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Semple v. Eyeblaster

August 27, 2009


The opinion of the court was delivered by: Hon. Harold Baer, Jr., United States District Judge


Plaintiff Elizabeth Semple ("Plaintiff" or "Semple") filed an Amended Complaint on January 20, 2009, alleging various causes of action against her former employer Eyeblaster, Inc. ("Eyeblaster"), its Chief Executive Officer Gal Trifon ("Trifon") (collectively, the "Eyeblaster Defendants"), Lehman Brothers, Inc. ("Lehman") and Deutsche Bank Securities Inc. ("DBSI") (collectively, the "Underwriters") arising out of her inability to exercise her options to purchase Eyeblaster stock. All Defendants moved to dismiss the claims against them. In an Opinion and Order dated May 26, 2009, this Court granted the Underwriters' motion to dismiss in its entirety, and granted the Eyeblaster Defendants' motion to dismiss in part. Defendants now move for summary judgment on each of the remaining claims against them. The remaining claims are for (1) tortious interference with business relations; (2) breach of contract; and (3) fraud. For the reasons set forth below, Defendants' motion is granted in part and denied in part.


Semple was employed as the Vice President for Global Human Resources at Eyeblaster from March 21, 2005 to April 20, 2008. As part of her compensation, Semple was awarded options to purchase Eyeblaster stock, subject to the terms of Eyeblaster's Third Amended and Restated Stock Option and Incentive Plan (the "2001 Plan") and Eyeblaster's 2007 Stock Option and Incentive Plan (the "2007 Plan"). By the time Semple left the company, 26,868 of her stock options had vested; the deadline to exercise those options was July 18, 2008.

In approximately November 2007, Eyeblaster began preparations for an initial public offering ("IPO") of its stock on the NASDAQ stock exchange. Lehman and DBSI were engaged to act as lead underwriters of the IPO; however, the underwriting agreement between Eyeblaster and the Underwriters was never fully executed. In connection with the contemplated IPO, the Underwriters and Semple entered into a letter agreement pursuant to which Semple agreed, among other things, to obtain prior written consent of the Underwriters before sheentered any agreement to sell or otherwise dispose of any stock that she would obtain by exercising her options (the "Lock-Up Agreement").*fn2 The Lock-Up Agreement stated that the consideration for Semple's promises were "the execution of the Underwriting Agreement by the Underwriters, and . . . other good and valuable consideration." The Lock-Up Agreement further provided that Semple would be released from her obligation to obtain prior written consent if: (1) Eyeblaster notifies the Underwriters that it does not intend to proceed with the IPO; (2) the Underwriting Agreement does not become effective by December 31, 2008; or (3) the Underwriting Agreement terminates before payment for and delivery of the Stock (the "Release Contingency provision").

On June 30, 2008, without prior written consent from the Underwriters, Plaintiff executed a non-binding letter of intent (the "LOI") with Millennium Technology Value Partners, L.P. ("Millennium"), a private equity company, indicating her intent to sell to Millennium 23,868 shares of Eyeblaster common stock that she was toreceive from theexercise ofher options. On July 3, 2008, Semple forwarded to Eyeblaster a copy of the LOI and a Notice of Proposed Transfer in which she provided notice of her intent to transfer these shares to Millennium. The next day, Eyeblaster advised Plaintiff that the Lock-Up Agreement required the consent of the Underwriters and until consent was obtained, the Lock-Up Agreement prohibited the proposed transaction with Millennium. On July 7, 2008, Semple received an email from Eyeblaster's counsel that advised her that the Lock-Up Agreement remained in effect, and that Eyeblaster would decline to transfer any Eyeblaster stock to Millennium without a waiver from the Underwriters, as any such transfer would be in violation of the Lock-Up Agreement. On the same day, Eyeblaster's chief financial officer, Sarit Firon, sent an email to Millennium that advised that by soliciting Eyeblaster employees to sell their stock, Millennium induced the employees to breach their Lock-Up Agreements, and stated that Eyeblaster reserved all rights to take all appropriate legal action against Millennium if it did not cease and desist such solicitation.

