The opinion of the court was delivered by: Buchwald, District Judge.
Final Agreement at 2 (emphasis supplied).
Thus, the sole issue in this litigation is whether the venture
capital investment received by TT in June of 2000 (the "Series-B
Investment"*fn1) triggered plaintiffs obligation, pursuant to
the Final Agreement, to pay the demanded fee. To resolve that
question we must determine whether the Series-B Investment is a
"Transaction" as defined in the Final Agreement. If so, TT is
obliged to pay CIBC the contemplated transaction fee.
C. The Series-B Agreement
On June 12, 2000, TT accepted venture capital financing from
Vistaar, Jackpot Enterprises (which has been renamed "J. Net"),
First Chicago Equity Corp. ("First Chicago"), and Cross Creek
Partners Xa, LLC ("Cross Creek") (collectively, the "Series-B
Investors"), whereby these companies invested approximately 19
million dollars in exchange for Series-B Preferred Stock. Def.'s
Ex. F ("Series-B Securities Purchase Agreement"); Pechenik Aff.
at ¶ 25. None of the Series-B Investors were located or
introduced to TT by CIBC. Pechenik Aff. at ¶ 26.
As a result of the Series-B Investment, the distribution of
TT's shares and the composition of TT's Board of Directors were
altered. The following tables summarize the ownership of TT
shares before and after the completion of the Series-B
Investment. Pl.'s Mem. in Support of Mot. for Summ. J. ("Pl.'s
Mem.") at 10.
Prior to the Series-B Agreement, TT had entered into a voting
agreement with the Series-A Investors (Def.'s Ex. H, "Voting
Agreement"). This Voting Agreement provided that TT's
seven-member Board of Directors was to be allocated as follows:
Two directors were appointed by the Series-A investors, two were
designated by the holders of a majority of the outstanding
shares of Common Stock, one was the CEO of TT, and two were to
be industry representatives not affiliated with TT or any
investor. Pl.'s Mem. at 12; Voting Agreement at 2. This Voting
Agreement did not survive the Series-B Agreement, which
Effective as of the Closing, the authorized size of
the Board of Directors shall be seven (7) members and
shall consist of (a) two individuals designated by
Vistaar; (b) two (2) individuals designated by J.
Net; (c) two (2) individuals who are designated by
the holders of a majority of the outstanding shares
of Common Stock; and (d) one (1) individual who is
not an officer or employee of the Company and who is
designated by the unanimous vote of the six (6) other
members of the Board of Directors.
Id. at 12-13.
As a protection against the J. Net and Vistaar Board Members,
Section 5(d) of the Certificate of Designation, Rights, and
Preferences of Series-B Convertible Preferred Stock of
TechTrader, Inc. ("Designation of Rights") requires that in any
related-party transaction that would benefit the Series-B
Investors, a vote of 85% of the Board of Directors must favor
the transaction. Pechenik Aff. at ¶ 41. Such a vote could be
obtained only if, in addition to the two J. Net Board Members
and the two Vistaar Board Members, one or both of the Board
Members appointed by the holders of Common Stock agreed to the
After the closing of the Series-B Agreement, Jacob Pechenik
remained the President and CEO of TT, David Roodberg remained
the Chief Operating Officer, and Greg Campbell remained the
Chief Technology Officer. Pechenik Aff. at ¶ 44. However, in
November of 2000, five months after the closing, Mr. Pechenik
stepped down as President and CEO, although he retained his
position as Chairman of the Board of Directors and adopted the
new title of Chief Strategy Officer. Pechenik Aff. at 16 n. 1.
Mr. Pechenik was succeeded as CEO by Matthew Suffoletto, who was
found through an executive search firm and was neither involved
in the Series-B Investment nor associated with the Series-B
Investors. Id. Also, David Roodberg's title changed from Chief
Operating Officer to Chief Financial Officer. Id.
D. Draft Agreement
TT asserts that an earlier draft of its agreement with CIBC
(Def.'s Ex. A, henceforth, the "Draft Agreement") provides
evidence that the parties did not intend a sale of securities
such as the Series-B Investment to be covered by the Final
Agreement. Def.'s Mem. in Opp. to Summ. J. ("Def.'s Mem.") at 2.
The Draft Agreement reads, in pertinent part:
The Company [TT] hereby engages CIBC World Markets as
both its exclusive agent in the private placement of
one or more classes or series of securities of the
Company to a limited number of sophisticated
investors (the "Investors") and its exclusive
financial advisor in connection with a possible sale
or other transfer, directly or indirectly and whether
in one or a series of transactions, of all or a
significant portion of the assets or securities of
the Company or any extraordinary corporate
transaction involving a change in control of the
Company, regardless of the form or structure of such
transaction (such sale or other transfer, the "M & A
Transaction"). Such securities in a private placement
(the "Securities") may take the form of subordinated
debt, preferred stock or common stock, or securities
convertible into or exchangeable for or accompanied
by warrants or other rights exercisable for or giving
the holder thereof the right to purchase common or
preferred stock (such placement shall be referred to,
individually, as the "Financing Transaction" and,
the M & A Transaction, as the "Transaction").
