Court Opinion

ID: 626099
Source: CourtListenerOpinion
Date Created: 2012-03-26 19:45:52+00
Date Added: 2024-06-11T15:41:04.063912
License: Public Domain

[DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT           FILED
                             ________________________ U.S. COURT OF APPEALS
                                                                      ELEVENTH CIRCUIT
                                     No. 11-12115                       MARCH 26, 2012
                               ________________________                   JOHN LEY
                                                                           CLERK
                         D. C. Docket No. 1:09-cv-00784-HTW

DANIEL L. BOMMER,

                                                                           Plaintiff-Appellee,

       versus

GEORGE REMINGTON REYNOLDS,
STEVEN S. GARELECK,

                                                                      Defendants-Appellants.

                  _________________________________________

                     Appeal from the United States District Court
                        for the Northern District of Georgia
                  _________________________________________

                                      (March 26, 2012)

Before EDMONDSON, ANDERSON, and FARRIS,* Circuit Judges.

       *
        Honorable Jerome Farris, United States Circuit Judge for the Ninth Circuit, sitting by
designation.
EDMONDSON, Circuit Judge:

       This state-law case involves a dispute between former business partners

about whether they made a contract. The parties formed a valid and enforceable

contract; the District Court properly granted summary judgment in favor of

Plaintiff.

                                   Background

       Telesis Management Corporation, a telecommunications company founded

by Plaintiff Bommer, merged with companies controlled by Defendants Reynolds

and Gareleck. The merger formed Cost Management Group, Inc. (“CMG”). In

consideration for the merger, Plaintiff received 600,000 shares of stock in CMG

and, along with Defendants, became one of the three principal stockholders in

CMG.

       Plaintiff and Defendants entered into a Stockholder’s Agreement (“the

Agreement”) for CMG. The Agreement contains a buy/sell provision. Under the

buy/sell provision, any of CMG’s principal stockholders may send a Special

Purchase Notice (“SPN”) to another principal stockholder and offer to buy the

other stockholder’s shares at a price and terms outlined in the SPN. The buy/sell

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provision allows principal stockholders to “buy out” or to be “bought out” of the

business relationship.

      In short, under the terms of the Agreement, a principal stockholder who

offers to buy the shares of another principal stockholder is to send an SPN

outlining the purchase price and terms of the deal. The recipient stockholder has

90 days “either to accept the offer or, at his or her sole option, reject the offer and

instead elect to buy all of the Offering Stockholder’s shares of the Stock, for the

Agreement Price and on the Agreement Terms.”

      Pursuant to the terms of the Agreement, only two potential outcomes exist

following the issuance of an SPN: (1) the recipient-stockholder either sells his

stock at the price set forth in the SPN, or (2) purchases the issuer-stockholder’s

stock at the price set forth in the SPN. The recipient of the SPN must act in one

way or another, or else, after 90 days, the SPN-recipient-stockholder automatically

does agree “to sell his or her shares of the Stock to the Offering Stockholder.”

      On 6 June 2008, Defendants sent Plaintiff an SPN notifying Plaintiff of their

intent to purchase his shares for a total price of $1,920,000. The SPN states that of

the $1.92 million, $1.728 million was payable immediately upon the close of the

transaction. The remaining $192,000 was to be paid pursuant to a Promissory

Note within a period of 2 years and subject to “Additional Terms” listed in the

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SPN. The “Additional Terms” included non-compete, non-solicitation, and

disclosure-of-business-interest clauses. About no competition, the additional

terms included this paragraph:

             b. Non-Competition Agreement. You shall execute a non-
      competition agreement which provides that for a period of two years
      from the Closing Date you will not directly or indirectly compete with
      the business of the Corporation by engaging in any business or
      enterprise that engages in telecommunication agency and resale
      services for telecommunications carriers anywhere within the United
      States. The final terms of the non-competition agreement will be
      subject to review by each party’s counsel and shall conform to the
      requirements of applicable law.

      Plaintiff decided to sell his shares to Defendants instead of purchasing all of

Defendants’ shares. Plaintiff wrote to Defendants on 4 September 2008 (within 90

days of the SPN), notifying them of his intention to sell his shares. The letter

states, “Pursuant to Section 10.1 of the Stockholder Agreement please accept this

letter as my acceptance as a shareholder of the Special Purchase Notice dated June

6, 2008.” In the same letter, Plaintiff tenders his 600,000 shares, resigns as an

officer and director of CMG, and asks for the $1.728 million to be wired to his

bank account. Plaintiff’s cover letter makes no mention of the “Additional

Terms,” but the SPN -- which Plaintiff signed and accepted -- includes the

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“Additional Terms” section.

       Plaintiff claims the 4 September 2008 letter operates as an acceptance of the

SPN, which creates a binding obligation on Defendants’ part to pay him $1.728

million.

