Pagidipati Enterprises, Inc. v. LABORATORY CORPORATION OF AMERICA HOLDINGS
Filing
59
MEMORANDUM OPINION, ORDER, AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE L. PATRICK AULD on 11/28/11, Ordering that Defendant's Motion for Leave to File a Surreply to Plaintiff's Reply Brief in Further Support of its Motion for Summary Judgment (Docket Entry 55 ) is GRANTED; Recommending that Plaintiff's Motion for Summary Judgment (Docket Entry 31 ) be GRANTED. (Law, Trina)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
PAGIDIPATI ENTERPRISES, INC.,
Plaintiff,
v.
LABORATORY CORPORATION OF AMERICA
HOLDINGS,
Defendant.
)
)
)
)
)
)
)
)
)
)
1:10CV742
MEMORANDUM OPINION, ORDER, AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
The above-captioned case comes before the undersigned United
States Magistrate Judge for a recommended ruling on Plaintiff’s
Motion for Summary Judgment (Docket Entry 31), pursuant to this
Court’s Amended Standing Order 30 and 28 U.S.C. § 636(b)(1)(B) (see
Docket Entries dated Sept. 29, 2010, and Nov. 11, 2011), as well as
for disposition of Defendant’s Motion for Leave to File a Surreply
to Plaintiff’s Reply Brief in Further Support of its Motion for
Summary
Judgment
(Docket
Entry
55),
pursuant
to
28
§ 636(b)(1)(A) (see Docket Entry dated Nov. 28, 2011).
U.S.C.
For the
reasons that follow, Defendant’s Motion for Leave to File Surreply
to Plaintiff’s Reply Brief in Further Support of its Motion for
Summary
Judgment
(Docket
Entry
55)
will
be
granted
and
a
recommendation will be made that the Court grant Plaintiff’s Motion
for Summary Judgment (Docket Entry 31).
BACKGROUND
This case arises from a Complaint, which identifies Plaintiff
as “a Florida corporation, formerly doing business in Ocala,
Florida, as Suncoast Labs” (Docket Entry 1, ¶ 1) and Defendant as
“a Delaware corporation having its principal place of business in
Alamance County, North Carolina” (id., ¶ 2).
Plaintiff and
Defendant “are parties to an Asset Purchase Agreement [(“APA”), as
to which, by its terms,] . . . North Carolina law governs.”
(Id.,
¶ 5; see also Docket Entry 5, ¶ 5.)
According to the Complaint, under the APA, “in the event
certain conditions are met, Plaintiff is entitled to receive from
Defendant, and Defendant is obligated to pay to Plaintiff, an
[E]arnout [P]ayment . . . calculated based on revenues earned by
Defendant during the applicable [E]arnout [P]eriod from Plaintiff’s
former customers . . . .”
(Docket Entry 1, ¶¶ 6-7.)
The Complaint
further alleges that “[t]he necessary conditions for Plaintiff to
receive an [E]arnout [P]ayment have been met, and Plaintiff is
entitled to receive from Defendant, and Defendant is obligated to
pay Plaintiff, the [E]arnout [P]ayment . . . [but that] Defendant
has failed and refused to pay the [E]arnout [P]ayment.”
¶¶ 17-18.)
(Id.,
Based on these allegations, the Complaint asserts that
“Defendant’s failure to pay Plaintiff the amount due and owing
Plaintiff under the [APA] constitutes a breach of [the APA] which
has caused Plaintiff damages . . . .”
(Id., ¶ 29.)
In its Answer, Defendant admitted that it “has not paid the
[E]arnout [P]ayment but den[ied] . . . that [it] owes any [E]arnout
[P]ayment to Plaintiff.”
(Docket Entry 5, ¶ 18.)
Additionally,
Defendant’s Answer asserts an affirmative defense that “Plaintiff’s
claims are barred by the doctrine of mutual mistake.” (Id., ¶ 32.)
