964 F.3d 107
1st Cir.2020Background
- Plaintiff Gregory Kelly, president of TelJet, alleges an oral side agreement with Riverside and Steven Kaplan promising him $1,000,000 if Tech Valley (a Riverside portfolio company) acquired TelJet; defendants deny the side deal and declined to pay after the 2013 closing.
- The Asset Purchase Agreement (APA) sold TelJet to Tech Valley/TVC; it contained seller representations (Article 2), a warranty that the transaction would not increase compensation to any individual (Section 3.23(f)), and indemnification provisions (Article 9) that except Article 2 breaches from survival/monetary caps.
- Kelly sued in Massachusetts federal court asserting breach of contract, fraud, promissory estoppel, quantum meruit, UDAP, aiding/abetting, and conspiracy; Riverside and Kaplan counterclaimed for indemnification under Article 9.
- The district court granted summary judgment for defendants, concluded Kelly breached his APA warranties (noting the undisclosed side deal), held defendants were APA Affiliates entitled to indemnification (uncapped for Article 2 breaches), and awarded $250,000 in attorneys’ fees (insurance deductible) plus interest.
- On appeal Kelly raised multiple challenges; the First Circuit affirmed, largely on waiver grounds for many of Kelly’s arguments and on the district court’s rulings about affiliate status, ripeness, the uncapped Article 2 indemnity, and the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of forum-selection clause | Kelly: bringing suit in MA did not waive APA's Delaware forum clause | Defs: filing in MA waived the clause; APA covers claims "arising under or relating to" the APA | Court: Kelly waived the clause by suing in MA; Delaware law construed phrase broadly; waiver not preserved on appeal for a new Delaware-law excuse |
| Affiliate standing for indemnification | Kelly: Riverside/Kaplan are not APA Affiliates and lack standing | Defs: Kaplan/Riverside controlled TVC/TJL Acquisition and are Affiliates under Rule 405/control definitions | Court: Kaplan/Riverside were Affiliates (control shown); therefore they may seek indemnification |
| Ripeness of indemnification claim | Kelly: Counterclaim not ripe until underlying liability resolved | Defs: Claim ripe under federal ripeness/Bankers Trust factors (probability of liability, size of potential damages, ability to pay, insurance) | Court: Indemnification claim is ripe; Kelly waived Delaware-law ripeness argument |
| Indemnification for attorneys' fees / complete defense | Kelly: APA does not unequivocally indemnify fees for "first-party" litigation; breach not established so fees inappropriate | Defs: Breach of Article 2 (and Section 3.23(f)) triggers uncapped indemnity covering fees; counterclaim is a complete defense to Kelly's claims | Court: Kelly waived the Delaware-fees-interpretation argument and other defenses; Article 2 breach provides uncapped indemnification and supports fee award |
| Timeliness / survival of indemnity claim | Kelly: Indemnification is time-barred | Defs: Article 2 breaches survive indefinitely under APA | Court: Claim timely because it rests on Article 2, which survives indefinitely |
Key Cases Cited
- FPE Found. v. Cohen, 801 F.3d 25 (1st Cir. 2015) (apply governing state contract law to interpret forum-selection clause)
- Parfi Holdings AB v. Mirror Image Internet, Inc., 817 A.2d 149 (Del. 2002) (Delaware courts construe "arising under or relating to" broadly for forum clauses)
- Huffington v. T.C. Grp., LLC, 637 F.3d 18 (1st Cir. 2011) (forum-selection clause can cover claims tied to contract performance)
- SEC v. Platforms Wireless Int'l Corp., 617 F.3d 1072 (9th Cir. 2010) (control analysis under Rule 405; multiple persons may exercise control)
- Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677 (7th Cir. 1992) (factors for ripeness of indemnification claims)
- Abbott Labs. v. Gardner, 387 U.S. 136 (1967) (ripeness framework—fitness and hardship)
- Pignons S.A. de Mecanique v. Polaroid Corp., 701 F.2d 1 (1st Cir. 1983) (appellate waiver principles)
- Zannino v. United States, 895 F.2d 1 (1st Cir. 1990) (arguments forfeited if not adequately developed on appeal)