The opinion of the court was delivered by: Pitman, United States Magistrate Judge
This is an action for breach of contract, arising out of a written agreement ("Agreement") between Mercury Partners LLC ("Mercury" or "plaintiff") and Pacific Medical Buildings, L.P. ("Pacific" or "defendant"), under which Mercury was to act as Pacific's sole and exclusive financial advisor to evaluate various capitalization strategies. Mercury seeks fees allegedly due under the Agreement, interest, attorney's fees and costs, and a declaration that Pacific is obligated to pay additional advisory fees for certain transactions. Pacific contends that Mercury is not entitled to any further fees beyond those already paid.
In April 2006 the parties stipulated to try separately the issues of liability and damages.
The parties consented to my exercising plenary jurisdiction over this matter pursuant to 28 U.S.C. § 636(c), and the matter was tried before me, without a jury, on January 16 and 17, 2007. Based on the testimony and other evidence offered at trial and the parties' post-trial submissions, I make the following findings of fact and conclusions of law.
1. Plaintiff Mercury Partners describes itself as a "real estate investment bank" that provided financial advisory services to various entities in the real estate and health care industries. (Direct Testimony Affidavit of Malcolm F. MacLean IV, sworn to January 8, 2007 ("MacLean Aff.") ¶ 4). Mercury is a Maryland limited liability company with its principal place of business in Greenwich, Connecticut (Joint Pre-Trial Statement, dated April 27, 2006). Malcolm F. MacLean IV is a Managing Director of Mercury (Stipulated Facts*fn1 ¶ 1).
2. Pacific is a real estate development company that develops and manages medical office buildings primarily in the Western United States (DX A; Deposition of Elizabeth Powell ("Powell Dep.") (PX 97) at 23; Deposition of Jeffrey Rush, M.D., taken on April 18, 2003 ("Rush Dep.") (PX 94) at 20; Direct Testimony Affidavit of Jeffrey Rush, M.D., sworn to January 3, 2007 ("Rush Aff.") ¶¶ 2-4; Deposition of Mark Toothacre ("Toothacre Dep.") (PX 95) at 179; Direct Testimony Affidavit of Mark Toothacre, sworn to January 3, 2007 ("Toothacre Aff.") ¶¶ 2-4). Pacific is headquartered in San Diego, California (Rush Aff. ¶ 2; Toothacre Aff. ¶ 2). Jeffrey Rush is Chairman of Pacific (Stipulated Facts ¶ 2). Mark Toothacre is Executive Vice President of Pacific Medical (Stipulated Facts ¶ 3). Elizabeth Powell is Chief Financial Officer and Vice President of Operations of Pacific (Stipulated Facts ¶ 4). Robert Rosenthal is President of Pacific (Direct Testimony Affidavit of Robert Rosenthal, sworn to January 2, 2007 ("Rosenthal Aff.") ¶ 1).
3. Pacific locates property adjacent or close to hospitals and, with the cooperation of the hospitals, subsequently arranges financing for and develops, builds, and operates office buildings, parking spaces and outpatient facilities to be used primarily by physicians who practice in the nearby hospitals (DX A; Rush Aff. ¶¶ 3-4; Rush Dep. (PX 94) at 20-21; Toothacre Aff. ¶¶ 3-4; Toothacre Dep. (PX 95) at 15, 191-92; Tr. at 100-101; 109-110). Pacific finances each of its projects on an individual, project-by-project basis (Rush Aff. ¶¶ 3-4; Toothacre Aff. ¶ 3; Toothacre Dep. (PX 95) at 191-92; Tr. at 100-01; 109-10). Pacific's principals and an established group of investors provide capital for its property development projects (DX-A at MP151-52; Powell Dep. (PX 97) at 12; Rush Aff. ¶¶ 5, 26; Rush Dep. (PX 94) at 24-26; Toothacre Aff. ¶¶ 5, 34; Tr. at 109; Toothacre Dep. (PX 95) at 27-28, 178-80, 202, 204). Dr. Rush has been the principal investor, providing up to approximately one-half of the capital for Pacific's projects (Rush Aff. ¶ 5; Rush Dep. (PX 94) at 24-26; Toothacre Dep. (PX 95) at 27-28, 202, 204).
