GSE Consulting, Inc. v. L3Harris Technologies, Inc.

USCA11 Case: 22-10647 Document: 32-1 Date Filed: 02/08/2023 Page: 1 of 15
[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-10647
____________________
GSE CONSULTING, INC.,
Plaintiff-Appellant,
versus
L3HARRIS TECHNOLOGIES, INC.,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 6:20-cv-01853-RBD-DCI
____________________
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2 Opinion of the Court 22-10647
Before ROSENBAUM and LAGOA, Circuit Judges, and WETHERELL,*
District Judge.
LAGOA, Circuit Judge:
This appeal centers around the question of what it means for
intellectual property to “merge.” Under the terms of a consulting
agreement between GSE Consulting, Inc. (“GSE”) and Harris Cor-
poration (“Harris”), GSE is entitled to a payment of up to four mil-
lion dollars in the event that certain intellectual property owned by
Harris is “sold, merged or transferred” but did not form “the pri-
mary basis of the sale.” GSE contends that the relevant intellectual
property, held by a subsidiary of one of Harris’s subsidiaries, nec-
essarily “merged” when Harris used a different subsidiary to effec-
tuate a comprehensive reverse triangular merger with an outside
company and thus triggered Harris’s payment obligation under the
parties’ agreement. L3Harris, 1 however, maintains that Harris’s
participation in the reverse triangular merger did not cause the rel-
evant intellectual property to “merge,” and has accordingly refused
to make the demanded payment. The district court agreed with
* Honorable T. Kent Wetherell, II, United States District Judge for the North-
ern District of Florida, sitting by designation.
1 After the reverse triangular merger was completed, Harris changed its name
to L3Harris Technologies, Inc. (“L3Harris”) and that entity is the Defendant-
Appellee in this case. We will refer to Harris when describing events occurring
before the reverse triangular merger and we will refer to L3Harris when de-
scribing events occurring after the merger.
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22-10647 Opinion of the Court 3
L3Harris and dismissed GSE’s breach of contract claim on sum-
mary judgment.
After careful review, and with the benefit of oral argument,
we affirm the district court’s ruling.
I. FACTUAL AND PROCEDURAL HISTORY
GSE is a Washington corporation that offers research and
consulting services related to infrastructure and energy. GSE’s
founder and president is George Taylor. L3Harris is a Delaware
corporation that specializes in defense and information technol-
ogy.
In 2008, GSE and Harris began discussing the idea of using
radio frequency heating technology to recover heavy oil from oil
sands. Those discussions culminated in the two companies devel-
oping intellectual property related to radio frequency heating, in-
cluding a process known as “Effective Solvent Extraction System
Incorporating Electromagnetic Heating.” To formalize the terms
of GSE’s continued involvement in the development of oil recov-
ery technology, the parties executed a consulting agreement on
August 1, 2010 (the “Consulting Agreement”).
Under that agreement, GSE was required to furnish “on
call” consulting services to Harris through December 31, 2022, and
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4 Opinion of the Court 22-10647
any intellectual property developed by GSE while engaged in work
for Harris would belong to Harris.2
In exchange, the Consulting Agreement sets forth two com-
pensation categories for GSE: base pay and special intellectual
property payments. In the ordinary course, GSE is entitled to spec-
ified hourly rates and a right of first refusal for ten percent of the
direct labor workshare of Harris’s projects involving radio fre-
quency heating of hydrocarbons. In the event of certain dealings
involving the relevant intellectual property, however, GSE is enti-
tled to additional “intellectual property fees.”
Those additional “intellectual property fees” are discussed in
Attachment F of the Consulting Agreement, which contains six sec-
tions. The first section sets forth definitions for “Intellectual Prop-
erty” and “Net Acquisition Value.” The second section governs
GSE’s special compensation in the event that Harris sells the rele-
vant intellectual property. The third section governs GSE’s special
compensation in the event that Harris licenses the relevant intel-
lectual property. The fourth section is titled “Business Develop-
ment” and governs GSE’s special compensation in the event that
“the IP is a primary basis for a third party’s financial contribution
to a business entity created solely or jointly by Harris.” The fifth
section caps GSE’s total recovery under Attachment F at seven mil-
lion dollars. The sixth and final section, titled “Miscellaneous,”
2 Taylor separatelyassigned to Harris his patent rights in Effective Solvent Ex-
traction System Incorporating Electromagnetic Heating.
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contains the following language, which lies at the heart of the par-
ties’ dispute:
b. Payments calculation for the following to be 3%
of market capitalization, capped at $4M:
i. in the event the IP is sold, merged or trans-
ferred and the primary basis of the sale is
not the IP.
ii. in the event the IP is exclusively licensed
and the primary basis of the license is not
the IP.
iii. in the event the IP is utilized in a Business
Development, but the primary basis of the
business development is not the IP.
