Stone Key Partners LLC et al v. Monster Worldwide, Inc.
Filing
116
OPINION AND ORDER re: 55 MOTION in Limine . filed by Stone Key Securities LLC, Stone Key Partners LLC, 61 MOTION in Limine to Exclude Testimony of Matthew Nimetz. filed by Monster Worldwide, Inc. For the reasons st ated above, the Court concludes that Stone Key failed to carry its burden to show that Monster breached the terms of the Engagement Letter by refusing to pay Stone Key fees in connection with JobKorea I, JobKorea II, or the Randstad Transaction. In particular, the Court holds, first, that Stone Key's engagement had ended by August 1, 2013, thereby precluding any claim for fees arising out of JobKorea II or the Randstad Transaction; and second, that Stone Key is not entitled to a fee fo r JobKorea I, even though the transaction occurred during the tail period, because the transaction did not qualify as a "Partial Sale Transaction" and because the fee provision is an unenforceable agreement to agree. Accordingly, Monster is entitled to judgment on Stone Key's first three claims. By contrast, with respect to its fourth claim, Stone Key did prove that it is entitled to $37,267.50 for its out-of-pocket expenses, plus 9% prejudgment interest as of Februa ry 13, 2017. The parties shall confer and, no later than two weeks from the date of this Opinion and Order, file an agreed-upon proposed judgment consistent with this Opinion and Order. The Clerk of Court is directed to terminate 17-CV-3851, Docket Nos. 55 and 61. SO ORDERED. (Signed by Judge Jesse M. Furman on 8/10/2018) (ne)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------------- X
:
STONE KEY PARTNERS LLC et al.,
:
:
Plaintiffs,
:
:
-v:
:
MONSTER WORLDWIDE, INC.,
:
:
Defendant.
:
:
---------------------------------------------------------------------- X
08/10/2018
17-CV-3851 (JMF)
OPINION AND ORDER
JESSE M. FURMAN, United States District Judge:
Plaintiffs Stone Key Partners LLC and Stone Key Securities LLC (together, “Stone
Key”) are, together, a boutique investment banking firm. Pursuant to an Engagement Letter
dated April 20, 2012 (the “Engagement Letter”), Stone Key was retained by Defendant Monster
Worldwide, Inc. (“Monster” or the “Company”) to assist in “a review of strategic alternatives,
including the possible sale of the Company or the sale of an equity interest in the Company.”
(PX-28 (“Engagement Letter”), § 1). Monster agreed to pay Stone Key compensation in the
event that the Company entered into certain qualifying transactions. In this suit, Stone Key
alleges that Monster breached its agreement to make those payments. In particular, Stone Key
alleges that it is owed $8,890,596.00 in fees for three different transactions: the 2013 sale of
49.99% of Monster’s interest in JobKorea (“JobKorea I”); the 2015 sale of Monster’s remaining
interest in JobKorea (“JobKorea II”); and the 2016 sale of the whole Company (the “Randstad
Transaction”). Stone Key also seeks reimbursement for $47,339.01 in expenses.
The Court held a three-day bench trial from June 25 to 27, 2018, with direct testimony
taken from most witnesses by affidavit. As trial and oral argument made clear, whether Monster
breached its obligation to pay Stone Key fees pursuant to the Engagement Letter turns largely on
whether the contract was completed before any of the transactions at issue took place. For the
reasons that follow, the Court finds that Stone Key failed to prove, by a preponderance of the
evidence, that the Engagement Letter remained open after August 1, 2013. It follows that Stone
Key is clearly barred by the terms of the parties’ contract from recovering fees for JobKorea II
and the Randstad Transaction. JobKorea I, however, poses a closer question because the
transaction occurred within a one-year tail period established by the Engagement Letter. The
Court finds, however, that Stone Key cannot claim a fee for JobKorea I either, for two
independent reasons: first, because the transaction did not qualify as a “Partial Sale Transaction”
within the meaning of the Engagement Letter; and second, because the applicable provision of
the Engagement Letter is an invalid and unenforceable agreement to agree. The Court does
conclude, however, that Monster owes Stone Key $37,267.50, plus 9% prejudgment interest, for
out-of-pocket expenses incurred under the Engagement Letter.
FACTUAL FINDINGS
Pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure, the Court makes the
following findings of fact based on the testimony and exhibits at trial. 1 The Court sets forth
certain additional findings of fact in the context of its legal analysis below.
A. The Engagement Letter
Stone Key is a small investment banking firm that was founded in 2008 by Michael
Urfirer and Denis Bovin, who worked at Bear Stearns until its collapse. (Urfirer Aff. ¶ 8;
1
The Court ruled on many of the parties’ objections to testimony and exhibits at trial and
reserved judgment on others. To the extent that there was an unresolved objection to testimony
or evidence that is relevant to the Court’s analysis, the Court resolves the objection below. The
Court need not and does not resolve the remaining objections.
2
Iannuzzi Aff. ¶¶ 7-8; Bovin Dep. 9-10). Monster is a publicly traded company, today owned by
Randstad Holding NV (“Randstad”), which is known primarily for operating the online
recruiting and employment website www.monster.com. (DX-110; Iannuzzi Aff. ¶ 3; Yates Aff.
¶¶ 3, 6). Salvatore Iannuzzi, who served as Chief Executive Officer of Monster from April 2007
to November 2014, and Timothy Yates, who served as (among other things) Chief Financial
Officer of the Company from June 2007 to January 2011 and then Chief Executive Officer from
November 2014 to November 2016, had done work with Bovin when Bovin was at Bear Stearns
and, based on that relationship, helped Stone Key get off the ground when it was founded.
(Iannuzzi Aff. ¶¶ 3, 6-10; Yates Aff. ¶¶ 3, 6, 8-12). Most significantly, Monster provided Stone
Key with office space at the Company’s New York offices (initially free of charge), and engaged
the new bank to assist with the acquisition of another job search site. (Iannuzzi Aff. ¶¶ 9-10).
On October 14, 2008, Monster and Stone Key also entered into the first in a series of retainer
agreements pursuant to which Stone Key provided Monster with general financial advisory
services. (PX-2; PX-7; PX-9; PX-29; Iannuzzi Aff. ¶ 11; Yates Aff. ¶ 10). The initial agreement
was for a period of one year, but it was renewed each year through 2013. (Id.).
In early 2012, Monster was facing “severe competitive pressures” and began to consider
a sale of the Company. (Iannuzzi Aff. ¶ 15; Yates Aff. ¶ 14; DX-5, at 1). In February 2012,
Monster invited Stone Key and Bank of America Merrill Lynch (“BAML”), another investment
bank with which the Company had a relationship, to make a presentation to Monster’s Board of
Directors about a potential “review of strategic alternatives.” (PX-20; Yates Aff. ¶ 16). As
contemporaneous documents make clear, and witnesses at trial confirmed, the parties
contemplated that the “review of strategic alternatives” would last approximately six to twelve
months and would encompass either a sale or a partial sale of the Company. (See Yates Aff.
3
¶ 18; Iannuzzi Aff. ¶ 18; McVeigh Aff. ¶ 9; DX-9, at 10-11; DX-15, at 10-11; Tr. 231-36, 37680, 430). A slide in the presentation to the Board of Directors also made clear that the “review
of strategic alternatives” could end with a decision to “Maintain ‘Status Quo.’” (DX-9, at 10).
To signify that the “review” could end without a sale transaction, the slide included an arrow
from “Maintain ‘Status Quo’” to the depiction of a “STOP” sign. (Id.).
Following the presentation by Stone Key and BAML, Monster’s Board authorized
management to begin the review of strategic alternatives. (DX-8, at 6). On March 1, 2012,
Monster publicly announced the review, (DX-10), and on March 5, 2012, the Company publicly
announced that it had “retained” Stone Key and BAML as financial advisors in connection with
the review. (PX-22). Despite that announcement, it was not until April 20, 2012, that Monster
and Stone Key actually formalized the engagement. On that date, the two companies signed an
extension of their general advisor retainer agreement. (PX-29). More relevant here, however,
the parties also entered into the Engagement Letter, pursuant to which Monster “engage[d]”
Stone Key to act jointly with BAML “as the Company’s financial advisor in connection with a
review of strategic alternatives, including the possible sale of the Company or the sale of an
equity interest in the Company.” (PX-28 (“Engagement Letter”), §§ 1-2). Four days later,
Monster signed a separate, but similar, engagement letter with BAML. (DX-20).
