Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02816/USCOURTS-ca10-88-02816-0/pdf.json

Parties Involved:
Beech Aircraft Corporation
Appellee
EDO Corporation
Appellant

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

EDO CORPORATION, ) 

) 

Plaintiff-Appellant,) 

) 

v. ) 

) 

BEECH AIRCRAFT CORPORATION, ) 

) 

Defendant-Appellee. ) 

No. 88-2816 

FILED 

Unircd Stites 0Jurr of Appeals T~nch Circuir 

/~UG 1 '! 1990 

&OBERT L. HOECKER 

Cl~rk 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 85-2204-S) 

Richard D. Greene of Morris, Laing, Evans, Brock & Kennedy, 

Wichita, Kansas, (Roger L. Theis, Jana Deines Abbott and Mark A. 

Ohlsen of Morris, Laing, Evans, Brock & Kennedy, Wichita, Kansas; 

John Cibinic, Annandale, Virginia, with him on the briefs) for 

Plaintiff-Appellant. 

Paul B. Swartz (Robert Martin and Jeff Kennedy with him on the 

brief) of Martin, Pringle, Oliver, Wallace & Swartz, Wichita, 

Kansas, for Defendant-Appellee. 

Before BRORBY, BARRETT and WEST, * Circuit Judges. 

BRORBY, Circuit Judge. 

* The Honorable Lee R. West, District Judge for the Western 

District of Oklahoma, sitting by designation. 

Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 1 
EDO Corporation (EDO) appeals the district court's rulings on 

the parties' summary judgment motions contained in the court's 

Memorandum and Order entered June 16, 1988; all adverse 

evidentiary rulings made during trial of the matter held August 29 

to September 9, 1988; and adverse rulings in the trial court's 

Memorandum and Order entered October 21, 1988, containing posttrial findings of fact, conclusions of law, and the court's 

judgment. We affirm. 

FACTS1 

Beginning in September 1982, Beech Aircraft Corporation 

(Beech) and EDO entered into a series of research and development 

contracts related to a new composite aircraft, 2 the Starship. 

Beech chose EDO's Fiber Science Division (FSD) as a subcontractor 

on the Starship research and development program because of FSD's 

experience with composite filament winding. 3 Under the series of 

contracts, FSD was to design and construct the main wing for the 

Starship. 715 F. Supp. at 991. 

The first contract between FSD and Beech provided that FSD 

would conduct a design study for the wing structure and propose a 

1 The facts are recited almost verbatim from the trial court's 

thorough opinion, EDO Corp. v. Beech Aircraft Corp., 71~ F. Supp. 

990 (D. Kan. 1988). 

2 "Composites" are combinations of 

materials including filament wound 

epoxy. 

high strength, low weight 

carbon graphite fibers and 

3 Composite filament winding is a 

constructing nonmetal aircraft. 

state-of-the-art process for 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 2 
design to Beech. The parties entered into this first contract in 

late 1982. The second, third and fourth contracts provided for 

further design, development and construction of the Starship wing. 

The contracts incorporated the following "termination for 

convenience" clause, borrowed from the federal Armed Services 

Procurement Regulations: 

The performance of work under this contract may be 

terminated, in whole or from time to time in part, by 

the buyer in accordance with this clause. Termination 

of work hereunder shall be effected by delivery to the 

seller of a Notice of Termination specifying the extent 

to which performance or work under the contract is 

terminated and the date upon which such termination 

becomes effective. 

Id. The contracts also contained a noncompetition clause that 

provided: 

For a period of six (6) years after the date of 

execution of this subcontract subcontractor shall 

not, except as authorized by contractor, provide to any 

third party, aircraft wing structure design consulting, 

manufacturing techniques, or manufacturing, tooling, or 

other technical information, or otherwise assist any 

such third party in the manufacturing of aircraft wing 

structures as the same relate to fixed wing aircraft 

having gross weights less than 85,000 lbs. or with 

respect to inventions, trade secrets, technical 

information or data which was [sic] developed pursuant 

to contracts with subcontractor and/or title to the same 

belongs to contractor per this contract. 

