Haertle v Brennan Investment Group LLC et al
Filing
83
DECISION AND ORDER signed by Magistrate Judge William E Duffin on 3/8/2017. IT IS THEREFORE ORDERED that the motion for summary judgment (ECF No. 63 ) shall be granted. This action is hereby dismissed, with prejudice. The Clerk shall enter judgment accordingly. (cc: all counsel) (mlm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
ERIC C. HAERTLE,
Plaintiff,
v.
Case No. 14-CV-1347
BRENNAN INVESTMENT GROUP, LLC
and BIG ACQUISITIONS LLC,
Defendants.
DECISION AND ORDER
Factual Background
In 2007 plaintiff Eric Haertle became the chief operating officer of his family’s
medical supply manufacturing business, H&P Industries, Inc. (ECF No. 66, ¶ 1.)
Haertle’s two siblings also worked at H&P. David Haertle was the chief executive
officer and Donna Petroff was the chief financial officer. (ECF No. 66, ¶ 3.) In January of
2011 the United States Food and Drug Administration found certain alcohol wipes
manufactured by H&P and a related company, Triad Group, Inc., to be contaminated
with bacteria. (ECF No. 66, ¶ 4.) The companies recalled the product, but the fallout
shut both businesses down and both filed for Chapter 11 bankruptcy protection on
August 9, 2012. (ECF No. 66, ¶ 5.) The bankruptcy proceedings of Triad Group and
H&P were consolidated and jointly administered (together with a third company, Triad
Pharmaceuticals, Inc.) as the “Triad Bankruptcy case.” (ECF No. 66, ¶ 6.)
The Haertle siblings developed a business plan for Triad to emerge from
bankruptcy with an infusion of approximately $2 million in financing to fund
operations. (ECF No. 66, ¶ 7.) The Haertles negotiated with the bankruptcy creditors’
committee to pay their unsecured creditors with future profits from the business after
its reorganization. (ECF No. 71, ¶ 3.) The bankruptcy plan included a proposal that
H&P’s assets–-the most valuable of which was the Triad/H&P manufacturing facility
located in Hartland, Wisconsin, hereinafter referred to as the “Hartland Property”–-be
sold at an auction, where the Haertles would be the “stalking horse bidder” 1 at $6.5
million. (ECF No. 71, ¶¶ 5, 8.)
To finance the $6.5 million “stalking horse” bid proposal, Eric Haertle reached
out to real estate broker Sam Dickman, Jr. to find parties interested in purchasing the
Hartland Property. (ECF Nos. 66, ¶8; 71, ¶ 14.) Dickman contacted defendant Brennan
Investment Group, LLC (hereinafter “Brennan”) regarding its interest in the Hartland
Property. (ECF No. 66, ¶ 10.)
A “stalking horse” is “[s]omething used to cover one’s true purpose; a decoy.” State v. Hajicek, 2001 WI
3, ¶ 22, 240 Wis. 2d 349, 620 N.W.2d 781; see also In re SpecialityChem Products Corp., 372 B.R. 434, 436 (E.D.
Wis. 2007) (“In the bankruptcy context, a stalking horse bidder reaches an agreement with the debtor-inpossession to purchase assets prior to the court-supervised auction of those assets. Because this bid will
be exposed to higher and better bids at auction, the agreement typically provides for a break-up fee to
compensate the stalking horse bidder for setting the floor at auction, exposing its bid to competing
bidders, and providing other bidders with access to the due diligence necessary to enter into an asset
purchase agreement.”)
1
2
On October 29, 2013, Scott McKibben—Brennan’s managing principal—sent
Dickman a “Letter of Intent” outlining certain terms under which Brennan would
negotiate a mutually acceptable Purchase and Sale Agreement for Brennan’s acquisition
of the Hartland Property. (ECF Nos. 66, ¶ 10; 67-1.) The Letter of Intent stated:
We are pleased to provide you this letter of intent, outlining certain
terms under which the Purchaser intends to negotiate a mutually
acceptable Purchase and Sale Agreement (“Purchase and Sale
Agreement”) for Purchaser’s acquisition of ownership of the
Property from its current owner of record. This letter is in no way
intended to be a complete or definitive statement of all the terms
and conditions of the proposed transaction, but remains subject to
the negotiation of a definitive Purchase and Sale Agreement.
(ECF No. 66, ¶ 11.) The Letter of Intent also contained a provision entitled “NonBinding Nature” that stated that “[n]othing contained herein shall create any obligation
on the part of any person or entity to either approve the terms of the proposed
transaction or enter into a Purchase and Sale Agreement” and that “no party will be
legally bound in any manner unless and until a formal, written Purchase and Sale
Agreement has been prepared, executed and delivered by all parties thereto[.]” (ECF
No. 66, ¶ 12.)
The Letter of Intent outlined a potential deal for the Hartland Property, which
would be a “sale leaseback”: the Haertles would sell the property to Brennan, which
would then lease the property back to the Haertles as a tenant (enabling the Haertles to
re-start their manufacturing business from the same building). (ECF No. 67-1.) The
purchase price would be $7,000,000, with the Purchaser and Seller entering into a seven3
year triple net lease for 100,000 square feet with an initial base rent of $450,000 per year
with three percent annual escalations. (ECF Nos. 66, ¶ 13, 67-1, 71, ¶ 25.) The Letter of
Intent was signed by Brennan (by McKibben as Managing Principal) as the “Purchaser.”
(ECF Nos. 67-1; 71, ¶ 25.) The “seller” signature block was left empty and both parties
agree that Eric Haertle 2 never signed it and never agreed to either a $7 million purchase
price or a seven-year triple net lease for 100,000 square feet. (ECF No. 70, ¶¶ 14-15.)
