Baim v. Dukart
| Docket Number | CIVIL ACTION NO. 21-1696 |
| Decision Date | 08 August 2022 |
| Citation | 620 F.Supp.3d 207 |
| Parties | Edward S. BAIM, et al., Plaintiffs, v. Joel DUKART, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Daniel J. Dugan, Spector Gadon Rosen Vinci PC, Philadelphia, PA, Leslie Beth Baskin, Spector, Gadon and Rosen, P.C., Philadelphia, PA, for Plaintiffs.
Michael J. Fortunato, Rubin, Fortunato & Harbison P.C., Wayne, PA, Neil Lapinski, Phillip Giordano, Gordon, Fournaris & Mammarella, P.A., Wilmington, DE, Andrew Michael DeLucia, Rubin Fortunato PC, Paoli, PA, for Defendants.
Joel and Michael Dukart offered to purchase four Philadelphia-area McDonald's restaurants for roughly $19 million from companies controlled by Edward Baim, and the parties eventually came to terms on a sale. Pursuant to a prior agreement with Baim, however, GNS Enterprises 6, LP, whose parent company is GNS Inc., held a right of first refusal to purchase the restaurants. The sale to the Dukarts was contingent, among other things, on GNS 6 not exercising that right and there being no pending or threatened litigation challenging the sale.
GNS 6 assigned the right to GNS Inc., which exercised it. Baim subsequently sold the restaurants to GNS Inc., which he claims he was contractually obligated to do. The Dukarts contend Baim was obligated to sell them the restaurants under their purchase and sale agreement. Baim and the companies through which he owned the restaurants sued the Dukarts seeking a declaration from the Court blessing the sale to GNS Inc. Plaintiffs then moved for summary judgment. After thoroughly reviewing the record and the parties' submissions, the Court denies the Motion.
The competing and overlapping negotiations between Baim and the Dukarts and Baim and GNS Inc. and the inconsistent language in the dueling purchase agreements make for a somewhat confusing, counterintuitive and inherently contradictory record. In sum, while GNS Inc. exercised its right of first refusal, a reasonable jury could find the Dukarts waived that contingency in their agreement with Baim. Moreover, there are material factual disputes concerning possible pending or threatened litigation surrounding the sale.
On October 31, 2019, Baim1 entered into a purchase and sale agreement to sell three McDonald's restaurants in New Jersey to GNS 6, which Grant Skylass owns along with GNS Inc. (Defs' Ex. 12, ECF 23-2; Pls' Ex. M ¶¶ 1-2, ECF 22-4.) The sale was finalized in February of 2020. (Defs' Ex. 12 § 1.1; Defs' Answer to Pls' Statement of Undisputed Material Facts ¶ 4, ECF 23-4.)
The Skylass Purchase and Sale Agreement granted GNS 6 a right of first refusal to purchase four additional McDonald's in Pennsylvania, three in Philadelphia and the fourth in a county adjacent to the city, also owned by Baim:
If . . . any BAIM ENTITY receives [an offer] for any one or more PHILADELPHIA RESTAURANT from anyone other than PURCHASER and desires to accept such offer, it must first give notice to PURCHASER of the proposed terms and conditions of the offer, including without limitation the purchase price, the proposed closing date and the conditions of closing (the "AGREEMENT TERMS"). Within 14 days of the date of the notice, . . . PURCHASER must notify Edward Baim of its agreement to purchase the restaurant on the AGREEMENT TERMS. Otherwise, the BAIM ENTITY may sell the restaurant pursuant to [the offer].
(Pls' Ex. A § 10.11(b), ECF 22-4.) The parties, with one irrelevant exception, were not allowed to assign their rights under the Agreement. (Defs' Ex. 12 § 10.2, ECF 23-2.) Notwithstanding this provision, GNS 6 subsequently assigned its right of first refusal to GNS Inc. (Skylass Aff. ¶ 6.)
Joel Dukart told Baim he and his brother wanted to buy the four Pennsylvania restaurants for approximately $19 million. (J. Dukart Dep. 5:16-10:16, Pls' Ex. B, ECF 22-4, Defs' Ex. 3, ECF 23-2.) Baim told them about the right of first refusal in the Skylass Purchase and Sale Agreement. (Id. at 10:24-11:8; M. Dukart Dep. 17:4-24, Pls' Ex. C, ECF 22-4, Defs' Ex. 10, ECF 23-2.)
On October 5, 2020, the Dukarts sent Baim a draft letter of intent setting forth their proposed terms for purchasing the four McDonald's. (Defs' Ex. 2, ECF 23-2.) Baim's counsel then gave the Dukarts' lawyer the specific provision in the Skylass Agreement granting the right of first refusal. (Defs' Ex. 13, ECF 23-2.)
