Gemini Investors Inc. v. Ameripark Inc.

• Decision Date: 23 June 2011
• Docket Number: No. 10–1312.,10–1312.
• Citation: 643 F.3d 43
• Parties: GEMINI INVESTORS INC., Plaintiff, Appellant,v.AMERIPARK, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

643 F.3d 43

GEMINI INVESTORS INC., Plaintiff, Appellant,
v.
AMERIPARK, INC., Defendant, Appellee.

No. 10–1312.

United States Court of Appeals, First Circuit.

Heard Feb. 7, 2011.Decided June 23, 2011.

[643 F.3d 44]

Victor H. Polk, Jr., with whom Zachary C. Kleinsasser and Greenberg Traurig, LLP were on brief, for appellant.Rocco E. Testani, with whom Jamala S. McFadden, Donna M. Brewer, Douglas K. Mansfield, Sutherland Asbill & Brennan LLP and Casner & Edwards LLP were on brief, for appellee.Before LYNCH, Chief Judge, SOUTER,^* Associate Justice, and STAHL, Circuit Judge.STAHL, Circuit Judge.

Gemini Investors Inc. (“Gemini”) sued AmeriPark, Inc. (“AmeriPark”) ¹ alleging breach of contract and breach of the covenant of good faith and fair dealing. Gemini, having lost at trial, asserts that the district court erred in instructing the jury. We affirm.

I. Facts & Background

AmeriPark owns and runs valet service operations at restaurants, hotels, and shopping centers across the country. It was founded by Robert K. Patterson, who led the company until 2008. At the time relevant to this litigation, Greenfield Partners, L.L.C. (“Greenfield”) owned 24.9 percent of AmeriPark. ² James S. Nix was

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Greenfield's Vice President and AmeriPark's primary contact at Greenfield.

On January 31, 2007, AmeriPark and Mile Hi Valet Services, Inc. (“Mile Hi”), a competing valet services company, executed a letter of intent indicating that AmeriPark would acquire Mile Hi for sixteen million dollars. Although much of the letter of intent was non-binding, the parties agreed to be bound by an exclusivity clause prohibiting Mile Hi from negotiating for its sale with anyone other than AmeriPark for a seventy-five day period.

To facilitate its purchase of Mile Hi, AmeriPark sought financing from Gemini, a private equity firm. Gemini's Managing Director, James Rich, took the lead in negotiations with AmeriPark. On March 15, 2007, AmeriPark and Gemini executed an “Outline of Key Transaction Terms” (“Outline”), which specified the terms pursuant to which Gemini would finance the Mile Hi acquisition, as well as some conditions for completion of the deal. Because the Outline contemplated a recapitalization of AmeriPark and a redemption of Greenfield's shares, AmeriPark needed Greenfield's approval to move forward with the financing as specified in the Outline.

Among other terms, the Outline included the following language: “This Outline does not constitute a commitment by Gemini to complete the financing and, other than the Section [sic] entitled ‘Exclusivity’ and ‘Confidentiality’, is non-binding on either party hereto.” That is, the only terms of the Outline that bound Gemini and AmeriPark were the exclusivity and confidentiality provisions.

The exclusivity provision read:

In consideration of Gemini's commitment to expend significant time, effort and expense to evaluate the possible investment, AmeriPark (and any officers, directors or representatives of AmeriPark) agrees not to discuss this opportunity or reach any agreement with any person or entity regarding financing for this Transaction or the pursuit of any sale or major other financing until April 16, 2007, provided that the exclusivity shall be automatically extended to the date that Mile Hi extends their exclusivity with [AmeriPark] either verbally or in writing.

(Emphasis added). The confidentiality provision read:

This Outline is delivered to you with the understanding that neither it nor its substance shall be disclosed by you to any third party except those in a confidential relationship with [AmeriPark] such as directors, senior executive officers, legal counsel and accountants. Disclosure to investment banking firms, mezzanine, venture capital or private equity funds or any other individual investors is strictly prohibited.

(Emphasis in original).

Importantly, as indicated in the above-quoted language, the Outline's exclusivity period was essentially coterminous with the exclusivity period created by the AmeriPark–Mile Hi letter of intent. Consequently, when Mile Hi later agreed to an extension of the letter of intent's exclusivity period, the Outline's exclusivity automatically extended as well.

