Court Opinion

ID: 1021494
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:07:29.165887+00
Date Added: 2024-06-11T10:35:38.896528
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 05-2304

KENNETH GROSS; LAUGHTON ESTATE TRUST,

                                               Plaintiffs - Appellants,

           versus

SES    AMERICOM,    INCORPORATED;       COLUMBIA
COMMUNICATIONS CORPORATION,

                                                Defendants - Appellees.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (CA-03-
102-RWT)

Argued:   September 20, 2006                 Decided:   January 11, 2007

Before WILLIAMS and TRAXLER, Circuit Judges, and Henry F. FLOYD,
United States District Judge for the District of South Carolina,
sitting by designation.

Affirmed by unpublished opinion. Judge Williams wrote the majority
opinion, in which Judge Floyd concurred. Judge Traxler wrote a
dissenting opinion.

ARGUED: Mark Douglas Colley, HOLLAND & KNIGHT, Washington, D.C.,
for Appellants. Robert P. Parker, PAUL, WEISS, RIFKIND, WHARTON &
GARRISON, Washington, D.C., for Appellees.     ON BRIEF: Lynn E.
Calkins, Cameron W. Fogle, HOLLAND & KNIGHT, Washington, D.C., for
Appellants.   Erika C. Birg, PAUL, WEISS, RIFKIND, WHARTON &
GARRISON, Washington, D.C., for Appellees.
Unpublished opinions are not binding precedent in this circuit.

                                2
WILLIAMS, Circuit Judge:

        Kenneth Gross and Laughton Estate Trust appeal the district

court’s grant of summary judgment to SES Americom, Inc. on their

breach of contract claim.        For the following reasons, we affirm.

                                        I.

     Appellants        Kenneth   Gross       and       Laughton    Estate    Trust

(collectively,    Appellants)     are       the    former   owners   of   Columbia

Communications Corporation (Columbia), which markets and leases

international satellite capacity to telecommunications service

providers.    In early 2000, Appellants sold Columbia to GE Americom

pursuant to a Merger Agreement.                   Thereafter, SES Global S.A.

acquired GE Americom, and GE Americom changed its name to SES

Americom.

     Telecommunications satellites operate in a geosynchronous

orbit    above   the   earth’s   equator          at   locations   determined   by

longitude.       The   electromagnetic        spectrum      used   for    satellite

communications is divided into numerous frequency ranges, including

the Ku-band, C-band, and Ka-band.            A satellite may be licensed to

operate within a particular band or on multiple bands as a “hybrid”

satellite.

     Prior to being acquired by SES Americom, Columbia sought to

acquire a Federal Communications Commission (FCC) license that

would permit it to operate a satellite in the Ku-band at the 47º

                                        3
West Longitude (W.L.) orbital slot.            At the time, Loral Orion

Network Systems (Loral) held the FCC license to operate a Ku-band

satellite at the 47º W.L. slot.      Consequently, Columbia filed with

the FCC a “Petition to Revoke” Loral’s license, arguing that Loral

had failed to meet certain obligations with the license.            Columbia

also applied to the FCC for its own license to construct, launch,

and operate a Ku-band satellite at the 47º W.L. slot.                 These

efforts were ongoing at the time Appellants sold Columbia to SES

Americom, and because a 47º W.L. Ku-band license would be valuable

to Columbia, Appellants entered into a First Letter Agreement (FLA)

in connection with the Merger Agreement that entitled Appellants to

receive additional compensation if Columbia obtained the license

from the FCC.    Columbia’s efforts to have Loral’s license revoked

ultimately proved unsuccessful.

       Because Columbia did not succeed before the FCC, the condition

entitling Appellants to receive additional compensation was not

met.     Nevertheless, the FLA contained another provision that

entitled Appellants to additional compensation if, through some

other approach, SES Americom obtained a 47º W.L. Ku-band license.