B. The Origin and Drafting of the Agreement
4. Dr. Rush and Mr. MacLean first met in April 2001 on an airplane (Stipulated Facts ¶ 5). They discussed Pacific's business and the prospect of Mercury providing financial advisory services to assist Pacific in securing investment capital (MacLean Aff. ¶¶ 6-7; Powell Dep. (PX 97) at 12; Rush Aff. ¶¶ 6-9; Rush Dep. (PX 94) at 50-51, 140-41, 160; Toothacre Aff. ¶ 7; Toothacre Dep. (PX 95) at 46-47, 204).
5. In late April or early May 2001, Rush and MacLean orally agreed that Mercury would become Pacific's financial advisor (MacLean Aff. ¶ 12).
6. MacLean drafted a proposed engagement letter, dated May 11, 2001 (MacLean Aff. ¶ 21; PX 75). MacLean claims to have sent this letter to Rush on or about May 11, 2001 (MacLean Aff. ¶ 21).
7. The May 11, 2001 draft agreement differs from the Agreement ultimately signed by the parties in the following material respects: (1) Paragraph 1 of the May 11 draft contained a provision not present in the final Agreement that Mercury will "assist in general business and financial analysis of [Pacific], including transaction feasibility analyses and valuation analyses;" (2) Paragraph 2 of the May 11 draft provided for a $50,000, rather than $35,000, retention fee; (3) Paragraph 2 of the May 11 draft did not contain any provisions pertaining to mortgages or property related financing, and (4) Paragraph 9 provided that the term of the engagement would be 36 months (PX 57; PX 75).
8. At some unspecified point in time MacLean crossed-out the $50,000 retention fee figure in Paragraph 2 of the May 11, 2001 draft and handwrote next to it the number "35,000," followed by a question mark (MacLean Aff. ¶ 37; PX 75). Similarly, MacLean crossed-out the 36 month post-termination period during which Mercury would still be owed advisory fees in Paragraph 9, and handwrote next to it the number "24" at an unspecified date.
9. MacLean sent a letter to Pacific dated May 31, 2001 stating in pertinent part that he was "excited to be working with you and your organization as your financial advisor in structuring and negotiating a capital transaction for Pacific[.] I am confident that a transaction can be consummated on favorable terms to you whereby you will receive the capital to incrementally grow your company. . . . I . . . look forward to continuing to work diligently to finalize a transaction." (MacLean Aff. ¶ 58; PX 86). Mercury claims that it had begun working for Pacific at the time of the May 11, 2001 letter, although no contract had been signed as of that date (MacLean Aff. ¶ 59; PX 29 at MP 00318; Tr. at 144).
10. MacLean attached a revised draft engagement agreement, dated May 24, 2001, to his May 31, 2001 letter (MacLean Aff. ¶ 58; PX 86). The May 24, 2001 draft engagement agreement was identical in all respects to the original May 11, 2001 draft except that the provisions in Paragraph 9 concerning the term of the engagement and duration of the post-termination period during which Mercury would be owed advisory fees were both reduced to 24 months (MacLean Aff. ¶ 64; PX 86).
11. There is a handwritten comment on the May 24, 2001 draft engagement letter crossing-out the $50,000 retainer fee in Paragraph 2 and stating "$25,000 when Rothschild's closes" (MacLean Aff. ¶ 65; PX 86). Mark Toothacre testified that he may have made this alteration (Tr. at 120).
12. On September 28, 2001, MacLean sent a second revised draft of the engagement agreement to Pacific with a cover letter of the same date (MacLean Aff ¶ 67; PX 82). The cover letter stated that the attached draft reflected changes that the parties had "discussed in San Diego" (PX 82). The letter stated in pertinent part that the second revised draft engagement letter "clarified the fee structure for mortgage debt versus senior, subordinated or mezzanine debt" and that, "[a]s discussed, [it] reduced the fee payable on mortgage debt from 2% to 1%" (PX 82).