On October 9, 2020, Baim and the Dukarts signed their letter of intent, which included a provision recognizing that GNS Inc. had the right of first refusal to any sale. (J. Dukart Dep. 14:5-8, 34:2-6.) Baim's counsel subsequently mailed the Dukarts' offer to GNS, Inc., providing the notice required under the Skylass Agreement and giving GNS Inc. two weeks to exercise its right. (Pls' Ex. D, ECF 22-4.) A week later, Skylass's counsel told Baim that GNS Inc. was exercising its right to purchase the restaurants on the terms proposed by the Dukarts. (Pls' Ex. E, ECF 22-4.) Importantly, Baim never objected to the substitution of GNS Inc. for GNS 6 and negotiated the sale to GNS Inc. See (Baim Dep. 84:22-86:15, Pls' Ex. F, ECF 22- 4, Defs' Ex. 1, ECF 23-2; Defs' Ex. 8, ECF 23-2).
On October 22, 2020, Skylass's lawyer sent Baim's counsel a draft purchase and sale agreement for the four Pennsylvania McDonald's. (Defs' Ex. 14, ECF 23-2.) But the parties disputed the terms of the proposed transaction. See, e.g., (Baim Dep. 70:7-71:16, 74:4-75:1, 78:21-79:5; Defs' Ex. 6, ECF 23-2). Specifically, Skylass felt Baim was trying to add terms to those proposed by the Dukarts. (Defs' Exs. 5, 7-8, ECF 23-2); see also (Glaser Dep. 18:11-24, Pls' Ex. G, ECF 22-4, Defs' Ex. 4, ECF 23- 2). For example, Baim wanted Skylass to make a larger, nonrefundable deposit. (Baim Dep. 48:22-49:4); see also (Glaser Dep. 18:2-16).
In late October, Skylass retained litigation counsel to enforce GNS Inc.'s right of first refusal and complete the purchase of the four restaurants. (Defs' Ex. 5, ECF 23-2; Glaser Dep. 14:3-19, 19:21-23.) Counsel then told Baim's attorney that his client was ready to complete the proposed transaction on the Dukarts' terms, pursuant to its enforceable right to match their offer. (Defs' Exs. 5, 7.) Moreover, Skylass's lawyer said his client was "fully prepared to seek specific performance in Court if necessary" but was willing to consider modifications "if that will avoid the need for litigation." (Defs' Ex. 7); see also (Defs' Ex. 5 (); Baim Dep. 58:13-21).
On October 26, 2020, as Baim negotiated with both Skylass and the Dukarts, the latter sent Baim a draft purchase and sale agreement, which again included a provision addressing GNS Inc.'s right of first refusal on any transaction involving the Pennsylvania restaurants. (Pls' Exs. I-J, ECF 22-4.) Four days later, Baim and the Dukarts signed the Dukart Purchase and Sale Agreement. (Pls' Exs. J-K, ECF 22-4.) It provided, inter alia, that the Dukarts' obligation to purchase the restaurants was subject to the following condition, which the Dukarts had, in their sole discretion, the right to waive:
Right of First Refusal. GNS Enterprises [6], LP shall not have exercised its rights pursuant to and in accordance with the terms of the Right of First Refusal contained in [the Skylass Purchase and Sale Agreement].
(Pls' Ex. J § 7.10.) In turn, Baim's obligation to sell the restaurants was subject to the following condition:
Challenge to This Agreement. There shall be no pending or threatened claim and/or suit by any party challenging this AGREEMENT or the consummation of the transactions contemplated herein.
(Id. at § 5.2.)2 Additionally, Baim represented the following:
Litigation. Except as listed on Exhibit F attached hereto: . . . There is no investigative action, inquiry, proceeding or litigation pending, or to the best knowledge of SELLER . . . threatened, against SELLER . . . or the RESTAURANTS before any court . . . . [SELLER does not know] of the occurrence of any events which are likely to give rise to any such action, proceeding or investigation.
(Id. at § 4.1.) Exhibit F is blank and was never amended. (Id. at Ex. F.)
On November 3, 2020, Skylass's counsel told Baim's lawyer that his client "has exercised its Right of First Refusal" and intended to consummate its purchase of the four restaurants. (Defs' Ex. 9, ECF 23-2.) Baim thereafter entered into a purchase and sale agreement with GNS Inc. and sent a copy to the Dukarts' attorney. (Pls' Ex. L, ECF 22-4; Defs' Answer to Pls' Statement of Undisputed Material Facts ¶¶ 26-27, ECF 23-4.) Baim sold the restaurants to GNS Inc. on December 21, 2020. (Pls' Ex. L § 1.1.)
On May 24, 2021, Baim and the entities through which he had owned the Pennsylvania McDonald's sued the Dukarts seeking a declaratory judgment that he lawfully sold the restaurants to GNS Inc. (ECF 5.) The Dukarts asserted four counterclaims related to their transaction with Baim, including for breach of the Dukart Purchase and Sale Agreement. (ECF 7 at 8-16.)3
Summary judgment is proper if the movant shows there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed R. Civ. P. 56(a). A fact is material if it might affect the case's outcome under the governing law, and a genuine dispute exists if a reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A mere scintilla of evidence supporting the nonmovant will not suffice; rather, to avoid summary judgment, he must set forth specific facts showing there is a genuine trial issue and cannot rest on pleadings. Id. at 252, 256, 106 S.Ct. 2505.
A court can consider any material in the record that may be admissible at trial, and must view facts in the light most favorable to the nonmovant and draw all inferences in its favor. See Fed. R. Civ. P. 56(c)(2); ...
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