Iacono v. Estate of Joseph M. Capano

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
LEONARD F. IACONO, SR. and )
SOVEREIGN PROPERTY )
MANAGEMENT, LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 11841-VCL
)
ESTATE OF JOSEPH M. CAPANO, )
JOANNE M. CAPANO, WS MERRIMAC )
CENTER LLC, JMC ACQUISITIONS, )
INC., and JAMCAP MANAGEMENT, )
INC., )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: May 13, 2020
Date Decided: June 29, 2020
William D. Sullivan, SULLIVAN HAZELTINE ALLINSON LLC, Wilmington,
Delaware; Philip S. Rosenzweig, SILVERANG, ROSENZWEIG & HALTZMAN, LLC,
King of Prussia, Pennsylvania; Counsel for Plaintiffs.
R. Karl Hill, SEITZ, VAN OGTROP & GREEN, P.A., Wilmington, Delaware; Counsel
for Defendants.
LASTER, V.C.
The plaintiffs sued to enforce an oral agreement to form a joint venture that would
acquire and develop real estate. The plaintiffs also asserted other theories of recovery.
The defendants moved for summary judgment, arguing that an oral agreement could
not have existed. In their reply brief, the defendants argued that if the court agreed, then
that ruling should also result in summary judgment in the defendants’ favor on the
plaintiffs’ other claims.
When considering a motion for summary judgment, the evidence must be viewed in
the light most favorable to the non-movants. Examined in that light, the evidence could
support a finding that an enforceable oral agreement existed. The defendants’ motion for
summary judgment on that issue is therefore denied. There is accordingly no need to reach
the defendants’ belated contention that judgment should be entered on the plaintiffs’ other
theories.
I. FACTUAL BACKGROUND
The facts are drawn from the evidence that the parties submitted in connection with
the defendants’ motion for summary judgment. At this procedural stage of the case, the
evidence must be construed in favor of the non-movants. The facts are written from that
perspective. The record at trial may support different factual findings.
A. The Joint Venture For Phase 3
Plaintiff Leonard Iacono is a seasoned real estate developer. He owns and operates
plaintiff Sovereign Property Management, LLC., a property management company.
The late Joseph Capano was also a seasoned real estate developer. His many
successful projects included Phases 1 and 2 of a master plan for the development of 1,100
acres in Middletown, Delaware, known as the “Westown Master Plan.” Together, Phases
1 and 2 comprised a commercial development known as the “Shoppes of Westown.”
Iacono also bid on Phases 1 and 2, but Capano secured and completed the projects.
Iacono and Capano met as a result of a lawsuit, but they subsequently became close
friends. For years, Iacono and Capano talked about developing real estate together.
In June 2015, Capano learned about an opportunity to bid on the third phase of the
Westown Master Plan (“Phase 3” or the “Project”), which was then owned by Westown
Retail 42 Acres, LLC (“Westown Retail”). Phase 3 involved the purchase and subsequent
development of approximately twenty-two acres adjacent to Phases 1 and 2.
Capano contacted Iacono, and they talked about bidding on Phase 3 together. On
June 16, 2015, Capano sent Iacono a set of projections for Phase 3. See Dkt. 51 Ex. 6. As
anticipated, on Thursday, June 18, 2015, Capano received a request for proposal to bid on
Phase 3.
Capano invited Iacono to join him at Kings Creek Country Club on Saturday, June
19, 2015, to play golf and discuss Phase 3. Iacono testified that after playing golf, he and
Capano agreed that “we were going to acquire [Phase 3] and that we were going to be
50/50.” Iacono Dep. 34. Iacono understood that “we would each be 50 percent partners in
the acquisition and development of the property.” Id. at 37. Iacono and Capano agreed that
“an actual entity was going to be formed that was going to own the property” and that
Capano would send Iacono a draft LLC agreement. Id. They discussed some of the initial
tasks that their venture would require, agreeing that Capano would handle the negotiations
to acquire the Project and Iacono would take the lead on obtaining the financing. Id. at 40.
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Iacono understood that “me and him would collectively design the center and build it,” but
Iacono “had no problem with [Capano] overseeing the construction of it.” Id.; accord id.
at 43 (agreeing that Capano would “[o]versee the construction” but not agreeing that
Capano would control construction). They also agreed that Capano’s property management
company would serve as the property manager for the Project once it was built and leased.
Id. at 38–39.
That same day, Capano submitted a draft letter of intent for Phase 3, constituting his
bid to acquire the Project. Capano caused one of his real estate companies, defendant JMC
Acquisitions, Inc., to submit the letter of intent. In reliance on his agreement with Capano,
Iacono did not bid. See id. at 29, 75. If he had not reached agreement with Capano, then
Iacono would have bid. Id at 75. On June 19, JMC Acquisitions and Westown Retail
entered into a letter of intent for Phase 3.
After the meeting at Kings Creek Country Club, Iacono and Capano told their
associates about their agreement. Iacono told Darren Caterino, his principal real estate
advisor, that he and Capano had agreed to acquire Phase 3 and “collectively design the
center and build it.” Id. at 40. Capano told Joseph Terranova and Sandra Duchemin, two
of his senior employees, that he planned to partner with Iacono for Phase 3. See Terranova
Dep. at 6465; Duchemin Dep. 34–37, 103.
B. The First Draft
On July 13, 2015, Capano sent Iacono a draft of an LLC agreement (the “First
Draft”). Dkt. 49 Ex. D. The First Draft was a simple and straightforward document.
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Consistent with the oral agreement reached at Kings Creek Country Club, the First
Draft contemplated a 50/50 ownership structure. See id. The draft designated Capano as
the “Class A Member” with a 50% member interest and Iacono as the “Class B Member”
with a 50% member interest. See id. § 12.
The First Draft departed from the 50/50 structure in only one respect. It provided
that only the Class A Member had the authority to manage the business and affairs of the
LLC. See id. The Class B Member did not have any power to manage the business and
affairs of the LLC. The Class B member also did not generally have any voting rights,
although the LLC could not engage in a list of nine significant actions without the consent
of the Class B Member. Id.
The First Draft did not distinguish among phases of the Project for purposes of
allocating management authority. In simplified terms, real estate projects can be thought
of as having three phases: (i) the planning and design phase, (ii) the construction phase,
and (iii) the post-construction and stabilization phase. By vesting all authority in the Class
A Member, the First Draft gave Capano control over all phases of the Project.
The First Draft contained a general prohibition on the members receiving
compensation from the LLC in their capacity as members. Id. § 13. As an exception to the
general prohibition, the First Draft stated that the LLC “may enter into a property
management agreement with an affiliate of the Class A Member to manage the Property,
upon such terms that are customary in the industry, including, without limitation a fee equal
to five percent (5%) of the gross income derived from the operation of the Property.” Id.
This provision reflected Iacono and Capano’s oral agreement that Capano’s property
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management company would serve as the property manager for Phase 3 once the Project
was built and leased. Iacono Dep. at 38–39.
Capano’s First Draft thus reflected an understanding of the 50/50 arrangement in
which Capano and Iacono would be equal partners from an economic perspective, but
where Capano would control the entity. Iacono understood at the time that Capano was “a
pretty independent individual” who almost always had complete control over his real estate
projects. Iacono Dep. 23.
C. Iacono Rejects The First Draft.
Iacono rejected the First Draft. In an email to Capano sent on July 15, 2015, Iacono
objected that “the rights of the Class B member are very limited” and insisted that he “must
be on the same pecking order” with Capano. Dkt. 49 Ex. E. He stated, “We obviously need
to resolve this before we can proceed.” Id.
Capano emailed back, “What part is a problem for you?” Id. Iacono responded
colorfully that the First Draft treated him “like a red headed step child.” Id. He stated,
“Therefore before I comment on the balance of this agreement this matter must be resolved
first. If we are 50/50 partners then we should be on a level playing field.” Id.