Pursuant to the Engagement Letter, Stone Key agreed “to assist” with the following tasks
“to the extent requested by” Monster:
(a) Review and analysis of the business, financial condition and prospects of the
Company and any Acquiror;
(b) Preparation of marketing materials concerning the Company and the Transaction . . . ;
(c) Preparation and implementation of a marketing plan;
(d) Solicitation of proposals from prospective Acquirors;
4
(e) Review of proposals received from prospective Acquirors;
(f) Review and analysis of the structure and terms of a proposed Transaction from a
financial point of view;
(g) Negotiation and implementation of the Transaction; and
(h) Providing such other related services as may reasonably be requested by the Company
in connection with the Transaction.
(Id. § 2). For its part, Monster agreed to compensate Stone Key, but only in the event of a
qualifying “Transaction,” defined as “any transaction or series of related transactions whereby,
directly or indirectly, control of the Company, or control of at least a majority of its businesses,
subsidiaries, divisions, operations or assets, is transferred by the Company and/or its affiliates for
consideration.” (Id. § 2). More specifically, the Engagement Letter identified three types of
qualifying Transactions for which compensation would be due, two of which are relevant here:
•
a “Sale Transaction,” defined as “a Transaction in which a majority of the voting
securities of the Company or all or substantially all of the assets of the Company and its
subsidiaries taken as a whole are transferred”; and
•
a “Partial Sale Transaction,” defined to “include any Transaction involving the sale of a
material portion of the assets or operations of the Company and its subsidiaries taken as a
whole that does not constitute a Sale Transaction.”
(Id. § 3). In the event of the former, Monster agreed to pay Stone Key $1,925,000 upon signing
and an additional fee upon consummation of the sale. (Id. §§ 4(a), (b)). And in the event of the
latter, Monster agreed to pay “a fee in an amount equal to 55% of the fee that shall be mutually
acceptable to the Company and Stone Key and consistent with compensation agreements
customarily agreed to by nationally recognized investment banking firms for transactions of
similar size and complexity where there are two co-financial advisors.” (Id. § 4(d)).
The Engagement Letter contained two other provisions relevant to the parties’ current
dispute. First, Monster agreed to “promptly reimburse Stone Key, periodically upon request, for
all out-of-pocket expenses reasonably incurred, invoiced and documented . . . in connection with
5
Stone Key’s rendering its services under [the] Agreement.” (Id. § 5). And second, the
Engagement Letter provided that either party could terminate the engagement “at any time” upon
written notice. (Id. § 6). Significantly, that same clause also included a “tail provision,”
pursuant to which Stone Key would “continue to be entitled” to compensation if a Sale
Transaction or Partial Sale Transaction “with a party . . . with whom Stone Key or the Company
had substantive discussions with respect to” a Sale Transaction or Partial Sale Transaction
“during the term of Stone Key’s engagement hereunder . . . is consummated prior to the
expiration of 12 months after any termination of Stone Key’s engagement hereunder.” (Id.).
B. The Review of Strategic Alternatives
Once Monster’s Board approved the review on March 1, 2012, Stone Key and BAML
began working with Monster to develop a list of prospective buyers and to create marketing
materials, non-disclosure agreements, and information that would be included in a “virtual data
room” to assist with due diligence. (Urfirer Aff. ¶ 76; Iannuzzi Aff. ¶ 31). By late March 2012,
Stone Key and BAML had begun an outreach campaign to potential investors and buyers.
(Urfirer Aff. ¶ 54). As of June 14, 2012, one or the other or both had contacted over eighty
potential purchasers and non-disclosure agreements had been executed with thirty-seven
prospective buyers. (PX-32). Preliminary bids for the Company ranged from $10 per share to
$16 per share. (Id.). At or about the same time, Monster’s Board had already begun to consider
alternative plans in case “the strategic alternatives process [did] not yield a result that was in the
best interests of the shareholders.” (DX-21, at 3). That August, Monster set September 10,
2012, as “the due date for final bids from interested parties.” (DX-25, at 2).
In September 2012, Monster began earnest discussions with Symphony Technology
Group (“Symphony”) regarding a potential acquisition. (Urfirer Aff. ¶¶ 81; PX-35; PX-36).
6
When Symphony’s bid came in too low, however, Monster rejected the offer and directed
Symphony to destroy all confidential material. (Urfirer Aff. ¶ 82; PX-38). By January 20, 2013,
talks with Symphony ended conclusively when the parties could not agree on a price. (DX-32, at
4; Iannuzzi Aff. ¶ 39; Yates Aff. ¶ 32). Soon thereafter, Monster entered serious discussions
with Platinum Equity (“Platinum”). (Urfirer Aff. ¶ 86). By the end of April 2013, however,
Iannuzzi, — Monster’s CEO at the time — told Monster’s Board that he thought the talks with
Platinum would end soon, and he requested that the Board authorize a share buyback plan to be
implemented as soon as the talks did end. (DX-42, at 3). On a May 2, 2013 earnings call,
Iannuzzi disclosed to investors that the Board had authorized such a plan, which would be
executed once conversations with prospective buyers ended. (DX-45, at 4-5, 12). Conversations
with Platinum did end on May 21, 2013. (Iannuzzi Aff. ¶ 49; Urfirer Aff. ¶ 87; Yates Aff. ¶ 38).
One day later, Monster executed a $200 million share buyback plan, (Iannuzzi Aff. ¶ 55), and on
July 18, 2013, the Company closed its virtual data room. (DX-59). On an August 1, 2013
earnings call, Iannuzzi told investors that “active conversations with regard to the potential sale
of [Monster] [had] c[o]me to a conclusion.” (PX-70, at 4). Iannuzzi acknowledged that a buyer
could always come along and stated that Monster was “prepared, in any point in time, to engage
in conversations.” (Id. at 14). Nonetheless, Iannuzzi made clear that Monster was not actively
pursuing a sale and had turned its attention to “intensively investigating, building and expanding
Monster's presence [in the United States] and overseas.” (Id.). Most significantly, Iannuzzi
announced that Monster had initiated the previously announced share buyback plan. (Id. at 4).
There is little evidence in the record that Stone Key or BAML did much work on the
review of strategic alternatives after the submission of final bids in September 2012. James
McVeigh, one of Monster’s main contacts at BAML during the review (Yates Aff. ¶ 15;
7
McVeigh Aff. ¶ 14), testified that the work of Stone Key’s counterpart, BAML, “had decreased
significantly” by the end of 2012 and that BAML was “no longer preparing marketing materials
or identifying potential new purchasers.” (McVeigh Aff. ¶ 20). Likewise, Yates testified that he
personally considered Stone Key’s engagement to have ended during the fall of 2012 because
“work . . . had stopped” by then. (Tr. 263-64). Bovin testified that he had no recollection of
Stone Key performing any of the services identified in the Engagement Letter after May 2013.
(Bovin Dep. 118-19). Urfirer himself admitted that, after May 2013, Stone Key’s daily work
under the Engagement Letter “diminished dramatically,” eventually becoming “dormant,” and
that he could identify no services performed by Stone Key under the Engagement Letter after
August 2013. (Urfirer Aff. ¶ 88-89; Urfirer Dep. 217). It is undisputed that Stone Key did not
perform any work whatsoever for Monster after April 2014, when Bovin resigned from Stone
Key. (Docket No. 57-1, Ex. 1 (“Pl.’s PCL”), ¶ 30; Docket No. 58 (“Def.’s PFF”), ¶ 107; Urfirer
Aff. ¶ 94). Neither Stone Key nor Monster terminated the Engagement Letter in writing.
C. The Job Korea Transactions and Sale of the Company
In December 2013, Monster sold a 49.99% interest in JobKorea, a Korean subsidiary of
Monster, to H&Q Asia Pacific, Ltd. (“H&Q”), a private equity fund that had first approached
Iannuzzi about investing in JobKorea in March 2013. (DX-40; DX-83). Negotiations between
H&Q and Monster took place over the course of July, resulting in a draft Memorandum of
Understanding, the terms of which were presented to Monster’s Board the same month. (PX-65;
PX-68; PX-69). On that same date, Monster signed a new engagement letter with BAML. (DX60). Under the new engagement letter, Monster agreed to pay BAML $2.5 million for a fairness
opinion for JobKorea I and to reimburse BAML for services it had provided to Monster as its
primary commercial lender. (DX-60; Iannuzzi Aff. ¶¶ 65-66; Yates Aff. ¶ 51). The JobKorea I
8
transaction closed on December 19, 2013. (Iannuzzi Aff. ¶ 78; DX-83). Stone Key did not work
on the JobKorea I transaction itself — though Urfirer testified that he “believe[d]” the bank had
done some “valuation work” that Monster used when H&Q first inquired about a deal. (Tr. 70).
