Spacek v. MARKETWATCH, INC.

420 F. Supp. 2d 303, 2006 U.S. Dist. LEXIS 10132, 2006 WL 626076
CourtDistrict Court, S.D. New York
DecidedMarch 13, 2006
Docket04 Civ. 8149(LBS)
StatusPublished

This text of 420 F. Supp. 2d 303 (Spacek v. MARKETWATCH, INC.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spacek v. MARKETWATCH, INC., 420 F. Supp. 2d 303, 2006 U.S. Dist. LEXIS 10132, 2006 WL 626076 (S.D.N.Y. 2006).

Opinion

MEMORANDUM AND ORDER

SAND, District Judge.

Lance Spacek, a financial analyst and advisor, worked for the investment company Salomon Smith Barney (SSB) from 1998 until November 2002. In March 2002, SSB entered into a contract with MarketWatch, a financial news and information website, to provide MarketWatch with investment advice with respect to four companies the company was considering for acquisition. Spacek was the principal liaison between SSB and MarketWatch, providing services that MarketWatch found more than satisfactory. When SSB laid Spacek off during an economic downturn in the digital media market, Market-Watch entered into a separate engagement with Spacek in order to keep him working on its transactions. This dispute arises out of the contract between Spacek and MarketWatch and raises the question of whether it allows Spacek to recover a fee for financial advice provided to Market-Watch. Both parties agree the contract is valid and binding. 1 After an examination of the contract and upon hearing evidence presented at trial, it is the Court’s decision that Spacek is entitled to his fee under the terms of the contract.

I. FACTS

In March 2002 MarketWatch retained SSB as its financial advisor for four potential acquisitions. The contract entered into between MarketWatch and SSB stated that MarketWatch had chosen to engage SSB as its “exclusive financial adviser in connection with one or more possible Transaction(s) involving Bankrate Inc., Hoover’s Inc., ScreamingMedia Inc. and/or EDGAR Online, Inc.” Screaming Media was often referenced as “SAM,” and would *305 eventually come to be known as Pinnacor. 2 The agreement was structured as a “success fee.” (Trial Tr. 83-84, Feb. 21-22, 2006) If no transaction was consummated, SSB would get nothing. If a transaction was consummated, a fee would be paid. The contract did not specify hours to be spent on any project by SSB. There was no floor or ceiling for the number of hours to be spent in analyzing, facilitating, or negotiating any of the four potential transactions.

If a transaction was consummated between MarketWatch and any of the four companies, SSB would be entitled to $1,000,000 as long as the transaction required an opinion letter. An opinion letter is an assessment of the fairness to the acquiring company of the proposed transaction. The assessment subjects the writer to potential liability if the fairness of the transaction is later challenged. If smaller transactions occurred which did not require the rendering of an opinion letter, the compensation was to be mutually determined by SSB and MarketWatch. SSB was obligated to perform “such financial advisory and investment banking services for the Company in connection with the proposed Transaction as are customary and appropriate in transactions of this type and as you reasonably request.” The contract also contained a “tail” provision, which ensured that if MarketWatch’s relationship with SSB terminated or expired SSB would still receive its fee if Market-Watch entered into a transaction with any of the four named companies within 12 months of the date of termination or expiration.

Spacek was the lead banker for SSB on the team working for MarketWatch, and he played a role in drafting the SSB-MarketWatch contract. He was the supervisor of the SSB team assigned to MarketWatch and he worked closely with MarketWatch in planning MarketWatch’s financial strategy with respect to the four companies detailed in the agreement. Spacek was MarketWatch’s primary contact at SSB; he spoke to MarketWatch officers and the board on a regular basis. Defendant’s witnesses, Lawrence Kramer, former CEO and chairman of Market-Watch, and Joan Platt, former CFO of MarketWatch, held Spacek and his work in high regard while he worked for SSB.

While working for SSB, Spacek evaluated MarketWatch’s four acquisition targets, including EDGAR Online and Scream-ingMedia. He examined the value of these companies to MarketWatch and assessed whether acquiring them made strategic sense. He made presentations to Kramer and Platt which detailed his analysis of the respective companies. He evaluated the potential business combinations with all four targets and presented strategies for all four targets to Kramer and Platt. SSB and MarketWatch agreed to pursue the EDGAR transaction first, as it appeared to be the best fit and to be significantly undervalued. Spacek was the lead negotiator for MarketWatch and both Kramer and Platt were pleased with the services Spacek was providing.

In November of 2002 Spacek was laid off by SSB. Kramer testified that he was “stunned” upon learning the news. (Tr. 17.) Platt was also unhappy, stating that MarketWatch “felt that he had done a good job for us and we wanted him to continue doing that job.” (Tr. 178.) The EDGAR negotiations were in full swing at the time and a deal with EDGAR appeared *306 to be set for closing in a matter of months. Losing Spacek was perceived by Market-Watch to be a loss to it. Testimony by the MarketWatch officers confirmed that Spa-cek had done quality work for Market-Watch and that MarketWatch did not want to lose him. Nor did Spacek want to abandon this client or this area of financial advisory services. As a result of this mutual desire to continue the professional relationship, a separate contract was drafted that would allow Spacek to continue working for MarketWatch on an independent basis.

CONTRACT DRAFTING

Spacek, working without the assistance of an attorney, drafted a new arrangement with Joan Platt. Platt testified that she could not recall specifically whether Mark-etWatch’s attorneys looked at the contract before it was signed but said she would be surprised if they had not. (Tr. 163.) Regardless, all sides agree that no attorney assisted Spacek in the drafting and that MarketWatch had at best minimal assistance from attorneys. This is regrettable because clearer drafting might well have prevented this dispute from ever arising.

Instead of drafting a new contract from scratch, the parties used the SSB-Market-Watch contract as a template and formed the contractual language for the new Spa-cek-MarketWatch agreement by excising certain words from the template and substituting others. This was done, in Spacers view, because he trusted that the SSB-MarketWatch contract had been reviewed by competent attorneys, and because by copying and excising sections he could avoid hiring an attorney himself. (Tr. 98-100.) MarketWatch was also content to use this process.

Spacek and Platt exchanged drafts of the new agreement and ultimately settled on a mutually agreeable version. Spacek wrote to Joan Platt that “[f]or simplicity, I have used the SSB engagement letter as the base and only modified it so that it reads correctly.” (E-mail from Spacek to Platt, Dec. 10, 2002.) He had “delete[d] the relevant portions: right of first refusal on financing, research commitment, delivery of an Opinion, etc.

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420 F. Supp. 2d 303, 2006 U.S. Dist. LEXIS 10132, 2006 WL 626076, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spacek-v-marketwatch-inc-nysd-2006.