Capano wrote back: “Other than daily management control we are on the same
playing field.” Id. That was a fair description of the First Draft, in which Iacono and Capano
had equal economic rights, but only Capano had control.
Capano then told Iacono, “Go ahead and change whatever you want and send it
back[.] We should be equal in all respects.” Id. (emphasis added). Construed in favor of
Iacono for purposes of the defendants’ motion for summary judgment, this email indicates
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that Capano agreed to Iacono’s position that they should be “equal in all respects,”
including on management.
Iacono testified that he spoke with Capano about the draft by telephone. Iacono Dep.
45, 101. Iacono had the impression that Capano understood what the deal was and had sent
the First Draft as a test, not expecting Iacono to sign it. Id. at 45. Capano told Iacono to
send back a proposed draft with his changes. Id.
D. The Second Draft
Iacono did not immediately send back changes to the First Draft. He had an attorney,
Doug Hershman, prepare a new agreement from scratch. See Iacono Dep. 46–47.
Preparing the new agreement took time. On August 3, 2015, before receiving the
new draft, Capano caused JMC Acquisitions to send a draft purchase and sale agreement
for the Project to Westown Retail. Dkt. 49 Ex. B. Later that day, Caterino sent Iacono’s
proposed LLC agreement to Capano. See Dkt. 49 Ex. F (the “Second Draft”). Caterino told
Capano that Iacono had “not yet reviewed” the Second Draft but asked Capano to review
it and offer comments. See Dkt. 49 Ex. F; Caterino Dep. 124. The next day, Capano sent
the Second Draft to his lawyer, Daniel Krapf. See Dkt. 49 Ex. F.
Like the First Draft, the Second Draft provided that Capano and Iacono would each
own a 50% member interest in the LLC. Unlike the First Draft, where the Class B Member
only had a consent right on specific issues, the Second Draft provided for both members to
have voting power proportionate to their member interest. See id. at ’882–83.
The most significant departure from the First Draft was in the area of management.
In contrast to the First Draft, which used a member-managed structure in which only the
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Class A Member had management rights, the Second Draft established a manager-managed
structure. It identified Capano and Iacono as the initial managers and provided that the LLC
only would be able to take action with the joint approval of both managers. See Dkt 49 Ex.
F at ’879–80. Like the First Draft, the Second Draft did not distinguish among phases of
the Project for purposes of allocating management authority. It implicitly contemplated the
same control structure for all phases.
Like the First Draft, the Second Draft addressed the ability of members to receive
compensation from the LLC. Establishing the opposite default rule, the Second Draft
provided that the members and their affiliates could receive compensation from the LLC.
The Second Draft specifically authorized the LLC to enter into a property management
agreement with a Capano affiliate, although it reduced the fee to 3.5% of rental income.
See id. at ’881.
Generally speaking, the Second Draft was a much more sophisticated and detailed
document. It contained a number of provisions that anticipated issues which could arise in
a 50/50 venture. Among other things, it
 Included an extensive set of definitions. See Dkt. 49 Ex. F at ’867–70.
 Contained detailed provisions addressing the admission of new members and the
extent to which members could transfer their interests. See id. at ’867–71
 Provided that when making distributions, a member would receive a “Preferred
Return” of 8% per annum on a member’s “Excess Unreturned Capital,” defined as
a situation in which the amount of one member’s unreturned capital exceeded the
other member’s. See id. at ’868, ’870, ’877.
 Established a dispute resolution section that attempted to address disagreements first
through mediation and then through arbitration. See id. at ’890–91.
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 Introduced a put/call mechanism for resolving deadlock through a consensual
buyout. See id. at ’875–76.
 Expanded the single paragraph on indemnification found in the First Draft to five
separate sections addressing indemnification and advancement rights. See id. at
’884–85.
In each case, the Second Draft treated the members equally. Although it added these deal
points, the Second Draft was a 50/50 venture in which the members had equal rights.
Like the First Draft, the Second Draft did not specify a dollar amount of capital that
each member would contribute. See id. at ’893. That was understandable, since the parties
had not yet agreed on the total amount they would need to invest. There was no indication
that the Second Draft altered the 50/50 agreement on contributing capital that Iacono and
Capano had reached.
In sum, the Second Draft reflected an understanding of the 50/50 arrangement as a
joint venture in which Capano and Iacono were equal in all respects. The draft was thus
consistent with Iacono’s understanding and with Capano’s email in which he stated, “We
should be equal in all respects.” Dkt. 49 Ex. E.
E. Capano’s Death
On August 11, 2015, Capano unexpectedly died. Before his death, Capano briefly
discussed the Second Draft with Krapf. See Krapf. Dep. 61. Capano had not provided
Iacono with any comments.
Joanne Capano, his widow, became the executrix of his estate and took over the
management of his businesses. To avoid confusion, this decision refers to Joanne using her
first name. Terranova became the point person for the Capano team on Phase 3.
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F. The Continued Pursuit Of Phase 3
Despite Capano’s death, Joanne decided to continue pursuing Phase 3 with Iacono.
She believed it was what Capano would have wanted. See Joanne Dep. 59.
On August 14, 2015, the Capano team caused JMC Acquisitions to execute a formal
agreement with Westown Retail for the purchase of Phase 3 (the “Purchase Agreement”).
The Purchase Agreement contemplated a purchase price of $4.95 million, a deposit of
$250,000, a due diligence period, and a closing within thirty days. Led by Caterino,
Iacono’s team began due diligence. See Dkt. 51 Ex. 12.
As due diligence progressed, the Capano side’s enthusiasm for the joint venture
waned. Terranova, Duchemin, and Joanne disliked and distrusted Iacono. See Terranova
Dep. 57; Duchemin Dep. 37; Joanne Dep. 29. Outwardly, they continued to support the
joint venture. See Dkt. 51. Exs. 13, 15, 16. Internally, they began developing a backup plan
if the relationship broke down. See, e.g., Dkt. 51. Ex. 18. Unaware of the Capano team’s
growing antipathy towards the joint venture, the Iacono side continued to move forward
with due diligence and began the process for securing financing. See Dkt. 51 Ex. 20.
G. The Third Draft
On September 2, 2015, Terranova sent a markup of the Second Draft to Iacono and
his team. Dkt. 49 Ex. H (the “Third Draft”). Because it was a markup rather than a rewrite,
the Third Draft retained the Second Draft’s organization, including the manager-managed
structure. Generally speaking, the Third Draft broadly accepted Iacono’s version of the
agreement, while proposing minor changes.
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Some of the changes reflected the fact that Capano had died. The Second Draft had
identified Capano as one of the initial managers of the LLC. He obviously could no longer
serve in that role. The Third Draft identified defendant JAMCAP Management, Inc., one
of Capano’s companies that Joanne now controlled, as the initial manager. See id. § 5.01(a).
In retaining the manager-managed structure and providing for equal management, the
Third Draft did not distinguish among (i) the planning and design phase, (ii) the
construction phase, and (iii) the post-construction and stabilization phase. See generally id.
The Third Draft thus adopted the 50/50 management structure that Iacono believed that he
and Capano had agreed upon, and which was consistent with Capano’s statement in his
email about being “equal in all respects.” Dkt. 49 Ex. E.
Just as he could no longer serve as a manager, Capano also could no longer serve as
a member of the LLC. The Third Draft identified a special purpose vehicle—WS Phase 3,
LLC—as the entity from the Capano side that would serve as the member. See Dkt. 49 Ex.
G § 1.01.
Most of the Capano team’s other revisions were minor. They lowered the preferred
return from 8% to 6% and provided that it would not accrue for the first thirty days. See id.
§ 1.01. They made some edits to the arbitration provision, and they struck the put/call
mechanism that would be used in the event of deadlock. See id. §§ 3.05, 10.8(b).
