Clearshot Holdings, Llc v. National Grid Wireless Holdings, Inc.
| Decision Date | 26 November 2007 |
| Docket Number | 071179BLS1 |
| Citation | 2007 MBA 535 |
| Parties | Clearshot Holdings, LLC v. National Grid Wireless Holdings, Inc. |
| Court | Massachusetts Superior Court |
As-is Docket Number: 07-1179 BLS1
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): van Gestel, Allan, J.
This matter is before the Court on two motions for summary judgment: Plaintiff ClearShot Holdings, LLC's Motion for Summary Judgment, Paper #8; and Plaintiff ClearShot Holdings LLC's Motion for Summary Judgment on the Counterclaim of National Grid Wireless Holdings, Inc., Paper #14. Both motions are opposed.
The following facts are not in dispute.
ClearShot Holdings, LLC ("ClearShot"), is a Delaware limited liability company, principally based in Malvern Pennsylvania. It is in the cellular telephone tower business. As such, it develops towers and enters into broadband lease agreements with cellular telephone carriers, allowing these carriers to install antennae equipment on the towers and to use the towers to provide cellular telephone services to their customers. The assets of ClearShot's business consist of towers (on real property sites, a few of which are owned and most of which are leased by ClearShot) and tenant lease agreements for the use of the towers.
ClearShot's business was conducted through ClearShot Communications, LLC ("CCLLC"),[1] of which ClearShot was the sole member.
National Grid Wireless Holdings, Inc. ("National Grid") is a Massachusetts corporation, based in Boxborough Massachusetts. National Grid is a subsidiary of the fourth largest utility in the world.
On August 17, 2006, ClearShot and National Grid executed and delivered an Interests Purchase Agreement ("IPA"),[2] in which ClearShot agreed to sell and National Grid agreed to purchase ClearShot's membership interest in CCLLC. National Grid agreed to pay ClearShot at closing $131,604,600, of which $128,500,000 was for wireless towers and associated land leases (defined in the IPA as "Towers") and fully executed lease agreements (defined in the IPA as "Contracted Tenant Agreements") listed in Exhibit D to the IPA. An additional $3,009,600 was for thirteen additional CTAs and the remaining $95,000 was for two specified Florida land leases.
ClearShot represented in Section 3.17 of the IPA that all Contracted Tenant Agreements to which it was a party on August 17, 2006, were listed in Schedule D and on Schedule 3.17 of the IPA. Despite this representation, as of August 17, 2006, ClearShot was a party to an additional twelve Contracted Tenant Agreements (the "Twelve Additional CTAs") not listed in Schedule D or on Schedule 3.17.
On September 21, 2006, eleven days before the closing of the IPA, ClearShot notified National Grid of the Estimated Closing Purchase Price, including the additional $3,009,600 for thirteen additional Contracted Tenant Agreements ("CTAs"), in accordance with IPA Section 2.3(a). Of the additional $3,009,000, $2,667,600 was for the Twelve Additional CTAs to which ClearShot was a party on August 17, 2006, but which were not listed in Schedule D or Schedule 3.17. The one other additional CTA had been entered into by ClearShot after the IPA was executed on August 17, 2006.
At the October 2, 2006 closing of the IPA, National Grid knowingly paid $2,667,600 for the Twelve Additional CTAs, even though it now alleges that those CTAs "should properly have been included in the agreements listed on Schedule 3.17 and Schedule D." National Grid asserts that it "forewent prosecution of its claims for misrepresentation and breach of the IPA and proceeded with the closing" "because National Grid had already expended considerable resources and made substantial commitments in connection with the transaction."
National Grid paid the additional $2,667,000 without raising any issue or complaint. National Grid did not challenge the additional $2,667,600 or the Twelve Additional CTAs prior to the closing, on the date of the closing, during the post-closing adjustment process, or thereafter, until at least January 5, 2007.[3]
IPA Section 5.6(c) required National Grid to notify ClearShot prior to the closing of any alleged breach of representation or warranty. National Grid gave no such notice. At the closing, National Grid delivered to ClearShot an Officer's Certificate in which it represented that it knew of no such breach of representation or warranty by ClearShot.
Of the monies paid at closing, five percent, or $6,629,517 went into an escrow account, pursuant to Section 2.3(a)(i) of the IPA.