FLA § B.5(b) entitled Appellants to an additional $10 million if,

by   September   1,   2003,   SES   Americom   filed   with   the    FCC   an

                                     4
application for a license to operate a Ku-band satellite at the 47º

W.L. orbital slot, and the FCC ultimately granted that license.1

     In April 2003, Appellants pursued a new tactic to get Loral’s

47º W.L. Ku-band license transferred to SES Americom, which would

thereby entitle Appellants to the additional $10 million.   Without

SES Americom’s knowledge, Appellants approached Loral with an offer

to buy Loral’s Ku-band license so that they could transfer it to

SES Americom.2 Appellants initially offered Loral $300,000 for the

     1
      First Letter Agreement § B.5(b) states,
     [T]he [Appellants] shall be entitled to receive an
     Additional Ku-band Amount [$10 million] for a Qualifying
     Ku-band Order granted to [SES Americom] by the FCC, . .
     ., if on or before the Subsequent Ku-Band Rights Date .
     . .: (I) following issuance of a Qualifying Ku-band
     Order, neither the FCC nor any other party seeks
     reconsideration or review of that order within the
     applicable periods and such order becomes a Final Order;
     or (ii) if upon completion of the first level of judicial
     review of the Qualifying Ku-band Order which is a
     dispositive determination, the order is a Qualifying Ku-
     band Order, regardless of whether any other party seeks
     further reconsideration or review.
(J.A. at 447-48.) A “Qualifying Ku-band Order” is “an order that
grants [SES Americom] Permanent Authority to make use of
commercially usable Ku-band spectrum at 47º W.L.” (J.A. at 448.)
The “Subsequent Ku-Band Rights Date” is the third anniversary of
the closing date of the Merger Agreement –- September 1, 2003.
(J.A. at 449.) The filing of an application with the FCC stayed
the September 1 deadline until the FCC granted or denied the
application.

     2
      A FCC rule change facilitated Appellants’ new approach. The
old FCC rules restricted Loral from selling its bare 47º W.L. Ku-
band license for a profit. In May 2003, the FCC released new rules
that eliminated this restriction; this rule change did not become
effective until August 27, 2003.

                                5
license, although Appellants had agreed on an opening offer as high

as $500,000.

     Loral was interested in Appellants’ proposed deal, but Loral

had a significant commercial relationship with SES Americom that it

did not want to disrupt and was therefore concerned about SES

Americom’s reaction to the deal.           As a result, Loral insisted that

Appellants obtain SES Americom’s approval of the deal before

continuing with negotiations.

     To assuage Loral’s concerns, on May 6, 2003, Appellants

drafted a proposed letter on behalf of SES Americom and sent it to

SES Americom for its approval.         The letter, which was addressed to

Loral’s   President,    stated    that     SES   Americom   “would    support”

Appellants’    purchase   of     the   license    from   Loral   and    “would

participate” in the necessary FCC filings to transfer the license.

(J.A. at 608.)    SES Americom declined to approve the letter.

     On July 15, 2003, Loral filed for bankruptcy protection.

Consequently, any transfer of Loral’s 47º W.L. Ku-band license

after   that   date   would    have    required   the    bankruptcy    court’s

approval.

     On July 16, 2003, Appellants sent SES Americom another letter.

This letter noted that Appellants were “prepared to undertake all

steps necessary to accomplish this transfer, including completion

of negotiations with and payments to Loral,” but that SES Americom

had not indicated any willingness to cooperate with the transfer.

                                       6
(J.A. at 609-610.)      Appellants enclosed with the letter a FCC

transfer application that they had filled out to effectuate the

transfer of Loral’s license to SES Americom.         The letter asked SES

Americom to sign the FCC transfer application and stated that

Appellants would “then complete [their] efforts to secure Loral’s

signature and prepare the application for filing.”         (J.A. at 610.)

SES Americom never responded.

     Appellants’ proposed deal with Loral never progressed, and on

September 1, 2003, their rights under FLA § B.5(b) to receive $10

million expired.       Appellants thereafter sued SES Americom for

failing to consent to a transfer of Loral’s 47º W.L. Ku-band

license, thereby blocking fulfillment of the condition in FLA

§ B.5(b) that would have entitled Appellants to $10 million.

Appellants argued that fulfillment of the condition should be

excused and that they were entitled to receive the $10 million

because SES Americom blocked fulfillment of the condition.

     On cross-motions for summary judgment, the district court

denied Appellants’ motion and granted SES Americom’s motion. In an

oral ruling, the district court rejected the Appellants’ arguments

that they were entitled to $10 million under the terms of FLA

§ B.5(b), concluding, inter alia, that SES Americom’s actions did

not prevent the transfer of the Ku-band license.            The district

court   noted   that   Appellants   engaged   only   in   “tentative   and

preliminary discussions” with Loral and that Loral and Appellants

                                    7
were “substantially at odds with each other” over the price of the

license, with Appellants having agreed on a maximum of $500,000 as

an opening offer and Loral Orion expecting a minimum of $1 million.

(J.A. at 325.)    The district court found that many obstacles stood

in the path of a completed purchase, such as the parties’ agreement

on a sale price, the bankruptcy court’s approval of the sale of the

license, and the FCC’s transfer of the license. The district court

also concluded that SES Americom did not violate its contractual

obligations by refusing to sign the transfer application when there

had been no agreement reached with Loral.

