# FILED
October 31, 19 97 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF AP PEALS OF

TENNESSEE, WESTE RN SECTION AT JACKS ON

_______________________________________________________ ) ENGENIUS ENTERTAINMENT, INC. ) Shelby County Chancery

Court and PENCZNER PRODUCTIONS, INC. ) No. 107488-3 R.D. ) Plaintiff

s/Appella nts. )

) VS. ) C.A. No. 02A01-9704-CH-00078 ) W. W. HERENT ON, in his offici al ) capacity , the CITY

OF MEMP

HIS , ) TENNESSEE, JIM

ROUT, in his ) official capa

city, and SHE LBY COUNTY ) TENNESSEE
. ) ) Defend ants/Appe

llees. )

)

______________________________________________________________________________ From the Chancer y Court of Shelby

County at Memphis
. Honorable D. J. Alissandratos, Chancellor
Mary l. Wolff , Thomas J.

Walsh , Douglas A. Black , WOLFF ARDI S, P.C., Memphis, Tennessee Attorney s for Plain

tiffs/App ellants. Monice Hagler Tate , City Attorney Patti C. Bowlan , Assistant City Attorney Attorneys for D efendants/Appellees W. W. Herenton and the City of Memphis, Tennessee. Donnie E. Wilson , Shelby County Attorney Robert B.

Rolwing , Assistant County Attorney Attorneys for D efendants/Appellees Jim Rout and Shelby County , Tennessee.

OPINI ON FIL

ED: AFFI RMED IN P

ART, REVERSED IN PA RT AND REM ANDED FARMER, J. HIGHERS, J. : (Concur s) SUMMERS, Sp. J. : (Concur s)Plai ntiffs EnGenius Enterta inment, Inc ., an d P en cz ne r P ro du ct io ns , In c. (c ol le ct iv el y, “EnGeni us” ), appeal t

he trial c ourt’s or

der which dismissed

their co mplaint ag ainst Def endants/ Appellees W. W. He re nt on , t he Ci ty o f M em ph is , J im Ro ut , a nd Sh el by C ou nt y. We rever se in part the trial court’s judgment based on our conclusion that EnGenius’s com plain t, when construed liberally in favor of

EnGenius, states claims against the Defendants for breach of implied contract and promi ssory

estoppel
.

I. EnGenius’ s Complaint

EnGenius ’s 43-pa

ge comp laint asse

rted cla ims for breach of

contract (counts I a

nd II), breach of implied contract (count II I), promissory

estoppel (count IV), “arbitrary and capricious conduct” (count V), and injunctive and d eclara tory relief ( count VI

). As per tinent to th

is appeal, the complain t contained the fo llowing a llegat ions:

In 1993, the

Defend ants dec ided to seek a private developer to design, construct, and operate improvements to 121,000 square feet of und eveloped leasehold space in The Py ramid, a public arena in downtow n Memphis. To this end, the D efenda nts prepared and issued a Request for Proposals(“RFP”) for de velopmen t o f the space. The RFP provided that, upon selection of a developer, the specific rent structure would be neg ot iated be tween the parties. The RFP a

lso provided that the te

rm of the d

evelopme nt contra ct would b e nego tiable bu t would “not exceed20 year s; a 10 year initi al term w ith two re newal pe riods of 5 ye ars eac

h.” The RF

P requir ed th e selected developer to spend approximately $10 million on certa

in perma nent impro vements to the leaseho ld space, including an inclin ed eleva

tor, which would be come

the property of

the Defe ndants upon installation.

