WEH Magic Valley Holdings v. EIH Parent et al
MEMORANDUM Signed by Judge Sam E Haddon on 6/7/2017. (DED)
JUN 0 7 2017
IN THE UNITED STATES DISTRICT COURT
Clerk, U.S. District Court
District Of Montana
FOR THE DISTRICT OF MONTANA
WEH Magic Valley Holdings, LLC, a
limited liability corporation,
EIH Parent, LLC, a limited liability
company and James Carkulis, an
On January 18, 2017, the Court conducted a hearing on Defendants' Motion
to Dismiss Counts I (In Part), and II through V of Plaintiffs Second Amended
Complaint and to Dismiss James Carkulis. 1 Upon determination that resolution of
the motion was premature, ruling was deferred. An amended scheduling order to
permit the parties to address the several unresolved issues was entered:
March 17, 2017
Discovery motions, with supporting briefs,
shall be filed no later than 10 days following
the moving party's compliance with
Fed. R. Civ. P. 26(c)(l) and 37(a)(l).
All pretrial motions, other than discovery motions,
shall be filed and fully briefed on or before:
May 12. 201 7
An attorney's conference to discuss the final
pretrial order preparation on or before:
Proposed final pretrial order on or before:
July 14. 2017 2
The parties were also directed at the January 18, 2017, hearing to: (1) brief
certain specific issues outlined by the Court; (2) stipulate to the content and file
the complete text of the Purchase and Sale Agreement ("PSA"); and (3) for the
Court to be notified if the parties did not fully agree upon content of the PSA to be
On March 14, 2017, a Stipulation Re: Contents of Contract3 was filed in
which the Court was informed that the parties had not reached agreement upon
content of the contract and that an issue remained unresolved as to whether certain
documents held in a virtual file-sharing platform, identified in the Agreement as
the "Data Room," were, or were not, a part of the PSA.
Issues for Resolution
Additional motions filed after the January 18, 2017, hearing were: (1)
Plaintiffs Notice of Dispute Re: Full Contents of Contract and Motion for Judicial
Determination; 4 and (2) Plaintiffs Motion in Limine to Exclude Expert Testimony
of James Carkulis. 5 Three briefs directed to related issues were also filed. 6 As of
May 19, 2017, all motions are fully briefed. All are ripe for resolution.
The Court has determined upon assessment and review of the whole of the
developed record, and notwithstanding the absence of a specific motion directed to
the scope of the Agreement of August 1, 2014, that the unresolved "Data Room"
issue outlined above, at bottom, defines the core of the parties' dispute, that the
issue is squarely framed and fully briefed, and is appropriate for address and
resolution as a question of law for the Court.
This Memorandum is directed specifically to determination of whether the
"Data Room" documents are, or are not, a part of the PSA as asserted
Doc. 120, Plaintiffs Opening Brief in Response to Court's Identification of Additional
Issues and Request for Briefing; Doc. 123, Defendants' Response to Plaintiffs Opening Brief
Regarding Additional Issues; Doc. 128, Plaintiffs Brief in Response to Court's Requests
Regarding Principle Issues.
by Plaintiff in its Notice of Dispute Re: Full Contents of Contract and Motion for
Judicial Determination. 7
The parties agree New York law should be applied in resolving the contract
interpretation issues of the case. 8 The Governing Law provision, section 9.5, of
the Purchase and Sale Agreement provides:
This Agreement, and any instrument or agreement
required hereunder (to the extent not otherwise expressly
provided for therein), shall be governed by, and
construed under, the laws of the State ofNew York,
without reference to conflicts of laws rules, except for
Section 5.1401 of the New York General Obligations
Under Section 5.1401 of the New York General Obligations law, application of
New York substantive law, without regard to a choice-of-law analysis, controls if
there is, as here, a contractually valid choice of law provision. 10
Established contract principles hold that "a court interpreting a contract
must 'give effect to the intent of the parties as revealed by the language they chose
See Docs. 120 at 3-7, 123 at 1-2.
Doc. 115-1 at 53.