13. The September 28, 2001 draft engagement agreement differed from the previous, May 24, 2001 draft in the following material respects: (1) the September 28 draft omitted from Paragraph 1 the language that Mercury will "assist [Pacific] in general business and financial analysis of [Pacific], including transaction feasibility analyses and valuation analyses"; (2) the September 28 draft reduced the retention fee in Paragraph 2 to $35,000; (3) Paragraph 2 of the September 28 draft was modified to provide that financial advisory fees were now to be paid "at closing of each transaction;" (4) Paragraph 2(a) of the September 28 draft contained an additional provision under which Pacific was to "issue to Mercury Partners a warrant to purchase 350,000 shares of common equity at a price of $10.00 per share at closing of" any equity transactions; (5) Paragraph 2(c) of the September 28 draft contained a new provision stating that "[i]n connection with any issuance of mortgage or property-related financing, [Pacific] will pay a financial advisory fee equal to 1% of the gross proceeds of the Transaction(s)," and (6) Paragraph 9 of the September 28 draft provided that the duration of the post-termination period during which Mercury would be owed advisory fees would be 36 months (PX 82).
14. Pacific did not sign the September 28, 2001 draft engagement letter as presented, but rather, made several alterations before signing it. Further, Pacific deferred signing the Agreement until December 2001 or January 2002. Pacific contends that it deferred signing the Agreement until Mercury could produce a satisfactory transaction which the parties could address in whatever engagement letter they signed (Rush Aff. ¶ 17; Toothacre Aff. ¶ 24; Toothacre Dep. at 96, 97; Tr. at 195). Dr. Rush testified at trial, however, that he did not intentionally delay signing the Agreement (Rush Dep. at 117; Tr. at 194-95).
15. The Agreement ultimately entered into provided, in pertinent part, that Mercury was to "act as sole and exclusive financial advisor to Pacific Medical Buildings, L.P., its affiliates and successors to evaluate various capitalization strategies" (PX 57 Introductory ¶). The Agreement further provided that the capitalization strategies may include the issuance of equity, debt and mezzanine capital, the merger with or sale to another company or an initial public offering of equity securities (hereinafter the "Transactions") (PX 57 Introductory ¶). Mercury was to assist Pacific "in analyzing, structuring, negotiating, effecting the Transaction(s)" (PX 57 ¶ 1).
16. In return, Pacific was to pay Mercury a retention fee of $35,000, and pursuant to Paragraph 2 of the Agreement, a financial advisory fee at the closing of each of the following types of Transactions: "(a) . . . any placement of private or public equity, equity related, or convertible securities . . . (b) . . . any issuance of senior, subordinated or mezzanine debt . . . (c) . . . any issuance of mortgage or property-related financing . . . (d) . . . any merger, acquisition, or sale transaction . . . (e) . . . an initial public offering" (PX 57 ¶ 2).
17. Handwritten after the text in subparagraph 2(c) of the Agreement was the sentence: "This assumes that Mercury originates the financing" (PX 57 ¶ 2). Handwritten after the text in subparagraph 2(d) was the sentence: "This assumes that Mercury originates/participates in the transaction" (PX 57 ¶ 2). Both of these amendments were made by Dr. Rush (Tr. at 208-09).
18. The term of the engagement under the Agreement was 24 months from the date of the Agreement unless terminated in accordance with the terms of the Agreement (PX 57 ¶ 9). The Agreement permitted either party to terminate the Agreement at any time by providing the other party with at least thirty days' prior written notice (PX 57 ¶ 9).
19. The Agreement also provided that fees payable to Mercury were to survive any termination of the Agreement and were payable on "any Transaction that [was] completed within 36 months of the expiration or termination of th[e] Agreement" (PX 57 ¶ 9).
20. The Agreement further provided that Pacific will "reimburse Mercury . . . for its reasonable expenses, including the fees and disbursements of its legal counsel, incurred in connection with this engagement" (PX 57 ¶ 2).
C. Sophistication and Attentiveness of The Parties
21. Dr. Rush and Mr. Toothacre negotiated the Agreement on behalf of Pacific Medical (MacLean Aff. ¶ 49; Tr. at 101, 181).