Doc. 51-1 at 15, § 6(b) (emphasis added).
Separately, the Consulting Agreement also contains a Flor-
ida choice-of-law and choice-of-venue provision, an integration
clause, a severability clause, and a provision confirming that both
parties understood the terms of the agreement and had an oppor-
tunity to consult with counsel before execution.
On January 1, 2016, Harris transferred all of its intellectual
property to one of its subsidiaries, Harris International, Inc., which
then likewise conveyed the intellectual property to its own subsid-
iary, Eagle Technology, LLC (“Eagle”). The intellectual property
discussed in the Consulting Agreement was included in those trans-
fers and remains held by Eagle as of this lawsuit.
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In 2018, Harris and L3 Technologies, Inc. (“L3”), announced
their intention to merge. The next year, the companies partici-
pated in a reverse triangular merger. The standard reverse trian-
gular merger proceeds as follows: an acquiring company creates a
transitory subsidiary, that subsidiary merges into a target company,
and then that target company survives as the new subsidiary of the
acquiring company. Here, Leopard Merger Sub Inc. (“Leopard”)
was the subsidiary of Harris that merged into L3, and, as a result of
that merger, L3 became a subsidiary of Harris. This is when Harris
adopted its current name, L3Harris.
The terms of the reverse triangular merger involving Harris,
Leopard, and L3, are set forth in the Plan of Merger (the “Plan”).
As relevant to this appeal, the Plan implicates, among other things,
the intellectual property discussed in the Consulting Agreement.
Section 5.15 of the Plan provides that each party to the re-
verse triangular merger “exclusively own[s] all right, title and in-
terest to its Company Intellectual Property” 3 and will continue to
“own or have sufficient rights to use all Intellectual Property used
in or necessary for the operation of their respective businesses as
presently conducted, and all such rights will survive unchanged af-
ter the consummation of the [reverse triangular merger].” 4 Section
3The Plan defines “Company Intellectual Property” to mean “all Intellectual
Property owned or purported to be owned by L3 and its Subsidiaries or Harris
and its Subsidiaries, as applicable.” Doc. 55-9 at 83.
4 The Plan defines “Intellectual Property” to mean:
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5.15 also contains representations that none of the parties to the
reverse triangular merger has knowledge of any claims of infringe-
ment, misappropriation, or other violations regarding its own in-
tellectual property, and that each party “has taken commercially
reasonable efforts . . . to protect and maintain its Company Intel-
lectual Property.” Similarly, Section 8.1 of the Plan provides that
each party to the reverse triangular merger “shall not . . . cancel,
abandon or otherwise allow to lapse or expire any Intellectual
Property that is material to the businesses of L3 and its Subsidiaries
or Harris and its Subsidiaries” as conducted at the time of the Plan.
Despite these terms, it is undisputed that the intellectual property
discussed in the Consulting Agreement was not the primary basis
of the reverse triangular merger.
Following the execution of this reverse triangular merger,
GSE sent L3Harris an invoice for four million dollars, invoking Sec-
tion 6(b)(i) of Attachment F to the Consulting Agreement. GSE’s
position is that all of Harris’s intellectual property, including the
all intellectual property anywhere in the world (whether for-
eign, state or domestic, registered or unregistered), including:
(a) patents and utility models of any kind . . . , (b) trademarks,
service marks, trade dress, logos, Internet domain names, uni-
form resource locators, and other similar identifiers of origin
. . . , (c) copyrights, rights under copyrights and industrial de-
signs . . . , (d) trade secrets and other rights in know-how and
confidential or proprietary information . . . , and (e) all other
intellectual property rights recognized by applicable Law.
Doc. 55-9 at 84–85.
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8 Opinion of the Court 22-10647
intellectual property discussed in the Consulting Agreement, was
“merged” as a result of the reverse triangular merger because it was
“addressed [by] and included in” the Plan. L3Harris ultimately re-
jected that position and refused to pay the invoice. L3Harris also
subsequently shut down the radio frequency heating program in
the spring of 2020. According to Taylor, this post-transaction shut-
down is precisely the sort of risk that Section 6(b)(i) was meant to
mitigate through compensation.
On October 6, 2020, GSE filed suit in the United States Dis-
trict Court for the Middle District of Florida. GSE brought a single
breach of contract claim against L3Harris for failing to pay the in-
tellectual property fee contemplated by Section 6(b)(i).
