F I L E D

United States Court of Appeals

Tenth Circuit

JUN 29 2004

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

LIFEWISE MASTER FUNDING, a

Delaware limited liability company;

LIFEWISE FAMILY FINANCIAL

SECURITY, a Utah corporation,

Plaintiffs-Counter-Defendants -

Appellants,

v.

TELEBANK, now known as E Trade

Bank, a federally chartered savings

bank,

Defendant-Counter-Claimant -

Appellee.

No. 03-4086

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

(D.C. No. 00-CV-495-B)

Thomas E. Plank, University of Tennessee College of Law, Knoxville, Tennessee,

and Brent V. Manning, (Candice Anderson Vogel, with him on the brief, and

Sammi V. Anderson, on the brief, Manning, Curtis, Bradshaw and Bednar, L.L.C.,

Salt Lake City, Utah), for Plaintiffs-Counter-Defendants - Appellants. 

Barkley Clark and Douglas Lobel (and Patrick D. Conner, Morgan, Lewis &

Bockius, L.L.P., on the brief, McLean, Virginia), for Defendant-Counter-Claimant

- Appellee.

Before EBEL, KELLY, and McCONNELL, Circuit Judges.
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KELLY, Circuit Judge.

Plaintiffs-Appellants LifeWise Master Funding, LLC and LifeWise Family

Financial Security, Inc. (collectively “LifeWise”) appeal the district court’s grant

of judgment as a matter of law and summary judgment against them in their

breach of contract claim against Defendant-Appellee E*TRADE Bank

(“E*TRADE”). The district court held that (1) LifeWise failed to satisfy a

condition precedent to E*TRADE’s provision of funding under the contract, and

(2) LifeWise failed to produce an admissible damages model attributable to its

lost profits. We have jurisdiction pursuant to 28 U.S.C. § 1291. For the reasons

stated below, we affirm.

Background

A. Factual Background

LifeWise was in the business of lending money to terminally ill patients. 

The company began business in 1996 by acquiring the assets of a prior viatical

company. V Aplt. App. at 2577. Its business plan involved making loans in the

form of lines of credit to terminally ill borrowers who pledged their life insurance

policies as collateral. When a borrower died, the amounts drawn from the line of

credit were deducted from the value of the insurance policy, plus interest and
1LifeWise Master was formed as a “bankruptcy remote” subsidiary, so that

the bankruptcy of the parent, LifeWise Family, would not affect its assets. XV

Aplt. App. at 6549.

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fees. 

Effective December 31, 1998, LifeWise and E*TRADE’s predecessor,

Telebank, entered into a Funding Agreement that allowed LifeWise to obtain up

to $200 million from Telebank over seven years. See I Aplt. App. at 239-88. 

This arrangement was also known as the “Facility.” Under the Facility, Telebank

would serve as LifeWise’s long-term “takeout lender.” This meant that when

LifeWise made a loan, it would draw from its own funds or from its short-term

lender, Bank One. XII Aplt. App. at 5319-21. Once it originated $1.75 million in

loans, LifeWise would make a funding request from Telebank. Id. at 5321-22. 

LifeWise would sell its loans to a wholly-owned subsidiary, LifeWise Master,1

which in turn obtained funds from Telebank, V Aplt. App. at 2578, and placed the

policies in trust with Bankers Trust Company under a Trust Indenture, XV Aplt.

App. at 6544-654. The sale of loans from LifeWise Family to LifeWise Master

was governed by a Loan Sale Agreement. II Aplt. App. at 734-58. Later, when a

borrower died, Telebank would first be paid in full from the proceeds of the life

insurance policy, and then LifeWise would receive its interest and fees. V Aplt.

App. at 2578-79.

The Funding Agreement imposed several conditions that the parties were to
2Section 4.10 provided:

The Initial Investor shall have determined that the underwriting

policies and procedures of LifeWise and the general business

operations of LifeWise are satisfactory to it. If not so

satisfactory, the Initial Investor shall disclose to the Company in

writing, in reasonable detail, the reasons for such determination.

I Aplt. App. at 259.

3Section 12 defined “lien” to include

any interest in property securing an obligation owed to . . . any

Person other than the owner of the property . . . whether or not

such interest shall be recorded or perfected and whether or not

such interest shall be contingent upon the occurrence of some

future event or events . . . and including the lien, privilege,

security interest or other encumbrance . . . .

I Aplt. App. at 277.

4Section 9.8(b) provided:

Except for the conveyances under the Indenture, LifeWise will not

sell, pledge, assign or transfer to any other Person, or grant,

create, incur, assume or suffer to exist any Lien on the Trust

Property or any interest therein (other than Permitted Liens), and

LifeWise shall defend the right, title, and interest of the Company

and the Trustee in, to and under the Trust Assets against all

claims of third parties claiming through or under LifeWise;

provided however, that LifeWise’s obligations under the Section

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meet before any funding was required to be provided. Section 4.10 of the

Agreement gave Telebank the right to determine whether LifeWise’s general

business operations were unsatisfactory to it, and if so, the reasons for the

dissatisfaction were to be provided to LifeWise in writing in reasonable detail.2

 

Additionally, Section 9.8(b) prohibited LifeWise from allowing any liens3 to be

placed on the policies that were placed in trust as collateral for Telebank’s

advances.4
9.8 shall terminate upon the repayment in full of the Notes and the

expiration of any applicable preference period.

I Aplt. App. at 267.

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During 1999, the first year in which the Facility was in place, the

arrangement ran smoothly. In January 2000, Telebank merged with E*TRADE

Bank, and concerns were soon raised within E*TRADE about LifeWise’s business

operations. Various meetings were held in early 2000 between E*TRADE and

LifeWise personnel. 

On April 28, 2000, E*TRADE sent a letter to LifeWise invoking its right

under § 4.10 of the Funding Agreement to delay funding to LifeWise until it

became satisfied with the general business operations of LifeWise. XV Aplt.

App. at 6667-68. The one-and-a-half page letter addressed E*TRADE’s

dissatisfaction with LifeWise’s low rate of loan production, failed marketing

campaign, inability to attract investors, unrestrained spending, and overall losses. 

After E*TRADE’s continued refusal to provide funding, LifeWise filed this

lawsuit in June 2000.

