Court Opinion

ID: 9369419
Source: CourtListenerOpinion
Date Created: 2023-02-08 20:00:27.355866+00
Date Added: 2024-06-11T17:16:14.903564
License: Public Domain

USCA11 Case: 22-10647    Document: 32-1      Date Filed: 02/08/2023    Page: 1 of 15

                                                              [PUBLISH]
                                    In the
                 United States Court of Appeals
                         For the Eleventh Circuit

                           ____________________

                                 No. 22-10647
                           ____________________

        GSE CONSULTING, INC.,
                                                       Plaintiff-Appellant,
        versus
        L3HARRIS TECHNOLOGIES, INC.,

                                                     Defendant-Appellee.

                           ____________________

                  Appeal from the United States District Court
                       for the Middle District of Florida
                   D.C. Docket No. 6:20-cv-01853-RBD-DCI
                           ____________________
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        2                         Opinion of the Court                      22-10647

        Before ROSENBAUM and LAGOA, Circuit Judges, and WETHERELL,*
        District Judge.
        LAGOA, Circuit Judge:
               This appeal centers around the question of what it means for
        intellectual property to “merge.” Under the terms of a consulting
        agreement between GSE Consulting, Inc. (“GSE”) and Harris Cor-
        poration (“Harris”), GSE is entitled to a payment of up to four mil-
        lion dollars in the event that certain intellectual property owned by
        Harris is “sold, merged or transferred” but did not form “the pri-
        mary basis of the sale.” GSE contends that the relevant intellectual
        property, held by a subsidiary of one of Harris’s subsidiaries, nec-
        essarily “merged” when Harris used a different subsidiary to effec-
        tuate a comprehensive reverse triangular merger with an outside
        company and thus triggered Harris’s payment obligation under the
        parties’ agreement. L3Harris, 1 however, maintains that Harris’s
        participation in the reverse triangular merger did not cause the rel-
        evant intellectual property to “merge,” and has accordingly refused
        to make the demanded payment. The district court agreed with

        * Honorable  T. Kent Wetherell, II, United States District Judge for the North-
        ern District of Florida, sitting by designation.
        1 After the reverse triangular merger was completed, Harris changed its name
        to L3Harris Technologies, Inc. (“L3Harris”) and that entity is the Defendant-
        Appellee in this case. We will refer to Harris when describing events occurring
        before the reverse triangular merger and we will refer to L3Harris when de-
        scribing events occurring after the merger.
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        22-10647              Opinion of the Court                       3

        L3Harris and dismissed GSE’s breach of contract claim on sum-
        mary judgment.
               After careful review, and with the benefit of oral argument,
        we affirm the district court’s ruling.
               I.     FACTUAL AND PROCEDURAL HISTORY
              GSE is a Washington corporation that offers research and
        consulting services related to infrastructure and energy. GSE’s
        founder and president is George Taylor. L3Harris is a Delaware
        corporation that specializes in defense and information technol-
        ogy.
               In 2008, GSE and Harris began discussing the idea of using
        radio frequency heating technology to recover heavy oil from oil
        sands. Those discussions culminated in the two companies devel-
        oping intellectual property related to radio frequency heating, in-
        cluding a process known as “Effective Solvent Extraction System
        Incorporating Electromagnetic Heating.” To formalize the terms
        of GSE’s continued involvement in the development of oil recov-
        ery technology, the parties executed a consulting agreement on
        August 1, 2010 (the “Consulting Agreement”).
               Under that agreement, GSE was required to furnish “on
        call” consulting services to Harris through December 31, 2022, and
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        4                          Opinion of the Court                      22-10647