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With leave of Court (Docket Entry 22), Plaintiff thereafter
filed a Supplemental Complaint alleging a second Earnout Period had
passed without Defendant “pay[ing] Plaintiff the [Earnout] [A]mount
due and owing under the [APA] . . . [resulting in] a breach of [the
APA] which has caused Plaintiff damages . . . .”
¶ 35.)
(Docket Entry 24,
Defendant’s Answer to Supplemental Complaint incorporates
the affirmative defenses asserted in the Answer and denies any
breach of the APA.
(Docket Entry 25, ¶¶ 30, 35.)
After the close of discovery (see Docket Entry 23), Plaintiff
filed its instant Motion for Summary Judgment (Docket Entry 31).
Defendant responded in opposition (Docket Entry 51)1 and Plaintiff
replied (Docket Entry 53). Defendant then filed its instant Motion
for Leave to File a Surreply to Plaintiff’s Reply Brief in Further
Support of its Motion for Summary Judgment (Docket Entry 55), which
Plaintiff has opposed (see Docket Entry 57).
DISCUSSION
Plaintiff has moved for summary judgment.
31.)
(See Docket Entry
In opposition, Defendant has cited declarations from Robert
Nelson and Greg Klenke that addressed the Earnout Payment.
e.g., Docket Entry 51 at 8, 10, 12-13, 15.)
Plaintiff
has
argued
that
the
Court
should
(See,
In its Reply,
disregard
those
declarations because Defendant failed to properly disclose Nelson
1
The Court (per the undersigned Magistrate Judge) authorized the public
filing of a redacted response (and related materials). (See Docket Entry 50.)
In addition, the Court (per the undersigned Magistrate Judge) accepted, as if
timely filed, a declaration Defendant inadvertently had omitted when it
responded. (See Docket Entry 54.)
-3-
as a possible witness, because both declarations conflict with the
testimony of Defendant’s proper Rule 30(b)(6) witness(es), and
because the declarations contain conclusory assertions as to legal
issues. (See Docket Entry 53 at 8-11.) Defendant has sought leave
to file a Surreply to address those arguments.
55.)
(See Docket Entry
Consideration of the Surreply (and/or of the declarations in
question) does not alter the analysis of the critical summary
judgment issues in this case (set out below) and, therefore,
Defendant’s
instant
Motion
for
Leave
to
File
a
Surreply
to
Plaintiff’s Reply Brief in Further Support of its Motion for
Summary Judgment (Docket Entry 55) will be granted.
Applicable Legal Standards
“The [C]ourt shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).
In considering that question, the Court “may not make
credibility determinations or weigh the evidence.”
Sanderson
Fed. R. Civ.
Plumbing
Prods.,
Inc.,
530
U.S.
133,
Reeves v.
150
(2000).
However, “unsupported speculation is not sufficient to defeat a
summary judgment motion if the undisputed evidence indicates that
the other party should win as a matter of law.”
Francis v. Booz,
Allen & Hamilton, Inc., 452 F.3d 299, 308 (4th Cir. 2006).
To the extent the Court must draw conclusions about matters of
North Carolina contract law in evaluating Plaintiff’s Motion for
-4-
Summary Judgment,2 “the highest court of the state is the final
arbiter
of
what
is
state
law.
When
it
has
spoken,
its
pronouncement is to be accepted by federal courts as defining state
law unless it has later given clear and persuasive indication that
its pronouncement will be modified, limited or restricted.”
v. American Tel. & Tel. Co., 311 U.S. 223, 236 (1940).
West
However,
“[a] state is not without law save as its highest court has
declared it.
and
acted
There are many rules of decision commonly accepted
upon
by
the
bar
and
inferior
courts
which
are
nevertheless laws of the state although the highest court of the
state has never passed upon them.”
Id.
Accordingly, “it is the
duty of [a federal court facing a question of state law] to
ascertain from all the available data what the state law is and
apply it . . . .”