     Appellants timely noted an appeal.         We have jurisdiction

pursuant to 28 U.S.C.A. § 1291 (West 2006).

                                  II.

     “Summary     judgment   is   appropriate   ‘if   the   pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law.’”     Laber v. Harvey, 438 F.3d 404,

415 (4th Cir. 2006) (en banc) (quoting Fed. R. Civ. P. 56(c)).      We

review de novo the district court’s grant of summary judgment,

viewing the facts in the light most favorable to the non-moving

party.   Id.     According to the parties’ agreement, New York law

governs the contractual provisions of the FLA.

                                   8
                                     A.

     Under the terms of the FLA § B.5(b), if the FCC issued the 47º

W.L. Ku-band license to SES Americom within the specified time

frame, Appellants were entitled to an additional $10 million

payment from SES Americom.         Section B.5(b) therefore created a

condition precedent to SES Americom’s obligation to pay: the FCC’s

grant of a Ku-band license to SES Americom.            See Oppenheimer & Co.

v. Oppenheim, Appel, Dixon & Co., 660 N.E.2d 415, 418 (N.Y. 1995)

(“A condition precedent is an act or event . . . which, unless the

condition is excused, must occur before a duty to perform a promise

in the agreement arises.” (internal quotation marks omitted)); 13

Williston    on   Contracts   §   38:7    (4th   ed.   2006)   (“A   condition

precedent is either an act of a party that must be performed or a

certain event that must happen before a contractual right accrues

or contractual duty arises.”).           The FCC never issued a Ku-band

license to SES Americom, so the condition precedent was never

fulfilled.

     Despite the nonfulfillment of the condition precedent, SES

Americom could be obligated to pay Appellants if it violated its

contractual duties under New York’s doctrine of prevention.               This

doctrine imposes on SES Americom, the conditional promisor, an

“implied obligation . . . not to do anything which [would] have the

effect of destroying or injuring the right of the [Appellants] to

receive the fruits of the contract.”         A.H.A. Gen. Constr., Inc. v.

                                     9
New   York   City    Hous.   Auth.,     699   N.E.2d   368,   374   (N.Y.   1998)

(internal quotation marks omitted). Under the prevention doctrine,

SES Americom “cannot rely on the failure of [Appellants] to perform

a condition precedent where [SES Americom] has frustrated or

prevented    the     occurrence    of   the    condition.”      Id.   (internal

quotation marks omitted).         In other words, SES Americom cannot act

to prevent fulfillment of FLA § B.5(b) to avoid paying Appellants

$10 million.

      For SES Americom to be liable under FLA § B.5(b) despite

nonfulfillment of the condition precedent, SES Americom must have

caused the nonfulfillment.         See Amies v. Wesnofske, 174 N.E. 436,

438 (N.Y. 1931) (stating that the prevention doctrine applies when

the promisor “is the cause of the failure of performance of a

condition [precedent]” (emphasis added)); Cross & Cross Props.,

Ltd. v. Everett Allied Co., 886 F.2d 497, 501 (2d Cir. 1989) (“‘It

is a well settled and salutary rule that a party cannot insist upon

a condition precedent, when its non-performance has been caused by

himself.’” (emphasis added) (quoting Young v. Hunter, 6 N.Y. 203,

207 (1852))); see also 22A N.Y. Jur. 2d Contracts § 377 (“If a

promisor prevents or hinders the occurrence of a condition, and the

condition    would    have   occurred     except   for   such   prevention    or

hindrance, the condition is excused or waived.” (emphasis added)).

      Moreover, even if SES Americom had caused nonfulfillment of

the condition, the condition precedent of FLA § B.5(b) is not

                                         10
automatically   waived   simply   because   SES   Americom   blocked   it.

“There are . . . ‘some cases in which some sort of prevention or

interference is contemplated by the parties as quite proper and

within the privileges of the promisor.’” Cross & Cross Props., 886

F.2d at 502 (quoting 3A A. Corbin, Corbin on Contracts, § 767, at

545 (1960)).    Thus, for the condition precedent of FLA § B.5(b) to

be excused, SES Americom “must have blocked the condition ‘through

a breach of the duty of good faith and fair dealing.’”                 Id.

(quoting Restatement (Second) of Contracts § 225 comment b); see

also id. (noting that “[c]ourts applying New York law repeatedly

have recognized the duty of good faith and fair dealing” in

contractual obligations).    “The boundaries set by the duty of good

faith are generally defined by the parties’ intent and reasonable

expectations in entering the contract.”       Id.