        any intellectual property developed by GSE while engaged in work
        for Harris would belong to Harris.2
               In exchange, the Consulting Agreement sets forth two com-
        pensation categories for GSE: base pay and special intellectual
        property payments. In the ordinary course, GSE is entitled to spec-
        ified hourly rates and a right of first refusal for ten percent of the
        direct labor workshare of Harris’s projects involving radio fre-
        quency heating of hydrocarbons. In the event of certain dealings
        involving the relevant intellectual property, however, GSE is enti-
        tled to additional “intellectual property fees.”
               Those additional “intellectual property fees” are discussed in
        Attachment F of the Consulting Agreement, which contains six sec-
        tions. The first section sets forth definitions for “Intellectual Prop-
        erty” and “Net Acquisition Value.” The second section governs
        GSE’s special compensation in the event that Harris sells the rele-
        vant intellectual property. The third section governs GSE’s special
        compensation in the event that Harris licenses the relevant intel-
        lectual property. The fourth section is titled “Business Develop-
        ment” and governs GSE’s special compensation in the event that
        “the IP is a primary basis for a third party’s financial contribution
        to a business entity created solely or jointly by Harris.” The fifth
        section caps GSE’s total recovery under Attachment F at seven mil-
        lion dollars. The sixth and final section, titled “Miscellaneous,”

        2 Taylor separatelyassigned to Harris his patent rights in Effective Solvent Ex-
        traction System Incorporating Electromagnetic Heating.
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        22-10647               Opinion of the Court                         5

        contains the following language, which lies at the heart of the par-
        ties’ dispute:
              b. Payments calculation for the following to be 3%
              of market capitalization, capped at $4M:
                     i. in the event the IP is sold, merged or trans-
                        ferred and the primary basis of the sale is
                        not the IP.
                     ii. in the event the IP is exclusively licensed
                         and the primary basis of the license is not
                         the IP.
                     iii. in the event the IP is utilized in a Business
                          Development, but the primary basis of the
                          business development is not the IP.
        Doc. 51-1 at 15, § 6(b) (emphasis added).
               Separately, the Consulting Agreement also contains a Flor-
        ida choice-of-law and choice-of-venue provision, an integration
        clause, a severability clause, and a provision confirming that both
        parties understood the terms of the agreement and had an oppor-
        tunity to consult with counsel before execution.
               On January 1, 2016, Harris transferred all of its intellectual
        property to one of its subsidiaries, Harris International, Inc., which
        then likewise conveyed the intellectual property to its own subsid-
        iary, Eagle Technology, LLC (“Eagle”). The intellectual property
        discussed in the Consulting Agreement was included in those trans-
        fers and remains held by Eagle as of this lawsuit.
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        6                           Opinion of the Court                 22-10647

               In 2018, Harris and L3 Technologies, Inc. (“L3”), announced
        their intention to merge. The next year, the companies partici-
        pated in a reverse triangular merger. The standard reverse trian-
        gular merger proceeds as follows: an acquiring company creates a
        transitory subsidiary, that subsidiary merges into a target company,
        and then that target company survives as the new subsidiary of the
        acquiring company. Here, Leopard Merger Sub Inc. (“Leopard”)
        was the subsidiary of Harris that merged into L3, and, as a result of
        that merger, L3 became a subsidiary of Harris. This is when Harris
        adopted its current name, L3Harris.
               The terms of the reverse triangular merger involving Harris,
        Leopard, and L3, are set forth in the Plan of Merger (the “Plan”).
        As relevant to this appeal, the Plan implicates, among other things,
        the intellectual property discussed in the Consulting Agreement.
               Section 5.15 of the Plan provides that each party to the re-
        verse triangular merger “exclusively own[s] all right, title and in-
        terest to its Company Intellectual Property” 3 and will continue to
        “own or have sufficient rights to use all Intellectual Property used
        in or necessary for the operation of their respective businesses as
        presently conducted, and all such rights will survive unchanged af-
        ter the consummation of the [reverse triangular merger].” 4 Section

        3The Plan defines “Company Intellectual Property” to mean “all Intellectual
        Property owned or purported to be owned by L3 and its Subsidiaries or Harris
        and its Subsidiaries, as applicable.” Doc. 55-9 at 83.
        4   The Plan defines “Intellectual Property” to mean:
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        22-10647                  Opinion of the Court                                7

