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Trainum v. Rockwell Collins, Inc.

United States District Court, S.D. New York

May 31, 2017

L. SCOTT TRAINUM, as Sellers' Representative, Plaintiff,
v.
ROCKWELL COLLINS, INC., Defendant. ROCKWELL COLLINS, INC., Counterclaim and Third-party Plaintiff,
v.
L. SCOTT TRAINUM, as Sellers' Representative, Counterclaim Defendant, and BRADLEY SMITH, ANN BREWER, and BRYAN TRAINUM, Third-party Defendants.

          OPINION AND ORDER

          JED S. RAKOFF, U.S.D.J.

         On 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 RCI.

         Following 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 him.

         For the 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 judgment claim.

         The pertinent facts, undisputed except where indicated, are as follows:

         RCI is 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[1]), ECF No. 82. Ann Brewer was the Chief Financial Officer of ICG, and Bryan Trainum was the Vice President of Programs. Id. ¶ 2.[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.

         Since 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.

         In late 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.

         During 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.

         In July 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.

         RCI 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.

         Following 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 facts).

         After 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.

         On 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).

         Article 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.

         RCI 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.

         As a 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.

         On 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.[3] 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.

         Turning 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 citations omitted).

         The 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).

         RCI now 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.

         First, 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 practices.

         As 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 program.

         RCI 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, [4] 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).

         It 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.

         As to 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.

         In any 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 Programs unreasonable.

         RCI's 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.

         Nor is 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.

         In sum, 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.

         But 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.

         Scott 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.

         In a 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[5] 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.

         Accordingly, 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.

         Second, 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. ¶ 36.[6] ICG did not list this obligation in Schedule 4.7(b) of the SPA.

         Yet, 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 ...


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