United States Court of Appeals For the First Circuit
No. 22-1141
FINSIGHT I LP,
Plaintiff, Appellant,
v.
ROBERT SEAVER and JAMES TOGA,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Selya, and Howard, Circuit Judges.
Israel F. Piedra, with whom Welts, White & Fontaine, P.C., Steven C. Reingold, Bridgitte E. Mott, and Saul Ewing Arnstein & Lehr LLP were on brief, for appellant. Robert L. Kirby, Jr., with whom Scott M. Zanolli and Pierce & Mandell, P.C. were on brief, for appellees.
October 4, 2022 SELYA, Circuit Judge. This case stands for a simple
proposition: when the clear text of a contractual provision gives
a party the right to terminate, that party may terminate according
to the provision's terms. Concluding, as we do, that defendants-
appellees Robert Seaver and James Toga properly exercised their
contractual right of termination, we affirm the district court's
entry of summary judgment in their favor.
I
We briefly rehearse the relevant facts and travel of the
case, arraying those facts in the light most favorable to the
nonmoving party (here, plaintiff-appellant FinSight I LP). See
Suzuki v. Abiomed, Inc., 943 F.3d 555, 557 (1st Cir. 2019); Flovac,
Inc. v. Airvac, Inc., 817 F.3d 849, 852 (1st Cir. 2016).
FinSight wished to purchase shares of stock in Unity
Technologies, Inc. (Unity). The defendants wished to sell some of
their Unity shares. Striving to achieve a meeting of the minds,
the defendants' broker, Prabjeet Rattan, effected an email
introduction of the parties. In due course, FinSight agreed to
purchase 50,000 shares of Unity stock (25,000 from each defendant)
for $29 per share.
To facilitate the sale, FinSight and the defendants
negotiated the terms of a stock transfer agreement (the STA)
through an exchange of emails. The defendants successfully
negotiated for the inclusion of a termination clause, which
- 2 - provided in part that "[i]f the Closing has not taken place within
7 business days of the date specified above, other than due to a
breach of this Agreement by Transferor, Transferor shall have the
right to terminate this Agreement immediately via email without
further notice to Transferee." The closing of the transaction was
subject to the condition that Unity approve the stock transfers
"on the terms and conditions hereof."
The STA was dated June 11, 2020; it was signed by the
defendants on June 12; and it was signed by FinSight on June 15.
Nobody transmitted the STA to Unity for a signature at that time,
although there was a space in the signature block for Unity to
sign.
Seaver emailed Unity on June 16, seeking its approval of
the transfers. Rattan followed up in the same email thread on
June 17 and again on June 29, attaching the signed STA both times
but not asking Unity to sign it either time. Unity conditionally
approved the transfers on July 20 but required the transfers to be
governed by its "own form of transfer agreement" (instead of the
STA). Unity submitted its preferred form of transfer agreement —
the secondary stock purchase agreement — to FinSight on July 29.1
1 In point of fact, Unity sent FinSight two separate but identical agreements, one for Seaver's stock and one for Toga's stock. For ease in exposition, we refer to these agreements together as "the SSPA."
- 3 - FinSight forwarded it to the defendants for their signatures on
July 29.
In the intervening time, the price of Unity stock had
soared. The defendants did not sign the SSPA. Instead — on August
2 — Seaver responded to FinSight's email (forwarding the SSPA),
stating "[w]e'll need to review the agreement and get legal review
also. However, the price has moved up considerably during the
delay. . . . I wouldn't be interested in proceeding with the deal
at the old price." The next day, Seaver replied to a separate
email thread that "I think we're going to have to pass on moving
forward with this." Konstantin Deykalo, a member of FinSight's
transactions team, responded, insisting that attempting to secure
a deal at a higher price risked losing Unity's approval; that any
higher price quoted by another broker was not secure; and that
FinSight considered the STA to be binding and would seek
reimbursement for the time and money it had invested in the deal
if the defendants welched.
On August 4, Seaver responded by terminating the STA
pursuant to the termination clause "to the extent [the STA] was
ever in effect." Four days later — in response to a letter from
FinSight — Seaver asserted that the defendants had properly
exercised their right to terminate and that, "[i]n any case, Unity
said they would not permit the sale based on [the STA]." The SSPA,
he added, had "different terms" from the STA.
- 4 - FinSight did not walk away quietly from the ruins of the
deal. Instead, it sued the defendants in the United States
District Court for the District of Massachusetts, alleging breach
of contract and other related causes of action. Federal
jurisdiction was based on diversity of citizenship and the
existence of a controversy in the requisite amount. See 28 U.S.C.