Id. at 237.
“Where an intermediate appellate
state court rests its considered judgment upon the rule of law
which it announces, that is a datum for ascertaining state law
which is not to be disregarded by a federal court unless it is
convinced by other persuasive data that the highest court of the
state would decide otherwise.”
Id.
The APA’s Earnout Payment Provisions
Under the APA, Plaintiff agreed to convey certain assets to
Defendant, including “the list of customers of [Plaintiff] who have
received services provided by [Plaintiff] during the 2007 and 2008
calendar years, as set forth on Schedule 1.1(a) attached [to the
2
The parties agree that North Carolina contract law applies in this case.
(See Docket Entry 32 at 11-13, 16, 18-21; Docket Entry 51 at 17, 19-21.)
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APA] (the ‘Customer List’).”
(Docket Entry 32-1 at 8 (underlining
in original); see also Docket Entry 32-4 at 2-21, Docket Entry 33
at 2-21, Docket Entry 33-1 at 2-21, Docket Entry 33-2 at 2-4
(“Schedule 1.1(a)” containing the “Customer List”).)3
The APA
further documents Defendant’s agreement to pay Plaintiff “an amount
equal to the sum of (a) Thirteen Million Dollars ($13,000,000) (the
‘Initial Purchase Price’), plus (b) the Earnout Amount (as defined
in Section 2.3 [of the APA]).”
(Id. at 10 (emphasis added).)
Section 2.3 of the APA establishes the following formula for
calculating the Earnout Amount:
(a) As used herein, (i) “First Earnout Period”
shall mean the one (1) year period commencing on the
first (1st) day of the calendar month immediately
following the Closing and ending on the day immediately
prior to the first (1st) anniversary of such commencement
date; (ii) “Second Earnout Period” shall mean the one (1)
year period commencing upon the day following the
expiration of the First Earnout Period and ending on the
day immediately prior to the first (1st) anniversary of
such commencement date; (iii) “Revenue Minimum Target
Amount” shall mean Four Million Nine Hundred One Thousand
Two Hundred Fourteen Dollars ($4,901,214); (iv) “Revenue
Multiplier” shall mean 2.1; (v) “Revenues” shall mean the
revenues of [Defendant] for any and all services provided
and billed to any customer listed on the Customer List,
as reflected in financial statements of [Plaintiff]
prepared in accordance with generally accepted accounting
principles, consistently applied, and subject to the
following: (A) Revenues shall not include any revenues
of [Defendant] as a result of the provision of services
to Freedom Health, Inc. and (B) if a customer included on
the Customer List is a Shared Customer (as hereinafter
3
Plaintiff attached a copy of the APA (including incorporated exhibits and
schedules) as part of Exhibit A to its Brief in Support of Plaintiff’s Motion for
Summary Judgment; the portions of said Exhibit A that encompass the APA appear
in the record at Docket Entries 32-1, 32-2, 32-3, 32-4, 33, 33-1, and 33-2, as
well as pages one through 38 of Docket Entry 33-3. Defendant has not contested
the authenticity of the APA copy in question, but instead has cited to said
filing in opposing summary judgment. (See Docket Entry 51 at 5, 9, 10, 12, 13.)
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defined), then for purposes of determining the Earnout
Amount, only a percentage of the revenues of [Defendant]
for any and all services provided and billed to such
Shared Customer shall be included in Revenues, such
percentages corresponding to each Shared Customer being
set forth on Exhibit 2.3(a) attached hereto; (vi) “Shared
Customers” shall refer to those customers listed on
Exhibit 2.3(a), which include certain customers (other
than Freedom Health Inc.) who were customers of both
[Plaintiff] and [Defendant] during the period from
January 1, 2007 through and including September 30, 2007;
(vii) “First Earnout Period Revenues” shall mean the
Revenues of [Defendant] during the First Earnout Period,
as determined pursuant to Section 2.3(d) below; (viii)
“Second Earnout Period Revenues” shall mean the Revenues
of [Defendant] during the Second Earnout Period, as
determined pursuant to Section 2.3(d) below; and (ix)
“Earnout Amount” shall mean the sum of the First Earnout
Period Payment and the Second Earnout Period Payment, not
to exceed Four Million Dollars ($4,000,000).