The parties thereafter negotiated the purchase of the Hartland Property. (ECF
No. 71, ¶ 33.) On November 22, 2013, McKibben sent an e-mail to Dickman detailing
two separate Brennan proposals for the purchase of the property:
Option A: Seller leases back 135k sf at $4.50 absolute net, 7 year
term, 3% bumps, price is $7.5 million.
Option B: Seller leases entire building at $3.25 absolute net, 15 year
term, 3% bumps, they keep rent from existing tenant through term, $8.6
million price, tenant purchase option after 10 years will be $15 million.
Both options will require some security deposit that we will need to
address more in diligence. In Option B, we would want a bigger SD
holdback.
(ECF Nos. 71, ¶ 33; 68-2.) Under Option A Brennan would keep the lease payment of
tenant PM Plastics (another tenant in the Hartland Property), while under Option B
Haertle would keep the PM Plastics lease payment. (ECF No. 71, ¶ 35.) Both options
were communicated to Haertle on or around November 25, 2013. (ECF No. 71, ¶ 34.)
It is unclear exactly when Eric Haertle’s two siblings decided not to be involved with the business going
forward. (See ECF No. 68-1 at 54.) However, Eric Haertle was the only one who negotiated with Brennan
over the Hartland Property. All references to “Haertle” that appear below therefore refer to plaintiff Eric
Haertle alone.
2
4
Two days later, on November 27, 2013, Haertle e-mailed Dickman:
This is what I am thinking:
$8.2 M Sale Price
5 year lease NNN @ $3.50/sq 3% bumps
Buyback option during the lease at $9-10M
1st right to assume PM’s leased space
I have thoughts on Option B but am leaning towards A.
(ECF No. 74-19 at 7.) Upon learning of Haertle’s terms, McKibben told Dickman, “I
don’t think it will work—that is a huge departure from our proposal.” (ECF No. 74-19 at
6.)
On December 2, 2013, McKibben responded to Haertle’s proposal with an e-mail
to Dickman containing another proposal about which he said there was “no room for
negotiation”:
$8.5 million (but when I add broker fee of 425k, loan fees of 75k, deal fee
of 85k and other costs we are at 9.2M). $3.25 net on entire building—10
year lease.
Purchase option at the end of 5 year (1 time right, not ongoing because it
makes debt too tricky), $11.5 million….[T]his is the absolute best I can do
on this deal and it is subject to me being able to procure 65% debt.
That is the deal we will be interested in.
(ECF 74-27 at 2.) Haertle claims that sometime in December he told Dickman that he
would accept this modified, $8.5 million Option B if Brennan wanted it, “although I
preferred the lower Option A.” (ECF No. 72, ¶ 17.) Despite this alleged “acceptance,”
Haertle still believed Brennan would revert to Option A. (ECF No. 71, ¶ 45.) Apparently
5
no documents evidence Haertle’s acceptance of Brennan’s offer, nor is there any
evidence that anyone told Brennan that Haertle would accept Brennan’s offer.
The bankruptcy creditors’ committee in Triad’s Chapter 11 proceeding requested
verification that Haertle would be able to fund the reorganization plan that he had
submitted. (ECF No. 71, ¶ 43.) To do so, counsel for Haertle contacted McKibben to ask
for Brennan’s sign-off on a document entitled “Plan Funding” (the “Plan Funding
Document”) to show that Haertle had a reputable financier in place. (ECF No. 74-1.) In
relevant part the Plan Funding Document stated:
Brennan Investment Group through BIG Acquisitions LLC (“Investor”)
intends to provide funding into the Plan proposed by Triad Group, Inc., H
& P Industries, Inc. and Triad Pharmaceuticals, Inc. (collectively, the
“Debtors”) in an amount of six million five hundred thousand dollars
($6,500,000) in order for the ‘Haertles’ to obtain substantially all of the
Debtors’ assets under the Second Amended Joint Plan of Reorganization…
on the ‘Financing Terms’ stated below.
(ECF No. 67-2.) Relevant here, “Financing Term” #7 stated, “Investor’s [sic] providing
funds is dependent upon it and the Haertles finalizing terms of instruments such as a
lease to consummate the transaction.” (ECF No. 66, ¶ 19.) The “Effective Date” of the
Plan Funding Document – the date on which the closing of the sale would need to
occur—was February 15, 2014. (Id.)
McKibben signed the Plan Funding Document on December 11, 2013, under a
signature block that listed “BIG Acquisitions, LLC” as the “Investor.” (ECF No. 67-2.)
The document was not signed by Haertle or any representative of the seller. (Id.) The
6
Effective Date was later changed to March 31, 2014, in a second, otherwise identical Plan
Funding Document, again signed only by McKibben. (ECF Nos. 66, ¶ 20 and 67-3.)
On December 16, 2013, Dickman sent an e-mail to McKibben stating that “[Eric
Haertle] would like a PSA [Purchase and Sale Agreement].” (ECF No. 74-29.) McKibben
e-mailed Brennan’s in-house lawyer, Sam Mandarino, on December 23, 2013, and
provided the following terms: “$8.5 million, $3.25/sf absolute net, 10 year, 3% annual
increases, end of year 5, purchase option $11.4 million.” (ECF No. 74-30.) Mandarino
understood that he was to place these deal terms into a written draft of a Lease and a
Purchase and Sale Agreement. (ECF No. 74-58 at 13-14.) The purchase option was
dropped another $100,000, to $11.3 million, in Brennan’s draft of the Lease. (ECF No. 686 at 26.)