§ 1332(a). After the close of discovery, the defendants moved for
summary judgment. See Fed. R. Civ. P. 56(a). FinSight opposed
the motion.
The district court granted the defendants' motion and
entered summary judgment in their favor. The court concluded,
among other things, that no enforceable contract had been formed
and that, even if the STA constituted an enforceable contract, the
defendants had properly exercised their termination right. See
FinSight I LP v. Seaver, 2022 WL 407423, at *2-3 (D. Mass. Feb.
10, 2022). This timely appeal followed.
II
We review the district court's entry of summary judgment
de novo. See Gen. Hosp. Corp. v. Esoterix Genetic Lab'ys, LLC, 16
F.4th 304, 308 (1st Cir. 2021). In conducting this tamisage, "we
take the facts in the light most hospitable to the
nonmovant . . . and draw all reasonable inferences therefrom to
that party's behoof." Id.; see Mason v. Telefunken Semiconductors
Am., LLC, 797 F.3d 33, 37 (1st Cir. 2015). We will affirm "when
- 5 - the record, read in this way, demonstrates that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law." Alston v. Int'l Ass'n of
Firefighters, Local 950, 998 F.3d 11, 24 (1st Cir. 2021) (citing
Fed. R. Civ. P. 56(a)). Such an affirmance may rest on any ground
supported by the record. See Houlton Citizens' Coal. v. Town of
Houlton, 175 F.3d 178, 184 (1st Cir. 1999).
Because this case arises in diversity jurisdiction, we
look to federal law for the summary judgment framework and to state
law for the substantive rules of decision. See Esoterix, 16 F.4th
at 308. As to which state is implicated in this formulation,
FinSight suggests that we apply either Massachusetts or Delaware
law and tells us that there is no substantive difference between
the two as to the questions of contract formation and breach that
are implicated here. The defendants are less explicit, but they
cite primarily to Delaware cases. As there is no real dispute
between the parties on this point, we will accept Delaware law as
furnishing the substantive rules of decision without performing a
full choice-of-law analysis. Cf. Borden v. Paul Revere Life Ins.
Co., 935 F.2d 370, 375 (1st Cir. 1991) (explaining that when "the
parties have agreed about what law governs, a federal court sitting
in diversity is free, if it chooses, to forgo independent analysis
and accept the parties' agreement").
- 6 - We divide our analysis into three segments. First, we
interpret the text of the termination clause and the bounds of the
right granted by that clause. Next, we assess FinSight's claims
based on the STA. Finally, we address FinSight's equitable claims.
A
FinSight first contends that the district court erred in
concluding that there was no genuine dispute of material fact as
to whether the parties entered into an enforceable agreement. We
do not need to reach this issue, though, because the district
court's alternative holding is dispositive here: even if we assume
(favorably to FinSight) that the STA was an enforceable contract,
the defendants properly terminated it. Our reasoning follows.
Under Delaware law, the interpretation of a contract is
a question of law for the court. See Paul v. Deloitte & Touche,
LLP, 974 A.2d 140, 145 (Del. 2009). To determine the correct
interpretation of a contract, we give priority to the intention of
the contracting parties, looking first to the text of the contract
"to conclude whether the intent of the parties can be determined
from its express language." Id. In interpreting the text,
"[c]lear and unambiguous language . . . should be given its
ordinary and usual meaning." Lorillard Tobacco Co. v. Am. Legacy
Found., 903 A.2d 728, 739 (Del. 2006) (second alteration in
original) (quoting Rhone-Poulenc Basic Chems. Co. v. Am. Motorists
Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)). "When the language of
- 7 - a . . . contract is clear and unequivocal, a party will be bound
by its plain meaning . . . ." Id. (first alteration in original)
(quoting Rhone-Poulenc, 616 A.2d at 1195-96). Thus, we will look
outside the margins of the contractual text for evidence of the
contract's meaning only when the text is ambiguous. See Eagle
Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232
(Del. 1997).
In resolving the question of whether the defendants
properly exercised their right to terminate under the STA, we begin
with the language of the termination clause itself. In its
entirety, that clause reads:
Subject to satisfying of Conditions Precedents (as provided in clause 3 hereof), the closing of the sale and purchase of the Transferred Shares shall take place at 10:00 a.m. California time on the date hereof (the "Closing") or as soon as reasonably practicable following satisfaction or waiver (by the applicable party) of the conditions set forth in this Section 2 (other than conditions which can on their terms be satisfied only at Closing), or at such other time or place as the parties may mutually agree. The Closing shall take place remotely via the exchange of documents, electronically or otherwise. If the Closing has not taken place within 7 business days of the date specified above, other than due to a breach of this Agreement by Transferor, Transferor shall have the right to terminate this Agreement immediately via email without further notice to Transferee.