A significant change in the Third Draft favored Iacono. Before Capano’s death,
Iacono and Capano had agreed that Capano’s property management company would
manage the Project once it was complete and leased. The Third Draft contemplated that the
parties would “select a mutually acceptable management company” to serve as property
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manager. Id. § 5.05(a). This change opened the door for Iacono’s company, Sovereign, to
bid for the property management work. The Third Draft also added a new provision that
required any member to give the LLC a right of first offer on any adjoining property before
developing the property independently. See id. § 6.09 (the “Right of First Offer”).
Like the Second Draft, the Third Draft did not specify a dollar amount of capital
that each member would contribute. That omission remained understandable, as the total
amount of capital necessary for the venture had not been determined. There was no
indication in the Third Draft that the members were departing from the 50/50 agreement
on capital that Iacono and Capano had reached.
On September 9, 2015, Caterino responded to the Third Draft. Dkt. 49 Ex. H. His
comments were generally detail-oriented and did not affect the basic structure of the deal:
 He argued for restoring the preferred return to 8%. See id.
 He wondered why the Capano team had struck the put-call provision. See id.
 He asked for clarity on who would guarantee the obligations of Capano’s special
purpose vehicle to ensure that there would be a financially capable entity or
individual standing behind the special purpose vehicle’s commitments. See id.
 He asked that an individual be identified as the manager for the Capano side rather
than JAMCAP so that there would be a single person who would have authority to
make decisions for the Capano team. See id.
In response to the Capano team opening up the position of property manager, Caterino
asked that the LLC give that work to Sovereign. He noted that Iacono had agreed that
“Capano Management [would] manage the project when Joe was alive,” and argued that
now “[i]t seems only fair that that same courtesy be extended to [Iacono].” Id.
Caterino pushed back hardest on the new Right of First Offer. He explained:
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This section is problematic. Firstly, it is one sided in that Capano already has
adjacent projects for which we are not partners that directly compete with
this Project. [Iacono] is agreeable to this provision provided he is offered the
opportunity to enter into the existing adjacent property units under mutually
acceptable terms.
Id. Iacono thus wanted to be cut in on Phases 1 and 2 as the price of giving the LLC the
Right of First Offer (the “Adjacent Property Management Right”).
Terranova forwarded Caterino’s comments to Duchemin, saying, “This is why I
don’t like [Caterino].” Dkt. 51 Ex. 22. He claimed it was “another instance where
[Caterino] just does his own thing and does not have the courtesy to include me in the e-
mail chain. Fine.” Id. Duchemin responded, “WOW!!!! Could this be our ticket out . . . .”
Id. It is not clear at this stage of the case why Terranova responded this way or why
Duchemin would have thought that Caterino’s comments could have provided a “ticket
out.” Construed in favor of Iacono for purposes of the motion for summary judgment, this
email suggests that Capano’s team was not negotiating in good faith and was looking for a
way to escape from the joint venture.
H. The September Meeting
On September 11, 2015, the parties met face to face in an attempt to finalize the
terms of the LLC agreement. Iacono and Caterino attended from his side. Terranova,
Duchemin, and Krapf attended from the Capano side.
During the meeting, the Capano team asked Iacono if he would consider putting in
75% of the required capital instead of 50%. Iacono Dep. 68. Iacono said that he would, but
only if (i) Sovereign became the property manager for Phase 3 and (ii) Capano’s estate
repaid an otherwise unrelated loan that Iacono had given Capano in the amount of
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$800,000. Id. at 68-69. Iacono said that if those conditions were unacceptable, he would
stick with contributing 50% of the capital. Id at 69-70.
Iacono left the meeting believing that Capano’s team would accept his conditional
offer to contribute 75% of the capital. Id. at 70. He thought that deal was more favorable
to Capano’s team because he believed they were comparatively cash-constrained. Id at 71.
One week later, on September 18, 2015, Iacono sent Terranova and Duchemin an
email in which he thanked them for allowing Sovereign to manage Phase 3 and asked if
they would consider having Sovereign also manage Phases 1 and 2. Dkt. 51 Ex. 19.
Terranova and Duchemin did not think they had agreed to let Sovereign manage Phase 3.
Consistent with the language of the Third Draft, they thought they had proposed to bid out
the work and let Sovereign bid like anyone else. See id. Terranova told Duchemin that they
needed a property management company of their own. See id.
Meanwhile, Iacono’s team was continuing to conduct due diligence and pursue
financing. They sent out a financing request and spoke with lenders. Compl. ¶ 85. They
also had follow-up meetings to discuss loan terms and select a lender. Id.
I. The Fourth Draft
On September 21, 2015, Terranova sent another version of the LLC agreement to
Caterino and Iacono. Dkt. 49 Ex. L (the “Fourth Draft”). The Fourth Draft continued to
track the Second Draft in terms of the ownership and management structure.
The Fourth Draft resolved many of the minor issues that Caterino had identified. It
provided that JAMCAP would designate a representative to act on its behalf to make
decisions as manager. See id. § 5.01. It made clear that either Joanne or Capano’s estate
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would provide a personal guarantee. See id. § 4.01. It accepted Caterino’s position on the
preferred rate of return, restoring it to 8%. See id. § 1.01. The Fourth Draft also specified
Sovereign as the initial property manager, subject to Sovereign and the LLC “entering into
a mutually acceptable property management agreement” and reserving the LLC’s right to
hire a different management company if agreement could not be reached. Id. § 5.05.
The Fourth Draft continued to omit the put/call provision. More significantly, the
Fourth Draft retained the Right of First Offer without providing Iacono with the Adjacent
Property Management Right.
Most significantly, the Fourth Draft called for Iacono to contribute 75% of the
capital and receive only a 50% member interest. See id. at 27. The Fourth Draft did not
address the $800,000 loan, which Iacono had made a condition of his willingness to provide
75% of the capital.
On September 23, 2015, Caterino reiterated to Krapf that if Iacono contributed 75%
of the capital, then both Sovereign had to be the property manager and Capano’s estate had
to repay the $800,000 loan plus interest. Krapf Dep. 119, 124. Krapf took the offer to
Joanne, who rejected it. Id. at 122, 124, 128.
During this time, Iacono’s team began to doubt whether the Capano team could
fulfill their commitments under the Purchase Agreement without Capano’s leadership. See
Dkt. 49. Ex. O. They began considering how they could step in and acquire Phase 3 if the
Capano team fell short. See id.; Dkt. 49 Ex. P at ’361.
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J. The Fifth Draft
On September 24, 2015, Krapf sent a fifth version of the LLC agreement to Iacono.
See Dkt. 49 Ex. P (the “Fifth Draft”). The Fifth Draft called for Iacono to contribute 75%
of the capital to Phase 3. In a step back from the Fourth Draft, the LLC Agreement no
longer provided for Sovereign to be the initial property manager. It also did not address the
$800,000 loan.
Iacono rejected the draft. He understandably told Krapf:
I don’t like to be retraded[.] [Y]ou expect me to infuse 75% and now you
delete [S]overeign as previously agreed[.] [T]his is unacceptable. If you
insist then it is 50/50. If you wish to discuss I’m available by cell.
Dkt. 49 Ex. Q.
On September 29, 2015, Joanne told Krapf to terminate the discussions. Joanne Dep.
60. He did. See Dkt. 49 Ex. S.
Over the next two weeks, Iacono’s team tried unsuccessfully to obtain Phase 3. On
October 29, 2015, the Capano team closed on Phase 3.
K. This Litigation
On December 23, 2015, the plaintiffs filed the complaint. It asserted seven causes
of action:
 Count I asserted a claim on behalf of Iacono to enforce an oral contract with Capano
to form a joint venture to acquire and develop Phase 3.