Monster announced JobKorea I to the public on November 7, 2013, but by October,
Stone Key knew the transaction was close to final. In an October 18, 2013 e-mail, Bovin
informed a number of Stone Key employees, including Urfirer, that Monster was close to
“finalizing the sale of 49% of its Korea operations for $90 million to HG Korea” — identifying
H&Q by the wrong name. (DX-72). On October 31, 2018, Bovin told the Stone Key team that
Monster expected to close JobKorea I within the week. (DX-75). Around this time, Bovin
congratulated Iannuzzi on the deal. (Iannuzzi Aff. ¶ 70; Tr. 412). Notably, however, Stone Key
did not seek a fee from Monster pursuant to the Engagement Letter at the time of the transaction.
Indeed, Bovin testified that he and Urfirer did not even discuss seeking a fee for JobKorea I.
(Bovin Dep. 123, 125-26). Nor did either of them, or anyone else at Stone Key, take any steps to
document a belief that the bank was entitled to a fee, let alone calculate a fee. (Tr. 72-73).
In November 2014, Yates took over as CEO of Monster. (Yates Aff. ¶ 6). Monster and
Stone Key had been out of contact since April 2014, when Bovin resigned from Stone Key, and
no one at Stone Key made any effort to contact Yates when he took over as CEO. (Urfirer Dep.
222-23; Hubbard Dep. 173). Then, in 2015, H&Q expressed interest in buying Monster’s
remaining share of JobKorea (“JobKorea II”). (DX-88). In July 2015, Monster engaged
Evercore — another investment bank, to which Bovin had decamped in April 2014, after a
falling out with Urfirer — paying it $1 million for JobKorea II and for services Evercore was
already providing Monster. (DX-89; Yates Aff. ¶ 57; Bovin Dep. 158). Monster sold the
remaining 50.01% of JobKorea to H&Q on October 13, 2015. (Yates Aff. ¶ 55; DX-94). It is
9
undisputed that Stone Key did “absolutely” no work on the JobKorea II transaction. (Tr. 83).
Once again, Stone Key did not seek a fee from Monster at the time. (Tr. 81-82). And once
again, there is no contemporaneous documentation within Stone Key reflecting that Urfirer or
anyone else there believed that the bank was entitled to a fee for the transaction. (Id. at 83).
Soon after JobKorea II, Monster began to consider a sale of the whole Company. Unlike
in 2012 and 2013, Monster decided against engaging in “a process in which the potential sale of
Monster were actively, openly and widely pursued,” and instead fielded inquiries informally.
(PX-145, at 2). On August 9, 2016, Monster announced a merger agreement pursuant to which
Randstad agreed to acquire all of Monster’s outstanding shares at $3.40 per share. (PX-98). The
deal closed on November 1, 2016. (DX-116). Within hours of the deal being announced, Urfirer
had contacted his attorney about the Randstad Transaction. (Tr. 54-56). And two days later,
Stone Key sent Monster a letter demanding, pursuant to the Engagement Letter, a fee of
$2,949,375 for the Randstad Transaction. (DX-103). The claim was reiterated in letters sent in
September 2016 and mid-February 2017. (DX-109; DX-113; DX-117). In its mid-February
letter, Stone Key added an additional demand for fees relating to the 2013 and 2015 JobKorea
transactions, as well as for expenses allegedly owed under the Engagement Letter. (DX-117). In
total, Stone Key demanded $8,890,596 in fees and $47,339.01 in expenses. Until Stone Key’s
demand letters, Monster and Stone Key had not been in contact since April 2014, when Bovin —
Monster’s primary contact — had departed Stone Key. (PX-85; Urfirer Dep. 222-23).
LEGAL STANDARDS
The applicable legal standards, derived from New York law, are well established and
undisputed. (See Docket No. 83, Ex. 1, ¶ 1). “Under New York law, a plaintiff bears the burden
of proving a breach of contract by a preponderance of the evidence.” Meda AB v. 3M Co., 969 F.
10
Supp. 2d 360, 378 (S.D.N.Y. 2013). To establish a breach of contract, a plaintiff must show
“(1) the existence of an agreement, (2) adequate performance of the contract by the claimant,
(3) breach of contract by the accused, and (4) damages.” Stadt v. Fox News Network LLC, 719
F. Supp. 2d 312, 318 (S.D.N.Y. 2010) (internal quotation marks and alterations omitted). “[T]he
fundamental objective of contract interpretation is to give effect to the expressed intentions of the
parties.” Lockheed Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011). The
“best evidence” of the parties’ intent, of course, “is the contract itself.” Gary Friedrich
Enterprises, LLC v. Marvel Characters, Inc., 716 F.3d 302, 313 (2d Cir. 2013).
In a dispute over the meaning of a contract, the threshold question is whether the relevant
contract terms are ambiguous. See, e.g., Great Minds v. Fedex Office & Print Servs., Inc., 886
F.3d 91, 94 (2d Cir. 2018). “[A]mbiguity exists where a contract term could suggest more than
one meaning when viewed objectively by a reasonably intelligent person who has examined the
context of the entire integrated agreement and who is cognizant of the customs, practices, usages
and terminology as generally understood in the particular trade or business.” Bayerische
Landesbank v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 53 (2d Cir. 2012) (internal quotation
marks omitted). By contrast, a contract is unambiguous when it has “a definite and precise
meaning . . . concerning which there is no reasonable basis for a difference of opinion.” Orchard
Hill Master Fund Ltd. v. SBA Commc’ns Corp., 830 F.3d 152, 157 (2d Cir. 2016). Where a term
is ambiguous, a court may consider extrinsic evidence to determine the parties’ intent. Matter of
MPM Silicones, 874 F.3d at 796; see also Garza v. Marine Transp. Lines, Inc., 861 F.2d 23, 27
(2d Cir. 1988). That evidence may include “any relevant course of dealing and course of
performance.” Meda AB, 969 F. Supp. 2d at 378. “[T]he practical interpretation of a contract by
the parties manifested by their conduct subsequent to its formation for any considerable length of
11
time before it becomes a subject of controversy, is entitled to great . . . weight.” Disney Enters.,
Inc. v. Finanz St. Honore, B.V., No. 13-CV-6338 (NG) (SMG), 2016 WL 7174650, at *6
(E.D.N.Y. Dec. 5, 2016); see also Peter J. Solomon Co., L.P. v. Oneida Ltd. (“Oneida II”), No.
09-CV-2229 (DC), 2010 WL 234827, at *3 (S.D.N.Y. Jan. 22, 2010) (“[T]he subsequent conduct
of the parties may be used to indicate their intent.”).
DISCUSSION
There is no dispute that Stone Key satisfies the first two elements of a breach-of-contract
claim: (1) the existence of a contract — namely, the Engagement Letter; and (2) Stone Key’s
performance under that contract. Instead, the dispute is whether Monster breached the
Engagement Letter by refusing to pay Stone Key fees and expenses in relation to JobKorea I,
JobKorea II, and the Randstad Transaction. Monster argues that the Engagement Letter was
completed before any of the three transactions took place. If no relevant provisions of the
Engagement Letter remained in effect at the time of the three transactions, then Monster could
not have breached the contract and Stone Key has no claim. Stone Key counters that there were
only two ways the Engagement Letter could have been completed: either through a Sale
Transaction or by written notice of termination. Because Monster never provided written notice,
Stone Key argues, the Engagement Letter remained open until the Randstad Transaction. Thus,
whether Stone Key is entitled to fees for either of the JobKorea transactions or the Randstad
Transaction turns, at least in part, on whether the Engagement Letter was still in effect at the
time of those transactions. Accordingly, it is to that question that the Court turns first.
A. Whether and When Stone Key’s Engagement Ended
It is undisputed that neither party ever terminated the Engagement Letter in writing
pursuant to Section 6. At the same time, there is no dispute (or, at least, no longer any dispute)
12
that the Engagement Letter could end in another way: through completion. In their pretrial
submissions, both parties appeared to acknowledge that written termination was not the only way
the Engagement Letter could end. (Pl.’s PCL ¶ 29 (“Stone Key’s engagement could [] be
terminated upon written notice . . . [or] completed by the consummation of a Sale Transaction
and payment of Stone Key’s fees.”); Def.’s PCL ¶ 11 (“[B]y limiting the scope of Stone Key’s
engagement . . . the parties expressly agreed that the engagement could end with [] completion
. . . .”)). And at oral argument after trial, Stone Key explicitly conceded the point. (Tr. 453-54).
That is for good reason, as the Engagement Letter itself expressly refers (in connection with an
indemnification agreement incorporated by reference into the Agreement) to “the termination,
modification, or completion of the engagement of Stone Key.” (Engagement Letter 15
(emphasis added)). Additionally, New York precedent holds that an agreement with a limited
purpose concludes when the purpose for which it was created ends. See, e.g., In re Oneida, Ltd.
