## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N os. 10

- 3278 & 10

- 3475 P ETER D EN ILa nd G ERAL D N ARDELL A, P la intif fs-A pp ella nts, C ross-A pp ellees , v.

DE B OER, I NC ., e tal ., D efend a nts-A pp ellees, C ross -App el lants

.
A pp ealsfr o m the United S t ates Di strictC our t fo r the Western Di stricto f Wisc onsin
. No . 09 -cv-470 -bb c

—Barb ara B. C rab b , Ju dge .
A RG UE D A PRI L 1, 2011

— D ECI DE D M AY 13, 2011

Befo re E A S T E RB R OO K, Chi e f Judg e, a nd B AUERa nd E VANS, C ircu it Judges . E A S T E RB R OO K, Chi e

f Judg e . R o na l d D e Bo er st a r t e d a t r u c k i n gb u s i n e s s , d e B o e r T r a n s p o r t a t i o n, i n 1 9 6 7
. He an d o therm em ber s o fhi s f am i l y m anage d i t for40 ye ar s, but by20 07 he wanted to sel l the busin es s an d ret i re .2 N os. 10

- 3278 & 10

- 3475 (T h er e w er e t h en th re e a f f iliat ed firm s: d eB oe r, Inc .; d eB oe r T ra n sp or ta tio n Inc .; an d d eB oe r C ap ita l A ss oc iate s Inc. ; we re ferto t h em col l ecti vel y a s deBoer

. ) A fter on e p ot en tia l sa le fe ll th ro u gh , P e t er D en il an d G er ald N ar d ella p ro p os ed to ta ke ov er m an ag em en t o f th e b u sin e s s an d p re p ar e itfor s ale to an ou ts id e in ve st or w ith in fi ve yea rs . Ronald D eB oerwas re cepti ve. The part i es s i g ne d two c o nt r a c t s a nd n e g o t i a t e d t o wa r d a thi r d. T h e firs t c o n t r ac t w as an em p loy m en t a gr ee m en t. It m ade De ni l the CEO o fde Bo era nd Nar del l a th e ex ec uti ve vi ce pr esi dent ofo perat i ons. Thi s contr act too k e ffect in O c to b er 20 0 8 ; D en il an d N ar d ella as su m ed th eir p os iti ons i m m edi ate l y. deBoerhel d th e r i ght t o disc harg e Den i l a nd Nar del l a wi tho r wi th o ut c au se , b uti fthe disc harg e was witho ut cause they were enti tl ed to extr a paym ents. The s ec ond contr act, a sto ck- pu rchas e a gr eem ent that al so was s i g ne d i n Oc tobe r 2 00 8, c all ed f o r De ni l t o b uy 4% o fdeBoer ’ s s to c k for$5 00, 000, and f orN ar del l a t o buy 2% f or$2 50, 000. The cl osi ng date w as A pri l 15 , 20 09, o r whenever th e th i r d c o nt r ac t was s i g ne d, i fe ar l i er . The parti es agr eed thatf ai lu re to purchase the sto ck by A p ril 1 5 , 2009, w ou ld be “c au se” for term inating D en il ’s an d Nar del l a’ s empl o y m en t. The y a l so a g r ee d tha t th e si gni ng o fthe thi rd co ntra ct

— a buy- sel l ag re em ent, c o mmo n w h e n o u t s i d e r s ac q u i r e s h a r e s o ff a mi l y fi r ms oro thercl ose l y hel d busi nesse s

— w ou ld be a co nd i ti on pr ecedent to the obl i gat i on t o pu rchas e the 4% and 2% i nter est s. The sto ck- pu rchas e contr act conta i ned a c l ause i n w hi ch the parti es prom i sed to use thei r besteff or ts to concl ud e the buy- sel l co ntra ct.Nos. 10

- 3278 & 10

- 3475 3 The b uy - se l l c o nt r ac t w as neve r s i g ne d, ho wev er . The goa l o f th i s ne g o ti at i o n was to ag r ee o n ho w the p urc h as e p ric e w o u l d be alloc at ed if d eB oe r c ou ld be so ld to an o utsi de buyer