 Count II alleged in the alternative that Iacono could rely on and enforce Capano’s
promise to jointly acquire and develop Phase 3 under the doctrine of promissory
estoppel.
 Count III alleged in the alternative that Iacono was entitled to relief under the
doctrine of equitable estoppel.
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 Count IV asserted a claim on behalf of Sovereign for tortious interference with
prospective economic advantage based on Sovereign’s interest in becoming the
property manager for Phase 3.
 Count V asserted a claim on behalf of Iacono for tortious interference with
prospective economic advantage based on his interest in pursuing a joint venture
with Capano.
 Count VI asserted a claim for unjust enrichment on behalf of Iacono.
 Count VII sought a constructive trust over Phase 3.
The defendants moved for summary judgment on Count I. In their reply brief, they argued
that if the court granted summary judgment on Count I, then it should also grant summary
judgment on the other six counts.
II. LEGAL ANALYSIS
Under Court of Chancery Rule 56, summary judgment “shall be rendered forthwith”
if “there is no genuine issue as to any material fact and . . . the moving party is entitled to
a judgment as a matter of law.” Ct. Ch. R. 56(c). When a party moves for summary
judgment, “the court must view the evidence in the light most favorable to the non-moving
party.” Merrill v. Crothall–Am., Inc., 606 A.2d 96, 99 (Del. 1992). With the evidence
viewed from this standpoint, the moving party bears the initial burden of demonstrating
that there are no genuine issues of material fact. Brown v. Ocean Drilling & Expl. Co., 403
A.2d 1114, 1115 (Del. 1979). If the moving party meets this burden, then the non-moving
party must “adduce some evidence of a dispute of material fact.” Metcap Sec. LLC v. Pearl
Senior Care, Inc., 2009 WL 513756, at *3 (Del. Ch. Feb. 27, 2009), aff’d, 977 A.2d 899
(Del. 2009); accord Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).
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An application for summary judgment must be denied “if there is any reasonable
hypothesis by which the opposing party may recover, or if there is a dispute as to a material
fact or the inferences to be drawn therefrom.” Vanaman v. Milford Mem’l Hosp., Inc., 272
A.2d 718, 720 (Del. 1970).
[T]he function of the judge in passing on a motion for summary judgment is
not to weigh evidence and to accept that which seems to him to have the
greater weight. His function is rather to determine whether or not there is any
evidence supporting a favorable conclusion to the nonmoving party. When
that is the state of the record, it is improper to grant summary judgment.
Cont’l Oil Co. v. Pauley Petroleum, Inc., 251 A.2d 824, 826 (Del. 1969). “The test is not
whether the judge considering summary judgment is skeptical that [the non-movant] will
ultimately prevail.” Cerberus Int’l, Ltd. v. Apollo Mgmt., L.P., 794 A.2d 1141, 1150 (Del.
2002). “If the matter depends to any material extent upon a determination of credibility,
summary judgment is inappropriate.” Id.
A. Count I: Breach Of Contract
In their motion for summary judgment and their opening brief, the defendants
focused exclusively on Count I of the complaint, in which Iacono asserts a claim for breach
of an oral agreement. “Under Delaware law, the elements of a breach of contract claim are:
1) a contractual obligation; 2) a breach of that obligation by the defendant; and 3) a
resulting damage to the plaintiffs.” WaveDivision Hldgs., LLC v. Millennium Digital Media
Sys., L.L.C., 2010 WL 3706624, *13 (Del. Ch. Sept. 17, 2010). The defendants argued that
summary judgment should be granted as a matter of law because a contract was never
formed.
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“A valid contract exists when (1) the parties intended that the [agreement] would
bind them, demonstrated at least in part by its inclusion of all material terms; (2) these
terms are sufficiently definite; and (3) the putative agreement is supported by legal
consideration.” Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1229 (Del. 2018).
The defendants do not dispute that the putative agreement was supported by consideration.
They contend that Capano and Iacono did not agree on all material terms, and they
implicitly argue that the terms were not sufficiently definite.
Overt manifestations of assent, rather than subjective intent, control contract
formation. See Ramone v. Lang, 2006 WL 905347, at *10 (Del. Ch. Apr. 3, 2006). A
contract must contain all material terms to be enforceable. See id. “What terms are material
is determined on a case-by-case basis, depending on the subject matter of the agreement
and on the contemporaneous evidence of what terms the parties considered essential.”
Eagle Force, 187 A.3d at 1230. The test for a valid oral contract thus is “whether a
reasonable negotiator in the position above asserting the existence of a contract would have
concluded in that setting, that the agreement reached constituted agreement on all the terms
that the parties themselves regarded as essential and thus that agreement concluded the
negotiations and formed a contract.” Leeds v. First Allied Conn. Corp., 521 A.2d 1095,
1097 (Del. Ch. 1986). “[C]ourts look to all of the surrounding circumstances, including the
course and substance of the negotiations, prior dealings between the parties, customary
practices in the trade or business involved and the formality and completeness of the
document (if there is a document) that is asserted as culminating and concluding the
negotiations.” Id. at 1102 (citations omitted).
18
1. The Evidence That Could Support The Existence Of An Oral Contract
Iacono asserts that an oral contract existed as a result of the agreement he reached
with Capano during their meeting at the Kings Creek Country Club, as subsequently
confirmed by their exchange of emails on July 15, 2015. Iacono testified that during the
meeting at the Kings Creek Country Club, he and Capano agreed that “we were going to
acquire [Phase 3] and that we were going to be 50/50.” Iacono Dep. 34. The structure of
the First Draft and the initial emails that were exchanged on July 15, 2015, indicate that
Capano and Iacono may have had different understandings as to whether their agreement
“to be 50/50” only extended to economic ownership, with Capano in control of the venture,
or whether they would be 50/50 in all respects. Regardless, in the final email of the
exchange on July 15, Capano agreed, “We should be equal in all respects.” Dkt. 49 Ex. E.
Viewed in the light most favorable to Iacono as the non-movant, this evidence could
support a finding that Capano and Iacono reached an enforceable oral agreement. Taken
together, Iacono’s testimony and the email exchange on July 15, 2015, are sufficient to
support a finding that Iacono and Capano agreed to form a simple and straightforward joint
venture in which they would acquire and develop Phase 3 as equal owners. The two
material terms were ownership and control. As to both, they agreed to be “equal in all
respects.”
In considering whether a contract was formed, a court must take into account the
facts of the specific case, including the parties’ relationship, their history of dealing with
each other, and the nature of the agreement. Capano and Iacono were seasoned real estate
developers and close friends. See Iacono Dep. 19. They had talked about going into
19
business together for years. See id at 21. Given their mutual trust and respect, Capano and
Iacono did not need to reach agreement on any terms beyond the basic issues of shared
ownership and control. A reasonable observer could conclude based on their objective
manifestations of assent that they agreed to move forward on the basis of a simple 50/50
joint venture. Id. at 39.
2. The Defendants’ Arguments
The defendants argue that Capano and Iacono did not reach agreement on all
material terms. The defendants’ arguments might prevail following a trial on a full
evidentiary record. They cannot carry the day on a motion for summary judgment.
The defendants attempt to create uncertainty as to the basic terms of the oral
agreement. They assert that there was no agreement on the amount of capital contributions.
See Dkt. 49 at 23. The further posit, “Assuming as true that Capano agreed to be 50/50
members with Iacono on ‘the acquisition of the property and development of the Phase 3
project, what does that mean?” Dkt. 54 at 4 (footnote omitted). Following up on this
rhetorical question, they ask, “[W]hat was each partner to contribute in capital?” Id.