Based on Eyeblaster's advice that Semple would not be able to transfer her shares to Millennium absent a waiver of the Lock-Up Agreement by the Underwriters, Semple retained counsel, Renee Eubanks, to assist her in obtaining thereleases. Eubanks contacted Colin Diamond, counsel for the Underwriters, who told her that Lehman would agree to provide the waiver, subject to Millennium's agreement to be bound by the Lock-Up Agreement. However, before the waiver was officially granted, Trifon discussed Plaintiff's request for a release with Paul Inouyne of Lehman and expressed his reservations regarding the request and indicated that Eyeblaster would prefer if the waiver were not granted. Defendants contend that Eyeblaster's position was based on its concerns about the continued viability of the company's use of the stock option plan as an employee retention tool. That is, Defendants' contend that the stock option plan would be essentially worthless to encourage employee retention if Eyeblaster employees simply could obtain funds necessary to exercise their options from a third-party funding source such as Millennium. On July 18, 2008, the Underwriters advised Semple that her request for a waiver of the Lock-Up Agreement would not be honored. However, on Semple's request, Eyeblaster granted an extension to August 20, 2008 for her to exercise her options. On approximately July 21, 2008, Semple had a conversation with Trifon in which she requested that he allow the release from the Lock-Up Agreement, but Trifon advised Semple that he would not consent to the release. Ultimately, Millennium withdrew from its deal with Semple, and she did not exercise any of her options before they expired.


A. Legal Standard on a Motion for Summary Judgment

A motion for summary judgment must be granted if the moving party shows "there is no genuine issue as to any material fact" and it "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment should be granted "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 (1986). In showing the existence of a genuine issue of material fact, "the non-moving party may not rely on mere conclusory allegations nor speculation," Golden Pac. Bancorp v. F.D.I.C., 375 F.3d 196, 200 (2d Cir. 2004), nor can it rely on mere denials or unsupported alternative explanations of its conduct, see SEC v. Grotto, No. 05 Civ. 5880 (GEL), 2006 WL 3025878, at *7 (S.D.N.Y. Oct. 24, 2006). Rather, it "must come forward with evidence sufficient to allow a reasonable jury to find in [its] favor." Brown v. Henderson, 257 F.3d 246, 252 (2d Cir. 2001); see also Fed. R. Civ. P. 56(e).

B. Enforceability of the Lock-Up Agreement

Plaintiff's principal argument, on which all of her contentions in opposition to summary judgment hinge, is that the Lock-Up Agreement was unenforceable as a matter of law because, as she learned in discovery, the underwriting agreement between Eyeblaster and the Underwriters, referenced in the Lock-Up Agreement, was never executed. Accordingly, Plaintiff argues that the Lock-Up Agreement was ineffective for lack of consideration, and there was therefore no basis for Defendants to refuse to honor her request to transfer her shares to Millennium.

Plaintiff's arguments in this regard must be rejected for two reasons, both of them premised on the express language of the Lock-Up Agreement itself.*fn3 First, the Lock-Up Agreement specifically provided that Semple agreed to the restrictions contained in the agreement "[i]n consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration." The language of this provision is unambiguous, and Plaintiff has proffered no facts to suggest that, even if the Underwriting Agreement had not been executed, she did not receive "other good and valuable consideration" in exchange for entering into the Lock-Up Agreement.*fn4 Second, the express language of the Lock-Up Agreement makes clear that the parties contemplated and acknowledged the fact that the Underwriting Agreement had not yet been finalized. Indeed, the first sentence of the Lock-Up Agreement provides that certain firms "propose[d] to enter into an Underwriting Agreement." Further, the Lock-Up Agreement provided that "[a]ny Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between [Eyeblaster] . . . and the Underwriters." Finally, the Lock-Up Agreement expressly contemplated that the Underwriting Agreement was not yet effective, as it provided that Semple would be ...

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