FinSight I LP v. Seaver

• Docket Number: 22-1141
• Decision Date: 04 October 2022
• Citation: 50 F.4th 226
• Parties: FINSIGHT I LP, Plaintiff, Appellant, v. Robert SEAVER and James Toga, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

50 F.4th 226

FINSIGHT I LP, Plaintiff, Appellant,

v.Robert SEAVER and James Toga, Defendants, Appellees.

No. 22-1141

United States Court of Appeals, First Circuit.

October 4, 2022

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.

Before Lynch, Selya, and Howard, Circuit Judges.

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 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 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.

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 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").

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 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

...