. The part i es ag re ed that al l equi ty i nvest or s would r ecei ve the pr ice theyhad pai d fo r th ei r s ha res, pl us i nt er es t, a nd tha t 75 % o fa ny s ur pl us w ou ld be dist ributed to the i nvest or s a ccor ding to shar e o w ners hi p. The r em ain i ng 25 % o fany surpl us w as to go to m em b er s of the m anage m ent t eam . But w hi ch m em ber s, and how m uch to each? That pro ved to be the s ti cki ng p oin t. Ronal d D eBoerwanted a schedul e; Deniland N ar del l a, however, i nsi ste d that Deni l have sol e di scr eti on t o deci de w ho r ecei ved how m uch f ro m th is s u rp lu s p oo l. R o n ald D eB oe r w or rie d th at D en il woul d us e th i s au th o r i tyt o di r ec t th e whol e am ou nt t o h i ms e l fa n d Na r d e l l a, e v e n th o u g h th e y wo u l d o wn onl y 6% of the sto ck. There w er e som e othe r op en i s s u e s , b u tw e n e e d n o td i s c u s s th e m. W hen A pri l 15 , 20 09, ar ri ved and the nego ti ati ons f or th e buy

- se l l c o nt r ac t r emai ne d s ta l l ed, De ni l a nd N ar del l a m i ght have pu rchas ed thei r 4% and 2% i nter est s an y way, a nd thus s ec ur ed th ei r po si ti ons , or th eymight have t e nd e r e d the $ 7 5 0 , 0 0 0 i nt o a n e s c r o w. T he y t o ok nei therst ep, and deBoer fi re d them , payi ng the bene fi ts that the em plo ym ent contr act speci fi ed f or a ter m i nati o n w ith c au se . The y r epl i ed wi ththi s su i t unde r the dive rs i ty j uri sdic ti on, se eking r eins tatem ent ( oratl eas t th e ben efi ts for term ination w ithou t cau se ), the op p ortuni ty to i nvesti n deBoer, a n d d am age s forwh at they c a l l R o n a l d D e B o e r ’ s t o r ti o us i n t e r fe r e n c e wi th th e t wo co m pl et ed co nt r ac ts
. de Bo er fi l ed a co unt er cl ai m , s ee k i ng4 N os. 10

- 3278 & 10

- 3475 d am ag es for t h e c os t o fi s s u i n g, an d th en u n d oin g, a divi dend t hat the fi rm had pai d i n anti ci pati on o f th e $750 , 00 0 i nv es tmen t. W i sc o ns i n l aw c o nt r o l s. The dist ri ct c ourtgr anted sum m ar y j ud gm ent an d dism i sse d the s uit, r ej ecting bo th si des’ cl ai m s. 20 10 U
. S. Dis t. L EXIS99404 ( W
. D
. W is. Sept
. 22, 2010 ). Pl ai nti ff s’ pri nci pal co nten tio n is that deB oerdi d not ful fi l i ts pr o m ise t o us e “b es t eff o r ts ” to r ea cha g r ee m en t o n a b uy - s e l l c o nt r a c t
. Ha d thi s co nt r a c tb e e n s i g ne d, p lainti ff s insi st, theywould have pu rchas ed thei r shar es byApri l 1 5, 2 00 9, a nd wou l d t od ay be b o thi nv es to r s an d m anage rs . One d iffi cul ty w i th thi s a rgum ent i s that pl a i nt i ff s t r e a tthe b e s t
- e ff o r t s c l a us e a s a f o r m o fa g re em en t to a g r ee , whi chde Bo erv i o l ated b y no t ac ce di ng to thei r posi ti on. Yet agr eem ents to ag re e a re notenf or ceab le in W i s c on sin
. D unlop v. Laits ch , 16 W i s. 2d 36 , 11 3 N
. W
. 2d 551 ( 1962 ) ; se e a lso Skyc o m C o rp. v. Telstar C o rp ., 813 F. 2d 81 0 (7t h Cir

. 19 87) ( an “a gr eem ent in pri nci ple ” i s no t e nfor c eabl e in W i sco nsi n; o nl y a co m ple ted con tract co nt aining esse nt ialsp ecifi cs is bind ing). A bes t-eff or ts cl ause usual l y r equi re s o ne par ty to m ak e a p p ro p ria te inv es tm en ts for a n ot h er ’s b en efit

— f or exam ple , a d istr ibutorbo und to use besteff or ts to p r o mo t e a l i n e o fp r o d u c t s mu s ta d v e r t i s e th e m, h a wk them to r eta i l er s, an d so o n. Thi s i s no t a t a l l wh at “bes t effo rt s” m e a n s w h en it co m es to n eg ot iat ion
. M e t r opol i t an V entu res, LL Cv. G E A A ssoc ia tes , 29 1 W i s. 2d 39 3, 71 7 N
. W
. 2d 58 ( 20 06 ) , he l d tha t a pr o m i se t o us e “b es t effort s ” t o p ersu ad e ano th er pa rty to ad he re to a partn ersh ip ag re em en t w as sa tis fied by ea rn es t re q u es ts ; i tNos. 10