        5.15 also contains representations that none of the parties to the
        reverse triangular merger has knowledge of any claims of infringe-
        ment, misappropriation, or other violations regarding its own in-
        tellectual property, and that each party “has taken commercially
        reasonable efforts . . . to protect and maintain its Company Intel-
        lectual Property.” Similarly, Section 8.1 of the Plan provides that
        each party to the reverse triangular merger “shall not . . . cancel,
        abandon or otherwise allow to lapse or expire any Intellectual
        Property that is material to the businesses of L3 and its Subsidiaries
        or Harris and its Subsidiaries” as conducted at the time of the Plan.
        Despite these terms, it is undisputed that the intellectual property
        discussed in the Consulting Agreement was not the primary basis
        of the reverse triangular merger.
               Following the execution of this reverse triangular merger,
        GSE sent L3Harris an invoice for four million dollars, invoking Sec-
        tion 6(b)(i) of Attachment F to the Consulting Agreement. GSE’s
        position is that all of Harris’s intellectual property, including the

               all intellectual property anywhere in the world (whether for-
               eign, state or domestic, registered or unregistered), including:
               (a) patents and utility models of any kind . . . , (b) trademarks,
               service marks, trade dress, logos, Internet domain names, uni-
               form resource locators, and other similar identifiers of origin
               . . . , (c) copyrights, rights under copyrights and industrial de-
               signs . . . , (d) trade secrets and other rights in know-how and
               confidential or proprietary information . . . , and (e) all other
               intellectual property rights recognized by applicable Law.
        Doc. 55-9 at 84–85.
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        8                          Opinion of the Court                       22-10647

        intellectual property discussed in the Consulting Agreement, was
        “merged” as a result of the reverse triangular merger because it was
        “addressed [by] and included in” the Plan. L3Harris ultimately re-
        jected that position and refused to pay the invoice. L3Harris also
        subsequently shut down the radio frequency heating program in
        the spring of 2020. According to Taylor, this post-transaction shut-
        down is precisely the sort of risk that Section 6(b)(i) was meant to
        mitigate through compensation.
               On October 6, 2020, GSE filed suit in the United States Dis-
        trict Court for the Middle District of Florida. GSE brought a single
        breach of contract claim against L3Harris for failing to pay the in-
        tellectual property fee contemplated by Section 6(b)(i).
               A year later, GSE and L3Harris filed cross-motions for sum-
        mary judgment.5 GSE argued that the reverse triangular merger
        constituted a “merger” of Harris and that Section 6(b)(i) unambig-
        uously requires payment of the intellectual property fee in such

        5 The summary judgment record includes, among other things, (1) the     parties’
        joint stipulation of agreed material facts; (2) the Consulting Agreement; (3) the
        Plan; (4) the testimony of George Taylor, the founder and president of GSE;
        (5) the testimony of Derik Ehresman, the senior program manager in charge
        of the radio frequency heating program at Harris; (6) the testimony of Mark
        Blue, a Harris employee who reported to Ehresman; (7) the testimony of
        Mitch Evander, L3Harris’s Chief Intellectual Property Counsel; (8) the testi-
        mony of Stephen Moore, the Harris employee who worked on the negotia-
        tions for the Consulting Agreement; (9) the testimony of Donald Teichen, one
        of L3Harris’s senior principals and Eagle’s corporate representative; (10) the
        testimony of Robert Johnson, the corporate representative of L3Harris; and
        (11) the testimony of Terry Sanks, an intellectual property attorney.
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        22-10647                  Opinion of the Court                      9

        cases. In the alternative, GSE argued that, even if Section 6(b)(i) is
        considered ambiguous, the drafting history of the Consulting
        Agreement and the testimony of the employees involved in the ne-
        gotiating its terms establish that Section 6(b)(i) was meant to cover
        transactions like the reverse triangular merger at issue. L3Harris,
        meanwhile, argued that Section 6(b)(i) requires payment only in
        the event that the intellectual property is merged (or sold or trans-
        ferred) and maintained that no such merger (or sale or transfer) oc-
        curred as part of the reverse triangular merger. L3Harris also ar-
        gued that the consideration of extrinsic evidence is precluded as a
        matter of Florida law by the unambiguous nature of Section 6(b)(i)
        and by the Consulting Agreement’s integration clause.
                On February 1, 2022, the district court entered its summary
        judgment order, denying GSE’s motion and granting L3Harris’s.
        In so ruling, the district court found that Section 6(b)(i) “unambig-
        uously means what it says: payment is triggered ‘in the event the
        IP is sold, merged or transferred’ – not [Harris].” The district court
        also rejected the notion that the intellectual property “merged”
        simply because it was addressed in the Plan. Instead, the district
        court concluded that the reverse triangular merger did not trigger
        payment under Section 6(b)(i) because it did not affect any rights
        with respect to the relevant intellectual property and because the
        relevant property remained held by Eagle at all material times. The
        district court accordingly entered judgment in favor of L3Harris.
               GSE filed a timely notice of appeal.
                         II.      STANDARD OF REVIEW
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        10                      Opinion of the Court                 22-10647