22. Mr. MacLean negotiated the Agreement on behalf of Mercury Partners (MacLean Aff. ¶¶ 7, 12).
23. Dr. Rush, Mr. Toothacre, and Mr. MacLean were all sophisticated business-people with extensive experience negotiating contracts (MacLean Aff. ¶¶ 2-5, 8, 13, 72; Tr. at 99-100).
24. Robert Rosenthal played a "very limited" role in the negotiation of the Agreement, and his contact with Mercury was "minimal" during the engagement (Tr. at 157-58, 229).
25. Elizabeth Powell played no role in reviewing or negotiating the Agreement and had no firsthand knowledge of anything that was said by either party to the other during those negotiations (Tr. 156-57).
26. Pacific had an in-house attorney, Evan Stone, Esq., during the period the Agreement was being negotiated. However, Dr. Rush did not consult with Mr. Stone during the negotiation of the Agreement or at any time thereafter (Tr. at 180, 268-69). Similarly, Mr. Toothacre was aware that Pacific had in-house counsel, but he, too, never had Mr. Stone review the Agreement (Tr. at 103).
27. Neither Mr. Toothacre nor Dr. Rush consulted, nor, so far as either is aware, did any one else at Pacific consult, Pacific's regular outside counsel, Seltzer & Caplan, or any other attorney concerning the Agreement (Tr. at 103-04, 181).
28. Mercury had corporate counsel at the time the Agreement was negotiated and executed, but Mr. MacLean could not recall whether he consulted with counsel in connection with the Agreement (Tr. at 88).
29. Mr. Toothacre did not review the Agreement closely before approving it, as amended by Dr. Rush, and was not sure if he read the earlier drafts of the Agreement that Mercury sent to Pacific (Toothacre Dep. (PX 95) at 96-98; Tr. at 101, 119, 123).
30. Dr. Rush testified at his deposition that he "probably did not do as good a job as [he] should have done in some of the paragraphs" of the Agreement, that he "should have put some lineations in that relative to ¶ (a) to clarify it" and that he "probably should have" been "more thorough" and added the same proviso to ¶ 2(a) and ¶ 2(b) to "clarify" his intent as he did with ¶ 2(c) and ¶ 2(d) (Rush Dep. (PX 94) at 127, 132, 136-37, 163).
31. Similarly, Dr. Rush testified at trial that he "probably could have done a better job with some of the paragraphs" in the Agreement and that he could have "changed things" to negotiate "a better agreement for Pacific" (Tr. at 203). Dr. Rush "didn't focus" on the different schedules of fees Mercury would earn for different types of transactions (Trial Tr. at 258)). Dr. Rush also testified that he reviewed and edited the Agreement "rather rapidly" and "very quickly" (Tr. at 267-69).
D. Mercury's Performance Under The Agreement
32. Between May 2001 and May 2002, Mercury evaluated capitalization strategies for Pacific by assisting Pacific in analyzing, structuring and negotiating financing transactions (MacLean Aff. ¶¶ 105, 113, 130).
33. Specifically, Mercury evaluated various capitalization strategies involving several financing proposals made by a company called Lillibridge, in conjunction with a company called Prudential (MacLean Aff. ¶¶ 106-15, 141; PX 12; PX 14; PX 16; PX 29; Toothacre Aff. ¶ 15; Tr. at 79, 117-19, 191, 247-48).
34. Mercury also evaluated capitalization strategies involving a financing proposal made by a company called Rothschild (MacLean Aff. ¶¶ 116-38; PX 1; PX 17; PX 18; PX 19; PX 20; PX 21; PX 25; PX 29; PX 32; PX 34; PX 35; PX 39; PX 42; PX 45; Rush Aff. ¶ 11; Toothacre Aff. ¶ 16; Tr. at 192).
35. Mercury also evaluated proposed capitalization strategies involving other financing partners as well, including companies such as Fidelity Real Estate, Warburg Pincus, and LaSalle (MacLean Aff. ¶¶ 139-40; Tr. at 145, 192).
36. Mercury did financial modeling and cash-flow projections, due diligence, project site visits, and participated in conference calls and meetings with potential financial partners and their attorneys and accountants ...