United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 07-2027
                                     ___________

Fairbrook Leasing, Inc., et al.,          *
                                          *
      Plaintiffs - Appellants,            *
                                          * Appeal from the United States
      v.                                  * District Court for the
                                          * District of Minnesota.
Mesaba Aviation, Inc.,                    *
                                          *
      Defendant - Appellee.               *
                                     ___________

                              Submitted: October 18, 2007
                                 Filed: March 4, 2008
                                  ___________

Before LOKEN, Chief Judge, GRUENDER and BENTON, Circuit Judges.
                              ___________

LOKEN, Chief Judge.

        In March 1996, Mesaba Aviation, Inc. (“Mesaba”), a regional airline, and
subsidiaries of Swedish airplane manufacturer Saab AB1 executed a document
entitled, “Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by Mesaba
Aviation, Inc.” (the “Term Sheet”). The Term Sheet called for Mesaba to purchase
thirty new 340BPlus aircraft from Saab and to sublease twenty used 340A aircraft
from Fairbrook. The Term Sheet recited that it was “a summary of selected elements”
of the final agreement; the parties agreed “to negotiate, execute, and deliver definitive

      1
      Fairbrook Leasing, Inc., Lambert Leasing, Inc., and Swedish Aircraft Holdings
AB (collectively, “Fairbrook”).
documentation . . . in substantially the form and substance of the 2/18/96 drafts . . . no
later than April 15, 1996.” Though no final agreement was ever signed, Fairbrook
delivered a total of twenty-three used 340A aircraft to Mesaba. The parties executed
short-term subleases on each aircraft, mistakenly expecting that a final agreement
would eventually be signed.

       In 2002, after Mesaba announced that it would return the leased aircraft,
Fairbrook sought a declaratory judgment to enforce the long-term lease provisions of
the Term Sheet. Applying New York law, we affirmed the district court’s grant of
summary judgment in favor of Fairbrook. Fairbrook Leasing, Inc. v. Mesaba
Aviation, Inc., 

, 465-67 (8th Cir. 2005) (“Fairbrook I”). Fairbrook
commenced this separate action in district court seeking expectancy (benefit-of-the-
bargain) damages for Mesaba’s breach of the Term Sheet agreement. The district
court2 granted summary judgment for Mesaba, concluding that, under New York law,
the Term Sheet is a “Type II” preliminary agreement for the breach of which no
expectancy damages may be recovered. Fairbrook appeals. We affirm.

                                    I. Background.

       In addition to lengthy provisions regarding the financing and purchase of new
Saab 340BPlus aircraft, the Term Sheet provided that Mesaba would sublease twenty
used 340A aircraft from Fairbrook for $44,000 per month, subject to a $13,000 per
month rebate if Mesaba met certain conditions such as avoiding default. The Term
Sheet further provided that individual subleases would be signed for each aircraft and
that “the term of each Sublease will be between 72 and 96 months . . . with best
efforts to obtain four (4), one (1) year extensions at the same Basic Rent.” The Term
Sheet contained details about the configuration, delivery, and refurbishment of each


      2
        The HONORABLE MICHAEL J. DAVIS, United States District Judge for the
District of Minnesota.

                                           -2-
aircraft and three conditions precedent, all of which were satisfied. It provided that
New York law would govern its construction, validity, and performance. After
signing the Term Sheet, Fairbrook acquired from third parties the right to sublease the
twenty aircraft for the full term specified in the Term Sheet and spent up to $500,000
refurbishing each plane. Mesaba reported in its annual 10-K and quarterly 10-Q SEC
filings that it had entered into an agreement to convert its fleet to Saab aircraft.

      Fairbrook delivered twenty-three 340A aircraft to Mesaba between May 1996
and June 1998. The parties executed interim subleases for each and extended the
Term Sheet's deadline for the execution of a final sublease agreement. In late 1997,
Saab announced it would stop manufacturing commercial aircraft. Worried about the
impact on maintenance and repair costs, Mesaba insisted that Saab pay for certain
maintenance costs on the 340A aircraft that were not included in the maintenance
agreement covering the purchased 340BPlus aircraft. Mesaba’s negotiators admitted
that Mesaba refused to sign long-term subleases on the 340A aircraft in part to gain
“leverage” to obtain this concession. Mesaba also wanted to shorten the sublease term
on some 340A aircraft to conform to Mesaba’s policy of not keeping aircraft in
service longer than seventeen years. Negotiations toward a final contract ultimately
ceased in December 1998.