In June 1993, th

e Defe ndants se nt RFP’s to

more th an 200 pot ential de veloper s across the nation, incl uding En Genius. EnGenius, along with two other potential developers, submitted proposal s to develop the leasehold space by the August 30, 199 3, deadli ne. EnGenius’s proposal described a high-tech

family enterta

inmenttheme park, to be known as the I sland Earth EcoCenter. At the requ est of the

Defend ants, EnG

enius formally

present ed its pro posal to the Defe

ndants’ respective may ors, Her

enton and then May

or William N . Morris, at a meeting held on October 28,1993.
By letter dated December 22, 1993, May ors Herenton and Morris sent EnGen ius a letter informing

it that its pr

oposal ha d been se lected, provided

that EnGe

nius could

prove its financi al capa

bility to develo p the proj ect in ac cordanc e with its p roposal:
Following presentations for development of the leasehold space at The Pyr amid, our administr ations ha ve care fully weighe d the bene fits of e ach prop osal, the

ir crea tivity , and most o f all, the ir potenti a l t o cr ea te a u ni qu e t ou ri st at tr ac ti on fo r M em ph is an d S he lb y Co un ty. As a result o f th is review , we have concluded that y

our part nership repres ents o ur best opportunity to achieve our goals for this space. Before making a final selection, we wi ll gi ve you r p ar tn er sh ip 60 da ys to prove your f

inancial capability to de velop this project

in accordance

with you r proposal. If this financial benc hmark can be reached, we shall b egin

immediately therea

fter to prepare a

contract betweencity and county

governments and y our company f or the lease and development of this space.

In January 1994, the Defendants publicly announced

that EnGenius had been chosen to develop the leaseho ld space in The Pyr amid. The following month, EnGenius representatives at tended a meeting with representatives of the Defendants at which EnGenius demonstrated its financial capabil ity t o complete the project.

Despite EnGenius ’s demons tration of its financ ial capa

bility to develop the project, the Defendants refused or ignored EnGenius’s repeated requests to discuss the terms of a lea s e agree ment. Instead, in April 1994, May ors Herenton and Morris decided to revive an entity known
as the Public Bu ild ing Authority (“PBA”) and to delegate to the PBA the responsibility for developing the leasehold s pace in “a non-political, less bureaucratic manner.” When EnGenius representatives expressed concern over this delay, City

and County officials assured the m that the Defend ants did not intend to reopen the RFP process, that EnGenius ’s plan to

develop T

he Py ramid had been chosen, and that EnGenius’s plan was the only plan that the PBA would consider. Based upon these

represen tations, EnGenius expended additional time and effort to make further presentations to the PBA.

EnGeniusrepres entative s first met with the

chairma n of the PB A in July

1994. Atthat

time, the PBA chairman expressed his view that the City and the Cou nty, an d not EnGe nius, should fund the permanent improvements to The Py ramid. At

the PBA ’s first public mee ting in August 1994, EnGenius again made a formal pre sentation of its plan to develop a theme park in The Pyramid. In September

1994, J im Rout was elected to replace William N. Morris as Mayor of Shelby County. EnGenius repre sentative s also attended a PBA meeting held in October 1994 a t whic h E nGenius presented the details of its plan to finance the development project, as well as technolo gical a spects of

the proje ct.
Despite their representations to the contrary , during the fall of 1994 City and County officia ls began discussions with other developers re garding pr oposals to develop The Pyra mid space. In Februa ry 1995, C ity and C ount y attorne ys recomm ended reject ing EnGenius ’ s financing plan, ostensibly

because the plan did not

comply withthe RFP’s requirement that the development plan “not re qu ir e a ny i nv es tm en t b y ci ty a nd county

gover nments.” In c ontrast to the attor ney s’ recommendation, EnGeniusrepres entative s m aintai ned that EnGenius’s financing plan did not require any investment by the City or

th e C ou nt y. Nonetheless , at a March 199 5 meeting, th e PBA adopteda resolution rejecting EnGenius’s development plan and r ecommending that the City and the County pursue

and evaluate alternative proposals for deve lopment of the leasehold space in The Pyramid. Although the PBA’s stated reason for rejecting EnGenius’sdevelopm ent plan w as that it might require some leve

l of finan

cial invo lvement o f the City a nd the County, the PBA’s recommendation that the City and the County pursue alternative development proposals called for the Ci ty and th e Coun ty to mak e a $10 mill ion ca pital inves tment in The Pyramid b y funding t h e perman ent im prove ments to th e buil ding.

In May 1995, the Defendants formally notified EnGenius that they we re considering other proposals for development of the leasehold space a nd that EnGenius wou l d be requ ired to make another

forma l present ation in order to receive further consider ation of its plan. The Defendants represented that this new proce ss would culminate in the selection of a developer.