When the evidence is viewed in the light most favorable to Iacono, there was an
obvious and simple agreement on capital contributions: Iacono and Capano would each
contribute 50% of whatever amounts were necessary to acquire the Project and develop
Phase 3, however much that might be. Leaving that term open did not mean an infinite or
indefinite commitment of capital. Both men were experienced real estate developers and
would have had a sense of what the Project would cost. Moreover, Capano had shared his
financial projections for the Project with Iacono before their meeting at Kings Creek
20
Country Club, so they were already on the same page as to the likely magnitude of the
investment.
Further trying to complicate matters, the defendants observe that after Capano died,
his side paid the deposit for the Project and eventually the $4.7 million purchase price. The
defendants ask rhetorically how the joint venture would account for those payments. Id.
When the evidence is viewed in the light most favorable to Iacono, the logical answer is
that once the Project was assigned to the LLC, Capano would have been credited with a
capital contribution equal to the $250,000 deposit that his side had funded. The balance of
the obligations under the purchase agreement would have become obligations of the LLC.
Under the parties’ agreement, Iacono would have been expected to shoulder 50% of the
total. It would not have been difficult for two experienced real estate professionals and
friends to figure that out.
The defendants also challenge the basic agreement on shared control. They argue
that Capano always controlled his entities, and that his nature was such that he would never
have agreed to share control with Iacono. Iacono Dep. 23. After trial, the evidentiary record
may support the defendants’ position. For present purposes, the competing evidence gives
rise to a material dispute of fact.
The defendants also try to create uncertainty about what shared control might mean.
Id. at 5. According to the defendants,
“management” has two separate meanings in this case. There is management,
i.e., decision-making and control on behalf of the company to be formed to
design, develop, and construct the Project on the Property “pre-
stabilization”), and there is what has been referenced as “post-stabilization”
management, which is the control after the project is built and developed and
21
there are tenants leasing space. Iacono may have thought that he was a 50/50
partner with equal rights to make decisions and control the company during
design, development, and construction stages, but there was no meeting of
the minds between Iacono and Capano on this essential point.
Id. (citation and footnote omitted). To the contrary, when viewed in the light most favorable
to Iacono, Capano’s agreement that he and Iacono would be “equal in all respects” indicates
that there was a meeting of the minds on this essential point.
The defendants also argue that “[s]trong evidence of Capano’s intention is reflected
in the First Draft of a ‘to be formed’” LLC that he sent on July 13, 2015. Dkt. 49 at 23.
This court has observed that “a clear intention to form an entity other than a general
partnership may strongly suggest that the parties did not earlier form a partnership [by oral
contract].” Grunstein v. Silva (Grunstein I), 2011 WL 378782, at *10 (Del. Ch. Jan. 31,
2011). But while Grunstein I made this observation, the decision did not rely on it to hold
that no agreement existed as a matter of law. Id. Instead, Grunstein I denied the defendant’s
motion for summary judgment, and the case proceeded to trial. Id. at *13.
Under the Delaware Limited Liability Company Act (the “LLC Act”), a formal
written LLC agreement is not required. See 6 Del. C. § 18-101(7). As a matter of law, an
LLC agreement can be “written, oral or implied.” Id. Consequently, “[t]he formation and
governance of an LLC can be as simple or complex as the circumstances require.” Robert
Symonds, Jr. & Matthew J. O’Toole, Symonds & O’Toole on Delaware Limited Liability
Companies § 4.01[B] (2d ed. 2017). By specifically contemplating an “oral or implied”
agreement, the statute necessarily envisioned the type of informal agreement that Capano
and Iacono reached. See Feeley v. NHAOCG, LLC, 62 A.3d 649, 663 (Del. Ch. 2012)
22
(noting that by authorizing “oral or implied” agreements, as well as a wide range of possible
“written” agreements, the LLC Act creates myriad opportunities for LLC agreements that
range “from the minimalistic to the ill-formed to the simply incomplete”). If an oral or
implied agreement does not cover every aspect of the parties’ relationship, then the parties
can rely on the LLC Act to supply default rules to govern their affairs. See id. At trial,
evidence that Capano (and Iacono) contemplated a “to be formed” LLC with a written
operating agreement could contribute to a finding that Capano and Iacono had not reached
a definitive agreement, but it is not sufficient to grant summary judgment in favor of the
defendants as a matter of law. As this court observed in Grunstein I, if “a definitive oral
agreement was reached initially, [then] since later documents were never adopted, the
initial agreement controls.” 2011 WL 378782, at *10.
The defendants devote most of their briefing to describing the twists and turns in
the evolution of the LLC agreement. See Dkt. 49 at 21–27; Dkt. 54 at 3, 7. They exaggerate
the significance of the differences between the First and Second Drafts, describing them as
“two ships passing in the night” and arguing that Capano and Iacono never reached
agreement on all material terms. Dkt. 49 at 24.
The Second Draft accurately reflected Iacono and Capano’s agreement that they
would be “equal in all respects.” Dkt. 49 Ex. E. Iacono’s lawyer prepared the Second Draft,
and in contrast to Capano’s bare-bones First Draft, Iacono’s lawyer added the types of
provisions that one would expect in a more sophisticated LLC agreement. The provisions
sought to anticipate and address the disputes that frequently arise in a 50/50 venture. For
example, the Second Draft contained mediation and arbitration provisions, a put-call
23
mechanism to resolve an unbreakable deadlock, and a preferred return if one member
ended up with more capital in the venture. A diligent lawyer serves up provisions like those
to flesh out the principals’ business deal. In each case, the Second Draft treated Capano
and Iacono identically. The Second Draft was thus a more sophisticated version of a 50/50
joint venture, but it was still a 50/50 joint venture.
When the record is viewed in Iacono’s favor for purposes of summary judgment, it
is easy to conclude that none of the additional features of the Second Draft were material
terms. They were “nice-to-have” provisions that would help the parties navigate the pitfalls
of a 50/50 relationship, but none were essential.
The defendants likewise overstate the significance of the parties’ negotiations over
the “nice-to-have” provisions. After Capano’s death, Joanne decided to proceed with
Capano’s deal with Iacono, and Terranova sent back the Third Draft. It was a mark-up
rather than a rewrite, and it broadly accepted Iacono’s version of the agreement. Several of
the Capano side’s changes reflected the fact that Capano had died and could no longer
serve as the initial manager of the LLC or as one of its members. Most of the Capano
team’s revisions were minor, such as lowering the preferred return from 8% to 6% and
providing that it would not accrue for the first thirty days, tweaking the arbitration
provision, and striking the put/call mechanism. The most significant change favored Iacono
by contemplating that the parties would “select a mutually acceptable management
company” to take on the role of property manager, thereby opening the door to Sovereign
serving in that role. See Dkt 49 Ex. G at 15.
24
In both their opening brief and reply brief, the defendants focus on the Capano side’s
request in September 2015 that Iacono contribute 75% of the capital to the venture. See
Dkt. 49 at 25; Dkt. 54 at 25. When examined under the standard that governs a motion for
summary judgment, this issue does not suggest a lack of agreement on material terms, but
rather an effort by the Capano team to amend the agreement that Capano and Iacono
reached. The deal between Capano and Iacono had always been that each would contribute
50% of the capital. When the Capano side proposed that Iacono contribute 75%, they were
proposing to amend the deal. Iacono was willing to accept the change, but only if (i)
Sovereign became the property manager for Phase 3 and (ii) Capano’s estate repaid the
$800,000 loan that Iacono had given Capano. Iacono Dep. 69. Iacono made clear that if
those conditions were unacceptable, he would stick with the original deal. Id. at 70.
Capano’s side did not accept Iacono’s conditions, yet they sent drafts that called for
him to contribute 75% of the capital. The deal broke down at this point. Read in the light
most favorable to Iacono, the evidence could support a finding that there was an agreement
on all material terms for a 50/50 joint venture, that Iacono was entitled to insist on that
structure if the parties could not agree to modify it, and that the Capano side breached the
agreement by refusing to proceed based on the original deal.