Brennan forwarded its drafts of the Lease and the Purchase and Sale Agreement
to Haertle (through Dickman’s company) on January 27, 2014. (ECF No. 68-3.) Nearly a
month later, on February 24, 2014, Haertle sent a revised Lease back to Dickman’s
company, which forwarded Haertle’s revisions to Brennan. (ECF No. 66, ¶ 23.) Haertle’s
revisions altered the Lease term from ten years to seven years; altered the rent schedule
from approximately $954,000 in year two with three percent annual increases (resulting
in rent exceeding $1 million by year four) to approximately $926,000 in year two and a
flat rate of $997,500 in years three through seven; changed the purchase option time
period from after year five to any time after the Lease went into effect; reduced the
7
tenant’s purchase option from $11.3 million to $10.5 million; removed Brennan’s 3.5%
management fee; and removed a disclaimer of purchase rights (i.e., right of first refusal,
right of first offer, purchase option, or similar rights). (ECF No. 66, ¶¶ 25, 26, 27, 28, 30,
31.)
McKibben was surprised by the extent of Haertle’s proposed changes to the
Lease. (ECF No. 66, ¶ 32.) Haertle characterized the changes as “looking to see if he
could improve upon the agreed upon deal as had been done with lowering the option
price from $11.5 million to $11.3 million, and revert back to the lower priced deal in
Option A.” (ECF No. 71, ¶ 83.) Haertle admits that as of mid-February “which option
we were leaning towards was still up in the air.” (ECF No. 68-1 at 36.) The parties
thereafter discussed the alterations. (See ECF No. 74-37.)
On February 27, 2014, Haertle’s counsel e-mailed Brennan the timeline of the
Chapter 11 bankruptcy proceedings. (ECF Nos. 74-26; 74-27). The timeline stated that
Haertle would need to submit a bid on February 28, 2014, and that a realistic closing
date would be April 15, 2014. (ECF Nos. 74-17; 74-18.) Haertle contends that on the
morning of February 28, 2014, he called Dickman and “…confirmed that all terms
requested by Brennan in the Draft Lease, as slightly modified by the parties on February
24, 2014, were acceptable.” (ECF No. 71, ¶ 86.) Dickman has no recollection of Haertle
ever accepting all of Brennan’s terms “or anything like that.” (ECF No. 68-13 at 27.)
8
There is no evidence that either Haertle or Dickman ever communicated to anyone at
Brennan that Haertle had accepted Brennan’s proposed Lease.
On February 28, 2014, Haertle signed and submitted to the designated sales
agent for the bankruptcy case a $6,500,000 bid (including a $325,000 deposit) for the
assets of the companies involved in the Triad bankruptcy case. (ECF No. 68-7.) Also that
day McKibben contacted a title company in order to complete an escrow arrangement
on the Hartland Property transaction. (ECF No. 74-38.) However, in an e-mail to
McKibben that same day Mandarino stated, “Perhaps we should hold on the escrow
deposit.” (ECF No. 74-40.)
On March 4, Haertle sent a revised version of Brennan’s draft Purchase and Sale
Agreement to Brennan. (ECF No. 66, ¶ 37.) The revised agreement altered several terms
from Brennan’s draft, including 1) changing the “seller” from Triad Group, Inc. to Eric
Haertle; 2) adding a provision stating Brennan accepted an underlying lease with a
third-party; 3) limiting Brennan’s remedy in the event Haertle was not the “Ultimate
Purchaser” under the Plan Funding Document; 4) changing from $100,000 to $30,000 the
maximum amount of expenses to be reimbursed in the event Haertle did not win the
auction; 5) removing a condition precedent to Brennan’s obligations that “no material
adverse change shall have occurred in the financial condition of the tenant”; and 6)
adding a provision prohibiting Brennan from making any claim against Haertle for
“any damages whatsoever” in the event of default. (ECF No. 66, ¶ 38, 39, 40, 41, 42, 43.)
9
Haertle disputes the characterization of these changes as a counteroffer, arguing that
the draft Purchase and Sale Agreement that Brennan proposed was merely a “first stab”
at an agreement. (ECF Nos. 71, ¶ 74; 74-58, at 14.) Haertle claims that his revisions were
made to make the Purchase and Sale Agreement consistent with the bankruptcy sale
procedures. (ECF No. 71, ¶ 89.)
On March 4, 2014, Brennan’s newly retained bankruptcy counsel left a voicemail
message with Haertle’s counsel stating, in relevant part,
The Brennan folks, whom have asked us to assist them . . . have decided to go in
a different direction and make a bid for the assets directly as opposed to
supporting an equity [infusion]. So, that is what they are currently planning to
do. They are very eager to continue discussing a lease of the premises with the
Haertles, if Brennan is the, in fact the winning bidder for the assets… .”
(ECF No. 74-57 at 34.) Counsel for Haertle made an effort to propose a new, alternative
arrangement on March 5, 2014, but in a March 7 phone call between Haertle, Brennan’s
managing principals (McKibben and Mike Brennan), and Dickman the parties were not
able to reach an agreement on any financing or lease deal. (ECF Nos. 68-11; 71, ¶ 94.) It
is undisputed that the parties never executed any version of the Lease or the Purchase
and Sale Agreement. (ECF No. 66, ¶ 58.) Because no financing deal could be reached,
Haertle did not participate in the bankruptcy auction.
Despite indicating that it may do so, Brennan never submitted a bid
(independently or otherwise) for the bankruptcy assets. (ECF No. 66, ¶¶ 82-83.) A
company called Medline Industries, Inc. submitted a winning bid of $7.1 million for the
10
Triad Group’s assets. (ECF No. 66, ¶ 59.) Haertle was refunded his $325,000 bid deposit.
