LEISURE PASS NORTH AMERICA, LLC v. LEISURE PASS GROUP, LTD.

Filing 66

OPINION. Signed by Judge William J. Martini on 4/14/14. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

LEISURE PASS NORTH AMERICA, LLC,

Civ. No. 2:12-cv-03375 (WJM)

Plaintiff,
OPINION
v.
LEISURE PASS GROUP, LTD.,
Defendant.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff Leisure Pass North America, LLC brings this breach of contract action
against Defendant Leisure Pass Group, Ltd. The Court previously granted Defendant’s
motion to dismiss a number of Plaintiff’s claims under Federal Rule of Civil Procedure
12(b)(6). Two motions are now pending in this case. First, Plaintiff moves for
reconsideration of the Court’s prior decision. Second, Defendant moves for summary
judgment on Plaintiff’s remaining claims under Federal Rule of Civil Procedure 56.
There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below,
Plaintiff’s motion for reconsideration and Defendant’s motion for summary judgment are
each DENIED.
I.

BACKGROUND

The following facts are undisputed. Defendant is a company based in London,
England. Defendant developed a product called the “Leisure Pass,” a travel card that
allows consumers to access various tourist attractions in a city at a discounted rate.
Defendant also developed a separate Leisure Pass Operating System (“LPOS”), a
software system that is used to manage the Leisure Pass businesses.
In 2002, Defendant entered into an agreement with Plaintiff, which gave Plaintiff a
license to sell Leisure Passes in North America. In a separate agreement, Defendant
granted Plaintiff a license to use the LPOS software (“LPOS License Agreement”). In
October 2008, the parties entered an additional agreement (“2008 Agreement”). Section
18 of the 2008 Agreement gave Plaintiff the option to purchase the rights to sell Leisure
Passes in North America (the “Option”). Section 18 provided, in relevant part, that:
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Leisure Group hereby grants North America the option, for the
period beginning on October 1, 2011 and anytime thereafter so
long as this Agreement remains in effect, to purchase the
Product and Rights for utilization in the Expanded Territory . . . .
Such option to purchase shall be deemed exercised immediately
upon Leisure Group’s receipt of North America’s written notice
of its intent to exercise the option (hereafter the “Option
Notice”). Within a reasonable period of time from the date of
Leisure Group’s receipt of the Option Notice, but not later than
30 days subsequent thereto, the parties shall schedule a closing
at a mutually convenient time, date and place within the United
States to consummate North America’s purchase of the Product
and the Rights for the Expanded Territory. . . .
The documents and instruments delivered at any such closing
shall be reasonably acceptable in substance and form to North
America’s attorneys. . . .
2008 Agreement at 23-25, Mot. to Dismiss App’x A, ECF No. 24-2. Section 18 does not
provide Plaintiff with a right to conduct due diligence before or after exercising the
Option. It also does not provide Plaintiff with the right to purchase the LPOS software.
But the 2008 Agreement does provide that Plaintiff “shall . . . be permitted to continue to
utilize the LPOS System for one year” after exercising the Option. Additionally, Section
18 provides that the purchase price for the “Product” and “Rights” will be “the aggregate
sum equal to the product obtained by multiplying .24 by the Average Net Sales (the
“Purchase Price”). Id. at 24. Average Net sales is defined as “the quotient obtained by
dividing the Net Sales generated during the two previous 12-month periods ending on the
date of calculation by two.” Id. The 2008 Agreement further provides that “it shall not
be modified in any manner except by an instrument in writing executed by the parties.”
Id. at 26.
In July 2011, Smart Destinations, Inc. (“Smart Destinations”) filed a patent
infringement suit against Plaintiff and Defendant over their use of the LPOS software.
Defendant and Plaintiff discussed the possibility of entering a joint defense agreement
(“JDA”) for that action, but they never executed a JDA. Despite the absence of a JDA,
Defendant took the lead on negotiating a potential settlement on behalf of itself and
Plaintiff. Defendant requested that Plaintiff refrain from participating in those
negotiations. Because settlement negotiations were still ongoing in October 2011,
Plaintiff refrained from exercising its Option at that time. In November 2011, Mr. Tom
Scullin, a member of Plaintiff, emailed Mr. Darren Evans, then CEO of Defendant,
requesting that the Purchase Price of the Option be “tolled.” Certification of Thomas F.X.
Scullin (“Scullin Cert.”) Ex. 22, ECF No. 53. Specifically, Sculling requested that the