A year later, GSE and L3Harris filed cross-motions for sum-
mary judgment.5 GSE argued that the reverse triangular merger
constituted a “merger” of Harris and that Section 6(b)(i) unambig-
uously requires payment of the intellectual property fee in such
5 The summary judgment record includes, among other things, (1) the parties’
joint stipulation of agreed material facts; (2) the Consulting Agreement; (3) the
Plan; (4) the testimony of George Taylor, the founder and president of GSE;
(5) the testimony of Derik Ehresman, the senior program manager in charge
of the radio frequency heating program at Harris; (6) the testimony of Mark
Blue, a Harris employee who reported to Ehresman; (7) the testimony of
Mitch Evander, L3Harris’s Chief Intellectual Property Counsel; (8) the testi-
mony of Stephen Moore, the Harris employee who worked on the negotia-
tions for the Consulting Agreement; (9) the testimony of Donald Teichen, one
of L3Harris’s senior principals and Eagle’s corporate representative; (10) the
testimony of Robert Johnson, the corporate representative of L3Harris; and
(11) the testimony of Terry Sanks, an intellectual property attorney.
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cases. In the alternative, GSE argued that, even if Section 6(b)(i) is
considered ambiguous, the drafting history of the Consulting
Agreement and the testimony of the employees involved in the ne-
gotiating its terms establish that Section 6(b)(i) was meant to cover
transactions like the reverse triangular merger at issue. L3Harris,
meanwhile, argued that Section 6(b)(i) requires payment only in
the event that the intellectual property is merged (or sold or trans-
ferred) and maintained that no such merger (or sale or transfer) oc-
curred as part of the reverse triangular merger. L3Harris also ar-
gued that the consideration of extrinsic evidence is precluded as a
matter of Florida law by the unambiguous nature of Section 6(b)(i)
and by the Consulting Agreement’s integration clause.
On February 1, 2022, the district court entered its summary
judgment order, denying GSE’s motion and granting L3Harris’s.
In so ruling, the district court found that Section 6(b)(i) “unambig-
uously means what it says: payment is triggered ‘in the event the
IP is sold, merged or transferred’ – not [Harris].” The district court
also rejected the notion that the intellectual property “merged”
simply because it was addressed in the Plan. Instead, the district
court concluded that the reverse triangular merger did not trigger
payment under Section 6(b)(i) because it did not affect any rights
with respect to the relevant intellectual property and because the
relevant property remained held by Eagle at all material times. The
district court accordingly entered judgment in favor of L3Harris.
GSE filed a timely notice of appeal.
II. STANDARD OF REVIEW
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10 Opinion of the Court 22-10647
We review de novo a district court’s grant of summary judg-
ment. Marbury v. Warden, 936 F.3d 1227, 1232 (11th Cir. 2019).
Summary judgment is proper when the evidence, viewed in a light
most favorable to the non-moving party, “presents no genuine is-
sue of material fact and compels judgment as a matter of law in
favor of the moving party.” Id. (quoting Caldwell v. Warden, 748
F.3d 1090, 1098 (11th Cir. 2014)). We likewise review de novo a
district court’s interpretation of a contract. Hegel v. First Liberty
Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015).
III. ANALYSIS
The issue on appeal is whether the intellectual property dis-
cussed in the Consulting Agreement “merged,” for purposes of Sec-
tion 6(b)(i) of Attachment F, as a result of the reverse triangular
merger involving Harris and L3. We hold that it did not.
We begin with the meaning of the word “merged,” as used
in Section 6(b)(i). Under Florida law, which the parties agreed ap-
plies to the Consulting Agreement, “[w]here the terms of a contract
are clear and unambiguous, the parties’ intent must be gleaned
from the four corners of the document.” Crawford v. Barker, 64
So. 3d 1246, 1255 (Fla. 2011). “In such a situation, ‘the language
itself is the best evidence of the parties’ intent, and its plain mean-
ing controls.’” Id. (quoting Richter v. Richter, 666 So. 2d 559, 561
(Fla. Dist. Ct. App. 1995)). Moreover, courts properly may consult
dictionaries to ascertain the plain meaning of language. Walsh v.
Walsh, 262 So. 3d 212, 215 (Fla. Dist. Ct. App. 2018).
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In the ordinary sense, to be “merged” means to be com-
bined. See Merge, Merriam-Webster, https://www.merriam-
webster.com/dictionary/merging (defining “merge” to mean “to
become combined into one”); Merge, Oxford English Dictionary,
https://www.oed.com/view/Entry/116760 (defining “merge” to
mean “to join or blend, esp[ecially] gradually; to combine, amal-
gamate”); see also Code Revision Comm’n for Gen. Assembly v.
