Paraflon Invs., Ltd. v. Fullbridge, Inc.

• Decision Date: 26 May 2020
• Docket Number: No. 19-1913,19-1913
• Citation: 960 F.3d 17
• Parties: PARAFLON INVESTMENTS, LTD., Plaintiff, Appellant, v. FULLBRIDGE, INC., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

960 F.3d 17

PARAFLON INVESTMENTS, LTD., Plaintiff, Appellant,

v.FULLBRIDGE, INC., et al., Defendants, Appellees.

No. 19-1913

United States Court of Appeals, First Circuit.

May 26, 2020

Nicholas D. Stellakis, with whom Michael R. Perry, Anna Baitchenko, and Hunton Andrews Kurth LLP were on brief, for appellant.

Lawrence G. Green, with whom Susan E. Stenger, Kelly K. Ballentine, and Burns & Levinson LLP were on brief, for appellees.

Before Kayatta, Circuit Judge, Souter,^* Associate Justice, and Selya, Circuit Judge.

SELYA, Circuit Judge.

When a seemingly delicious investment opportunity turned rancid and left a foul taste, plaintiff-appellant Paraflon Investments, Ltd. (Paraflon) went on the offensive: it sued the once and former object of its affections, Fullbridge, Inc. (Fullbridge), and Fullbridge's principals, Peter Olson and Candice Olson, claiming fraud and misrepresentation. Following a five-day bench trial, the district court turned Paraflon away empty-handed. See Paraflon Invs., Ltd. v. Fullbridge, Inc., No. 16-12436, 2019 WL 3759522, at *12 (D. Mass. Aug. 9, 2019). Paraflon now seeks appellate review. After rounding off some ragged edges, we affirm.

I. BACKGROUND

We rehearse the relevant facts consistent with the district court's supportable factual findings. See Dudley v. Hannaford Bros., 333 F.3d 299, 301 (1st Cir. 2003). Our tale begins with an introduction to the protagonists and other leading players.

Paraflon is a private limited company, principally based in the British Virgin Islands and wholly owned by a family trust. The trust's main beneficiary, Michael Sarkesian, scouts investment opportunities for Paraflon. Founded in 2010 by the Olsons and based in Massachusetts, Fullbridge develops training courses for students to facilitate their successful transition into the workforce.¹ The Olsons served jointly as Fullbridge's chief executive officers until August of 2015. Thereafter, Peter Olson alone acted in that capacity. He resigned in May of 2016.

This case has its genesis in Fullbridge's relationship with Takamol, a subsidiary of the Kingdom of Saudi Arabia's Ministry of Labor. The Ministry created Takamol with a view toward bolstering the Saudi labor market through private sector partnerships. In May of 2014, Takamol issued a Request for Proposal (RFP) seeking bidders for "Wave 1" of a project involving the production of online training courses. Fullbridge submitted a bid and was subsequently notified by Takamol, both verbally and (at some point) in writing, that it was the winning bidder.

In August of 2014 (after Fullbridge had been selected as the winning bidder for Wave 1), Takamol and Fullbridge executed a project agreement, sometimes referred to as the "Master Agreement." This Agreement provided that it would "serve as a framework for the terms" governing Fullbridge's work, which would occur incrementally in line with discrete work orders. Each work order would function "as a separate contract and [would] adopt the terms of" the Master Agreement. In turn, the Master Agreement disclaimed any commitment "that a Work Order will be offered, awarded or entered into," and declared that no "binding agreement" would exist "until the relevant Work Order is formally executed."

In the fall of 2014, Takamol issued a second RFP for "Wave 2" of the project. Fullbridge again submitted a bid and was awarded a portion of the Wave 2 project. After Fullbridge was notified of the award, the parties spent weeks negotiating final pricing, eventually reaching an accord through an exchange of e-mails.

Although the Master Agreement referenced the Wave 1 RFP, its application was not expressly confined to Wave 1. And at the time the Master Agreement was executed, Takamol informed Peter Olson that it would cover all of Fullbridge's future work for Takamol, including any projects associated with Waves 2 and 3. Consistent with this representation, work orders subsequently issued to Fullbridge for both Wave 1 and Wave 2 incorporated by reference the terms of the Master Agreement.

Throughout Fullbridge's work on Waves 1 and 2, Takamol maintained a practice of "perform[ ] now, paper[ ] later." Relying on this practice, Fullbridge began work on Wave 1 before the Master Agreement had been executed, proceeding on the basis of verbal assurances from Takamol that it had received the Wave 1 award. Similarly, Fullbridge began multiple projects months before any work orders for those projects were executed.

