Essco Geometric v. Harvard Industries

Harvard Industries, Inc. (defendant) manufactured chairs. Generally, Harvard’s purchasing manager had the unilateral authority to select a foam supplier and negotiate the contract. After Ed Kruske became Harvard’s president, Harvard implemented a new policy under which selection of suppliers required Kruske’s approval. Harvard never communicated the new policy to anyone outside the company. However, evidence indicated that the new policy was a mere formality and that Kruske never declined to approve a supplier or contract. Contemporaneously, Harvard’s performance review of its purchasing manager, Michael Gray, stated the company’s intention that Gray take a more active role in managing his department. Subsequently, Gray agreed to a contract with Essco Geometrics, Inc. (d/b/a Diversified) (plaintiff), under which Diversified would be Harvard’s principal foam supplier for a government contract. Kruske did not approve the contract. When Kruske learned of Gray’s agreement with Diversified, he stopped orders to Diversified and, upon receiving a new bid from American Excelsior, a Diversified competitor, made American Excelsior Harvard’s principal foam supplier. Diversified brought suit for breach of contract. Gray testified that he believed his agreeing to the contract with Diversified was part of his job as purchasing manager. Further, testimony indicated that industry custom was for purchasing managers to have unilateral authority to enter into supply contracts. Harvard filed a motion for judgment as a matter of law. The district court denied the motion, and the jury returned a verdict for Diversified. Harvard appealed.