Public.Resource.Org, Inc., 906 F.3d 1229, 1248–49 (11th Cir. 2018)
(listing various formulations of the ordinary meaning of the word
“merge”). When referring to corporations, however, a “merger”
describes the consolidation of two or more corporations into one,
surviving corporation. See Merger, The Law Dictionary,
https://thelawdictionary.org/merger/ (defining the merger of
corporations as “the uniting of two or more corporations by the
transfer of property of all to one of them, which continues in exist-
ence, the others being swallowed up or merged therein”); Merger,
Merriam-Webster, https://www.merriam-webster.com/diction
ary/merger (defining merger in the context of corporations to
mean the “absorption by a corporation of one or more others”).
Although Section 6(b) generally pertains to corporate transactions,
the object of the sentence that forms Section 6(b)(i) is the relevant
intellectual property. For this reason, we read Section 6(b)(i) to
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unambiguously use the ordinary definition of the term “merged,”
i.e., to be combined.6
But we also recognize that there is more than one way in
which things (here, intellectual property) can be combined and sat-
isfy the ordinary definition of the term “merged.” For instance,
things can be substantively combined, i.e., blended or mixed to-
gether, to create a new thing. See Public.Resource.Org, Inc., 906
F.3d at 1249 (“The use of the word ‘merge’ thus carries with it
strong connotations of unification or combination of disparate ele-
ments into a single whole in which the previously distinct attrib-
utes of each element become intermingled and shared.”). Alterna-
tively, things can be combined simply as a matter of grouping, i.e.,
pooled together for a certain purpose.
Even so, the reverse triangular merger at issue did not
“merge,” i.e., combine, the relevant intellectual property in any or-
dinary way. As detailed above, the Plan contains assurances re-
garding the validity, right to continued use, and maintenance of
each party’s intellectual property. And, given its broad definitions
of “Company Intellectual Property” and “Intellectual Property,”
the Plan certainly reaches the intellectual property held by Eagle as
subsidiary of one of Harris’s subsidiaries. Critically, however, the
Plan neither blends, pools, nor otherwise combines the intellectual
6 At multiple points in its briefs, GSE recognizes that this ordinary definition
of the term “merged” applies.
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property held by Eagle with any other intellectual property. There-
fore, the intellectual property discussed in the Consulting Agree-
ment was not “merged,” for purposes of Section 6(b)(i), as a result
of the reverse triangular merger, and the district court did not err
in entering summary judgment in favor of L3Harris.
None of the arguments that GSE raises on appeal warrants
reaching a different conclusion.
GSE’s primary argument is that, when read holistically, Sec-
tion 6(b)(i) is meant to ensure compensation in the event of large-
scale corporation transactions, including corporate mergers. In
making this argument, GSE underscores that the payment contem-
plated by Section 6(b)(i) is (1) conditioned upon the primary basis
of the sale being something other than the intellectual property and
(2) calculated based on market capitalization. But these aspects of
Section 6(b)(i) do not change the plain meaning of the requirement
that the relevant intellectual property be “sold, merged or trans-
ferred.” Nor do they otherwise establish a broad intent to guaran-
tee compensation in the event of corporate mergers without differ-
entiation. Rather, as it plainly states, Section 6(b)(i) guarantees
GSE an intellectual property fee if two conditions are met—i.e., the
intellectual property is “sold, merged or transferred” and is not “the
primary basis of the sale”—and that fee is calculated based on the
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affected market capitalization. This arrangement is consistent with
the district court’s interpretation and ruling. 7
GSE’s alternative argument, meanwhile, assumes that Sec-
tion 6(b)(i) is ambiguous and then relies on evidence beyond the
four corners of the Consulting Agreement, including the testimony
of individuals involved in the negotiation and drafting process. But
because the language of Section 6(b)(i) is unambiguous, Florida law
forbids us from “entertain[ing] evidence contrary to its plain mean-
ing.” Sheen v. Lyon, 485 So. 2d 422, 424 (Fla. 1986); accord Emer-
gency Assocs. of Tampa, P.A. v. Sassano, 664 So. 2d 1000, 1003 (Fla.
Dist. Ct. App. 1995) (“[W]hen the terms of a voluntary contract are
clear and unambiguous, as here, the contracting parties are bound
by those terms, and a court is powerless to rewrite the contract to
make it more reasonable or advantageous for one of the contract-
ing parties.”). Accordingly, we conclude that GSE’s alternative ar-
gument is unavailing.
IV. CONCLUSION
7GSE also contends that the district court committed reversible error by re-
jecting GSE’s interpretation without “articulat[ing] an affirmative meaning for
the disputed language” and “clarifying what such language means.” This con-
tention lacks merit. The district court adequately engaged with the language
of Section 6(b)(i) by explaining that the “sold, merged or transferred” require-
ment is in reference to the intellectual property itself and is unsatisfied where
the intellectual property is merely “involved in” a sale, merger, or transfer of
something else.
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For these reasons, we affirm the district court’s order grant-
ing summary judgment in favor of L3Harris.
AFFIRMED.