Alatus Aerosystems v. Triumph Aerostructures, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ALATUS AEROSYSTEMS, )
)
Plaintiff, )
)
v. ) C.A. No. N20C-12-038 EMD CCLD
)
TRIUMPH AEROSTRUCTURES, LLC )
and TRIUMPH AEROSTRUCTURES – )
TULSA, LLC, )
)
Defendants. )
Submitted: September 27, 2021
Decided: December 27, 2021
Upon Plaintiff’s Motion to Enforce Settlement Agreement, Motion to Dismiss Defendants’
Counterclaims, and Request for Attorneys’ Fees
DENIED
John L. Reed, Esquire, Kelly L. Freund, Esquire, DLA Piper LLP, Wilmington, Delaware;
Benjamin D. Schuman, Esquire, Harry P. Rudo, Esquire, DLA Piper LLP, Baltimore, Maryland.
Attorneys for Plaintiff Alatus Aerosystems.
Joelle E. Polesky, Esquire, Stradley Ronon Stevens & Young, LLP, Wilmington, Delaware;
Michael D. O’Mara, Esquire, Joseph T. Kelleher, Esquire, Stradley Ronon Stevens & Young
LLP, Philadelphia, Pennsylvania. Attorneys for Defendants Triumph Aerostructures, LLC and
Triumph Aerostructures – Tulsa, LLC.
DAVIS, J.
I. INTRODUCTION
This is a breach of contract case assigned to the Complex Commercial Litigation
Division of the Court. Plaintiff Alatus Aerosystems (“Alatus”) filed this action alleging breach
of contract against Defendants, Triumph Aerostructures, LLC and Triumph Aerostructures –
Tulsa, LLC (together, the “TAS Companies”). The TAS Companies filed their Answer,
Affirmative Defenses, and Counterclaims.
Alatus has filed a motion to enforce a settlement agreement, dismiss the TAS Companies’
counterclaims and for attorneys’ fees (the “Motion”). Alatus contends that the TAS Companies
agreed to a settlement and asks the Court to enforce that settlement. The TAS Companies
opposed the Motion. The Court held a hearing on the Motion on September 27, 2021. At the
conclusion of the hearing, the Court took the Motion under advisement. For the reasons set forth
below, the Motion is DENIED.1
II. RELEVANT FACTS
On August 22, 2018, Alatus and the TAS Companies entered into an agreement entitled
as the Contract Manufacturing Agreement (the “CMA”).2 Under the CMA, Alatus would
provide certain products to the TAS Companies.3 The TAS Companies would then incorporate
these products into aerospace structures the TAS Companies fabricated and assembled for
original equipment manufacturer customers.4
On April 3, 2020, Alatus sent a letter to the TAS Companies giving notice of a Force
Majeure Event under Section 23.21 of the CMA.5 The letter states that “[d]ue to the ongoing
COVID-19 pandemic, Alatus is presently unable to perform its obligations to the [TAS}
Companies under the CMA.”6 Alatus has not rescinded its invocation of the Force Majeure
Event, but the CMA remains in effect and the parties continue to perform under it.7
1
The Court’s finding on the first form of relief—the request to enforce a settlement—guides the Court’s decisions
on the TAS Companies’ counterclaims and the request for attorneys’ fees and costs. This Decision only addresses
the first question. The Court is denying the Motion as to enforcing the settlement so the Court will not (i) dismiss
the counterclaims and (ii) award attorneys’ fees and costs.
2
Compl. ¶¶ 10-12.
3
Id. ¶ 13; Defendants’ Brief in Opposition to Plaintiff’s Motion to Enforce Settlement Agreement, Motion to
Dismiss Defendants’ Counterclaims, and Request for an Award of Attorneys’ Fees, at 6 (hereinafter referred to as
“Opp.”).
4
Id.
5
Compl. ¶ 18.
6
Id.
7
Id.
