Court Opinion

ID: 2972799
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:54:09.582048+00
Date Added: 2024-06-11T13:15:30.716417
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                               File Name: 05a0687n.06
                                Filed: August 9, 2005

                                           No. 04-3886

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

ROBERT A. GOODMAN                      )
                                       )
      Plaintiff-Appellant,             )
                                       )
v.                                     )                 ON APPEAL FROM THE
                                       )                 UNITED STATES DISTRICT
CISCO SYSTEMS, INC.,                   )                 COURT FOR THE NORTHERN
                                       )                 DISTRICT OF OHIO
      Defendant-Appellee.              )
                                       )
                                       )
                                       )
_______________________________________)

Before: MARTIN and ROGERS, Circuit Judges; and FORESTER,* District Judge.

       KARL FORESTER, Senior District Judge. Robert Goodman appeals the district

court’s grant of summary judgment to defendant Cisco Systems, Inc. (“Cisco”) on claims arising

from a “success fee” allegedly owed to Goodman for his involvement in certain corporate

transactions.

                     FACTUAL AND PROCEDURAL BACKGROUND

       *
        The Honorable Karl S. Forester, Senior United States District Judge for the Eastern District
of Kentucky, sitting by designation.
       In 1986, Goodman started the law firm of Goodman, Weiss, and Miller (“GWM”), where

he served as a partner until December of 1999, when he took of-counsel status. During his

active practice with GWM, Goodman represented Aironet Wireless Communications

(“Aironet”), a company that was later acquired by Cisco. In July 1999, Aironet engaged in an

initial public offering (“IPO”), in which GWM represented Aironet. GWM billed Aironet on an

hourly basis for its work on the IPO.

       Goodman claims that he was not involved in the day-to-day work on the Aironet IPO in

July of 1999, but assisted in getting the IPO “rolling”. Subsequently, during the summer of

1999, Aironet’s CEO, Roger Murphy, allegedly called Goodman and expressed some concern

about the ultimate success of the IPO. After his discussion with Roger Murphy, Goodman

claims that he became more involved with the IPO. Specifically, Goodman claims he opened up

a dialogue with the SEC, persuaded a third company to sell its shares in Aironet, and intervened

to keep people from alienating the SEC. Goodman alleges that Murphy was seeking Goodman’s

“distinct diplomatic skills [and] his personal connections and influence.” Appellant’s Br. 7. In

addition, Goodman claims that Murphy told him that “if you will get involved [in the IPO], you

will get a premium for yourself above your fee.” JA 285.

       Goodman stated that the first time he and Murphy discussed the amount of the fee was in

January of 2000, and that when the IPO closed in July/August of 1999, there was not a firm

agreement as to a particular fee. After the IPO was completed, Cisco began negotiations to

acquire Aironet. At this time, Goodman claims that Murphy told him about the acquisition and

advised that he would like Goodman to be involved personally. Goodman also alleges that

Murphy told him that he would receive a premium for his participation. As for his involvement

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in the merger, Goodman claims that he acted “like an insurance policy against things going

wrong,” and used his influence to keep a third company from doing anything to harm the merger.

JA 346-47.

       Goodman admits that he and Murphy did not discuss the amount of the premium at the

time Murphy asked him to get involved in the merger, but instead, Murphy told him in late

January or early February 2000, to name his figure, well after the merger agreement was signed

on November 8, 1999, but prior to the completion of the merger on March 15, 2000. Goodman

expressed some reluctance to name a figure and Murphy told him to find some benchmarks to

give guidance on setting the amount of the premium. In mid-February, Goodman told Murphy

that some people were using bankers’ fees for non-bankers and Murphy allegedly responded that

he would give Goodman sixty (60) basis points of the value of the merger. Sixty (60) basis

points would equal $7.2 million. Goodman, however, allegedly suggested cutting the fee in half

because he was uncomfortable with the proposed $7.2 million.

       Subsequent to their agreement, Goodman told Murphy that he would be willing to

allocate $1 million of the $3.6 million merger fee for the work he completed on the IPO.

Therefore, Goodman claims that the $3.6 million fee sought was compensation for his work on

both the merger and the IPO. In order to collect his fee, Goodman sent a single line-item invoice

for $3.6 million to Aironet on March 8, 2000. The invoice was sent on GWM letterhead and

asked that Aironet transfer the funds to Goodman’s personal account. This was the first

reference to the alleged IPO or merger fees in writing. Murphy denies ever having agreed to pay

Goodman any fees beyond those paid to GWM for its representation of Aironet in the IPO and

the merger.

