Foros Advisors LLC v. Digital Globe, Inc.
333 F. Supp. 3d 354
S.D. Ill.2018Background
- Foros Advisors (Foros) and DigitalGlobe, Inc. (DGI) executed an Engagement Letter in August 2015: Foros would provide strategic/financial advisory work for set retainer fees and DGI would "offer Foros the opportunity" to act as financial advisor on any resulting acquisitions or strategic transactions during the term and for 18 months after termination (the "Offer Clause").
- Foros performed the contracted strategic work (including a financial model called the "Sandbox" and scenario presentations) and was paid the retainer and quarterly fees set in the Engagement Letter.
- DGI later negotiated and consummated a merger with MacDonald, Dettwiler and Associates Ltd. (MDA) in February 2017; Barclays and PJT were retained as financial advisors and received large transaction fees. Foros was not offered the advisory role for the MDA merger.
- Foros sued DGI for breach of contract ( alleging breach of the Offer Clause), and alternatively for quantum meruit and unjust enrichment seeking at least $18 million; DGI moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- The court considered whether (1) the Offer Clause is an enforceable promise or an unenforceable agreement to agree, (2) the Offer Clause falls within the New York Statute of Frauds, and (3) whether quasi-contract claims survive given the Engagement Letter.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Offer Clause (agreement to agree) | Offer Clause created a binding obligation to offer Foros the advisory role; customary terms can supply missing details | Clause leaves material terms (role, scope, compensation) open — thus an unenforceable agreement to agree | Court: Clause is too indefinite (no objective standard to fill material gaps) and is unenforceable |
| Statute of Frauds (one-year and services-for-sale provisions) | Engagement Letter is a sufficient written memorandum satisfying Statute of Frauds | Offer Clause extends >1 year and promises compensation for negotiating/assisting in sale, so it must satisfy Statute of Frauds and it lacks essential terms | Court: Offer Clause is within Statute of Frauds and the Engagement Letter does not state essential terms; clause fails SOF |
| Enforceable duty to negotiate in good faith | At minimum, parties agreed to negotiate in good faith over future engagement | Material terms are missing; a duty to negotiate is unenforceable where terms are too indefinite | Court: No enforceable agreement to negotiate in good faith because material terms are open and not ascertainable |
| Quantum meruit / unjust enrichment (quasi-contract) | Foros performed at a reduced rate in reliance on the promise of future engagement; unjust enrichment/quantum meruit should allow recovery of the lost expected fees | Valid Engagement Letter specifies compensation for the services performed; existence of an enforceable contract precludes quasi-contract recovery | Court: Quasi-contract claims dismissed — Foros was paid per the Engagement Letter; quasi-contract cannot be used to reprice bargained-for work or evade Statute of Frauds |
Key Cases Cited
- McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) (motion-to-dismiss factual-pleading standard in Second Circuit)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept legal conclusions on a motion to dismiss)
- Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d 475 (N.Y. 1989) (definiteness requirement; courts may use extrinsic standards to supply missing terms when appropriate)
- Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382 (N.Y. 1987) (existence of valid contract ordinarily bars quasi-contractual relief)