2
In the fall of 2020 Alatus and the TAS Companies, together with their respective counsel,
commenced negotiations regarding their disagreements (i) relating to the CMA and (ii) other
non-CMA-related matters.8 The parties were represented by counsel during the negotiations—
Stephen Ballas, of DLA Piper, for Alatus and Frederick V. Geisler, in-house counsel, for the
TAS Companies.9 On October 1, 2020, Mr. Geisler and TAS Companies executives met in
person with Alatus and its counsel to discuss a global settlement of the parties’ disputes.10 After
a series of proposals and counterproposals, the parties failed to reach an agreement on October 1,
2020. Based on the discussions that day, however, Mr. Geisler prepared a draft settlement
agreement and sent it to Mr. Ballas on October 9, 2020.11
Between October 12, 2020, and October 16, 2020, Alatus did not comply with its
delivery obligations and the TAS Companies canceled certain deliverables under Purchase
Orders previously submitted to and accepted by Alatus.12 During the months of October and
November, the parties continued to negotiate.13 On November 24, 2020, after subsequent
meetings and negotiations, Mr. Ballas sent a counterproposal to Mr. Geisler.14
After failing to come to an agreement, Alatus filed the Complaint on December 3, 2020.15
Even after the filing of the Complaint, the parties continued to negotiate. On December 18,
2020, the TAS Companies, requested to extend the deadline to respond to Alatus’s Complaint “in
light of the current settlement negotiations and the upcoming holidays” to January 19, 2021.16
8
Id. ¶ 19.
9
Opp. at 7.
10
Id.
11
Id. at 8.
12
Answer ¶ 20.
13
Compl. ¶¶ 21-26.
14
Opp. at 8.
15
D.I. No. 1.
16
Opp. at 9; Declaration of Joseph T. Kelleher (hereinafter “Kelleher Decl.”) ¶ 6, Ex. A.
3
Alatus agreed.17 On January 18, 2021, the TAS Companies requested a further extension stating
“I understand that our clients are working to settle this matter.”18 Alatus also agreed to this
request.19 On January 29, 2021, the TAS Companies filed their Answer, Affirmative Defenses,
and Counterclaims of Defendants (the “Answer”).20
The following outlines the purported communications and status of the negotiations after
the commencement of the Complaint:21
• December 10, 2020: 11:11 a.m.: Email from Mr. Geisler to Mr. Ballas in which the
parties’ disputes would be “best resolved through a negotiated settlement” and set forth
the details of a proposed purchasing framework, noting that the terms were “subject to
agreement on the definitive terms of a settlement agreement.”
1. The TAS Companies agree to pay Alatus open accounts receivables valued at $3.5
million as of 12/2/20 upon execution of a settlement agreement.
2. The TAS Companies will purchase $3.456 million of additional parts identified on
the attached excel spreadsheet from Alatus, with payment due ten days after delivery
of all parts in category 2 and 3.
a. $2.056 million is past/due by 12/31/20
b. $1.399 million is due between Jan – March 2021
3. The TAS Companies will also purchase the parts identified on the tab “WIP Items –
Buy as Finished Goods” with the approximate value of $37k upon Alatus’ completion
of those parts which are currently identified as WIP. Payment due ten days after
delivery of all parts in category 2 and 3.
4. The TAS Companies will purchase the raw materials identified in Alatus’ November
25, 2020 spreadsheet (which identifies those goods as having a value of $2.713
million) for the sum of $2.713 million, with payment due ten days after delivery of all
of the raw material to the TAS Companies. If less than the full amount of the raw
material identified on Alatus’ November 25 spreadsheet is delivered, the price will be
reduced accordingly.22
• December 10, 2020: 6:48 p.m.: Email from Mr. Ballas to Mr. Geisler in which Mr. Ballas
proposed the following changes to the email sent earlier that day and adds two terms.
17
Opp. at 9.
18
Kelleher Decl., ¶ 7, Ex. B.
19
Id.
20
D.I. No. 6.
21
Unless indicated otherwise, the series of these emails appear in the Declaration of Stephen Ballas (hereinafter
“Ballas Decl.”) (Exs. A-G).
22
Ballas Decl. at Ex. B.
4
1. Notes that the terms are acceptable to Alatus and states to “See also #4 below for the
additional payment due upon execution of the settlement agreement.”
2. Notes that the terms are acceptable to Alatus, “except that (1) delivery is FOB Alatus
and (2) the $3.456M must be delivered (upon execution of the settlement agreement)
into an escrow with DLA Piper for Alatus to draw upon as and when it delivers (FOB
Alatus) the parts. See also #3 below for the additional $37k to go into this escrow.”
3. Notes that the terms are acceptable to Alatus “except that (1) delivery is FOB Alatus
and (2) the $37k must be delivered (upon execution of the settlement agreement) into
the escrow in #2 above, for Alatus to draw upon as and when it delivers (FOB Alatus)
the parts.”
4. Notes that the terms are acceptable to Alatus “except that (1) the purchase price for
these materials is $3M (flat) and (2) delivery is FOB Alatus. Because it is FOB
Alatus, Triumph may arrange for pickup at any time, such that Alatus expects this
payment together with the payment in #1 above upon execution of the settlement
agreement.”
