United States District Court, S.D. New York
L. SCOTT TRAINUM, as Sellers' Representative, Plaintiff,
ROCKWELL COLLINS, INC., Defendant. ROCKWELL COLLINS, INC., Counterclaim and Third-party Plaintiff,
L. SCOTT TRAINUM, as Sellers' Representative, Counterclaim Defendant, and BRADLEY SMITH, ANN BREWER, and BRYAN TRAINUM, Third-party Defendants.
OPINION AND ORDER
August 6, 2015, Rockwell Collins, Inc. ("RCI"), an
avionics company, acquired International Communications
Group, Inc. ("ICG"), a company that specialized in
developing communications systems for aircraft (the
"Acquisition"). The terms of the Acquisition were
set out in a Stock Purchase Agreement ("SPA")
between RCI and L. Scott Irainum ("Scott Trainum"),
the Chief Executive Officer and major shareholder of ICG, who
also acted on behalf of ICG's other shareholders in the
transaction. In the months after the Acquisition, RCI came to
believe that ICG officials had made false representations
leading up to the signing of the SPA in order to induce RCI
to purchase ICG, and that various warranties in the SPA had
been breached. After RCI served a notice of claim seeking
indemnification for breaches of the SPA, Scott Trainum
initiated this action seeking a declaration that, inter
alia, ICG did not breach the warranties in the SPA and
that the remaining balance of the purchase price, which was
held in escrow pending the disposition of RCI's notice of
claim, should be disbursed. RCI responded by asserting
counterclaims against him and three other ICG officers.
Specifically, RCI asserted counterclaims for breach of
contract against Scott Trainum; unjust enrichment against Ann
Brewer, Bryan Trainum, and Bradley Smith; and fraud and
negligent misrepresentation against all four. Bryan Trainum
then asserted a counterclaim for breach of contract against
discovery, all parties filed motions for summary judgment.
RCI moves for summary judgment on Scott Trainum's
declaratory judgment claim, its breach of contract claim in
part, its unjust enrichment claim against Bryan Trainum, and
Bryan Trainum's counterclaim. Scott Trainum, Brewer, and
Bryan Trainum (collectively, the "Seller
Defendants") move for summary judgment on RCI's
claims for fraud, negligent misrepresentation, and unjust
enrichment, and on part of RCI's breach of contract
claim. Smith moves for summary judgment on all claims against
reasons explained below, the Court denies RCI's motion on
its contract claim; grants Scott Trainum's motion on the
contract claim in part and denies it in part; grants summary
judgment to Scott Trainum, Brewer, and Smith on RCI's
fraud claim; denies summary judgment to Bryan Trainum on
RCI's fraud claim; grants summary judgment to all
defendants on the negligent misrepresentation and unjust
enrichment claims; denies RCI's motion with regard to
Bryan Trainum's breach of contract claim; and grants in
part RCI's motion on Scott Trainum's declaratory
pertinent facts, undisputed except where indicated, are as
an avionics company headquartered in Cedar Rapids, Iowa.
Statement of Undisputed Material Facts Pursuant to Local
Civil Rule 56.1 in Supp. of Joint Mot. for Summ. J. of
Countercl. Def. L. Scott Trainum, Third-Party Def. Ann C.
Brewer, and Third-Party Def. Bryan S. Trainum ("Seller
Defs. Rule 56.1 Stmt.") ¶¶ 5-6, ECF No. 59.
Prior to its acquisition, ICG was a company based in Newport
News, Virginia, that designed and built satellite
communications ("satcom") systems used in aircraft.
Rockwell Collins Inc.'s Resp. to Countercl. Def. L. Scott
Trainum, Third-Party Def. Ann C. Brewer, and Third-Party Def.
Bryan S. Trainum's Statement of Undisputed Material Facts
and Counter-Statement of Material Facts ("RCI Rule 56.1
Resp. to Seller Defs.") ¶ 1 (additional
facts), ECF No. 82. Ann Brewer was the Chief
Financial Officer of ICG, and Bryan Trainum was the Vice
President of Programs. Id. ¶ 2. Bradley Smith
assumed the role of Chief Operating Officer at ICG in January
2015. Third-Party Def. Bradley Smith's Statement of
Undisputed Material Facts in Supp. of Mot. for Summ. J.