Draft Agreement. Based upon the changes from the Draft version
to the Final Agreement, TT contends that the Series B Investment
is a "Financing Transaction" which is not encompassed by the
Final Agreement and, therefore, that no fee is owed.
E. The Dispute
While CIBC asserts that they played an active, albeit
relatively minor, role in facilitating the Series-B Agreement,
Lubin Aff. at ¶ 12-19, for the purposes of this motion, we
accept as true TT's assertion that "CIBC had nothing to do with
the negotiation or execution of the Series-B Agreement."
Pechenik Aff. at ¶ 27. On June 12, 2000, the morning of the
closing of the Series-B Investment, representatives of TT and
the Series-B Investors met with Mr. Lubin. Pechenik Aff. at ¶
30-31. At this meeting, CIBC requested to be paid the
transaction fee that is the subject of this litigation. Id.
Thereafter, on or about June 19, 2000, CIBC sent TT an invoice,
for its fee and out of pocket expenses, in the amount of
$764,515.95. Pl.'s Rule 56.1 Statement of Facts at ¶ 20. TT
refused to pay this invoice, Id. at ¶ 21, and this litigation
A. Summary Judgment Standard
Summary judgment is properly granted "`if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to material fact and that the moving party is
entitled to judgment as a matter of law.'" R.B. Ventures, Ltd.
v. Shane, 112 F.3d 54, 57 (2d Cir. 1997) (quoting Fed.R.Civ.P.
56(c)). The Federal Rules of Civil Procedure mandate the entry
of summary judgment "against a party who fails to make a showing
sufficient to establish the existence of an element essential to
that party's case, and on which that party will bear the burden
of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317,
322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In reviewing the
record, we must assess the evidence "in the light most favorable
to the non-movant and . . . draw all reasonable inferences in
[that party's] favor." Delaware & Hudson Ry. Co. v.
Consolidated Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990). The
mere existence, however, of an alleged factual dispute between
the parties will not defeat a motion for summary judgment. In
order to defeat such a motion, the nonmoving party must
affirmatively set forth facts showing that there is a genuine
issue for trial. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is
"genuine . . . if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party." Id. at 248,
106 S.Ct. 2505 (internal quotation omitted).
B. Applicable Law
The Final Agreement states that "this letter agreement will be
governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of
law." Final Agreement at 4. Thus, New York law will be applied
to the present dispute.
C. Contractual Ambiguity
The parties agree that they intended to, and did in fact,
enter into a written contract whose terms are embodied in the
Final Agreement. Pl.'s Rule 56.1 Statement of Facts at ¶ 1,
Def.'s Rule 56.1 Statement of Facts at ¶ 1. Under New York law,
"when parties set down their agreement in a clear, complete
document, their writing should as a rule be enforced
according to its terms." W.W.W. Assocs., Inc. v. Giancontieri,
77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 566 N.E.2d 639 (1990).
When the terms of a written contract are ambiguous, however, a
court may turn to evidence outside the four corners of the
document to ascertain the intent of the parties. Scholastic,
Inc. v. Harris, 259 F.3d 73, 82 (2d Cir. 2001); Curry Rd. Ltd.
v. K Mart Corp., 893 F.2d 509, 511 (2d Cir. 1990). Furthermore,
when the language of a contract is ambiguous and there exists
relevant extrinsic evidence of the parties' actual intent,
summary judgment is precluded. Mellon Bank, N.A. v. United Bank
Corp. of N.Y., 31 F.3d 113, 116 (2d Cir. 1994); Sayers v.
Rochester Tel. Corp. Supplemental Mgmt. Pension Plan,
7 F.3d 1091, 1094 (2d Cir. 1993). Finally, "[w]hether or not a writing
is ambiguous is a question of law to be resolved by the courts."
W.W.W. Assocs. at 162, 565 N.Y.S.2d 440, 566 N.E.2d 639.
Therefore, on this motion for summary judgment, we must decide
at the threshold whether the Final Agreement is "ambiguous."
Under New York law,
[A] word or phrase is ambiguous when it is capable of
more than a single 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.
Shepley v. New Coleman Holdings Inc., 174 F.3d 65, 70 (2d Cir.