On July 10, 1995, EnGenius a gain made a formal presentation to the May ors regarding its plan to develop a family-or iented indoor theme park called I sland Ear th EcoCenter. In addition to

present ing deta il ed plans and a video pre sentation regar ding its c reative concep t,EnGenius present ed a comp rehensi ve feas ibility

study of the project a

long with a draft of a proposed lease agree ment. At the reque st o f t he City and the County , EnGenius later made another presentation at which it provided additional information.

In October 1995, the Defendants aga in notified EnGe nius that it had been selected
as t he developer o f The Pyramid spac e. In addition to both Mayors’ verbal representations that EnGenius h ad been selecte d and that the Defe ndants would proceed to neg otiate a l ease wit h EnGenius , EnGeniu s recei ved the f ollowing letter f rom May or Rout’s a ssistant:

I am pleased that as a res ult of May or Herenton and Mayor Rout’s deliber ations, your company

has been sel ected as the vehicle for development of The Pyr

amid’s “attraction space.” Your innovative concept and the strength of y our management team were the critical factors in this decision

and all of us who have worked on this project a re confide

nt that I sland Ear

th will bec ome a hig

hly success ful, entert ainin g, cutting

edge a ttractio n for our community. B eginning next week, we look forward

to finalizing the contractual arrange ment betweenyour company

and the City and County

governments so that we can begin development of this project as soon a s possible.

Based on these r

eprese ntations b y the Defe

ndants, E nGeniu s bega n to spend time and effort finalizing the lease, detailing plans for construction, and neg otiating with various entities to provide the services needed to complete the project. The D efendants encouraged E nGenius to b egin negotiations with third-party vendors in order to keep the project on a “fa st track.”

The Defend ants, mea

nwhile, r etained outside c ounsel to draf

t the lease agreement with EnGenius
. In Novembe r 1995, the Defend ants’ counsel inf

ormed EnG

enius tha t the Def endants
were demandin g a $50, 000 “non- refunda ble fee ” for the

right to negotia te with the

Defend ants. Taking th e position tha t it already had a cquired the right to enter into a lease ag reement with the Defend ants by virtue

o f its sele ction as th

e develo per of th e lease hold spac e, EnGen

ius refu sed to pay the $50,000 fee. Around this time, May or Herenton told a Memphis newspaper, The Commercial Appeal , that he had concer ns abo ut awa rding a long-term lease to a private develope r and that it might be best to maintain governmental control of The Pyram id. At a me eting he

ld November

30, 19 95, May

or Here nton alle gedly

advised E

nGenius th at the City

simply could use EnGenius’s ideas and documentation to build the project without compensating EnGenius.Mayor Herenton subseque

ntl y canc eled a press conference w hich had been scheduled to announce EnGenius’s selection as developer of The Pyramid space . By letter dated December 21, 1995, Mayors Her

enton and Rout terminated any further negotia tions with E

nGenius, informing

it that “the Request for Pr oposal process . . . has come to a conclusion. No selection of a de veloper is being made.” This lawsuit followed.

II. EnGe nius ’s B rea ch o f Co ntra ct C

laim s

In support of its breach of contract claims, EnGenius made the following assertio ns:

COUNT I (BREACH OF

CONTRACT )

. . . . 170. The RFP constituted a solicitation of offers to develop the Leasehold Space in The Pyramid. 171. EnGenius responded t o the R FP with an offer to develop the Island Earth EcoCenter in the Leasehold Space. EnGe nius’s offer in

cluded not only

the deve

lopment of

fami ly

orientedhigh-tech attractions, but also the development of improvements to the infrastructure of The Py ramid. 172. Pursuant

to the terms of EnGenius’s of fer, the estimated cost of

the development, approximately $24.5 million, was to be fina nced sole ly th rough p rivate in vestment. 173. By

letter dated D ece mber 22, 1993, the City and County acting through thei r authorized representatives, May or Herenton and Mayor Mor ris, accepted EnGenius’s off er, formi ng a bindi ng agree