B. Procedural Background

During pretrial proceedings, LifeWise submitted a total of four damages

models to the district court. The first model was based on the written report of

Mr. Merrill Norman, LifeWise’s damages expert. I Aplt. App. at 309-63. Upon

E*TRADE’s motion in limine, V Aplt. App. at 2100-454, the district court
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excluded the testimony of Mr. Norman on the basis of Federal Rules of Evidence

403 and 702, and the rule set forth in Daubert v. Merrell Dow Pharmaceuticals,

Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137

(1999). VIII Aplt. App. at 3530-43. LifeWise then presented its second damages

model, based on the testimony of Mr. Mark Livingston, its Chief Executive

Officer. Id. at 3567-97, 3695-727. This too immediately met with a challenge

from E*TRADE, and the district court concluded that this second submission was

also inadmissible under Rule 702, Daubert/Kumho, and New York law’s

reasonable certainty standard, see Schonfeld v. Hilliard, 62 F. Supp. 2d 1062,

1071-72 (S.D.N.Y. 1998), rev’d in part, 218 F.3d 164 (2d Cir. 2000). VIII Aplt.

App. at 3841-47. At the district court’s invitation, LifeWise submitted a third

damages model, id. at 3735-840, 3848-924, which was met by E*TRADE’s

Motion for Summary Judgment for lack of damages, IX Aplt. App. at 3925-4132. 

Although the district court denied E*TRADE’s motion, it rejected LifeWise’s

damages model, which was based on regression analysis, pursuant to Rule 702. 

XIII Aplt. App. at 5970-79. The district court gave LifeWise one final chance to

produce an acceptable damages model. Id. at 6025-27.

LifeWise’s fourth and final damages model was submitted to the district

court on September 13, 2002. X Aplt. App. at 4501-647. As could be expected,

E*TRADE once again moved for summary judgment on damages. XI Aplt. App.
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at 4898-5118. The district court took E*TRADE’s motion under advisement and

also ordered that the trial be bifurcated. XIV Aplt. App. at 6222-48.

Trial was held December 2-20, 2002, and focused primarily on LifeWise’s

main claim, that E*TRADE denied funding in bad faith for pretextual reasons

unrelated to LifeWise’s poor business operations. The jury rejected this claim,

finding that E*TRADE’s denial was not in bad faith, and LifeWise does not

challenge this finding on appeal. XIII Aplt. App. at 5592-93. The jury also

found, however, that E*TRADE’s letter to LifeWise explaining its dissatisfaction

with LifeWise’s business was not sufficiently detailed. Id.

After the jury verdict as to liability, E*TRADE filed a motion for judgment

as a matter of law, arguing that it had no obligation to provide funding to

LifeWise because LifeWise violated § 9.8 of the Funding Agreement by placing

liens on E*TRADE’s collateral. XII Aplt. App. at 5294-402.

On March 5, 2003, the district court granted both of E*TRADE’s pending

motions. XIII Aplt. App. 5594-666. On the motion for judgment as a matter of

law, the district court ruled that LifeWise violated Section 9.8 of the Funding

Agreement by placing liens on the collateral that secured repayment of

E*TRADE’s funding advances.

On the summary judgment motion regarding damages, the district court

held that LifeWise’s September 13, 2002, damages model was unduly speculative
5The Funding Agreement between LifeWise and E*TRADE was governed

by New York law, I Aplt. App. at 282; the Note Purchase Agreement and the

Security Agreement (both of which were between LifeWise Family and BP) were

governed by Utah law, XV Aplt. App. at 6712, 6732; the Loan Sale Agreement

between LifeWise Family and LifeWise Master was governed by New York Law,

II Aplt. App. at 751; and the Trust Indenture between LifeWise and Bankers Trust

was also governed by New York law, XV Aplt. App. at 6564.

6Specifically, LifeWise pledged “all assets of the Debtor . . . , whether now

owned or existing or hereafter acquired, owned, existing or arising (whether

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under New York Law, unreliable and not helpful under Rule 702, and unduly

prejudicial under Rule 403. The district court also held that LifeWise CEO Mark

Livingston, its only designated expert, was not qualified under Rule 702 to testify

to the September 13, 2002, damages model.

The district court entered judgment for E*TRADE on March 24, 2003. 

This appeal followed.

Discussion

A. The Liens Issue

In early 1999, LifeWise asked its Chairman Michael Salzhauer for financial

assistance. On April 1, 1999, LifeWise obtained a $5 million loan from Benjamin

Partners (“BP”), a Salzhauer family partnership, by executing a Security

Agreement, XV Aplt. App. at 6716-37, and a Note Purchase Agreement, id. at

6690-715.5 In the Security Agreement, LifeWise Family granted BP a security

interest in “all assets”6 of LifeWise, including LifeWise’s interests in the policies
acquired by contract or operation of law) and wherever located . . . including,

without limitation . . . [a]ll of Debtor’s right, title and interest in any and all Life

Insurance Policies . . . .” XII Aplt. App. at 5351.

7Unless otherwise indicated, both BP and Combined Partnership will be

referred to as BP in this opinion.

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held by Bankers Trust that secured E*TRADE’s advances. XII Aplt. App. at

5351. LifeWise does not dispute that liens were placed on the policies. XV Aplt.

App. at 6736. On December 31, 2000, another Salzhauer family entity, Combined

Partnership, was substituted as the secured party in the Security Agreement.7

 XII

Aplt. App. at 5396-97.

E*TRADE did not discover the liens on the policies until after this lawsuit

was filed, during the deposition of LifeWise’s Chief Financial Officer, Mr. Syver

Norderhaug. XV Aplt. App. at 6788-94. Three weeks later, on April 1, 2001,

LifeWise and Combined Partnership executed an Acknowledgment and

Confirmation. Id. at 6736-37. The document acknowledged that “LifeWise

granted Combined Partnership a security interest in . . . LifeWise’s rights under

certain Life Insurance Policies,” but that “Combined Partnership wishes to

disclaim any and all right, title or interest in the Life Insurance Security Interest,

if any such interest ever existed.” Id.

The Security Agreement listed two ways in which BP’s lien could be

released. First, under § 7, the liens could be released if “the Secured Obligations

have been paid in full.” Id. at 6728. Second, under § 11, BP could unilaterally
8Effective July 1, 2000, UCC Article 9 was repealed from the Utah Code

and superceded by “Article 9A,” Utah Code Ann. §§ 70A-9A-101 et seq. See

WebBank v. Am. Gen. Annuity Serv. Corp., 54 P.3d 1139, 1142 n.3 (Utah 2002)

(citing S.B. 168, 53d Leg., Gen. Sess., 2000 Utah Laws 866-943). However, the

former Article 9–specifically § 9-306(2)–was in effect at the time the Security

Agreement was signed and effective. XV Aplt. App. at 6717, 6734.

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decide to surrender the collateral. Id. at 6729. LifeWise concedes that neither of

these conditions was met. 

