UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 95-11127

RICHARD M. SCAIFE, doing business as

Scaife Flight Operations;

Plaintiff - Appellant,

H. YALE GUTNICK,

Appellant,

VERSUS

ASSOCIATED AIR CENTER INC., a corporation,

Defendant - Appellee.

Appeal from the United States District Court

for the Northern District of Texas

November 14, 1996

Before REYNALDO G. GARZA, DeMOSS, and PARKER, Circuit Judges.

DeMOSS, Circuit Judge:

In this case, we are asked to review the district court’s

decision granting summary judgment in favor of Associated Air

Center and against Richard M. Scaife t/d/b/a Scaife Flight

Operations on Scaife’s breach of contract claim. The district

court also entered an order imposing monetar y sanctions against

Scaife and non-monetary sanctions against H. Yale Gutnick, Scaife’s

Pittsburgh counsel. Scaife appeals from the summary judgment order

and Gutnick appeals from the order imposing sanctions. For the

forthcoming reasons, we hold that no contract was ever made and,2

therefore, we AFFIRM the district court’s decision granting summary

judgment. However, we find that the district court abused its

discretion by ordering sanctions against Gutnick and VACATE the

order of sanctions against Gutnick.

BACKGROUND

In 1993, Scaife Flight Operations began accepting bids for a

corrosion inspection and customized renovation of the interior of

Richard Scaife’s personal aircraft, a DC9-15. Scaife hangers and

maintains the aircraft in Latrobe, Pennsylvania. On March 24,

1994, Jeff Bosque, one of Associated Air Center’s (“AAC”)

representatives, sent a lett er and an original proposed

Modification Agreement to perform a corrosion inspection and

renovate the aircraft to Scaife’s chief pilot, Dan Harbaugh. AAC,

a Texas corporation with its principal place of business in Dallas,

Texas, repairs and renovates aircraft. The proposal and bid for

$2,300,000 was executed by AAC’s president, Roy Gilbreath. In a

letter attached to the proposal, AAC expressly requested that

Harbaugh execute the agreement and “return one fully executed copy

to [AAC] for our files.”

Harbaugh se nt the agreement to one of Scaife’s attorneys,

Thomas Zwilling of Strassburger McKenna Gutnick & Potter. On March

30, AAC representative Bosque faxed an unexecuted second proposed

Modification Agreement directly to Zwilling. This second agreement

incorporated suggestions from Zwilling which materially changed the3

first agreement. Zwilling then faxed the second revised agreement

to Harbaugh.

The next day, Zwillin g sent an unexecuted four-page fax to

Bosque with several changes to th e second revised agreement.

Bosque made these revisions and faxed an unexecuted third proposed

Modification Agreement back to Zwilling. Bosque was supposed to

send a final Modification Agreement with AAC’s authorized signature

to Zwilling by April 4. In fact, expecting Bosque to send the

signed agreement to Zwill ing, Harbaugh had arranged to travel to

Zwilling’s office on April 4 to sign the agreement on behalf of

Scaife Flight Operations.

Bosque never sent a final agreement to Zwilling or any other

Scaife representative. Harbaugh contacted AAC and asked Bosque why

AAC never sent the final agreement. Bosque explained that AAC had

concerns about the scope of work to be performed on the aircraft.

Bosque asked Harbaugh whether Scaife would consider changes in the

agreement to reduce certain costs for AAC. Harbaugh declined.

AA C’s President, Roy Gilbreath, also told Harbaugh that AAC had

underbid the job by $200,000 to $250,000. Gilbreath then attempted

to continue the negotiations with Harbaugh. Harbaugh again refused

to modify the agreement and stated that Scaife expected AAC to

honor the final agreement.

When AAC failed to begin work on the aircraft, Scaife brought

this breach of contract action in the United States District Court

for the Western District of Pennsylvania. The case was later

transferred to the Northern District of Texas on the basis of a1 All of the drafts of the modification agreement relied upon

by Scaife a s constituting the alleged contract required that any

disputes arising under the agreement “shall be governed by the law

of the State of Texas.”

