## Facts

- SCM Corp. decided to divest six European copier subsidiaries and negotiated with N. Norman Muller and Reprosystem, B.V., a Netherlands entity formed to acquire the assets.
- The parties negotiated extensively and publicly announced an “agreement in principle.”
- Plaintiffs’ proposal and subsequent communications repeatedly stated the deal was “subject to” a satisfactory audit and execution of a definitive written agreement.
- The parties exchanged multiple drafts of complex transaction documents that contemplated effectiveness only upon execution by authorized representatives.
- No definitive, signed sale agreement was executed.
- SCM discovered an accounting issue, reassessed the transaction, terminated negotiations, and later sold the subsidiaries to another buyer.
- Plaintiffs sued for breach of contract, unjust enrichment, securities fraud under Rule 10b-5, and promissory estoppel.
- The district court found a contract existed, held SCM breached, and awarded $1,062,000 based on SCM’s profits from the subsidiaries during negotiations, despite finding plaintiffs could not have performed; it dismissed the securities-fraud and promissory-estoppel claims.

## Issues

1. Whether the parties formed a binding contract for the sale of the subsidiaries despite repeated “subject to definitive agreement” conditions and the absence of an executed final writing.
2. Whether quasi-contract restitution could be awarded as “unjust enrichment” based on SCM’s profits from its subsidiaries during the negotiation period.
3. Whether plaintiffs could recover under promissory estoppel or a purported obligation to negotiate in good faith after SCM withdrew.
4. Whether plaintiffs had standing for Rule 10b-5 liability when no securities sale was consummated.

## Decision

- The Second Circuit reversed the judgment for breach of contract and restitution and held no enforceable contract was formed.
- The court held unjust-enrichment damages were unavailable because SCM’s profits from its own subsidiaries were not a benefit conferred by plaintiffs and were not unjust to retain.
- The court affirmed dismissal of promissory estoppel and rejected liability based on an independent duty to negotiate in good faith on these facts.
- The court affirmed dismissal of the Rule 10b-5 claim because plaintiffs were neither purchasers nor sellers in a completed securities transaction.

## Legal Principles

- Under New York law, whether parties are bound before signing a contemplated final document turns on objective intent shown by words, conduct, and surrounding circumstances.
- When sophisticated parties clearly condition obligation on execution of a definitive written agreement, “agreements in principle,” draft documents, and progress on material terms do not create a binding contract absent execution.
- Unjust enrichment requires enrichment at the plaintiff’s expense; retention of profits from one’s own property during failed negotiations, without a conferred benefit, does not support restitution.
- Promissory estoppel requires a clear and definite promise; statements conditioned on signing definitive documents do not satisfy that requirement.
- Rule 10b-5 standing generally requires a completed purchase or sale; a failed transaction leaves the claimant outside the purchaser-seller class.

## Conclusion

The Second Circuit enforced the parties’ expressed condition that no binding obligations would arise without a signed definitive agreement, and it refused to convert failed negotiations into liability through restitution, promissory estoppel, or Rule 10b-5 where no sale occurred and no clear unconditional promise was made.


Reprosystem, B.V. v. SCM Corp., 727 F.2d 257 (2d Cir. 1984)