      Mesaba operated the twenty-three 340A aircraft through 2001, making timely
lease payments of $31,000 per month. Three were returned by agreement in
December 2001.3 In July 2002, Mesaba gave notice that it would return the twenty


      3
        Fairbrook objected to the condition of the returned aircraft, demanded that
Mesaba continue paying rent until they were upgraded, and claimed that Mesaba’s
refusal to do so was a Term Sheet default that forfeited Mesaba’s right to receive the
monthly rebate on the remaining twenty aircraft. Though the Fairbrook I majority
opined that “all of the essential terms had been agreed 

, the
Term Sheet was silent on the critical question of return condition. The record does not
reflect how this separate dispute over return condition was resolved.

                                         -3-
remaining aircraft by October 2004. In October 2002, Mesaba stopped making lease
payments on several aircraft. Fairbrook then commenced the declaratory judgment
action to enforce the Term Sheet, taking the position that Mesaba was bound to the
full extended twelve-year sublease term for each aircraft.

                                   II. Fairbrook I.

       In the declaratory judgment action, the parties filed cross motions for summary
judgment. The district court denied Mesaba’s motion and granted partial summary
judgment in favor of Fairbrook, concluding that, even though the Term Sheet was a
“preliminary agreement,” it was an enforceable contract because its “length, detail,
formality, and completeness lend[] support to the finding that this document defines
the parties’ obligations, and is not a mere invitation for them to continue to negotiate.”
Fairbrook Leasing, Inc. v. Mesaba Aviation, Inc., 

, 1069-70 (D.
Minn. 2003). Alternatively, the court held that the parties to the Term Sheet “bound
themselves at a minimum to a framework within which to negotiate open terms in
good faith,” and Mesaba breached this duty by seeking concessions that contradicted
the Term Sheet’s “framework.” 

The court concluded that Fairbrook
could enforce the Term Sheet subleases up to ninety-six months but denied Fairbrook
summary judgment on its claim that it was entitled to unilaterally extend the Term
Sheet subleases an additional four years. 

       In June 2004, the parties entered into a Stipulation reciting that the “Order of
December 8, 2003 is the extent of the declarations sought by [Fairbrook] at this time”
and dismissing without prejudice Fairbrook’s claims for four-year sublease
extensions. “Accordingly,” the Stipulation recited, “final judgment may be entered
on the Court’s December 8, 2003 Order to allow [Mesaba] to appeal that order at this
time.” The court entered an Order that the remaining claims were dismissed without




                                           -4-
prejudice and directed that “final judgment be entered.”4 The Clerk entered a separate
Judgment the next day containing no substantive terms.

       Although Fairbrook filed the action seeking a declaratory judgment and referred
to “declarations” in the Stipulation that manufactured a final order for appeal, the
“final” Order of December 8, 2003, contained no declaratory judgment. Cf. Azeez
v. Fairman, 

, 1297 (7th Cir. 1986). It was in substance an interlocutory
order granting partial summary judgment. As the district court’s decision was based
on alternative grounds, the preclusive effect of the summary judgment we affirmed in
Fairbrook I must be determined by examining our opinion, not the district court’s
Order. Fairbrook interprets Fairbrook I as holding that the Term Sheet was a “Type
I,” fully enforceable long-term contract entitling Fairbrook to the benefit of its
bargain, namely, damages equal to $44,000 per month per aircraft for the fully
extended twelve-year subleases. Mesaba construes Fairbrook I as concluding that the
Term Sheet was a binding commitment only to negotiate the remaining open terms in
good faith. To frame this dispute, it is necessary to examine New York contract law
before we review the district court’s decision to adopt Mesaba’s interpretation of
Fairbrook I. We review the district court’s grant of summary judgment and its
interpretation of state law de 

.