4 forum selection clause in the proposed contract. 1 After receiving

the case from Pennsylvania, the federal district court in Texas

entered its standard order for the parties to participate in a pretrial settlement conference. Paragraph 9(a) of the order required

that all parties and counsel participate in per son, not by

telephone or other remote means. Later, the district court entered

a Mediation Order stating:

The named parties shall be p resent during the

ent ire mediation process and each party which is

not a natural person must be represented by an

executive officer with authority to negotiate a

settlement. Counsel and parties shall proceed in a

good faith effort to try to resolve this case.

The instructions from the mediator also required that “party

representatives must have authority to settle and all persons

necessary to the decision to settle shall be present.”

Before the scheduled me d iation, AAC learned that Richard

Scaife was not going to attend and that Scaife planned on sending

Harbaugh in his place. AAC contacted the district court and told

the court of this development. Scaife’s local counsel requested a

conference for the purpose of determining whether Richard Scaife

was required to attend the mediation. At the conference, local

counsel explained to the district court that Mr. Gutnick, Scaife’s5

Pittsburgh la wyer, told Scaife that Harbaugh should attend the

mediation and that his attendance was not required. As a result,

Scaife had not made plans to attend.

The district court made it clear during the conf erence call

that Scaife was expected to attend the mediation. Local counsel

advised Gutnick of the district court’s position. Scaife

purportedly told Gutnick that he did not want to appear and

authorized Gutnick to file a motion to voluntarily dismiss the case

without prejudice to avoi d violating the court’s order requiring

him to appear at the mediation. This motion was filed on September

20, 1995.

The next day, Scaife’s local counsel appeared at the mediation

without Scaife and tendered a check to the mediator. AAC filed a

motion to dis miss with prejudice under Rule 16(f) and 41(b) as a

sanction for Scaife’s failure to appear. The district court

scheduled a hearing for both Scaife’s voluntary motion to dismiss

and AAC’s motion to dismiss, which included a motion for sanctions.

After the hearing, the district court denied AAC’s mo tion to

d ismiss and entered a sanction order against Scaife and Gutnick.

The district court ordered Scaife to pay all of AAC’s expenses,

including attorney’s fees, incurred in preparing for and attending

the mediation session and the subsequent hearing on the motions to

dismiss. The district court sanctioned Gutnick by admonishing him

that his role, as o fficer of the court, is not to unilaterally

interpret away a court order by advising his client to do something

other than what the court’s order plainly requires. The district6

court ordered Gutnick to (a) publish the district court’s

memorandum order to all members of his firm; (b) bring the

memorandum order to the att ention of any court to which he may

apply in the future; and (c) file a personally signed certificate

acknowledging that he read the memorandum and agrees to comply with

t he stated terms of the sanction order. Five days later the

district court entered summary judgment against Scaife on the

breach of contract claims. Scaife appealed from the district

court’s summary judgment order and Gutnick appealed f rom the

district court’s order imposing sanctions.

DISCUSSION

We review the district court’s decision to grant summary

judgment de novo

. Burditt v. West American Ins. Co.

, 86 F.3d 475,

476 (5th Cir. 1996). The district court’s sanction order is

reviewed for abuse of discretion. N atural Gas Pipeline Co. of

America v. Energy Gathering, Inc.

, 86 F.3d 464, 467 (5th Cir.

1996).

1. The Contract

Scaife contends that the district court erred in treating the

formation of a binding contract as a legal issue for the court to

decide. F oreca, S.A. v. GRD Development Co., Inc.

, 758 S.W.2d 744,

746 (Tex. 1988) (holding that questions concerning th e formation

and terms of a particular contract, and the intent of the parties,

were properly considered questions of fact for a jury to decide).7

Sca ife argues that substantial evidence of offer and acceptance

e xists in this case to warrant submitting the case to a jury.

Scaife notes that AAC executives, Bosque and Gilbreath, admitted in

deposition testimony that the terms and conditions of the

Modification Agreement had been fully and fairly agreed upon by the

parties and that AAC was willing to proceed until Gilbreath

unilaterally terminated the contract.

