* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### APR 2 1997 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

GEORGE C. BOYD; GAIL P. BOYD; EARL WIGGINS; SHELLY WIGGINS, also known as Bud & Son Distributing, Plaintiffs-Appellees,

v. KMART CORPORATION,

Defendant-Appellant. No. 96-7065 (D.C. No. CV-95-249-P) (E.D. Okla.)

ORDER AND JUDGMENT *

Before PORFILIO, ANDERSON, and BRISCOE, Circuit Jud ges.
After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The c ase is therefore ordered submitted without oral argument.1 Pursuant to 28 U.S.C. § 636(c)(1), the parties cons ented to proceed before

the magistrate judge. Accordingly, our jurisdictio n arises under § 636(c)(3) and 28 U.S.C. § 1291. -2- Defendant Kmart Corporation appeals from a judgmententered by the magistrate judge 1 on a jury verdict awarding plaintiffs, collectivel y known as Bud & Son Distributing, $288,835.77 for breach of contr act. Kmart had disavowed a renewable contract that gave Bud & Son the exclusiv e right to collect waste tires generated by a group of Kmart auto service faciliti es. The magistrate judge granted Bud & Son partial summary judgment on vario us liability issues before trial, leaving only the computation of damages for the jury’s determination. Following the denial of its motion for new trial/re mittitur, Kmart appealed. Kmart raises eight issues for review, six relating to summary judgment matters, a seventh challenging the jury verdict, an d the last objecting to a post-judgment procedural ruling. Kmart contends th e magistrate judge erred in finding as a matter of law that (1) regional manage r Herb Rone had apparent authority to bind Kmart to the Bud & Son contract, (2) Kmart breached the contract, (3) Kmart remained liable for the breach after Rone’s demotion, (4) Kmart’s contractual obligations continued afterit sold all of its automotive service centers, (5) Kmart remained liable into the first extended year of the contract despite Rone’s demotion prior to the exten sion, and (6) Kmart’s liability continued through the remainder of the contract. K mart also asserts that (7) the-3-

determination of damages was fatally flawed, and (8 ) the magistrate judge erred in denying its request to supplement the summary ju dgment record after entry of judgment on the jury verdict. As explained below, we affirm the determination that Kmart breached a binding contract (issues 1 & 2), and that its demotion of the contracting manager had no effect on the contin uing validity (and, hence, extendibility) of the contract (issues 3, 5-6). Ho wever, we hold that Kmart’s liability ceased upon its good faith sale of the fa cilities involved (issue 4), necessitating a redetermination of damages and, thu s, obviating consideration of Kmart’s objection to the existing award (issue 7). Finally, we dismiss Kmart’s challenge to the denial of its post-judgment motion to supplement the pretrial summary judgment record (issue 8).
I We review the rulings made on summary judgment de n ovo. Kaul v. Stephan , 83 F.3d 1208, 1212 (10th Cir. 1996). On the basi c issues of liability, we are in substantial agreement with the analysis expr essed in the magistrate judge’s pretrial order of January 31, 1996, which relies on a number of pertinent, uncontroverted facts that need not be repeated in d etail here. Suffice it to say that, in accordance with his managerial title and f unction, Herb Rone was authorized to select the suppliers and contractors required by the service centers for which he was responsible, he executed an exclus ive contract with Bud & Son-4-

for the disposal of all waste tires for those cente rs, and nine months later, after entering into a country-wide tire disposal agreemen t with Lakin General Corp., Kmart directed all of its managers, including Rone, to cancel any conflicting individual contracts. In our view, these facts est ablish Rone’s apparent authority to execute the Bud & Son contract and Kmart’s subse quent breach thereof.
A Kmart argues that, despite general managerial autho rity to contract for service center needs, Rone did not have even appare nt authority to agree to the terms of the particular contract at issue, because it transgressed an internal organizational limitation on agreements extending b eyond a manager’s tenure. In essence, Kmart attempts to cloak in the garb of app arent authority the following novel legal defense: every contract with Kmart aut omotive service centers tacitly incorporated the overriding condition that--regardl ess of what the parties actually agreed to on the matter--the contract’s enforceable term was inherently limited to the tenure of the particular individual managing th e affected service centers. Kmart does not cite any precedent for this dubious proposition, let alone case law underwriting its position in the vocabulary of apparent authority. We do not gainsay Kmart’s right to impose and enfor ce exceptions to the contracting authority granted its managers, but suc h special limitations are effective only if made known to those with whom the y conduct business. See2 Kmart cites two assertedly contrary items of eviden ce. Neither is material.