- 3278 & 10

- 3475 5 did notr equi re o ne si de to sa c rifice i ts own inter est s i n the proce ss. I fthe b es t eff o r ts unde r taki ng i s no t ana g r ee m en t to a g r ee , whatmighti t be? T he co nt r ac t do es no t defi ne the phra se, and the parti es th em se lves m ay not have h a d a n y c l e a r i d e a ; th e y h a v e n o tp r o ffe r e d a n y c o mm unica ti ons exchanged duri ng the nego ti ati ons. M aybe they w er e thi nki ng al ong the l i nes o fa du ty th at l abor and m anage m ent hav e under federa l l aborl aw : to engag e in go od- f ai th b ar gaini ng to w ar d a co ntra ct w i th r espectto tho se i ssues thatem ploye rs m ust d isc u ss w ith u n ion s. F i rs t Nat i o n a l M a i n t e n a n c e Corp. v. NLRB , 4 52 U. S. 6 66 ( 19 81 )
. Thi s dut y r equi r es a n e xchange of propos al s a nd o bl i ges ea ch si de to co nsi der the o ther ’ s r equests se ri ousl y, and to co m prom i se w hen po ss ibl e, b ut it d o es no t co m pele i th ers i de to a cc eptthe ot h er ’s p ro p os als

. G o lden S ta te Tran sit C o rp. v. Lo s A ng eles , 475 U
. S. 60 8 ( 1986 )
. I fthat ’ s the m eani ng of thi s “ best e ff o r t s ” c l a us e , the n b o th s i de s pe r f o r med as r e qu i r e d. Th e y e xc ha ng e d ma nyp ro po s a l s , s ug g e s t e d a men dm ents, m ade co unterpr oposa l s, and so o n; the nego ti ati ons l ast ed f or s ix m onths. The f act that one fi nal di sag r ee m en t

— h ow to d ivid e 2 5 % o f an y s u rp lu s o n sa le ofthe busi ness

— c ou ld n otbe br id ge d d o e s n otim p ly tha te i the r s i de f a i l e d t o b a r g a i n i n g o o d f a i th. deBoer di d no t ha ve t o a cc eptpl aint i ff s’ fi na l pr o po sa l, a ny m or e than pla i nti ff s had to acc ept deBoer ’ s. Li k e th e d i s t r i c t c o u r t, we c o n c l u d e th a t n e i th e r s i de vi ol ate d the be st-e ff or ts cl ause ofthe sto ck pu rchas e ag re em en t. T h is, p lu s t h e a b se n c e o f a s ign ed bu y-s ell6 N os. 10

- 3278 & 10

- 3475 ag r ee m en t, mean s th atthe s tock- pur ch as e ag r ee m en t did not re quir e pla i nti ff s to buy 6% of deB oer ’ s s toc k. Pl ainti ff s say that ita l so m eans that they w er e e nti tl ed to k ee p the i r mana g er i alj o bs , o r a t leas t be pa i d the co m pen sa ti o n due whenfi r ed wi th o utc au se . Ye t th e em p loy m en t con tr ac t d oe s no t con ta in th e sam e c on d it i o n p r e c e d e n ta s th e s t o c k

- p u r c h a s e c o n t r a c t
. T h e e mpl o y me n tc o n t r a c tma d e p l a i n t i ff s ’ ma n a g e r i a l p o s i t i o ns contingent o n thei r buyi ng st ockno l ate r than A pri l 15 , 2009
. T hey wer e f r ee t o b uy the s to ck, wi tho r wi th o ut a buy- sel l ag re em ent; theyj ust cho se not to d o so. They ag re ed that they c ou ld be l et go f orcause i fthey did notpay up byA pri l 15 , 20 09. H avi ng cho se n not to pay, theycan’ t co m pla i n abo ut the ter m i nati on o f th e i r man a g e r i a l po s i t i o ns . Ro na l d De Bo e r wa nt e d to ensure thatthe new m anage rs ’ i nter es ts w er e a l i gned w i th tho se ofo thershar ehol ders. Pl ai nti ff s were not en ti tl ed to r et ain the i r po si ti o ns wi th o utma ki ngthe i nv e s t men te s s e nt i a l t o tha te nd

. A rgum ents about tor ti ous inter ference w i th co ntra ct ar e po intl ess . N o one “i nter fer ed” with a ny co ntra ct; de Bo e r s i mpl y e nfo r c e d the c o nt r a c t s i thad ne g o t i a t e d. Pl ain tiffs d evo te a l ot ofspace to ar gui ng tha t defendants did n ota c ti n g o o d f a i th, b y wh i c h the y me a n that deBo ert o o kful l a dva nt ag e o fi ts r i g ht s un d er the c o ntr a c t s . I twa s e nt i t l e d t o do tha t
. “ Go o d f a i th” i n c o nt ra ct l aw m eans honesty pl us r efra i ni ng fro m o pp or tuni st ic co nd uc t tha t e xp l o i t s the o the r s i de ’ s s un k c o s t s . S ee M a rket S treet A ssoc ia tes L.P . v. Frey, 9 4 1 F.2d 588 (7th C ir. 19 91 ); C ontine ntal Bank, N .A . v . Ev eret t, 96 4 F
. 2d 701 ( 7th C ir. 19 92 ); PSI Ene rgy, Inc . v. Exxon Coal U SA, Inc . , 17F. 3dNos. 10