(“Oneida I”), 400 B.R. 384, 391 (Bankr. S.D.N.Y. 2009) (noting that, to require written
termination where a limited-purpose contract has run its course, would “extend the scope of the
engagement” and “convert the [agreement] into an open-ended advisory contract”).
That said, the parties vehemently disagree with respect to what qualifies as “completion”
of the contract. Monster claims that the contract was completed once the “review of strategic
alternatives” for which Stone Key was hired came to an end — whether or not Monster sold the
company or completed any transaction at all. (See Def.’s PFF ¶ 55 (“Upon the conclusion of the
Review, whether successful or unsuccessful, Stone Key’s engagement under the Engagement
Letter would be completed.”); see also id. ¶ 56; Tr. 480 (arguing that the parties involved did not
send a termination letter because, once the process ended without success, they believed the
engagement had ended)). Stone Key claims that the contract could be completed only with “the
13
sale of the company and [Monster’s] payment of [Stone Key’s] fees.” (Tr. 454; see also id. at
454-56; Pl.’s PCL ¶ 25 (“Monster’s engagement of Stone Key under the Engagement Letter
could not be deemed to have been completed before Monster consummated a Sale Transaction
(as defined in the Engagement Letter) and paid Stone Key’s final invoice.”)). That is, on Stone
Key’s view, the Engagement Letter remained open until Monster was sold and, until that point,
absent written notice, Monster remained entitled to seek Stone Key’s advice and Stone Key
remained entitled to a fee in the case of a qualifying transaction. (Tr. 461).
Monster plainly has the better of the argument. First, as a matter of law, courts have held
that a limited-purpose engagement can end even if the project for which a party was engaged
does not end with a successful transaction. See, e.g., Argilus, LLC v. PNC Fin. Servs. Grp., Inc.,
419 F. App’x 115, 119 (2d Cir. 2011) (finding that the parties’ relationship “came to an end . . .
when it became clear that the . . . proposal would not be accepted”). That is, a limited-purpose
contract — which the Engagement Letter indisputably was — ends when the purpose for which
it was entered ends. See In re Dorrough, Parks & Co., 173 B.R. 135, 141 (Bankr. E.D. Tenn.
1994) (“The parties entered a contract with a finite duration: the debtor was to perform the public
offering work, and once the public offering was completed, the contract ended.”), aff’d, 185 B.R.
46 (E.D. Tenn. 1995). 2 As discussed below, Stone Key and Monster entered the Engagement
Letter for the purpose of pursuing a sale of the Company; nothing in that agreement required
2
Stone Key argues that, “as a matter of contract law,” completion required the complete
sale of the company and payment to Stone Key. (Tr. 456). But the only case cited by Stone Key
for that proposition is Oneida, which happened to feature a completed transaction but which by
no means held that a successful transaction (never mind a company’s sale) was the only way,
other than written termination, to complete a limited-purpose engagement letter. See Oneida I,
400 B.R. 384; Oneida II, 2010 WL 234827. Notably, the Court in Oneida I held that the
engagement there had been completed following a “Restructuring Transaction,” even though the
parties’ engagement letter contemplated the consummation of a “Sale Transaction.” See Oneida
I, 400 B.R. at 387; Oneida II, 2010 WL 234827, at *3.
14
Monster to actually sell itself in order for the pursuit of a sale to come to an end. Cf. Am. Inv. &
Mgmt. Co. v. Arab Banking Corp., No. CIV. A. 91-0040, 1993 WL 54601, at *4 (D.D.C. Feb.
18, 1993) (holding that where a written contract provided for a fee only in the case of a
successful transaction, no fee was due when no transaction proved successful).
Second, as a matter of common sense, the Engagement Letter could plainly end without
written termination or a successful sale of the Company. To see why that is, one need only
assume that Monster entered a Sale Transaction thirty years after the parties entered the
Engagement Letter and twenty-eight years after the last contact between the parties (that is, to
change the date of the Randstad Acquisition from 2016 to 2042, but otherwise keep the facts of
the case the same). In such a scenario, it would be absurd to suggest that the parties’ contract
remained in effect — even without written notice — and Stone Key wisely conceded as much
during oral argument at the conclusion of the case. (Tr. 456-57). While wise, however, that
concession is also fatal to Stone Key’s argument that the Engagement Letter could end only
through written termination or a successful sale of the Company. That is, by conceding that
Stone Key could not enforce the Engagement Letter twenty-eight years after the parties’ last
contact, Stone Key concedes that the contract could be completed through some means other
than written termination or a successful sale of the Company. The relevant question then
becomes merely one of line-drawing — namely, determining when the contract was completed.
Finally, and most significantly, Monster’s position is supported by extrinsic evidence of
the parties’ understanding of “completion” — to which the Court may look because the meaning
of the term in the Engagement Letter is ambiguous. (See Def.’s PCL ¶ 78 (arguing that the Court
must look to the parties’ course of dealing to establish when Stone Key’s engagement was
completed); Tr. 455 (Stone Key conceding that the meaning of “completion” was not “spelled
15
out” in the Engagement Letter)). From the start, the parties plainly understood that Stone Key
was primarily engaged to advise Monster in connection with a sales process, the principal goal of
which was to sell the Company. That was the understanding of Bovin, who negotiated the
Engagement Letter, (Bovin Dep. 39), and of Ryan Hubbard, a Stone Key vice president who “coquarterbacked” the strategic review on behalf of the bank and who spent sixty to seventy percent
of his time on it. (Hubbard Dep. 10, 44, 46, 51). That was also the understanding of Monster’s
officers. At trial, Timothy Yates, who was Monster’s Executive Vice President at the time the
Engagement Letter was signed, (Yates Aff. ¶ 3), testified that “[t]he major focus [of the process]
was on selling the whole company. The secondary focus was on finding a strategic buyer, which
could be affected [sic] either through a [‘private investment in public equity’] or through in some
cases a partial sale transaction.” (Tr. 287). And as Iannuzzi testified, “[t]he thrust of everything
we did, everything we prepared was with regard to the sale of the entire company.” (Tr. 379).
Contemporaneous documentation supports that understanding. In a list of sixty-seven potential
investors and purchasers provided by Stone Key in early April 2012, just before the Engagement
Letter was signed, sixty-two were listed as prospective acquirers of the entire company, while
only thirteen were considered for a partial purchase of assets and thirty-two for a private
investment in public equity. (PX-25, at 23-26). By June 2012, twelve of the fifteen companies
that had expressed serious interest in Monster were seeking to acquire Monster as a whole; and
the two parties with whom Monster had earnest discussions over the course of 2012 and 2013 —
Symphony and Platinum — were both interested in an acquisition. (PX-32, at 2).
Additionally, extrinsic evidence makes clear that the parties understood that the review
would be conducted on a limited timeline and might end without a transaction. According to
McVeigh, BAML’s representative on the review of strategic alternatives, “maintaining the status
16
quo was always an option for [Monster].” (McVeigh Aff. ¶ 12; see also Tr. 251 (Yates testifying
that “different people . . . put different odds on [the possibility] that the sale process was not
going to result in a sale”); Hubbard Dep. 69 (noting that an “option in any strategic alternatives
review” is the “status quo,” where “management doesn’t undertake a transaction and continues to
run and operate the business as it has been doing”)). Indeed, in an “illustrative time line” that
was part of its February 28, 2012 presentation to Monster’s Board, Stone Key included the
possibility that Monster’s Board would decide to maintain the “status quo,” clearly indicating
that such a decision would bring the review to an end by drawing an arrow from that outcome to
the representation of a stop sign. (See PX-20, at 10; see also PX-25, at 13 (describing the “pros”
and “cons” of “stay[ing] the course”)). 3 The timeline as a whole showcases a forward-flowing
process heading toward several potential completion points; nothing about it suggests that the
process might lie dormant and then restart, let alone cycle back through a previously completed
stage. In fact, no document in evidence suggests as much.
Over the course of 2012 and the first half of 2013, the parties continued to signal that the
process would unfold over a discrete period. Timelines were reviewed, resolutions were
discussed, and a due date for final bids was set. (See PX-143, at 3; DX-24, at 2-3; DX-25, at 2).
As potential bidders narrowed during the last half of 2012 and first half of 2013, first to two and
then to one, the parties began to anticipate the end of the process. In February 2013, the Stone
Key team proposed language for a Monster press release letting the market know there could be
“no assurance that [the] strategic review process [would] result in a transaction.” (DX-34, at 1).
3
Urfirer tried to minimize the significance of the stop sign by noting that it was “outside”
the box containing the four possible outcomes of the strategic alternatives review, (Tr. 29), but
that is risible. Notably, Hubbard concurred that the stop sign signified that the strategic review
could end without a transaction. (Hubbard Dep. 69; see also Bovin Dep. 44-45 (agreeing that
maintaining the status quo was an option)).