ment purs uant to wh

ich EnGe nius was se

lected a s t h e developer of the Leasehold Space, the reby ac quiring the exclusive right to develop and operate the I sland Earth E coCen ter and related attractions in the Leasehold Space of The Pyramid. 174. The agreement between EnGenius and the City and County was subje ct only

to the condition subsequent that EnGenius demonstr ate its fi nancial

capabil ity t o develop the project. 175. EnGenius satisfied the condition subsequent on or about February 28, 1994, but the City and County, acting throug

h the PBA, Mayor

Herento n and May

or Morrisrefuse d to permit EnGenius to proceed with development of the L easehold Space. 176. The aforementioned acts of the PBA, May or Herenton and Mayor Morris in pre

venting EnGen ius from performing under the contract were arbitrary

and capricious, in bad faith, and constituted abrea ch of t he City and County ’s agr

eement to permit En Genius to develop the Leasehold Spac e of the Pyra mid.

. . . . COUNT II

(BREACH OF

CONTRACT )

. . . . 184. In or about March 1995, the City a nd County proposed a modification of

its agreement with EnGenius, pursuant to which the City and County

would spe

nd up to $10 million on imp rovemen ts to the infrastr

uctu re of The Pyr

amid, with EnGenius financing the remaining cost of the development of the I sland Ear

th EcoCenter and related attract ions throu gh priva

te investm

ent. 185. P ursu ant

to the terms of the proposed modification, EnGenius acquired the exclusive rights to lease the Lease

hold Space and to develo

p and ope rate th e Island Earth EcoCenter and related attractions in the Leasehold Space of The Pyramid for

a period of 20 ye ars. 186. EnGenius agreed to this proposed modification of the contract, but thereafter

the City and County

breached their agreement by r efusing to lease the spac e to EnGe

nius. 187. The afor em en ti on ed ac ts of th e C it y an d C ou nt y a n d their authorized repres ent atives were arbitrary and capricious, and otherwis e constituted a breach of the City and County ’s oblig ation to deal with EnGenius fairly a nd in good faith to proceed with the development of the Lease hold Space of the Pyra

mid.

Our supreme court re cently

set forth the stand ard to be

applied b y a

court in r uli n g
on a motion to dismiss a complaint pursuant to rule 12.02(6) of the Tennes see Rul es of Civil Procedure:

A motio n to dismiss for failure to state a claim upon w hic h

relief can be g ranted t ests the suff

iciency of the co mplaint. The basis f or the motion i s that the a llegat ions conta

ined in the

compla int , considered

alone and taken a s true, a re insuf ficient t o state a claim as a matter of law. The motion admits the truth of all relevant and material allegations, but asserts that such facts do not constitute a cause of a cti on. In resolving the issues in this appeal, we are required to construe the complaint

liberall y in the plaintiff’s favor and take the allegations of the complaint as true.

Pursell v. First Am. Nat’l Bank , 937 S.W.2d 838, 840 (Tenn. 1996).
Applying the foregoing standard, which requires us to accept all factual alleg ationsas true, we conclude that EnGenius’s complaint fails to state a cause of ac tion for breach

of contr act. In asserting its breach of contract clai ms, EnGenius relies on the existence of at least three document s to establish the existence of a contract: the RFP issued by the Defe

ndants; EnGenius’s response to the RFP; and letters from the Defendants informing EnGenius that it had been selected
as the successful developer. The alleg ations of EnGenius’s complaint and thes e docume nts, however, make clear that

the parties also contemplated the subsequent execution of a formal contract memorial iz i ng the parties’ agreement. The Restatement ( Second) o

f Contracts addresses the question o f whethe

r a contr act exists a

t this stag e in the pa

rties’ ne gotiatio ns:
§ 27. Existence of Contract Where Written Mem orial i s Contemplated Manifesta

tions of asse

nt tha t are in the mse lves s uffi cient

to conclude a contract will notbe preve nted from so operat

ing by the factthat the parties also manifest an intention to prepare and adopt a writt en memorial thereof; but the circ umstances may show that the