Id. at 991-92. (The terms "seller" and "subcontractor" in these 

provisions refer to EDO; "buyer" and "contractor" refer to Beech.) 

After entering the December 1982 contract, FSD developed its 

design concept for the Starship main wing and in April 1983 

presented the design study to Beech. Id. at 992. 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 3 
Work under the contracts proceeded, and in late 1983 FSD 

began to gear up to produce the Starship main wing. At that time, 

FSD was presented an opportunity to bid on research and development of a composite 

Rinaldo Piaggio. 

aircraft project for an Italian company, 

FSD was asked to bid on several components of 

the aircraft, including the forward wing, or canard, and the wing 

tips and flaps on the main wing, but was not asked to bid on the 

main wing itself. Id. Although FSD officials were enthusiastic 

about the Piaggio opportunity, Beech officials were strongly 

opposed to FSD pursuing the Piaggio opportunity. They believed 

that FSD's participation in the Piaggio project would be a breach 

of the noncompetition clause in the contracts between EDO and 

Beech. Id. FSD ultimately decided to forego the Piaggio 

opportunity and continued working with Beech. Id. 

In early 1984, Beech began to reexamine the Starship project 

and its progress. Brainerd Holmes, president of Beech's parent 

company, Raytheon, and several Beech employees were dissatisfied 

with the progress of the Starship project. They had growing 

concerns about the feasibility of FSD's proposal and felt there 

were too many "unknowns" with the project and too many risks in 

the method by which FSD proposed the main wing be built. Id. On 

March 20, 1984, Holmes discussed his concerns with the Beech 

engineering team. The engineering team expressed no confidence in 

completing the Starship program on schedule or in building the 

aircraft as originally proposed. Id. at 993. Holmes then decided 

to order a restructuring of the Starship program, including 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 4 
bringing the construction of the main wing "in house" at Beech and 

employing an alternative design developed for the main wing at 

Beech. That same day Beech president Linden Blue notified FSD 

that Beech was terminating their contracts. Id. 

FSD immediately formed a termination team to determine all 

amounts Beech would owe FSD under the "termination for 

convenience" clause of the contracts. The parties agreed on some 

amounts owed FSD, but disagreed as to whether FSD was entitled to 

receive "unabsorbed overhead." 4 Beech refused to pay any amounts 

attributable to unabsorbed overhead. Id. 

EDO filed suit, claiming the termination was improper because 

the original contract did not permit termination absent a change 

of circumstances or, alternatively, because the contract had been 

modified to delete the termination clause. EDO also claimed that 

even if the termination were proper, FSD was entitled to 

additional compensation (unabsorbed overhead) under the contract. 

FSD joined claims of detrimental reliance, breach of fiduciary 

duty, and misappropriation of trade secrets, seeking a recovery of 

actual and punitive damages in excess of $50 million. 

After joint motions for summary judgment, the trial court 

denied EDO's motion for summary judgment but stated that 

4 The trial court defined "unabsorbed 

of 'fixed' costs incurred at FSD 

allocated to the Starship project as 

overhead" as "that amount 

which could no longer be 

a portion of the cost of that 

project." 715 F. Supp. at 993. 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 5 
"unabsorbed overhead may be recoverable under settlement of the 

terminated contract." Memorandum and Order, June 16, 1998, at 17. 

The court granted summary judgment to Beech on EDO's claims 

concerning an orally modified contract, the unavailability of 

anticipatory profits as a measure of recovery under the settlement 

of the terminated contract, and breach of fiduciary duty. Id. 

After a two-week trial on the remaining claims, the trial court · 

determined that EDO failed to meet its burden of proof on any of 

its claims, and entered judgment for Beech on all pending claims. 

715 F. Supp. at 996. 

On appeal EDO argues: (1) the trial court erred in refusing 

to award unabsorbed overhead as a part of termination damages; 

(2) the trial court erred in finding a change of circumstances 

sufficient to justify termination; (3) the trial court erred in 

granting summary judgment against EDO on oral modification of the 

contracts; and (4) the trial court erred in its application of the 

elements of promissory estoppel. 