(b) To the extent the First Earnout Period
Revenues exceed the Revenue Minimum Target Amount, Seller
shall be entitled to the payment of an amount equal to
(i) the First Earnout Period Revenues less the Revenue
Minimum Target Amount, multiplied by (ii) the Revenue
Multiplier (the “First Earnout Period Payment”);
provided, Ahowever, in no event shall the First Earnout
Period Payment exceed Two Million Dollars ($2,000,000).
For the avoidance of doubt, in the event the First
Earnout Period Revenues do not exceed the Revenue Minimum
Target Amount, the First Earnout Period Payment shall be
zero (0).
(c) To the extent the Second Earnout Period
Revenues exceed the Revenue Minimum Target Amount, Seller
shall be entitled to the payment of an amount equal to
(i) the Second Earnout Period Revenues less the Revenue
Minimum Target Amount, multiplied by (ii) the Revenue
Multiplier, less (iii) the First Earnout Period Payment
(the “Second Earnout Period Payment”); provided, however,
in no event shall the First Earnout Period Payment and
the Second Earnout Period Payment collectively exceed
Four Million Dollars ($4,000,000). For the avoidance of
doubt, in the event (A) the Second Earnout Period
Revenues do not exceed the Revenue Minimum Target Amount
or (B) the Second Earnout Period Payment is a negative
number, the Second Earnout Period Payment shall be zero
(0).
-7-
(Id. at 12 (underlining in original) (bolding added); see also
Docket Entry 32-2 at 23-31, Docket Entry 32-3 at 2-7 (“Exhibit
2.3(a)” containing list of “Shared Customers”).)
In
moving
for
summary
judgment,
Plaintiff
has
asserted
Defendant “admits that under the APA, as drafted and in the form
agreed upon, the full Earnout [A]mount for both Earnout Periods is
owed.”
(Docket
Entry
32
at
7.)
According
to
Plaintiff,
Defendant’s “sole defense to payment is that that [sic] the Shared
Customer List was underinclusive . . . resulting in a ‘mutual
mistake.’”
(Id. at 9.)
In Plaintiff’s view, Defendant “wants the
Court to re-write the [APA] to include all the ‘omitted’ customers
[as if listed on Exhibit 2.3(a) as Shared Customers], the effect of
which
would
be
to
abrogate
the
Earnout
[Payment]
obligation
entirely.” (Id.; see also id. at 9 n.5 (“[Defendant] does not seek
to void the APA for mistake; rather it wants to keep all the
benefits it has received from the transaction but without the cost
of the Earnout [Payment].”).)
Defendant’s summary judgment brief does indeed acknowledge
that the provisions of the APA quoted and cited above would entitle
Plaintiff to the total maximum Earnout Payment of $4,000,000 (see
Docket Entry 51 at 2-3); however, as Plaintiff forecast, Defendant
has opposed summary judgment on the ground that “the APA does not
comport with the parties’ intent as a result of a mutual mistake.”
(Id. at 2.)
Specifically, Defendant asserts that “[a] failure by
[Defendant] to initially correctly identify all customers shared
between the parties on a ‘shared customer list’ means that, as
-8-
drafted, the APA gives Plaintiff a $4 million [Earnout Payment]
based on revenues attributable to [Defendant’s] own long-standing
customers, . . . a result [that] was never intended by the parties
. . . .”
(Id. at 2-3.)
According to Defendant, under these
circumstances, North Carolina law permits reformation of the list
of “Shared Customers” in Exhibit 2.3(a) of the APA to include
additional customers (resulting in a reduction of relevant revenue
calculations sufficient to negate Plaintiff’s right to any Earnout
Payment).
