Court Opinion

ID: 2672211
Source: CourtListenerOpinion
Date Created: 2014-05-02 00:50:51.514436+00
Date Added: 2024-06-11T09:19:53.675515
License: Public Domain

13-3913-cv
Starr v. Firstmark Corp.

                  UNITED STATES COURT OF APPEALS
                      FOR THE SECOND CIRCUIT

                                 SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S
LOCAL RULE 32.1.1.   WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED
WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER").      A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

           At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall United
States Courthouse, 40 Foley Square, in the City of New York, on
the 24th day of April, two thousand fourteen.

PRESENT:   JOHN M. WALKER, JR.,
           DENNY CHIN,
           CHRISTOPHER F. DRONEY,
                     Circuit Judges.

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MARC A. STARR,
                           Plaintiff-Appellant,

                           -v-                           13-3913-CV

FIRSTMARK CORP.,
                           Defendant-Appellee.

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FOR PLAINTIFF-APPELLANT:             LEAH MARY CAMPBELL, Katten Muchin
                                     Rosenman LLP, New York, New York

FOR DEFENDANT-APPELLEE:              ERIC L. UNIS, Troutman Sanders
                                     LLP, New York, New York

            Appeal from the United States District Court for the

Eastern District of New York (Feuerstein, J.).
          UPON DUE CONSIDERATION, IT IS ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

          Plaintiff-appellant Marc A. Starr appeals from the

district court's judgment entered September 11, 2013 dismissing

his second amended complaint and denying leave to file a third

amended complaint.   By opinion and order filed September 9,

2013, the district court granted the motion of defendant-

appellee Firstmark Corp. ("Firstmark") to dismiss pursuant to

Fed. R. Civ. P. 12(b)(6) and denied Starr's letter motion for

leave to file a third amended complaint.   We assume the parties'

familiarity with the facts, procedural history, and issues on

appeal.

          This case arises out of a stock purchase agreement

("SPA") through which Firstmark acquired Centroid, Inc.

("Centroid"), a company that manufactures and assembles

replacement parts for military applications, from Starr.    As the

former owner of Centroid, Starr was eligible for periodic "Earn-

Out Payments" depending upon Centroid's performance during the

two years following Firstmark's acquisition.   Starr makes three

arguments on appeal:   the district court erred in (1) concluding

that he failed to sufficiently allege a claim for breach of the

implied covenant of good faith, (2) failing to accept as true

the factual allegations of the second amended complaint and

failing to draw all reasonable inferences in his favor as

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required on a Rule 12(b)(6) motion, and (3) failing to grant

leave to file a third amended complaint.

           We review de novo a district court's grant of a motion

to dismiss under Rule 12(b)(6).    See Simmons v. Roundup Funding,

LLC, 622 F.3d 93, 95 (2d Cir. 2010).    While we generally review

a district court's denial of a motion for leave to amend a

pleading for abuse of discretion, where the denial is based on

rulings of law, our review is de novo.    See Spiegel v.

Schulmann, 604 F.3d 72, 78 (2d Cir. 2010) (per curiam); Kassner

v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 242 (2d Cir. 2007).

     1.    The Implied Covenant of Good Faith

           The SPA provided that Firstmark would prepare

financial statements in accordance with generally accepted

accounting principles ("GAAP") and that any disputes over the

calculations would be decided by an independent accountant.      The

parties agreed that the accountant's findings would "be final

and binding upon the Parties and [would] not be subject to

judicial review."   (App. 47).    Starr concedes that an

independent auditor jointly chosen by the parties found that

Firstmark's accounting complied with GAAP.    Nevertheless, he

argues that Firstmark breached Delaware's implied covenant of

good faith in the way it applied GAAP to calculate Centroid's

revenue.

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             The duty of good faith and fair dealing attaches to

every contract under Delaware law and encompasses "the

obligation to preserve the spirit of the bargain rather than the

letter, the adherence to substance rather than form."       Pierce v.