      4
        Despite our frequent warnings, many lawyers use this dismissal-without-
prejudice tactic to evade the statute limiting our appellate jurisdiction to the review
of final orders. Regrettably, we often review such bogus final orders, as in Fairbrook
I. See generally Great Rivers Coop. of S.E. Iowa v. Farmland Indus., Inc., 

, 688-90 (8th Cir. 1999). Even more regrettably, we did not in Fairbrook I declare
the dismissal of the remaining claims to be with prejudice, as we did in Minnesota Pet
Breeders, Inc. v. Schell & Kampeter, Inc., 

, 1245 (8th Cir. 1994), which
would have foreclosed Fairbrook’s attempt to revive its claims for extended subleases
in this action. In any event, if Fairbrook’s use of this distasteful tactic has produced
a result less favorable than had it litigated Fairbrook I to a proper final disposition by
the district court, we have no sympathy for misfortune of its own making.

                                           -5-
              III. The New York Law of Preliminary Agreements.

       In general, New York courts will not enforce “a mere agreement to agree, in
which a material term is left for future negotiations.” Joseph Martin, Jr., Delicatessen,
Inc. v. Schumacher, 

, 543 (N.Y. 1981). But the intent of the parties
is controlling. Therefore, a contract is enforceable even though it leaves some
elements for future negotiation and agreement “if some objective method of
determin[ing the open terms] is available, independent of either party’s mere wish or
desire.” Metro-Goldwyn-Mayer, Inc. v. Scheider, 

, 931 (N.Y. 1976).
The absence of a contemplated formal agreement is also not dispositive. If the parties
do not intend to be bound until a formal agreement is signed, there is no contract until
that event occurs. “On the other hand . . . where all the substantial terms of a contract
have been agreed on, and there is nothing left for future settlement, then an informal
agreement can be binding even though the parties contemplate memorializing their
contract in a formal document.” R.G. Group, Inc. v. Horn & Hardart Co., 

, 74 (2d Cir. 1984) (quotation omitted). In addition, even if the parties have not
agreed on all the essential terms of a final agreement, a New York court may conclude
that they entered into an enforceable “good-faith contractual obligation to cooperate”
in the negotiation of a final agreement. Goodstein Constr. Corp. v. City of New York,

, 100 (N.Y. 1986).

       A federal court in New York attempted to synthesize these diverse principles
in Teachers Insurance & Annuity Association of America v. Tribune Co., 670 F.
Supp. 491, 498-99 (S.D.N.Y. 1987) (“Tribune”). Recognizing a “strong presumption”
against finding binding obligations in preliminary understandings that include open
terms and call for future approvals and the execution of contract documents, the court
nonetheless identified two types of preliminary agreements that are given binding
force. “One occurs when the parties have reached complete agreement . . . on all the
issues perceived to require negotiation. Such an agreement is preliminary only in
form . . . . The second . . . expresses mutual commitment to a contract on agreed


                                          -6-
major terms, while recognizing the existence of open terms that remain to be
negotiated.” In this second type, the parties “bind themselves to a concededly
incomplete agreement in the sense that they negotiate together in good faith . . . to
reach final agreement within the scope that has been settled in the preliminary
agreement.” In Tribune, the court enforced a preliminary commitment for a long-term
loan that recited it was a “binding agreement” after the borrower used the commitment
to its advantage before refusing to close on the final agreement because interest rates
had declined.

      Two years later, in Arcadian Phosphates, Inc. v. Arcadian Corp., 

,
72 (2d Cir. 1989), the Second Circuit observed that, in determining whether “a
preliminary manifestation of assent was a binding preliminary agreement of the
second type,” the court in Tribune “used a modified version of a test that this court
devised for preliminary agreements that more closely resemble the first type.”
Looking no further than the first factor of that test, the court in Arcadian held that the
preliminary agreement at issue was not binding because references that negotiations
might fail and that a binding agreement would be completed in the future
demonstrated the parties did not intend to be bound.

       Tribune and Arcadian were concerned with identifying when an agreement of
the “second type” is an enforceable agreement to negotiate a contemplated final
agreement. In some later cases, however, the federal courts in New York have
declared there are two types of binding preliminary agreements, “Type I” and “Type
II,” distinguished only by a fifth, highly subjective factor, the “context” of the
negotiations. See Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 

, 548-51
(2d Cir. 1998); Shann v. Dunk, 

, 77 (2d Cir. 1996); Krauth v. Executive
Telecard, Ltd., 

, 293 (S.D.N.Y. 1995). In contrast, New York’s
intermediate appellate courts have held, consistent with Goodstein, that parties can
enter into binding preliminary agreements to negotiate a final contract in good faith,
but we have found no New York appellate decision enforcing a “Type I” agreement,


                                           -7-
or even recognizing the Type I-Type II dichotomy applied by the federal courts. See
180 Water St. Assocs., L.P. v. Lehman Bros. Holdings, Inc., 

, 279
(N.Y. App. Div. 2004); SNC, Ltd. v. Kamine Eng’g & Mech. Contracting Co., 

, 48 (N.Y. App. Div. 1997).