- 8 - As an initial matter, the parties do not dispute in this
court that "the date specified above" refers to the STA's execution
date. They disagree, however, as to whether the execution date is
June 11 (the date inscribed in the contract itself) or June 15
(the date on which the last of the parties — FinSight — signed the
STA). Taking the facts in the light most favorable to the
nonmoving party — as we are required to do — we assume that the
date of execution is June 15.
With that assumed fact in place, the termination clause,
stripped to bare essence, provides unambiguously that if the
closing does not take place within seven business days of June 15
and the delay is not due to a breach by the defendants, the
defendants will have an unqualified right to terminate the STA
forthwith. What is more, the undisputed facts show that the
defendants properly exercised this right: the transaction did not
close within seven business days next following the execution date,
and the defendants gave their notice of termination subsequent to
the expiration of that period.
FinSight demurs. It asserts that we should interpret
the text of the termination clause to provide that the defendants
lose their termination right if they breach the contract at any
time, not just if they commit a breach within the seven days. But
this assertion is decisively rebutted by the plain language of the
termination clause itself. That clause states that the defendants
- 9 - may terminate if the closing "has not taken place within 7 business
days of the [execution] date . . . , other than due to a breach of
this Agreement by [the defendants]." The phrase "other than"
indicates that the potential breach contemplated by the
termination clause is a restriction on the accrual of the
termination right, not a requirement that applies after the right
has vested. See 2 Oxford English Dictionary 962 (2d ed. 1989)
(defining "other than" as "besides, except, apart from"). The
termination clause thus clearly states that the defendants had the
right to terminate the STA if the closing did not take place within
seven business days of the execution date, unless that delay was
attributable to their breach.
Even if we found the text to be ambiguous — and we do
not — the undisputed evidence shows that the defendants
specifically negotiated for the seven-day termination clause
because they did not want to be "tied up indefinitely" while the
stock price was subject to fluctuation. The defendants even
offered to delay execution if FinSight believed it could not
satisfy the conditions within the seven-day window. FinSight could
have balked at including such a termination clause in the contract,
negotiated for either a longer period of time or a clause
embroidered with more contingencies, or gotten its ducks in a row
before executing the STA. FinSight did none of these things. The
undisputed evidence supports the plain reading of the text: the
- 10 - defendants' termination right vested, as the parties intended,
after seven business days.
Here, moreover, it is uncontroverted that the defendants
did nothing in the seven business days following June 15 either to
breach the STA or to undermine the closing of the deal. The
defendants sought to carry out the conditions of the contract
within that time span. Seaver emailed Unity on June 16 seeking
its approval to transfer the defendants' shares, pursuant to the
STA's requirement that Unity approve the transfer prior to the
closing. Unity did not respond to that email or subsequent emails
from the defendants' broker until June 29, well after seven
business days had elapsed. The fact that the deal did not close
within seven business days of June 15 was not "due to a breach of
th[e] Agreement by [the defendants]" but, rather, due to Unity's
foot-dragging. Consequently, the defendants' right to terminate
vested at the expiration of seven business days. And the
defendants thereafter exercised that right as they were entitled
to do.
In an effort to change the trajectory of the debate,
FinSight mounts a flanking attack. It contends that — even if the
STA gave the defendants a right to terminate that vested after
seven days — the defendants could not properly exercise that right.
FinSight raises this argument in two, slightly different,
- 11 - iterations. First, it claims that once the conditions precedent
were satisfied, performance was required under the contract and
the termination right vanished. Second, it claims that the
defendants acted in bad faith and breached the STA based on their
purported reasons for terminating the contract. In analyzing these
claims, we assume — albeit without deciding — that Unity's approval
was provided on terms and conditions materially equivalent to those
set forth in the STA, such that the condition of its approval was
satisfied.
As to the first argument, we understand FinSight to mean
that the defendants' termination right went up in a puff of smoke
once Unity approved the transfer and the STA's conditions precedent
were satisfied. We see the logic behind FinSight's argument
insofar as the power to terminate operates "prospectively" to
discharge only a party's "contractual duty to perform promises
that are still wholly executory." 13 Sarah Howard Jenkins, Corbin
on Contracts § 68.9, at 250 (Joseph M. Perillo rev. ed. 2003). It
follows that there may be nothing to terminate if no promises
remain to be performed.
But this is not such a case. There is simply no basis
in the text of the STA for concluding that once the conditions
precedent were satisfied, the contract was completed such that the
termination right vanished or that the failure to transfer shares
constituted an immediate breach.