Int'l Ins. Co. of Ill., 671 A.2d 1361, 1366 (Del. 1996)

(internal quotation mark omitted).1    Delaware law also provides,

however, that "where a dispute arises from obligations that are

expressly addressed by contract, that dispute will be treated as

a breach of contract claim."    Nemec v. Shrader, 991 A.2d 1120,

1129 (Del. 2010); see also id. at 1128 ("Delaware's implied duty

of good faith and fair dealing is not an equitable remedy for

rebalancing economic interests after events that could have been

anticipated, but were not, that later adversely affected one

party to a contract.").

             Starr posits that Firstmark's application of GAAP "in

a particular manner" violated the duty of good faith.       (Reply

Br. at 4).     But Starr and Firstmark did not agree to a

particular application of GAAP, as the SPA merely provided that

Firstmark would "cause [Centroid] to prepare internal financial

statements in accordance with GAAP."     (App. 44).   Hence, the SPA

did not require only a particular application of GAAP, and,

indeed, Starr notes that "[i]t is well recognized . . . that

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     As the parties agree and as it provides, the SPA is governed by
Delaware law.

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GAAP is 'flexible.'"   (Appellant's Br. at 15).   Nor has Starr

pointed to anything in the SPA that implies that the parties

would have agreed to a particular application of GAAP had they

"specifically addressed the issue at the time of contract."

Nemec, 991 A.2d at 1127; see also Fitzgerald v. Cantor, No.

16297-NC, 1998 WL 842316, at *1 (Del. Ch. Ct. Nov. 10, 1998)

("Since a court can only imply a contractual obligation when the

express terms of the contract indicate that the parties would

have agreed to the obligation had they negotiated the issue, the

plaintiff must advance provisions of the agreement that support

this finding in order to allege a sufficiently specific

contractual obligation.").   The independent accountant specified

in the contract's dispute resolution provision reviewed

Firstmark's calculations and found that they adhered to GAAP.

Starr is therefore bound by the independent accountant's

decision and he is barred from repackaging his claims under

Delaware's contractual duty of good faith.   "A party does not

act in bad faith by relying on contract provisions for which

that party bargained where doing so simply limits advantages to

another party."   Nemec, 991 A.2d at 1128.

     2.   The Rule 12(b)(6) Standard

          Starr also contends that the district court did not

"accept[] as true [his] allegations concerning the course of

[his] negotiations" with Firstmark.    (Appellant's Br. at 20).

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In particular, he points to an email he received from

Firstmark's CFO about how it would calculate Centroid's year-end

earnings.    The email, which is referenced in the second amended

complaint, purportedly provided assurance that Firstmark would

not make certain adjustments.    The district court did not,

however, interpret the email in a manner inconsistent with

Starr's interpretation, and the email did not form the basis for

the district court's dismissal.    Instead, the district court

merely cited the email as evidence that the parties specifically

discussed accounting methodology prior to executing the SPA, and

it noted that the parties could have included similar language

in the SPA -- but they did not.    Contrary to Starr's suggestion,

therefore, the district court's reference to the email did not

contravene the requirements of Rule 12(b)(6).

  3.        Leave to Amend

             Finally, we agree with the district court that leave

to amend would have been futile.       Starr had already filed three

complaints.    His proposed fourth iteration added no new facts or

legal theories.    Starr accepts as much, conceding that the third

amended complaint "asserts the same claims."      (Appellant's Br.

at 28).     Because Starr has not identified any new facts that, if

pleaded, "could cure the deficiencies that led to the dismissal

of [his initial] complaint," Wilson v. Merrill Lynch & Co., 671

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F.3d 120, 140 (2d Cir. 2011), the district court did not abuse

its discretion in denying leave to amend.

          We have considered appellant's remaining arguments and

conclude they are without merit.       For the foregoing reasons, we

AFFIRM the judgment of the district court.

                              FOR THE COURT:
                              Catherine O'Hagan Wolfe, Clerk

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