Scaife also argues that the district court incorrectly framed

the issue as whether the parti es intended to make a signed or

unsigned written contract. Scaife contends that the issue turns on

whether the parties intended signatures to be a condition precedent

to an enforceable contrac t. As support for this proposition,

Scaife notes that Bosque’s March 24 cover letter to Harbaugh states

“[w]e now have everyones [sic] verbal approval on both the contract

language and payment schedule. The enclosed contracts are for the

modification and maintenance of [the aircraft]. Please return one

fully executed copy to us fo r our files.” Scaife contends that

this letter shows AAC’s intent to have the execution of the

contract considered a mere formality.

Scaife argues next that the district court ignored the factual

distinctio ns between the cases it cited and the present case.

Scaife contends that in the case heavily relied upon by the

district court, Simmons and Simmons Constr. Co. v. Rea

, 286 S.W.2d

415, 418 (Tex. 1955), the Texas Supreme Court found no evidence

that the parties intended the writing to be a binding contract

absent their signatures. In contrast, Scaife argues that a wealth8

of evidence exists to show that signatures were not required to

make a binding contract in this case. As support, Scaife contends

that it deposited $800,000 into its bank account on April 5 as the

first installment became due and cut a check payable to AAC on the

same day. Scaife also notes that Harbaugh made lodging

arrangements near AAC’s facilities for the th ree months that the

aircraft was scheduled to be worked on and that Harbaugh told two

other bidders that Scaife had chosen AAC for the renovation work.

Scaife also argues that, in Simmons

, the plaintiff sued to

enforce a contract even though the defendant never indicated that

he accepted the contract. Scaife contends that the district court

erred in relying on this case because the defendant AAC is the

signatory and there is no question that AAC intended to be bound by

this agreement. Scaife maintains that the district court also

incorrectly cited Simmons for the proposition tha t “if parties

negotiating a contract intend for the contract to be reduced to

writing and signed, then no contract is formed unless and until the

writing has been executed by both the p arties.” According to

Scaife, Simmons does not stand for this proposition.

AAC argues that Texas law states that if the parties intend

for the contract to be reduced to writing, no offer and acceptance

exists unless and until the writing is executed by all the parties.

Simmons

, 286 S.W.2d at 418. AAC contends that the summary judgment

evidence proves that Scaife and AAC intended the agreement to be

signed by both parties. For example, AAC notes that (1) the

agreement had signature blocks for the parties to sign; (2) the9

language in the agreement provided “IN WITNESS WHEREOF, the parties

have caused this agreement to be executed by their duly authorized

representative at Dallas, Texas, on the first date written above;”

(3) one third of the contract price w as due “upon the signing of

the contr act;” (4) the aircraft was to be delivered to the owner

within 90 days subject to the execution of the contract; and (5) a

clause in the con tract stated that no party could alter or amend

the contract except in writing signed by both parties.

Furthermore, AAC argues that Harbaugh’s deposition testimony

stated that Bosque would have Gilbreath sign the agreement and then

ship it to Scaife Flight Operations for Harbaugh to sign. Harbaugh

stated that he did not want to make another trip to Zwillin g’s

office to sign the agreement unless it would definitely be there.

AAC maintains that this evidence shows that Scaife and AAC intended

for the agreement to be signed before a binding contract was

formed.

Further, AAC maintains that the district court’s reliance on

Simmons was proper because that case reached the issue of whether

a signature was required on a contract as a condition precedent for

formation of the contract. As in the present case, the summary

judgment evidence shows that AAC and Scaife intended for the

signatures to be a condition precedent to the formation of the

contract. AAC contends that regardless of how the issue was

framed, each party’s signature was required for the f ormation of

this contract. Scaife’s attempt to distinguish S immons fails10

because Simmons established that if parties negotiating a contract

intend to require signatures, then a contract is not formed unless

both parties sign the contract. Simmons , 286 S.W.2d at 419.