Pursuant to Local Civil Rule 56.1 ("Smith Rule 56.1
Stmt.") ¶ 1, ECF No. 63.
the early 2000s, RCI and ICG had a business relationship in
which ICG supplied RCI with satcom products. RCI Rule 56.1
Resp. to Seller Defs. ¶ 34 (additional facts). RCI's
interest in acquiring ICG primarily derived from two of
ICG's ongoing programs to develop satcom systems for the
cockpits of commercial airplanes (the "Programs"):
the Aspire-300 program, which ICG was developing for
Honeywell International Inc. ("Honeywell"), and the
ICS-300 program, which ICG was developing internally with the
assistance of The Boeing Corporation ("Boeing").
Id. ¶ 4.
2014, RCI began conducting due diligence on ICG. Id.
¶¶ 35, 39-40. Smith served as a point of contact
for RCI and provided updates on the Programs, as, for
example, in a presentation in February 2015. Rockwell Collins
Inc.'s Resp. to Third-Party Def. Brad Smith's
Statement of Undisputed Material Facts and Counter Statement
of Material Facts ("RCI Rule 56.1 Resp. to Smith")
¶¶ 27, 31 (additional facts), ECF No. 80. Bryan
Trainum also provided RCI with information on the Programs.
See Rockwell Collins Inc.'s Statement of
Material Facts ("RCI Rule 56.1 Stmt.") ¶¶
12, 14, ECF No. 70. However, RCI maintains that it received
only very limited information about the Programs throughout
most of the due diligence period.
the lead-up to the Acquisition, the Programs experienced some
setbacks. For example, on June 3, 2015, Honeywell notified
ICG that some of ICG's performance was behind schedule
and expressed concern about the timely completion of the
Aspire-300 project. Decl. of Michael Bhargava in Supp. of
Counter-Pi. Rockwell Collins, Inc.'s Opp. to Third-Party
Def. Bradley Smith's Mot. for Sum. J. ("Bhargava
Decl. in Opp. to Smith Mot.") Ex. 17, ECF No. 79. In
July 2015, ICG negotiated with Honeywell a six-month
extension to the schedule for the Aspire-300 project, and ICG
provided RCI with a copy of the Amendment to the Honeywell
contract on July 10, 2015. RCI Rule 56.1 Stmt. ¶ 17;
Resp. to Rockwell Collins Inc.'s Statement of Material
Facts and Statement of Additional Undisputed Material Facts
("Seller Defs. Rule 56.1 Resp.") ¶¶ 17,
17(a), ECF No. 75. In addition, on June 23, 2015, Boeing sent
ICG a request for additional payment based on Boeing's
efforts to compensate for ICG's poor quality work.
Bhargava Decl. in Opp. to Smith Mot. Ex. 19.
2015, RCI sought more comprehensive information on the
Programs from ICG. At RCI's request, on July 13 Smith
forwarded RCI a master program schedule for the Aspire-300
and ICS-300 programs. Smith Rule 56.1 Stmt. ¶ 38;
see Decl. of Mark Cuccaro in Supp. of Third-Party
Defendant Bradley Smith's Mot. for Summ. J.
("Cuccaro Decl.") Ex. 6, ECF No. 64. RCI and ICG
then convened a two-day series of meetings on the Programs in
Newport News on July 20 and 21. RCI Rule 56.1 Resp. to Seller
Defs. ¶ 43 (additional facts). The first day of meetings
focused on the Aspire-300 program, while the second day
focused on the ICS-300 program. See Seller Defs.