(See id. at 17-20.)
Reformation for Mutual Mistake
Under North Carolina law, “[a] mutual mistake is one common to
both parties to a contract wherein each labors under the same
misconception
respecting
a
material
fact,
the
terms
of
the
agreement, or the provisions of the written instrument designed to
embody such agreement.”
Branch Banking & Trust Co. v. Chicago
Title Ins. Co., ___ N.C. App. ___, ___, 714 S.E.2d 514, 518 (2011)
(internal ellipses and quotation marks omitted).
a
well-established
equitable
remedy
used
to
“Reformation is
reframe
written
instruments where, through mutual mistake . . . the written
instrument
agreement.”
fails
to
embody
the
parties’
actual,
original
Id. at ___, 714 S.E.2d at 517-18 (internal quotation
marks omitted).
As the “party seek[ing] to reform a contract due
to an affirmative defense such as mutual mistake,” Defendant bears
“the burden of proof,” id. at ___, 714 S.E.2d at 518 (internal
ellipses and quotation marks omitted).
-9-
More specifically, Defendant “has the burden of showing that
the
terms
of
the
instrument
do
not
represent
the
original
understanding of the parties and must do so by clear, cogent and
convincing evidence.” Hice v. Hi-Mil, Inc., 301 N.C. 647, 651, 273
S.E.2d 268, 270 (1981) (emphasis added).
“Additionally, there is
a strong presumption in favor of the correctness of the instrument
as written and executed, for it must be assumed that the parties
knew what they agreed and have chosen fit and proper words to
express that agreement in its entirety.”
marks omitted) (emphasis added).
Id. (internal quotation
Given this “strong presumption,”
id., at the summary judgment stage, Defendant must identify record
evidence from which a reasonable fact-finder could render judgment,
“by clear, cogent and convincing evidence,” id., as to:
“‘(1) the
terms of an oral agreement made between the parties; (2) their
subsequent adoption of a written instrument intended by both to
incorporate
the
terms
of
the
oral
agreement
but
differing
materially from it; and (3) their mutual but mistaken belief that
the writing contained their true, i.e., the oral, agreement,’”
Branch Banking, ___ N.C. App. at ___, 714 S.E.2d at 518 (quoting
Matthews v. Van Lines, 264 N.C. 722, 725, 142 S.E.2d 665, 668
(1965)); see also Dorsey v. Dorsey, 306 N.C. 545, 547, 293 S.E.2d
777, 779 (1982) (“All the essential elements for reformation must
be proved by clear, strong, and convincing evidence.”).
The record in this case does not contain evidence sufficient
to support a finding that, prior to the execution of the APA, the
parties reached an oral agreement that differs materially from the
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APA because of a mutual mistake in the drafting of the APA.
In
particular, to prevail in this case, Defendant must identify record
evidence from which a reasonable fact-finder could conclude that,
before they executed the APA, the parties orally agreed that the
customers Defendant now contends should have appeared on the APA’s
Exhibit 2.3(a), in fact would constitute “Shared Customers,” i.e.,
customers as to whose future revenues Plaintiff would get only
reduced
credit
in
Earnout Payment.
determining
Plaintiff’s
eligibility
for
an
Defendant, however, has not pointed to any
evidence that, prior to the APA’s execution, the parties ever
agreed to any list of “Shared Customers” other than the one in the
APA’s Exhibit 2.3(a) or ever agreed to any discrete, objective
criteria that would make a particular customer a “Shared Customer”
for purposes of calculating revenues relevant to the Earnout
Payment. (See Docket Entry 51 at 12-16, 18 (containing Defendant’s
discussion of and citations to allegedly relevant record material
regarding “Shared Customer Carve Out,” “Errors in the Shared
Customer List,” and “presence of a mutual mistake”).)