5. “[The TAS Companies] cannot place any new orders under the CMA, and the CMA
terminates entirely upon the last delivered order in #2 and #3 above.”
6. Full mutual releases of all claims.
7. Mr. Ballas specifies that the offer expires at 5pm Pac on Friday 12/11/2020 and is
subject to a definitive settlement being signed up by 12/31/2020.23
• December 28, 2020: 8:36 p.m.: Email from Mr. Ballas to Mr. Geisler which
includes a settlement proposal to the TAS Companies that states “Here is Alatus’s
response to your last settlement proposal and our follow-up conversation on this
topic on 12/11. Note that:
1. I believe this conforms in all material respects to our 12/11 discussion.
2. We have accommodated your inspection/validation as well as cash-timing
needs.
3. To bring the total settlement value to $10m, we are including within the sale
Alatus’s tooling used in Triumph’s programs.
This is in lieu of your offer to include an extra $300k in POs.
We want to sign up the settlement agreement in 2020, even if Triumph doesn’t fund
the escrow with DLA until a few days later. To that end, I will proceed to revise
23
Id.
5
the draft settlement agreement that you sent me on 10/9/20 to conform to this
proposal. I will send that thru to you in the next day.24
• January 5, 2021: 1:18 p.m.: Email from Mr. Ballas to Mr. Geisler with a new
draft settlement agreement and wrote:
“Further to my email last week: We have now drafted the accompanying settlement
agreement that matches our most recent writeup. See attached. I used your prior
draft settlement agreement as my starting point, but I obviously reworked it to
reflect a substantially different business deal. Given this, I don’t think a blackline
is helpful and so haven’t attached one.
What is your ETA to discuss and advance this?”25
• January 7, 2021: 3:07 p.m.:26 Email from Mr. Ballas to Mr. Geisler that relays
Alatus’s position on four unresolved points raised by the TAS Companies on a
phone call earlier the same day: (1) tooling; (2) partially finished raw materials;
(3) raw materials still on order; and (4) an escrow arrangement for open orders.27
• January 13, 2021: 2:45 a.m.:28 Email from Mr. Ballas to Mr. Geisler with
additional in-line comments regarding Alatus’s position on points addressed in his
January 7, 2021 email. The in-line comments include multiple requests for lists
and more information. The email reads:
“Further to our discussion earlier today, see CAPS BELOW. I’ve tried to capture
both the [TAS Companies] proposal as well as the Alatus response.
I believe we are now agreed in principle on all material points, subject to the parties’
signing a definitive settlement agreement reflecting all of this. What is your ETA
to review and revise the draft settlement agreement that I previously sent thru?”29
• January 13, 2021: 2:27 p.m.: Email from Mr. Geisler to Mr. Ballas that responds
and states that he was “tied up today but will endeavor to get to it tomorrow and
get something back to you by either Friday or Monday.”30
• January 13, 2021: 2:46 p.m.: Email from Mr. Ballas to Mr. Geisler about thirty
minutes after receiving the email stating that Mr. Geisler was tied up and asked
for clarification writing:
24
Id.
25
Id.
26
Although not significant to the present matter, the Court notes that in Ballas Decl., Ex. B this email is
timestamped for 6:07 AM while in Ballas Decl., Exs. C-F this email is timestamped for 3:07 PM.
27
Ballas Decl., Ex. B.
28
Also not significant to the present matter, the Court notes that in Ballas Decl., Ex. C this email is timestamped for
3:45 AM while in Ballas Decl., Exs. D-F this email is timestamped for 2:45 AM.
29
Ballas Decl., Ex. C.
30
Ballas Decl., Ex. D.
6
“Ok, will stand by. Point of clarification btw, which has always been the intent from
our perspective. But, I want to make sure no disconnects on it.
That is, this settlement is the ‘global resolution’ of all pending disputes and
outstanding payments owed back and forth as between the parties. By this, I mean
that the settlement supersedes/wipes out all Alatus AR that Triumph owes Alatus,
and also wipes out all Alatus AP that Alatus owes Triumph.
Is that your understanding as well?”31
• January 13, 2021: 2:58 p.m.: Email from Mr. Geisler to Mr. Ballas less than ten
minutes later stating: “Yes.”32
• January 21, 2021: 5:59 p.m.: Email from Mr. Geisler to Mr. Ballas with TAS
Companies’ counterproposal set forth in a new draft settlement agreement.33 The
main way this proposal varied from previous agreements was that it conditioned
the release of the TAS Companies’ claims against Alatus upon Alatus’s
completion of deliveries of products to the TAS Companies.