The defendants finally claim that “after Capano died, Iacono, along with his team,
planned almost immediately to take this deal away from the Capano family, assuming that
the Capano side, led by Terranova, would fail to obtain the funds to close.” Dkt. 49 at 26.
That is inaccurate. Read in the light most favorable to Iacono, the record certainly does not
25
reflect that. Even read in the light most favorable to the movants, the record does not
suggest that Iacono “planned almost immediately” to take the deal.
There is evidence in the record that on September 23, 2015, Caterino suggested that
if Terranova could not get the deal done, then Iacono could step in and acquire the Project.
Dkt. 49 Ex. O. Caterino made this suggestion some six weeks after Capano died, almost
two weeks after the September 11 meeting, and after the Capano side had sent back the
Fourth Draft, in which the Capano side took the position that Iacono should contribute 75%
of the capital yet receive only a 50% interest without satisfying Iacono’s conditions for
changing the deal. Read in the light most favorable to Iacono, Caterino’s email reflects
understandable frustration with the Capano side’s actions, doubt about Terranova’ s ability
to execute, and contingency planning if the Capano side failed to fulfill the terms of the
Purchase Agreement.
The next day, Krapf sent the Fifth Draft. It called for Iacono to contribute 75% of
the capital to Phase 3. Dkt. 49. Ex. P. In a step back from the Fourth Draft, the LLC
Agreement no longer provided for Sovereign to be the initial property manager. Read in
the light most favorable to Iacono, the backward move was a signal that the Capano side
did not want to proceed with the deal. Iacono read it that way, telling Krapf that he did not
like “to be retraded” and that he would proceed with the original 50/50 deal. Dkt. 49 Ex.
Q. Joanne then instructed Krapf to terminate discussions. Viewed in the light most
favorable to Iacono, this sequence of events does not suggest an effort by Iacono to steal
the deal. It rather suggests a failure by the Capano side to negotiate in good faith. It was
after these events that Iacono tried unsuccessfully to obtain Phase 3.
26
3. The Defendants’ Cases
To argue that summary judgment should be granted in their favor, the defendants
rely on quotations from Leeds and Ramone. Neither decision granted a motion for summary
judgment. Both decisions were rendered after trial. See Ramone, 2006 WL 905347, at *10;
Leeds, 521 A.2d at 1097, Both involved more complex business ventures with more
moving parts than the current case. The more apt precedent for this case is Grunstein I.
a. Leeds
The Leeds decision involved a suit by the plaintiff, Leonard Leeds, to establish that
he had not formed a binding contract to sell a nursing home. 521 A.2d at 1097. The
defendant and putative buyer was a company owned by Malcom Glazer, the well-known
entrepreneur, who was represented during parts of the negotiations by William
Sondericker, a relatively junior lieutenant.
Leeds had placed an advertisement soliciting buyers for the nursing home, and
Sondericker responded. Id. at 1098. Leeds told Sondericker that he wanted to take back
tax-exempt industrial revenue bonds as part of the purchase price (“IRB financing”). Id.
The benefits to Leeds from using tax-exempt bonds were obvious, and he told Sondericker
that if the buyer used IRB financing, then the sale price would be $3.5 million; otherwise,
the price would be $4.5 million. Id. Sondericker recalled Leeds asking for $4 million and
mentioning IRB financing, but he claimed not to understand its significance other than as
a form of seller financing. Id. Leeds asked for a down payment of $1 million in cash, with
the balance of the consideration taking the form of twenty-five-year bonds that paid 12%
27
interest. Id. Sondericker reported the terms to Glazer, who thought Leeds wanted too much
cash. Id.
Six weeks later, Sondericker contacted Leeds again. A series of discussions ensued,
during which Leeds again mentioned IRB financing, but eventually signaled a willingness
to take $750,000 in cash. Id. At that point, Glazer became interested, and he took over the
negotiations. Id. He offered to buy the nursing home for $3.5 million with a down payment
of $500,000. Id. The parties quickly compromised on $600,000. Id. at 1099.
Glazer sent Leeds a letter of intent that described a total purchase price of $3.5
million, a down payment of $600,000 in cash, and a $2.9 million bond “to be taken back
by Seller, payable principal and interest at 12%” over twenty-five years. Id. at 1099. The
letter of intent did not specify IRB financing. Leeds prepared a detailed letter identifying
additional terms for the transaction, including IRB financing, but he did not send it. Instead,
he signed and returned the letter of intent. Id.
A month later, the parties met for a day-long meeting to finalize the details of the
transaction. They “could agree on virtually nothing.” Id. at 1101. Leeds took the position
that IRB financing was part of the deal and that Glazer should pay the financing fees.
Glazer took the position that IRB financing was not part of the deal and that if Leeds wanted
it, he should pay for it. Id. The parties also could not agree on “[s]uch minor points as who
would pay for title insurance and transfer taxes.” Id. By the end of the day, Leeds decided
that he did not want to do business with Glazer. About a month later, Leeds wrote to
Sondericker disclaiming any interest in a transaction. Sondericker replied that there was
already a signed agreement in the form of the letter of intent. Id. at 1101.
28
Considering these facts in a post-trial decision, Chancellor Allen held that a contract
to sell the nursing home had not been formed. Id. at 1102–03. He framed the issue as
whether a reasonable person would conclude that the parties intended to be bound based
upon their objective manifestations of assent, cautioning that it was “not a simple or
mechanical test to apply.” Id. at 1101.
Negotiations typically proceed over time with agreements on some points
being reached along the way towards a completed negotiation. It is when all
of the terms that the parties themselves regard as important have been
negotiated that a contract is formed. In determining whether agreements
reached were meant to address all of the terms that a reasonable negotiator
should have understood that the other party intended to address as important,
courts look to all of the surrounding circumstances, including the course and
substance of the negotiations, prior dealings between the parties, customary
practices in the trade or business involved and the formality and
completeness of the document (if there is a document) that is asserted as
culminating and concluding the negotiations.
Until it is reasonable to conclude, in light of all of these surrounding
circumstances, that all of the points that the parties themselves regard as
essential have been expressly or (through prior practice or commercial
custom) implicitly resolved, the parties have not finished their negotiations
and have not formed a contract. Agreements made along the way to a
completed negotiation, even when reduced to writing, must necessarily be
treated as provisional and tentative. Negotiation of complex, multi-faceted
commercial transactions could hardly proceed in any other way.
Id. at 1101–02 (citations omitted).
Applying this test to the facts, Chancellor Allen found that the letter of intent
“clearly evidences agreement concerning key elements of the transaction,” such as “price,
principal amount of the note, its term and interest rate.” Id. at 1102. But he nevertheless
held “in light of all the circumstances” that a reasonable person “could not have understood
that the November 15 document represented a completed negotiation.” Id. Most
29
importantly, he believed that Sondericker and Glazer “knew that IRB financing was an
important point that Leeds had brought up on several occasions,” and it was not reasonable
for them to think that Leeds had dropped the issue. Chancellor Allen also observed that
while it is surely possible to make a binding contract to sell a $3.5 million
business, including real estate, on a single page, it would be extraordinary to
do. Absent a clear indication that the other party intended that unusual
course, a reasonable commercial negotiator—and surely one with Mr.
Glazer’s experience—could not conclude in these circumstances that that
was intended. For example, putting aside the question of the impact on the
transaction of having IRB financing available, there are myriad topics and
terms utterly conventional when a commercial seller in a significant
transaction takes back a note—such as financial covenants, including
restrictions on dividends or other stockholder distributions; warranties
concerning the financial condition and due organization of the maker of the
note; and terms defining and governing defaults and cures of default. There
is no legal requirement that these topics be dealt with before negotiations
resulting in agreements may be regarded as having concluded in a contract.