       After reviewing this array of decisions, we have serious doubt whether the so-
called Type I binding preliminary agreement occupies a legitimate place in New York
contract law. Much of our doubt is based on experience. When negotiating and
drafting countless contracts in our prior legal careers, we rarely if ever encountered
a “memorandum of understanding” or a “preliminary agreement” that required
nothing more than the wordsmithing of a true scrivener to become a “final contract.”
When such a document is encountered -- and the expressly binding commitment
letters in Tribune and contemporaneous cases5 may be examples, even though the
federal courts described them as “Type II” preliminary agreements -- it should be
enforced as a final, not as a preliminary, agreement. Any document less final, if
binding under New York law, should be enforced as a preliminary agreement to
negotiate in good faith in accordance with the two opinions of the New York Court
of Appeals in Goodstein,6 unless, consistent with Scheider, there is “some objective
method” of determining its open terms “independent of either party’s mere wish or

.

       This case well illustrates our reluctance to acknowledge the Type I category of
binding preliminary agreements. After the Term Sheet was signed, any lawyer worth
her salt would not have signed off on a final contract committing client Mesaba to
sublease twenty expensive airplanes for eight years, and granting the sublessor options


      5
       Teachers Ins. & Annuity Ass’n of Am. v. Ormesa Geothermal, 

(S.D.N.Y. 1991); Teachers Ins. & Annuity Ass’n of Am. v. Butler, 

(S.D.N.Y. 1986).
      6
      

, and its sequel, Goodstein Constr. Corp. v. City
of N.Y., 

(N.Y. 1992) (“Goodstein II”).
                                      -8-
for four more years, without seeking to negotiate whether there might be unforseen
circumstances (in addition to an act of God) that should relieve Mesaba of its long-
term commitment. A premature decision by Saab to stop supporting the 340 series of
aircraft is an example of a circumstance that might warrant bargaining.

                         IV. The District Court’s Rulings.

        A. Type I or Type II Agreement. In Fairbrook I, we reviewed a summary
judgment opinion, interlocutory at the time it was issued, alternatively ruling that the
Term Sheet was a Type I and a Type II binding preliminary agreement. In affirming,
we expressly held that the “negotiations surrounding the Term Sheet and the parties’
conduct lead us to conclude that [Fairbrook] and Mesaba entered into a Type II
agreement, binding the parties to comply with the Term 

.
Therefore, we concluded, “at a minimum, Mesaba and [Fairbrook] bound themselves
to a framework that mandated good faith negotiations over the remaining open terms
of their agreement.” 

We further concluded, over Judge Colloton’s dissent,
that Mesaba’s insistence on final sublease terms contrary to provisions in the Term
Sheet was a breach of its commitment to negotiate “the remaining open terms” in good
faith. 

the parties’ cross motions for summary judgment in this case, the
district court after careful review construed our opinion in Fairbrook I as concluding
that the Term Sheet was a Type II preliminary agreement. We agree. The court
further concluded that basic principles of issue preclusion bar Fairbrook from relying
on the district court’s alternative ruling that the Term Sheet was a Type I agreement
because that ruling was not upheld on appeal. Again, we agree. See RESTATEMENT
(SECOND) OF JUDGMENTS § 27 cmt. o (1982); 

(explaining
that Type I and Type II agreements give rise to different obligations). Fairbrook
argues at length that, when we affirmed in Fairbrook I, we implicitly upheld the
district court’s conclusion that the Term Sheet was a Type I agreement. But this
contention is contrary to the explicit holding in our prior opinion. Moreover, if this
                                          -9-
were an open issue because Fairbrook I was ambiguous, we have no difficulty
concluding as a matter of law that the Term Sheet was, at most, a binding Type II
preliminary agreement. To reach this conclusion, we look no further than the parties’
understanding that separate interim sublease agreements were required for each
aircraft while the final sublease documents were being negotiated.