Counsel from both parties spoke on the phone about the counterproposal the next day.34
• January 22, 2021: 5:01 p.m.: Email from Mr. Ballas to Mr. Geisler noting several
ways in which the revised settlement varied from previous drafts and the
conditions Alatus had to continue to work on the settlement, noting that in the
absence of a response by the following Monday, Alatus would resume its efforts
in the Delaware litigation.35 The email states in part:
1. Your revised Settlement Agreement varies in several material respects from the
parties’ agreement in principle. That’s frustrating and wasted weeks of Alatus’s
time. Alatus also agreed to postpone the Delaware litigation based on the
understanding that there was already agreement in principle. A few examples
where your new proposal deviates:
a. The mutual releases were to be effective immediately. You have now
restructured it such that Alatus’s release of Triumph is effective
immediately, whereas Triumph’s release of Alatus is effective only
when Alatus delivers the last remaining order.
b. The releases were to be fulsome in both directions, i.e., ‘anything and
everything’ was to be released. Although your drafting isn’t totally clear
31
Ballas Decl., Ex. E.
32
Ballas Decl., Ex. F.
33
Declaration of Frederick V. Geisler (hereinafter “Geisler Decl.”), Ex. 5.
34
Geisler Decl. ¶ 21.
35
Ballas Decl., Ex. G.
7
to me, the release now appears limited to the CMA, the M&A
agreement, the G650 LTA (but only the two remaining spar obligations)
and the discrete list of disputes relating to those items (e.g., the working-
capital dispute, the tax disputes, the Fives dispute, etc.). Also, all AR/AP
between the parties – in both directions - was to be wiped out, per our
email exchange on this topic.
2. That said, we will work with your new proposal in the interests of resolving
this. But, before we commit further time to this endeavor, please confirm your
agreement in principle to the following: . . .
3. We need a response from you on #2 above by 8am Pacific on Monday morning.
After that, we will resume our efforts on the Delaware litigation. In the
meantime, Alatus is reviewing your Excel item by item to confirm it/provide
the delivery dates, and is also pulling the POs for all raw materials on order per
your request.36
The TAS Companies did not respond to Alatus’s demand. The TAS Companies, a week
later, filed the Answer.
After the TAS Companies filed the Answer, the parties continued to discuss settlement
terms and exchanged further competing proposals, but failed to come to any agreement.37 On
May 27, 2021, the TAS Companies sent a notice of termination and notice of setoff, asserting
that they had a right to terminate the CMA for cause.38 On June 4, 2021, Alatus responded to the
TAS Companies termination letter and argued that: (i) the parties had reached a binding
settlement agreement in January 2021, and (ii) the TAS Companies had breached the settlement
agreement and were not entitled setoff.39
On June 23, 2021, Alatus filed the Motion.40
36
Id. (emphasis added).
37
Kelleher Decl., Ex. C, Ex. D, Ex. E.
38
Kelleher Decl., Ex. F (5/27/2021 Notice of Termination).
39
Kelleher Decl. Ex. G.
40
D.I. No. 7.
8
III. PARTIES’ CONTENTIONS
A. THE MOTION
Alatus argues three main points. First, Alatus contends that the settlement agreement’s
terms are those contained in the draft settlement agreement sent by Plaintiff to Defendants on
January 5, 2021, as modified by the parties’ discussions between January 5, 2021, and January
13, 2021 (collectively, the “January 2021 Agreement”), and that the Court should enforce that
agreement. Alatus claims that the January 2021 Agreement contained all material terms and as
such was immediately binding. Second, Alatus asks the Court to dismiss the Answer with
prejudice because of the January 2021 Agreement. Third, Alatus, argues that the Court should
award attorneys’ fees and costs to Alatus related to the filing and prosecution of the Motion.
B. THE OPPOSITION
The TAS Companies assert that the parties did not reach a binding settlement agreement
in January 2021. The TAS Companies contend that the parties did not intend to be bound for
two main reasons. The TAS Companies claim that the contemporaneous and subsequent
negotiations demonstrate a lack of assent to be bound. The TAS Companies additionally argue
that the settlement was contingent on the execution of a written agreement. The TAS
Companies, therefore, assert that Alatus has no basis to seek dismissal of the Answer.
IV. DISCUSSION
A. LEGAL STANDARD
“Delaware courts favor the negotiated settlement of contested legal disputes and enforces
them as contracts.”41 “Whether or not a settlement agreement was reached is a fact intensive
41
Delphi Petroleum, Inc. v. Magellan Terminal Holdings, L.P., 2020 WL 1972857 at *5 (Del. Super. Apr. 23, 2020)
(citing Clark v. Ryan, 1992 WL 163443, at *5 (Del. Ch. June 12, 1992)).