- 3278 & 10

- 3475 7 96 9 (7 th C ir. 19 94 ); V ent ureAssoci ates Co rp. v. Zenith D ata Sy stem s C o rp . , 9 6 F
. 3d 275 ( 7th Ci r . 1 99 6)
. An a ct o r who sul ks i n hi s dre ss ing r oo m m i d-way thr ough the pro du cti on o fa m ovi e i s be havi ng o pp or tuni sti cal l y, bec ause th e pr o duce r ha s spe nta g r ea t dea l on th e fi l m a nd d oe s n otw an t t o s ta rtov er w ith a n ew ac to r. d eB oe r d id no tt a k e a dv a nt a g e o fp l a i nt i ff s ’ s un kc o s t s ; i nste a d, pla i nti ff s v olunteer ed to st ar t work i ng atdeBoer k no wi ngtha tthe b uy - se l l c o nt r a c th a d n o tb e e n s i g ne d. The y c o ul d ha ve pr o te ct ed th emse l ve s bywai ting, a nd th ey can ’t use th e ir ow n d ecision as th e sp ringboard f ori nsi sting tha t deBoercapi tul ate to th ei r contr actual propos al s. W e’ r e m y sti fi ed bypl aint i ff s’ a r g um en ts abo utthe d ivi d en d and their cont en tion th at d eB oer fai led to turn o ve r a l l fi na nc i ali nf o r m at i o n. I fpl aint i ff s wer e sa y i ng th at th e d ivid en d d ilu te d t h e v alu e o f th eir (p ot en tia l) 6% i nt er es t, s o tha t they s ho ul d no t be r equi r ed to b uy the s toc k, they m i ght ha ve a poi nt; l i kewis e i fthey ar gued that the fi nanci ali nfo rm atio n m ade the sto ck pu rchas e l ess at tr acti ve. But pla i ntiffs h ave not ar gued that these ev ents excuse them fro m p er f or m i ng; i nstea d th eys ti l l w an te d t o b ec o m e i nv es to r s. The di vi den d and bel ate d discl osur e do not su p p or t the kind o fr el i ef that pla i nti ff s s eek

. A s forthe cro ss- appeal : deBoerju m p ed the gun by di s t r ib u t i n gth e d i v i d e n d b e f o r e p l a i n t i ff s h a d ma de th ei r i nv es tment
. Pe o pl e who co untthe i rc hi ckens be f o r e th e y h a t c h h a v e o n l y th e ms e l v e s t o b l a me. The sto ck- pu rchas e a gr eem ent enti tl ed Deniland N ar del l a t o8 N os. 10

- 3278 & 10

- 3475 postpone thei r i nvest m ent unti l aftera buy- sel l ag re em ent was i n pla ce. W hen deBoer bal ked atpl ai ntiff s’ propos al s forthe buy- sel l ag re em ent, theywere enti tl ed to w al k a w ay w i thout i nvest i ng. They di d not viol ate any o fdeBoer ’ s r i ghts by doi ng s o ( and, as w e hav e ob s e rv ed alre ad y, p lain tiffs w er e a s fre e t o rej ec t R on ald DeB oer ’ s pro posal s forthe buy- sell a gr eem ent a s he w as to r ej e c tthe i r s )
. No thingi n the s t o c k

- pu r c ha s e a g re em ent r equi re s Deni l and N ar del l a t o com p en sate deB oerf orexpenses i ncurr ed i n anti ci pati on ofa $750 , 000 i nvest m ent o r i n re turni ng to the st atu s quo antei fthe in vestm ent di d not o ccur. The cr oss - appeal st ri kes us a s nothi ng but an excuse to fi l e a sur - re p ly bri efto have the l ast w or d . I fwe had been as ked, we w oul d have dism i sse d the cr oss - ap p ea l and r ej ecte d the e xtrabr i ef be f o r e th e j udg es ha d b ee n f o r ce d t o was te tim e r ea di ng i t
. S e e A ven tis Phar m a S
. A. v. Hos pi r a, Inc . , 2011 U
. S. A p p . L EXIS6020 (Fed

. Cir. M ar. 24, 2011). A FFI RMED

5- 13- 11