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Option Purchase Price be calculated as of October 1, 2011, regardless of when Plaintiff
exercised the Option (the “Tolling Modification”). Id.
On March 1, 2012, the parties met in Hoboken, New Jersey. Certification of
Darran Evans dated June 11, 2013 (“Evans’s Cert.”) ¶ 16, ECF No. 6-1. In attendance
were Evans, Mr. Rob Foreman on behalf one of Defendant’s investors, as well as Scullin
and Mr. Francis Tedesco on behalf of Plaintiff. Evans’s Cert. ¶ 17. At the meeting,
Plaintiff again raised the Tolling Modification. Evans’s Cert. ¶ 20. Plaintiff alleges that
the parties verbally agreed to the Tolling Modification. Defendant denies that it entered
into any verbal agreement. The next day, Scullin sent an e-mail to Evans stating, in
relevant part: “Also, appreciate your confirming the fact that you have agreed to ‘toll’
the amended and restated agreement with respect to the purchase price and ‘average net
sales.’” Scullin Cert. ¶ 54 & Ex. 25. Evans did not respond to Scullin. Evans did,
however, forward Scullin’s email to Forman, who responded: “Noted – must have been a
different meeting he was in.” Evans’s Cert. ¶¶ 22-23 & Ex. 4.
Later in March 2012, Defendant reached a confidential settlement agreement with
Smart Destinations (the “Settlement”). The Settlement disposed of all the claims pending
against both Defendant and Plaintiff. Plaintiff did not sign the Settlement and never saw
a copy of the Settlement. Shortly thereafter, Plaintiff exercised its Option to purchase the
rights to sell Leisure Passes in North America. Plaintiff’s exercise notice stated that the
Purchase Price of the Option would be calculated as of October 1, 2011. Scullin Cert.
Ex. 36. Scullin and Evans subsequently exchanged several emails regarding the Purchase
Price. Scullin insisted that Defendant had agreed to the Tolling Modification, and Evans
insisted that Defendant had not. Evans’s Cert. ¶ 24.
Despite their disagreements, the parties began drafting and negotiating closing
documents, as required by the terms of the Option. Evans’s Cert. ¶ 26. Contrary to
Plaintiff’s requests, Defendant did not disclose the confidential Settlement to Plaintiff
after it exercised the Option. However, in order to close the Option, Defendant agreed to
indemnify Plaintiff for any claims made by Smart Destinations regarding Plaintiff’s use
of the LPOS software. Defendant also provided expansive representations and warranties
assuring Plaintiff that it would have the ability to use the LPOS system for an additional
year under the existing LPOS License Agreement, free and clear of any claim by Smart
Destinations. The parties continued to disagree about the alleged tolling modification.
Under the Option, the closing was required to take place within thirty days after
Plaintiff delivered its exercise notice – so sometime in April 2012. 2008 Agreement at
24. The deal did not close, because the parties could not agree on three issues: (1)
disclosure of the Settlement; (2) the Tolling Modification; and (3) the form of the closing
documents. On May 3, 2012, Defendant issued a time-of-the-essence closing letter,
setting a closing date for June 4, 2012. Plaintiff subsequently filed this action to compel
Defendant to “specifically perform its obligations” under the 2008 Agreement and close
the deal.
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II.