17
Significantly, the draft language referenced two different possible outcomes: “a specific
transaction,” Stone Key’s draft stated, could be approved by the Board of the Directors or “the
review process [could be] concluded.” (Id.). That the two were phrased in the alternative makes
plain that Stone Key was well aware that the review process might “conclude[]” without “a
specific transaction.” In an earnings call three days later, Iannuzzi informed investors that
Monster was “spending little additional management or financial resource[s] in pursuit of” the
review of strategic alternatives. (DX-35, at 4). And Stone Key anticipated at the time that the
process was winding down. When a new buyer approached Stone Key about Monster in March
2013, Hubbard wrote to Bovin and Urfirer: “Between us, there is no chance MWW will engage
with a new buyer at this time . . . .” (DX-39, at 2). Bovin agreed. (Id. at 1). This is consistent
with Yates’ testimony that around this time Monster “knew the process was coming to an end”
and had instructed Stone Key and BAML “not to open up any new initiatives.” (Tr. 272).
Lastly, the parties’ understanding that the strategic review could — and did — conclude
without a sale is confirmed by the fact that the review did conclude without a sale and that
Monster, BAML, and Stone Key all accepted that conclusion. Minutes of the April 30, 2013
Board meeting state that Iannuzzi “indicated that while discussions regarding strategic
alternatives were ongoing, he anticipated that the conversations with the final interested party”
— Platinum — “would terminate shortly, thereby allowing [Monster] to execute upon a stock
buyback plan.” (DX-42, at 3). A few days later, Bovin informed the Stone Key team that, if
asked, Iannuzzi planned to tell investors that the “process [was] coming to an end, [with] no
assurance of a transaction.” (DX-44; see also Hubbard Dep. 111 (identifying the “process” as
“Project Marlin,” Stone Key’s code name for the strategic review)). Further, when, on May 21,
2013, negotiations with Platinum broke down, it is plain that Monster and Stone Key employees
18
both understood the review to be effectively over. Hubbard e-mailed his colleagues: “[Project]
Marlin died today.” (DX-49; see also Hubbard Dep. 115). And Bovin, Iannuzzi, and Yates (in
his capacity as Monster’s Rule 30(b)(6) witness) all testified that this was their own
understanding at the time. (See Bovin Dep. 85 (as of May 21, 2013, “the strategic alternatives
process for Monster that we and Bank of America were conducting had ended or was in the
process of ending”); Iannuzzi Aff. ¶ 52 (“As of May 21, 2013, Monster’s publicly-disclosed
Review concluded without a transaction.”); Yates Dep. 64 (“[I]t is clear to me that the process
ended when the conversations with Platinum ended [on May 21, 2013].”)). Moreover, both
Yates and Iannuzzi testified — credibly — that they had conversations with Bovin and Hubbard
around this time alerting them that Monster considered the sales process over and planned to do
no further work on it. (Tr. 269, 408-10). That testimony is corroborated by McVeigh, BAML’s
representative, who testified that — on a date he could not remember, but clearly around May or
June 2013 — Yates had called to tell him that the sales process was over, a conversation that
McVeigh considered “a formality,” because “[t]here was nothing going on” at the time. (Tr.
428; see also id. at 426-28; Yates Aff. ¶ 22).
Any doubt that the strategic review — and, by extension, Stone Key’s engagement —
had run its course is resolved by the parties’ conduct in the days, months, and years following the
end of talks with Platinum on May 21, 2013. For instance, the “virtual data room,” which had
been established to enable prospective acquirers to conduct due diligence, was shut down on July
18, 2013. (DX-59; see also Bovin Dep. 108-09 (agreeing that it was customary to shut down a
virtual data room after a transaction had concluded “either successfully or unsuccessfully”)).
And on May 22, 2013 — the very day after the Platinum talks ended — Monster initiated the
$200 million share repurchase program that the Board had authorized on April 30, 2013 and that
19
Monster had, in its May 2, 2013 earnings call, announced would be implemented once
conversations with prospective buyers came to an end. (Iannuzzi Aff. ¶ 55; Yates Aff. ¶ 42; DX42, at 3-4; DX-45, at 4-5, 12). That step is particularly strong evidence of the strategic review
having come to a close, as insider trading laws effectively precluded Monster from announcing
the buyback program while it was actively trying to find a buyer. (Tr. 403-04; see Stowell Aff.
¶ 19; Bovin Dep. 86-87; see also DX-45, at 4-5, 12 (Iannuzzi stating, in a May 2, 2013 earnings
call that it would be “inappropriate to execute” on the buyback program authorized by the Board
while conversations with prospective buyers were ongoing, but that Monster would do so when
the conversations ended)). Iannuzzi formally announced the buyback program on August 1,
2013, telling investors that “active conversations with regard to the potential sale of the company
came to a conclusion during the second quarter which allowed Monster to pursue its previously
announced stock repurchase program.” (PX-70, at 4). Notably, financial analysts read those
statements as confirmation that Monster’s strategic review had come to an end. (DX-65 (stating
that Monster “threw in the towel on a 15-month effort to sell the company, a conclusion that had
become apparent when [Monster] began repurchasing stock in May”); see also DX-62; DX-63). 4
Even more notably, Stone Key employees appear to have done the same, as they ceased regular
discussions with Monster about the sales process. (See Bovin Dep. 106; Hubbard Dep. 129).
The reaction of Urfirer and Bovin to news of the JobKorea transactions confirms that
they did not genuinely believe the Engagement Letter to be open. For one, Bovin called Iannuzzi
to congratulate him on the deal at the time (Iannuzzi Aff. ¶ 70; Tr. 412) — a strange thing to do
4
To be clear, the Court considers the statements of financial analysts as evidence of the
market’s reaction to Monster’s August 1, 2013 announcement, not for the truth of any matter
asserted. See Fed. R. Evid. 801(c). Accordingly, Stone Key’s hearsay objections to those
exhibits are overruled. (See Docket No. 83, at 19-20).
20
if he believed that the Engagement Letter was still open and that Stone Key was entitled to a fee.
Even more tellingly, Stone Key did not demand a fee for JobKorea I; Bovin and Urfirer did not
even discuss Stone Key’s entitlement to a fee; and no one at Stone Key documented or calculated
what Stone Key’s fee for JobKorea I might be. (Bovin Dep. 123, 125-26; Tr. 72-73). In fact,
Stone Key did not seek a fee for JobKorea I until February 2017 — more than three years after
the fact. (See DX-117; Bovin Dep. 127-30; Urfirer Aff. ¶ 111). Urfirer claims that Stone Key
decided to defer discussion of a fee for JobKorea I with Monster until “an appropriate future
date” because of Stone Key’s historic relationship with Monster and because Stone Key believed
that BAML’s fee under its 2015 contract with Monster was only $250,000. (Urfirer Aff. ¶ 111).
But that explanation is incredible. Stone Key was in dire financial straits at the time of the
JobKorea I transaction, so it is hard to imagine that Urfirer and Bovin would have delayed
seeking a fee if they had genuinely believed they were entitled to one. (See DX-87; Bovin Dep.
141). At a minimum, they surely would have spoken to each other about their entitlement to a
fee or made an effort to either calculate, or document their entitlement to, a fee. Yet Urfirer
admitted that Stone Key does not possess any contemporaneous documentation of such
communication. (Tr. 72-73, 83).
In short, the evidence is overwhelming that all of the participants in the strategic review
— Monster, BAML, and Stone Key itself — understood that the review, and thus Stone Key’s
engagement pursuant to the Engagement Letter, could end without a sale or written termination.
More to the point, the evidence is overwhelming that all of those participants understood that the
strategic review, and thus Stone Key’s engagement pursuant to the Engagement Letter, did come
to an end. Fixing the date on which the engagement ended is, of course, difficult given the
absence of a written termination letter or other discrete event. An argument could be made (and
21
Monster does make it, albeit weakly (Tr. 481-82)) that the engagement ended on May 21, 2013,
when Monster’s discussions with Platinum ended, or May 22, 2013, when the Company
launched its stock repurchase program. But, without a doubt, the engagement had run its course
(as Monster argues more forcefully (Def.’s PCL ¶¶ 15, 18; see also Tr. 481-82)) by August 1,
2013, when Iannuzzi publicly announced that the stock buyback program had been launched.
There is no evidence in the record that Monster and Stone Key communicated about the review
after that date, and, as noted, they ceased communicating altogether in April 2014, when Bovin
left Stone Key. Cf. In re Persaud, 467 B.R. 26, 40 (Bankr. E.D.N.Y. 2012) (finding that an
attorney and client’s cessation of communications about an engagement and inactivity in their
relationship for a year demonstrated that the parties understood the project had ended).