9
inquiry.”42 “Settlement agreements are binding where the parties agree to all the material terms
and intend to be bound by that contract, whether or not the contract is in writing.”43
“A party seeking to enforce a purported agreement has the burden of proving the
existence of a contract by a preponderance of the evidence.”44 In determining if the movant has
met its burden, the Court must ask:
whether a reasonable negotiator in the position of one asserting the existence of a
contract would have concluded, in that setting, that the agreement reached
constituted agreement on all of the terms that the parties themselves regarded as
essential and thus that that agreement concluded the negotiations and formed a
contract.45
“Under Delaware law, determining whether the parties reached a binding contract to settle
requires an examination of the parties’ overt manifestations of assent.”46 “It is this objective
manifestation that controls the question of whether an agreement was reached on all material
terms.”47
B. THE COURT FINDS THAT THE JANUARY 5-13 EMAILS AND OFFER DID NOT CONTAIN
ALL OF THE TERMS ESSENTIAL TO AN AGREEMENT
Alatus contends that no material terms were in dispute after the January 13, 2021 email
sent at 2:45 a.m. Alatus notes that this email included in-line responses to the January 7, 2021
email. Alatus argues that conversations capturing both parties concerns about tooling, partially
finished raw materials, raw materials still on order, and escrow for open orders were all settled
and agreed to based on the parties’ communications. Most importantly, Alatus claims that the
parties agreed to full mutual releases and that these releases would be effective immediately.
42
Delphi, 2020 WL 1972857 at *2.
43
Id. at *5 (citing Schwartz v. Chase, 2010 WL 2601608, at *4 (Del. Ch. June 29, 2010)).
44
Id. (citing Schwartz, 2010 WL 2601608 at *4).
45
Schwartz, 2010 WL 2601608, at *4 (quoting Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1097 (Del. Ch.
1986)).
46
Delphi, 2020 WL 1972857, at *6 (citing Schwartz, 2010 WL 2601608, at *4).
47
Id. (citing Spacht v. Cahall, 2016 WL 6298836, at *2 (Del. Super. Oct. 27, 2016)).
10
The TAS Companies disagree and assert that open issues remained, including final
disposition of tooling and raw material, the escrow arrangement for open orders, and the timing
and conditions of the parties’ releases. The TAS Companies rely on their email communications
to demonstrate the parties’ disagreement on these material issues. The TAS Companies argue
that agreement on these issues, particularly the timing and conditions of releases, were essential
to any settlement as it was necessary to compel Alatus’s performance and ensure the TAS
Companies could meet its obligations to its customers. The TAS Companies further contend that
Mr. Ballas’s emails stating that immediate mutual releases were a contingency of the deal,
demonstrates the materiality of the releases.
Under Delaware law for a settlement agreement to be binding, the parties must have
agreed to all material terms and intend to be bound by the agreement.48 In Leeds v. First Allied
Connecticut Corp., the Court of Chancery held that despite the presence of agreement in a signed
letter on major terms of the sale of a business and its associated real estate, no contract was
formed.49 Specifically, the Court of Chancery noted that “there are myriad topics and terms
utterly conventional when a commercial seller in a significant transaction takes back a note” that
were not present in the purported agreement.50 Leeds is instructive on the question of when
negotiations are complete and a contract has formed. The Court of Chancery explains:
Until it is reasonable to conclude, in light of all of the [] 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.”51
48
Delphi, 2020 WL 1972857, at *2.
49
Leeds, 521 A.2d at 1102-03.
50
Id. at 1103.
51
Id. at 1102.
11
Just as in Leeds, the Court finds that there are missing terms which indicate that negotiations
were not complete and that a contract had not been formed during the January 5-13
communications.