LifeWise argues, however, that BP’s lien was released pursuant to § 5.6 of

the Security Agreement, coupled with Section 9-306(2) of the Uniform

Commercial Code, Utah Code Ann. § 70A-9-306(2) (1999).8 Section 9-306(2)

provided that “a security interest continues in collateral notwithstanding sale,

exchange, or other disposition thereof unless the disposition was authorized by

the secured party in the security agreement or otherwise, and also continues in any

identifiable proceeds including collections by the debtor.” (emphasis added). 

Section 5.6 of the Security Agreement, wherein BP authorized disposition of the

collateral by LifeWise Family in certain cases, states:

Debtor will not sell, assign, transfer or otherwise dispose of any

material portion of the Account or Contracts, which constitute a

part of the Collateral, or attempt, offer or contract to do so except,

so long as no Event of Default has occurred and is continuing, for

the disposition of such accounts and Contracts [1] in the ordinary

course of business [2] to third party purchasers [3] without

recourse to the Debtor.

XV Aplt. App. at 6726 (emphasis added).
- 11 -

The dispute in the present case therefore focuses on whether the assignment

of loans from LifeWise Family to LifeWise Master was “without recourse” and

thus authorized by BP. If the disposition of the policies was authorized by BP,

such authorization would extinguish any security interest BP would have had in

the policies, and the policies would therefore be unencumbered when transferred

to Bankers Trust as collateral.

The district court granted judgment as a matter of law to E*TRADE on the

liens issue. We review a grant of a judgment as a matter of law de novo, applying

the same standard as the district court. Hyler v. Geo-Seis Helicopters, Inc., 269

F.3d 1190, 1193 (10th Cir. 2001). A motion for judgment as a matter of law may

be granted if “a party has been fully heard on an issue and there is no legally

sufficient evidentiary basis for a reasonable jury to find for that party on that

issue.” Fed. R. Civ. P. 50(a)(1). 

LifeWise argues that when LifeWise Family transferred the life insurance

policies to LifeWise Master and thereafter to Bankers Trust, any lien that was on

the policies was terminated pursuant to UCC § 9-306(2) because BP authorized

such disposition under § 5.6 of the Security Agreement.

As a preliminary matter, we note that E*TRADE argues that because § 5.6

nowhere expressly released the liens, no release was ever created. Aplee. Br. at

35-36. This is unpersuasive. According to E*TRADE, no release occurs absent
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the requisite words of release, discharge, or renunciation. However, the cases

cited by E*TRADE all relate to releases from tort liability. See State v. Upstate

Storage, Inc., 535 N.Y.S.2d 246, 248 (N.Y. App. Div. 1988); Carpenter v.

Machold, 447 N.Y.S.2d 46, 46-47 (N.Y. App. Div. 1982); Simonson v. Travis,

728 P.2d 999, 1002 (Utah 1986). It is well settled, however, that under UCC § 9-

306(2), a lienholder who authorizes the sale of property in which he has a security

interest waives the lien on the collateral. See First Fin. Co. v. Akathiotis, 249

N.E.2d 663, 665 (Ill. App. Ct. 1969); Lisbon Bank & Trust Co. v. Murray, 206

N.W.2d 96, 97 (Iowa 1973); Whirlpool Corp. v. Dailey Constr., Inc., 429 S.E.2d

748, 750 (N.C. App. Ct. 1993). No magic language of release is required; indeed,

courts have even terminated security interests simply by implying authorization

from a party’s conduct. See, e.g., Lisbon Bank, 206 N.W.2d at 99. E*TRADE

has provided us with no contrary authority applying a stricter standard. 

We now turn to whether LifeWise Family’s assignment of the loans and the

underlying security interests in the policies was in accordance with § 5.6 of the

Security Agreement. As stated above, § 5.6 required that dispositions be (1) in

the ordinary course of business, (2) to third party purchasers, and (3) without

recourse to LifeWise. 

There can be no serious dispute that the first two requirements of § 5.6

were met in the transfer of the loans to LifeWise Master. LifeWise Master is a
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distinct and separate legal entity from LifeWise Family. Moreover, as the Loan

Sale Agreement stated, LifeWise Master was “formed . . . for the sole purpose of

acquiring certain . . . loans secured by related life insurance policies,” and

LifeWise Family “intend[ed] to sell or contribute [the] loans” to LifeWise Master. 

II Aplt. App. at 736. Thus, LifeWise sold its loans “in the ordinary course of

business” and to a “third party purchaser.”

E*TRADE, however, attempts to argue that the first two requirements are

not met because (1) a “purchaser” requires a “sale,” and that no “sale” was made

between LifeWise Family and LifeWise Master because the transfer of the

policies constituted, in part, a capital contribution by LifeWise Family under the

Loan Sale Agreement, (2) life insurance policies are not “goods” and therefore

cannot be purchased in the ordinary course of business, and (3) LifeWise Family

is not in the business of selling insurance policies. Aplee. Br. at 39-43. 

E*TRADE arrives at these three arguments by equating the requirement in § 5.6

that the dispositions be made “in the ordinary course of business to third party

purchasers” to the definition of a “buyer in the ordinary course” in UCC § 1-

201(9), Utah Code Ann. § 70A-1-201(9). That provision, however, concerns

purchasers of goods, and, as E*TRADE states, insurance policies are not “goods.” 

Aplee. Br. at 42. But the Security Agreement and specifically § 5.6 both

concerned the life insurance policies on which BP had a lien. Therefore, to apply
- 14 -

§ 1-201(9)’s definition of “buyer in ordinary course” onto § 5.6 would render the

section a nullity.

As for the third requirement, the Loan Sale Agreement is again instructive: 

Section 2(i) states

[1] Except as specifically provided for herein, [2] the sale and the

purchase of the Loans under this Agreement is without recourse to

any Seller; [3] provided that the Seller shall be liable to the

Purchaser for all representations, warranties, covenants and

indemnities made by it under this Agreement.

II Aplt. App. at 744 (emphasis added). Following § 2(i) is a list of seventeen

representations and warranties that survived the sale of any loan.

The district court essentially held that because § 2(i) has an “except”

clause and a “provided that” clause, the sale of loans was not “without recourse.” 

The court reasoned that if the sale were truly without recourse, “the provision

would have stated simply that ‘the sale and the purchase of the Loans under this

Agreement is without recourse to any Seller.’” XIII Aplt. App. at 5649.

We conclude that the district court erroneously interpreted the phrase

“without recourse.” “Recourse” refers only to the liability of a seller of

receivables to the purchaser if the underlying obligors fail to pay the receivables. 