agreem ents are prelim inary nego tiations. Comment:
a . Parties who plan to make a final written instrument as the expression of their contract neces sarily discu ss the pro posed ter ms of the contr act bef ore they ente r into it a

nd often, before the final writing is made, a

gree u pon all the

terms whi ch they

plan to i ncorpor ate ther ein. This t

hey may do orally

or by exc hange o f several writing s. It i s p ossible thus to make a contract the terms of which include a

n obliga tion to exec

ute subse quently

a final w rit ing which shall contain certain provisions. If p ar ties have definite ly agreed that they will do so, and that the final wr iting shall con

tain these provisions and no others, they have then concluded

the contr act. b
. On the other

hand, if either party

knows or has reason to know that the other party regards the agr

eement as incomplete and intends that no obl

igation shall exist u

ntil other terms are assented

to or until the whole has been reduced to another written f o rm, the preliminary

negotiations and agreements do not constitute

a contra ct.
Restatement (

Second) o f Contracts § 27 (1979).

As ex pl ai ne d b y an ot he r a ut ho ri ty,

It is quite possible for

parties to make an enforceable contract binding them to prepare and execute a subsequent final agree ment. In order that such may be the ef fect, it i s necessary

that agreement shall have been expresse d on all es sential te rms that a re to be i ncorpor

ated in the document
. That doc ument is unde rstood to be a mere memorial ofthe agreement already reached. I

f the document or contract that the parties a gree t

o make is to

contain a

ny material

term that

is no t already agreed on, no co ntract h as y et been made; t he s o-called “contra ct to make

a contra ct” is not a

contract at all.

1 Arthur L. Corbin et al., Corbin on Contracts § 2.8, at 133-34 (Rev. ed. 1993) (footnotes omitted).

In accord ance with the for egoing authoriti es, we hol d that EnGenius’s c omplaint f ails to state a cause of action f or brea ch of con tract. Whe

n viewed in their entirety, the doc

uments upon which EnGeniusrelies to establish the existen

ce of a c ontract , as well a s the alle gatio n s of EnGenius’s complain

t, make c lear (1 ) that the parties intended t

o ente r i nto a written contract memorializing their agreement, but (2) that the parties ha d not yet reac

hed agre ement on certain essential terms of the agreement. Specifically, the RFP issued by the Defe

ndants indicated that two essential terms of t

he lease agreement would be neg otiated after the Defendants selected a developer. Alth ough the RFP required th e develo per to pr opose a minimum rent and percen tage of gross
revenues to be paid the Defendants, the RFP also provided that the specific r ent structure would be negotiated

betweenthe parties upon selection of a developer. The RFP fur ther provided that the term of th e lease woul d be negotiable, although the term could not exceed 20 y ears. In the abse

nce of agreement

as to these

two terms, we conclude that, as a matter of law, no ag reement existed between the parties regarding En Geni us’s development and lease of The Py ramid space. See Arcadian Phosphates

, Inc. v . Arcad

ian Corp. , 884 F.2d 69, 74 (2d Cir. 1989) (holding that no binding contract existed where documents relied upon ref erred t o possibility that negotiations might fail and to completio n of bindin g salesagree ment at som

e future date); VentureAssocs. Cor p. v. Zeni

th Data Sys. Corp. , 987 F.2d 429, 432-33 (7th Cir. 1993) (affirming trial court’s dismissal of breach
o f contra ct claim where parties’ preliminary agreement specified that any final agreement was subject to preparation and execution of mutually satisfactory pur

chase agreement); Viking Broad. Corp. v. Snell Publ’g Co. , 497 N.W.2d 383, 386 (Neb. 1993) (affirmingsummary judgme nt in favor of defendant where

