Pro Done, Inc. v. Basham

• Decision Date: 03 May 2019
• Docket Number: No. 2018-0060,2018-0060
• Parties: PRO DONE, INC. v. Teresa BASHAM & a.
• Court: New Hampshire Supreme Court

172 N.H. 138

210 A.3d 192

PRO DONE, INC.

v.Teresa BASHAM & a.

No. 2018-0060

Supreme Court of New Hampshire.

Argued: October 11, 2018

Opinion Issued: May 3, 2019

Rath, Young and Pignatelli, P.C., of Concord (Michael S. Lewis, Kenneth Bartholomew, and R. Terry Parker on the brief, and Mr. Lewis orally), for Pro Done, Inc.

Shaheen & Gordon, P.A., of Concord (William E. Christie, Timothy J. McLaughlin, and Alexander W. Campbell on the brief, and Mr. McLaughlin orally), for Teresa Basham, Individually and as Non-Independent Trustee of the Paul R. Hooper 1998 GST Exempt Trust, Terrence Lee Hooper, and Timothy John Hooper.

Ransmeier & Spellman, P.C., of Concord (Biron L. Bedard ), for John C. Ransmeier, Trustee of the Paul R. Hooper 1997 Trust, joined in the brief of Teresa Basham, Terrence Lee Hooper, and Timothy John Hooper.

HANTZ MARCONI, J.

The plaintiff, Pro Done, Inc., appeals an order of the Superior Court (Kissinger, J.) dismissing its amended complaint against the defendants, Teresa Basham, individually and as non-independent trustee of the Paul R. Hooper 1998 GST Exempt Trust, Terrence Hooper, Timothy Hooper, and John Ransmeier, trustee of the Paul R. Hooper 1997 Trust,¹ for breach of contract, tortious interference with contractual relations, and civil conspiracy. Specifically, the plaintiff challenges the trial court's ruling that an alleged violation of a certain contractual provision does not provide a basis for the plaintiff's claims. We reverse and remand.

The plaintiff's amended complaint alleges the following facts. Upon their father's death in 2009, Teresa Basham, Timothy Hooper, and Terrence Hooper (sibling defendants) each received a portion of their father's one-third ownership interest in three companies known as the Pro-Cut entities, to be held in trust by John Ransmeier. In 2012, the sibling defendants negotiated with Joseph Willey, another owner of the Pro-Cut entities, to sell their ownership interests. They eventually agreed upon a sale price, and in November 2013, Ransmeier, on the sibling defendants' behalf, executed fifteen Securities Redemption Agreements (SRAs) with the Pro-Cut entities, the terms of which were stated to be binding upon "the heirs, personal representatives, successors and assigns of the parties." Ransmeier also executed on behalf of the sibling defendants a document attached to each SRA entitled "Release," which states, in pertinent part:

Other than as set forth in the Agreement, the Seller hereby fully, finally and forever releases, discharges, quit claims and covenants not to sue and otherwise agrees not to enforce any claim, cause of action, right, title or interest ... against, the Company, its respective officers, directors, managers, members, employees, agents, and representatives as well as their successors and assigns ... of, from, and with respect to any and all claims ... in connection with any prior ownership interest in the Company by the Seller, including but not limited to any claim based on any future transaction that the Company or any unit holder may enter into in relation to the equity of the Company.

Each sibling defendant received approximately $ 750,000 as a result of the transactions.

After these transactions, one of the Pro-Cut entities, Brake Solutions, Inc., acquired another Pro-Cut entity. It then changed its name to Pro-Cut International, Inc. In May 2014, three unrelated companies, collectively known as Snap-on, purchased the Pro-Cut entities for approximately $ 41.3 million. Pro-Cut International, Inc. was then renamed Pro Done, Inc. Pro Done, Inc., the plaintiff in this case, alleges it is a resulting company, successor, or assignee of the Pro-Cut entities that were parties to the SRAs.

After Snap-on's purchase of the Pro-Cut entities, the sibling defendants filed a lawsuit, with the assistance of Ransmeier, in the United States District Court for the District of New Hampshire against Willey and trustees of trusts that were members of the Pro-Cut entities at the time of the Snap-on transaction. Although the plaintiff is not a party to the federal action, the defendants have served subpoenas on the plaintiff and Snap-on entities as part of that lawsuit. Snap-on has also asserted rights to indemnification against the plaintiff.