See Ministers and Missionaries Benefit Bd v. Snow, 45 N.E.3d 917, 922 (N.Y. 2015).
to use. "' 11 '"The proper interpretation of an unambiguous contract is a question of
law for the court[.]" 12
"A contract is not ambiguous simply because the parties have urged
conflicting interpretations." 13 "[A] contractual provision is ambiguous only 'when
it is reasonably susceptible to more than one reading."' 14 The August 1, 2014,
Purchase and Sale Agreement is not ambiguous.
Contentions of the Parties
Plaintiff requests a determination that "the documents in the Data Room are
entitled to be relied upon by the Parties as part and parcel to the Contract." 15
Plaintiff also asserts "[t]he documents contained in the Data Room were intended
by the Parties to the Purchase and Sale Agreement ("PSA") to be relied upon as an
integral part of the transaction." 16 Defendants counter that "[t]he documents in the
Reyes v. Metromedia Software, Inc., 840 F. Supp. 2d 752, 755 (S.D.N.Y. 2012)
(quoting Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992)).
Id (quoting Omni Quartz, Ltd v. CVS Corp., 287 F.3d 61, 64 (2d Cir. 2002)).
Id (citing Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d
1091, 1095 (2d Cir. 1993)).
Id (quoting US. Fire Ins. Co. v. Gen. Reinsurance Corp., 949 F.2d 569, 572 (2d Cir.
Doc. 116 at 3.
Doc. 116 at 3.
Data Room, which number 932, were not included in the definition of the parties'
Agreement, nor are they included among the documents specifically identified as
being part of the contract." 17
The Purchase and Sale Agreement
The August 1, 2014, Purchase and Sale Agreement provided for Seller
("EIH") to sell to Buyer ("WEH") 99% ofEIH's membership interests (the
"Equity Interests") in Exergy Idaho Holdings, LLC ("Exergy"). The scope of the
transaction and the interests to be transferred were clearly and unequivocally
spelled out in two specific provisions, Article 2, Section 2.1:
Sale and Purchase of Equity Interests. In
accordance with the terms and conditions hereof, and
subject to the satisfaction or waiver of the conditions
precedent to each Party's obligations as provided herein,
as applicable, at Closing, Seller shall sell, transfer and
assign to Buyer the Equity Interests, and Buyer shall
purchase, acquire, accept assignment of and pay for the
Equity Interests. 18
and Article 9, Section 9.2:
Entire Agreement; Amendments. This
Agreement and the other Transaction Documents
constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, of
Doc. 117 at 2.
Doc. 115-1 at 19.
the Parties with respect to the subject matter hereof. No
oral representations or modifications concerning this
instrument nor any course of dealing between or among
any Persons having any interest in this Agreement shall
be of any force or effect unless contained in a subsequent
written modification signed by the Party to be charged.
This Agreement may be amended, modified or waived
only by a written instrument executed by the Parties. 19
The Article I Definitions and Interpretation section defines "Agreement" as
"this Purchase and Sale Agreement, including all Exhibits, Schedules and other
attachments hereto, as amended, restated or otherwise modified from time to
time." 20 "Data Room" is defined as "all documents and materials posted to the
website https://app.box.com/s/8w8vogwlr6di5poec6vu." 21
The reference in Article I, Definitions and Interpretation, to "Data Room"
documents and material posted to a designated website does not identify any Data
Room material as a membership interest in Exergy to be transferred to WEH.
Likewise, none of the references to Data Room materials otherwise referenced in
the PSA or its Schedules can be read to include Data Room materials as
membership interests in Exergy to be sold and transferred to WEH. None of the
Doc. 115-1 at 52-53.
Doc. 115-1 at 7.
Doc. 115-1 at 8.
Schedules identified in the "SCHEDULES" section22 of the PSA can be said to
have any application to the scope of the transaction or the interests to be
In short, none of the documents held in the virtual file-sharing platform
described as the "Data Room" nor any interest said to be represented in or
identified by the Data Room contents, including the so-called Reserves, were a
part of the Equity Interests to be transferred by EIH and sold to WEH as a part of
the Purchase and Sale Agreement of August 1, 2014. WEH has no breach of
contract claim against EIH founded on failure ofEIH to transfer the $583,868 in
Reserves to WEH, as is claimed by WEH, or based upon failure of EIH to disclose
to WEH that transfer of the $583,868 in Reserves had occurred prior to transfer of
the Equity Interests
7 ~y of June, 2017.
United States District Judge
See Doc. 115-1 at 5.
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