A seller disclaims this liability, known as “credit liability,” by selling the

receivables “without recourse.” See Thomas E. Plank, The True Sale of Loans

and the Role of Recourse, 14 Geo. Mason L. Rev. 287, 289 (1991). However,
9E*TRADE claims that LifeWise raises the differences between credit

liability and warranty liability for the first time on appeal. Aplee. Br. at 45. This

is doubtful, considering the district court’s extensive discussion of the matter. 

See XIII Aplt. App. at 5650-52.

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although the sale of receivables “without recourse” releases the seller from

liability in case of the debtor’s insolvency, the seller retains liability for breach

of warranty, or “warranty liability.”9 See id. at 306. As the Oklahoma Supreme

Court stated,

the term “no recourse” or “without recourse” in an assignment

does not, without more, evidence an intent to disclaim the implied

warranty of genuineness and validity, but is meant only to make

clear the assignor does not guarantee the debtor’s solvency or that

the debtor will fulfill his obligation.

Indiana Nat’l Bank v. State Dep’t of Human Servs., 880 P.2d 371, 380 (Okla.

1994); see also Gen. Elec. Credit Corp. v. Air Flow Indus., Inc., 432 So.2d 607,

609 (Fla. App. Ct. 1983) (“implied warranties are not affected . . . by the fact

that the assignment was made ‘without recourse.’”); 12 C.F.R. pt. 3, app. A, §

4(a)(11) & (a)(3)(iii) (excluding from definition of “recourse” “[w]arranties that

permit the return of assets because of fraud, misrepresentation, or incomplete

documentation”).

Thus, even in a non-recourse assignment, there is still an implied warranty

that, for instance:

• the chose assigned is a valid and genuine obligation of the

parties;
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• the right assigned actually exists and is subject to no

limitations or defenses other than those stated or apparent

at the time of the assignment;

• the right assigned is based on adequate consideration;

• any evidence of the right delivered as part of the

assignment, or exhibited as an inducement to accept the

assignment, is genuine and what it purports to be.

6 Am. Jur. 2d Assignment § 158 (footnotes omitted); see also Wait v. Williams,

91 S.E. 969, 970 (S.C. 1917); Restatement (Second) of Contracts § 333. 

Contrary to the district court’s and E*TRADE’s position, the warranty

made by LifeWise Family to LifeWise Master in § 5(i) of the Loan Sale

Agreement does not convert the sale from a nonrecourse assignment to a recourse

assignment. Section 5(i) provides that, if LifeWise Family breaches one of the

seventeen representations and warranties that “materially and adversely affects”

a loan, LifeWise Family must “immediately repurchase” the loan from LifeWise

Master. The section merely provides a remedy if LifeWise Family breached an

express warranty or made a false representation; it does not allow recourse

against LifeWise Family simply for the obligors’ insolvency or failure to pay. 

The seventeen representations and warranties act as an inducement for LifeWise

Master to accept the assignment; even in a nonrecourse assignment, LifeWise

Family must warrant that those representations are genuine. See Penowa Coal

Sales Co. v. Gibbs & Co., 85 A.2d 464, 467 (Md. 1952).

In deciding that the LifeWise Family’s sale of the loans to LifeWise
- 17 -

Master was not without recourse, the district court also reasoned that 

were the Court to interpret the “except for” and the “provided

for” clauses as not providing “recourse” in this case, they would

convey no new rights to LifeWise Master than it was already

entitled to as a matter of contract law. However, New York law

disfavors contract interpretations that render provisions of a

contract superfluous.

XIII Aplt. App. at 5652. We disagree.

First, the seventeen representations and warranties in the Agreement are

specific to this transaction. Their incorporation into the part of the Agreement

that details the parties’ liability is therefore not superfluous. Moreover, while

the “except for” and “provided that” language technically may not be necessary

as a matter of contract law, their placement along with the “without recourse”

language reinforces and confirms LifeWise Family’s responsibilities under the

Agreement. Indeed, sellers frequently specify that a sale of a receivable is

“without recourse,” even when they sell with express warranties. See, e.g., 1

U.C.C. Legal Forms § 2:174 (Assignee’s Right to Payment); 3 U.C.C. Legal

Forms § 9:473 (Assignment Without Recourse). LifeWise’s argument that such

redundancy in contracting language is common to avoid frivolous litigation is

given greater weight in light of the fact that “without recourse” is often found in

assignment contracts but also simply restates the law of assignment. See 29

Williston on Contracts § 74:8 (“[When using the phrase ‘without recourse,’] the

assignor is only seeking to make certain what the law would indeed, in any event,
- 18 -

imply from mere assignment, that the assignor is not responsible for the solvency

of the debtor.”); see also Restatement (Second) of Contracts § 333(2) (“An

assignment does not of itself operate as a warranty that the obligor is solvent or

that he will perform his obligation.”). Under the district court’s ruling, any

contract provision that attempts to state the law is superfluous and therefore must

be interpreted in a manner inconsistent with the law. We do not interpret New

York’s law regarding contract construction so broadly.

Finally, our conclusion as to the meaning of “without recourse” in the law

of assignments is in accord with the meaning of that term for negotiable

instruments. An indorser of a negotiable instrument assumes credit liability. See

UCC § 3-415(a), Utah Code Ann. § 70A-3-415(a) (an indorser becomes liable to

pay the instrument according to its terms if the primary obligor fails to pay the

instrument). The indorser may disclaim credit liability by indorsing the

instrument “without recourse.” See UCC § 3-415(b). Disclaiming credit liability

by indorsing “without recourse” does not, however, disclaim applicable transfer

and presentment warranties. See UCC § 3-416 cmt. 3.

Because LifeWise Family’s assignment of the policies to LifeWise Master

was without recourse, we hold that BP’s lien on the collateral was released upon

the transfer of the loans from LifeWise Family to LifeWise Master. LifeWise

therefore did not fail to satisfy a condition precedent to the funding agreement
- 19 -

with E*TRADE.

B. The Damages Issue

Having concluded that LifeWise did not fail to satisfy a condition

precedent does not end our review. The question we now turn to is whether the

district court erred in rejecting the fourth damages model proffered by LifeWise

and in declining to consider what LifeWise refers to as “reliance” damages. We

conclude that the court correctly ruled that the future lost profits evidence was

speculative and thus properly excluded, and that the jury verdict in favor of

E*TRADE precludes reliance damages.