Rule 56.1 Stmt. ¶ 98; RCI Rule 56.1 Resp. ¶ 98. The
leaders of RCI's due diligence team, Jeff Payne and Dion
Hayes, attended the meetings, as did members of RCI's
engineering team, including Gregg Zupcsics. RCI Rule 56.1
Resp. to Seller Defs. ¶ 43 (additional facts). The
Seller Defendants and RCI agree that Smith attended the
meeting on July 20 regarding the Aspire-300 program,
Id. ¶ 44, and Bryan Trainum attended and
presented some material at the meeting on July 21 regarding
the ICS-300 program, RCI Rule 56.1 Stmt. ¶ 14. Smith,
however, states that he has no recollection of participating
in either meeting. Third-Party Def. Bradley Smith's Resp.
to Rockwell Collins Inc.'s Counterstatement of Material
Facts ("Smith Rule 56.1 Resp.") ¶¶ 38-40,
ECF No. 89.
claims that ICG personnel made several representations about
the progress of the Programs during those meetings. According
to RCI, during the first presentation, the ICG team
represented that the Aspire-300 program had completed the
Critical Design Review ("CDR") phase, had completed
the "Red Label 1" stage, and had undergone
sufficient "pre-qualification" testing to warrant
"high confidence" that the product designed would
successfully complete subsequent formal testing. RCI Rule
56.1 Resp. to Seller Defs. ¶¶ 44-46 (additional
facts). During the second presentation, RCI asserts that the
ICG team also represented that the ICS-300 program had
completed the CDR phase, had "essentially full
functionality, " and had started Minimal Operational
Performance Testing ("MOPS"). Id.
the meetings, Zupcsics emailed Bryan Trainum his notes from
the meetings, which contained various details regarding the
programs, and asked Bryan Trainum for suggested additions or
revisions. Id. ¶¶ 47-48; Decl. of Michael
Bhargava in Supp. of Counter-Pi. Rockwell Collins, Inc.'s
Opp. to Countercl. Def. L. Scott Trainum, Third-Party Def.
Ann C. Brewer, and Third-Party Def. Bryan S. Trainum's
Mot. for Summ. J. ("Bhargava Decl. in Opp. to Seller
Defs. Mot.") Ex. 27, ECF No. 83. Bryan Trainum responded
that the notes "look[ed] like a good summary of the
discussion, " and that he was "reviewing all of the
ICS-300 details ... to ensure they were communicated
correctly" and would provide clarification if needed.
RCI Rule 56.1 Resp. to Seller Defs. ¶ 48 (additional
the July 20 and 21 meetings, RCI held an internal meeting to
discuss the information they had gleaned regarding the
Aspire-300 and ICS-300 programs. Id. ¶ 49.
Relying on the representations in those meetings, RCI decided
to acquire ICG. Id. ¶ 50.
August 6, 2015, Scott Trainum, on behalf of ICG's
shareholders, and RCI executed the SPA, pursuant to which RCI
acquired 100% of ICG's shares. RCI Rule 56.1 Stmt. ¶
1; see Decl. of Michael Bhargava in Supp. of
Counter-Pi. Rockwell Collins, Inc.'s Mot. for Summ. J.
("Bhargava Decl. dated Apr. 7, 2017") Ex. A
("SPA"), ECF No. 69. For these shares, RCI agreed
to pay $50 million, as well as an additional $14 million
depending on certain contingencies. Id. RCI
deposited $4 million of the purchase price into escrow, $2
million of which was to be delivered to Scott Trainum on the
eight-month anniversary of the SPA (April 6, 2016) and the
other $2 million of which was to be distributed on the
16-month anniversary (December 6, 2016). Seller Defs. Rule
56.1 Resp. ¶ 2 (additional facts). Out of the purchase
price, in accordance with a schedule set out in the SPA, ICG
made payouts of $3, 000, 000, $720, 000, and $3, 400, 000 to
Bryan Trainum, Brewer, and Smith, respectively. See
SPA Schedule 2.1(b)(iii).
IV of the SPA contained several warranties by ICG. Most
consequentially for the purposes of this action, ICG
provided, for each the Aspire-300 program and the ICS-300
program, an "estimate at completion"
("EAC"), i.e., an estimate of the total
cost, including past costs and anticipated future costs,
required to complete the project. The EAC for Aspire-300 was
$6, 762, 114, and the EAC for ICS-300 was $9, 515, 643. SPA
Schedule 4.11(e). ICG also warranted that the financial
statements attached to the SPA were accurate, and that ICG
had no liabilities except for those disclosed in the
SPA's schedules. SPA §§ 4.7, 4.24.
claims that, after the Acquisition, it learned that the
Programs were not nearly as far along in their development as
it had understood before entering the SPA, and that both of
the Programs had yet to complete certain milestones that ICG
personnel had represented were already completed.
