidence Rule
The undisputed facts establish that plaintiffs' contract
claim, alleging defendants' breach of a purported oral
agreement to "get" them Texarkana, is barred by the parol
evidence rule. The parol evidence rule "was developed to
safeguard the sanctity of integrated writings from future
attempts at contradiction," United States v. Wallace & Wallace
Fuel Oil Co., 540 F. Supp. 419, 425 (S.D.N.Y. 1982) (citations
omitted), and serves "to permit a party to a written contract
to protect himself against `perjury, infirmity of memory or the
death of witnesses.'" Fogelson v. Rackfay Const. Co., 300 N.Y. 334,
338, 90 N.E.2d 881, 882 (1950) (quoting Mitchill v. Lath,
247 N.Y. 377, 160 N.E. 646 (1928). The parol evidence rule
[w]hen two parties have made a contract and have
expressed it in a writing to which they have both
assented as the complete and accurate integration
of that contract, evidence, whether parol or
otherwise, of antecedent understandings and
negotiations will not be admitted for the purpose
of varying or contradicting the writing.
3 A. Corbin, Contracts § 573, at 357 (1960). On defendants'
motion to dismiss, however, the Court declined to dismiss on
the basis of the parol evidence rule without discovery,
observing that "there are two exceptions to the parol evidence
rule that are potentially applicable." Id. One possibility was
that "plaintiffs may demonstrate that the scope of the written
agreement, and integration clause, did not include the
agreement concerning Texarkana," but rather "was collateral to
the written agreement." Id. Another was that "plaintiffs could
show fraud in the inducement, despite the integration clause."
Id. Now that discovery is complete, it is clear that as a
matter of law, plaintiffs have adduced no facts tending to
establish either of these possible exceptions to the parol
1. The Texarkana and Franklin Agreements
The deposition testimony establishes that plaintiffs
uniformly have insisted that the agreement for Franklin, at
every stage, was inextricably linked to Texarkana, and that
Texarkana was an essential element of the Franklin transaction.
Robert Deligiannis testified that "[t]he essential terms of the
contract [for Franklin] were that if we did not get the
franchise, we were not going to sell the Franklin franchise to
the Pepsi-Cola Company." (R. Deligiannis Tr. 4-5.) Constantine
Deligiannis testified that "[t]he terms of the contract that I
agreed to was that we would sell them Franklin for
consideration for Texarkana." (C. Deligiannis Tr. 41.)
Constantine further testified:
Q. It is your contention, am I correct, and your
understanding, that the two transactions were
linked, that is, you would not have sold Franklin
but for the alleged promise of PepsiCo that you
would get Texarkana; is that correct?
A. That's right, yes, sir.
(C. Deligiannis Tr. 50; see also R. Deligiannis Tr. 383, 524;
Burkhalter Tr. 40-42.) Plaintiffs' unequivocal version of the
facts is that the only transaction they contemplated was one in
which getting Texarkana was the sine qua non for selling
Franklin. The "collateral agreement" exception to the parol
evidence rule thus has no application.
In a clumsy and ultimately futile attempt to bring their case
within the "collateral agreement" exception, plaintiffs assert
a new version of the alleged oral contract in direct contrast
to that given during their depositions. Plaintiffs now argue
that the sale of Franklin was not consideration for Texarkana
but rather that:
if the Deligiannis group sold Franklin to Metro,
then PepsiCo would permit the Texarkana trademark
license to be transferred only to plaintiffs. . ..
PepsiCo promised that it would not approve the
transfer of the Texarkana license to anyone but
plaintiffs. . . .
PepsiCo represented to plaintiffs that it would
not approve the transfer of the Texarkana
franchise to anyone but them.
Plaintiffs' Memorandum ("Pl. Mem.") at 19, 24. This latest
version of the alleged oral agreement, one in a series of
versions that plaintiffs have proffered during the course of
this litigation, is utterly unsupported by probative
evidentiary facts. Plaintiffs' competing versions of the facts
(see Pl.Mem. at 19-24; Supplemental Affidavit of Robert
Deligiannis, ¶ 9), in stark contrast to their clear and
uncontroverted deposition testimony concerning the nature and
content of the alleged oral agreement, fails as a matter of law
to create a genuine issue of fact. See Mack v. United States,
(2d Cir. 1987); Miller v. International Tel. &
(2d Cir.), cert. denied,
, 88 L.Ed.2d 122 (1985). This Court will not
suffer plaintiffs' attempt to create issues of fact through
their own proffer of materially different versions of the
Moreover, accepting plaintiffs' new version of the facts as
true, plaintiffs still fail to establish even a colorably
enforceable contract. The agreement plaintiffs now urge, a
"separate and distinct" promise that PepsiCo "would not approve
the transfer of the Texarkana [trademark] license to anyone but
plaintiffs" (Pl.Mem. at 14, 19), would have required PepsiCo to
refuse to license any purchaser of Buchanan Enterprises other
than plaintiffs, whether that other purchaser were qualified or
not. Its effect would have been to force Buchanan to sell to
plaintiffs, or not sell at all. Such a promise — even if it
were not directly contrary to the record — could not provide
the basis for a valid claim for two reasons. First, such a
contract would be lacking in consideration; and second, it
would have been illegal.
Plaintiffs testified without contradiction that Franklin was
consideration for Texarkana and that the two were linked.
Plaintiffs now deny that one was consideration for the other.