We review the district court’s grant of summary judgment and its

conclusions of law de novo, applying the same legal standard used by the district

court under Rule 56. Essence, Inc. v. City of Federal Heights, 285 F.3d 1272,

1283 (10th Cir. 2002). “When applying this standard, we view the evidence and

draw reasonable inferences therefrom in the light most favorable to the

nonmoving party.” N. Tex. Prod. Credit Ass’n v. McCurtain County Nat’l Bank,

222 F.3d 800, 806 (10th Cir. 2000) (internal quotation marks and citations

omitted). We review a district court’s decisions excluding evidence at the

summary judgment stage only for an abuse of discretion. Lantec, Inc. v. Novell,

Inc., 306 F.3d 1003, 1016 (10th Cir. 2002). Under this standard, “we will not

disturb the district court’s decision unless we have a definite and firm conviction
10In its reply brief, LifeWise argues that it did appeal the district court’s

rulings concerning the three previous damages models in that (1) its Notice of

Appeal included “all prior rulings . . . leading up to the final judgment;” (2)

LifeWise’s Statement of Issues in its opening brief appealed broadly the district

court’s rejection of all lost profits evidence; (3) the factual and procedural history

for each model is provided in the background section of the opening brief; and (4)

LifeWise provided record cites where it preserved for appeal each of the district

court’s adverse rulings. Aplt. Reply Br. at 16 n.7 (citations omitted). All of these

points, however, only show that LifeWise could have appealed the district court’s

rulings on the other damages models. An examination of the argument section of

LifeWise’s brief, however, shows that it did not in fact appeal such rulings, as it

set forth no substantive arguments against the district court’s decisions. See Aplt.

Br. at 50-72; Dubbs v. Head Start, Inc., 336 F.3d 1194, 1202 n.4 (10th Cir. 2003)

(“even issues designated for review are lost if they are not actually argued in the

party’s brief”); Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 679 (10th Cir.

1998) (“Arguments inadequately briefed in the opening brief are waived . . . .”).

- 20 -

that the lower court made a clear error of judgment or exceeded the bounds of

permissible choice in the circumstances.” Id. (internal quotation marks and

alteration omitted). 

1. Lost Profits Damages

LifeWise submitted a total of four damages models to the district court, all

of which were excluded. LifeWise appeals only the district court’s decision to

exclude its fourth and final model.10 In short, the first three damages models

were excluded because they were found to be deficient under Rules 403 and 702,

Daubert/Kumho, and New York’s requirement that alleged losses be capable of

being proved with reasonable certainty, see Schonfeld v. Hilliard, 62 F. Supp. 2d

1062, 1071-72 (S.D.N.Y. 1998).
- 21 -

LifeWise’s fourth damages model based a damages amount on an estimate

of $167 million in projected loans from April 2001 through the end of 2005. X

Aplt. App. at 4502-03, 4510, 4514. In a nutshell, LifeWise predicted that based

on the $167 million figure, gross revenue was about $44 million, and total costs

about $30 million. Id. at 4502-03. When costs are subtracted from the gross

revenue, the resulting lost profits equal $14 million (this figure increases to $19

million if a longer average loan life is used). Id. at 4503 & n.6. Then, applying

a discount rate of 13%, the resulting damages in present (April 1, 2001) dollars,

depending on the average loan life and other variables, are from $6.7 million to

$9.3 million. Id. at 4503-04.

The district court held that this fourth damages model (1) was unduly

speculative because it was not sufficiently based on LifeWise’s past, (2) failed to

meet the requirements of Daubert and Rule 702 because Mr. Livingston was not

qualified as an expert on the methodology employed in the statement, the

methodology was not reliable, Livingston’s testimony did not “fit” the case, and

the statement was not helpful to a jury, and (3) was inadmissible under Rule 403

because any probative value was outweighed by the danger of being misleading

and confusing to the jury and unnecessarily time-consuming.

a. Mr. Livingston’s Testimony

LifeWise argues that the district court erred in failing to admit Mr.
- 22 -

Livingston’s damages testimony as an expert opinion under Rule 702, and as a

lay witness opinion under Rule 701.

i. Rule 702

Rule 702 allows expert testimony only where the “witness [is] qualified as

an expert by knowledge, skill, experience, training, or education” to offer such

opinions. To qualify as an expert, Mr. Livingston was required to possess “such

skill, experience or knowledge in that particular field as to make it appear that

his opinion would rest on substantial foundation and would tend to aid the trier

of fact in his search for truth.” Graham v. Wyeth Labs., 906 F.2d 1399, 1408

(10th Cir. 1990) (quoting Bridger v. Union Ry. Co., 355 F.2d 382, 387 (6th Cir.

1966)). The heart of expert testimony is the foundation. Whether a witness can

parrot the results of a model does not mean that he is qualified to explain how

the model works or to opine on the statistical validity or interpretation of the

results. See Wilkins v. Univ. of Houston, 662 F.2d 1156, 1157 (5th Cir. Dec.

1981) (“Since multiple regression analysis is subject to misuse, courts cannot be

expected to accept at face value conclusions derived from such a model absent

expert testimony concerning the validity of the model itself.”) (emphasis added).

However, Mr. Livingston was not an expert in damages analysis or in any

of the techniques used to create the September 13, 2002, damages model. He

admitted that he had never used the methods used to create the September 13,
- 23 -

2002, damages model; he even confessed that “I am not a [damages] modeler.” 

IX Aplt. App. at 3994; see also XI Aplt. App. at 4850 (“I’m not an accountant

and I’m not an academic”); id. at 4851 (“I’m not an expert on regression

analysis.”); id. at 4852 (“I am not a statistician and I’m not an expert about

regression analysis.”). Indeed, Mr. Livingston took a single undergraduate class

in economics. But he took no accounting or finance courses, had no training in

damage analysis, had never testified as a damages expert or prepared an expert

damages report, had never taught a course or lectured on damages, and has never

been published in the field. Id. at 4855-56. As the district court noted, Mr.

Livingston is “not a trained economist and cannot legitimately educate a jury on

many of the complex economic aspects of [the damages model] such as ‘Scurves.’” XIII Aplt. App. at 5634 n.10; see also TK-7 Corp. v. Barbouti, 993

F.2d 722, 728 (10th Cir. 1993) (affirming exclusion of witness who was not

qualified as an expert); Broadcourt Capital Corp. v. Summa Med. Corp., 972

F.2d 1183, 1195 (10th Cir. 1992) (holding that witness with some general

experience and education in the field lacked sufficient qualifications to qualify as

expert in the area); Brown v. Am. Honda Motor Co., 939 F.2d 946, 952 (11th

Cir. 1991) (concluding that statistics, “without an analytic foundation, are

virtually meaningless.”). Given Mr. Livingston’s utter lack of any familiarity,

knowledge, or experience with damages analysis, the district court did not abuse
- 24 -

its discretion in ruling that he could not testify as an expert regarding such a

complex subject matter as LifeWise’s fourth damages model.