Specifically, as to the ICS-300 project, RCI claims that
after the Acquisition it learned that the CDR had not been
completed until July 29, 2015, that the project had not yet
begun MOPS testing, and that it did not have full
functionality, among other defects. RCI Rule 56.1 Stmt.
¶ 21(a)-(e). As to the Aspire-300 project, RCI claims
that it discovered after the Acquisition that Honeywell did
not consider the CDR phase for the Aspire-300 project to have
been completed, that Honeywell had rejected the Red Label 1
product that ICG submitted, that pre-qualification testing
had not been completed, and that a redesign was necessary.
Id. ¶ 23 (a)-(i) . The Seller Defendants and
Smith dispute these claims. See Seller Defs. Rule
56.1 Resp. ¶¶ 21 (a)-(e); id. ¶¶
23(a)-(i); Smith Rule 56.1 Resp. ¶ 34.
result of the purported deficiencies, RCI contends that it
had to engage in substantial redesigns of the Aspire-300 and
ICS-300 products and additional work that vastly increased
the costs of completing the Programs. According to RCI, the
current EAC for the ICS-300 project is $19, 689, 000, which
is $8, 692, 000 more than the EAC provided by ICG, RCI Rule
56.1 Stmt. ¶ 22, and the current EAC for the Aspire-300
project is $22, 121, 000, which is $13, 204, 000 more than
the EAC provided by ICG, Id. ¶26. In addition,
RCI claims that it discovered additional liabilities that ICG
failed to disclose in the SPA.
April 5, 2016, RCI served on Scott Trainum a notice of claim,
which alleged breaches of several of the warranties in the
SPA and sought indemnification for the damages that RCI
claimed it sustained. Seller Defs. Rule 56.1 Resp. ¶ 3
(additional facts). The notice of claim had the effect of
barring the distribution of the remaining portion of the
purchase price held in escrow. Id. ¶ 5
(additional facts). The parties could not resolve the dispute
and, on September 7, 2016, Scott Trainum initiated this
action seeking a declaratory judgment that ICG had not
breached any of the provisions of the SPA referenced in
RCI's notice of claim and also seeking an order for the
funds in escrow to be distributed to him. See Compl.
for Decl. J. ¶ 57, ECF No. 1. RCI subsequently filed
counterclaims against not only Scott Trainum but also Bryan
Trainum, Smith, and Brewer, see Def.-Counter-Pi.
Rockwell Collins, Inc.'s Answer, Countercls., and
Third-Party Compl. ("Countercls."), ECF No. 15, and
Bryan Trainum filed a counterclaim against RCI for breach of
contract, Third-Party Def. Bryan S. Trainum's Answer,
Affirmative Defenses, and Countercl., ECF No. 29. Smith moved
to dismiss RCI's claims against him, but that motion was
denied. Mem. Order, Mar. 9, 2017, ECF No. 51.
now to the instant motions, under Rule 56(a) of the Federal
Rules of Civil Procedure summary judgment is appropriate when
the "movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law." Fed.R.Civ.P. 56(a). The movant bears the
burden of demonstrating the absence of a genuine dispute of
fact, see Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 256 (1986), and, to award summary judgment, the court
must be able to find "after drawing all reasonable
inferences in favor of a non-movant" that "no
reasonable trier of fact could find in favor of that party,
" Heublein, Inc. v. United States, 996 F.2d
1455, 1461 (2d Cir. 1993). A fact is considered material
"if it might affect the outcome of the suit under the
governing law, " and a dispute of fact is deemed
"genuine" where "the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party." Holtz v. Rockefeller & Co., 258
F.3d 62, 69 (2d Cir. 2001) (internal quotation marks and
Court first considers the motions addressed to the claim for
breach of contract, which RCI asserts against Scott Trainum.
To prove a breach of contract under New York law, a plaintiff
must show "(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."