                We review de novo a district court’s grant of summary judg-
        ment. Marbury v. Warden, 936 F.3d 1227, 1232 (11th Cir. 2019).
        Summary judgment is proper when the evidence, viewed in a light
        most favorable to the non-moving party, “presents no genuine is-
        sue of material fact and compels judgment as a matter of law in
        favor of the moving party.” Id. (quoting Caldwell v. Warden, 748
        F.3d 1090, 1098 (11th Cir. 2014)). We likewise review de novo a
        district court’s interpretation of a contract. Hegel v. First Liberty
        Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015).
                                 III.    ANALYSIS
               The issue on appeal is whether the intellectual property dis-
        cussed in the Consulting Agreement “merged,” for purposes of Sec-
        tion 6(b)(i) of Attachment F, as a result of the reverse triangular
        merger involving Harris and L3. We hold that it did not.
                 We begin with the meaning of the word “merged,” as used
        in Section 6(b)(i). Under Florida law, which the parties agreed ap-
        plies to the Consulting Agreement, “[w]here the terms of a contract
        are clear and unambiguous, the parties’ intent must be gleaned
        from the four corners of the document.” Crawford v. Barker, 64
        So. 3d 1246, 1255 (Fla. 2011). “In such a situation, ‘the language
        itself is the best evidence of the parties’ intent, and its plain mean-
        ing controls.’” Id. (quoting Richter v. Richter, 666 So. 2d 559, 561
        (Fla. Dist. Ct. App. 1995)). Moreover, courts properly may consult
        dictionaries to ascertain the plain meaning of language. Walsh v.
        Walsh, 262 So. 3d 212, 215 (Fla. Dist. Ct. App. 2018).
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        22-10647               Opinion of the Court                       11

                In the ordinary sense, to be “merged” means to be com-
        bined. See Merge, Merriam-Webster, https://www.merriam-
        webster.com/dictionary/merging (defining “merge” to mean “to
        become combined into one”); Merge, Oxford English Dictionary,
        https://www.oed.com/view/Entry/116760 (defining “merge” to
        mean “to join or blend, esp[ecially] gradually; to combine, amal-
        gamate”); see also Code Revision Comm’n for Gen. Assembly v.
        Public.Resource.Org, Inc., 906 F.3d 1229, 1248–49 (11th Cir. 2018)
        (listing various formulations of the ordinary meaning of the word
        “merge”). When referring to corporations, however, a “merger”
        describes the consolidation of two or more corporations into one,
        surviving corporation. See Merger, The Law Dictionary,
        https://thelawdictionary.org/merger/ (defining the merger of
        corporations as “the uniting of two or more corporations by the
        transfer of property of all to one of them, which continues in exist-
        ence, the others being swallowed up or merged therein”); Merger,
        Merriam-Webster, https://www.merriam-webster.com/diction
        ary/merger (defining merger in the context of corporations to
        mean the “absorption by a corporation of one or more others”).
        Although Section 6(b) generally pertains to corporate transactions,
        the object of the sentence that forms Section 6(b)(i) is the relevant
        intellectual property. For this reason, we read Section 6(b)(i) to
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        12                         Opinion of the Court                      22-10647