UNABSORBED OVERHEAD 

EDO argues the trial court erred in refusing to award 

unabsorbed overhead as a part of the termination costs for a 

proper termination. 

Our review of a trial court's determination of the 

amount of damages resulting from a breach of contract is 

governed by the clearly erroneous standard. 

Fed.R.Civ.P. 52(a); Paramount Pictures Corp. v. 

Thompson Theatres, Inc., 621 F.2d 1088, 1091 (lOth 

Cir.1980). We are not constrained by the clearly 

erroneous standard, however, when the trial court's 

computation of damages is predicated on a misconception 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 6 
of the governing rule of law. Bose Corp. v. Consumers 

Union of United States, Inc . , 466 u.s. 485, 501 (1984). 

Chaparral Resources, Inc. v. Monsanto Co., 849 F.2d 1286, 1289 

(lOth Cir. 1988) (citations omitted). Thus, in reviewing 

challenges to a trial court's· determination of damages in a breach 

of contract case, we must distinguish between the challenge to the 

computation of the amount from the challenge to the law applied in 

computing that amount. 

EDO argues the trial court misapplied the law and asks this 

court to "exercise its independent judgment and determine whether 

the record establishes that the governing rules of law regarding 

unabsorbed overhead were applied correctly by the trial court." 

The trial court determined that EDO failed to meet its burden of 

proof on the issue of unabsorbed overhead. 715 F. Supp. at 994. 

In its order on the motions for summary judgment, the trial 

court stated: 

[I]t appears to the court after a review [of the 

authorities cited by the parties] that unabsorbed 

overhead supported by proof sufficient to establish a 

direct link to the termination of the contract is 

recoverable in certain circumstances. Given the 

previous analysis by the court concerning the commercial 

nature of these contracts and the absence in this case 

of the special consideration normally afforded in 

government procurement of contracts, the court believes 

that the present case is an appropriate one for recovery 

of unabsorbed overhead, contingent upon proper proof at 

trial, in the event that the factfinder fails to find a 

breach of contract. 

Memorandum and Order, June 16, 1988, at 12 (emphasis added). The 

trial court defined unabsorbed overhead as "that amount of 'fixed' 

costs incurred at FSD which could no longer be allocated to the 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 7 
Starship project as a portion of the cost of that project." 715 

F. Supp. at 993 (Finding of Fact No. 26). 

EDO agrees with the trial court's definition of unabsorbed 

overhead but contends that after trial the district court changed 

this definition and the required proof. In other words, according 

to EDO, after the court stated in its rulings on the summary 

judgment motions that proof of a "link" between termination and 

unabsorbed overhead would be required, the court changed the 

requisite "linkage" to one between unabsorbed overhead and the 

Starship project. EDO claims this change required FSD literally 

to "prove the impossible." The company further asserts that this 

"change in the ·standard of proof reflects a basic misunderstanding 

of the nature of unabsorbed overhead and was a clear error of 

law." 

We note first that the district court arguably would have 

been justified in ruling that unabsorbed overhead was simply not 

recoverable under the termination provision of the Beech-EDO 

contracts. The termination clause did not expressly provide for 

payment of this element of damages. Moreover, where the federal 

government is a party to the contract and invokes the so-called 

"termination for convenience" clause, such damages apparently are 

not recoverable against the government. ~'Nolan Bros., Inc. 

v . United States, 437 F.2d 1371, 1389 (Ct. Cl. 1971) (finding no 

precedent for awarding post-termination general and administrative 

expenses to nonterminating party). However, the court determined 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 8 
that the Beech-EDO contracts were governed by ordinary commercial 

contract principles and accordingly ruled that "the recovery of 

unabsorbed overhead [is appropriate], contingent upon proper proof 

at trial." Beech has not appealed this ruling. We agree that, 

under commercial contract principles, see, ~' u.c.c. § 2-708, 

and given sufficient proof, EDO might have been entitled to 

recover its unabsorbed overhead. 