Eternity Glob. Master Fund Ltd. v. Morgan Guar. Trust Co.
of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (internal
quotation marks omitted).
moves for summary judgment in its favor on its breach of
contract claim based on alleged breaches of three warranties
contained in Article IV of the SPA. The breaches consist of
the underestimation of the respective EACs for the Aspire-300
and ICS-300 projects, the failure to disclose an obligation
to purchase licenses, and the misrepresentation of the value
of ICG's inventory. Scott Trainum cross-moves for summary
judgment in his favor on the first two of those claims, as
well as on breach claims arising out of the failure to
disclose an obligation to repay relocation costs of a former
employee and an alleged cost assertion from Embraer S.A. The
Court discusses each alleged breach in turn.
with regard to the alleged understatement of the
Programs' EACs, Section 4.11(e) of the SPA provides:
The current Estimates at Completion (EACs) prepared by
management of the Company for existing Contracts of the
Company are set forth on Schedule 4.11(e) and reflect (i) all
material costs incurred related to such Contracts in
accordance with GAAP and (ii) reasonable and appropriate
estimates to complete such Contracts, in each case based on
actual costs incurred, estimates of the effort to complete
such Contracts from the Company's engineering and program
management functions and industry standards and past Company
noted above, Schedule 4.11(e) provided an EAC of $6, 762, 114
for the Aspire-300 program, and $9, 515, 643 for the ICS-300
contends that the EACs were significantly understated because
they relied on false assumptions. Specifically, as to the
Aspire-300 program, RCI claims that the EAC was understated
because (1) certain contractual milestones -- the CDR and Red
Label 1 stages of development, as well as pre-qualification
testing -- had not been completed, despite ICG's
representations that they had; (2) the EAC was calculated
with "unburdened" labor rates that underestimated
the cost of labor; and (3) the EAC did not factor in a
six-month extension to the project's timeline. RCI claims
that the EAC for the ICS-300 program was understated because
(1) the project was in an early stage of development, having
not begun MOPS testing, finished the product's software,
nor completed pre-qualification testing, and (2) it too used
unburdened labor rates. Given those flawed assumptions, RCI
concludes, the EACs could not be "true and correct,
" in violation of Section 8.1 of the SPA,  and they were not
calculated in "accordance with GAAP" and were not
"reasonable and appropriate" given "actual
costs incurred" and "industry standards, " in
violation of Section 4.11(e).
makes little sense to discuss whether EACs -- which are, by
their very name, estimates -- are "true and
correct." Rather, what must be "true and
correct" is not the EACs themselves but the
representation in Section 4.11(e) that the EACs reflect
"reasonable and appropriate estimates" based on
actual costs, ICG's practices, and industry standards.
See SPA § 4.11(e). RCI fails to establish that
there is no genuine dispute as to whether the EACs
incorporated flawed assumptions and whether those assumptions
necessarily render the EACs unreasonable.
the completion of milestones, while RCI focuses on its
assertion that ICG, despite its representations, had not
completed certain milestones for the Aspire-300 and ICS-300
projects, RCI does not show how those purported
misrepresentations caused the EACs to be unreasonably low. In
other words, RCI does not establish that the EACs were
necessarily based on an understanding that those milestones
were completed. Even if, as RCI suggests, the need to
complete an outstanding milestone increases the time and cost
of the project as a whole, RCI has failed to establish the
premise needed to show that the EACs understated these costs,
i.e., that the EACs were calculated under the
assumption that further work on the milestones was not
required to complete the project.
case, even on the assumption that the failure to account for
not-yet-completed milestones could render the EACs
unreasonable, there remain genuine disputes of material fact
that preclude summary judgment in favor of RCI. Scott
Trainum, in particular, vigorously disputes the premise of
RCI's argument, viz., that each of the
identified milestones was assumed to be complete when in fact
it was not. To take one example, while RCI asserts that ICG
did not complete the CDR on the ICS-300 project in October
2014, as ICG had represented, see RCI Rule 56.1 Stmt. ¶
21(a), Scott Trainum contends that Boeing considered the
milestone complete as of October 29, 2014, see Seller Defs.
Rule 56.1 Resp. ¶ 21(a); see also Decl. of Michael L.