To the contrary, Defendant has acknowledged that, during the
drafting process that resulted in the APA (and its Exhibit 2.3(a)
listing “Shared Customers”), Defendant “agreed to remove customers
from [Defendant’s proposed] Shared Customer List at [Plaintiff’s]
request based on [Plaintiff’s] position that although a given
customer
was
technically
‘shared’
—
i.e.,
serviced
by
both
[Defendant] and [Plaintiff] during the agreed to January 1 to
September 30, 2007 period — the customer was currently being
-11-
serviced exclusively by [Plaintiff] and thus was in reality being
brought to [Defendant] through the acquisition.”
(italics in original).)
(Id. at 14
Defendant has not come forward with any
evidence that, prior to the execution of the APA (with its Exhibit
2.3(a) listing “Shared Customers”), Plaintiff orally agreed that
the other customers Defendant now contends should have appeared in
Exhibit 2.3(a) in fact should constitute “Shared Customers” for
purposes of Earnout Payment calculations.
(See id. at 12-16, 18.)4
In essence, Defendant seeks reformation based on the prospect
that
a
fact-finder
might
conclude
that
Plaintiff
would
have
accepted an Exhibit 2.3(a) to the APA that included on the list of
“Shared
Customers”
the
identified by Defendant.
additional
customers
now
belatedly
Such an approach does not fit within the
scope of the mutual mistake doctrine recognized by North Carolina
4
Moreover, Defendant’s summary judgment brief does not dispute Plaintiff’s
assertion (see Docket Entry 32 at 4-5) that — as part of the negotiation process
— Plaintiff gave Defendant Plaintiff’s list of customers, but Plaintiff lacked
any access to Defendant’s list of customers. (See Docket Entry 51 at 2-21.)
Plaintiff thus had no information from which to accept (or to challenge) the
placement of customers on any “Shared Customer” list apart from the specific
proposed lists tendered to it by Defendant after Defendant compared Plaintiff’s
list of customers to Defendant’s own records. (See Docket Entry 32 at 4-5.)
Further, assuming (as Defendant contends) the record reflects that Plaintiff’s
transactional attorney acknowledged holding an expectation during the negotiation
process “that both [Defendant] and [Plaintiff] would provide accurate information
to arrive at the Shared Customer List” (Docket Entry 51 at 14), such evidence
does not support an inference that, prior to the execution of the APA, Plaintiff
orally agreed that the customers Defendant now seeks to have added to Exhibit
2.3(a) of the APA would constitute “Shared Customers” for purposes of determining
Plaintiff’s eligibility for an Earnout Payment.
The record simply does not
reflect what agreement the parties would have reached about the composition of
Exhibit 2.3(a) had Defendant provided “accurate” information about the customers
in question. Finally, for reasons discussed below, under North Carolina law,
reformation based on mutual mistake requires the comparison of a written
agreement to a prior oral agreement actually made by the parties, not to a
hypothetical oral agreement the parties might have made.
-12-
law, as the following statement from the North Carolina Court of
Appeals illustrates:
Chicago Title needed to show that it and BB&T had a
meeting of the minds as to the specific terms of the 2003
policy, and that some material part of their agreement
was mistakenly omitted from the 2003 policy.
In the
present case, Chicago Title and BB&T needed to have
orally agreed upon the specific description of the real
property to be covered by the 2003 policy. A general
intent on the part of Chicago Title to cover whatever
real property BB&T intended to have covered is
insufficient to form the basis for a reformation based
upon mutual mistake. Chicago Title fails to make any
argument that it and BB&T had specifically agreed that
the contested parcel would be excluded from coverage by
the 2003 policy. . . .
Viewing the evidence in the light most favorable to the
party opposing summary judgment, Chicago Title simply has
not provided a factual basis to support equitable
reformation of the 2003 policy. Chicago Title did not
present evidence sufficient to forecast a showing that
BB&T and Chicago Title had mutual intentions to exclude
the Centura deed of trust from the 2003 policy and that
the 2003 policy, as the result of a mutual mistake,
failed to properly express those intentions.