The issue of whether the parties required that the agreement

be signed to be considered binding is one of intent, and,

therefore, the issue is normally a fact quest ion for the jury to

decide. Foreca , 758 S.W.2d at 746; Scott v. Ingle Bros. Pacific,

Inc. , 489 S.W.2d 554, 556 (Tex. 1972); and Simmons , 286 S.W.2d at

417. However, the district court decided that Scaife’s assertions

did not raise a genuine issue of material fact concerning whether

the parties intended to make signatures a requi rement for the

formation of a binding contract and, on these grounds, the district

court granted summary judgment. We note that parties may enter

into an oral contract even though they are contemplating a formal

writing. See Simmons , 286 S.W.2d at 418. The subsequent writing

then becomes merely a “convenient memorial” of the agreement.

Cothron Aviation, Inc. v. Avco Corp.

, 843 S.W.2d 260, 263 (Tex. Ct.

Ap p.--Fort Worth 1992, writ denied). The “convenient memorial”

doctrine usually requires a finder of fact to ascertain whether the

parties intended to be bound by the agreement before the agreement

was formally executed. Id

.

However, the question presented here is not whether there was

a prior oral contract. The evidence clearly shows that the parties

intended that a written contract wo uld govern their agreed upon

obligations. Instead, the question presented is whether the third

proposed agreement was accepted and became a binding contract11

without the signatures of the parties. When reviewing written

negotiations, the question of whether an offer was accepted and a

contract was formed is primarily a question of law for the court to

decide. S & A Marinas, Inc. v. Leonard Marine Corp.

, 875 S.W.2d

766, 769 (Tex. Ct. App.--Austin 1994, writ denied). If an agreement has been reduced to writing, as it was in this case, an assent

to the writing must be manifested. Simmons , 286 S.W.2d at 418;

Cothron Aviation

, 843 S.W.2d at 264. Manifestation of assent

“commonly consists of signing and delivery.” Simmons , 286 S.W.2d

at 418; and see Cothron , 843 S.W.2d at 264.

The contract in this case was revised at least three times and

expressly contained signature blocks for the parties. All three of

the proposed agreements, entitled “Aircraft Modification

Agreement,” included the following clause and signature blocks:

IN WITNESS WHEREO F, the parties have caused this

Agreement to be executed by the ir duly authorized

representative at Dallas, Texas, on the date first

above written.

SCAIFE FLIGHT OPERATIONS

By:_____________________

Duly Authorized Representative

Date:___________________

ASSOCIATED AIR CENTER, INC.

By:________________________

Roy G. Gilbreath

President

Date:_____________________

Harbaugh’s deposition testimony explained that G ilbreath was to

sign the agreement for AAC and send it to Zwilling’s office for

Harbaugh’s signature. The contract was never delivered and neither

party ever signed the agreement. “If parties negotiating a12

contract intend that the contract shall be reduced to writing and

signed by the parties,

... th en either party may withdraw at any

t ime before the written agreement is drawn up and signed by both

parties.” Gasmark, Ltd. v. Kimball Energy Corp. , 868 S.W.2d 925,

929 (Tex. Ct. App.--Fort Worth 1994, no writ) (citing Premier Oil

Refining Co. of Texas v. Bates

, 367 S.W.2d 904, 907 (Tex. Ct. App.

--Eastland 1963, writ ref’d n.r.e.)).

In this case the contract was never signed. Signature blocks

were included on the contract and Scaife took affirmative steps to

ensure that a representative would be able to sign the agreement

once a finalized contract had been prepared and signed by AAC. We

hold that the parties con templated the formation of a binding

agreement to include the signatures of both parties. No evidence

shows that AAC began work on the aircraft or acted in any

affirmative manner to assent to the agreement notwithstanding the

lack of delivery and formal execution of the contract. F oreca

, 758

S.W.2d at 746 n.2 (listing criteria which may be helpful in

determining whether a contract has been formed, such as whether a

party takes action in preparation of performance). After carefully

reviewing the summary judgment evidence, we agree with the district

court that the parties intended to manifest their assent to this

agreement through a formal written contract signed by both parties.

We hold that no contract was ever formed and, as a result, summary

judgment was appropriate in this case.13

2. Sanctions

Federal courts have inherent powers which include the

authority to sanction a party or attorney when necessary to achieve

the orderly and expeditious disposition of their dockets. C hambers

v. NASCO, Inc. , 501 U.S. 32, 43 (1991); Natural Gas Pipeline Co.