Moreover, the district court also held that LifeWise’s fourth damages

model failed to meet the standard set forth in Daubert v. Merrell Dow

Pharmaceuticals, 509 U.S. 579 (1993), and Kumho Tire Co. v. Carmichael, 526

U.S. 137 (1999), because (1) Mr. Livingston was not qualified as an expert in

most of the methodology used in the statement, (2) the methodology is

misleading, not reliable, and unsupported by use in any other comparable setting,

(3) the methodology does not fit the present case because three month rolling

averages are not appropriate for making profit predictions beyond one period,

and S-curves are not appropriate for a young company such as LifeWise that

claims to have a vast untapped market in need of its unique loan product, and (4)

the model was not helpful to a jury but would tend to confuse, mislead, and

waste time. XIII Aplt. App. at 5634-35.

Lifewise does not challenge any of the district court’s bases for excluding

the damages model itself under Daubert and Kumho Tire except by arguing that

the district court improperly weighed evidence. Aplt. Br. at 55-56. However,

the court found that LifeWise’s use of three-month rolling averages, step-down

methodologies, compounded monthly growth rates, S-Curves, and a 13%

discount rate was “unique to this case and not based on any recognized
- 25 -

standard.” XIII Aplt. App. at 5630. Moreover, the methodology was not in

regular usage for predicting future profits, was not peer reviewed, has no

uniform usage in any known industry, and is capable of manipulation to achieve

virtually any desired result. Id. LifeWise does not challenge any of these points. 

The district court did not abuse its discretion. 

ii. Rule 701

The district court did not analyze Mr. Livingston’s testimony as lay

opinion testimony under Rule 701. LifeWise, however, argues that Mr.

Livingston’s position as CEO of LifeWise gives him personal knowledge to

testify as to its lost profits.

When the subject matter of proffered testimony constitutes “scientific,

technical, or other specialized knowledge,” the witness must be qualified as an

expert under Rule 702. Rule 701 applies only “[i]f the witness is not testifying

as an expert.” Fed. R. Evid. 701. Indeed, the rule expressly prohibits the

admission of testimony as lay witness opinion if it is based on “specialized

knowledge.” Id. In other words, “a person may testify as a lay witness only if

his opinions or inferences do not require any specialized knowledge and could be

reached by any ordinary person.” Doddy v. Oxy USA, Inc., 101 F.3d 448, 460

(5th Cir. 1996). 

In this case, Mr. Livingston testified only regarding LifeWise’s fourth
- 26 -

damages model. The model concerned moving averages, compounded growth

rates, and S-curves. Mr. Livingston could not testify about these technical,

specialized subjects under Rule 701. 

The cases string-cited by LifeWise allowing a business owner to opine as

to value do not support its position. In one group of cases, the courts found

business owners’ testimony admissible under Rule 701 because the owners had

sufficient personal knowledge of their respective businesses and of the factors on

which they relied to estimate lost profits. See Malloy v. Monahan, 73 F.3d 1012,

1015-16 (10th Cir. 1996); Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153,

1174-75 (3d Cir. 1993); In re Merritt Logan, Inc., 901 F.2d 349, 360 (3d Cir.

1990); MCI Telecomms. Corp. v. Wanzer, 897 F.2d 703, 706 (4th Cir. 1990). In

other cases, the owners offered valuations based on straightforward, common

sense calculations. See Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256,

265 (2d Cir. 1995) (business owner calculated past lost profit damages for

defamation based on actual decrease in sales); State Office Sys, Inc. v. Olivetti

Corp. of Am., 762 F.2d 843, 847 (10th Cir. 1985) (business owner calculated that

its lost profits equaled its lost profit per computer times 29 lost sales); Teen-Ed,

Inc. v. Kimball Int’l, Inc., 620 F.2d 399, 402-03 (3d Cir. 1980) (plaintiff, an

authorized dealer of defendant’s product for five years, used historical gross

profit margin and historical gross sales to determine lost profits). Mr.
- 27 -

Livingston’s proposed expert testimony does not fit either circumstance.

In the present case, although Mr. Livingston was the president of the

company, he does not have personal knowledge of the factors used by LifeWise’s

fourth damages model to estimate its lost profits. On the other hand, the district

court acknowledged that Mr. Livingston could have testified solely as a

businessperson based on his personal knowledge and his experience as president

of the company. He could have given a straightforward opinion as to lost profits

using conventional methods based on LifeWise’s actual operating history. 

Indeed, the court essentially invited LifeWise to have him so testify. See XIII

Aplt. App. at 5639.

Instead of limiting Mr. Livingston’s testimony to his experience as a

businessperson and president of the company, however, LifeWise had him

“enter[] into the realm of rolling averages, S-curves, and compound growth rates

that appear to be an amalgam of logic, hope, and economic jargon.” Id. at 5636-

37. But Mr. Livingston himself admitted that he “can’t recall any prior

instances” where he used such methods at LifeWise. XI Aplt. App. at 4961. 

Such subject matters fail to be rationally based on Mr. Livingston’s perception,

and therefore cannot be admissible as lay opinion testimony.

b. New York Law

Even were we to find that Mr. Livingston was qualified to testify about the
- 28 -

intricacies of LifeWise’s September 13 damages model, we nevertheless agree

with the district court that the model itself fails to satisfy New York’s

prohibition of speculative damages. Loss of future profits as damages for breach

of contract are allowed under New York law only if (1) it is demonstrated with

certainty that such damages have been caused by the breach, (2) the alleged loss

is capable of proof with reasonable certainty, and (3) the particular damages

were fairly within the contemplation of the parties to the contract at the time it

was made. Kenford Co. v. County of Erie, 493 N.E.2d 234, 235 (N.Y. 1986). 

Under the second prong, damages may not be “merely speculative, possible or

imaginary.” Id. 

The district court found that LifeWise’s damages model was too

speculative. LifeWise claims that its damages were reasonably certain and not

speculative because (1) it had an established business, (2) it was profitable, (3)

its damages statements were based on an analysis of historical operations, (4) it

was not based on a deficient scientific formula, and (5) determination of the

appropriate discount rate is for the jury. 

Under New York law, evidence of lost profits by new businesses must be

received with greater scrutiny. Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir.

2000); see also Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d

326, 332 (2d Cir. 1993); Kenford, 493 N.E.2d at 234-35. This is because they do
- 29 -

not have a “reasonable basis of experience–i.e. historic profits–upon which to

estimate lost profits with the requisite degree of reasonable certainty.” 

Schonfeld v. Hilliard, 62 F. Supp. 2d 1062, 1071-72 (S.D.N.Y. 1999).