Nevertheless, we agree with Beech that appellant's argument 

concerning the altered standard of proof is largely semantic. We 

discern no difference between the standard of proof announced by 

the court in its summary judgment ruling and that reiterated in 

its post-trial conclusions of law. Rather, the court denied 

appellant's claim for unabsorbed overhead simply because EDO's 

proof of this element of damages was deficient. The court stated: 

After reviewing the evidence in this case, including the 

testimony of plaintiff's expert, William Murphy, the 

court concludes that plaintiff did not meet its burden. 

While plaintiff's expert did show the court how he 

calculated unabsorbed overhead, he showed the court no 

evidence that any of the costs included in that amount 

were directly linked to the Starship project. Nor did 

any other witness or piece of evidence establish a 

direct link. Plaintiff's burden at trial was not simply 

to calculate unabsorbed overhead as a percentage of 

total overhead. The only conclusion the court is left 

with is that all 'fixed' overhead costs were incidental 

to conducting the ongoing business of FSD. This 

conclusion is strengthened by the evidence showing that 

overhead incurred directly as a result of the Starship 

contracts (~, capital improvements) was reimbursed by 

Beech upon termination. 

715 F. Supp. at 994 (Conclusion of Law No. 5). Our review of the 

district court's orders and the record convinces us that the trial 

court used the proper standard of proof and was consistent in 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 9 
applying this standard, and that EDO failed to establish what 

portion of unabsorbed overhead could properly be allocated to the 

terminated work. 

At trial, EDO's expert witness William Murphy was asked 

during direct examination to "tell the Court whether there's any 

way to demonstrate a direct link or direct relationship between 

that unabsorbed overhead to the terminated work." In response, 

however, Mr. Murphy embarked on an academic explanation of Cost 

Accounting Standards Board methods and undertook to comment on 

certain case law. Id. at 520. The court sustained an objection 

to this answer, and plaintiff's counsel abandoned the subject of 

overhead to pursue a separate item of damages. 5 At no point 

during his testimony (which we find ambiguous and confusing) did 

Mr. Murphy explain the connection, if any, between the amount of 

unabsorbed overhead expenses incurred by EDO and the termination 

by Beech of the Starship contracts. Mr. Murphy discussed how 

EDO's estimate of unabsorbed overhead was calculated and confirmed 

by modeling, but he failed to explain how the unabsorbed overhead 

estimate (or any component thereof) was related to the Beech 

contracts. 

Beech's expert, on the other hand, discussed the various 

components of EDO's reported overhead expenses and illustrated 

5 We find no error in the trial court's sustaining the objection 

to this testimony, particularly in light of the failure of 

plaintiff's counsel to defend against the objection or to make any 

further attempt to obtain a direct answer from the witness. 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 10 
for each component how the expense had not changed significantly 

during the Beech contract period or how (in the case of personnel, 

for example) EDO had reduced the expense after termination of the 

contracts (e.g., by reducing the work force). He also pointed out 

what, in his opinion, were flaws in the premises of the model 

employed by EDO's witness. 

Our deference to the trial court as factfinder on this issue 

is corroborated by our own review of the record. We hold the 

district court was correct in ruling that EDO failed to sustain 

its burden of proof with respect to this element of damages. 

CHANGE OF CIRCUMSTANCES 

EDO next argues the trial court erred in finding a change of 

circumstances sufficient to justify termination under the 

"termination for convenience" clause. EDO also argues the trial 

court misapplied the law governing such terminations. 

The district court's decision on this issue was guided by the 

analysis in Torncello v. United States, 681 F.2d 756 (Cl. Ct. 

1982) (en bane). 715 F. Supp. at 993. Torncello summarized the 

case law up to that time concerning exercise of the "termination 

for convenience" clau·se in government contracting situations. The 

claims court concluded that the function of the clause, as held by 

those cases, was "to allocate the risk of a change in the 

circumstances of the bargain or in the expectations of the 

parties." 681 F.2d at 766. 