First, Kmart attempts to create a factual dispute b y citing its own assertion that plaintiff George Boyd

“was aware that a Zone Manager could not bind anot her Zone Manager.” Appellant’s Appendix (App.) I at 48 . Ambiguities aside (is the asserted managerial independence direct or indirect , geographic or temporal?), summary judgment may not be opposed with inadmissib le assertions of matters beyond personal knowledge. See Fed. R. Civ. P. 56(e); Gross v. Burggraf Constr. Co. , 53 F.3d 1531, 1541 (10th Cir. 1995). Second, Kmart cites a deposition excerpt in which Rone claims he had told Boyd he la cked authority to execute the contract. As discussed later, we dismiss Kmart’s appeal from the order refusing to supplement the summary judgment record with this excerpt. Thus, the evidence is outside the scope of review. In any ev ent, Rone’s vague, qualified statement that he “thinks” at some time he told Boy d he lacked authority to make such a long-term commitment, though he has no “spec ific recollection” of doing (continued...) -5- Oaks v. Motors Ins. Corp. , 595 P.2d 789, 791-92 (Okla. 1979) (“Though the powers of an agent may be limited by definite restr ictions on his authority, . . . such powers are prima facie coextensive with the bu siness entrusted to his care, and will not be narrowed by limitations not communi cated to the person with whom he deals.”); see also Ocean Accident & Guar. Corp. v. Denner , 250 P.2d 217, 220-21 (Okla. 1952) (“If a person imposes uponanother the duties and responsibilities involving the management and contr ol of a business, such person will be presumed to have authority to represent his employer in any matter within the scope of the business; and this rule applies pe culiarly to corporations which act only through their officers and agents.” (quotations omitted)). When, as here, competent evidence shows only the grant of general contracting authority without notice of an alleged exception thereto, 2 apparent authority is properly found as a2 (...continued)

so, see App. II at 604-06, is insufficient to dispute Boyd ’s unequivocal statement, consistent with the terms of the parties’ agreement , that Rone specifically assured Boyd of his authority when they executed the contra ct, an assurance sought by Bud & Son to justify substantial anticipatory expen ditures, see App. I at 58. -6- matter of law. See, e.g. , Home State Bank v. Sullins , 178 P.2d 86, 88 (Okla. 1947) (apparent authority issue unnecessarily givento jury where no evidence restriction on agent’s authority ever communicated) ; Elam v. Town of Luther , 787 P.2d 1294, 1296 (Okla. Ct. App. 1990) (reversing tr ial court and holding general contracting agent had “express, apparent and/or imp lied authority” to execute particular contract at issue).
B Kmart insists that, in any event, the evidence did not establish its breach of the Bud & Son contract, for several reasons. First , Kmart contends “[t]here was no testimony from the parties who negotiated and ex ecuted the Lakin Contract concerning which Kmart automotive service centers t he Lakin Contract was intended to cover, nor was there any testimony conc erning from what locations Kmart intended to offer Lakin tires.” Brief of App ellant at 25. Kmart’s own memorandum, issued April 4, 1995, clearly fills the alleged gap in the evidence. The memorandum states in unequivocal terms that “[a ]ll stores in the lower 48 states are included,” that “[a]ll of the used, junk , take-off and adjustment tires-7-