DISCUSSION

Plaintiff asserts five causes of action in the Complaint. In Count 1, entitled
“Demand for Specific Performance,” Plaintiff demands an injunction requiring Defendant
to comply with Section 18 of the 2008 Agreement, generally. In Count 2, entitled
“Breach of Contract as to the 2008 Agreement,” Plaintiff takes issue with Defendant’s
refusal to deliver reasonably acceptable closing documents, refusal to disclose the
Settlement, and refusal to honor the alleged tolling agreement. In Count 3, entitled
“Breach of Covenant of Good Faith and Fair Dealing,” Plaintiff takes issue with
Defendant’s unilateral selection of a closing date and with Defendant’s refusal to disclose
the Settlement. In Count 4, entitled “Declaratory Judgment with respect to Price
Calculation Date,” Plaintiff seeks an injunction compelling Defendant to comply with the
alleged tolling agreement. And in Count 5, entitled “Breach of Confidentiality
Agreement,” Plaintiff alleges that Defendant disclosed its confidential information to
Smart Destinations during settlement negotiations. Defendant’s Answer contains a threecount counterclaim seeking damages for breach of contract arising from Plaintiff’s
refusal to close (Counterclaim Counts 1 and 2) and a declaration that the Option has
terminated (Counterclaim Count 3).
The Court previously granted Defendant’s motion to dismiss all of Plaintiff’s
claims seeking disclosure of the Settlement (portions of Counts 1, 2, and 3) and Count 5
regarding the disclosure of confidential information to Smart Destinations. Plaintiff
moves for reconsideration of the Court’s decision to grant Defendant’s motion to dismiss
with respect to the portions of Counts 1, 2, and 3 seeking disclosure of the Settlement.
Defendant separately moves for summary judgment on the remaining claims against it
and its counterclaims.
A. Motion for Reconsideration
In its previous ruling, the Court found that Plaintiff was not entitled to review the
Settlement. Plaintiff argues that the Court should grant its motion for reconsideration
because the Court’s ruling contains errors of law and fact. Specifically, Plaintiff claims
that: (1) the Court incorrectly determined as a matter of law that the covenant of good
faith and fair dealing does not create a right of due diligence, (2) the Court failed to
consider its argument that it was entitled to reasonably acceptable closing documents,
including the Settlement, under Section 18 of the 2008 Agreement, and (3) the Court
overlooked several facts – the plain language of the Settlement, that the parties entered
into the Option prior to Smart Destination’s lawsuit, and that neither Defendant nor Smart
Destinations sealed the Settlement.
A motion for reconsideration should not be treated as an appeal of a prior decision.
See Morris v. Siemens Components, Inc., 938 F. Supp. 277, 278 (D.N.J.1996) (“A
party’s mere disagreement with a decision of the district court should be raised in the
ordinary appellate process and is inappropriate on a motion for reargument”). It is
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improper for the moving party to “ask the court to rethink what it ha[s] already thought
through – rightly or wrongly.” Oritani Sav. & Loan Ass'n v. Fid. & Deposit Co., 744 F.
Supp. 1311, 1314 (D.N.J. 1990). A motion for reconsideration may be granted only if (1)
there has been an intervening change in the controlling law; (2) new evidence has become
available since the court granted the subject motion; or (3) it is necessary to correct a
clear error of law or fact or to prevent manifest injustice. Max’s Seafood Café by Lou–
Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (citing North River Ins. Co. v.
CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995)). Manifest injustice pertains
to situations where a court overlooks some dispositive factual or legal matter that was
presented to it. See In re Rose, No. 06–1818, 2007 WL 2533894, at *3 (D.N.J. Aug.30,
2007).
Here, the Court considered the arguments and facts previously raised, and did not
make any clear errors. First, the Court explicitly considered and rejected Plaintiff’s
contention that it has an implied right to conduct due diligence arising from Defendant’s
duty of good faith and fair dealing. See Leisure Pass N. Am., LLC v. Leisure Pass Grp.,
Ltd., No. 12-03375, 2013 WL 4517841, at *3 (D.N.J. Aug. 26, 2013) (“Plaintiff argues
that it has an implied right to conduct due diligence arising from Defendant’s duty of
good faith and fair dealing. Not so. Again, there is no such thing as an implied right of
due diligence.”). Although Plaintiff may disagree with the Court’s legal analysis, a
motion for reconsideration is not the proper vehicle for doing so. See Oritani, 744 F.
Supp. at 1314. Second, the Court acknowledged and rejected Plaintiff’s argument that it
was entitled to see the Settlement under Section 18 of the 2008 Agreement. See Leisure
Pass, 2013 WL 4517841, at *3 (finding that “Section 18 makes no mention of due
diligence” and holding that “there is no reason that the Court should give either party
more than it bargained for.”). Third, the Court did not overlook any facts. The Court
considered the plain language of the Settlement, finding that “the 2008 Agreement makes
clear that Plaintiff does not have the right to acquire the LPOS system, so Plaintiff is not
an acquirer under the Settlement.” See id. And the Court considered the facts relating to
the reasonableness of Plaintiff’s request to see the Settlement, such as the timing of the
Smart Destination’s lawsuit and the fact that the Settlement was not sealed. The Court
found those facts to be irrelevant. See id. (“Plaintiff argues that the Settlement is relevant
to the Option, and that it is only reasonable that Plaintiff be allowed to review the
Settlement. These arguments miss the point. The question is not whether the Settlement
is relevant or whether review of the Settlement is reasonable. The only question is
whether the 2008 Agreement gives Plaintiff a right to review the Settlement. The answer
is no.”). Plaintiff may not use a motion for reconsideration to re-litigate issues that the
Court has already decided. Because Plaintiff has failed to present any clear error of law
or fact and has not shown that reconsideration is necessary to prevent manifest injustice,
the Court will deny its motion.