(ECF No. 66, ¶ 60.)
This litigation ensued. Haertle’s complaint alleges eight causes of action against
Brennan. The first four are contract-based claims: 1) breach of contract; 2) breach of the
duty of good faith and fair dealing; 3) breach of the implied promise to refrain from
hindering or obstructing performance of contract; and 4) repudiation of contract. (ECF
No. 1.) The remaining four claims are plead in the alternative: 5) promissory estoppel;
6) tortious interference of [sic] contract by Brennan; 7) punitive damages; and
8) piercing BIG Acquisitions, LLC’s corporate veil. (Id.) The defendants, Brennan and
BIG Acquisitions, LLC, move for summary judgment on all eight causes of action. (ECF
No. 63.) The motion, being fully briefed, is now ready for resolution. (ECF Nos. 64, 69,
81).
Summary Judgment Standard
“The court 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.” Fed. R. Civ. P. 56(a). Material facts are those that “might affect the
outcome of the suit” under the applicable substantive law and a dispute is “genuine” if
a reasonable factfinder could return a verdict for the nonmoving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). While “courts are required to view the facts
and draw reasonable inferences ‘in the light most favorable to the party opposing the
11
[summary judgment] motion,’” Scott v. Harris, 550 U.S. 372, 378 (2007), “the nonmovant
must produce sufficient admissible evidence, taken in the light most favorable to it, to
return a jury verdict in its favor” to survive summary judgment. Fleishman v. Cont’l Cas.
Co., 698 F.3d 598, 603 (7th Cir. 2012) (citing Berry v. Chi. Transit Auth., 618 F.3d 688, 69091 (7th Cir. 2010)).
Analysis
A. Haertle’s Contract-Based Claims
Defendants move for summary judgment on Haertle’s first four claims because
all of them require the existence of a contract. And, defendants claim, the parties never
entered into a contract.
Neither party disputes that Wisconsin substantive contract law applies. See
Henderson v. U.S. Bank, N.A., 615 F. Supp. 2d 804, 808 (E.D. Wis. 2009) (“In Wisconsin…
the law of the forum should presumptively apply unless it becomes clear that nonforum
contacts are of greater significance.”) (internal citations omitted). Under Wisconsin law,
“a breach of contract claim has three elements: (1) a valid contract; (2) a violation or
breach of the terms of that contract; and (3) damages.” Schuetta v. Aurora Nat. Life Assur.
Co., 27 F. Supp. 3d 949, 957 (E.D. Wis. 2014) (citing Steele v. Pacesetter Motor Cars, Inc.,
2003 WI App 242, ¶ 10, 267 Wis. 2d 873, 672 N.W.2d 141). Haertle’s other three contractbased claims all also require the existence of a contract. See Tang v. C.A.R.S. Prot. Plus,
Inc., 2007 WI App 134, ¶ 41, 301 Wis. 2d 752, 781, 734 N.W.2d 169, 183 (“A duty of good
12
faith is implied in every contract, and is a guarantee by each party that he or she will not
intentionally and purposely do anything to prevent the other party from carrying out
his or her part of the agreement, or do anything which will have the effect of destroying
or injuring the right of the other party to receive the fruits of the contract”) (emphasis
added); Wis. JI-Civil 3060 (1993) (“If one person enters into a contract with another, there
is an implied promise by each that each person will do nothing to hinder or obstruct
performance by the other.”) (emphasis added); Tilstra v. Boumatic, LLC, 1 F. Supp. 3d
900, 912 (W.D. Wis. 2014) (“In order to constitute an anticipatory repudiation of a
contract [under Wisconsin law], there must be a definite and unequivocal manifestation
of intention on the part of the repudiator that he will not render the promised
performance when the time fixed for it in the contract arrives.”) (citing Wisconsin Dairy
Fresh, Inc. v. Steel & Tube Products Co., 20 Wis. 2d 415, 427, 122 N.W.2d 361, 367 (1963))
(emphasis added).
Defendants set forth three arguments supporting their position that the parties
never entered into a contract.
1. No meeting of the minds on the essential terms
It is undisputed that there is no written agreement signed by both parties.
Defendants argue that there was no meeting of the minds between the parties on the
essential terms of the proposed financing deal. Even the most concrete evidence of an
agreement—the Plan Funding Document—was nothing more than an “agreement to
13
agree” which is unenforceable under Wisconsin law. Denil v. DeBoer, Inc., 650 F.3d 635,
638 (7th Cir. 2011) (Wisconsin law).
Haertle responds that discussions over several months of negotiation show that
the terms were “sufficiently clear so as to form a contract between the parties.” He
contends that all essential deal points had already been agreed to by the time the Plan
Funding Document was drafted such that the contingent language of “Financing Term
#7” did not render it an “agreement to agree.” Even if some terms were still “up in the
air,” contracts may be formed between parties even though they require details to be
worked out. Dawson v. Gen. Motors Corp., 977 F.2d 369, 374 (7th Cir. 1992) (applying
Illinois law).
In Wisconsin, contracts must be sufficiently definite as to the parties’ basic
commitments and obligations to be enforceable. Mgmt. Comput. Servs., Inc. v. Hawkins,
Ash, Baptie & Co., 206 Wis. 2d 158, 178, 557 N.W.2d 67 (1996). “Courts often describe the
definiteness requirement as mutual assent, or ‘meeting of the minds.’” Id (citing Wis JICivil 3010; 1 ARTHUR L. CORBIN, CORBIN
ON
CONTRACTS § 4.13, at 634-637 (Joseph M.
Perillo, revised ed. 1993)). “To constitute an acceptance and the creation of a contract
there must be a meeting of the minds upon all essential terms thereof.” Todorovich v.