Branch Banking, ___ N.C. App. at ___, 714 S.E.2d at 519 (internal
brackets, citations, and quotation marks omitted) (emphasis added).
Under the foregoing standard, to secure reformation based on
its mutual mistake defense, Defendant “needed to show that it and
[Plaintiff] had a meeting of the minds as to the specific terms of
the
[asset
purchase],
and
that
some
material
part
of
their
agreement was mistakenly omitted from the [APA],” id. (emphasis
added).
More precisely, Defendant had to come forward with
evidence
that
the
parties
“orally
agreed
upon
the
specific
description of the [‘Shared Customers’] to be covered by the
[agreement],” id. (emphasis added). The record, however, lacks any
-13-
evidence that the parties reached “a meeting of the minds as to the
specific terms of the [asset purchase],” id., other than that
reflected by the APA. Nor does the record reflect that the parties
“orally agreed upon the specific description of the [‘Shared
Customers’] to be covered by the [agreement],” id., other than the
description contained in Exhibit 2.3(a) of the APA.
“A general intent on the part of [Defendant regarding the
terms of the agreement] . . . is insufficient to form the basis for
a reformation based upon mutual mistake.”
Id. (emphasis added).
Defendant’s
lacks
claim
for
reformation
thus
merit
because
Defendant “fail[ed] to make any argument that it and [Plaintiff]
had specifically agreed,” id. (emphasis added), that the customers
in question would appear in Exhibit 2.3(a) of the APA.
“Viewing
the evidence in the light most favorable to [Defendant], [it]
simply has not provided a factual basis to support equitable
reformation of the [APA].
[Defendant] did not present evidence
sufficient to forecast a showing that [it and Plaintiff] had mutual
intentions to [include the customers in question on the list of
‘Shared Customers’] and that [Exhibit 2.3(a) of the APA], as the
result of a mutual mistake, failed to properly express those
intentions.”
Id. (emphasis added).5
5
The foregoing discussion demonstrates that Defendant’s focus on evidence
regarding its general intent to come up with a formula for the Earnout Payment
conditioned on growth of revenues due to the acquisition and Plaintiff’s supposed
acceptance of this premise (see Docket Entry 51 at 8-13, 18) is misplaced. To
secure reformation based on mutual mistake, Defendant has an obligation to
identify evidence of an oral agreement about a specific contractual term, i.e.,
what customers would constitute “Shared Customers” for purposes of determining
(continued...)
-14-
In sum, on the record of this case, the lone affirmative
defense on which Defendant now relies (to avoid its obligation to
tender to Plaintiff the maximum Earnout Payment required by the
APA) fails as a matter of law.
As a result, the Court should enter
summary judgment in Plaintiff’s favor.
CONCLUSION
Even after consideration of Defendant’s Surreply (and the
declarations discussed therein), the Court should conclude that
Defendant’s argument for reformation based on mutual mistake lacks
sufficient evidentiary support to survive summary judgment.
The
written terms of the APA thus govern and Defendant has acknowledged
that, under those written terms, Plaintiff has a right to the
maximum Earnout Payment.
Accordingly, Plaintiff has shown that
“there is no genuine dispute as to any material fact and [that it]
is entitled to judgment as a matter of law,” Fed. R. Civ. P. 56(a).
IT IS THEREFORE ORDERED that Defendant’s Motion for Leave to
File a Surreply to Plaintiff’s Reply Brief in Further Support of
its Motion for Summary Judgment (Docket Entry 55) is GRANTED.
IT IS RECOMMENDED that Plaintiff’s Motion for Summary Judgment
(Docket Entry 31) be GRANTED.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
November 28, 2011
5
(...continued)
the Earnout Payment, that differed from Exhibit 2.3(a) of the APA. Evidence
about the general principles that may have informed the parties’ negotiations
over the Earnout Payment formula does not suffice.
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