“letter of intent was so cursory , indefinite, and conditional as to fail as a matter of law to establish an objective intent on the part of the parties to be bound thereby ”). At most, the document s evinced an agreement be tween the parties t

o negot iatein good f

aith to re ach a final leas e1 In the ir brief , the Def endants d raw a dis tinction be

tween the competiti ve bidding

process and the request for proposal process employ ed here. In our vie

w, this distinction is irrelevant. EnGenius’s claim that the Defendants were oblig ated to enter into a long-term lease for development of The Pyr

amid space was not based on the argume nt that EnGenius submitted the best proposal for such development but, rather, was base d on the argument that, having selecte d EnGenius as the successful developer, and having promised to prepare an agreement, the Defendants were obligated to do so. agree ment. 1 See Arcadian Phosphates , 884 F.2d at 74; VentureAssocs. Corp. , 987 F.2d at 433; see also Arno ld P

alme r Golf Co. v. Fuqua Indus. , 541 F.2d 584, 588- 89 (6th Cir . 1976); United Magazine Co. v. Prudential Ins. Co. , 877 F. Supp. 1076, 1083 (S.D. Ohio 1995).

III. EnGenius ’s Breach of Implied Co ntract Claim

Alth ough En Genius’s complain t fails to s tate a c laim for b reach o f an expre ss contract, this failure does not preclude EnGenius from asserting a cause of

action under a

theory of implied contract. See Scandlyn v. McDill Columbus Corp. , 895 S .W.2d 342, 345 (Tenn. App. 1994). While an ex press contra ct is cre ated by the part ies’ ac tual asse

nt to mutually a

ccepta ble terms, “a contr

act implie d in law is i mposed by operati on of law , without r egard to the assent

of the parties, on grounds of reason and justice.” Id. (quot ing Continental Motel Brokers, Inc. v. Blankenship , 739 F.2d 226, 232 (6th Cir. 1984)). In order to state a cause of action unde r thi s theory , the plai ntiff must

allege the following ele

ments:

A benefit conferred upon the defenda nt by the plaintiff, appreciation by the defendant of such

benefit , and ac ceptanc e of such benefit under such circumstances that it would be ineq uitable for him to retain the benefit without paymen

t of th e value thereof. The most significant requirement

for a recovery

. . . is that the enrichment to the defendant be unjust.
Haynes v. Dalton , 848 S .W.2 d 664, 666 (T enn. A pp. 19 92) (q uoti ng Paschall’ s, Inc. v. Dozier , 407 S.W.2d 150, 155 (Tenn. 1966)).

In su pport of t his theor y, E nGenius ma

de the fo llowing a

llegat ions:

192.
. . . [T]he Cit

y and County issued an RFP which constituted a solicitation of offers to develo

p the L easehol d Space in The Pyramid.193. EnGeni us resp onded to th e RFP with a

n offer to develop the Island Earth EcoCenter in the Leasehold Space. En Genius’s offer included not only the development of family

orientedhigh-tech attractions, but also the development of improvements to the infrastructure of The Py ramid. 194. EnGenius’s offer constituted a bid which p roper ly responded

to the RFP and which complied with the terms of t he RFP, thereby giving rise to an implied co ntract b etween the part ies. 195. Pursuant

to the implied co ntract b etween the City and County and EnGe

nius, the City and County

had an obligation of good faith and fair de aling which req uired the m to respo nd to EnGe

nius’ bid fairly, honestly

and in good faith. 196. The City and County did not respond to EnGenius’ b id fa ir ly, honestly

and in good f

aith, bas ed on the f

acts as a lleged herein and on the dea

lings be tw een th e p ar ti es ge ne ra ll y. T o t he co nt ra ry, during and after

EnGenius ’s persis tent goo d-faith e fforts to respond to the RFP, which efforts EnGenius continued to make des pit e additional and unreasonable demands and delay s imposed by the City and Co un ty, th e C it y a nd C ou nt y tr ea te d E nG en iu s u nf ai rl y, ar bi tr ar il y, capriciously, inconsistently , and in bad faith, and ge nerally withrespect to the bid process acted without reason abl e or rational basis.

We conclude that

EnGenius’s complaint alleges sufficient facts to state a cla im for br eachof an impli ed contr act. Alth ough the

foreg oing all egatio ns do not specify th at EnGeniu s conferred a benef it upon the D efenda

nts for wh ich it should be compensated, the factual allega tions of En Genius’s complaint support such a theory . As pointed out in EnGenius’s reply brie f, for example, the complaint alleges that, at the Defendants’ r equest, EnGenius caused

to be prepared and presented to the Def

endants a feasibil ity s tu dy which pr

ovided the

Defend ants with v aluable informat io n concerning EnGenius’s proposed theme pa rk, including the projected number of visitors to the attraction during its first five y ears of operation. EnGeniusalso provided the D efenda nts with the creative concept for the I sland Earth EcoCenter, a concept which, according to EnGenius’s allegations, the Defendants threatened to appropriate without compensating EnGenius.