                                   B.

     In this case, assuming that SES Americom was contractually

obligated to give its consent to Appellants’ purchase of the

license from Loral, SES Americom did not cause the nonfulfillment

of the condition precedent of FLA § B.5(b).

                                   1.

     Loral told Appellants that it would not be interested in

negotiating for the purchase of the license unless Appellants

obtained SES Americom’s approval of the proposed transaction.

                                   11
Appellants contend that SES Americom twice refused to provide its

consent to the proposed transaction, thereby preventing fulfillment

of the condition precedent.

     Appellants first attempt to secure SES Americom’s consent to

the proposed transaction occurred in the May 6, 2003, draft letter

that Appellants sent to SES Americom for its signature. The letter

attempted to show SES Americom’s consent by stating that SES

Americom   “would    support”   Appellants’   purchase   and   “would

participate” in the necessary FCC application to transfer the

license.   (J.A. at 608.)   Although SES Americom did not sign the

letter, its failure to sign the letter did not prevent the proposed

transaction from coming to fruition, because Loral stated that if

it had received the letter it would have asked for a “more explicit

statement that SES Americom . . . supports this transaction.”

(J.A. at 2299.)     Thus, SES Americom’s failure to sign the draft

letter did not prevent fulfillment of the condition precedent

because this letter was insufficient to meet Loral’s concerns and

thereby enable negotiations to proceed.

                                  2.

     The second attempt to secure SES Americom’s consent to the

proposed transaction occurred when Appellants sent SES Americom the

letter and FCC transfer application on July 16, 2003, the day after

Loral filed for bankruptcy. Appellants had filled out the transfer

application with the required information but needed SES Americom

                                  12
and Loral to execute the application.              Appellants informed SES

Americom   that    if   it   would   execute    the   transfer   application,

Appellants would then complete negotiations with Loral for the

purchase of the license.       SES Americom never responded.

      We agree with the district court that FLA § B.5(b) did not

obligate SES Americom to execute the transfer application at the

time that Appellants presented it to SES Americom. As the district

court described, Appellants were asking SES Americom “to sign in a

blank application to transfer the license,” with SES Americom “not

knowing whether Loral . . . was going to sign it, not knowing if

[the application was going to be filed], [and] not knowing if it

was going to go anywhere . . . .”              (J.A. at 326.)    To be sure,

Loral clearly indicated that it would not negotiate with Appellants

over the license unless SES Americom gave its consent to the

transaction.      In this second attempt, however, Appellants did not

merely ask SES Americom to consent to the transaction; rather,

Appellants asked SES Americom to execute a legal document before a

deal with Loral had been reached.          SES Americom did not breach its

duty of good faith and fair dealing by refusing to sign a transfer

application before Loral had agreed to sell the license.

      Moreover, we agree with the district court’s conclusion that

SES Americom’s refusal to execute a blank transfer application did

not   prevent   fulfillment    of    the   condition   precedent.     If   SES

Americom had signed the transfer application, Appellants would then

                                      13
have proceeded with negotiations with Loral, but there were several

required, unfulfilled steps preventing the transaction.                   First,

there was a substantial difference in the amount ($300,000) that

Appellants offered for the license and the minimum amount (at least

$1 million) that Loral was willing to accept.             Thus, negotiations

would have been required to reach an agreement on price.                 Second,

even if they had agreed on price, Appellants had been negotiating

with   Loral’s    President,     who    lacked   authority   to   approve     the

transaction.     Approval by Loral required consultation with Loral’s

chief executive officer and possibly authorization by Loral’s board

of directors.      At deposition, Loral’s president stated that this

“wasn’t a transaction that [he] actually thought was ever going to

come to fruition.”         (J.A. at 2292.)        Third, because Loral had

entered   bankruptcy,      any   sale   of   Loral’s   assets,    such   as   the

license, would have required the bankruptcy court’s approval.

Appellants’ own bankruptcy expert noted that the bankruptcy rules

require that creditors receive a minimum of twenty days notice

before property of the debtor may be sold.             Finally, the transfer

application had to be filed with the FCC.               Unless all of these

required steps were completed between July 16 and September 1,

2003, the condition precedent in FLA § B.5(b) could not have been

fulfilled.     We therefore cannot say that it was SES Americom’s

refusal   to     execute   the    transfer    application    that    prevented

fulfillment of the condition precedent.            Because SES Americom did

                                        14
not    cause   the   nonfulfillment    of    FLA   §   B.5(b),   the   condition

precedent is not excused under New York’s prevention doctrine.3

                                      III.

