182 F.3d 659 (8th Cir. 1999), 98-1601, Video Update, v Videoland

Docket Nº:98-1601
Citation:182 F.3d 659
Party Name:Video Update, Inc., a Minnesota corporation, Appellant, v. Videoland, Inc., an Indiana corporation; Mark Spilker, individually, Appellees.
Case Date:July 08, 1999
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 659

182 F.3d 659 (8th Cir. 1999)

Video Update, Inc., a Minnesota corporation, Appellant,


Videoland, Inc., an Indiana corporation; Mark Spilker, individually, Appellees.

No. 98-1601

United States Court of Appeals, Eighth Circuit

July 8, 1999

February 10, 1999, Submitted


Page 660

Eric Magnuson, Minneapolis, MN., argued (Patrick J. Rooney and William P. Wassweiler, on the brief), for Appellant.

Robert M. McClay, St. Paul, MN., argued (Paula D. Osborn, on the brief), for Appellee.

Before McMILLIAN, JOHN R. GIBSON and MURPHY, Circuit Judges.

McMILLIAN, Circuit Judge.

Video Update, Inc. (Video Update) appeals from a final order entered in the United States District Court1 for the District

Page 661

of Minnesota, granting summary jud gment in favor of Videoland, Inc. (Videoland), and Videoland's owner, Mark Spilker. Video Update, Inc., v. Videoland, Inc., No. 3-96-735 (D. Minn. Jan. 26, 1998). For reversal, Video Update argues that the district court erred in (1) interpreting the purchase agreement between Video Update and Videoland, (2) awarding attorney's fees to Videoland and Spilker, and (3) awarding pre-judgment interest to Videoland and Spilker. For the reasons stated below, we affirm.


Jurisdiction in the district court was proper based upon 28 U.S.C. § 1332. Jurisdiction in this court is proper based upon 28 U.S.C. § 1291. The notice of appeal was timely filed pursuant to Fed. R. App. P. 4(a).


The following is a summary of the undisputed facts set forth in the district court's order. Id. In 1980 Mark Spilker founded Videoland, a video rental business which owned and operated various stores in Lafayette, Indiana. Video Update and Videoland entered into negotiations for the sale of Videoland to Video Update which culminated in a signed purchase agreement in November 1995. Under the purchase agreement, Video Update agreed to pay Spilker approximately $ 4 million-- $ 2 million in cash and approximately $ 2 million in unregistered Video Update stock (239,163 shares). The purchase agreement provided that, if Spilker sold the stock between March 14 and September 14, 1996, Video Update would guarantee a price of at least $ 12 per share. If the stock sold for less than $ 12, Video Update agreed to pay the difference or the "deficiency amount," in cash or additional stock, as set forth in Section 1.3(a)(ii) (the "deficiency payment provision") of the purchase agreement. 2 In addition, Section 6(k) (the "lockup/dribble" provision) of the purchase agreement contained restrictions on both the amount and timing of Spilker's sale of stock.3

In January 1996 Video Update notified Spilker that it intended to file a registration statement with the Securities Exchange Commission in contemplation of a public offering. In response, Spilker requested that Video Update register his shares so that he could sell them. At Video Update's request, Spilker executed a "registration election form" in which he agreed to honor the lockup provision. The Video Update shares were registered on February 15, 1996. Between March 15,1996 and May 24, 1996, Spilker sold 239,163 shares of Video Update stock for less

Page 662

than $ 12.00 per share. During April and May 1996 he sold 2 blocks of 30,000 shares each within 5 business days.

In August 1996 Video Update filed this action for declaratory judgment pursuant to 28 U.S.C. § 2201 in federal district court to determine its liabilities under the purchase agreement. Video Update sought a judicial declaration that Spilker's obligation under Section 6(k) of the purchase agreement was an express condition precedent to Video Update's obligation to make the deficiency payment, that Spilker breached the purchase agreement by selling in excess of 25,000 Video Update shares within a five (5) business day period, in violation of the lockup/dribble provision, and that Video Update is excused from performance under Section 1.3(a)(ii), and has no obligation to pay attorney's fees. Videoland and Spilker filed an answer asserting affirmative defenses (waiver, disproportionate or extreme forfeiture) and a counterclaim against Video Update for a deficiency payment in excess of $ 1.2 million.

The parties filed cross-motions for summary judgment. In January 1998 the district court granted summary judgment in favor of Videoland and Spilker. The district court regarded this case as one of contract interpretation and applied Minnesota law pursuant to a choice-of-law provision in the purchase agreement. The district court noted that the parties did not dispute that Spilker sold his stock for less than the $ 12 per share guarantee or that some of Spilker's sales of stock exceeded the quantity and frequency limitations set forth in the lockup/dribble provision. By relying upon the "condition precedent" language in Section 6(k), Video Update...

To continue reading