LifeWise argues it was not a new business because the concept was

devised, assets were acquired, and loans were being issued three years before the

Facility was signed. Aplt. Br. at 61. In addition, since the inception of its loan

program, LifeWise made credit available to borrowers totaling more than $33

million. IV Aplt. App. at 1698. Finally, the Facility was in effect for well over

a year before E*TRADE first denied funding in April 2000. XV Aplt. App. at

6667-68.

While its history of operations clearly does not make LifeWise as firmly

established as some other businesses, we think it probably places LifeWise

outside of the scope of “new businesses” contemplated by Schonfeld and

Kenford. Generally, cases applying a higher evidentiary standard for new

businesses involve businesses that had not yet begun to operate, or have been

running for just a few months. See, e.g., Lovely Peoples Fashion, Inc. v. Magna

Fabrics, Inc., No. 95 Civ. 8450, 1998 WL 422482, at *1-2 (S.D.N.Y. July 22,

1998) (plaintiff dressmaker had only completed one single order for dresses);

Kenford, 493 N.E.2d at 235 (stadium, which would provide revenue, was never

constructed); Zink v. Mark Goodson Prods., Inc., 689 N.Y.S.2d 87, 88 (N.Y.
- 30 -

App. Div. 1999) (proposed television game show was to feature a host not well

known to American audiences who had never previously hosted a game show);

Lee Kin Chiu v. City of N.Y., 666 N.Y.S.2d 872, 874 (N.Y. App. Div. 1997)

(plaintiffs were involved in new business for less than two months).

However, although the evidentiary standard may be heightened for new

businesses, “[w]hether the claim involves an established business or a new

business, . . . the test remains the same, i.e., whether future profits can be

calculated with reasonable certainty.” Ashland Mgmt. Inc. v. Janien, 604

N.Y.S.2d 912, 916 (N.Y. 1993); see also Coastal Aviation, Inc. v. Commander

Aircraft Co., 937 F. Supp. 1051, 1066 (S.D.N.Y. 1996) (“The New York Court of

Appeals has instructed that the key issue is whether damages can be proven to

‘reasonable certainty.’”) (quoting Kenford, 493 N.E.2d at 235). Thus, rather than

focus on whether LifeWise should be labeled a “new business” or an established

one, we address the issue of whether LifeWise can establish lost future profits

with reasonable certainty.

LifeWise argues that despite the district court’s findings, its business was

profitable. Specifically, LifeWise claims that the second half of 2001 would

have been a profitable period if its litigation expenses against E*TRADE were

excluded. Aplt. Br. at 62. However, LifeWise shut down its operations in April

2001 and thus severely cut its advertising, payroll, and other costs, yet continued
- 31 -

to generate revenue as borrowers died. X Aplt. App. at 4511, 4522. Other than

the second half of 2001, LifeWise concedes that it incurred five years of straight

losses. Aplt. Br. at 62.

LifeWise argues, however, that a history of losses does not necessarily

preclude an award of future profits. In support of this argument, LifeWise cites

two cases, Yusef Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126

F.3d 15, 23-24 (2d Cir. 1997), and Lamborn v. Dittmer, 873 F.2d 522, 533 (2d

Cir. 1989). Contrary to LifeWise’s assertion, Yusef Ahmed did not “apply[]

New York Law to uphold lost profits of $46 million even though plaintiff had

substantial losses.” Aplt. Br. at 62. Instead, the court held that an arbitrator’s

decision to award that amount did not meet the high standard for overruling a

decision under the Federal Arbitration Act–“manifest disregard of the law.” 126

F.3d at 23-24. That case is therefore not applicable. Similarly, Lamborn did not

involve lost profits damages, but rather concerned the proper methodology in

estimating the value of an entire business. 873 F.2d at 533-34. It is thus

distinguishable from the present case.

Even assuming that LifeWise could show lost profits damages despite

never having been profitable, it has not done so here in a manner that satisfies

New York’s prohibition of speculative damages. In its damages report, LifeWise

has failed to connect its past losses with its proposed future earnings. It remains
- 32 -

a fact that LifeWise sustained losses in every year of its over five years of

existence, and frequently experienced capitalization problems, yet the damages

model predicted only uninterrupted future growth.

For instance, according to its audited financial statements, LifeWise lost at

least $12 million from February 1996 to April 2001, for an average yearly loss of

over $2.2 million. XI Aplt. App. at 4934. However, the damages model turns

LifeWise into a successful company with over $14 million in net profits from

April 2001 to December 2005, for an average yearly net profit of approximately

$3 million. Similarly, during LifeWise’s history, the number of loan originations

fluctuated each month: 28 months show a decline in originations while 33

months show an increase. X Aplt. App. at 4647, XII Aplt. App. at 5244. 

However, under the LifeWise’s damages model, Mr. Livingston anticipated not a

single future setback. In LifeWise’s actual history, its average monthly change

in loan originations was an increase of $18,288. XI Aplt. App. at 4906-07, 4945. 

However, under its fourth damages model, LifeWise’s average monthly increase

is $44,992–nearly two and a half times more. Id. at 4922. Finally, over its fiveyear history, LifeWise originated approximately $24 million in loans. X Aplt.

App. at 4647. Now, it claims that in a shorter period, it will originate over $167

million–over seven times more. LifeWise has simply failed to show any sort of

link between its past history and its future predictions.
11The district court also found that LifeWise’s fourth damages report was

more likely to confuse and mislead a jury than to help it, and thus excluded the

report under Federal Rule of Evidence 403. XIII Aplt. App. at 5635. LifeWise

has failed to adequately respond to this alternative basis for excluding its fourth

damages report, see Aplt. Br. at 69 n.39, and the issue is therefore waived,

Eateries, Inc. v. J.R. Simplot Co., 346 F.3d 1225, 1232 (10th Cir. 2003). Even

were the argument not waived, we have reviewed LifeWise’s fourth damages

report, which consists of nearly 500 pages including exhibits, X Aplt. App. at

4501-647; III Aplt. App. at 1026-106; VII Aplt. App. at 3055-149, 3151-56,

3173-74; VIII Aplt. App. at 3758-88, 3792, 3848-64; XIII Aplt. App. at 5796-899,

and we believe the district court did not abuse its discretion in determining that

- 33 -

The two cases LifeWise cites in support of its position are distinguishable. 

In Merlite Industries, Inc. v. Valassis Inserts, Inc., 12 F.3d 373, 374 (2d Cir.