There is little contrary evidence in the record, and none of that evidence is persuasive.
The principal evidence to the contrary comes from Urfirer, who testified that he understood that
the contract could be completed only with a successful sale (or written termination) and that he
therefore viewed it as in existence well beyond August 2013. (Tr. 130-31). The Court declines
to credit that self-serving testimony, based on both the Court’s assessment of Urfirer’s demeanor
in Court and on the fact that his testimony is belied by his own conduct — for example, by the
fact that he made no effort to contact Stone Key (let alone demand, calculate, or document that
he was owed a fee) when the JobKorea transactions were first announced; and that he did not
even make contact with Yates when Yates assumed the role of Monster’s CEO in November
2014. Moreover, even if the Court did credit Urfirer’s testimony, his understanding of the
contract is inconsistent with the overwhelming evidence summarized above that Stone Key’s
engagement had run its course by August 1, 2013. That evidence includes the testimony of the
other principal participants in the relevant events — Bovin, Hubbard, McVeigh, Yates, and
22
Iannuzzi — all of whom have less of an interest in the outcome of this litigation than Urfirer
(and, in many instances, were more directly involved in the review and in the relevant
interactions between Monster and Stone Key). 5 It also includes scores of contemporaneous
documents — such as Board minutes, slide decks, and e-mails involving Stone Key personnel —
reflecting an understanding that Project Marlin, the code name for the strategic review, had
“died” by August 1, 2013. (DX-49).
Other than Urfirer’s testimony, only two categories of evidence even arguably support
Stone Key’s position — and neither is enough to carry its burden. The first is a presentation,
dated November 19, 2013, and prepared by Stone Key for Monster, stating that “Monster is in
the final stages of its strategic alternatives review process that was initiated in March 2012.”
(DX-82, at 5). Significantly, however, that language was inserted into the document as early as
July 2013 — when the strategic review was arguably in its “final stages.” (See DX-58). There is
no evidence that it continued to be in its “final stages” four months later. Additionally, the
statement was made by Stone Key, not by Monster, and there is no evidence in the record that it
was ever shown to representatives of Monster. Finally, the statement is belied by the testimony
of the document’s author, Hubbard, who declared that Project Marlin “died” on May 21, 2013,
when all viable efforts to sell the Company had been exhausted. (See DX-49; Hubbard Dep. 44,
123). Stone Key seeks to minimize the significance of Hubbard’s assessment by dismissing him
as a “junior” banker at Stone Key. (Urfirer Dep. 30; Tr. 93). But, his relative seniority aside,
5
The Court also declines to rely on the testimony of Plaintiff’s expert, Matthew Nimetz.
For one, Nimetz focused almost exclusively on the issue of written termination and suggested
that the engagement between Monster and Stone Key could end only through written
termination, (see Nimetz Aff. ¶ 45), a position that Stone Key itself has disavowed, (Tr. 453-54).
For another, Nimetz reviewed very little extrinsic evidence, (see Tr. 169-80), rendering his
testimony of limited value in evaluating the scope of Stone Key’s engagement under the
Engagement Letter given the admitted ambiguity of the term “completion.”
23
Hubbard was arguably more involved in the strategic review than anyone else at Stone Key, (see
Hubbard Dep. 46 (describing himself as the strategic review’s “co-quarterback”)), and devoted
sixty to seventy percent of his time to the project, (see id. at 50-51), so his view carries weight.
The second category of evidence consists of early drafts of a settlement agreement
exchanged between Urfirer and Bovin during Bovin’s contentious exit from Stone Key in the
Spring of 2014. The drafts show that Urfirer suggested, and for a time Bovin accepted, that
Bovin could receive compensation from a “current signed engagement[]” with Monster. (PX-84,
at 5; see also PX-81, at 2; Urfirer Aff. ¶¶ 95-96). 6 Notably, however, while the drafts specified
live projects associated with two other engagements (“General Dynamics (Project Atlas)” and
“QinetiQ (Project Zebedee)”), they did not specify any particular Monster project or
engagement, let alone identify “Project Marlin.” (See PX-84, at 5). The import of Monster’s
inclusion in the settlement drafts is thus ambiguous. At most, it proves that Urfirer proposed
adding a tail provision for a Monster engagement during what both sides admit were acrimonious
negotiations. (Tr. 493-94; Urfirer Dep. 221). But Urfirer may well have done so knowing or
thinking there would be no future income from any Monster engagement. Or he may have done
so purely speculatively (or because, as early as 2014, he anticipated the position that Stone Key
would take in this litigation). Either way, Urfirer’s inclusion of Monster in the draft settlement
does not reveal much — particularly in the face of Bovin’s unambiguous testimony that he
understood the Engagement Letter to have ended by August 1, 2013. (Bovin Dep. 93).
Admittedly, Monster has no good explanation for its failure to send a written termination
notice to Stone Key — except that all of the participants in the strategic review plainly viewed it
6
Bovin and Urfirer ultimately decided on a different compensation structure that did not
include a tail provision for any Monster engagement. (See Urfirer Aff. ¶ 96).
24
as unnecessary (if they thought about it at all) because the engagement had run its course. (See
Tr. 426-28 (McVeigh describing a call from Yates notifying him that the review had terminated
as a “formality” because “[t]here was nothing going on”); Tr. 262 (Yates stating that he never
considered sending written notice of termination)). The absence of such written notice was
certainly a recipe for litigation, if only because it made it difficult to identify precisely when
Stone Key’s engagement came to an end and the tail provision began. But the difficulty of
dating the engagement’s end does not mean that it did not end. To the contrary, the evidence
overwhelmingly shows that Stone Key’s engagement under the Engagement Letter did end and
that it did so no later than August 1, 2018. It follows that Stone Key is not entitled to fees for
either JobKorea II or the Randstad Transaction, as both occurred well after the contract ended —
and well after any conceivable tail period had run its course. But JobKorea I requires further
analysis because it closed in December 2013, within twelve months of the end of the engagement
(whether the end is dated May 21, 2013 or August 1, 2013), and Monster (now) concedes that the
tail period set forth in Section 6 of the Engagement Letter was triggered by completion of the
contract. 7 That is, because JobKorea I occurred within twelve months of August 1, 2013, and
Monster indisputably conducted substantive discussions with its counterparty prior to that date
(see PX-65; PX-68; PX-69), the completion of the contract does not answer the question of
whether Stone Key is entitled to a fee for that particular transaction.
7
An argument could perhaps have been made that the tail provision applied only in the
event of written termination. In fact, Monster seemed to take that position in pre-trial
submissions. (See Def.’s PCL ¶ 25; Def.’s PFF ¶ 59). At the conclusion of trial, however,
Monster conceded that the tail provision applied in the case of completion without written
termination as well — a concession no doubt prompted by the fact that every one of its own
witnesses agreed with that understanding of the tail provision. (Tr. 481).
25
B. JobKorea I
Although completion of the contract does not preclude Stone Key from recovering a fee
for JobKorea I, the Court concludes that the bank is precluded from doing so for at least two
other reasons. First, the Court concludes that JobKorea I did not qualify as a “Partial Sale
Transaction” within the meaning of the Engagement Letter. As noted, Section 3(c) of the
Engagement Letter defines a “Partial Sale Transaction” as “any Transaction involving the sale of
a material portion of the assets or operations of the Company and its subsidiaries taken as a
whole that does not constitute a Sale Transaction.” (Engagement Letter § 3(c)). At oral
argument, Stone Key’s counsel conceded that Monster retained operational control over
JobKorea after selling H&Q Capital a minority stake in the company (or at least that there was
no evidence in the record suggesting otherwise). (Tr. 466-67; see also Tr. 363 (David Stowell,
Monster’s expert, testifying that Monster “owned the operations” of JobKorea before and after
JobKorea I); Tr. 393-94 (Iannuzzi noting that Monster maintained “full operational control” of
JobKorea after JobKorea I)). Hence, it cannot be said that JobKorea I involved the sale of a
material portion of the operations of Monster and its subsidiaries — let alone a material portion
of the operations of Monster and its subsidiaries “taken as a whole.” (Engagement Letter § 3(c)).
Thus, to prove that JobKorea I qualified as a Partial Sale Transaction, Stone Key would have to
show that it involved “the sale of a material portion of the assets . . . of the Company and its
subsidiaries taken as a whole.” (Id. (emphasis added)). Stone Key failed to do so.
The Engagement Letter does not define what portion of assets would qualify as
“material.” In the securities fraud context, courts in this Circuit have “typically” used five
percent as “the numerical threshold . . . for quantitative materiality.” Dekalb Cty. Emps.’ Ret.