Kinnickinnic Mut. Loan & Bldg. Ass’n, 238 Wis. 39, 42, 298 N.W. 226 (1941). That said,
“meeting of the minds” or “definiteness” is an objective standard; courts look to the
parties’ conduct and practical interpretation to discern their intent. Metro. Ventures, LLC
14
v. GEA Assocs., 2006 WI 71, ¶ 24, 291 Wis. 2d 393, 409-10, 717 N.W.2d 58, 66-67. “The
question is whether there is sufficient evidence to ascertain the intent of the parties”
when examining “both the wording of the contract as well as the surrounding
circumstances… .” Id. at ¶ 25.
Ascertaining the intent of the parties begins by examining what they have placed
in writing. Seitzinger v. Cmty. Health Network, 2004 WI 28, ¶ 22, 270 Wis. 2d 1, 15, 676
N.W.2d 426, 433. There are two documents signed by Brennan’s agent, Scott McKibben:
(1) the October 29, 2013 Letter of Intent and (2) the Plan Funding Documents (dated
December 11, 2013 and January 14, 2014). The Letter of Intent is titled “Letter of Intent
to purchase and leaseback [the Hartland Property]” and, of relevance here, had a “Nonbinding nature” paragraph which stated in part:
[I]t is understood that no party will be legally bound in any manner unless and
until a formal, written Purchase and Sale Agreement has been prepared,
executed and delivered by all parties thereto;
(ECF Nos. 66, ¶ 12; 67-1.) The Letter of Intent also contained a “Lease Contingency”
outlining some terms of a lease (i.e., rental amount and lease term) that both parties
acknowledge were never agreed to. (ECF Nos. 66, ¶ 15; 70, ¶ 15.) The Letter of Intent
reveals that, from the start, Brennan intended that its purchase of the Hartland Property
would include a leaseback as the means through which Brennan would recuperate its
investment and that Brennan would not be bound by the Letter of Intent “unless and
15
until a formal, written Purchase and Sale Agreement has been prepared, executed and
delivered by all parties thereto[.]” (ECF No. 67-1 at 2.)
As set forth by Brennan in the Plan Funding Document, Brennan (through BIG
Acquisitions, LLC) would provide Haertle $6,500,000 in financing in anticipation of its
purchase of the Hartland Property as long as certain conditions were met.
(ECF Nos. 67-2; 67-3.) Financial Term #7 specifically stated that the obligation to
provide funds “is dependent upon [the investors] and the Haertles finalizing terms of
instruments such as a lease to consummate the transaction.” (ECF No. 67-2 at 2.)
Financial Term #7 does not specify the lease term, the amount of rent, the rent schedule,
whether the tenant shall have a purchase option, or any further details regarding the
lease structure. (ECF No. 67-2 at 2.)
Since the Plan Funding Document does not set forth the details of the Lease or of
a Purchase and Sale Agreement, Haertle asks the court to examine the negotiation
record to find the Lease and Purchase and Sale Agreement terms to which the parties
agreed. His complaint states that all deal terms were agreed to “by December 11, 2013.”
(ECF No 1, ¶ 15.) That is the date McKibben executed the Plan Funding Document
discussed above.
But Haertle changed the terms of the deal with his revised Lease on February 24,
2014 (see ECF No. 68-4 (red-lined version of lease)), and his revised Purchase and Sale
Agreement on March 4, 2014. (ECF No. 68-8.) Haertle also admits that as of February 26,
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2014, the lease terms were still “up in the air.” (ECF No. 68-1 at 36-38.) On this record,
then, the following Lease terms appear indeterminate:
i.
Purchase Price
The parties initially discussed two different options for the purchase price ($8.6
million and $7.5 million). (ECF No. 71, ¶ 33.) Although Haertle’s complaint states that
an $8.5 million purchase price had been agreed to in December, he testified in his
deposition that the purchase price was still “up in the air” as of February 26, 2014. (ECF
No. 68-1 at 36-37.) Indeed, Haertle’s February 24, 2014 revisions to the Lease were his
attempt to move the purchase price from $8.5 million to $7.5 million. (ECF No. 71,
¶¶ 83-84.) No subsequent correspondence indicates or confirms that the parties ever
agreed on a purchase price.
ii.
Option price
Haertle’s complaint also alleges that the parties agreed to a purchase option price
of $11.3 million. (ECF No. 1, ¶ 17(g).) That term appears in the draft Lease that Brennan
sent to Haertle on January 27, 2014. (ECF No. 74-35 at 33.) There is no evidence that
Haertle ever agreed to that price. Indeed, Haertle’s revisions to the Lease changed the
option price to $10.5 million. (ECF No. 68-5 at 3.) No evidence has been submitted on
which a finder of fact could base a conclusion that the parties “agreed” to any particular
option price.
17
iii.
Option term
Haertle’s complaint states that his deal with Brennan would allow him to
exercise a purchase option any time after the first five years of the Lease. (ECF No. 1,
¶ 17(g).) Haertle’s revisions to the draft Lease, however, allowed Haertle to exercise his
purchase option at any time during the Lease. (ECF No. 68-5 at 3.) No evidence has
been submitted on which a finder of fact could base a conclusion that the parties
“agreed” to any particular option term.
iv.
Lease Term
Brennan proposed a 10 year lease term in its draft sent to Haertle on January 27,
2014. (ECF No. 74-35 at 3.) And Haertle’s complaint alleges that the parties agreed to a
ten-year lease term. (ECF No. 1, ¶ 17(g).) However, there is no evidence supporting that
allegation. In fact, Haertle responded to Brennan’s proposed ten year lease term with a
proposal for a seven-year lease. (ECF No. 68-4 at 5.) No evidence has been submitted on
which a finder of fact could base a conclusion that the parties agreed to any specific
lease term.
v.