But, unless there is some affirmative basis to suppose that the parties actually
intended to pass over such points, a reasonable negotiator in a transaction of
this size and type would not be justified in concluding that such was the
unexpressed intention.
Id. at 1102–03. Chancellor Allen also cited the fact that neither Leeds nor Glazer “really
thought of the negotiations as having been completed” when they signed the letter of intent;
they instead viewed the subsequent meeting as a forum for additional negotiations. In
addition, no one from Glazer’s side had seen the nursing home. Id. at 1103. Chancellor
Allen therefore concluded that when Leeds signed the letter of intent, “[t]he negotiations
had not yet reached the point at which a contract was formed.” Id.
There are sufficient differences between this case and Leeds to conclude that Leeds
does not compel the granting of summary judgment. Most important, the procedural
postures are different. That Leeds decision was issued after a two-day trial, during which
30
Chancellor Allen had the opportunity to consider evidence and hear testimony. Id. at 1097.
In this case, the defendants have moved for summary judgment, which requires viewing
the evidence in Iacono’s favor.
Next, the transaction in Leeds was more complex that than a 50/50 joint venture.
The transaction in Leeds involved the sale of a nursing home, including the related real
estate, using tax-exempt IRB financing, which required compliance with a governing
regulatory scheme. The Capano/Iacono transaction was a 50/50 joint venture in which both
sides would be equal in all respects. It is true that the men planned to purchase and develop
real estate, but that was not the subject of the agreement that they reached between
themselves. The purchase of the Project was governed by the formal Purchase Agreement.
The agreement at issue in this case was between Capano and Iacono. It is also true, as in
Leeds, that the development of Phase 3 would necessitate the investment of several million
dollars in capital, but unlike in Leeds, the record at this stage suggests that Capano and
Iacono were comfortable investing significant sums on a relatively informal basis. For
example, Iacono had loaned $800,000 to Capano on an informal basis, and he also made a
loan at Capano’s request to an associate of Capano’s whom Iacono did not know. See
Iacono Dep. 30.
A third critical distinction involves “the surrounding circumstances, including the
course and substance of the negotiations [and] prior dealings between the parties.” Leeds,
521 A.2d at 1102. Unlike the parties in Leeds, Capano and Iacono were close friends who
trusted one another. They had previously talked about investing together, and they reached
agreement on a 50/50 joint venture through negotiations that they conducted themselves.
31
They immediately manifested their agreement by telling their associates about it, and they
both acted as if an agreement had been reached. In Leeds, by contrast, the buyer and seller
had never met. The initial discussions took place between Leeds and Sondericker, with
Glazer only becoming involved later. And although Leeds and Glazer signed the letter of
intent, neither viewed the document as the final deal.
These distinctions do not mean that Leeds is not an instructive precedent or that
Iacono will prevail at trial. As in Leeds, the court could conclude after weighing the
evidence that Iacono and Capano contemplated memorializing their venture in a written
agreement that would involve further negotiation. It is also possible that the court could
conclude that some of the open terms were material. What matters for present purposes is
that Leeds does not support granting judgment as a matter of law.
b. Ramone
The defendants also rely on Ramone. There, Michael Ramone sought to establish
that he and Jeffery Lang had formed a binding contract to acquire a building and operate a
swimming pool and fitness center. Ramone, 2006 WL 905347, at *1.
Ramone and Lang had learned independently that the Newark YWCA was for sale.
Both were interested, and they coincidentally ran into each other in the YWCA’s parking
lot. They discussed their interest in the property, but “nothing concrete came out of these
early discussions.” Id. at *2. Subsequently, without Ramone’s input or involvement, Lang
entered into an agreement to buy the YWCA for $1.4 million, conditioned on the property
being rezoned for commercial use. Id.
32
About a month later, Ramone and Lang began to discuss a possible business venture.
Id. at *3. During their discussions, they explored a series of possible deal structures. One
involved Ramone renting the pool facility from Lang. Id. Another involved Ramone
purchasing the pool facility and Lang retaining the rear portion of the property. Id.
Lang sent Ramone an email that identified proposed deal terms for a joint purchase
of the property and a lease to Ramone’s business. The email including the purchase price
for the property, estimated closing costs, and the key terms of the lease. Id. at *3. Ramone
was supposed to send Lang comments on the proposed deal structure. Id. Lang then sent
Ramone a proposed LLC agreement. Id. It called for Lang and Ramone to each own a 50/50
member interest in an LLC that would own the building and lease 85% of it to Ramone and
the rest to Lang. Id.
Later that month, Lang prepared two different descriptions of the deal. In each
version, Ramone and Lang were 50/50 members of an LLC that would own the property,
but the other terms of the deal varied. Id. Lang sent the proposals to Ramone and asked for
information to refine them, which Ramone did not provide. Over the next two months, the
parties continued to discuss different frameworks, including a new alternative in which
Ramone would acquire the property, and another in which Ramone would have no interest
in the property but would receive an option to buy the pool facility. Id.at *5.
The closest the parties came to an agreement was after a meeting on July 8, 2005,
when Lang sent Ramone an email proposing the following terms:
 Ramone and Lang would join a LLC on a 50% basis . . . ;
 Ramone would lease the building for $10 per square foot triple net;
33
 Lease payments would be held in an operating account only used for
capital needs if they occur;
 Ramone would have the option to buy out Lang’s 50% interest in the
LLC one year and one day after the closing for $150,000 plus any
equity that Lang put into the deal, approximately $70,000, for a total
purchase price of $1.55 million;
 Ramone would transfer the back parcel on the Property to Lang for
development; and
 Improvements to the building and pool would be completed in order
for both to be open by September 1 for use by Ramone.
Id. Ramone responded, “This sounds like what I am looking for. I do not understand the .
. . tax implications. I am also uncertain of some details concerning the additional parcel,
however I think we are close enough to warrant us getting this done.” Id. (internal quotation
marks omitted).
While seeking to have the property rezoned for commercial use, Lang represented
that he and Ramone were partners in the venture. Id. at *3. After Lang succeeded in
rezoning the property, he sent Ramone a new set of terms. It provided more detail about
the loan and the renovations. It also removed the buyout option. Id. at *6. Lang asked
Ramone to respond by week’s end. Id. Ramone never responded. Id.
Frustrated by Ramone’s silence, Lang had his lawyer tell Ramone that he would
only proceed with a deal that did not include a buyout option. Id. The lawyer gave Ramone
a firm deadline to respond. Id. Ramone did not respond. Instead, later that month, Ramone
and Lang briefly discussed a different structure that involved bringing in a third-party
investor and reducing the rent. Id. at *7. Lang hoped to finalize a set of documents, and he
asked Ramone to provide certain information to his attorney. After Ramone provided it,
34
Lang asked Ramone to address four other issues. Ramone responded, but did not comment
on the LLC agreement or the lease. Id. The parties never finalized the documentation, and
Lang closed on the property without Ramone. Id. at *9.
Considering these facts after trial, the court found that a binding agreement had not
been formed. Id. at *10. Ramone contended that he formed a contract by accepting Lang’s
email dated July 8, 2005. The court found that a reasonable person would not have
concluded from Ramone’s response that a contract had been formed:
[A]lthough in that email Ramone signals his general agreement in moving
forward on the structure Lang described, Ramone’s words in the email do
not reflect a commitment to the exact terms outlined by Lang—as reflected
in his caveats that he does not understand certain aspects of Lang’s proposal
and that he is uncertain about another aspect. Ramone’s own subjective and
after-the-fact view that this email was acceptance is not sufficient to prove
he manifested objective assent. In addition, through his suggestion that they
meet to finalize the details, Ramone’s response (e.g., that they were close
enough) indicates that further negotiation was needed in order for a contract
to have been created. Since acceptance is the ultimate step in making a
contract, the commitment cannot be conditioned on some final step to be
taken by the offeror.