will be picked up by Lakin,” and that “all other us ed tire haulers currently being used are to be canceled as of May 1, 1995.” App. I at 42. Second, Kmart asserts that under the Lakin contract , “Kmart did not have to offer Lakin all its used tires,” Brief of Appellantat 25, evidently maintaining that this latitude with respect to its Lakin obligations avoided a breach of its existing agreement with Bud & Son. In short, Kmart contends its execution of the Lakin contract covering the same service already subject to the exclusive Bud & Son agreement--which it promptly ordered canceled to ac commodate the Lakin contract--did not breach the earlier agreement. Th is implausible contention is not supported by reasoned argument or relevant authority. See generallyBrownlee v. Lear Siegler Management Servs. Corp. , 15 F.3d 976, 977 (10th Cir. 1994) (adequate appellate advocacy requires supporting au thority and/or developed argument). Indeed, analogous case law undercuts Km art’s position. Cf. EKE Builders, Inc. v. Quail Bluff Assocs. , 714 P.2d 604, 608 (Okla. Ct. App. 1985) (disavowal of contractual relationship and executio n of conflicting agreement “amounted to a repudiation . . . justifying plainti ff to treat the contract as totally breached and to immediately sue for damages”). Third, Kmart cites evidence indicating that Bud & S on picked up some used tires from Kmart after the May 1 cancellation date. No authority or persuasive argument is provided to link this factual assertion to the challenged ruling-8-

regarding breach. While the cited evidence may be pertinent on the issue of damages, it does not nullify the legal effect of th e uncontroverted actions taken by Kmart in clear breach of the parties’ exclusive agr eement.
II Kmart contends the following provision from the Bud& Son agreement conditioned performance on Herb Rone’s continued employment as manager of the affected service centers:

Now therefore K-Mart Corporation does hereby grant Bud & Son Distributing the exclusive right to dispose of its waste tires from the stores under the supervision of District Manage r, Herb Rone which are listed on Exhibit “A” attached to this co ntract and which come into existence in this same area supervised byDistrict Manager, Herb Rone. App. I at 39. Thus, Kmart argues, by demoting Rone ten days after ordering cancellation of the Bud & Son agreement, it extingu ished any further obligations and effectively curtailed its contractual liability . The magistrate judge rejected this argument, holding that the Rone references simply provided a means to identify, in shorthand terms, the service centers c overed by the agreement. As this ruling involves questions of law, see Lewis v. Sac & Fox Tribe , 896 P.2d 503, 514 (Okla. 1994) (ambiguity of contract and me aning of unambiguous contract are legal issues for courts to resolve), c ert. denied , 116 S. Ct. 476 (1995), our review is de novo, see Bank of Oklahoma v. Muscogee (Creek) Nation , 972 F.2d 1166, 1171 (10th Cir. 1992).-9-

We agree with the magistrate judge that the quoted provision is not reasonably susceptible to the gloss proffered by Km art, which pries out of the language a peremptory condition that, given its sig nificance to the value and stability of a fairly long-term contract, one would expect to be directly and distinctly stated. Further, Kmart’s construction o f the quoted language is at odds with a later provision binding the contracting part ies’ assigns. On Kmart’s reading, the latter provision must entail the unstated and implausible qualification, “but only if Kmart’s assignee happen s to hire Herb Rone and employ him in the same capacity he presently has wi th Kmart.” Finally, absent clear linguistic support, the magistrate judge was properly loathe to credit a construction of the agreement giving Kmart unilater al power to void its obligation simply by transferring, demoting, or terminating an employee. While perhaps none of these difficulties alone would foreclose Km art’s interpretation, taken together and considered in light of the magistrate judge’s manifestly reasonable, contrary construction, they persuade us that the ma gistrate judge correctly determined the unambiguous meaning of the disputed provision. Thus, Rone’s employment as manager of the service c enters was not a condition to the continuing validity of the Bud & S on contract. Consequently, his demotion had no effect on either party’s performanc e obligations, nor did it-10-