National Grid now possesses all records of ClearShot constituting or reflecting the two land leases in the State of Florida described in Schedule C of the IPA. National Grid has never requested ClearShot to execute any documents to accomplish a transfer of these two leases.
The IPA provided for a post-closing period during which ClearShot could complete the construction of pending towers and obtain additional tenant lease agreements, for which National Grid would make additional payments on two subsequent "Deferred Payment" dates.
Section 2.5 of the IPA provided that on the "First Deferred Payment Date," defined to be no later than December 29, 2006, National Grid would pay an additional "First Deferred Payment Price" to be designated by ClearShot in a "First Payment Certificate."
The IPA defined the "First Deferred Payment Price" to mean the "First Deferred Payment Enterprise Value" minus expenditures made by the Company in connection with the tower sites and tenant lease agreements that were components of that value. The "First Deferred Payment Enterprise Value" was defined to include a multiple of the net revenues of tenant lease agreements tendered to National Grid prior to the First Deferred Payment Date that were either under negotiation at the time of the closing (defined as "Pending Tenant Agreements") or negotiated thereafter:
"First Deferred Payment Enterprise Value" means, as at the First Deferred Payment, the amount of (i) the product of 19 times annualized Net revenue for Accepted Contract tenant agreements that are Pending Tenant Agreements at the Closing that become Contracted Tenant Agreements prior to the First Deferred Payment Date; (ii) the product of 18 times annualized Net revenue for Accepted Contract tenant agreements that are not Contracted Tenant Agreements or Pending Tenant Agreements at Closing that become Accepted Contract Contracted Tenant Agreements prior to the First Deferred Payment Date, and (iii) the greater of $250,000.00 or Run-Rate TCF for Qualifying Towers completed or acquired by the Company that do not appear on Schedule D within a minimum of one (1) broadband equivalent tenant. In no event shall First deferred Payment Enterprise Value include agreements that become Contracted Tenant Agreements following the First Deferred Payment Date.
The IPA defined "Accepted Contracts" to include broadband tenant lease agreements meeting three requirements: the tenant lease agreements had to be (x) with a tenant "capable of performing," (y) on terms and conditions consistent with the Company's then current tenant lease agreements, and (z) first tendered to National Grid after the closing pursuant to Section 5.12, "whether or not such agreement has been, or ever is, executed by the Company." Section 5.12 authorized ClearShot's principals, between the Closing and the First Deferred Payment Date, to negotiate tenant lease agreements with tenants and tender them to National Grid for signature by the Company. Section 5.12 obligated National Grid to cause the Company to execute such contracts promptly following tender by ClearShot.
The "Net Revenue" of an Accepted Contract tenant agreement that would be multiplied was the gross revenue associated with the tenant lease agreement minus any incremental amount paid under a tower site ground lease on account of that tenant lease agreement.
The First Deferred Payment Enterprise Value also included the value of any "Qualifying Towers" that did not appear on Schedule D to the IPA. The IPA defined "Qualifying Towers" as a tower having at least one tenant that had commenced rent or had installed equipment on such tower. A Qualifying Tower's value was based on a multiple of net revenues, defined in a "Run-Rate TCF" formula. The definition of Run-Rate TCF for a Qualifying Tower included the revenues of tenant lease agreements on the tower under which the tenant had commenced payment of rent or had installed equipment on the tower.
The IPA also provided for a "Second Deferred Payment Date" to take place no later than March 31, 2007. Under Section 2.6 of the IPA, the Purchaser on that date would pay a "Second Deferred Payment Price" certified in a "Second Deferred Payment Certificate" and based on a "Second Deferred Payment Enterprise Value." The Second Deferred Payment Enterprise Value was based upon the Run-Rate TCF for any towers not listed in the IPA's Schedule D that were the subject of an Accepted Contract on the First Deferred Payment Date, but that were not included in the computation of the First Deferred Payment because no tenant "had installed equipment or commenced payments on the First Deferred Payment Date." Section 2.6 provided that there would be no Second Deferred Payment Date unless on the First Deferred Payment Date there were Accepted Contracts for towers for which no Run-Rate TCF could then be calculated because the tenant had not yet commenced payment or installed equipment.
Following the October 2, 2006 closing, and pursuant to Section 5.2 of the IPA, ClearShot delivered to National Grid 22 additional tenant lease agreements prior to the December 29, 2006...
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