Simes ("Simes Decl.") Ex. 3 at RCIICG000130245
(including a Boeing presentation on the ICS-300 project that
lists, under the heading "Status/Accomplishments, "
the notation "Critical Design Review (CDR) completed =
10/14/2014"), ECF No. 76. Scott Trainum raises similar
factual disputes regarding each of the other allegedly
incomplete milestones. See Seller Defs. Rule 56.1
Resp. ¶¶ 21 (a)-(e), 23 (a)-(i). Accordingly, RCI
has failed to demonstrate that there is no genuine dispute of
material fact as to whether the milestones in question were
complete and, if they were not, whether the failure to
account for their incompleteness rendered the EACs for the
argument that ICG appeared to use "unburdened"
labor rates, i.e., rates that do not account for
overhead costs, to calculate the EACs also does not warrant
summary judgment. RCI's sole support for the conclusion
that the use of unburdened labor rates violates industry
standards comes from the declaration of Sean Foster,
RCI's employee and damages expert. Foster states only
that it is "normal industry practice and in accordance
with [GAAP] to include indirect costs, " as the use of a
burdened engineering labor rate does. Decl. of Sean Foster
¶¶ 4-5, ECF No. 67. But Foster, who makes his
declaration "based upon [his] own personal knowledge and
a review of documents, " id. ¶ 1, cites no
basis for this assertion, and, even if true, it does not
conclusively establish that the use of unburdened labor rates
is not in accordance with GAAP or industry practice.
Moreover, Scott Trainum disputes RCI's claim that ICG did
in fact use unburdened labor rates. Seller Defs. Rule 56.1
Resp. ¶ 22(b). Thus, RCI has not put forth undisputed
material facts showing that ICG used unburdened rates and
that doing so rendered the EACs unreasonable.
RCI entitled to summary judgment based on its argument that
ICG failed to adjust the EAC for the Aspire-300 program to
reflect a six-month extension to that program's schedule.
On June 19, 2015, ICG provided RCI with an EAC for the
Aspire-300 program of $6, 762, 114, which is the amount that
was ultimately provided in the SPA. See Simes Decl. Ex. 29 at
ICG010006021, ICG010006270; Bhargava Decl. dated Apr. 7, 2017
Ex. A at Schedule 4.11(e). Then, as noted above, in July 2015
ICG and Honeywell extended the completion date for the
Aspire-300 program by six months. RCI Rule 56.1 Stmt. ¶
17. Notably, in an email on July 1, 2015, shortly before ICG
and Honeywell agreed to the extension, Bryan Trainum wrote
that the current EAC for the Aspire-300 project would be
incorrect if the end date for the project were moved.
See Bhargava Decl. dated Apr. 7, 2017 Ex. U. Thus it
is clear that the EAC was not adjusted, despite Bryan
Trainum's indication that an extension of the schedule
would affect the EAC. Yet, given that RCI has not shown what
other assumptions went into the EAC and whether the EAC was
reasonable before the extension to the schedule, the
unaccounted-for impact of the extension alone does not
establish that no rational trier of fact could conclude that
the EAC for the Aspire-300 was reasonable.
then, RCI has not demonstrated that it is entitled to summary
judgment on its breach of contract claim based on the alleged
understatement of the EACs.
neither has Scott Trainum demonstrated that he is entitled to
summary judgment on RCI's contract claim in this regard.
Scott Trainum contends that RCI's claim must fail because
the undisputed evidence establishes that ICG reasonably
calculated the EACs for the Programs in accordance with the
standards specified in Section 4.11(e) of the SPA. Mem. in
Opp. to Rockwell Collins Inc.'s Mot. for Summ. J.
("Seller Defs. Opp.") 5 (citing Seller Defs. Rule
56.1 Stmt. ¶¶ 54, 57-58, 70, 73-74), ECF No. 74.
Yet he puts forth no evidence establishing the EACs'
conformity with industry standards. See, e.g.,
Seller Defs. Rule 56.1 Stmt. ¶¶ 57, 73 (stating
that "ICG and Defendants used ICG's material, actual
costs incurred, its projection of future costs based on its
labor rates, its practices and procedures, and industry
standards" to formulate the EACs but not referencing any
evidence that ICG complied with industry standards in doing
so). Even if, as Scott Trainum argues, ICG calculated the
EACs in accordance with its own practices and ICG personnel
believed the EACs to be reasonable, those facts, on their
own, are not sufficient to establish that there can be no
genuine dispute as to the reasonableness of the EACs.
