50 F.4th 226
1st Cir.2022Background
- FinSight agreed to buy 50,000 Unity shares (25,000 from each defendant) at $29/share; parties executed a Stock Transfer Agreement (STA) that required Unity approval as a condition precedent.
- STA included a negotiated termination clause: if Closing did not occur within 7 business days of the execution date (unless delay was due to Transferor's breach), Transferor could terminate immediately via email.
- STA dated June 11; defendants signed June 12; FinSight signed June 15 (court assumed June 15 as execution date for nonmovant). Defendants sought Unity approval June 16–29; Unity conditionally approved July 20 but required Unity’s own form (SSPA) submitted July 29.
- Defendants declined to sign the SSPA after the stock price rose and on August 4 emailed termination of the STA. FinSight sued for breach and related claims in D. Mass.; defendants moved for summary judgment.
- District court granted summary judgment for defendants; First Circuit affirmed, holding that—even assuming the STA was enforceable—the defendants validly exercised their contractual termination right.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract formation/enforceability | STA was an enforceable agreement binding on parties | (Defendants argued otherwise) Court did not decide formation because alternative ground dispositive | Assumed STA enforceable for FinSight’s benefit but resolved case on termination clause — defendants prevailed |
| Interpretation/timing of termination clause | Execution date is last signature (June 15); termination right should be constrained | Clause plainly grants Transferor right to terminate after 7 business days unless delay due to Transferor breach | Clause unambiguous; using June 15, 7 business days elapsed and termination right vested; defendants properly terminated |
| Whether termination right disappears once conditions precedent satisfied (e.g., Unity approval) | Once Unity approved and conditions were satisfied, defendants had duty to close and could not terminate | Nothing in STA text extinguishes the already-vested termination right upon satisfaction of conditions | Right remained; no textual basis to read termination right away upon satisfaction of conditions precedent |
| Promissory estoppel / unjust enrichment | Defendants’ conduct (pursuing Unity approval, broker’s emails) waived termination right and induced reliance | No reasonable reliance; FinSight knew STA contained termination right; unjust enrichment claim undeveloped | Promissory estoppel fails (no reasonable reliance); unjust enrichment waived for lack of developed argument |
Key Cases Cited
- Paul v. Deloitte & Touche, LLP, 974 A.2d 140 (Del. 2009) (contract interpretation is a question of law; give priority to parties’ intent as reflected in text)
- Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728 (Del. 2006) (clear and unambiguous contract language given ordinary meaning)
- Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192 (Del. 1992) (same principle on plain meaning rule)
- Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) (look outside contract text only when ambiguous)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (breach requires violation of an obligation imposed by the contract)
- Lord v. Souder, 748 A.2d 393 (Del. 2000) (elements and purpose of promissory estoppel)
- Chrysler Corp. (Del.) v. Chaplake Holdings, Ltd., 822 A.2d 1024 (Del. 2003) (promissory estoppel presupposes lack of enforceable contract)
- Gilbert v. El Paso Co., 490 A.2d 1050 (Del. Ch. 1984) (in termination-clause context, invoking party’s motive is generally irrelevant)