Opinion ID: 531044
Heading Depth: 2
Heading Rank: 2

Heading: Valuation of Right to Receive Earn-Out Stock

Text: 14 USI's next claim on appeal is that the trial court erred in failing to instruct the jury to value Gregg's right to receive earn-out stock as part of the consideration he received for the contract. USI argues that the jury should have been instructed to credit it not only for the earn-out stock Gregg actually received (approximately $900,000), but also for the contingent right it gave to Gregg to receive yet additional stock if the former Gregg companies reached specified profit levels in the five years following the closing. USI states that the jury determined, in its $12.5 million valuation based on an earnings theory, that the companies had large potential for future earnings and therefore, it had to find that Gregg's contingent earn-out right was correspondingly large because the earn-out was directly related to the companies' earnings potential. Thus, USI maintains that the jury instruction regarding calculation of Gregg's compensatory fraud damages was erroneous, and the award must be set aside. 15 The record indicates that USI raised its challenge to the jury instruction after the parties had initially agreed to the charge as set forth in the charge conference. 6 See (R132-133, 134; R19-485). As the parties prepared to present final arguments to the jury, USI's counsel told the trial court that, although they failed to mention it at the charge conference, they wished the words including his right to receive earnout stock appended to the fraud instruction. See (R134-5). Although USI challenged the instruction so late in the proceedings, Rule 51 of the Federal Rules of Civil Procedure permits a party to do so if the party objects before the jury retires to consider its verdict. Accordingly, we consider on appeal the challenged instructions as part of the entire charge, in light of the allegations of the complaint, the evidence presented, and the arguments of counsel, to determine whether the jury was misled and whether the jury understood the issues. Pate v. Seaboard R.R., Inc., 819 F.2d 1074, 1077 (11th Cir.1987) (footnote omitted). 16 USI asserts that the jury was misled because the trial court's instruction disregarded this court's prior ruling on the fraud damage issue. On the contrary, we find that even without reference to the additional language USI requested, the district court's instruction directed the jury to take into account the earn-out payment of approximately $900,000 USI remitted to Gregg in calculating Gregg's out-of-pocket loss, the amount to which the prior appeal was directed. This court's prior opinion states that the earnout provision is not too speculative and uncertain to be considered in calculating damages.... [T]he uncertainty in amount of ... the earnout, [was] reduced by trial time because [this] amount had become known. Gregg, 715 F.2d at 1533. Therefore, it was permissible for the jury to value Gregg's right to receive earn-out stock as the amount of the one payment USI actually made to Gregg for this purpose. 17 In addition, it does not necessarily follow that because the jury determined that the former Gregg companies had large potential for future profits, that the earn-out would be correspondingly large. The jury apparently concluded that it was USI's fraud in failing to provide working capital and refusing to allow Gregg to run his companies that deprived Gregg of his right to receive additional stock and limited the value of that contingent right to $900,000. Considering the entire record as it relates to the jury instructions given, including the evidence presented by both parties and the arguments of counsel, we hold that the jury was fully apprised of and understood the issues for consideration in awarding compensatory damages on Gregg's fraud claim. Thus, we find no error in the trial court's instruction. 18