As Fullbridge's relationship with Takamol matured, Fullbridge found itself undercapitalized and went hunting for investors. In the spring of 2015, Paraflon paid $500,000 to purchase shares of Fullbridge's convertible preferred stock during the company's Series D financing round. At that time, Paraflon had made only a handful of other investments (none of which had been in the education sector).

In April — from this point forward all dates are in 2015 unless otherwise expressly denominated — Takamol issued a third RFP seeking course developers for Wave 3. This RFP included provisions requiring successful bidders to enter into three-year "Framework Agreements" with Takamol. It also required all bidders, "including those who ha[d] previously entered into an agreement with Takamol," to complete a "Legal Requirements attachment" since the standard terms employed in previous RFPs had been updated. Any successful bidder would be "expected to enter into a Framework Agreement with Takamol on the basis" of these legal requirements. Additionally, the RFP stated that "Preferred Bidder[s]" would be notified of that status in writing.

Fullbridge submitted a bid for Wave 3 in late May. In August, Takamol requested a meeting with a Fullbridge decisionmaker to commence negotiations regarding Wave 3. On August 17, three Takamol representatives met with two Fullbridge representatives in Saudi Arabia, with Peter Olson and two other Fullbridge employees participating by telephone. At this meeting, a Takamol representative stated that Fullbridge had won a substantial share of the Wave 3 project, to include the development of approximately 8,000 learning hours over the course of three years, with the price per learning hour capped at $4,800.² Fullbridge estimated that, under this arrangement, it would earn approximately $40 million in revenue.

In the aftermath of the August 17 meeting, Fullbridge understood that the parties had reached a high-level agreement on the approximate number of learning hours, the maximum price per learning hour, and the overall duration of the work. Fullbridge also understood, though, that the parties still needed to negotiate a "second layer" of more granular details. These details included the "families" of course topics that Fullbridge would produce, the number of courses to be developed within each family, and the exact price associated with each family. But based on previous statements that the Master Agreement would govern all of Fullbridge's work for Takamol, Fullbridge did not believe that it would be required to execute a new Framework Agreement for Wave 3.

Shortly after the August 17 meeting, a Fullbridge employee e-mailed Takamol a "pricing offer" containing a proposed breakdown of course families, the price per learning hour associated with each family, and the average course length per family. The next day, Abeer AlHashimi (a Fullbridge representative based in Saudi Arabia) reported that Takamol's "initial feedback" on Fullbridge's proposed pricing had been positive and that Fullbridge should expect to hear back from Takamol within two days "on the exact volume and families awarded."

Fullbridge quickly commenced logistical planning for its work on Wave 3, remaining in regular contact with Takamol along the way. Starting in September, Peter Olson checked weekly with AlHashimi, inquiring whether it would be accurate to tell investors that Fullbridge's Wave 3 "deal" was "still on." AlHashimi (who had contact with Takamol's upper echelon) repeatedly confirmed the deal's continued viability. Apparently still strapped for capital, Fullbridge sought loans from two venture capital firms. Both firms requested documentation of the Wave 3 award, sparking a series of communications between Fullbridge and Takamol about Wave 3's status. Although we need not recite book and verse, several data points bear mention.

To begin, Takamol declined to sign a non-binding statement, drafted by Fullbridge, confirming the Wave 3 award. Then — in an e-mail to Takamol in late October — Peter Olson indicated that Fullbridge was ready to begin work in earnest on Wave 3 "pending the actual award of courses and a clear timetable for delivery."³ He requested "a sense of the exact timing and courses designated." Takamol responded that although it had been "delayed by issues outside of [its] control," matters seemed to be "moving in the right direction." Emphasizing that it valued its "partnership" with Fullbridge, Takamol stated that although it could not give "a date now," all partners could expect to receive "a better outlook" the following week.

In an e-mail to AlHashimi a few days later, Takamol indicated that it was "still waiting for the management approval in this particular RFP" and proposed that an alternative arrangement be implemented "to expedite the approval." This alternative arrangement entailed the issuance of a so-called buffer order for "a certain number of learning [h]ours" on a "letter of intent basis" and a fixed price agreement that would set the "price and the demand for [the] long period agreement." Takamol's representative noted that although he did not know "how much" would ultimately be agreed to (an apparent reference to the volume and/or price of courses), Fullbridge's original pricing offer was "acceptable" to him. AlHashimi responded that Fullbridge would accept this arrangement if Takamol confirmed the full scope of the Wave 3 project (specifically, a minimum of 7,200 learning hours with an average production of 600 learning...