We recognize that

a factu al dispute

exists as to whether the information provided by EnGenius actually

conferred a benefit upon the Def endants and, if s o, t he v alu e of suc h be nef

it . In light of the allegations contained in the c ompla int, however, we hold that th

e trial c ourt err

ed in granting the D efenda

nts’ motion

to dismiss En Genius’sclaim for breach of implied

contract.2 The Restatement ( Second) o f Contracts providesthat: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach ma

y be limited as justice r equires
. Restatement (

Second) o f Contracts § 90(1) (1979). IV. EnGe

nius’s Promisso

ry Estoppe l Claim

We likewise

hold that th

e tr ial court erred in dismissing EnGenius’s promissory estoppel claim. A s wit h EnGenius’s implied contract claim, EnGenius’s claim of promissory estoppel is not dependent upon the existence of an express contract between the parties. Arcadian Phosphates

, Inc. v. Arcadian Corp. , 884 F.2d 69, 73- 74 (2d Ci r. 1989); United Magazine Co. v. Prudential

Ins. Co. , 877 F. Su

pp. 1076, 1 084-85 (S .D. Ohio 1 995); Quake C onstr., Inc. v. American Airlines , 565 N.E. 2d 990, 100 4 (Ill. 1990). U

nder the theory of promiss ory

estoppel ,
[W]he n one . . . by his promise induces a nother to change h i s situation, a repudiation of the prom ise wou ld amount to a fraud. Where one make s a promise which th e p romisor should rea sonably expect to induce acti on or forbearance of a de finite and substantial c haracter on the part of the promisee, and where such promise do e s in fact ind uce such action or forbea rance, it is binding if injustice can be avoided only by

enforcement of the promise.

Foster & Creighton Co. v. Wilson Contracting Co. , 579 S.W.2d 422, 427 (Tenn. App. 1978) (citing 17 C.J.S. Contracts § 74)); see also Restatement (Secon d) of Contracts § 90(1) (1979). 2 This theory of recovery

is sometimes referred to as “detrimental reliance” because, in addition to showing that the defendant made a promise upon which the plaintiff reasonably

relied, the plaintiff must show that this reliance resulted in detriment to the plaintiff. Foster & Creighton Co. , 579 S.W.2d at 427; Quake Const

r. , 565 N.E.2d at 1004.

We conclude that EnGenius’s complaint contained adequa te allegations to support a claim of promissory estoppel beca use the complaint alleged that the Defenda nts made a

promise which they rea sonably should have expected to induce a ction on the part of EnGenius; that the Defend ants’ promise did induce such action; and that EnG enius relied on the promise to

itsdetrimen

t. See United Magazine Co. , 877 F. Supp. a t 1084-85; Quake Const

r. , 565 N.E.2d at 1004- 05. Speci fically , EnGeniu s made the following

allega tions:

201.
. . . [T]he City and County made numerous repres e ntations and promises to EnGenius designed to induce EnGenius to incur time and expen se responding to the City and County’s repeated requests for information and prep aring t

o develop the Leasehold Space of

The Pyramid. 202.
. . . [T]he C ity and County repeatedly

promised and represented

that they

would ent

er in to a contra

ct with a p

rivate developer for construction of improvements to the Leasehold Space of The Pyr

amid, and further repeat edly repres ented and promise d to award th at contr

act to EnG

enius. 203. In reliance upon the Ci ty and County ’s representations and promises, EnGeniusresponded to the City and County ’s reque sts, thereby incur

ring time and expenses in excess of $1,000,000. 204. After

inducing EnGeniusto incur substantial time and expe nse in reliance on the City a nd County’s represe

ntations and promises, and after twice notify ing EnGenius that

it had been selected to develop the Leasehold Space of The Py ramid, the City and County arbitra rily , capric iously

and in bad faith refused to permit EnGenius to develop t

he I sland Ear

th EcoCen

ter and r elate d at tractions in the Leasehold Space of the

Pyramid.