       B. Remedies for Breach of a Type II Agreement. Because we held in
Fairbrook I that Mesaba breached a Type II preliminary agreement to negotiate the
final sublease agreement in good faith, the district court next considered what
remedies are available to Fairbrook for this type of breach. Invoking general
principles governing the recovery of lost profits for breach of contract, Fairbrook
argued that it was entitled to damages equal to all lost revenues over the life of the
subleases contemplated in the Term Sheet. The district court rejected this contention,
concluding that the issue was instead controlled by the decision of the New York
Court of Appeals in Goodstein II. Agreeing with New York federal court decisions,
the district court held that Goodstein II “prohibits the award of expectancy damages
for the breach of a preliminary agreement.” See Westerbeke Corp. v. Daihatsu Motor
Co., 

, 210 (2d Cir. 2002); Gorodensky v. Mitsubishi Pulp Sales (MC),
Inc., 

, 255 n.2 (S.D.N.Y.), aff’d, 

(2d Cir. 2000).7

       On appeal, Fairbrook urges us to limit Goodstein II to its “extreme” facts and
apply the normal contract principle that lost profits may be recovered from the
breaching party if such damages were reasonably foreseeable and can be measured
with reasonable certainty. See Ashland Mgmt. Inc. v. Janien, 

, 1010
(N.Y. 1993). In support, Fairbrook notes that New York federal courts awarded lost
profits for the breach of Type II agreements in two cases decided before Goodstein II,

      7
       New York’s intermediate appellate courts have likewise read Goodstein II as
categorically precluding expectancy damages for breach of a binding preliminary
agreement to negotiate a final agreement in good faith. See 180 Water St. 

; Sands Bros. v. Generex Pharms., Inc., 

, 18
(N.Y. App. Div. 2002); accord Fairbrook 

(Colloton, J., dissenting).
                                       -10-
Teachers Insurance v. 

, and Teachers Insurance v. 

, and in a more recent case that did not cite Goodstein II, Network
Enterprises, Inc. v. APBA Offshore Productions, Inc., 

, 487
(S.D.N.Y. 2006).

       We are not as confident as the district court that Goodstein II should be read as
categorically precluding benefit-of-the-bargain damages for all breaches of binding
preliminary agreements to negotiate a final agreement in good faith. This is a difficult,
largely unsettled question of remedies. See the conflicting opinions in Venture Assocs.
Corp. v. Zenith Data Sys. Corp., 

, 278, 281 (7th Cir. 1996) (applying
Illinois law). Goodstein II rejected an award of expectancy damages in part because
“if no agreement was reached and . . . it cannot even be known what agreement would
have been reached, there is no way to measure the lost 

, quoting 1 E. Allan Farnsworth, Farnsworth on Contracts § 3.26a, p. 314 (1st ed.
1990). But what if it can be discerned what agreement would have been reached?
What if, for example, the open terms left to be negotiated can be determined by
“objective criteria . . . found in the agreement itself, commercial practice or other usage
and custom,” as in 

?

       To put the question more concretely, consider Teachers Insurance v. Butler, a
pre-Goodstein II case in which a borrower reaped the benefits of the lender’s
preliminary loan commitment for nineteen months and then, because interest rates had
declined, refused to sign the final agreement, ostensibly because it contained an
additional provision that was consistent with the lender’s and the lending industry’s
practice. The court held that the lender was entitled to benefit-of-the-bargain damages
-- the difference between the interest rate specified in the commitment letter and the
interest rate at the time of the 

. The court in Tribune
allowed the same lender to recover the benefit of a similar commitment letter but
described the commitment letters as Type II 

. Would
the New York Court of Appeals, applying its later Goodstein II decision, reach a


                                          -11-
different result, precluding recovery of the interest rate differential because it is an
expectancy-type measure of damages? We suspect not.