Id. (internal quotation marks omitted). The court thus concluded that even if Lang’s email
was an offer, Ramone’s response was not an acceptance. Id at *11.
The court also found that the parties had not agreed on all material terms. The court
observed that “[n]egotiations continued throughout July, over various terms, including the
possibility of a buyout option, the amount of space Ramone would lease, and the price per
square foot.” Id. The continuing negotiations on substantive issues demonstrated that an
enforceable contract was not in place. Id. The court also noted that the idea of a third
investor was introduced late in the negotiations, which changed the entire deal structure.
35
Id. The court rejected the idea that the July 8 email reflected anything other than “a renewed
interest to negotiate a deal structure together of some sort.” Id.
As with Leeds, there are significant differences between this case and Ramone. Like
Leeds, Ramone was a post-trial opinion, and the court had the opportunity to consider
evidence and hear testimony. Id. at *1. Here, the defendants moved for summary judgment.
Even more so than Leeds, the facts in Ramone involved a complex deal structure.
One component of the arrangement contemplated an LLC in which Lang and Ramone
would be 50/50 members, but the similarities with this case end there. The transaction in
Ramone involved other components in which the parties’ interests were neither equal nor
aligned. Most notably, Ramone would lease a portion of the building and receive a non-
reciprocal option to acquire Lang’s interest in the LLC. If Ramone exercised the option,
then the LLC would transfer a portion of the property to Lang so that he could develop it.
Because the parties’ interests in these points were not aligned, the material terms of those
arrangements needed to be negotiated. The Iacono/Capano deal, by contrast, was a simple
50/50 joint venture. Unlike Ramone, this case did not involve multi-step bargaining.
The facts of Ramone also lacked evidence of an initial agreement between the
principals, comparable to the deal between Capano and Iacono. They reached broad
agreement on a 50/50 joint venture during their meeting at Kings Creek Country Club and
resolved the last issue by email. Ramone and Lang discussed a series of widely differing
deal structures, never zeroing in on any of them.
Finally, as in Leeds, the relationship between the parties was different. Lang and
Ramone were acquaintances, but not close friends. It was not credible that Lang and
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Ramone reached agreement on a complex deal structure that they kept recasting as their
discussions continued. Capano and Iacono were close friends who trusted one another.
Given their history together, Capano and Iacono could have reached agreement on a simple
50/50 joint venture.
As with Leeds, these distinctions do not mean that Ramone is not an instructive
precedent. What matters for present purposes is that Ramone does not support entering
judgment as a matter of law in the defendants’ favor.
c. Grunstein I
Rather than Leeds or Ramone, the more informative case is Grunstein I. There,
plaintiffs Leonard Grunstein and Jack Dwyer argued that they had reached an oral
agreement with defendant Ronald Silva to form a joint venture to acquire a large provider
of healthcare and rehabilitative services to the elderly that owned approximately 345
nursing home facilities throughout the United States. Grunstein I, 2011 WL 378782, at *1.
As in this case, Grunstein and Dwyer contended that they had reached agreement with Silva
on “a very simple partnership. Equal partners.” Id. at *2. As in this case, none of the terms
were memorialized in a signed writing. See id. As in this case, the parties did circulate
several documents that contemplated forming an LLC. See id. at *3–5.
As in this case, the parties in Grunstein I acted in conformity with the putative oral
agreement. There, they created three special purpose vehicles and caused them to enter into
a merger agreement to acquire the nursing home services company. See id. at *3. The
merger agreement was then amended to substitute entities that Silva controlled. See id. at
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*4. After closing, Silva refused to share ownership with the plaintiffs, claiming no
agreement existed. See id. at *2, 5.
The defendants moved for summary judgment, and the court denied the motion. Id.
*1. Viewing the evidence in the light most favorable to Grunstein and Dwyer, the court
found that the record could support the existence of a joint venture agreement. Id. at *10.
The court held that the existence of the unsigned LLC agreements did not prevent the
plaintiffs from proving the existence of a binding oral agreement, explaining that if “a
definitive oral agreement was reached initially, [then] since later documents were never
adopted, the initial agreement controls.” Id. at *10.
Grunstein I is informative for a series of reasons. First, Grunstein I and this case
share the same procedural posture—a motion for summary judgment. Second, at a high
level, they involve similar transaction structures, with principals agreeing among
themselves to form a joint venture that engages in a transaction with a third party. Third, if
anything, the facts in Grunstein I seem more likely to have supported a ruling that no
agreement existed as a matter of law than the facts in this case.
The greater complexity in Grunstein I extended to both the joint venture and the
third-party transaction. The putatively “simple partnership” was not so simple. There were
at least three and possibly four principals, making the arrangement inherently more
complicated. One of the principals was itself a major institution, the investment bank Credit
Suisse/First Boston. There was ostensibly a side agreement under which Credit Suisse
would provide a bridge loan in return for its equity interest, but that interest could be
converted into a fee arrangement. Id. at *3. There was also ostensibly a side deal under
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which Dwyer would secure long term financing in return for his interest, but he too could
convert his interest into a fee arrangement. Dwyer also maintained that he had the right to
a pre-paid fee as an advance on his compensation. Id. at *2. Grunstein and Silva were
supposed to invest cash in the deal. Id. at *4. It was not clear whether Dwyer participated
in the meeting at which the putative joint venture was formed. Id.
The nature of the third-party deal was even more complex. It involved the
acquisition of a major corporation for $2.2 billion. The parties contemplated financing the
deal through a combination of a short-term bridge loan, cash from the principals, equity
financing from third parties, and a special type of HUD-insured debt, which had to satisfy
certain regulatory requirements. The initial agreement with the third party was
subsequently amended on three occasions to revise its terms. See id.at *4-5. The third
amendment resulted in Grunstein’s interest in the joint venture being converted into a
carried interest. Id. at *9.
In contrast to the current case, there was no indication in Grunstein I that any of the
principals had the type of longstanding and trusting friendship that existed between Capano
and Iacono. Grunstein and Dwyer appeared to have invited Silva into the deal at the
suggestion of Credit Suisse. Id. at *2.
Despite far more complex facts in Grunstein I, the court denied the defendants’
motion for summary judgment, and the case went to trial. That ruling supports the denial
of the defendants’ motion for summary judgment in this case.
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4. Summary Judgment Denied On Count I
Viewed in the light most favorable to Iacono, the record could support a finding that
Capano and Iacono agreed on all material terms. Moreover, assuming for the sake of
argument that Iacono and Capano did not agree on all material terms, the evidence viewed
in the light most favorable to Iacono indicates that they agreed, at a minimum, on the
general structure of a joint venture and committed to negotiate in good faith over the terms
of an LLC agreement. An agreement to negotiate in good faith is itself an enforceable
agreement. See, e.g., SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330 (Del. 2013).
There are complexities to the analysis, such as the implications of Capano’s death, but there
is blackletter authority which indicates that an enforceable agreement to negotiate in good
faith could have been reached. See Restatement (Second) of Contracts § 262 cmt. b. (Am.
L. Inst. 1981); 17B C.J.S. Contracts § 691, Westlaw (database updated June 2020).
Viewed in the light most favorable to Iacono, the record could support a finding that
Capano and Iacono entered into an enforceable oral agreement. The defendants’ motion
for summary judgment must be denied.
B. The Plaintiffs’ Other Claims
The defendants did not move for summary judgment in their opening brief on any
claims other than Count I. In their reply brief, they asserted that if this court were to grant
summary judgment on Count I, then that holding “eviscerates the remaining claims” and
necessitates granting summary judgment on those as well. Dkt. 54 at 18. This court has not
granted summary judgment on Count I, and it is not possible to grant summary judgment
in the defendants’ favor on the other claims.
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III. CONCLUSION
The defendants’ motion for summary judgment is denied.
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