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B. Motion for Summary Judgment
Federal Rule of Civil Procedure 56 provides for summary judgment “if the
pleadings, the discovery [including, depositions, answers to interrogatories, and
admissions on file] and disclosure materials on file, and any affidavits show that there is
no genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 32223 (1986); Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir. 1990). A factual
dispute is genuine if a reasonable jury could find for the non-moving party, and is
material if it will affect the outcome of the trial under governing substantive law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court considers all
evidence and inferences drawn therefrom in the light most favorable to the non-moving
party. Andreoli v. Gates, 482 F.3d 641, 647 (3d Cir. 2007).
Initially, the moving party has the burden of demonstrating the absence of a
genuine issue of material fact. Celotex Corp., 477 U.S. at 323. Once the moving party
has met this burden, the nonmoving party must identify, by affidavits or otherwise,
specific facts showing that there is a genuine issue for trial. Id. The opposing party must
do more than just rest upon mere allegations, general denials, or vague statements.
Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001). Rather, to withstand a proper
motion for summary judgment, the nonmoving party must identify specific facts and
affirmative evidence that contradict those offered by the moving party. Anderson, 477
U.S. at 256–57.
i. Plaintiff’s Claims
Defendant moves for summary judgment on the remaining claims against it.
Because there are genuine issues of material fact regarding Plaintiff’s remaining claims,
the Court will deny Defendant’s motion.
1. The Tolling Modification
Plaintiff alleges that Defendant agreed to the Tolling Modification. Accordingly,
Plaintiff maintains that the Option Purchase Price should be calculated as of October 1,
2011 rather than the exercise date. The 2008 Agreement provides that it may only be
modified through a writing signed by the parties. A contractual provision providing that
any modification must be made in writing “may be expressly or impliedly waived by the
clear conduct or agreement of the parties or their duly authorized representatives.” Home
Owners Constr. Co. v. Borough of Glen Rock, 169 A.2d 129, 135 (N.J. 1961). The
parties may agree to a modification “through words, creating an express contract, or by
conduct, creating a contract implied-in-fact.” Weichert Co. Realtors v. Ryan, 608 A.2d
280, 284 (N.J. 1992) (citing Restatement (Second) of Contracts § 19(1) (1981)). But “the
intention to modify must be mutual and clear.” Cnty. of Morris v. Fauver, 707 A.2d 958,
967 (N.J. 1998). Accordingly, where the agreement at issue contains a requirement that
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any modifications be made through a signed writing, the party seeking to enforce an
alleged oral modification must establish the modification by clear and convincing
evidence. Home Owners, 169 A.2d at 135.
Here, the evidence presented would not allow a reasonable finder of fact to find
that Defendant assented to the Tolling Modification prior to the March 1, 2012 meeting.
In fact, the record indicates that Plaintiff was aware that Defendant had not agreed to it.
For example, in an email dated November 4, 2011, Scullin wrote the following to Evans:
On another note, as you know Francis [Tedesco, Plaintiff’s principal] called Mitch
[Cybulski, the then majority holder in Defendant] several weeks ago and wanted
to discuss [the Option], in particular he wanted to request that the provisions
contained in Section 18 be ‘tolled’ pending the outcome of your discussions with
Smart Destinations.
Scullin Cert. ¶ 38 & Ex. 20; see also ¶ 46 (indicating that, on November 15, 2011,
“Cybulski advised that he would get back to [Scullin] on the ‘tolling’ issue”). A request
is not an agreement. Furthermore, Defendant’s silence following Scullin’s March 2,
2012 e-mail does not, as a matter of law, constitute assent. However, there is a genuine
issue of material fact with respect to whether the parties agreed to the Tolling