1999) (quotation marks and citations omitted). Thus, if
contractual terms have a definite and precise meaning and are
not reasonably susceptible to differing interpretations, they
are not ambiguous. Seiden Assocs. v. ANC Holdings, Inc.,
959 F.2d 425, 428 (2d Cir. 1992).
D. Contractual Interpretation
First, we address TT's contention that CIBC is not entitled to
a fee because they did not introduce the Series-B Investors to
TT. Def.'s Mem. at 18. This contention is without merit as the
Final Agreement between TT and CIBC states that CIBC is entitled
to a transaction fee, "if, during the term of this engagement or
within six (6) months thereafter, a Transaction is consummated
or an agreement is entered into that subsequently results in a
Transaction." Final Agreement at 2. This clause creates an
unambiguous duty on the part of TT to pay the fee if the
stipulated Transaction occurs. First, it is written in the
passive voice, thus demonstrating that there is no requirement
that CIBC take any action at all to earn their fee. All that
must occur is that a qualifying Transaction be "consummated" or
"entered into" by TT. Id. Second, there is no language in the
Final Agreement stating that CIBC must identify the party or
parties to a Transaction with TT as a condition to receiving its
transaction fee. Thus, the mere fact that CIBC did not locate or
identify the Series-B Investors is wholly irrelevant to whether
TT is obliged to pay a transaction fee to CIBC.
We now turn to the issue of whether the Final Agreement is
ambiguous, such that reference may be made to parol evidence to
discern the parties' intentions. Not surprisingly, plaintiff and
defendant each posit different definitions for the word
"Transaction," as used in the Final Agreement. Under TT's
definition, the Series-B Investment does not qualify as a
Transaction and, thus, CIBC is not entitled to a transaction
fee, while under CIBC's definition, the Series-B Investment does
indeed qualify as a Transaction, and, thus, it is entitled to a
TT asserts that the Final Agreement requires a given
transaction to meet two requirements in order to be deemed a
Transaction covered by the contract. Def.'s Mem. at 7. According
to TT, a Transaction either (1) involves a sale or transfer of a
significant portion of TT's securities or (2) is an
extraordinary corporate transaction, and, in either case, (3)
it must involve a change in control of TT. Id.
CIBC, on the other hand, argues that a Transaction either (1)
involves a sale or transfer of a significant portion of TT's
securities or (2) it is an extraordinary corporate transaction
involving a change in control of TT. Pl.'s Mem. in Further
Support of Mot. for Summ. J. ("Pl.'s Reply") at 4-5.
Contractual language "whose meaning is otherwise plain is not
ambiguous merely because the parties urge different
interpretations in the litigation." Metropolitan Life Ins. Co.
v. RJR Nabisco Inc., 906 F.2d 884, 889 (2d Cir. 1990) We
conclude that the language of the Final Agreement is
unambiguous, and that a plain and grammatically correct reading
of the Final Agreement supports CIBC's position. Thus, reference
to parol evidence is not warranted.
For the reasons that follow, we find that the Series-B
Agreement was both a significant transfer of securities as
well as a transaction that resulted in a change of control of
TT. Accordingly, even assuming, arguendo, that TT's reading of
the Final Agreement is correct, CIBC would still prevail.
(i) Significant Transfer of Securities
Following the Series-B Investment, 62% of the shares of TT
ended up in the ownership of entities that had not previously
owned any shares of TT. TT argues that whether a significant
portion of its securities were transferred in the Series-B
Investment is inherently a question of fact. Def.'s Mem. at
13-14. Given the facts before us, however, we find that the
arguable ambiguity of the term "significant" is immaterial.
While it is true that, within a certain range, the term
"significant" is vulnerable to differing interpretations of
numerical value, there can be no doubt that a transfer such as
that involved in the Series-B Investment, is significant.
(ii) Change in Control
The Series-B Investment also resulted in a change of control
of TT. In making such a determination, we note that the four
votes given to the Series-B Investors produces a simple majority
on a seven member Board. However, this factor is not the basis
for our determination as the four votes given to the Series-B
Investors are divided equally between J. Net and Vistaar and
there is no reason to believe that these two companies will
always have identical interests or have otherwise agreed to vote
as a bloc.
TT argues that because no single person or entity controlled
the Board, control of the Board did not change. Def.'s Mem. at
17. This argument is non sequitur. Accepting TT's assertion
that no single entity controls TT, it is clear that control of
TT is shared among an alliance of sorts. Changes in the alliance
controlling TT are, in fact, changes in control of TT. It is
clear that a change in control of the majority of a seven member
Board of Directors is within the plain meaning of the terms
"change of control" of TT.
As evidence that the Series-B Investors did not take control
of TT, the defendant points to several stipulations in the
Designation of Rights that limit the actions that can be taken
by the Series-B Investors' Board Members, acting as a bloc.
Def.'s Mem. at 17 n. 5. In fact, this evidence
contradicts defendant's position as such stipulations are only
necessary if the Series-B Investors acquired, through their
designated Board members, the capacity to control TT.
Having found that the Series-B Investment involved a
significant transfer of securities and a change in control of
TT, it was within the contractual definition of a "Transaction"
for which a fee is due under either party's reading of the Final
Agreement. Thus, we need not analyze whether the Series-B
Investment is an "extraordinary transaction".
For the reasons stated, plaintiffs motion for summary judgment
is granted and the Clerk of the Court is respectfully directed
to forthwith enter judgment in favor of the plaintiff in the sum
of $764,515.95 with prejudgment interest to run from June 12,
IT IS SO ORDERED.