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In Torncello the government terminated a contract to take 

advantage of a lower price of which it had known at the time it 

entered into the contract with the pfaintiff at a higher price. 

The court noted· that the government's invocation of the 

termination clause allowed it to "walk away from all of its 

contractual obligations." Id. at 760. The court held that the 

government's exculpatory use of the clause in these circumstances 

was improper because it would "vitiate the consideration normally 

furnished by the government for a requirements contract without 

substituting any other sufficient obligation." Id. at 770. In 

other words, in those circumstances it would render illusory the 

government's obligations under the contract. The court held that 

availability of the clause was restricted "to situations where the 

circumstances of the bargain or the expectations of the parties 

have changed sufficiently that the clause serves only to allocate 

risk." Id. at 771. But it cautioned: "We hold in this opinion 

only that the government may not use the standard termination for 

convenience clause to dishonor, with impunity, its contractual 

obligations." Id. at 772. Thus, 

Id. 

if the government were to change its convenience 

termination procedures in such a way that valid 

consideration · was still furnished in an exculpati9n 

situation, by limiting its power to terminate in some 

way that would be consideration for the contract if it 

alone had been bargained for, then convenience 

termination for exculpatory purposes would also be 

proper. 

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Appellate Case: 88-2816 Document: 01019381367 Date Filed: 08/17/1990 Page: 12 
In the case at bar, the district court concluded that, 

especially in a research and development setting 

employing state of the art technology, a reevaluation 

and redirection of the program as occurred at Beech in 

this case is a "substantial change" making continuance 

of the contract "clearly advisable." Cancellation 

of the contract in this case was in good faith and did 

not constitute a breach of contract. 

715 F. Supp. at 993 (Conclusion of Law No. 3). We concur with 

this reasoning. 

The circumstances of this case differ markedly from those 

that concerned the court in Torncello. Beech could not terminate 

the EDO contracts with impunity. From the moment the contracts 

were entered into, Beech incurred obligations thereunder, unlike 

· in Torncello, where the government never ordered--nor was it 

required by the contract to order--any services from the 

plaintiff. Beech and EDO had mutual obligations under these 

contracts; Beech provided notice to EDO of its intent to 

terminate; it entered into a settlement for the payment of damages 

following termination; and, as the district court found, its 

actions evidenced good faith. 6 

6 The Torncello court rejected good faith as a meaningful limit 

on the government's right to terminate, but only because the 

government is presumed to act in good faith ("subject only to an 

extremely difficult showing by the plaintiff to the contrary"). 

681 F.2d at 770. Thus, the claims court concluded: "[T]he 

government's obligation to act in good faith hardly functions as 

the meaningful obligation it may be for private persons." 681 

F.2d at 771. Here, relying on Bonanza Inc. v. McLean, 242 Kan. 

209, 747 P.2d 792, 801 (1987) (noting "modern trend is to apply 

the duty of good faith and fair dealing in every contract"), and 

distinguishing Augusta Medical Complex, Inc. v. Blue Cross, 227 

Kan. 469, 608 P.2d 890, 896 (1980) (holding motive in terminating 

irrelevant where contract gives absolute, but mutual, right to 

terminate), the district court decided "that the Kansas Supreme 

Court would place some restriction on Beech's right to terminate." 

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Although we agree with the district court that "changed 

circumstances or expectations," within the contemplation of 

Torncello, did exist in this case, we find it unnecessary to 

decide whether Beech must be able to point to such a change in 

order to invoke the clause. Absent the concern present in 

Torncello--that the obligations of the party possessing the 

unilateral right of termination are illusory due to want of 

consideration--we will enforce a contract freely entered into by 

two competent parties. Here, Beech's power of termination was 

clearly supported by consideration. Accordingly, we affirm the 

district court's conclusion that Beech's termination of the EDO 

contracts did not constitute a breach of those agreements. 