Alatus points to the January 5, 2021, written agreement which states “hereby jointly and
severally immediately releases and forever discharges” for support of the conclusion that the
parties agreed on that term. Further, Alatus notes that it was over a week, on January 21, 2021,
when they were first aware that the TAS Companies had taken an alternative position on this
point. However, in Mr. Ballas’s January 13, 2021 2:45 a.m. email, Mr. Ballas notes that
“FINALLY, YOU SAID EARLIER THAT ALATUS IS ALREADY PAST DUE ON SOME
OPEN ORDERS, AND THAT YOU NEEDED A NEW ‘COMMITTED DELIVERY DATE’
FROM ALATUS ON THOSE ORDERS. PLEASE PROVIDE THIS LIST OF ORDERS AS
DISCUSSED, AND ALATUS WILL THEN PROVIDE THE NEW COMMITTED DELIVERY
DATES.”52 This sentence indicates that Alatus was aware of the TAS Companies concerns
regarding past due orders and that this term of the agreement was outstanding. Additionally,
when the TAS Companies sent their counterproposal on January 21, 2021, Mr. Ballas responds
on January 22, 2021, noting that:
Your revised Settlement Agreement varies in several material respects from the
parties’ agreement in principle. . . . A few examples where your new proposal
deviates:
a. The mutual releases were to be effective immediately. You have now
restructured it such that Alatus’s release of Triumph is effective immediately,
whereas Triumph’s release of Alatus is effective only when Alatus delivers the
last remaining order. . .53
52
Ballas Decl., Ex. C.
53
Ballas Decl., Ex. G.
12
This email, and the TAS Companies counterproposal, demonstrate that the TAS Companies were
not in agreement on the effective date of the release. Mr. Ballas appears to be aware that the
TAS Companies had questions about past due open orders, and that these remaining deliveries
could disrupt an agreement as to the timing of the mutual releases. As such, the January 5, 2021,
proposal (with the conditions discussed in the January 5-13 emails) did not contain all terms
essential to a settlement agreement.
C. THE PARTIES DID NOT INTEND TO BE BOUND
Even if the Court were to find that the January 5-13 emails contained all essential terms
to the agreement, the Court cannot hold that an enforceable settlement agreement existed unless
the TAS Companies and Alatus intended to be bound by that agreement.
In Eagle Force Holdings, LLC v. Stanley V. Campbell, the Supreme Court elaborated on
the conclusions in Leeds and further explained the importance of all essential or material terms
being agreed to prior to a court finding the parties intended to be bound noting:
Though Leeds concerned a letter of intent, common sense suggests that parties to a
sophisticated commercial agreement, let alone any agreement, would not intend to
be bound by an agreement that does not address all terms that they considered
material and essential to that agreement-a different inquiry than whether these terms
are sufficiently definite. As such, all essential or material terms must be agreed
upon before a court can find that the parties intended to be bound by it, and thus,
enforce an agreement as a binding contract. 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.54
Accordingly, the Court must find that all essential or material terms have been agreed upon
before finding that the parties intended to be bound.
The question of whether the parties intended to be bound by the contract “looks to the
parties’ intent as to the contract as a whole, rather than analyzing whether the parties possess the
54
Eagle Force Holdings, LLC v. Stanley V. Campbell, 187 A.3d 1209, 1230 (Del. 2018).
13
requisite intent to be bound by each particular term.”55 “Under Delaware law, ‘overt
manifestation of assent—not subjective intent—controls the formation of a contract.’”56 When
applying this objective test to determine “whether the parties intended to be bound, the court
reviews the evidence that the parties communicated to each other up until the time that the
contract was signed . . .”57 “Delaware courts have also said that, in resolving this issue of fact,
the court may consider evidence of the parties’ prior or contemporaneous agreements and
negotiations in evaluating whether the parties intended to be bound by the agreement.”58
Alatus contends that the parties clearly intended to be bound. The TAS Companies claim
that the parties did not intend to be bound for two main reasons. First, the TAS Companies argue
that the contemporaneous and subsequent negotiations demonstrate a lack of assent to be bound.
Second, the TAS Companies note that the settlement was contingent on the execution of a
written agreement.
i. Contemporaneous Conduct and Communications
Alatus argues that the parties’ agreement to extend the TAS Companies deadline to file a
responsive pleading until January 29, 2021, reinforces an understanding between the parties that
the agreement was final. Additionally, Alatus asserts that the January 13 email correspondence
is evidence of assent. The TAS Companies disagree, claiming that the parties’ contemporaneous
conduct and communications belie the existence of an enforceable settlement agreement.
55
Id. at 1229.
56
Black Horse Capital, LP v. Xstelos Holdings, Inc., 2014 WL 5025926, at *12 (Del. Ch. Sept. 30, 2014) (quoting
Indus. Am., Inc. v. Fulton Indus., Inc., 285 A.2d 412, 415 (Del. 1971)).
57
Eagle Force, 187 A.3d at 1229.
58
Id. at 1230.
14
1. Extension for Response
The email extending the deadline for a response from the TAS Companies does not
support the theory that there was a shared understanding that the agreement was final. The Court
thinks it is unclear—when looking at the emails about extensions of deadlines and the parties’
subsequent actions—that the parties intended to be bound.
