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Williamson Acquisition, Inc. v. PNC Equity Management Corp.

January 15, 2010


The opinion of the court was delivered by: Michael A. Telesca United States District Judge



Plaintiffs Williamson Acquisition, Inc., ("WAI"), David L. Williamson ("Williamson"), (collectively the "Williamson plaintiffs") and Argilus, LLC ("Argilus") bring the above titled actions against defendants PNC Financial Services Group, Inc., PNC Equity Capital, PNC Equity Management Corp., and PNC Equity Partners, L.P., (collectively "PNC"), claiming that the defendants breached a contract with the plaintiffs; violated implied covenants of good faith and fair dealing; unjustly enriched themselves at plaintiffs expense; breached their fiduciary duties to the plaintiffs, misappropriated trade secrets; converted plaintiffs property; and engaged in tortious interference with contract, unfair competition, and tortious interference with prospective business advantage. According to the plaintiffs, they hired PNC to assist them with purchasing the Griffith Oil Company, ("Griffith") a subsidiary of the Energy East Company. Plaintiffs claim, however, that after they and PNC failed to acquire Griffith, PNC, using confidential secrets that it learned during the negotiation process, and in violation of its agreements with and fiduciary duties to Argilus, Williamson, and WAI, solicited and assisted a different buyer in his successful acquisition of the company. Plaintiffs contend that as a result of defendants' actions, they were denied the opportunity to buy Griffith Oil, and were denied commissions on the sale of Griffith Oil.

By motion dated March 31, 2009, defendant PNC Equity Management Corp. moves for summary judgment against plaintiffs David L. Williamson and Williamson Acquisition, Inc., on grounds that there are no material issues of fact in dispute, and that it is entitled to judgment in its favor. By motion dated April 3, 2009, the PNC defendants move for summary judgment against plaintiff Argilus on grounds that there are no material questions of fact in dispute, and that they are entitled to judgment in their favor. Plaintiffs oppose the defendants motion contending that there are several issues of fact in dispute, and that as a result, summary judgment may not be granted.

For the reasons set forth below, I grant the defendants' motions for summary judgment, and dismiss plaintiffs' complaints with prejudice.


The instant cases arise out of the same set of facts, and therefore, I discuss the factual background of both cases simultaneously.

In September, 2002, Energy East Corporation, an energy services company, through its agent Morgan Stanley & Company, ("Morgan Stanley") offered for sale a subsidiary of Energy East, the Griffith Oil Company ("Griffith" or "Griffith Oil"). Plaintiff David Williamson, who had experience in the energy industry as an owner of an energy corporation, was interested in purchasing Griffith, and entered into a confidentiality agreement with Morgan Stanley pursuant to which he received from Morgan Stanley a confidential offering memorandum regarding Griffith. In October, 2002 Williamson, on behalf of a yet-to-be-created company that would purchase Griffith, submitted to Morgan Stanley a proposal for the purchase of Griffith. Williamson's proposal was well received, and he, along with a limited number of select potential buyers, was allowed to proceed with further investigation into the purchase of Griffith.

Williamson engaged in extensive investigation into Griffith, and began investigating financing options for the purchase of the company. With respect to financing, in November, 2002, Williamson entered into an agreement with plaintiff Argilus pursuant to which Argilus was to act as Williamson's exclusive financial advisor (hereinafter the "Williamson-Argilus Agreement"). Pursuant to the terms of the Williamson-Argilus Agreement, in return for acting as Williamson's financial advisor, Argilus was to be paid $25,000.00 up front, and was to receive $1.2 in commissions (referred to as a "success fee") upon completion of the sale of Griffith to Williamson. Argilus was also given stock options to purchase shares of the new company formed to purchase Griffith upon completion of the sale to Williamson.

In an effort to obtain financing for a possible bid to purchase Griffith, Argilus, on behalf of Williamson, contacted PNC, as well as other equity firms, to determine interest in putting together a financing package. PNC expressed interest in working with Argilus and Williamson, and on November 26, 2002, entered into a confidentiality agreement with Argilus, (which was acting on behalf of Williamson Acquisition Incorporated) whereby PNC agreed not to disclose any confidential information learned about a company described in the Agreement as an "Energy Co." According to PNC, the "Energy Co." referred to in the agreement was Griffith, which was being offered for sale confidentially by Energy East and Morgan Stanley, which companies required that interested investors maintain confidentiality about the identity of Griffith. According to PNC, because WAI, Williamson, and Argilus were not allowed to disclose the identity of Griffith without a confidentiality agreement in place with PNC, the PNC-Argilus Agreement was required to protect the confidentiality of Griffith. Indeed, Griffith was referred to as "Energy Co." by Argilus in promotional materials it sent to prospective lenders.

Argilus and WAI contend that the confidentiality agreement pertained to WAI and Williamson's confidential information, despite the fact that WAI had not been incorporated at the time, and neither entity constituted an "Energy Company." Other than the PNC-Argilus Confidentiality Agreement, PNC did not enter into any other written agreements with Argilus, Williamson, or WAI.*fn1

On December 2, 2002, Williamson met with representatives of PNC in Pittsburgh, Pennsylvania, to further discuss the proposed acquisition of Griffith. According to the plaintiffs, Williamson, divulged more confidential information about his proposed bid for Griffith at the meeting.

