Curtis Cox v. Snap, Inc.
2017 U.S. App. LEXIS 10479
4th Cir.2017Background
- In January 2006 SNAP and Curtis Cox executed a binding memorandum: Cox would promote SNAP in exchange for an equity stake in the form of non‑qualified stock options (308 shares, 5% of authorized stock).
- The contract stated SNAP “will issue” the options on January 12, 2006, provided for a SNAP-initiated repurchase right after Jan 1, 2008 and a Cox put (right to require repurchase) after Jan 1, 2011, with payment over five years plus interest.
- Cox exercised his put in March 2011; SNAP refused to repurchase and denied owing anything in October 2015. Cox sued in state court (removed to federal court), alleging breach for failure to repurchase and failure to issue the options.
- SNAP argued the contract only promised to issue options in the future (a condition precedent to repurchase) and therefore no options ever vested; it also argued statute of limitations barred the claim.
- The district court granted summary judgment for Cox, finding the contract conveyed the options (or, alternatively, was ambiguous and construed against SNAP) and awarded $637,867.42 based on the contract formula and interest. SNAP appealed.
Issues
| Issue | Plaintiff's Argument (Cox) | Defendant's Argument (SNAP) | Held |
|---|---|---|---|
| Whether the contract itself conveyed stock options or only promised to issue them later | The contract granted options effective Jan 12, 2006 (same day) — if ambiguous, construe against SNAP; prevention doctrine/waiver applies | “Will issue” language shows a future, executory promise; issuance was a condition precedent and never occurred, so no repurchase obligation | Court: Even if issuance were a condition precedent, SNAP prevented performance by refusing to issue the options; prevention doctrine/waiver excuses the condition — SNAP liable |
| Applicability of the prevention doctrine | Cox: SNAP’s failure to issue options (which SNAP controlled) wrongfully hindered the condition, excusing it | SNAP: Prevention doctrine requires affirmative obstruction or is inapplicable if Cox first materially breached | Court: Prevention doctrine applies when promisor’s wrongful inaction prevents a condition; SNAP caused non‑occurrence and cannot rely on it |
| Whether Cox’s claims are time‑barred | Cox: Even under SNAP’s view, SNAP’s breach (failure to issue) occurred early and prevents SNAP from invoking limitations defense; SNAP waived first‑breach defense | SNAP: Cox’s claim for failure to issue options accrued earlier and is time‑barred; alternatively, Cox breached first | Court: SNAP waived its first‑breach defense by not pressing it at summary judgment; limitations argument fails because prevention doctrine excuses non‑occurrence |
| Proper calculation of damages | Cox: Use contract formula: ((.8 x 2010 sales) – (.8 x 2005 sales)) x 0.05; apply five‑year payment with prime interest | SNAP: The contract text “This amount is estimated to be approximately $12,000,000” fixes 2005 sales (or 80% thereof) at $12M, not actual 2005 sales of $4,938,584 | Court: "Estimate" and "approximately" denote a benchmark, not a conclusive stipulation; use actual 2005 sales. District court’s damages calculation affirmed ($637,867.42) |
Key Cases Cited
- Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717 (4th Cir.) (recognizing prevention doctrine under Virginia law)
- Parrish v. Wightman, 34 S.E.2d 229 (Va. 1945) (Virginia articulation of rule that promisor cannot rely on a condition precedent it prevents)
- NLRB v. Local 554, Graphic Commc’ns Int’l Union, 991 F.2d 1302 (7th Cir.) (illustrative application excusing a condition precedent when the necessary approval was not sought by the party responsible)