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       In March of 2000, Cisco assumed all debts and liabilities of Aironet after the completion

of the merger. This included any fee owed to Goodman for services rendered. Prior to the

closing of the merger, Cisco received documents from Aironet listing the $3.6 million as a

liability. However, Cisco became suspicious of the $3.6 million fee and began investigating the

legitimacy of the invoice in April or May of 2000. On May 3, 2000, Cisco financial manager,

Mike Tamaru, sent an email to Jane Isham, Aironet’s former, and Cisco’s current, corporate

controller. In this email, Tamaru requested more detail relating to the Goodman invoice. Isham

forwarded Tamaru’s email to Murphy, who responded with the following email on May 4, 2000:

       The Goodman Weiss Miller (GWM) invoice represents: 1) a fixed fee of $2.4M for
       the Cisco/Aironet acquisition and 2) a 1.2M fee relating to Aironet’s IPO.

       The $2.4M acquisition fee is a transaction based fee based on 0.3% of the aggregate
       transaction value measured at the time the deal was announced (November 8, 1999).
       The calculation being $800M x .003 = $2.4M. This transaction fee is in addition to
       hourly billings that total approximately $200K (per Jane Isham).

       As a point of reference, Aironet’s investment banker, Dain Rausher Wessels,
       received a transaction fee of 0.6% of the aggregate transaction value measured at the
       time of closing (March 15, 2000). The calculation being $1,275M x .006 = $7.64M.
       Besides the difference in measurement dates, the DRW fee was due and payable at
       closing.

       In terms of reasonableness, the combined DRW and GWM fees total .8% of the
       transaction value at closing which I believe is reasonable and fair in M&A type deals
       that can range from 0.5 to 2.0 percentage points.

       The $1.2M fee relating to the Aironet IPO is a different story. This is both belated
       and disputed amount between the Company and GWM, I believe, based on recent
       conversations with the managing partner, that the GWM firm is willing to waive any
       claim to the $1.2M fee in exchange for receiving prompt payment of the $2.4M
       acquisition fee.

       I hope this answers your questions. Let me know if I can be of further assistance, as
       I would like to conclude this matter before I leave Cisco on May 31st.

                                                4
JA 1312. Subsequently, Tamaru sent various emails to Cisco employees asking for invoice

details and any other documentation relating to Goodman’s bill. In an email to Isham dated July

28, 2000, Tamaru indicated that the invoice should not be paid.

       On January 30, 2000, Goodman filed suit seeking payment of the fee. In his complaint,

Goodman alleged: 1) breach of contract; 2) unjust enrichment; and 3) promissory estoppel. The

district court granted Cisco’s motion for summary judgment on all claims, finding that there was

no binding contract between the parties because, as Aironet’s outside counsel, Goodman had an

ethical duty to undertake any action necessary to achieve the goals of Aironet. Therefore, the

district court reasoned, there was no consideration for the promise to pay Goodman an additional

amount for his personal involvement in the transactions. Furthermore, the district court found

that there was no enforceable contract between the parties because the terms of the contract were

indefinite and because no meeting of the minds had occurred. The district court found that Cisco

had not been unjustly enriched by Goodman’s involvement in the IPO and the merger because

“Goodman did not confer an uncompensated benefit on Cisco.” JA 57. Finally, the court found

that Goodman could not prove that he detrimentally relied on the purported promise to pay him a

premium in exchange for his services.

       Goodman appeals the district court’s grant of summary judgment.

                                           ANALYSIS

I.     Standard

       The district court’s grant of summary judgment is reviewed de novo. Valentine-Johnson

v. Roche, 386 F.3d 800, 807 (6th Cir. 2004). “Summary judgment is proper where there exists

no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.

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In considering a motion for summary judgment, the district court must construe all reasonable

inferences in favor of the nonmoving party.” Id. The court must decide “whether the evidence

presents a sufficient disagreement to require submission to a jury or whether it is so one-sided

that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

251-52 (1986). Because this is a diversity action, the Court must apply the substantive law of

Ohio. See, John Hancock Fin. Servs. v. Old Kent Bank, 346 F.3d 727, 733 (6th Cir. 2003).

II.    Breach of Contract Claim

       In his complaint, Goodman alleges that he entered into a contract with Murphy for the

payment of a fee upon the successful completion of Aironet’s IPO and merger with Cisco. The

district court found that Goodman and Aironet had no valid contract because there was a lack of

consideration for the alleged fee, there was no mutual assent to the contract terms, and the

contract was indefinite.

       Under Ohio law, a plaintiff alleging breach of contract must demonstrate 1) the existence

of a contract; 2) performance by the plaintiff; 3) breach by the defendant; and 4) damages.