Modification on or after March 1, 2012. Plaintiff has produced evidence demonstrating
that Defendant assented to the modification, while Defendant has produced evidence
showing that it did not. Based on the evidence produced, a reasonable trier of fact could
find by clear and convincing evidence that Defendant assented to the modification.
Furthermore, contrary to Defendant’s assertions, there was consideration for the
Tolling Modification. Defendant is correct that, to be enforceable, the modification must
also be backed by new or additional consideration.1 Cnty. of Morris, 707 A.2d at 967
(citing Ross v. Orr, 69 A.2d 730, 732 (N.J. 1949). However, any consideration for a
modification, however insignificant, satisfies this requirement. Oscar v. Simeonidis, 800
A.2d 271, 276 (N.J. Super. Ct. App. Div. 2002). Here, Plaintiff’s decision to continue
forgoing settlement discussions with Smart Destinations during the period from March 1,
2012 until the Settlement’s execution later that month constitutes consideration. Thus,
Defendant’s motion for summary judgment on this issue will be denied.
2. The Closing Documents
Plaintiff also alleges that Defendant breached the 2008 Agreement by failing to
deliver reasonably acceptable closing documents. Section 18 of the 2008 Agreement
specifies that the documents delivered at closing must be “reasonably acceptable in form
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This requirement does not apply to sales transactions. Under the Uniform Commercial Code, as enacted in New
Jersey, there is no requirement of new and additional consideration to support the modification of an agreement. N.
J. Stat. Ann. § 12A:2-209(1) (“An agreement modifying a contract within this chapter needs no consideration to be
binding.”).
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and substance to [Plaintiff’s] attorneys.” Here, there are factual disputes as to whether
the closing documents provided were acceptable. For instance, the closing documents
contained a Purchase Price calculated based on the exercise date. Scullin Cert. ¶ 83.
Depending on whether Defendant assented to the Tolling Modification, that Purchase
Price may or may not have been reasonable. Accordingly, the Court will not grant
summary judgment to Defendant on this issue.
ii. Defendant’s Counterclaims
The Court will also deny Defendant’s motion for summary judgment on its
counterclaims. Defendant argues that the Option should be extinguished due to
Plaintiff’s failure to close. Specifically, Defendant claims that when Plaintiff sent the
exercise notice, the Option ceased to exist and became a bilateral contract. Plaintiff then
breached that bilateral contract by refusing to close.
Generally, when exercising an option, the option holder “must adhere strictly to
the terms of the contract.” See Seaboard Towers Development Co., LLC v. AC Holding
Corp., II, 2008 WL 2340016 (N.J. Super. Ct. App. Div. June 10, 2008) (quoting
Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Associates, 864 A.2d 387,
395 (N.J. 2005)). “[I]f the option holder does ‘not abide by the strict terms governing the
exercise of the option’ it is subject to suffering ‘the consequences of its default.’” Id.
Here, Plaintiff’s exercise notice provided that the Purchase Price of the Option would be
calculated as of October 1, 2011, contrary to the Option’s express terms. Thus, this issue
is contingent upon whether Defendant agreed to the Tolling Modification. If so, then the
Plaintiff’s exercise notice was consistent with the terms of the modified Option and the
Option should not be extinguished. If not, then Plaintiff’s exercise notice did not abide
by the strict terms of the Option and the Option is void.
Plaintiff argues that even if the tolling agreement is void, it should be excused
from its contractual obligations under the Option because the Smart Destinations lawsuit
frustrated the purpose of the Option. The Court finds that Plaintiff has waived this
affirmative defense. See JB Pool Mgmt., LLC v. Four Seasons at Smithville Homeowners
Ass'n, Inc., 67 A.3d 702, 712 (N.J. Super. Ct. App. Div. 2013) (holding that the defense
of frustration of purpose must be raised in a responsive pleading, unless exceptional
circumstances excuse that oversight).2