Sys. v. Controladora Vuela Compania De Aviacion, S.A.B. de C.V., No. 15-CV-1337 (WHP),
26
2016 WL 3685089, at *4 (S.D.N.Y. July 6, 2016). This case is not, of course, a securities fraud
case. Nevertheless, Stone Key identifies no other legal standard by which to measure the
materiality of a portion of assets — and, in fact, relies itself on securities fraud cases to argue
that the sale of 49.9% of JobKorea’s assets was not immaterial as a matter of law. (Docket No.
57 (“Pl.’s PFF”), ¶ 80). Accordingly, the Court will use that standard here. Measured against it,
the 49.9% stake in JobKorea plainly did not qualify as a “material portion” of the assets of
Monster and its subsidiaries because, as Monster’s expert Stowell explained, that stake
constituted less than four percent of the Company’s “total assets.” (Stowell Aff. ¶ 38 n.40 (“As
of the 3rd quarter 2013, total assets of JobKorea were $113 million, and 49.99% of this equals
$56,567,389. Total assets of the Company at the same time were $1.54 billion. $56.5
million/$1.54 billion = $3.7%.”); see also DX-70; Tr. 430-31 (McVeigh explaining that he
viewed JobKorea I as separate from the Engagement Letter because JobKorea I was “a minority
asset, a small asset, relative to the company”)). Stone Key’s only argument to the contrary is that
Monster’s assets should be measured according to their fair market value and that JobKorea I
was “greater than ten percent of the enterprise value of Monster.” (Tr. 467). But Stone Key
provides no basis to conclude that the Engagement Letter’s reference to “assets” means anything
other than the standard accounting concept of “book value” — that is, the assets that appear on a
balance sheet. (See Tr. 337 (Stowell describing the “book value” of assets)). 8
8
Stone Key also suggests that the transaction was “material” because the announcement of
JobKorea I “resulted in a one-day increase in Monster’s stock price in excess of 15%.” (Pl.’s
PFF ¶ 79). But that argument disregards the plain language of the Engagement Letter, which
does not ask whether the transaction was material, but whether it involved the sale of a material
portion of the Company’s assets. (Engagement Ltr. § 3(c)). Moreover, Stone Key did not
conduct an event study, so it is speculative to say that the increase in stock price was attributable,
let only entirely so, to JobKorea I. Finally, if JobKorea was as fundamental to Monster’s
business as Stone Key suggests, one would expect its stock to have dropped, not risen, after
27
Second, and in any event, Stone Key is barred from collecting a fee because the
Engagement Letter’s “Partial Sale Transaction” fee provision is an invalid agreement to agree.
Under New York law, “there can be no legally enforceable contract” where an agreement “is not
reasonably certain in its material terms.” Cobble Hill Nursing Home v. Henry & Warren Corp.,
548 N.E.2d 203, 482 (N.Y. 1989). Thus, “a mere agreement to agree, in which a material term is
left for future negotiations, is unenforceable.” Joseph Martin, Jr., Delicatessen, Inc. v.
Schumacher, 417 N.E.2d 541, 541 (N.Y. 1981). “A compensation term is not indefinite . . .
simply because it fails to specify a dollar figure or a particular compensation formula to be
employed in calculating compensation.” Benevento v. RJR Nabisco, Inc., No. 89-CV-6266
(PKL), 1993 WL 126424, at *5 (S.D.N.Y. Apr. 1, 1993). Nevertheless, a price term may be
insufficiently definite where “the amount can[not] be determined objectively without the need
for new expressions by the parties.” Cobble Hill Nursing Home, 548 N.E.2d at 483. When
compensation is calculated “with reference to industry standards or customs, the plaintiff must
establish that the omitted term is fixed and invariable in the industry in question.” Benevento,
1993 WL 126424, at *7 (citing Hutner v. Greene, 734 F.2d 896, 900 (2d Cir. 1984) (internal
quotation marks omitted)).
Applying those standards here, the Court concludes that the Engagement Letter’s Partial
Sale Transaction fee provision is unenforceable. That provision — Section 4(d) — states that, in
the event of a qualifying transaction, Monster will pay Stone Key “an amount equal to 55% of
the fee that shall be mutually acceptable to the Company and Stone Key and consistent with
compensation agreements customarily agreed to by nationally recognized investment banking
Monster announced the sale of a 49.9% stake in the subsidiary. (See Docket No. 75-1 (“Def.’s
PCL Response”), ¶ 105).
28
firms for transactions of similar size and complexity where there are two co-financial advisors.”
(Engagement Letter § 4(d) (emphasis added)). By its terms, therefore, the provision calls for a
“new expression[]” by the parties in the event of a qualifying transaction. Cobble Hill Nursing
Home, 74 N.Y.2d at 483. Moreover, it “contains no methodology, formula, or external measure
by which the Court might objectively determine the compensation to be paid.” GEM Advisors,
Inc. v. Corporación Sidenor, S.A., 667 F. Supp. 2d 308, 326 (S.D.N.Y. 2009). That “vagueness
is fatal” to Stone Key’s claim with respect to JobKorea I. Id. at 327; see also id. at 326 (reaching
the same conclusion with respect to a compensation provision providing that the plaintiff’s fee
“shall be mutually agreed” between the parties “in an average range of 2.0% . . . of each
Transaction Value”); Benevento, 1993 WL 126424, at *6 (reaching the same conclusion with
respect to a compensation provision calling for a “mutually agreed upon” fee determined “in
accordance with,” or “with reference to,” “comparable investment banking standards” (internal
quotation marks omitted)).
That conclusion is reinforced by other evidence in the record. At trial, witnesses for both
sides agreed that Section 4(d) would call, in the first instance, for a “fee run” — an analysis of
publicly available investment banking fees for comparable “precedent transactions.” (See Tr. 8491, 347, 353-54, 432-34). As Stone Key’s own arguments reveal, however, there is no “fixed
and invariable standard” for conducting a fee run. Benevento, 1993 WL 126424, at *7 (internal
quotation marks omitted). Stone Key used publicly available investment banking fees for
transactions between $50 million and $100 million announced between January 1, 2009 and
December 31, 2013. (PX-113, at 13-18). Stone Key then proceeded to consider only the top two
quartiles of those fees and, within those top two quartiles, transactions from the mean fee amount
(as opposed to the minimum fee amount) to the maximum fee amount. (See id. at 13; see also
29
Docket No. 81, ¶ 4). After doing that, Stone Key added a 25-50% co-advisor premium to the
implied transaction fee. (PX-113, at 10-11). In doing so, however, Stone Key made a number of
subjective choices — for example, to consider fees for transactions between $50 million and
$100 million, to consider just some rather than all quartiles, to take the mean to maximum fees
and to exclude the minimum, and to add a particular premium. Urfirer sought to justify those
choices — for instance, he testified that he took the top two quartiles based on the history of
Stone Key’s relationship with Monster and that he added a co-advisor premium of 25-50% based
on investment-banking experience (Tr. 114-16; 119-20) — but the fact remains that they were
anything but objective ones. Moreover, Section 4(d) calls for a fee consistent with transactions
of “similar size and complexity where there are two co-financial advisors,” (Engagement Letter
§ 4(d)), but the fee run performed by Stone Key did not even distinguish between single-advisor
and co-advisor fees, and it is impossible to tell how complex each transaction in the fee run was,
never mind what the relationship between the banker and client was or how much work the
banker had performed on the deal. (See Tr. 90; PX-113, at 13).
On top of that, at best, a “fee run” yields only a range of fees, and fixing on a “mutually
acceptable” fee within that range would plainly have required further negotiation and agreement.
Stowell testified, for example, that the final fee would have been “negotiated based on [the]
complexity or amount of time and energy [the bank] put[s] into a transaction.” (Tr. 351). And
McVeigh concurred, explaining that whether and where to fix a fee within the fee-run range
would have been “a function of [a] business negotiation” between the bank and company. (Tr.