Rent Schedule
Brennan’s draft Lease proposed a rent schedule that began at $926,500 for the
first year and increased each subsequent year’s rent by 3%. (ECF No. 74-35 at 39.)
Haertle’s revised Lease proposed rent of $926,500 in years one and two and then rent of
$997,500 in years three through seven. (ECF No. 68-5 at 13.) Because Haertle changed
18
the lease term from ten years to seven years, Haertle did not propose a rent amount for
years seven through ten. (Id.) The total difference between Haertle’s rent schedule and
Brennan’s rent schedule amounted to $3,778,418.21. (ECF No. 66, ¶ 70.) No evidence has
been submitted on which a finder of fact could base a conclusion that the parties had
“agreed” to any particular rent schedule.
2. Haertle Never Accepted Brennan’s Offer
Haertle claims that he did, in fact, accept Brennan’s offer as to all of the above
terms. In support, he first argues that his revised Lease and revised Purchase and Sale
Agreement were not a “counteroffer.” Instead, they were merely an attempt to “see if
Brennan would ‘revert back’ to the $7.5 million financing option from the $8.5 million
financing option agreed to… .” (ECF Nos. 69, at 11; 71, ¶ 83.)
A counteroffer is defined as “an offeree’s new offer that varies the terms of the
original offer and that ordinarily rejects and terminates the original offer.” BLACK’S LAW
DICTIONARY (10th ed. 2014) (emphasis added). No matter what label he would like to
attach to them, Haertle’s February 24, 2014 revisions to the draft Lease, and his March 4,
2014 revisions to the draft Purchase and Sale Agreement, constituted a counteroffer that
operated to reject Brennan’s offer. Leuchtenberg v. Hoeschler, 271 Wis. 151, 155, 72 N.W.2d
758 (1955) (“The acceptance of an offer upon terms varying from those of the offer,
however slight, is a rejection of the offer.”) (quoting Hess v. Holt Lumber Co., 175 Wis. 451,
455, 185 N.W. 522, 523 (1921)); Fricano v. Bank of America NA, 2016 WI App 11, ¶ 29, 366
19
Wis. 2d 748, 770, 875 N.W.2d 143 (“A contract is formed when there is a meeting of the
minds as to its terms, and an acceptance that varies the terms of the offer constitutes a
rejection and a counteroffer.”). Haertle’s revisions changed the terms of the deal. And
not just minor terms. He changed the most important components of the transaction.
As Brennan notes, Haertle’s argument ignores “[t]he general rule. . . that, where
an offer is made and refused, the transaction is closed and the party refusing cannot by
changing his mind create a contract or obligation against the protest of the party
making the offer.” Cass v. Haskins, 154 Wis. 472, 143 N.W. 162 (1913); NDC, LLC v.
Wisconsin Dept. of Transp., 2016 WI App 16, ¶ 12, n. 4, 366 Wis. 2d 809, 874 N.W.2d 347
(table) (argument that NDC was entitled to withdraw its rejection with a later
acceptance of the original offer lacked merit: “An offeree’s power of acceptance is
terminated by his rejection of the offer, unless the offeror has manifested a contrary
intention.”) (quoting Restatement (Second) of Contracts § 38(1), at 104 (Am. Law Inst.
1981)); 1 WILLISTON ON CONTRACTS § 5.3 (4th ed.) (“When an offer has been rejected, it
ceases to exist, and a subsequent attempted acceptance is inoperative… .”). It is wellsettled Wisconsin law that, when a purported “acceptance” alters the offer’s terms, it
operates as a rejection of the offer, and no contract is formed unless the party making
the original offer either renews it or agrees to the proposed modifications. Todorovich v.
Kinnickinnic Mut. Loan & Bldg. Ass’n, 238 Wis. 39, 298 N.W. 226, 227 (1941). Once Haertle
rejected Brennan’s offer by submitting a revised Lease and a revised Purchase and Sale
20
Agreement, he no longer had the right to accept Brennan’s offer unless Brennan
manifested a contrary intention. And there is no evidence that Brennan manifested such
a contrary intention.
Anticipating this finding, Haertle posits that Brennan’s “good faith obligations”
would not allow it to “refuse[] to agree to the original terms when Haertle accepted
them[.]” (ECF No. 69 at 13.) Haertle cites Bear Development, LLC v. City of Kenosha, 822 F.
Supp. 2d 865 (E.D. Wis. 2011), for the proposition that Brennan’s conduct constituted
bad faith. In Bear Development, the parties had a signed, written contract stating that
Bear Development, LLC “shall enter into such [Remediation Contract] as may be
required by [the City] and TRC companies.” Id. at 867. After initially voicing its
opposition to the City’s draft remediation contract, Bear Development accepted the
City’s contract by signing and delivering it to the City prior to the deal’s deadline. Id. at
868. When the City refused to acknowledge the contract, the court held that it had
breached the duty of good faith and fair dealing, finding “[p]arties to a contract have a
duty of good faith to each other” and a party “lacks good faith where it treats a
counteroffer as nullifying the original, and then makes no further offer, nor permits the
party to accept the original conditions which were presumably agreeable in the first
instance.” Id. at 870-71 (emphasis added).
21
But unlike the situation in Bear Development, Brennan had not entered into a
contract with Haertle. Nothing required Brennan to remain in negotiations after
Haertle’s counteroffer rejected Brennan’s offer.
