327 F. Supp. 3d 673
S.D. Ill.2018Background
- Kortright (a fund and its two co‑founders) contracted with Investcorp in 2013: Investcorp would invest proprietary and client capital and obtain seed-investor economics; parties later signed a Revenue Sharing Agreement (RSA) conditioned on closing of a separate Man Group transaction by Sept. 30, 2016 (§5.2).
- In April–June 2016 Kortright negotiated a transfer of the funds to Man Group; Investcorp initially consented but later revoked consent, claiming it needed clients' consent which it could not obtain, and redeemed client capital; the Man Group closing did not occur.
- Kortright sued for tort and contract claims; the Court dismissed most claims and left negligent misrepresentation claims tied to Investcorp’s April 2016 statements.
- Near close of discovery Kortright sought to amend to add a breach of the RSA claim, alleging Investcorp’s stated reason for revoking consent (client nonconsent) was fabricated and that Investcorp itself caused the failure of the closing condition.
- Kortright moved also to strike Investcorp’s jury demand based on jury‑waiver clauses in the Project, Termination, and Amended Termination Agreements; both parties sought sanctions against the other.
- Decision summary: Motion to amend denied (futile); motion to strike jury demand granted (waiver enforceable and covers the claims); both sanctions motions denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to amend to add breach of the RSA should be allowed | New discovery shows Investcorp fabricated client‑consent story and thus breached RSA; amendment timely and justified | Amendment futile because §5.2 made RSA ineffective (never formed) when Man closing failed | Denied: amendment futile because §5.2 is an express condition precedent to formation and never occurred |
| Whether §5.2 is a condition to formation or to Investcorp's performance | §5.2 should be read as condition to performance to avoid rendering RSA meaningless | §5.2 unambiguously conditions the RSA’s effectiveness on the Man closing (condition to formation) | §5.2 creates an express condition precedent to formation (RSA never came into effect) |
| Whether the prevention (prevention/frustration) doctrine applies so Investcorp cannot rely on nonoccurrence | Investcorp prevented the closing by revoking consent and thus cannot rely on the failed condition | Prevention rule does not apply to a condition precedent to formation because no contract yet existed | Rejection: prevention rule inapplicable to condition precedent to formation; no implied duty not to prevent before contract formation |
| Whether Investcorp’s jury demand must be stricken under contractual jury‑waiver clauses | Jury waiver clauses in agreements apply broadly to claims "relating in any way" to the agreements or fund operation | The negligent misrepresentation claim is distinct and does not fall within waivers’ scope | Granted: jury waivers were knowing, voluntary, enforceable and their broad language covers the claims at issue |
Key Cases Cited
- Foman v. Davis, 371 U.S. 178 (1952) (factors for leave to amend under Rule 15)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for plausible claim)
- Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685 (1995) (distinguishing conditions precedent to formation vs. performance)
- Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243 (2d Cir. 2002) (futility of amendment judged by Rule 12(b)(6) standard)
- Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007) (federal law governs enforceability of jury‑waiver clauses in diversity cases)
- Consol. Edison, Inc. v. Ne. Utils., 426 F.3d 524 (2d Cir. 2005) (implied contractual obligations and limits on prevention rule)