       Though we are uncertain whether the New York Court of Appeals would
construe Goodstein II as categorically as did the district court and the cases on which
that court relied, we have no difficulty affirming the district court’s decision that
expectancy damages may not be recovered in this case. The Goodstein II court denied
expectancy damages because

      the City’s sole obligation . . . was to negotiate in good faith. . . . To allow
      the profits that plaintiff might have made under the prospective [final
      agreement] as the damages for breach of the exclusive negotiating
      agreements would be basing damages . . . on the prospective terms of a
      nonexistent contract which the City was fully at liberty to reject. It
      would, in effect, be transforming the agreement to negotiate for a contract
      into the contract itself. . . . [A] party’s alleged failure to negotiate in good
      faith is not a but-for cause of plaintiff’s lost profits, since even with the
      best of faith on both sides the deal might not have been closed . . . .

Goodstein 

(quotation omitted). The same reasoning applies
in this case. The Term Sheet was silent on significant issues such as the allocation of
maintenance costs and the condition of returned aircraft. The parties were not
obligated to agree on these issues, nor can the missing terms be judicially determined
by objective criteria in the Term Sheet itself or in commercial practice, usage, or
custom. In effect, Fairbrook asks us to do what New York law prohibits -- transform
a binding preliminary agreement to negotiate for a contract into the contract itself. The
district court properly concluded that Fairbrook may not recover unpaid sublease
revenues for Mesaba’s breach of its duty to negotiate a final sublease in good faith.

      Finally, Fairbrook argues that the district court erred in dismissing its claim for
out-of-pocket expenses incurred in reliance on the binding preliminary agreement to
negotiate. It is undisputed that reliance damages are recoverable under New York law.

                                           -12-
See 

; 180 Water St. 

. The
goal of reliance damages is to allow “recover[y] for those efforts that were to [a
party’s] detriment and thereby placed him in a worse position.” Farash v. Sykes
Datatronics, Inc., 

, 1246 (N.Y. 1983); RESTATEMENT (SECOND) OF
CONTRACTS § 349 (1981). However, this issue was not properly preserved for appeal.

        In the district court, Fairbrook’s complaint stated five claims for various
categories of “rent” for Mesaba’s breach of the Term Sheet. Mesaba filed the first
motion for summary judgment, arguing that Fairbrook may only recover reliance
damages for Mesaba’s alleged breach of a Type II preliminary agreement, and that
Fairbrook had conceded its reliance damages were de minimis.8 One month later,
Fairbrook filed its cross motion for summary judgment, arguing only that it was
entitled to recover the benefit of its bargain -- past and future unpaid gross sublease
rent -- whether the Term Sheet was a Type I or a Type II agreement. One month after
that, Fairbrook filed its memorandum opposing Mesaba’s motion. On the next-to-last
page of its brief, after forty pages arguing its claims for expectancy damages, Fairbrook
asserted in a two-sentence footnote that, even if New York law did limit Fairbrook to
its reliance damages, that claim “likely exceeds the amounts that [Fairbrook] seek[s]
to recover for the benefit of [its] bargain.” Fairbrook then listed as examples of its
reliance damages “headlease obligations for leased aircraft, ownership costs on equity
aircraft, and refurbishment costs.”

       In the Background section of its summary judgment Memorandum and Order,
the district court noted that Fairbrook “admitted that under a Type II agreement, its out-
of-pocket expenses would be de minimis.” The court did not discuss the issue further.
Fairbrook never sought to amend its complaint to assert a claim for reliance damages;
never sought additional time to present evidence on this potential summary judgment
issue, see FED. R. CIV. P. 56(f); and did not file a motion urging the district court to


      8
        Mesaba further submitted detailed evidence showing that it had paid Fairbrook
a total of $53,537,000 in rent under the interim subleases for the 340A aircraft.
                                         -13-
reconsider its summary dismissal of the issue. Nonetheless, Fairbrook argues for the
first time on appeal that it never conceded its overall reliance expenditures were de
minimis, only that its expenses related to the negotiation of the Term Sheet were de
minimis. Thus, the reliance damages issue was not properly preserved in the district
court, either factually or legally. We decline to exercise our limited discretion to
consider an issue raised for the first time in an appeal taken after years of extensive
litigation. See Fjelsta v. Zogg Dermatology, PLC, 

, 809 (8th Cir. 2007);
Von Kerssenbrock-Praschma v. Saunders, 

, 375-77 (8th Cir. 1997).

      The judgment of the district court is affirmed.
                     ______________________________




                                        -14-