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SPACE IMAGING EUROPE, LTD. v. SPACE IMAGING L.P.

March 17, 1999

SPACE IMAGING EUROPE, LTD. AND TOWER GROUP, INC., PLAINTIFFS,
v.
SPACE IMAGING L.P., SPACE IMAGING, INC., AND SPACE IMAGING/EOSAT LLC, DEFENDANTS.



The opinion of the court was delivered by: Chin, District Judge.

OPINION

In this diversity case, plaintiffs Space Imaging Europe, LTD. and Tower Group, Inc. move for summary judgment on the question of whether defendants Space Imaging L.P., Space Imaging, Inc. and Space Imaging/EOSTAT LLC were required to give plaintiffs a right of first refusal based on a letter of intent ("LOI") that the parties executed in September 1997. Defendants cross-move for summary judgment, contending that there was no meeting of the minds as to the enforceability of the LOI. For the reasons stated below, plaintiffs' motion for summary judgment is denied and defendants' motion is granted. The complaint is dismissed with prejudice.

BACKGROUND

A. The Facts

The basic facts underlying this dispute were discussed in the Court's prior decision on plaintiffs' motion for a preliminary injunction. See Space Imaging Europe, Ltd. v. Space Imaging L.P., No. 98 Civ. 2291, 1998 WL 190356, at *1 (S.D.N.Y. Apr. 21, 1998) ("Space Imaging I"). Additional facts have come to light during discovery. Construed in the light most favorable to plaintiffs, the facts are as follows:

1. The Parties and Summary of Events

Defendants are in the business of developing and marketing high resolution geographic images from satellites. In the spring of 1997, defendants began searching for parties with whom they could contract for the right to market and operate their IKONOS satellite abroad. (See Barton MSJ Aff. ¶ 5). The contracts that defendants hoped to enter into — a Regional Affiliate Agreement ("RAA") and a Regional Operations Center Purchase Agreement ("ROCPA") — would give a contracting party the exclusive right to market and transmit IKONOS satellite images within a certain territory.

Plaintiffs are shell corporations that are owned and/or managed by Emmanual Ducas. At some point during the spring of 1997, defendants began negotiating with Ducas for the exclusive right to be a Regional Affiliate for a certain territory that included parts of Europe, the Middle East, and North Africa (the "Territory").

Initially, defendants communicated with Ducas through a consultant named Jon Monett. (Mueller Aff. ¶ 2). In June 1997, however, Monett introduced Ducas to John Copple, defendants' chief executive officer, and Conrad Mueller, defendants' vice president for international communications. (Barton MSJ Aff. ¶ 6). Shortly after being introduced to Copple and Mueller, Ducas requested that defendants enter into a Letter of Intent ("LOI") as to the parties' negotiations with him. (Id. ¶ 7; Mueller Dec. ¶ 4).

2. The LOI

The parties signed a three-page LOI that was dated September 22, 1997 on September 25, 1997. The letter was printed on defendants' letterhead and was addressed to Ducas. Ducas signed on behalf of "an entity to be named later," and Copple signed on behalf of defendants.

The LOI contains three introductory paragraphs, each containing cautionary language as to the purpose of the LOI. These paragraphs read as follows:

  Space Imaging is pleased to document the basis upon
  which we intend to negotiate to reach an agreement
  with you (or an entity that you control) in regard to
  the execution of a Regional Affiliate Agreement
  ("RAA") and the construction, management and
  operation of a Regional Operations Center ("ROC")
  located in Greece or any location that you designate
  within the geographic area set forth on Exhibit A
  hereto (the "Territory"). This ROC will allow you to
  . . . market[] and sell minutes of imaging sensor . .
  . time and images transmitted from Space Imaging's
  IKONOS satellite . . . to be launched late in 1997,
  or that will be transmitted by any satellite launched
  by Space Imaging or its successors for up to ten (10)
  years after the effective date of the RAA. This
  letter is not a binding agreement. It is written to
  memorialize our discussions thus far and to serve as
  a basis to go forward.