,

86 F.3d at 467. We review sanctions imposed under the district

court’s inher ent powers for abuse of discretion. N atural Gas

Pipeline Co. , 86 F.3d at 467.

“[T]he threshold for the use of inherent power sanctions is

high.” C

haves v. M/V Medina Star

, 47 F.3d 153, 156 (5th Cir.

1995). “Such powers may be exercised only if essential to preserve

the authority of the court and the sanction chosen must employ the

least possible power adequate to the end proposed.” E nergy

Gathering , 86 F.3d at 467 (internal quotations omitted).

At the conference held the day before the mediation, the court

advised Gutnick that Scaife would be required to attend. Because

Scaife was unable to attend the mediation on such short notice,

Gutnick filed a motion to dismiss without prejudice t o avoid

violating the district court’s order.

The district court then held a hearing on the motions to

dismiss filed by both parties. AAC’s motion also included a motion

for sanctions. After the hearing, the district court issued an

order imposing sanctions on Scaife, requiring Scaife to pay all

costs associated with the aborted mediation and the motions to

dismiss. This sanction order was not appealed by Scaife.14

The district court also sanctioned Gutnick by admonishing him

not to unilaterally interpret away a court order by advising his

client to do something other than what a district court’s order

requires that client to do. The district court sanctioned Gutnick

by requiring him to (a) p ublish the district court’s memorandum

order to all members of his firm; (b) bring the memorandum order to

the attention of any court to which he may apply in the future; and

(c) file a personally signed certificate acknowledging that he read

the memorandum and agrees to comply with the stated terms of the

sanction order.

Gutnick argues that the district court abused its discretion

because the sanctions order is grossly excessive and the court did

not issue specific findings to show that Gutnick acted in bad

faith. See Dawson v. United States

, 68 F.3d 886, 895 (5th Cir.

1995) (noting that in order for a district court to impose

sanctions under its inherent power a specific finding of bad faith

must be made). Gutnick contends that he never advised Scaife to

disobey the court order to appear at the mediation hearing and that

Scaife never wilfully violated the court’s order. Gutnick argues

that he and Scaife acted on good faith reliance that Harbaugh’s

attendanc e was sufficient to satisfy the requirements of Rule 16

and the pretrial and mediation orders to send a person with

settlement authority to the mediation.

Gutnick contends that the sanctions assessed not only harm his

personal reputation, but restrict his ability to practice in other

state and federal courts by requiring him to submit a copy of the15

sanction order to any bar which Gutnick is not currently a member.

Gutnick argues that the sanction order violates the Tenth Amendment

by invading th e exclusive authority of state courts to regulate

admission to their respective bars. Further, Gutnick contends that

the district court’s order violates 28 U.S.C. § 2071 because it

creates new conditions for Gutnick’s admission to practice in other

federal courts. Finally, Gutnick argues that he was denied due

process because the district court failed to provide him with an

adequate notice and opportunity to be heard on the sanction issue.

After carefully reviewing the record in this case, we hold

that the district court abused its discretion by failing to employ

the least severe sanction adequate to achieve the desired result.

It is understandable that the district court would believe that

some sanction was required when, after issuing an order and holding

a conference to clarify the order, Scaife and Gutnick ignored such

order. However, Gutnick explained that he made the decision to

have Harbaugh attend the mediation because he was the only person

involved with the contractual negotiations for Scaife Flight

Operations. Harbaugh had all the requisite authority to settle the

case. Scaife was not involved in the contractual negotiations and

had no know ledge of the underlying facts of this dispute.

Therefore, Gutnick decided that Harbaugh would be the best person

to attend the mediation.

We hold that the sanctions imposed on Gutn ick are overbroad

and excessive. We believe that the sanctions requiring Scaife to

pay all costs associated with the mediation and subsequent motions16

to dismiss is adequate and suffic ient to serve the necessary

purpose of deterrence. Therefore, we vacate the district court’s

order imposing sanctions on Gutnick.

CONCLUSION

For the foreg oing reasons, we A FFIRM the decision of the

district court granting summary judgment in favor of AAC and VACATE

the sanctions assessed by the district court against Gutnick.