On January 18, 2021, the TAS Companies contacted Alatus requesting an extension and
noting “that our clients are working to settle this matter.”59 Alatus argues that it agreed to this
extension because it believed that it indicated the parties had reached a final settlement
agreement. The course of negotiations contradicts this notion because this was not the first
extension Alatus agreed to “in light of [] current settlement negotiations.” On December 19,
2021, Alatus agreed to the first extension for the same reasons.60 At neither point did the parties
indicate that there would be an extension because there was a final settlement.
2. January 13, 2021, Email Exchange
Similarly, Alatus’s argument that the January 13 email indicates intent to be bound is not
clear. On January 13, 2021, Mr. Ballas indicates that he has attempted to capture both parties’
perspectives and states that he believes they “are now agreed in principle on all material
points.”61 However, he clarifies that it is “subject to the parties’ signing a definitive settlement
agreement” and asks Mr. Geisler when he estimates he will have time to review and revise the
draft settlement agreement that he previously sent.62 The question of reviewing and making
59
Kelleher Decl., Ex. B.
60
Kelleher Decl., Ex. A.
61
Ballas Decl., Ex. C.
62
Id.
15
revisions seem to demonstrate that neither Alatus nor the TAS Companies viewed the parties’
communications as “concluding negotiations and forming a contract.”63
Further, Mr. Geisler responds by indicating he is tied up and says he “will endeavor to get
to it tomorrow and get something back to [Mr. Ballas] by either Friday or Monday.”64 The Court
finds that this also demonstrates that the parties understood that the agreement still needed
revisions which would not be complete until at the earliest later that week.
Alatus argues that its January 13, 2021 email, sent at 2:46 PM, supports its contention
that the parties intended that draft of the settlement agreement to be the final draft. Alatus
contends that the email states “this settlement is the ‘global resolution’ of all pending disputes
and outstanding payments owed back and forth as between the parties. . . . Is that your
understanding as well?”65 The TAS Companies respond with a “Yes.”66 Despite this contention,
in the same email Mr. Ballas makes clear that he is simply asking a question for clarification
about the intention of the parties in the negotiation process, not asking for agreement on the
proposal.67 In fact, Mr. Ballas’ previous email indicates that he was waiting on feedback from
Mr. Geisler.68
Alatus provides the Court with caselaw supporting its position; however, the facts here
differ significantly from those. In Alatus’ cases, assent or agreement to the contract was express
and the question for the Courts remained whether the nature of the assent (generally oral) was
sufficient to bind the parties. In Loppert v. Windsortech, Inc., the party stated “we have a deal at
1.1 million options,” to which the other party responded “good – I’ll let the company know.”69
63
Leeds, 521 A.2d at 1097.
64
Ballas Decl., Ex. D.
65
Ballas Decl., Ex. E.
66
Ballas Decl., Ex. F.
67
Ballas Decl., Ex. E.
68
Ballas Decl., Ex. C.
69
Loppert v. Windsortech, Inc., 65 A.2d 1282, 1285 (Del. Ch. 2004).
16
In Sarissa Capital Domestic Fund LP v. Innovita, Inc., parties “confirmed they ‘had a deal.’”70
In Whittington v. Dragon Group LLC, the parties did not “dispute that the parties reached a
settlement agreement on all material terms.”71 Finally, in the case of Delphi, the parties told the
court they were “settled in principle” and each threatened to enforce the agreement.72
Here, the sole communication which Alatus relies on to support the position that the
parties were entirely in agreement and manifested assent is the one-word “Yes” email. While
Alatus may have intended to be bound, the facts do not support the notion that the TAS
Companies intended to be bound.
3. Subsequent Conduct
In Leeds, the Court discusses the significance of the subsequent conduct of the parties on
the formation of a contract. There, the Court of Chancery found the subsequent conduct of the
parties demonstrated they did not intend the letter to be the completion of all negotiations.73 The
parties met a month after the purported agreement for additional negotiations and “could agree
on virtually nothing.”74 Thus, the Court of Chancery held that the original purported agreement
was an agreement on certain terms, but it was not intended to be the final contract.
Similarly, the conduct of the TAS Companies and Alatus since the purported January
2021 Agreement is inconsistent with the notion that an enforceable settlement had been reached.
For example, after the TAS Companies provided a competing draft settlement agreement that
materially differed from Alatus’s January 2021 proposal, Alatus stated they would “work with
[the TAS Companies] new proposal in the interests of resolving this.”75 The TAS Companies
70
Sarissa Capital Domestic Fund LP v. Innovita, Inc., 2017 WL 6209597, at *3 (Del. Ch. Dec. 8, 2017).