The plaintiff subsequently filed this action in superior court against the defendants, asserting claims of breach of contract, and, in the alternative, tortious interference with contractual relations and civil conspiracy. The plaintiff's amended complaint sought "any and all such damages as it has sustained or will sustain by reason of Defendants' conduct, including any consequential damages," as well as a permanent injunction barring the defendants from participating in any action against the plaintiff and its affiliates, exemplary and punitive damages to deter future illegal conduct, and reasonable attorney's fees and costs in litigating the present action.

The defendants moved to dismiss the plaintiff's action, arguing, inter alia, that the release agreements, including the covenant not to sue contained therein, do not give rise to a cause of action for breach of contract. In dismissing the plaintiff's amended complaint, the trial court, relying on Kaye v. Wilson-Gaskins, 227 Md.App. 660, 135 A.3d 892, 906-07 (2016), concluded that a covenant not to sue functions only as an immediate release, rather than a promise of future forbearance that may be breached, unless the agreement clearly demonstrates that the parties intended for the obligee to recover consequential damages incurred as a result of the obligor's failure to honor the covenant. See Kaye, 135 A.3d at 904, 906-07. Finding "no clear indication in the Releases that the parties contemplated consequential damages to be award[ed] as a result of their breach," the trial court concluded that the release agreements operated as releases rather than covenants not to sue, and therefore a violation of the release agreements could not constitute a basis for a breach of contract action. The trial court also concluded that the plaintiff's alternative claims of tortious interference with contractual relations and civil conspiracy were "not reasonably susceptible of a construction that would permit recovery" because those claims "rest on a theory that the parties ... to the Releases maintained a contractual relationship that imposed ongoing duties to the Plaintiff."

The plaintiff moved for reconsideration. The trial court denied the plaintiff's motion, and this appeal followed.

In reviewing the trial court's grant of a motion to dismiss, our standard of review is whether the allegations in the plaintiff's pleadings are reasonably susceptible of a construction that would permit recovery. Slania Enters. v. Appledore Med. Grp., 170 N.H. 738, 741, 186 A.3d 222 (2018). We assume that the plaintiff's pleadings are true and construe all reasonable inferences in the light most favorable to the plaintiff. Id. We then engage in a threshold inquiry that tests the facts alleged by the plaintiff against the applicable law, and if the allegations constitute a basis for legal relief, we must hold that it was improper to grant the motion to dismiss. Id.

On appeal, the plaintiff makes numerous, yet related, arguments challenging the trial court's dismissal of its breach of contract claim. Its central arguments may be distilled into one contention: the trial court's order ignored express terms of the release agreements — in which the defendants "covenant[ed] not to sue and otherwise agree[d] not to enforce any claim" against the plaintiff — and denied the plaintiff the opportunity to seek consequential damages for breach of the contract, contrary to New Hampshire law.

The defendants argue that, as a matter of law, a covenant not to sue operates only as a release. Therefore, they argue, the act of suing in violation of a covenant not to sue does not give rise to a breach of contract action unless the covenant "include[s] language evidencing an intent that a breach of the covenant would entitle the non-breaching party to recover consequential damages." Based upon this principle, the defendants contend that the trial court properly concluded that the plaintiff failed to state a cause of action for breach of contract.

The parties' arguments present a question of first impression for this court: whether New Hampshire law recognizes a cause of action for breach of contract based upon a covenant not to sue where the contract does not expressly provide that the non-breaching party is entitled to consequential damages for breach of the covenant. We hold that it does.

Because the release agreements are part of a contract, we apply the general rules of contract interpretation. See McDonough v. McDonough, 169 N.H. 537, 541, 153 A.3d 187 (2016) ; Moore v. Grau, 171 N.H. 190, 194, 193 A.3d 272 (2018). When interpreting a written agreement, we give the language used by the parties to the agreement its reasonable meaning, considering the circumstances and the context in which the agreement was negotiated, and reading the document as a whole. Town of Pembroke v. Town of Allenstown, 171 N.H. 65, 70, 189 A.3d 309 (2018). We give an agreement the meaning intended by the parties when they wrote it. Found. for Seacoast Health v. Hosp. Corp. of America, 165 N.H. 168, 172, 71 A.3d 736 (2013). Absent ambiguity, we determine the parties' intent from the plain meaning of the language used in the contract. Id. The interpretation of a contract is ultimately a question of law for this court to decide. McDonough, 169 N.H. at 541, 153 A.3d 187. Accordingly, we review a trial court's interpretation of a contract de novo. Id.

Under New Hampshire law, "[a] breach of contract occurs when there is a failure without legal excuse to perform any promise which forms the whole or part of a contract." Lassonde v. Stanton, 157 N.H. 582, 588, 956 A.2d 332 (2008) (quotation and brackets omitted). Pursuant to the release agreements...