ORAL MODIFICATION 

EDO next claims that the district court erred in granting 

summary judgment against EDO on the issue of oral modification of 

the contracts. In reviewing a grant of summary judgment, we apply 

the same standards employed by the district court, affirming if 

there are no genuine issues of material fact and if the moving 

party is entitled to judgment as a matter of law. Osgood v. 

Memorandum and Order, June 16, 1988, at 11. We concur in the 

district court's determination that Beech's exercise of its right 

to terminate must have been in good faith. 715 F. Supp. at 993; 

see also Goff v. American Savings Ass'n, 1 Kan. App. 2d 75, 561 

P.2d 897, 901 (1977) ("[g]ood faith is required in every business 

transaction"). Moreover, we agree with the trial court that 

Beech's cancellation of the contracts was done in good faith. 715 

F. Supp. at 993. 

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State Farm Mutual Auto. Ins. Co., 848 F.2d 141, 143 (lOth Cir. 

1988). 

EDO claims that Linden Blue's oral assurances: of a continuing 

relationship with Beech, see 715 F. Supp. at 992 (Finding of Fact 

No. 18), modified the written contracts to delete Beech's right to 

terminate the contracts for convenience. According to EDO, the 

district court erroneously assumed EDO was arguing that these oral 

statements created enforceable contractual commitments beyond the 

period of the written contracts. The district court further 

erred, EDO claims, in relying on the contract prohibition against 

oral modification. 

EDO claims that the following excerpt from the district 

court's order on summary judgment motions reveals that the court 

believed EDO was arguing for an extension of the contracts' terms: 

The court finds that the types of oral commitments 

alleged to have been made by Beech management concerning 

a long-term partnership are simply too amorphous to 

support a contractual modification. No term of years 

was given, nor were any promises of specific future 

production or research and development projects made. 

Memorandum and Order of June 16, 1988, at 11. However, we are 

unable to conclude from this statement that the district court 

misunderstood EDO's oral modification claim. It could as easily 

be construed as indicating simply that the court found that Blue's 

oral assurances did not alter the firmness or permanence of 

Beech's contractual relations with EDO. However, EDO's contention 

that these assurances of some sort of "long-term" or "permanent" 

relationship reflect only on the viability of the termination 

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clause and not on the contracts' term is logically and internally 

inconsistent (see the following section of this opinion) and may 

have contributed to the district court's confusion, if any, on 

this point. 

Regardless of the district court's understanding of the scope 

of the contract modification sought by EDO, however, we agree that 

the oral assurances cited by EDO are "too amorphous" to vary any 

written term of the parties' agreements. Although Kansas law 

allows modification of the terms of a written agreement on the 

basis of oral promises under certain circumstances, the burden is 

on the plaintiff to prove by clear and convincing evidence an 

intent to so modify the agreement. ~' Lambertz v. Builders, 

Inc., 183 Kan. 602, 331 P.2d 559, 560 (1958); Alexander v. 

Wehkamp, 171 Kan. 285, 232 P.2d 440 (1951). Evidence of vague, 

indefinite, or ambiguous statements will not suffice. See 

Lambertz, 331 P.2d at 563. At best, the statements of Mr. Blue 

and FSD president Berrisford to which EDO refers us are ambiguous 

as to the parties' intent regarding the termination clause. At 

worst, they reveal nothing whatsoever with respect to that 

contract provision. The statements certainly do not constitute 

clear and convincing evidence of an intent to modify an express 

term of each of the Beech-EDO agreements. We affirm the district 

court's grant of summary judgment to Beech on this claim. 

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PROMISSORY ESTOPPEL 

Finally, EDO argues that Blue's oral assurances to FSD "also 

supported a promise for additional work beyond the existing 

contracts[, which] becomes enforceable as a result of FSD's 

detrimental reliance." EDO claims it forewent the Piaggio 

opportunity on the basis of Blue's assurances and that it is thus 

entitled to expectancy damages on a promissory estoppel theory. 

EDO complains that the trial court erred both in finding no 

promise and in finding there would be no injustice if the promise 

were not enforced. 