abrogate Bud & Son’s express right to extend the co ntract for an additional five
years. III The magistrate judge deemed Kmart’s sale of its aut omotive service operation in November 1995 irrelevant to its liabil ity, because by that time the Bud & Son agreement had already been breached. In the magistrate judge’s stated view, a contractual liability cannot be nullified b y the termination or sale of the affected business. Actually, contracts differ in t he latitude they afford parties to extinguish their obligations through such actions and, as explained below, the Bud & Son contract falls into a unique category in this respect. Given that contract damages may only compensate for lost benefits the p laintiff would have obtained absent the breach, see Okla. Stat. Ann. tit. 23, § 96; Ferrell Constr. Co . v. Russell Creek Coal Co. , 645 P.2d 1005, 1010 (Okla. 1982); B & B Lines, In c. v. Ryan Freight Lines, Inc. , 601 P.2d 1207, 1209 (Okla. Ct. App. 1979), if Kma rt’s obligation would have expired upon the sale of its automotive service operation, extending its liability beyond that time would resu lt in a damage award improperly exceeding compensable loss, see, e.g. , Osborn v. Commanche Cattle Indus., Inc. , 545 P.2d 827, 831-32 (Okla. Ct. App. 1975) (damag es for breach of contract that could have been terminated by either party upon thirty days’ notice may not include lost profits beyond thirty-day noti ce period).3 From another perspective, the agreement could be ch aracterized, without

any alteration in the resulting analysis, as a “req uirements” contract, with Kmart being the buyer of a service quantified in terms of its need for tire disposal. -11- The agreement at issue, which grants Bud & Son excl usive access to Kmart’s waste tires without specifying a quantity t erm, is a fairly straightforward example of an “output” contract, pursuant to which the obligor’s duty to supply the promised commodity is quantified (and therefore limited) by reference to its production thereof. 3 See generallyE. Allan Farnsworth, Farnsworth on Contracts § 7.17, at 371 (Supp. 1996) (describing “output” an d “requirements” contracts). The fact that the agreement concerns a mere by-prod uct of Kmart’s operations does not alter its character in this respect. See 2 Joseph M. Perillo & Helen Hadjiyannakis Bender, Corbin on Contracts § 6.7, at 279-80 (Rev. ed. 1995). Generally, a reduction in output (or requirements), even the complete cessation of business, is permissible under such co ntracts, so long as the change is effected in good faith. See Farnsworth, supra§ 7.17, at 371. This court has previously applied this general rule in Oklahoma co ntract cases, see, e.g. , M.W. Kellogg Co. v. Standard Steel Fabricating Co. , 189 F.2d 629, 632 (10th Cir. 1951); Southwest Natural Gas Co. v. Oklahoma Portland Cement Co. , 102 F.2d 630, 632-33 (10th Cir. 1939), and the state legislature expressly codified it in the sales context by adopting the pertinent Uniform Com mercial Code provision, see Okla. Stat. Ann. tit. 12A, § 2-306(1) & UCC comment2 (“good faith variations-12-

from prior requirements are permitted even when the variation may be such as to result in discontinuance”). Bud & Son argues for a deviation from this general rule, insisting that two other decisions of this circuit, Central States Pow er & Light Corp. v. United States Zinc Co. , 60 F.2d 832 (10th Cir. 1932), and Tri-State Gener ation & Transmission Ass’n v. Shoshone River Power, Inc. , 874 F.2d 1346 (10th Cir. 1989), direct us to impose on Kmart an implied obli gation to remain in the auto service business for the duration of the parties’ a greement. Neither of these decisions is apposite here. Central States implied such an obligation because the contract at issue included specific minimum and max imum quantity parameters and, consequently, “differ[ed] from the usual insta nce of an agreement where the vendor is to furnish all of a commodity required byvendee.” 60 F.2d at 834 (Cotteral, J., opinion); id. at 835 (Lewis, J., concurring) (noting, for same r eason, “this is not a requirement contract”). Similarly, Tri-State , a Wyoming case, cited the “conventional rule” that “‘good faith variation s’” in requirements are allowed “‘even to the extent of a determination to liquidat e or discontinue the business,’” 874 F.2d at 1358 (quoting HML Corp. v. General Food s Corp. , 365 F.2d 77, 81 (3d Cir. 1966)), and only deviated from the rule be cause the “unique” nature of the contract, see id. at 1355-57, 1359-60 (noting interrelationship of p arties and involvement of government regulatory agency), took the case out of the “routine”4 The only pertinent evidence of record appears to be the unchallenged