1993), the plaintiff had been operating for over forty years, and was an

established, profitable company. LifeWise, on the other hand, has never been

profitable, and its attempt to use a small slice of its short operating history to

show that enormous profits were expected from an unsubstantiated turnaround in

business is unacceptable. Similarly, in Travellers International, A.G. v. Trans

World Airlines, Inc., 41 F.3d 1570, 1579 (2d Cir. 1994), the parties had a 20-

year joint venture agreement. The court found that the long-term course of

dealings between the parties, coupled with demonstrable profit margins and a

verifiable pricing structure permitted lost profits to be calculated with reasonable

certainty. This is a far cry from LifeWise’s comparatively disappointing history

of operations. The district court properly excluded LifeWise’s fourth damages

model as overly speculative under New York law.11
the danger from confusion of the issues, misleading the jury, and waste of time

presented by the model substantially outweighed its probative value. Macsenti v.

Becker, 237 F.3d 1223, 1240 (10th Cir. 2001).

- 34 -

2. Reliance Damages

In light of its disposition of the case on the liens issue and lost profits

damages, the district court did not reach LifeWise’s claim for reliance damages. 

XIII Aplt. App. at 5666. LifeWise now argues that even if this court affirms the

district court on the issue of lost profit damages, we should still remand the case

to the district court to determine what, if any, reliance damages it may recover. 

Based on the jury’s finding that E*TRADE’s discontinuation of funding was not

in breach of the Funding Agreement, see id. at 5593, we disagree.

In order to recover reliance damages for breach of contract, the plaintiff

must demonstrate with certainty that there was a breach and that such damages

have been caused by the breach. See Kenford Co. v. County of Erie, 493 N.E.2d

234, 235 (N.Y. 1986). In other words, there must be a “definite and logical

connection between what is proved and the damages a jury is asked to find.” 

Berley Indus., Inc. v. City of New York, 385 N.E.2d 281, 283 (N.Y. 1978).

As noted above, the jury found that (1) E*TRADE had a good faith basis

for denying funding because it was not satisfied with the general business

operations of LifeWise, but (2) E*TRADE did not adequately disclose in writing

the reasons for its dissatisfaction with LifeWise’s business operations. XIII
- 35 -

Aplt. App. at 5592-93. However, upon the district court’s issuance of its

Memorandum Opinion and Order granting E*TRADE’s Motion for Summary

Judgment Regarding Lost Profits Damages and E*TRADE’s Motion for

Judgment as a Matter of Law on the Basis of LifeWise’s Failure to Satisfy

Conditions Precedent Relating to Liens, the district court entered judgment in

favor of E*TRADE and vacated the jury verdict. Id. at 5667.

LifeWise argues that because the jury’s verdict was vacated, its finding

that E*TRADE did not deny the funding in bad faith cannot be used to argue that

no causal link connects E*TRADE to LifeWise’s damages. We disagree. A

judge “continue[s] to be bound by a jury’s findings even if its verdict is vacated,

so long as the underlying factfinding is not impugned.” Artis v. Hitachi Zosen

Clearing, Inc., 967 F.2d 1132, 1138 (7th Cir. 1992); cf. Lytle v. Household Mfg.,

Inc., 494 U.S. 545, 550 (1990). Here, the jury verdict was vacated not because it

was thought to be unreliable, but rather because the district court’s decision as to

a matter of law made the verdict moot. Compare Dranchak v. Akzo Nobel, Inc.,

88 F.3d 457, 459 (7th Cir. 1996) (when events during trial and improper

omission from jury instructions contributed to reasons for setting aside verdict,

the verdict’s factual accuracy is impugned, and verdict has no implications in

court’s analysis of non-jury issues). Thus, as the jury’s finding that E*TRADE

denied funding in good faith was not appealed, it must stand. Such a finding
- 36 -

removed any causal connection between E*TRADE’s denial of funding and

LifeWise’s reliance damages.

Alternatively, LifeWise argues that E*TRADE, by refusing to provide

adequate grounds for its dissatisfaction, “deprived LifeWise of the ability to cure

and resulted in the loss of the Facility and destruction of LifeWise’s business.” 

Aplt. Reply Br. at 26. This argument presupposes a right to cure, a right that we

do not see in the agreement documents, and which was not pinpointed in

LifeWise’s briefs. When pressed in oral argument about where such a right

originated, counsel for LifeWise first pointed to § 4.10 of the Funding

Agreement, I Aplt. App. at 259. In his rebuttal argument, counsel corrected

himself, stating that the right to cure was not in the Funding Agreement, but in

sections 6.1(c) and 11.3 of the Trust Indenture. XV Aplt. App. at 6583, 6609. 

Finally, in a letter to the court after oral argument, counsel stated that he

“misread” the proper references. According to counsel, (1) § 11.1 of the Funding

Agreement, I Aplt. App. at 270, refers to the Trust Indenture for events of

default; (2) § 6.1(c) and (d) of the Trust Indenture, XV Aplt. App. at 6583,

defines “Events of Default” for breach of covenant and breach of warranty; and

(3) § 11.3 of the Trust Indenture, XV Aplt. App. at 6609, further refers to

breaches of warranty.

We do not read either the Funding Agreement or the Trust Indenture to
- 37 -

provide an opportunity for LifeWise to cure its breach of § 4.10 of the Funding

Agreement. Sections 6.1(c)-(d) and 11.3 allow 30 days to cure a breach of

certain representations or warranties. XV Aplt. App. at 6583, 6609. Section

4.10 is a condition precedent to each funding, not a representation or warranty. I

Aplt. App. at 257-59. Accordingly, the provisions in the Trust Indenture cited by

LifeWise do not give a contractual right to cure a breach of section 4.10.

As a last resort, LifeWise essentially claims that a cure provision is

implied in § 4.10 because (1) such notice would be useful only if LifeWise can

address the alleged concerns, and (2) E*TRADE in fact requested LifeWise to

cure its dissatisfaction before it declined to fund. We disagree.

First, LifeWise does not oppose the district court’s statement of

undisputed facts, which indicates that the notice provision grew out of

E*TRADE’s desire to have the ability to be released from the contract in its sole

discretion. See XIII Aplt. App. at 5598. The provision ensures that a decision

by E*TRADE to terminate funding is objectively reasonable and in good faith. It

does not, explicitly or implicitly, confer any right whatsoever to LifeWise to cure

any defect identified by E*TRADE. Second, the fact that E*TRADE requested

that LifeWise address E*TRADE’s dissatisfaction before E*TRADE declined to

fund does not create a contractual right to cure after E*TRADE declined to fund. 

Finally, even if a cure provision existed, it could not be a basis for causation. 
- 38 -

LifeWise has offered no evidence that within 30 days, it could have improved its

business operations to meet E*TRADE’s good faith satisfaction.

LifeWise therefore cannot claim reliance damages resulting from

E*TRADE’s failure to fund or failure to provide adequate reasons for its refusal

to fund.

AFFIRMED.