Brezoczky v. Domtar Corp
5:16-cv-04995
N.D. Cal.Dec 5, 2017Background
- Plaintiff Kelly Brezoczky founded Butterfly Health, Inc. ("Butterfly 1") and sought a partner to make a stalking-horse bid for its assets in a § 363 bankruptcy sale. Domtar expressed interest and the parties executed a Letter of Intent (LOI) on March 28, 2016 to form Butterfly Acquisition, LLC ("Butterfly 2").
- The LOI contained nonbinding language (Section 7) and an explicit termination right (Section 9) allowing either party to end the LOI under stated conditions.
- Brezoczky alleges an oral joint-venture agreement with Domtar that predated or was separate from the LOI, and that the LOI memorialized those oral terms (including her ownership and Domtar’s buyout rights).
- Domtar terminated the LOI in early May 2016 and purchased Butterfly 1’s assets at the June 2016 auction without Brezoczky or Butterfly 2.
- Brezoczky sued for breach of contract and breach of fiduciary duty; Domtar moved for summary judgment on both claims and Brezoczky cross-moved on Domtar’s mitigation affirmative defense.
- The Court found no admissible evidence of a binding oral joint-venture or enforceable LOI terms creating contractual obligations to Brezoczky, granted Domtar’s summary-judgment motion, and denied Brezoczky’s cross-motion as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a binding joint-venture/contract existed between Brezoczky and Domtar | Brezoczky: an oral agreement existed and was later memorialized by the LOI; joint ventures can be oral | Domtar: LOI was explicitly nonbinding and negotiations were tentative; no agreement was formed | Court: No genuine issue—no binding oral or written contract; summary judgment for Domtar |
| Whether LOI/Side Letter terms (e.g., "commercially reasonable efforts") are enforceable by Brezoczky | Brezoczky: Domtar’s Side Letter to lender and LOI terms impose obligations enforceable against Domtar | Domtar: Brezoczky was not a party to Side Letter; LOI disclaims binding terms except limited sections; Domtar used commercially reasonable efforts | Court: Brezoczky cannot enforce Domtar’s Side Letter and no evidence Domtar failed to use commercially reasonable efforts |
| Whether breach-of-fiduciary-duty claim stands absent contract | Brezoczky: fiduciary duties arose from the joint-venture relationship | Domtar: fiduciary claim depends on existence of contractual relationship | Court: Fiduciary claim fails because no contractual relationship existed |
Key Cases Cited
- Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199 (2006) (contract enforceability requires sufficient definiteness to ascertain obligations and damages)
- Ersa Grae Corp. v. Fluor Corp., 1 Cal. App. 4th 613 (1991) (principles on contractual definiteness)
- Cal. Lettuce Growers v. Union Sugar Co., 45 Cal. 2d 474 (1955) (agreements too indefinite are unenforceable)
- Samuels v. Holland American Line—USA Inc., 656 F.3d 948 (9th Cir. 2011) (summary-judgment standard; draw inferences for nonmoving party)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (whether evidence requires a jury trial vs. one-sided summary judgment)
- Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099 (9th Cir. 2000) (moving party’s burden to negate an essential element at summary judgment)