       Because SES Americom did not cause the nonfulfillment of the

condition precedent, it is not contractually liable under New York

law.       We therefore affirm the district court’s grant of summary

judgment to SES Americom.

                                                                        AFFIRMED

       3
      Our good colleague in dissent believes that “appellants
presented sufficient evidence to create a genuine issue of material
fact as to causation.”     Post at 2.     With upmost respect, we
disagree and briefly note two grounds supporting the district
court’s grant of summary judgment to SES Americom.
     First, as we have described in the text, the May 6, 2003,
draft letter was inadequate to address Loral’s concerns, so SES
Americom’s refusal to sign that letter did not cause the condition
precedent to remain unfulfilled.
     Second, Appellant’s next and final attempt to secure SES
Americom’s approval of the transaction required SES Americom to do
more than indicate its approval. Appellants asked SES Americom to
execute a transfer application -- a legal document -- before the
deal with Loral had been finalized. Even if SES Americom’s refusal
to sign the transfer application caused nonfulfillment of the
condition precedent –- a conclusion that we reject –- “a condition
precedent is not automatically waived simply because the
conditional promisor blocks the condition precedent.”       Cross &
Cross Props., Ltd. v. Everett Allied Co., 886 F.2d 497, 502 (2d
Cir. 1989). SES Americom would be liable only if it breached its
duty of good faith and fair dealing, and we agree with the district
court that SES Americom was not obligated to execute the transfer
application.

                                       15
TRAXLER, Circuit Judge, dissenting:

      When appellants negotiated the merger of Columbia with GE

Americom, both appellants and GE Americom were interested in

obtaining Loral’s 47N Ku-band license.                  Anticipating continuing

pursuit of that license, GE Americom agreed to pay appellants an

additional ten million dollars if appellants were able to obtain a

qualifying    Ku-band    order    from      the   FCC   by    September   1,   2003.

Several months after the merger, however, GE Americom was acquired

by SES Global SA, and GE Americom became SES Americom.

      Relying on the still valid agreement of additional pay for

obtaining the 47N Ku-band license, appellants continued their

efforts to obtain Loral’s license and began to make progress in

their discussions with Loral. Because SES Americom was a potential

customer, Loral wanted to make sure a deal with appellants would

not   anger   SES   Americom     and   so     requested      assurances   that   SES

Americom had no objection to the license transfer.                  Unfortunately

for appellants, SES Americom was not interested at all in a 47N

Ku-band license, and when appellants approached it for a statement

of support to Loral, SES Americom stonewalled and refused to assist

appellants.    Without some assurance that SES Americom would accept

the license from Loral or participate in the processing of the FCC

transfer application, appellants had no chance of completing the

deal with Loral.        Negotiations collapsed and appellants brought

this suit against SES Americom.

                                         16
     In my view, appellants presented sufficient evidence to create

a genuine issue of material fact as to causation.                    Four major

hurdles evolved that appellants had to clear in order to obtain

Loral’s license:       (1) willingness of Loral to sell, (2) agreement

on price, (3) FCC approval of license transfer, and later (4)

bankruptcy court approval.

     Appellants’ discussions with Loral’s chief operating officer

confirmed Loral’s interest in selling.           Although no specific sales

price   was   agreed    upon,   an    opening    offer      had   been    made   by

appellants,   and   Loral    was     keeping   the   door    open   for   further

negotiations.   Loral was not using the 47N W.L. Ku-band license and

the negotiations were occurring at a time when Loral was selling

off assets in an effort to raise cash.

     As to the necessary FCC approval, appellants provided a report

from an expert in the communications field that it was “virtually

certain” the Commission would have approved the transfer (J.A.

1109) and a bankruptcy expert gave a statement that “there is no

reason why the [bankruptcy] court would not have considered and

quickly approved the sale....” (J.A. 1159).            While these approvals

would have to be obtained quickly, when I view the evidence in the

light most favorable to appellants, I see no overarching impediment

to their being had in a timely fashion.

     Loral never used the license and went into bankruptcy. No one

ever bought the license at a bankruptcy sale.                       I think the

                                       17
inferences are reasonable that Loral needed money and appellants

were the only ones genuinely interested in buying the license. The

only thing apparently preventing a transfer of the license was the

refusal of SES Americom to indicate its approval.     This, in my

judgment, is sufficient to show that SES Americom’s refusal to

cooperate caused the loss to the appellants.

                               18