The trial court correctly stated the requirements for 

invoking promissory estoppel; to wit: 

[T]he plaintiff must establish that a) defendant made a 

promise, b) the promise was made under circumstances 

where the promisor intended and reasonably expected the 

promise would be relied upon by the promisee, c) the 

promisee acted reasonably in reliance on the promise, 

and d) a refusal to enforce the promise would result in 

an injustice. 

715 F. Supp. at 994 (citing Kansas Power & Light Co. v. Burlington 

N.R.R. Co., 544 F. Supp. 1336, 1350 (D. Kan. 1982), rev'd on other 

grounds, 740 F.2d 780 (lOth Cir. 1984), cert. dismissed, 469 u.s. 

1200 (1985); Berryman v. Kmoch, 221 Kan. 304, 559 P.2d 790, 794 

(1977)). 7 Similarly, in Marker v. Preferred Fire Ins. Co., 211 

7 The principle of the doctrine of promissory estoppel is 

restated in § 90 of the Restatement (Second) of the Law of 

Contracts, which "has long been recognized and relied upon by [the 

Kansas Supreme Court.]" Kirkpatrick v. Seneca Nat'! Bank, 213 

Kan. 61, 515 P.2d 781, 786 (1973). Section 90 states: 

A promise which the promisor should reasonably 

expect to induce action or forbearance of a definite and 

substantial character on the part of the promisee, and 

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Kan. 427, 434, 506 P.2d 1163, 1170 (1973), the Kansas Supreme 

Court held that 

in order for the doctrine of promissory estoppel to be 

invoked the evidence must show that the promise was made 

under circumstances where the promisor intended and 

reasonably expected that the promise would be relied 

upon by the promisee and further that the promisee acted 

reasonably in relying upon the promise. 

(Emphasis added.) 

The district court held that the noncompetition clause in the 

Beech contracts would prohibit the proposed Piaggio work; thus, 

there would be no injustice in not enforcing Beech's alleged 

promise. In response to EDO's claim that it could have bid on a 

part of the Piaggio work excluding the forward wing (which latter 

work arguably would have been forbidden by the Beech contracts), 

the court held that there was "no competent evidence presented 

which would indicate that FSD representatives told Beech they 

might pursue this alternative." 715 F. Supp. at 995 (Conclusion 

of Law No. 11). The court concluded that EDO had not shown "that 

Beech promised FSD their relationship would continue if FSD 

declined to make a more limited bid on the Piaggio aircraft," id.; 

thus, the court ruled that EDO failed to satisfy the first element 

of promissory estoppel. 

which does induce such action or forbearance is binding 

if injustice can be avoided only by enforcement of the 

promise. 

Quoted in 515 P.2d at 786. 

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Although the evidence on the matter is controverted, we 

cannot say that the district court's finding with respect to FSD's 

opportunity to make a limited bid to Piaggio, and Beech's 

knowledge of that opportunity, is clearly erroneous. Accordingly, 

we would affirm the court's ruling that EDO did not make the 

necessary showing on the first element of promissory estoppel. It 

is perhaps clearer, however, that EDO also failed to provide proof 

~ 

of the second element--that Beech made the alleged promises with 

the intention and the reasonable expectation that EDO would rely 

on them in foregoing the Piaggio opportunity. There is no 

suggestion that "promises" were made by any Beech employee other 

than Linden Blue. Blue testified that he "thought that the 

contract probably provided that [FSD] couldn't, or shouldn't" do 

the Piaggio project but that "if it wasn't specifically prohibited 

by the contract, that [he] thought it was [prohibited] from an 

ethical and team performance standpoint." Believing this, it is 

unlikely that Mr. Blue intended or relied on his indefinite 

assurances to FSD to induce FSD to forego the Piaggio work. 

Furthermore, the indefinite nature of those assurances and Mr. 