        unambiguously use the ordinary definition of the term “merged,”
        i.e., to be combined.6
                But we also recognize that there is more than one way in
        which things (here, intellectual property) can be combined and sat-
        isfy the ordinary definition of the term “merged.” For instance,
        things can be substantively combined, i.e., blended or mixed to-
        gether, to create a new thing. See Public.Resource.Org, Inc., 906
        F.3d at 1249 (“The use of the word ‘merge’ thus carries with it
        strong connotations of unification or combination of disparate ele-
        ments into a single whole in which the previously distinct attrib-
        utes of each element become intermingled and shared.”). Alterna-
        tively, things can be combined simply as a matter of grouping, i.e.,
        pooled together for a certain purpose.
               Even so, the reverse triangular merger at issue did not
        “merge,” i.e., combine, the relevant intellectual property in any or-
        dinary way. As detailed above, the Plan contains assurances re-
        garding the validity, right to continued use, and maintenance of
        each party’s intellectual property. And, given its broad definitions
        of “Company Intellectual Property” and “Intellectual Property,”
        the Plan certainly reaches the intellectual property held by Eagle as
        subsidiary of one of Harris’s subsidiaries. Critically, however, the
        Plan neither blends, pools, nor otherwise combines the intellectual

        6 At multiple points in its briefs, GSE recognizes that this ordinary definition
        of the term “merged” applies.
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        22-10647               Opinion of the Court                        13

        property held by Eagle with any other intellectual property. There-
        fore, the intellectual property discussed in the Consulting Agree-
        ment was not “merged,” for purposes of Section 6(b)(i), as a result
        of the reverse triangular merger, and the district court did not err
        in entering summary judgment in favor of L3Harris.
              None of the arguments that GSE raises on appeal warrants
        reaching a different conclusion.
                GSE’s primary argument is that, when read holistically, Sec-
        tion 6(b)(i) is meant to ensure compensation in the event of large-
        scale corporation transactions, including corporate mergers. In
        making this argument, GSE underscores that the payment contem-
        plated by Section 6(b)(i) is (1) conditioned upon the primary basis
        of the sale being something other than the intellectual property and
        (2) calculated based on market capitalization. But these aspects of
        Section 6(b)(i) do not change the plain meaning of the requirement
        that the relevant intellectual property be “sold, merged or trans-
        ferred.” Nor do they otherwise establish a broad intent to guaran-
        tee compensation in the event of corporate mergers without differ-
        entiation. Rather, as it plainly states, Section 6(b)(i) guarantees
        GSE an intellectual property fee if two conditions are met—i.e., the
        intellectual property is “sold, merged or transferred” and is not “the
        primary basis of the sale”—and that fee is calculated based on the
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        14                         Opinion of the Court                       22-10647

        affected market capitalization. This arrangement is consistent with
        the district court’s interpretation and ruling. 7
               GSE’s alternative argument, meanwhile, assumes that Sec-
        tion 6(b)(i) is ambiguous and then relies on evidence beyond the
        four corners of the Consulting Agreement, including the testimony
        of individuals involved in the negotiation and drafting process. But
        because the language of Section 6(b)(i) is unambiguous, Florida law
        forbids us from “entertain[ing] evidence contrary to its plain mean-
        ing.” Sheen v. Lyon, 485 So. 2d 422, 424 (Fla. 1986); accord Emer-
        gency Assocs. of Tampa, P.A. v. Sassano, 664 So. 2d 1000, 1003 (Fla.
        Dist. Ct. App. 1995) (“[W]hen the terms of a voluntary contract are
        clear and unambiguous, as here, the contracting parties are bound
        by those terms, and a court is powerless to rewrite the contract to
        make it more reasonable or advantageous for one of the contract-
        ing parties.”). Accordingly, we conclude that GSE’s alternative ar-
        gument is unavailing.
                                  IV.     CONCLUSION

        7GSE  also contends that the district court committed reversible error by re-
        jecting GSE’s interpretation without “articulat[ing] an affirmative meaning for
        the disputed language” and “clarifying what such language means.” This con-
        tention lacks merit. The district court adequately engaged with the language
        of Section 6(b)(i) by explaining that the “sold, merged or transferred” require-
        ment is in reference to the intellectual property itself and is unsatisfied where
        the intellectual property is merely “involved in” a sale, merger, or transfer of
        something else.
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        22-10647               Opinion of the Court                      15

              For these reasons, we affirm the district court’s order grant-
        ing summary judgment in favor of L3Harris.
              AFFIRMED.