If as they now claim, the two were separate, then there would
have been no consideration for the alleged promise to exclude
all others for the Texarkana licenses. The promise is therefore
unenforceable as a matter of law. Shields v. Hoffman, 416 Pa. 48,
204 A.2d 436 (1964) (consideration cannot be borrowed from
a "separate and distinct" agreement); Di Sante v. Russ
Financial Co., 251 Pa. Super. 184,
380 A.2d 439 (1977) (legally enforceable contract requires
that each contracting party supply consideration to
Such agreement would have been unenforceable in any event
because it would have been illegal. Plaintiffs' alleged
agreement would require PepsiCo to deny Mid-South a license
— even though it was an existing qualified PepsiCo licensee
for territories surrounding Texarkana — and force Buchanan to
sell to plaintiffs for whatever he could get. The alleged
agreement is patently unenforceable because its performance
would have worked a fraud on Buchanan. McConnell v.
Commonwealth Pictures Corp., 7 N.Y.2d 465, 199 N.Y.S.2d 483,
166 N.E.2d 494 (1960) (even if contract entirely legal, public
policy will deny its enforcement if its performance would
practice fraud on third party); Cherry Press, Inc. v.
Redevelopment Auth. of Philadelphia, 11 Pa.Cmwlth. 47,
312 A.2d 477 (1973) (court will not enforce agreement that would work
fraud on third party).
On the motion to dismiss, the Court also held open the
possibility that plaintiffs could bring themselves within a
second exception to the parol evidence rule if they "could show
fraud in the inducement, despite the integration clause."
(Opinion at 24 n. 6.) In order to establish fraud, including
both fraud in the inducement and fraudulent misrepresentation,
a party must establish:
Averbach v. Rival Mfg. Co.,
, 1019 (3d Cir.),
, 96 L.Ed.2d 675
(1987). Where a party opposes a motion for summary judgment by
attempting to establish fraud, that party must present "clear
and convincing evidence" of the requisite elements of fraud and
may rely neither on conclusory allegations nor speculation.
Lester v. Pickwick Int'l, Inc., 528 F. Supp. 1011, 1013
(E.D.N.Y. 1981); see also Federal Deposit Ins. Corp. v. Borne,
599 F. Supp. 891 (E.D.N.Y. 1984). Plaintiffs here have failed to
establish the requisite elements of either fraudulent
inducement or fraudulent misrepresentation and thus cannot
avoid the application of the parol evidence rule to bar proof
of the purported oral agreement concerning Texarkana.
a. Basis of plaintiffs' fraud claim
For the "fraud in the inducement" exception to frustrate the
application of the parol evidence rule, "the fraud involved
must consist of representations of presently existing material
fact." See, e.g., First Pennsylvania Bank N.A. v. Weber,
240 Pa. Super. 593, 360 A.2d 715 (1976). "A promise to do something
in the future, which promise is not kept, is not fraud,
however, because it is not a misrepresentation of fact." First
Pennsylvania Banking & Trust Co. v. McNally, 200 Pa. Super. 196,
188 A.2d 851 (1963). Similarly "[a] broken promise to do or
refrain from doing something in the future . . . is not
accounted `fraud of the kind that will admit parol testimony to
vary the terms of a written contract.'" Sokoloff v. Strick,
404 Pa. 343, 348, 172 A.2d 302, 304 (1961) (citation omitted).
Here, the alleged promise to "get" plaintiffs Texarkana is
asserted to have been the very consideration for plaintiffs'
sale of Franklin. As Constantine Deligiannis emphasized, "we
would sell them Franklin for consideration for Texarkana." (C.
Deligiannis Tr. 41; accord id. at 50; R. Deligiannis Tr. 383,
524.) Because plaintiffs' fraud claim is that PepsiCo orally
promised them Texarkana and did not fulfill that promise, which
is purported to be the very consideration given in exchange for
plaintiffs' promise to sell Franklin to PepsiCo, plaintiffs
cannot establish fraudulent inducement. Cranston Print Works
Co., 521 F. Supp. at 614; Tesoro Petroleum Corp., 484 N.Y.S.2d
at 835. Plaintiffs' fraudulent misrepresentation claim
b. Proof of fraudulent intent
Plaintiffs' inability to establish the fraudulent inducement
exception is confirmed by their failure to adduce evidence of
fraudulent intent. It is well-settled that a purely conclusory
allegation that defendants never intended to perform, standing
alone, cannot convert a claim for breach of contract into one
for fraudulent inducement to contract. Hotel Constructors, Inc.
v. Seagrave Corp., 574 F. Supp. 384 (S.D.N.Y. 1983). Similarly,
"fraudulent intent not to perform a promise cannot be inferred
merely from the fact of nonperformance." Brown v. Lockwood,
76 A.D.2d 721, 733, 432 N.Y.S.2d 186, 195 (2d Dept. 1980).
Plaintiffs have offered no evidence that PepsiCo intended not
to fulfill the alleged promise to "get" plaintiffs Texarkana at
the time the promise was allegedly made. Robert Deligiannis,
for example, asserted only "that whenever somebody promises you
something and does not carry forward with it . . . that is
fraud." (R. Deligiannis Tr. 7.) Constantine Deligiannis
likewise based his fraud claim solely upon the allegation that
PepsiCo failed to fulfill its alleged promise. (C. Deligiannis
Tr. 62-62, 89-90.) Plaintiffs, moreover, offered no evidence
that PepsiCo's alleged change in policy occurred at the time of
the alleged contract rather than after the sale of Franklin.
There is thus no proof of exactly what defendants' intention
was at the time of the alleged oral promise. Plaintiffs'
testimony, amounting to nothing more than allegations of
non-performance, fails to raise a genuine issue of fact.
See Perma Research and Dev. Co. v. Singer Co., 410 F.2d 572,
578 (2d Cir. 1969).
c. Justifiable reliance