- 12 - We must look to the text of the contract to determine
what obligations it places on the parties. See VLIW Tech., LLC v.
Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003) (explaining
that a breach of contract requires "the breach of an obligation
imposed by that contract"); see also Airborne Health, Inc. v. Squid
Soap, LP, 984 A.2d 126, 145 (Del. Ch. 2009) (concluding no breach
of contract where contract provisions did not by their terms impose
those obligations on defendant which plaintiffs sought to
enforce). In support of its argument that the defendants lost
their termination right once Unity approved the deal, FinSight
points to language in the termination clause decreeing that the
closing "shall take place . . . on the date hereof . . . or as
soon as reasonably practicable following the satisfaction or
waiver" of the conditions precedent. This mandatory language,
FinSight argues, left no choice for the defendants but to transfer
their shares or commit a breach.
There is simply no principled basis for concluding that
all the obligations under the contract were fulfilled at that
point. After all, the parties had not yet transferred the shares
or the money. And there is no reason to read the cited language
as affecting the termination right: that section of the paragraph
refers to the effect of conditions on the closing, not the
termination right. If those conditions had been satisfied within
the seven-day period before the termination right vested, the
- 13 - defendants may well have had an obligation to close "as soon as
reasonably practicable." But nothing in the text supports an
inference that the completion of the conditions precedent would
subvert the termination right that already had vested.2
We turn to the second version of FinSight's argument.
FinSight claims that the defendants violated an implied covenant
of good faith and fair dealing by asserting in bad faith that the
basis for their termination was the SSPA's materially different
terms and by endeavoring to "kill the deal" by asking Unity to
withdraw its support. But this argument muddles the order of
events: by the time that the defendants asserted that the terms
of the STA and SSPA were materially different and reached out to
Unity to ask it to revoke its support, they already had terminated
the deal. Their actions after that point are immaterial.
Next, FinSight directs us to Section 5.7 of the STA,
entitled "Company Information," in which the defendants "[gave] up
the opportunity to sell the Transferred Shares at a possible higher
price in the future," as evidence that the defendants breached the
2 Along the same lines, we reject FinSight's attempted reliance on the "further assurances" clause of the STA, which provides that "[t]he parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement." FinSight reads that clause to create an obligation for the defendants to renegotiate the terms of the SSPA if it contained material differences from the STA. But there is nothing in the further assurances clause that suggests that it operates as a restriction on the defendants once that termination right has vested.
- 14 - STA and acted in bad faith before they invoked the termination
clause. Noting that Seaver wrote on August 2 that he "wouldn't be
interested in proceeding with the deal at the old price," FinSight
suggests that the defendants both breached Section 5.7 and operated
in bad faith when they later cited the differences between the STA
and the SSPA as a reason for their exercise of the termination
right.
It is black letter law that contract provisions must be
read as a whole, taking context into account. See, e.g., New
Castle Cnty. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 174 F.3d
338, 349 (3d Cir. 1999) (explaining that a "single clause or
paragraph of a contract cannot be read in isolation, but must be
read in context" (quoting Cheseroni v. Nationwide Mut. Ins. Co.,
402 A.2d 1215, 1217 (Del. 1979))).
Read as a whole, Section 5.7 is obviously meant to state
and delimit the full extent of the defendants' relevant knowledge
about the company. Nothing in Section 5.7 suggests that its final
line is intended to be read as a hidden circumscription of the
power to terminate, such that termination would be allowed for any
reason except a rise in the market price. We will not assume,
without more, that the purpose of a separate provision discussing
"Company Information" is to imply such a restriction.
And here, there is no "more." The termination clause
included only two restrictions: that it could not be exercised
- 15 - for seven business days after the date of execution and that it
could not be exercised thereafter if the delay was caused by the
defendants' breach. The parties specifically negotiated the
termination clause and could have incorporated further
restrictions in it. They did not. Our obligation, then, is to
enforce the termination clause that the parties wrote into the
contract, not to enforce hypothetical termination provisions that
they might have written. See Gilbert v. El Paso Co., 490 A.2d
1050, 1055 (Del. Ch. 1984), aff'd, 575 A.2d 1131 (Del. 1990)
(explaining that, in the context of a termination clause, when
"the conditions are expressed, the motivation of the invoking party
is, in the absence of fraud, of little relevance"). Under the
terms of the STA, any subsequent discussions of the defendants'
reasons for terminating were irrelevant to the question of whether
they had properly exercised their right of termination in the first
place.
We turn next to the final version of FinSight's argument
as to whether a breach preceded the defendants' invocation of their
termination right. In this variant, FinSight maintains that an
action for breach lies even if the defendants properly exercised
their termination right — as we have concluded they did.