Blue's admission that he was unwilling to make any commitment to 

FSD concerning future production strongly suggest it would have 

been unreasonable for Mr. Blue or Beech to expect such assurances 

to induce FSD to forego the Piaggio work. Absent this intent and 

reasonable expectation, EDO's showing on the second element of 

promissory estoppel fails. 8 

8 Arguably, FSD's reliance on the indefinite assurances of Mr. 

Blue (particularly in light of his refusal to make any commitment 

to FSD regarding future production), in deciding to forego the 

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"L 

Finally, with respect to the scope of the noncompetition 

clause, the district court found that "the parties intended the 

[clause] to prohibit FSD from doing work similar to that it was 

doing for Beech that would employ similar technology." 715 F. 

Supp. at 994 (Conclusion of Law No. 9). We agree.

9 However, EDO 

correctly points out that, even if the Beech contracts disallowed 

the Piaggio work, FSD's foregoing the opportunity could have 

provided adequate consideration to support the alleged exchange 

of promises if FSD had believed in good faith that the work was 

not prohibited (citing Kossick v. United Fruit Co., 365 U.S. 731, 

738 (1961) (citing Restatement, Contract§§ 75-76); Reed v. Kansas 

Postal Tel. & Cable Co., 125 Kan. 603, 264 P. 1065 (1928)). The 

district court apparently overlooked this principle. See 715 F. 

Supp. at 994-95. Nevertheless, EDO's argument in this regard 

fails upon scrutiny of the evidence of its asserted good faith 

belief that the Piaggio work was not prohibited. 

Specifically, EDO cites FSD president Berrisford's testimony 

in support of its claim that FSD believed in good faith that the 

Piaggio work was not barred by the noncompetition clause. 

Piaggio opportunity, was also unreasonable. Had the district 

court so found, EDO would have failed to make the requisite 

showing under the third element of promissory estoppel as well. 

9 Although the trial court characterized this finding as a 

conclusion of law, a question concerning the intent of contracting 

parties is generally considered a question of fact. As such, we 

must affirm this finding of the district court's unless it is 

clearly erroneous. Chaparral Resources, 849 F.2d at 1289. Our 

review of the record convinces us the court's finding is a correct 

construction of the parties' intent. 

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Replying to Beech's counsel's question on cross-examination as to 

whether Berrisford and Blue "had discussed the fact that [the 

Piaggio] work was prohibited by the noncompete clause," Mr. 

Berrisford first stated: "That was never brought up .... Linden 

Blue did not say that it was prohibited and we had not determined 

that in any way it was prohibited." (Emphasis added). However, 

Mr. Berrisford then acknowledged that he had heard Blue's 

~ 

testimony the previous day that "he [Blue] recalled telling 

[Berrisford] that if [the Piaggio work] wasn't prohibited it 

certainly ought to be because of the competitive nature of the 

aircraft." (Blue's testimony as restated by counsel for Beech; 

cf. Tr. Vol. I, at 99-100 (testimony of Linden Blue)). Mr. 

Berrisford then admitted that he "recall[ed] a discussion with 

Linden Blue. He did not tell me it certainly ought to have been 

prohibited but, in fact, you know, the discussion was very similar 

to as it was related yesterday [by Blue]." 

In our view, the inconsistency in Berrisford's testimony and 

its ambiguity concerning FSD's assessment of the noncompetition 

clause do not evidence a good faith belief that the Piaggio work 

was not prohibited. Berrisford's statement that FSD "had not 

determined that in any way [the Piaggio work] was prohibited" is 

not equivalent to saying FSD believed the work would be allowed 

under the contract. Our conclusion is reinforced by two telegrams 

in the record that reveal EDO had doubts, at least initially, 

about the effect of the noncompetition clause on pursuing a 

Piaggio contract ("Beech agreement may blow [Piaggio work] out of 

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the tub"; "implications of contract with Beech not totally clear, 

. '· however, FSD willing to at least look at drawings and specs and 

worry about Beech later"). We conclude EDO lacked a good faith 

belief that it would not be prohibited by its agreements with 

Beech from pursuing the Piaggio opportunity. We agree with the 

district court that EDO has failed to prove its claim based on 

promissory estoppel. 

Accordingly, the district court's decision is AFFIRMED. 

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