affidavit of Joseph Collins, Kmart Vice President f or Strategic Business Integration and Productivity Improvement, stating that the line of automotive service centers had been sold as “part of Kmart’s o ngoing efforts to divest itself of non-core businesses so that Kmart could concentr ate its efforts and resources (continued...) -13- or “commonplace” requirements situation, id. at 1359-60. There is nothing in the present case corresponding to such exceptional circ umstances. Indeed, the only uncommon factor here, that the commodity involved w as a mere by-product of Kmart’s automotive service operation, fortifies our adherence to the general rule permitting good faith cessation of business: This fact . . . makes it less likely that [Kmart] h as promised, by implication or otherwise, to produce a minimum amou nt or to continue to carry on the work of production for a s tated time. Ordinarily, the seller would wish to make the duty to sell a mere by-product conditional upon the exigencies of the m ain business; the seller would not wish to be bound to let the tail w ag the dog. Corbin, supra§ 6.7, at 279-80 (footnote omitted). Accordingly, we may affirm the magistrate judge’s d ecision extending Kmart’s liability beyond the date it sold its entir e automotive service operation only if the evidence demonstrates as a matter of law that the sale constituted a bad faith effort by Kmart to circumvent its obligations with respect to the particular service centers covered by the Bud & Son agreement. However, Bud & Son, which has relied exclusively on its theory of impli ed obligation, has not alleged, much less substantiated, any such claim of bad fait h. 4 Consequently, we must4 (...continued)

on its core business of operating discount retail s tores.” App. I at 125. There is nothing indicative of bad faith vis a vis Bud & Son in that statement. -14- remand this case for a redetermination of damages e xcluding any assessment of Bud & Son’s anticipated profits for the years follo wing Kmart’s sale of its automotive service operation.
IV Finally, Kmart challenges the denial of its post-ju dgment motion to supplement the record relating to the summary judgm ent proceedings. We conclude we lack jurisdiction over this ruling and, therefore, dismiss this portion of the appeal. See generallyBender v. Williamsport Area Sch. Dist. , 475 U.S. 534, 541 (1986) (every federal appellate court has a special obligation to satisfy itself of its own jurisdiction, even if parties do not raise the issue). Fed. R. App. P. 3(c) requires that every notice of appeal “designate the judgment, order, or part thereof appealed from.” F urther, “Rule 3’s dictates are jurisdictional in nature, and their satisfaction is a prerequisite to appellate review. Although courts should construe Rule 3 liberally wh en determining whether it has been complied with, noncompliance is fatal to an ap peal.” Smith v. Barry , 502 U.S. 244, 248 (1992). Thus, this court has frequently dismissed appellate challenges to undesignated rulings, especially whenother particular orders were specified in the notice and these orders did not an alytically subsume the omitted-15-

rulings. See, e.g. , Cunico v. Pueblo Sch. Dist. No. 60 , 917 F.2d 431, 444 (10th Cir. 1990); Averitt v. Southland Motor Inn , 720 F.2d 1178, 1180-81 (10th Cir. 1983); Scaramucci v. Dresser Indus., Inc. , 427 F.2d 1309, 1318 (10th Cir. 1970); cf. Jones v. Nelson , 484 F.2d 1165, 1168 (10th Cir. 1973) (appeal fromdenial of new trial motion properly encompassed prior judgment probed by that motion); Herron v. Rozelle , 480 F.2d 282, 285 (10th Cir. 1973) (same; also no ting general rule that appeal from final judgment subsumes all p rior rulings “producing the judgment”). Kmart’s notice of appeal designates for review: “t he Order granting Plaintiffs’ Motion for Summary Judgment, dated Janu ary 31, 1996, the final judgment entered in this matter on the 8th day of F ebruary, 1996, and the Order denying Defendant’s motion for new trial and/or mot ion for remittitur, dated May 10, 1996.” Appellant’s Docketing Statement att ach. 3. Absent from this designation is any reference to the magistrate judg e’s order of March 26, 1996, denying Kmart’s motion to supplement the summary ju dgment record (filed after, and thus not addressed by, Kmart’s new trial motion ). As this collateral ruling is not subsumed by any of the specified decisions, it is barred from review.-16-

The judgment entered by the magistrate judge for th e United States District Court for the Eastern District of Oklahoma is AFFIRMED in part and REVERSED in part, and the cause is REMANDED for further proceedings consistent herewith.

Entered for the Court

Stephen H. Anderson Circuit Judge