Opinion ID: 2819791
Heading Depth: 3
Heading Rank: 2

Heading: Phase IIs

Text: The Phase IIs loomed large both in the parties’ negotiations and in the trial testimony. Trovare argues here that, as with the due diligence, Appellees refused to conduct the Phase IIs in order to impair Trovare’s access to financing, and thereby scuttle the deal. Appellees argue that they refused to perform the Phase IIs until they received at least a conditional financing commitment. This was in an effort to minimize their financial liability for environmental remediation, should the deal fall through. The district court’s findings on the Phase II issue are not entirely clear. The court did not mention the Phase IIs prior to reaching its holding that no termination had occurred. After concluding that Simkins did not terminate negotiations prior to September 30, the court made the following statement: One more word before I finish, and that is about this environmental study issue, which a lot of testimony and evidence was presented. Mr. Cecola testified that his financing bank always demanded the Phase II, and that because he didn’t get the Phase II, that frustrated and basically killed his ability to finance the deal. 18 No. 13-2005 But Andrew Harlan, who was the banking witness presented by the [defendant], testified, he was at TCF Bank, testified that that bank did not demand a Phase II, because they weren’t financing the real estate. So there is a definite inconsistency between that testimony and Mr. Cecola’s, which really calls Mr. Cecola’s credibility into question. Trovare argues that this statement by the district court constitutes clear error and calls for reversal. Trovare argues that the court misunderstood either the nature of Harlan’s testimony or Cecola’s representations and made a clearly erroneous factual finding. As the court itself noted, TCF Bank was not providing the real estate financing, so it did not require the Phase IIs. Cecola never represented that it did. Instead, he represented that another bank—the one financing the real estate—demanded the Phase IIs. Therefore, Trovare argues, Cecola’s credibility could not properly have been called into question by Harlan’s testimony. We agree with Trovare that Harlan’s testimony, as far as we can tell, should have had no impact on Cecola’s credibility. However, this statement by the district court does not constitute clear error requiring reversal, for the following reasons. First, it seems to us that the Phase II issue had little or no bearing on the district court’s reasoning or conclusion as to termination. The court mentions the Phase IIs after reaching its holding, and we have no reason to believe that the court’s “[o]ne more word” influenced its already established view on the question of termination. Second, Trovare does not establish that the only reasonable explanation for Appellees’ refusal to conduct the Phase IIs was a desire to scuttle the deal. Appellees put forward a No. 13-2005 19 plausible explanation as to their reluctance—their possible financial liability for remediation—and Trovare’s arguments do not render that explanation implausible. To be sure, Appellees’ actions relative to the Phase IIs give us some pause. At best, Appellees changed their negotiation position regarding the Phase IIs, and at worst, they engaged in misrepresentation about whether the Phase IIs would occur. After Battaglia represented that Appellees would begin the Phase II process, Gadon then represented on multiple occasions that no Phase IIs would be completed until after an APA had been signed. This was a position that Trovare indicated would be a deal-breaker. Gadon also testified, however, that he ultimately “got tired of arguing about it,” and indicated that Appellees would do the Phase IIs prior to signing an APA. The district court credited Gadon’s testimony, and Trovare does not establish that the district court was clearly erroneous.