Trainum also argues that RCI cannot base its contract claim
on extra-contractual representations regarding the completion
of milestones because the parties disclaimed making any
warranties not contained in the SPA. See SPA § 13.5
("Except for the representations and warranties
contained in Articles III, IV, and V or in any Transaction
Document, as applicable, no party nor any other Person makes
any express or implied representation or warranty on behalf
of any Seller or Buyer, and each Seller and Buyer disclaims
any such representation or warranty."). Yet this
objection misses the mark: RCI's contract claim depends
not on RCI's reliance on representations
(unlike, as discussed infra, RCI's fraud claims)
but rather on the EACs' reliance on mistaken
assumptions in their calculations, which assumptions RCI
alleges were also the subject of misrepresentations.
similar vein, Scott Trainum argues that RCI cannot base its
contract claim on representations regarding the completion of
milestones because, to the extent those representations were
false, RCI knew of their falsity. Section 13.20 of the SPA
provides that a representation or warranty made by ICG shall
not be deemed waived unless one of two specified
representatives of RCI has "actual knowledge (without any
duty of inquiry) as of the date [of the SPA's execution]
of any breach or inaccuracy of any representation or
warranty." However, "knowledge of any fact or
circumstance that could give rise to any such breach or
inaccuracy, or access to any document describing any fact or
circumstance that could give rise to any such breach or
inaccuracy, alone shall not constitute actual
knowledge." SPA § 13.20. Thus, even if the relevant
persons at RCI were aware that, contrary to ICG's
representations, certain milestones were not complete, Scott
Trainum has not established that those persons had actual
knowledge of a breach of the applicable warranty itself --
viz., that the EACs were calculated reasonably
--rather than of a circumstance that could give rise to an
inaccuracy, which, by the terms of 13.20, does not entail a
waiver of the warranty.
neither RCI nor Scott Trainum is entitled to summary judgment
on RCI's contract claim based on the alleged
understatement of the EACs, as there remain disputes of
material fact with regard to whether the statuses of various
milestones were appropriately factored into the EACs, whether
the labor rates that ICG used in calculating the EACs
conformed with industry standards, and whether the EAC for
the Aspire-300 project was reasonable in light of the
extension to that project's schedule.
as to RCI's claim that ICG failed to disclose an
obligation to purchase licenses, Section 4.7(b) of the SPA
provides in relevant part that, "[e]xcept for
Liabilities . . . set forth on Schedule 4.7(b), . . . [ICG]
has no Liabilities of any kind or nature." Exhibit A to
the SPA defines "Liability" as "any and all
claims, debts, liabilities, obligations and commitments of
whatever nature, whether . . . absolute or contingent, ... or
due or to become due, and whenever or however arising . . .
." Pursuant to an agreement with Satcom 1 Aps (the
"Satcom 1 Agreement"), ICG was obligated to buy at
least 350 licenses, at $2200 each, which ICG had planned to
use in a router that it produced. RCI Rule 56.1 Stmt. ¶
ICG did not list this obligation in Schedule 4.7(b) of the
under the SPA, RCI has waived its claim in this regard, as it
had actual knowledge of the existence of the obligation at
the time the SPA was executed. Specifically, RCI does not
dispute that Dion Hayes, one of the individuals who is listed
in Schedule 13.20 and whose knowledge may therefore be
imputed to RCI, had received a copy of the Satcom 1
Agreement. RCI Rule 56.1 Resp. to Seller Defs. ¶ 102(g);
see also Decl. of Aaron F. Jaroff ("Jaroff
Decl.") Ex. 6 at 149 (Hayes testifying that he received
the Satcoml license agreement), ECF No. 60. Moreover, RCI
does not dispute that it had identified the obligation to
purchase licenses pursuant to the Satcom 1 Agreement during
its review of that contract before the Acguisition. RCI Rule
56.1 Resp. to Seller Defs. ¶ 116; see also
Jaroff Decl. Ex. 52 at RCIICG000027092 (including an internal
RCI document from March 2015 identifying issues raised in
ICG's contracts, which identifies the Satcom 1 Agreement
and notes that it ...