  The offer described herein is subject to successful
  conclusion of negotiations by December 31, 1997.
  Successful conclusion means the signing of a RAA and
  ROCPA. Space Imaging will grant you 60 days from the
  signing [of both agreements] to make any initial
  payment required under the RAA or ROCPA.
  The key points of a future series of agreements,
  the first of which being the RAA, is to be executed
  no later than December 31, 1997, are as follows:

(Copple Dec. Ex. A (emphasis added)).

The introductory paragraphs are followed by eighteen bullet point provisions. These bullet point provisions are not divided into subsections, nor are any of them preceded by narrative language other than the three introductory paragraphs quoted above. The first thirteen of these provisions discuss mechanics related to the RAA and ROCPA agreements, setting forth certain rights and responsibilities of the parties. For instance, several of these provisions contain language such as, "You will have the right to. . . ." (Id. (bullet points 2, 7, 9, 10)). A number of provisions also outlined defendants' responsibility to provide Ducas with assistance. (Id. (bullet points 3, 4, 5, 8, 11)).

The last five bullet points also contain cautionary language as to the effect of the LOI and the provision at issue in this case concerning a right of first refusal (hereinafter the "Provision"). These bullet points read as follows:

  • Each party to this [LOI] is an independent
  contractor, and this letter does not make either
  party a partner or agent of the other party. Neither
  party has, nor will it represent to third parties,
  any authority or right to act for or obligate the
  other party. This [LOI] does not create any binding
  relationship, contract, joint venture, partnership,
  trust or agency.
  • Neither party has committed to any exclusivity
  regarding dealing with the other during the
  negotiations.
  • You will have the right to match or better any
  offer made by a competing entity in the Territory
  prior to Space Imaging contracting with such entity.
  If you match or better such a competing offer, you
  will be awarded the contract(s) with Space Imaging.
  • Each party hereby retains all rights to any
  property, patents, products and information it now
  owns or generates.
  • Each party bears its own cost and expenses related
  to these efforts.

(Id. (bullet points 13-18)). The LOI does not provide that any of these bullet points are to be treated any differently than any of the other provisions in the agreement.

The LOI does not state that any consideration was being given by or to the other side. Nor was any tangible consideration in fact exchanged. Copple declares that defendants received no consideration for the LOI in general, or for the right of first refusal in particular. (See Copple Dec. ¶ 2). Plaintiffs do not disagree.

3. Negotiating History

The parties exchanged several drafts of the LOI before executing the LOI dated September 22, 1997. As noted, the parties entered into the LOI at plaintiffs' urging. Ducas sent defendants a one-page draft LOI on June 8, 1997 ("Draft One"). (Mueller Dec. Ex. A). Draft One opened with the statement that it "sets forth the bases upon which we intend to reach an agreement with you. . . ." (Id. (emphasis added)). Draft One proceeded to list, in bullet point fashion, the "key points upon which [the parties] intend to agree in writing." Draft One did not contain a right of first refusal provision, an expiration date, or any other cautionary language as to whether it created a binding contract.

  Each party to this Letter of Intent is an independent
  contractor, and this letter does not make either
  party a partner nor agent of the other party. Neither
  party has, nor will it represent to third parties,
  any authority or right to act for or obligate the
  other party. This Letter of Intent does not create
  any binding relationship, joint venture, partnership,
  trust, or agency. The intent is to document the
  interest and discussions that have occurred and serve
  as a basis to go forward.

(Id.). In addition, defendants added three other provisions as to the parties' costs, expenses, proprietary rights, and non-commitment to exclusivity regarding their dealings with each other.

Ducas faxed Mueller a "Revised Proposed Letter of Intent" on August 19, 1997 ("Draft Three"). (Id. Ex. C). Draft Three retained the provisions that defendants had included in Draft Two. Draft Three opened with a paragraph stating the purpose of the LOI and then listing, in bullet points, the "key points of an agreement to be executed as quickly as possible, and no later than 90 days. . . ." (Id.). Ducas, however, included the following provision toward the end of Draft Three:

  You will have the right to match or better any offer
  made by a competing entity prior to Space Imaging
  contracting with any such entity; if you match or
  better such a competing offer, you will ...

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