433). Given all of that, it is not surprising that Urfirer himself characterized the Partial Sale
Transaction fee provision in deposition testimony as an “agreement to agree” (albeit perhaps
without understanding the legal implications of that characterization), (see Tr. 95-96), or that
30
Hubbard used the same words in an e-mail to Monster regarding a draft of the Engagement
Letter. (DX-126, at 1 (“The attached Engagement Letter and Retainer Amendment have been
updated to reflect the ‘agreement to agree’ on a fee for all transactions other than a sale of the
entire company.”)). Nor is it surprising that Stone Key’s own calculation of the fees it is owed
for the JobKorea transactions morphed dramatically between its initial demand and its final
litigation position. (Tr. 99, 101-08; DX-117; Urfirer Aff. ¶¶ 130-43). Urfirer and Hubbard may
not have been using the term “agreement to agree” in a legal sense, but their characterizations
were nonetheless apt. Put simply, “it is evident that the parties expected to negotiate an
additional fee arrangement at a later date and declined to define [Stone Key’s] complete
compensation package at the time of contracting. . . . The compensation clause therefore is
indefinite and unenforceable as a formal contract, as a matter of law.” Benevento, 1993 WL
126424, at *7-8; accord GEM Advisors, 667 F. Supp. 2d at 326. 9
Cowen & Co., LLC v. Fiserv, Inc., 31 N.Y.S. 3d 494 (N.Y. App. Div. 2016), upon which
Stone Key principally relies (Docket No. 72-2), does not call for a different result. In Cowen, the
First Department held that a transaction fee was not an unenforceable agreement to agree where
it required the parties to “work in good faith” toward a fee that was “consistent with investment
banking industry practice for transactions of comparable complexity, level of analysis and size.”
Cowen, 31 N.Y.S. 3d at 495-96. The Court found that the fee was sufficiently definite because it
could “be ascertained from public price indices and industry practice.” Id. at 496. In Cowen,
9
Stone Key might have had a claim for quantum meruit, see Benevento, 1993 WL 126424,
at *5 (“[I]f the contract is unenforceable due to indefiniteness, the party seeking to enforce the
compensation clause may be entitled to recover on a quantum meruit basis the reasonable value
of services rendered.”), but Stone Key explicitly dropped its quantum meruit claim before trial
and thus has waived any such argument. (See Docket No. 83, at 2).
31
however, the parties had engaged in a pre-litigation course of conduct that signaled agreement
over how to conduct a fee run and where they would have set the fee. See id. at 495, 497
(describing that the parties had discussed a 1% fee for the potential transaction and exchanged
fee runs and that “[a]t no time did defendant object to plaintiff's approach”). By contrast,
Monster and Stone Key never discussed a fee, let alone how to calculate a fee, for JobKorea I
until Stone Key made its February 2017 demand. (DX-117; Yates Aff. ¶ 52). And, as discussed
above, the record here is replete with evidence that conducting a fee run entails a host of
subjective choices — and is not guided by “fixed and invariable” standards in the investmentbanking industry. Benevento, 1993 WL 126424, at *7 (internal quotation marks omitted). In any
event, even if Cowen were on point, it is not binding, see, e.g., C.I.R. v. Bosch’s Estate, 387 U.S.
456 (1967) (“[I]n diversity cases . . . while the decrees of lower state courts should be attributed
some weight[,] the decision is not controlling where the highest court of the State has not spoken
on the point.” (internal quotation marks and alterations omitted)), and the Court would decline to
rely on it, as the First Department gave no consideration to either the subjective choices that
underlie a fee run or the negotiations required for parties to fix upon a fee even after completing
the fee run.
In sum, although the completion of Stone Key’s engagement does not, by itself, preclude
its claim for fees relating to JobKorea I, that claim fails for at least two reasons: because the
transaction did not qualify as a Partial Sale Transaction within the meaning of the Engagement
Letter and because the relevant fee provision is an unenforceable agreement to agree. 10
10
In light of that conclusion, the Court need not and does not reach Monster’s other
arguments for rejection of Stone Key’s claim relating to JobKorea I — namely, that JobKorea I
did not qualify as a “Partial Sale Transaction” because it was not even a “Transaction” within the
meaning of the Engagement Letter; that Stone Key waived any right to payment when it elected
not to seek a fee for several years; that because Stone Key was not Monster’s exclusive advisor
32
C. Expenses
Stone Key’s final claim is for reimbursement of its out-of-pocket expenses pursuant to
Section 5 of the Engagement Letter, which provides that Monster will reimburse “all out-ofpocket expenses reasonably incurred, invoiced and documented . . . in connection with Stone
Key’s rendering its services under this Agreement.” (Engagement Letter § 5). Wisely, Monster
does not contest (and certainly does not seriously contest) that Stone Key is entitled to some such
reimbursement. (Def.’s PCL Response ¶¶ 143-48). Instead, the only dispute is whether Stone
Key is entitled to all $47,339.01 in expenses that it claims. The Court concludes that it is not for
the simple reason that those expenses include some that predated the signing of the Engagement
Letter on April 20, 2012, and some that postdated the completion of the engagement by August
1, 2013. (PX-111, at 2, PX-114). Admittedly, Stone Key’s work on the strategic review began
several weeks before the Engagement Letter was signed. (PX-22, at 2). Section 5, however,
does not provide for reimbursement of expenses incurred before the Engagement Letter was
signed. Instead, by its terms, it provides for reimbursement only of expenses reasonably incurred
“under” the Engagement Letter — and, as Stone Key conceded during oral argument, the
expenses incurred before the agreement was signed (or after it was completed) could not, by
definition, have been incurred “under” the agreement. (See Tr. 479). Excluding those items, and
mindful that Monster did not contest the reasonableness of Stone Key’s alleged expenses, the
Court finds that Monster owes Stone Key $37,267.50 for the out-of-pocket expenses Stone Key
incurred under the Engagement Letter. (PX-114).
and Monster negotiated JobKorea I independently, the transaction is outside the ambit of the
Engagement Letter; and that, because Stone Key was not the procuring cause of JobKorea I, it
cannot seek compensation for the transaction. (Def.’s PCL ¶¶ 57-70).
33
Further, the Court concludes that Stone Key is owed prejudgment interest on those
expenses from the date of Stone Key’s original invoice — namely, February 13, 2017. “Under
CPLR 5001, interest on a sum awarded as a result of a breach of contract is computed from the
earliest date that the claim accrued.” NML Capital v. Republic of Argentina, 952 N.E.2d 482,
486 (N.Y. 2011). “In contract actions, . . . a claim generally accrues at the time of the breach.”
Hahn Auto. Warehouse, Inc. v. Am. Zurich Ins. Co., 967 N.E.2d 1187, 1191 (N.Y. 2012); see
also Reid v. Inc. Vill. of Floral Park, 967 N.Y.S.2d 135, 136 (N.Y. App. Div. 2013) (“Where the
claim is for the payment of a sum of money allegedly owed pursuant to a contract, the cause of
action accrues when the plaintiff possesses a legal right to demand payment.”). “[W]hen the
right to final payment is subject to a condition, the obligation to pay arises and the cause of
action accrues, only when the condition has been fulfilled.” Hahn Auto. Warehouse, Inc., 967
N.E.2d at 1191 (quoting John J. Kassner & Co. v. City of N.Y., 46 N.Y.2d 544, 550 (1979)).
Under the Engagement Letter, Monster’s obligation to reimburse Stone Key for its out-of-pocket
expenses was conditioned only on Stone Key’s “request” for payment of those expenses. (See
Engagement Letter § 5). Stone Key’s claim for reimbursement of its expenses thus accrued on
the day it rendered a request for reimbursement — that is, on February 13, 2017, the date of its
first invoice. Stone Key is therefore entitled to 9% interest on its out-of-pocket expenses as of
that date. See, e.g., Harbinger F&G, LLC v. OM Grp. (UK) Ltd., No. 12-CV-5315 (CRK), 2015
WL 1334039, at *35 (S.D.N.Y. Mar. 18, 2015) (applying New York law to conclude that the
plaintiff’s breach-of-contract claim “accrued . . . when it sent [the defendant] the final written
demand for payment”).
34
CONCLUSION
For the reasons stated above, the Court concludes that Stone Key failed to carry its
burden to show that Monster breached the terms of the Engagement Letter by refusing to pay
Stone Key fees in connection with JobKorea I, JobKorea II, or the Randstad Transaction. In
particular, the Court holds, first, that Stone Key’s engagement had ended by August 1, 2013,
thereby precluding any claim for fees arising out of JobKorea II or the Randstad Transaction;
and second, that Stone Key is not entitled to a fee for JobKorea I, even though the transaction
occurred during the tail period, because the transaction did not qualify as a “Partial Sale
Transaction” and because the fee provision is an unenforceable agreement to agree.
Accordingly, Monster is entitled to judgment on Stone Key’s first three claims. By contrast,
with respect to its fourth claim, Stone Key did prove that it is entitled to $37,267.50 for its outof-pocket expenses, plus 9% prejudgment interest as of February 13, 2017.
The parties shall confer and, no later than two weeks from the date of this Opinion
and Order, file an agreed-upon proposed judgment consistent with this Opinion and Order.
The Clerk of Court is directed to terminate 17-CV-3851, Docket Nos. 55 and 61.
SO ORDERED.
Date: August 10, 2018
New York, New York
35
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?