Although there is no evidence that Haertle ever told Brennan that he was
accepting Brennan’s offer, Haertle argues that he accepted Brennan’s offer on February
28, 2014, during a phone call with Sam Dickman. (ECF No. 71, ¶ 86.) Dickman has no
recollection of Haertle ever accepting all of Brennan’s terms “or anything like that.”
(ECF No. 68-13 at 27.) Nevertheless, Haertle says that Dickman was acting as an agent
of Brennan throughout the transaction and that, by communicating his acceptance to
Dickman on February 28, 2014, Haertle effectively communicated his acceptance of
Brennan’s January 27, 2014 draft Lease to Brennan.
“An agency relationship arises when ‘one person (a principal) manifests assent
to another person (an agent) that the agent shall act on the principal’s behalf and subject
to the principal’s control, and the agent manifests assent or otherwise consents so to
act.” Jamison v. First Credit Servs., Inc., 290 F.R.D. 92, 100 (N.D. Ill. 2013) (quoting
Restatement (Third) of Agency § 1.01). No evidence exists that Dickman and Brennan
entered into an agency relationship with regard to the potential acquisition of the
Hartland Property. While Dickman was responsible for fostering communication
between the two parties, nothing suggests that Brennan authorized Dickman to accept
offers on its behalf. No reasonable finder of fact could conclude that Dickman was
22
acting as an agent for anyone other than Haertle during the negotiations with Brennan.
It was Haertle who brought Dickman into the transaction to help him find someone
who could purchase the Hartland Property. Dickman found Brennan, with whom he
had worked in the past, but that does not mean that Dickman was at any time acting as
Brennan’s agent.
In short, no evidence exists that Haertle ever communicated to Brennan that he
accepted Brennan’s offer. And Haertle cannot use his conversation with Dickman to
satisfy the mutual assent necessary to form a contract. Together, the defendants’
arguments convince the court that summary judgment is appropriate on Haertle’s
contract claims.
3. Statute of frauds
A second, independent reason exists for granting the defendants’ summary
judgment motion regarding Haertle’s contract claims. The Wisconsin Statute of Frauds,
Wis. Stat. § 706.02, requires that a transaction involving an interest in land must be
evidenced by a conveyance that “[i]s signed by or on behalf of all parties, if a lease or
contract to convey.” Wis. Stat. § 706.02(e)(1). “The obvious purpose of requiring the
signature of the grantor to appear on the conveyance is to evidence his intent to become
bound by the agreement.” Nelson v. Albrechtson, 93 Wis. 2d 552, 560, 287 N.W.2d 811, 816
(1980); see also In re Estate of Johnson, 2006 WI App 19, ¶ 10, 289 Wis. 2d 100, 709 N.W.2d
88 (“[t]he primary purpose of the Statute of Frauds is evidentiary, to require reliable
23
evidence of the existence and terms of the contract and to prevent enforcement through
fraud or perjury of contracts never in fact made.”).
By the same token, however, the statute “is not intended to give either party a
‘technical escape from a fair and definite agreement.’” In re Couilard, 486 F.R. 466, 475
(W.D. Wis. 2012) (quoting Kenner v. Realty & Fin. Co., 204 Wis. 575, 236 N.W. 597, 602
(Wis. 1931)). Wis. Stat. § 706.04 allows a court to enforce a transaction that fails to meet
one of the formal requirements of Wis. Stat. § 706.02, “provided all of the elements of
the transaction are clearly and satisfactorily proved… .” Wis. Stat. § 706.04.
Brennan contends that any contract allegedly formed with Haertle did not
comply with the statute of frauds. Haertle responds that the statute of frauds does not
require a single document incorporating all of the terms of agreement between the
parties as long as the parties’ conduct indicates that the transaction is governed by
several documents. See Wis. Stat. § 706.02(2)(c). He also relies on Hilkert v. Zimmer, 90
Wis. 2d 340, 343, 280 N.W. 2d 116, 118 (1979), for the proposition that, where the details
of an agreement between the parties are disputed, a court’s determination on the effect
of the statute of frauds is premature at the summary judgment stage.
In Hilkert the question was whether the parties had orally agreed to modify a
written conveyance that they had fully executed. The opinion turned on the complexity
of oral variations of written contracts. Id. at 117-118 (“Whether a written contract can be
orally modified cannot be disposed of as easily as the trial court’s opinion would
24
suggest. The subject of the possibility of the oral variation or rescission of written
contracts within or partly within the statute of frauds comprises a chapter of more than
50 pages in length in a leading treatise on contracts.”). Thus, summary judgment
without analysis of the complex rules concerning oral modifications to written
agreements was found to be inappropriate. Id.
But no complex analysis is necessary here. The issue is whether any of the
documents, separately or combined, sufficiently contained all material terms so as to
satisfy the formal requirements of Wis. Stat. § 706.02. As discussed above, the parties
were still negotiating terms when Brennan pulled out of the transaction. There is no
writing, or collection of writings, that provides the evidentiary reliability that the
statute of frauds is meant to ensure. Thus, the court further finds that the statute of
frauds provides an independent ground for granting Brennan’s summary judgment on
Haertle’s contract related claims.
For the reasons discussed, the court shall grant Brennan’s motion for summary
judgment as to Counts 1-4 of Haertle’s complaint.
B. Promissory Estoppel
Promissory estoppel in Wisconsin dates back to Hoffman v. Red Owl Stores, Inc., 26
Wis. 2d 683, 698, 133 N.W.2d 267, 275 (1965), and requires the plaintiff establish the
following elements: “(1) the existence of a promise that (2) the promisor reasonably
should have expected would induce substantial action or inaction, (3) did induce such
25
action or inaction, and (4) must be enforced in order to avoid injustice.” Am.