On December 5, 2002, Williamson initiated the incorporation of Williamson Acquisition, which, according to the plaintiffs, was to be the company that would purchase Griffith.*fn2 That same day, Williamson sent a purchase offer for Griffith (the "Williamson Offer"), on behalf of WAI, to Morgan Stanley. The purchase offer contained a December 5, 2002 letter from PNC outlining the terms of the offer. Energy East considered the Williamson Offer along with offers from at least two other entities. According to the plaintiffs' Complaints, PNC initially indicated to Williamson that Energy East was enthusiastic about the Williamson Offer, but later, told Williamson that the sale would go through only if Williamson accepted a reduced role in Griffith Oil upon completion of the sale. According to Williamson, Energy East told PNC that the management of Griffith had strong reservations about working with Williamson. The Complaints allege that PNC then engaged in its own due diligence (without informing Williamson or gaining Williamson's consent) and learned for itself that the management of Griffith refused to work with Williamson. While the plaintiffs contend that the allegations regarding Griffith's reluctance to work with Williamson are false, the plaintiffs nevertheless acknowledge that as of January 17, 2003, Energy East had decided to terminate all negotiations with all potential buyers of Griffith, and rejected all offers to purchase the company. According to Williamson, even if Energy East had not rejected the WAI offer, he would not have gone forward with the deal if he could not control Griffith. Deposition Testimony of David Williamson at p. 214-215.

Despite having rejected all bids for Griffith, in February, 2003, Griffith contacted PNC, and asked PNC to contact Philip Saunders ("Saunders"), a former owner of Griffith, to determine if Saunders would have interest in purchasing Griffith if Griffith were once again available for sale.*fn3 According to the defendants, Saunders expressed such an interest, and negotiations to sell the company took place in June, 2003. PNC worked with Saunders in all aspects of the negotiations, and as part of the purchase deal, became a part owner of Griffith. By November, 2003, the sale of Griffith to Saunders and PNC was completed. Thereafter, Williamson and Argilus each brought separate actions against PNC claiming that PNC, by participating in the purchase of Griffith with Saunders breached its contractual and common law duties to the plaintiffs.


I. The Defendant's Motion for Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." When considering a motion for summary judgment, all genuinely disputed facts must be resolved in favor of the party against whom summary judgment is sought. Scott v. Harris, 550 U.S. 372, 380 (2007). If, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party, a grant of summary judgment is appropriate. Scott, 550 U.S. at 380 (citing Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587 (1986).

II. The Argilus Claims

Plaintiff Argilus brings eight causes of action against the PNC defendants claiming that the defendants are liable for: (1) breach of contract, (2) unjust enrichment; (3) quantum meruit; (4) breach of the implied covenant of good faith and fair dealing, (5) tortious interference with contract; (6) tortious interference with prospective advantage and unfair competition (7) misappropriation of trade secrets and unfair competition; and (8) conversion. I discuss these claims seriatim.

A. Breach of Contract

1. The Commission Contract

Argilus claims that it was a party to the Williamson-Argilus Agreement, pursuant to which it was entitled to a fee of $1.2 million if Williamson, through his company WAI, was successful in purchasing Griffith Oil. Argilus further claims that because PNC became a joint venturer with Williamson and WAI, and a part-owner of WAI, PNC became liable to Argilus under the Williamson-Argilus Agreement upon Saunders' purchase of Griffith, because PNC itself became a part owner of Griffith as a part of that sale. PNC counters that because it was not a party to the Williamson-Argilus contract, and because the Williamson-Argilus Agreement specifically provides that third-parties such as PNC are not subject to the terms or conditions of the Williamson-Argilus Agreement, it can not be held liable to Argilus for payment of the $1.2 million success fee. PNC also claims that although there was a proposal that PNC become a part-owner of WAI, that proposal was never acted on, and at no time did PNC ever become an owner of WAI.

To state a claim for breach of contract under New York law, a plaintiff must establish: (1) the existence of a valid contract, (2) performance of the contract by the plaintiff; (3) breach of the contract by the defendant; and (4) damages. First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2nd Cir. 1998)(citing Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir.1994); Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2nd Cir. 2004)("To make out a viable claim for breach of contract a 'complaint need only allege (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.'")(quoting Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir.1996).

In the instant case, the plaintiff has failed to establish the existence of a valid, binding contract between PNC and Argilus under which PNC agreed to pay success fees to Argilus. This is because the Williamson-Argilus Agreement, upon which plaintiff relies as establishing a contractual obligation between PNC and Argilus, specifically and unambiguously provides that the Agreement applies only to Williamson, WAI, and Argilus, and "is not intended to confer any rights upon any other individual shareholder, owner, creditor or partner of the [WAI]... or any other person not a party hereto...." Williamson-Argilus Agreement at ¶ 9. Accordingly, even assuming that PNC was a shareholder, owner, partner or joint venturer of Williamson or WAI, the Williamson-Argilus Agreement specifically excludes PNC from the rights, benefits, or obligations of the agreement.*fn4 I therefore find that PNC was not a party to any written contract with Argilus under which it was obligated to pay any fees to Argilus, and as a result, I deny plaintiff Argilus's claim for breach of contract.

Nor can the plaintiff establish that PNC was obligated to pay Argilus's success fee pursuant to the terms of an oral contract. New York State's statute of frauds specifically requires that any contract "to pay compensation for services rendered in negotiating a... purchase... of any... business...." shall be in writing. N.Y. Gen. Ob. L. ยง 5-701. Because Argilus seeks compensation for its role in consummating the purchase of Griffith by Williamson and WAI, any oral agreement regarding that compensation is void and unenforceable under the Statute of Frauds. Argilus' attempts to characterize the oral agreement as something other than an agreement to compensate it for its role in facilitating the purchase of Griffith by Williamson and WAI, or rely on the doctrine of promissory estoppel, are unavailing. To invoke a claim based on promissory estoppel, Argilus must establish that there was a clear and unambiguous promise by PNC to pay Argilus a success fee. See Sugerman v. MCY Music World, Inc., 158 F.Supp.2d 316, 325 (S.D.N.Y. ...

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