In April 2007, after the parties signed the Outline but before the exclusivity provision expired, Patterson asked Nix if Greenfield would be interested in financing the Mile Hi acquisition in lieu of the Gemini-led financing. ³ Also during this period, Patterson approached Robert Stroup, the Chief Executive Officer and sole shareholder

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of Mile Hi, about the possibility of seller financing. After some negotiation, Stroup agreed to finance the acquisition and, on May 4, 2007, AmeriPark purchased Mile Hi using this seller financing.

On June 25, 2007, Gemini sued AmeriPark in Massachusetts Superior Court alleging that AmeriPark breached the Outline's exclusivity provision by pursuing financing for the Mile Hi acquisition from both Greenfield and Stroup. The suit was removed to federal court, and eventually went to trial. ⁴

At trial, the parties had competing views about the meaning of the exclusivity provision. AmeriPark argued that the phrase “any person or entity” referred to the persons or entities expressly set forth in the confidentiality provision—investment banks, private equity funds, etc.—and therefore AmeriPark's financing-related discussions with Greenfield and Stroup did not constitute a breach of AmeriPark's contractual obligations. Gemini, on the other hand, contended that the exclusivity provision was unambiguous and prohibited discussions with “any person or entity,” including Greenfield and Stroup. Accordingly, Gemini requested the following jury instruction: “Under the Exclusivity agreement, AmeriPark agreed not to discuss with any person or entity the proposed transaction with Mile Hi or to reach any agreement with any person or entity regarding any major financing until the exclusivity period expired.”

Over Gemini's objection, the district court concluded that the exclusivity provision was ambiguous and instructed the jury about its meaning in part as follows:

[Y]ou've got to look at the language of the exclusivity provision.... [Y]ou've got to figure out what does that private law require each party ... to do....

You use the plain and ordinary meaning of the words that the parties used, having in mind the commercial context.... Having in mind what the parties, what their commercial goals were, what did they have in mind when they entered into this deal, so that you can understand what the language they put down in that exclusivity agreement means....

I'm telling you that the law is that if the plain and ordinary meaning of the words that they used tell [sic] us how they should have behaved, you follow that.... That's what they put down in a contract. What they say about it afterwards doesn't count.

Now, if you are not clear on the point, if you think that there's any ambiguity in those words, start with this. What were they trying to do.... And while what they think later may bear on that, its not what they think later, it bears only to tell you what they thought they were doing when they agreed.

Later in the instructions, the district court further clarified: “you're going to interpret the contract, which means you're going to decide what it requires[.]”

As for causation and damages, Gemini argued that the Mile Hi acquisition would have occurred with Gemini's financing but for AmeriPark's breach of the exclusivity provision, and therefore Gemini was entitled to expectation damages for the profits it would have realized had the deal been completed. As an alternative theory of causation and damages, Gemini, citing Air Technology Corp. v. General Electric Co., 347 Mass. 613, 199 N.E.2d 538 (1964), urged the district court to instruct the jury

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on what Gemini called a “lost opportunity” theory. Specifically, Gemini argued that, even if it could not prove by a preponderance that AmeriPark's breach was the but for cause of the Gemini-financed deal falling through, the jury could still award damages for Gemini's “lost ... opportunity to negotiate” with AmeriPark to finance the deal. This “lost opportunity,” Gemini claimed, could be calculated by assessing the value of the transaction to Gemini had it gone forward, and then decreasing that value based on the possibility that the deal would have fallen through for some reason other than AmeriPark's breach.

The district court refused to issue Gemini's “lost opportunity” instructions. ⁵ Instead, it instructed the jury on causation and expectation damages in part as follows:

Gemini, since they [sic] want the benefit of the bargain, they've [sic] got to prove that but for the breach this deal would in fact have gone through and they would have made money....

A reasonable approximation [of damages] will suffice, but its got to be proved by a fair preponderance of the evidence.

This is largely a matter of judgment committed to the jury taking into account relevant factors, including what you conclude would have been the approximate net amount realized by Gemini from the deal going through.

After closing, the district court gave the jury a general verdict form, despite AmeriPark's previous request for a special verdict. During deliberations, the jury asked the following question: “Please redefine Question No. 4. Did breach cause Gemini losses? Do we assume [sic] contract would have gone through if it was not breached?” The district court responded by essentially reiterating its causation instruction and stressing that it was for the jury to determine if the breach caused the deal to collapse. Later that same day, the jury returned a verdict in favor of AmeriPark.

II. Discussion

Gemini essentially raises two issues on appeal.⁶ First, did the district court err by refusing to instruct the jury on Gemini's “lost opportunity” ⁷ theory of causation and damages? Second, did the district court...