       Briefly stated, Defendants say no contract was formed because between

June 2008 and March 2009 each party sent many other offers and counteroffers

and the negotiations never ceased. Defendants especially cite an 11 June 2008

letter from Plaintiff’s lawyer as the first counteroffer which, Defendants say,

terminated the SPN.1

       Despite Defendants’ contention that no contract to buy Plaintiff’s stock

exists, Defendants accepted Plaintiff’s resignation, took his keys, and shut down

his company e-mail and other forms of access. Defendants also received the

tender of Plaintiff’s stock; Defendants made no attempt to return the stock until

after Plaintiff filed suit.

       Plaintiff filed suit to compel payment of the $1.728 million plus interest.

The District Court concluded that a binding contract to purchase shares was

established between the parties pursuant to the Agreement and the SPN. The

       1
       Plaintiffs also argue that the SPN is no proper offer because the terms are too uncertain,
incomplete, and indefinite.

                                                5
District Court granted summary judgment to Plaintiff and awarded $1.728 million

plus interest. But the District Court declined to award the additional $192,000

claimed by Plaintiff, finding that Plaintiff never complied with the SPN’s

“Additional Terms.” Defendants appeal.

                                     Discussion

      General contract law applies to this case. Shareholder agreements “are

construed according to the principles of the law of contracts.” Simpson v.

Pendergast, 659 S.E.2d 716, 719 (Ga. Ct. App. 2008) (quotations omitted).

Georgia state contract law controls and instructs that a “definite offer and

complete acceptance, for consideration, creates a binding contract.” Fernandez v.

WebSingularity, Inc., 681 S.E.2d 717, 721 (Ga. Ct. App. 2009) (quotations

omitted).

      Defendants chiefly argue that no contract was formed either because no

proper offer was made or that if an offer was made, Plaintiff rejected it (by his

counteroffers).

      But the text of the SPN was clear enough: the SPN was an offer pursuant to

the Agreement. Defendants even testified that in sending the SPN, Defendants

                                          6
intended either to buy out Plaintiff or for Plaintiff to buy out Defendants.

Defendants testified clearly about their goals (and desired outcome) of sending the

SPN. The SPN represented a definite and valid offer.

       Plaintiff accepted the terms of the SPN with his 4 September 2008 letter

stating, “Pursuant to Section 10.1 of the Stockholder Agreement please accept this

letter as my acceptance as a shareholder of the Special Purchase Notice dated June

6, 2008.” Plaintiff also actually signed the special purchase notice of 6 June 2008,

signing under an all caps phrase that said, “ACCEPTED AND AGREED TO.”

       Considering the Stockholders’ Agreement, negotiations or talks that the

parties engaged in after the 6 June 2008 issuance of the SPN and before the 4

September acceptance do not undermine the unambiguousness and completeness

of Plaintiff’s acceptance.2 With his acceptance of 4 September, Plaintiff

performed as fully as he then could: Plaintiff tendered his 600,000 shares,

resigned as an officer and director of CMG, and asked for the $1.728 million to be

wired to his bank account. Plaintiff sufficiently manifested his acceptance of the

terms of the SPN.

       Defendants especially draw our attention to the matter of no competition.

       2
         For example, in an 11 June 2008 letter, Plaintiff’s lawyer writes: “In addition, this letter
shall not be construed as a rejection of the offer contained within the Special Purchase Notice[.]”

                                                  7
They focus on one sentence in particular: “The final terms of the non-competition

agreement will be subject to review by each party’s counsel and shall conform to

the requirements of applicable law.” But we observe that Plaintiff, by his

acceptance, agreed that he would execute a non-competition agreement for a

period of two years to bar his competition anywhere in the United States. We

strongly doubt that Plaintiff was free to compete once he accepted the SPN.3

Furthermore, although the SPN states that the “final terms of the non-competition

agreement will be subject to review by each party’s counsel and shall conform to

the requirements of applicable law,” we believe that the essential terms -- time,

area and so on -- had already been agreed to in the SPN; formalities and details

remained to be worked out. In addition, as we understand the law, the parties to a

contract can agree to bind themselves by that contract to negotiate in good faith

and to work out -- within an agreed framework -- some terms that remain open. Of

course, Georgia law imposes an implied duty of good faith and fair dealing for all

parties in contracts. The parties made an enforceable contract although it

remained executory in part.

      The SPN represented a valid and definite offer pursuant to the Agreement.

Plaintiff’s acceptance (for consideration) was total, complete, and definite. No

      3
          We are not asked in this suit to enjoin Plaintiff from competing.

                                                  8
genuine issue of material fact exists about whether the parties formed a valid

contract. The District Court therefore correctly granted summary judgment in

favor of Plaintiff.

      AFFIRMED.

                                         9
ANDERSON, Circuit Judge, dissenting.

       Very respectfully, I dissent. In my judgment, the acceptance of the offer in

this case was ambiguous with respect to whether he had accepted all material

terms. The negotiations and course of dealing between the parties made clear that

Bommer had not accepted all material terms, including in particular the term

requiring a reasonable covenant not to compete. Because the offer was never

accepted, there was no contract, and therefore I would have reversed the judgment

of the district court.

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