Orthodontics Corp. v. Epicor Software Corp., 746 F. Supp. 2d 996, 999 (E.D. Wis. 2010).
“While the first [three] requirements . . . present issues of fact which ordinarily will be
resolved by a jury, the [fourth] requirement, that the remedy can only be invoked where
necessary to avoid injustice, is one that involves a policy decision by the court.”
Hoffman, 26 Wis. 2d at 698.
For purposes of promissory estoppel, “[a] promise is a manifestation of intent by
the promisor to be bound, and is to be judged by an objective standard.” Major Mat Co.
v. Monsanto Co., 969 F.2d 579, 583 (7th Cir. 1992). “Whether a reasonable person in the
position of the plaintiff would conclude that the defendant’s statement was a
commitment or a mere prediction is a question of fact for a jury to resolve—unless the
court rules that reasonable people could reach only one reasonable conclusion.” Id.
The promise here, as set forth in Haertle’s complaint, is one whereby “Brennan
promised to provide financing of $8.5 million to Haertle for the purchase of the Sale
Assets.” (ECF No. 1, ¶ 49.) The complaint further alleges that Haertle incurred costs
pursuing bidding in reliance on Brennan’s promise. (ECF No. 1, ¶ 51-52.)
But there is no evidence that Brennan ever made an unconditional promise to
provide Haertle with $8.5 million. Both the Letter of Intent and the Plan Funding
Document conditioned Brennan’s promise to provide funding on the parties entering
into a Lease and a Purchase and Sale Agreement. They never did. It was not reasonable
26
for Haertle to rely on Brennan’s conditional offer to provide funding even though the
conditions were not satisfied.
The court cannot find that Haertle reasonably relied on a promise that must now
be enforced to avoid an injustice. Brennan’s motion for summary judgment shall be
granted with regard to Haertle’s claim for promissory estoppel.
C. Tortious Interference With Contract Claim & Punitive Damages
Brennan also moves for summary judgment on Haertle’s sixth cause of action,
which alleges tortious interference with contract. Haertle’s claim alleges that he and BIG
Acquisitions, LLC had a prospective contractual relationship. When Brennan stopped
negotiating with Haertle in order to pursue its own purchase of the Hartland Property,
Brennan tortiously interfered with the prospective contract that BIG Acquisitions had
with Haertle.
Brennan challenges the first element of a tortious interference with contract
claim, namely, that “(1) the plaintiff had a contract or prospective contractual
relationship with a third party… .” Duct-O-Wire Co. v. U.S. Crane, Inc., 31 F.3d 506, 509
(7th Cir. 1994). It contends that a principal cannot be liable for interfering with a
prospective contractual relationship that its agent is negotiating on its behalf, as BIG
Acquisitions was doing here.
Haertle contends that there is at least a factual dispute over whether BIG
Acquisitions was acting as Brennan’s agent during negotiations with Haertle. There
27
isn’t. Haertle’s complaint specifically alleges that at all relevant times BIG Acquisitions,
LLC was acting as an agent for Brennan. (ECF Nos. 1, ¶ 20; 60, ¶ 20.) Brennan admitted
that that allegation was true. That fact having thus been established, Haertle cannot
now be heard to contend that somehow there is a factual dispute regarding it.
Moreover, when the agent is attempting to enter into a contract on the principal’s
behalf, the agent is merely a proxy for the principal. In re Guardianship of Muriel K., 2002
WI 27, ¶ 25, 251 Wis. 2d 10, 26, 640 N.W.2d 773, 779 (“It is, accordingly, a consequence
of the [agency] relationship that whatever an agent does in the lawful prosecution of the
transaction entrusted to him is the act of the principal.”) (quoting 3 Am.Jur.2d Agency §
1 (1986)). Haertle’s claim essentially alleges that Brennan interfered with its own
prospective contract. And that a party cannot do. See Joseph P. Caulfield & Associates, Inc.
v. Litho Prods. Inc., 155 F.3d 883, 889 (7th Cir. 1998) (“a party cannot interfere tortiously
with its own contract”) (citing Wasau Med. Ctr. v. Asplund, 182 Wis. 2d 274, 514 N.W.2d
34, 44 (1994)). Therefore, Brennan’s motion for summary judgment as to Count 6 shall
be granted.
D. Punitive Damages
“[T]he general rule in Wisconsin is that there can be no punitive damages
without compensatory damages.” C & A Invs. v. Kelly, 2010 WI App 151, ¶ 10, 330 Wis.
2d 223, 229, 792 N.W.2d 644, 647; see also Tucker v. Marcus, 142 Wis. 2d 425, 439, 418
N.W.2d 818, 823 (1988) (“A general and perhaps almost universally accepted rule is that
28
punitive damages cannot be awarded in the absence of actual damage”). Because no
other, independent bases exists for Haertle to recover actual damages, Brennan’s motion
for summary judgment as to Count 7 shall be granted.
E. Corporate Veil-piercing Claim
Since there are no remaining causes of action, Haertle’s claim to pierce BIG
Acquisition’s corporate veil cannot be sustained as a stand-alone claim. See Eberts v.
Torge & Svetlana Goderstad, No. 05-C-527, 2008 WL 123594, at *2 (E.D. Wis. Jan. 10, 2008)
Therefore, Brennan’s motion for summary judgment on Count 8 is granted.
IT IS THEREFORE ORDERED that the motion for summary judgment (ECF
No. 63) shall be granted. This action is hereby dismissed, with prejudice. The Clerk
shall enter judgment accordingly.
Dated at Milwaukee, Wisconsin this 8th day of March, 2017.
_________________________
WILLIAM E. DUFFIN
U.S. Magistrate Judge
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