71
Whittington v. Dragon Grp. LLC, 2013 WL 1821615, at *3 (Del. Ch. May 1, 2013).
72
Delphi, 2020 WL 1972857, at *8.
73
Leeds, 521 A.2d at 1100.
74
Id.75
Ballas Decl., Ex. G.
17
filed the Answer a week later, and Alatus did not argue that the TAS Companies had already
settled or seek to enforce any previous settlement until the filing of the Motion.
Since January 2021, when Alatus argues the parties reached a binding agreement, both
parties have exchanged competing settlement proposals with materially different terms. Like the
parties in Leeds, Alatus and the TAS Companies conduct after January 2021 does not support the
notion that they had both intended to be bound by the terms of the January 2021 settlement
agreement.
ii. Contingency on the Execution of a Written Document
The TAS Companies contend that it did not intend to be bound by an agreement absent a
signed definitive contract.
The law in Delaware on this issue is clear:
Where all the substantial terms of a contract have been agreed on, and there is
nothing left for future settlement, the fact, alone, that it was the understanding that
the contract should be formally drawn up and put in writing, did not leave the
transaction incomplete and without binding force, in the absence of a positive
agreement that it should not be binding until so reduced to writing and formally
executed.76
If the Court were to find that the parties’ actions were in fact significant enough that they
constituted “all the substantial terms of the contract” with “nothing left for future settlement,”
then it is the job of this Court to determine whether the parties “positively” agreed to condition
the settlement on the execution of a written agreement.
Alatus has correctly identified the controlling cases of Delphi and Sarissa Capital;
however, the facts differ in a meaningful way from both cases. In Delphi the parties had agreed
on all material aspects of the agreement and the only outstanding matter was whether the
76
Delphi, 2020 WL 1972857, at *5 (citing Loppert, 865 A. 2d at 1287) (quoting Universal Products Co. v.
Emerson, 179 A. 387, 394 (Del. 1935)).
18
settlement agreement was contingent on the execution of a written document.77 As discussed
above, the parties had several outstanding matters to discuss. As such, the matter of whether the
parties positively agreed to condition the settlement on the execution of a written agreement is
not necessary.
In Sarissa Capital, the parties had been negotiating back and forth verbally with the
intention of reducing their talks to writing.78 One of the parties drafted a settlement agreement
and press release which did not provide that it would become effective only upon signature.
Shortly after sending over the draft the parties verbally agreed to the contract.79 The Court found
that these facts did not indicate that the parties “positively agree[d] that such agreement should
not be binding until so reduced to writing and formally executed.”80
Here, unlike in Sarissa Capital, the written agreement that Alatus purports to be a final
settlement agreement does include the condition that the parties sign an agreement for it to be
final. On January 13, 2021, Mr. Ballas from Alatus emailed the TAS Companies stating that he
believes they “are now agreed in principle on all material points” but qualifies the agreement by
noting that it is “subject to the parties’ signing a definitive settlement agreement.”81 This
indicates that Alatus designated a subsequent writing as a necessary precondition to being bound.
Because the substantial terms of the contract had not been agreed upon and given the
precondition of a signed definitive settlement agreement, the Court finds that settlement was
contingent—or subject to—Alatus and the TAS Companies signing a settlement agreement.
77
Delphi, 2020 WL 1972857, at *6.
78
Sarissa Capital, 2017 WL 1821615, at *23.
79
Id.80
Id. at *24.
81
Ballas Decl., Ex. C.
19
Beyond conditioning settlement on a written agreement, Alatus believed there was no
settlement agreement as of January 22, 2021. In an email, Mr. Ballas, in part, writes:
We need a response from you on #2 above by 8am Pacific on Monday morning.
After that, we will resume our efforts on the Delaware litigation. In the meantime,
Alatus is reviewing your Excel item by item to confirm it/provide the delivery
dates, and is also pulling the POs for all raw materials on order per your request.82
Mr. Ballas is setting a deadline for the TAS Companies to provide whether there is a
settlement and asserting that if no response is received then Alatus would resume this
litigation. The TAS Companies did not respond with an email. Instead, the TAS
Companies filed the Answer.
The Court cannot find there was an agreed upon settlement with this record.
Accordingly, the Court denies the Motion.
V. CONCLUSION
For the reasons set forth above, the Court DENIES the Motion.
Dated: December 27, 2021
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
cc: File&ServeXpress
82
Id. (emphasis added).
20