This argument is past its expiration date. FinSight did
not make this argument below. Even in this court, FinSight
- 16 - squarely presented the argument for the first time in its reply
brief. As such, we deem the argument doubly waived. See
Teamsters, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21
(1st Cir. 1992) ("If any principle is settled in this circuit, it
is that, absent the most extraordinary circumstances, legal
theories not raised squarely in the lower court cannot be broached
for the first time on appeal."); Sandstrom v. ChemLawn Corp., 904
F.2d 83, 86 (1st Cir. 1990) (explaining that because argument was
not made "in appellant's opening brief, surfacing only in his reply
brief, it has been waived").
That ends this aspect of the matter. Even assuming that
the parties were bound by an enforceable contract, FinSight cannot
escape the terms of that contract. The termination right is
clearly stated, and the defendants properly exercised it.
B
FinSight proposes two alternative theories of recovery,
neither of which sounds in breach of contract. First, it alleges
that the defendants are liable under a theory of promissory
estoppel. Second, it alleges that the defendants are liable for
unjust enrichment. We address these plaints separately.
- 17 - 1
To succeed on a claim for promissory estoppel, FinSight
"must show by clear and convincing evidence that: (i) a promise
was made; (ii) it was the reasonable expectation of the promisor
to induce action or forbearance on the part of the promisee; (iii)
the promisee reasonably relied on the promise and took action to
his detriment; and (iv) such promise is binding because injustice
can be avoided only by enforcement of the promise." Lord v.
Souder, 748 A.2d 393, 399 (Del. 2000). "The prevention of
injustice is the 'fundamental idea' underlying the doctrine of
promissory estoppel." Chrysler Corp. (Del.) v. Chaplake Holdings,
Ltd., 822 A.2d 1024, 1034 (Del. 2003) (quoting Chrysler Corp. v.
Quimby, 144 A.2d 123, 133 (Del. 1958)). Recovery under promissory
estoppel presupposes the lack of an enforceable contract. See
Chaplake Holdings, 822 A.2d at 1031.
In advancing this theory of liability, FinSight relies
primarily on Ramone v. Lang, 2006 WL 4762877 (Del. Ch. Apr. 3,
2006). There, the defendant promised the plaintiff that,
regardless of whether they reached an agreement in their
negotiations over the joint ownership of a property (which they
did not), the plaintiff could lease the property. See id. at *6-
7, *14. Here, in contrast, FinSight does not allege a comparably
definite promise to close the deal on which it would have been
reasonable for it to rely.
- 18 - FinSight claims that the substance of the STA should be
enforced — even if the agreement itself is unenforceable — on the
basis that the defendants negotiated the STA, were aware of
FinSight's efforts to close the transaction, and pursued Unity's
approval. But FinSight also claims that it believed the STA to be
in effect following its June 15 signing of that document. Thus,
there is no question that FinSight was aware of the defendants'
termination right. It would not have been reasonable for FinSight
to rely on the defendants to refrain from exercising their right
to terminate under an agreement that FinSight believed to be in
effect.
FinSight responds that the defendants' actions signaled
their intent to waive their termination right and that, in light
of that waiver, FinSight could reasonably rely on their eschewal
of the termination right. In support, FinSight directs our
attention to the actions of the defendants' broker, Rattan, who
continued to pursue Unity's approval after the seven business days
had passed and indicated that the defendants would be willing to
sign a second agreement if Unity demanded it. But this is merely
shouting into the wind: even if Rattan was the defendants' agent
and, through him, the defendants indicated that they might be
willing to wait until Unity approved the deal, those actions would
not be enough for the defendants to reasonably anticipate that
FinSight would rely on them as a waiver of the termination clause.
- 19 - It would not have been reasonable for FinSight to assume that
Rattan's indication of continued interest through occasional
emails overrode the express language of the termination right.
Put another way, the defendants' actions in this case could not
reasonably have been expected to induce reliance, nor were those
actions of such a character that the only way to avoid injustice
would be to enforce the terms of the STA outside the bounds of
contract law.
This leaves FinSight's claim for unjust enrichment.
That claim is presented in conclusory fashion, devoid of developed
argumentation. Because FinSight has failed to flesh out that claim
with either law or argument, we deem it waived. See United States
v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) ("[I]ssues adverted to
in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived.").
III
We need go no further. The terms and conditions of the
STA are clear and unambiguous. It says what it means and — once
the seven-day window had closed — the defendants were free to
exercise the termination right that the STA afforded to them. For
the reasons elucidated above, the judgment of the district court
is
Affirmed.
- 20 -