The Defendants contend that EnGenius’s claims based on implied contract and promissory

estoppel must fail because the RFP i ssued by the Def endants contained the following provision:

This [RFP] does not oblig ate Shelby County Government or City of Memphis Government to p ay any costs associated with the preparationand su bmission of the proposals or for costs associated with interviews or presentations.
Contrary to the Defendants’ contention, this provi sion did n ot requir e the tria l court to d

ismiss EnGenius’s claims for implied contract and promissory estoppel. In a sse rting these cla ims, EnGenius does not claim that the Defendants are responsible for EnGenius’s costs by virtue of the Defend ants’ issuance of the RFP. Rather, as we view the pleading s, EnGeni us’s claim for compensation is based on the allegation that the Defendants, having concluded the RFP process by selecting EnGenius as the successfuldevelope r, then in duced En Genius to incur add itional expe

nse and effort at the Defendants’ reque st by represe nting that they would soon be ent ering i nto a l ong-3 T.C.A. § 29-2-101 (Supp. 1995).
4 The Def endants a lso conte nd that an y c ontract betwee n EnGeniu s and the D efenda nts was not enforceable because the contract was not executed by the appropriate governmental officials as required by

local ordinances. Even if this contention subsequently is proven to be correct, this would not necessarily preclude EnGenius from recovering from the Defendants on the equitable grounds of implied contract or promissory estoppel. See City of Le banon v. Bair

d , 756 S.W.2d 236, 242-45 (Tenn. 1988). term lease with EnGenius for developm

ent of The

Pyr amid spac e. We also

reject t he Defe ndants’ contention tha t the statute of frauds 3 bars EnGenius’s implied contract and promissory estoppel actions. Although the statute of frauds may prevent the Defendants from seeking enforcement

of an alleged oral ag reemen t under these equitable doctrines, the statute does not preclude EnGenius from
recove ri ng damages for unjust enrichment or detrimental re liance. See Steelman v. Ford Motor Credit Co. , 911 S.W.2d 720, 723 (Tenn. Ap p. 1995); Cummins Cu mberland, Inc. v. Dominion Bank , No. 01A01-9008-CH-00287, 1991 WL 17176, at *2 (Tenn. App. F eb. 15, 1991). 4

V. EnGenius’s Claims for “Arbitrary and Caprici ous Conduct” a

nd Injunctive and Declaratory Relief

As for EnGe

nius’s re maining claims, w e affir

m the tr ial court’s dismissal of EnGenius ’ s claim for injunctive and declaratory relief, inasmuch as EnGenius has not raised dismissal of this cla

im as an iss ue on app eal. We a lso a ffirm the trial court’s dismissal of EnGenius’s claim for “arbitrary and capricious conduct.” While the authorities cited by EnGenius indicate that a governmental entity ’s actions may be cha llenged on the ground that such actions ar e arbitrary and capricious, these authorities do notsupport the existence of an independent cause of action for damages based on the Def endants’ “arbitrary

and capricious conduct.” See Metropolitan Air Research Testing Auth. v. Metropolitan Gov’t , 84 2 S.W. 2d 611, 619 (Tenn. App. 1992); Computer Shoppe v. State , 780 S.W.2d 729, 737 (Tenn. App. 1989).

VI. Conclusion
That portion of the trial court’s judgment dismissing EnGenius’s claims for breach of implied contract and promissory e stoppel is reversed and this cause remanded for further procee dings consiste

nt with this opinion. In all other respects, the trial c ourt’s judgment is affirmed.Costs of this appeal are taxed one-half to EnGenius and one-ha lf to the Defendants, f

or whic h
ex ec ut io n m ay i ss ue if

ne ce ss ar y.

____________________________________ FAR MER , J.

______________________________ HIG HERS, J. (Conc

urs)

______________________________ SUMMERS, Sp. J. ( Concurs)