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Moreover, the doctrine of frustration of purpose does not apply to this case. Under the doctrine of frustration of
purpose, “[w]here, after a contract is made, a party's principal purpose is substantially frustrated without his fault by
the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his
remaining duties to render performance are discharged, unless the language or the circumstances indicate the
contrary.” Unihealth v. U.S. Healthcare, Inc., 14 F. Supp. 2d 623, 634 (D.N.J. 1998) (quoting Restatement (Second)
of Contracts § 265 (1981)). Here, the principal purpose of the Option was to purchase the Product and the Rights to
use the Product in North America. The Smart Destination lawsuit, which involves the LPOS system, did not
frustrate that principal purpose.
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However, there are genuine issues of material fact regarding Plaintiff’s other
affirmative defense – that Defendant should be equitably estopped from arguing that
Plaintiff has defaulted on the Option. “Estoppel is ‘an equitable doctrine, founded in the
fundamental duty of fair dealing imposed by law, that prohibits a party from repudiating
a previously taken position when another party has relied on that position to his
detriment.’” Casamasino v. City of Jersey City, 730 A.2d 287, 298 (N.J. 1999) (quoting
State v. Kouvatas, 678 A.2d 1178, 1182 (N.J. Super. Ct. App. Div. 1996). “[O]ne may,
by voluntary conduct, be precluded from taking a course of action that would work
injustice and wrong to one who with good reason and in good faith has relied upon such
conduct.” Summer Cottagers’ Ass’n of Cape May v. City of Cape May, 117 A.2d 585,
590 (N.J. 1955). “The doing or forbearing to do an act induced by the conduct of another
may work an estoppel to avoid wrong or injury ensuing from reasonable reliance upon
such conduct.” Id. at 504. Here, depending on what the parties discussed at the March 1,
2012 meeting, a reasonable fact-finder could determine that Plaintiff reasonably relied on
Defendant’s silence following Scullin’s March 2, 2012 email when it exercised the
Option. Accordingly, the Court will deny Defendant’s motion for summary judgment on
its counterclaims.
III.

CONCLUSION

For the reasons stated above, Plaintiff’s motion for reconsideration and
Defendant’s motion for summary judgment are each DENIED. An appropriate order
follows.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: April 14, 2014

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