Doner v. Snapp, 649 N.E.2d 42, 44 (Ohio App. 1994). To establish a valid contract, the conduct

of the parties must evidence a meeting of the minds, and the essential terms of the contract must

be definite and certain. Nilavar v. Osborn, 711 N.E.2d 726, 732 (Ohio App. 1998). The terms of

the contract are generally considered certain when they provide a basis for determining the

existence of a breach and determining an appropriate remedy. Id. at 734.

       Goodman is unable to prove either a meeting of the minds or certainty as to the essential

terms of the alleged success fee for the IPO. It is unclear what specific actions were required

beyond Goodman’s involvement through GWM in the IPO. Goodman and Murphy had no

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agreement about the fee that would be paid for Goodman’s involvement in the transaction. In

fact, Goodman repeatedly admitted that there was no binding agreement between him and

Murphy at the time the IPO closed. See, JA 286, 287 and 289.

       Furthermore, Goodman is unable to prove a meeting of the minds regarding the terms of

the alleged contract for the merger success fee. In a similar action, Isquick v. Classic

Autoworks, Inc., 627 N.E.2d 624, 627 (Ohio App. 1993), the court found that an alleged oral

agreement concerning the restoration of antique vehicles was not sufficiently definite to

constitute an enforceable contract because the agreement contained no provision concerning the

extent or scope of the restoration or methods to be followed in restoring the vehicles. Similar to

Isquick, the agreement between Goodman and Murphy contained no provisions concerning the

extent or scope of Goodman’s involvement in the transactions.

III.   Unjust Enrichment Claim

       Goodman argues that, whether or not the court finds the success fee agreements

constituted enforceable contracts, he should be allowed to recover under a theory of unjust

enrichment.

       The doctrine of unjust enrichment is a quasi-contractual theory of recovery which

provides that “a person shall not be allowed to profit or enrich himself inequitably at another’s

expense, but should be required to make restitution of or for property or benefits received,

retained, or appropriated, where it is just and equitable that such restitution be made.” Norton v.

City of Galion, 573 N.E.2d 1208, 1209 (Ohio App. 1989). Therefore, in order to successfully

state a claim of unjust enrichment, a plaintiff must establish “(1) a benefit conferred by a plaintiff

upon a defendant; (2) knowledge by the defendant of the benefit; and (3) retention of the benefit

                                                  7
by the defendant under circumstances where it would be unjust to do so without payment.”

Hambleton v. R.G. Barry Corp., 465 N.E.2d 1298, 1302 (Ohio 1984).

       Goodman cannot establish all of the elements needed to support a claim of unjust

enrichment. First, he cannot demonstrate that he conferred a benefit. Goodman fails to

demonstrate how his role facilitated the success of the IPO or merger transaction. Second, it

appears that Cisco was unaware of any agreement between Cisco and Aironet. Furthermore, it

does not appear that Murphy or anyone else at Aironet knew exactly what Goodman was doing

to facilitate the IPO and/or the merger. Therefore, there was no apparent knowledge by the

defendant of the benefit conferred by Goodman. Finally, Goodman has failed to demonstrate

that the retention of any benefit conferred would be unjust. As outside counsel for Aironet,

Goodman was expected to work for the benefit of his client. In addition, Goodman testified that

he billed and was paid for some of the services that he performed in relation to the IPO and the

merger. Therefore, it would not be unjust for Cisco to retain any benefit received from

Goodman’s involvement.

IV.    Promissory Estoppel Claim

       Goodman’s promissory estoppel claim is also meritless. Promissory estoppel is a quasi-

contractual remedy employed by courts to prevent an injustice. In order to succeed on a theory

of promissory estoppel, a plaintiff must establish 1) a promise; 2) that is clear and unambiguous

in its terms; 3) reliance by the party to whom the promise is made; 4) that the reliance was

reasonable and foreseeable; and 5) that the party claiming estoppel was injured by the reliance.

Rigby v. Fallsway Equip. Co., Inc., 779 N.E.2d 1056, 1061 (Ohio App. 2002).

                                                8
       Assuming Murphy promised to pay Goodman a fee for his involvement in the IPO and

merger, the terms of such a promise were not clear and unambiguous. At the time any promise

was made, it was not clear what type of involvement was required by Goodman or what amount

of compensation would be rendered. In fact, Goodman testified that he did not come to an

agreement with Murphy relating to the fee until February 2000, well after the close of the IPO

and after he became involved in the merger. Therefore, at the time Goodman alleges he

detrimentally relied on Murphy’s promise by becoming involved in the IPO and merger, the

terms of the promise were not clear and unambiguous. In addition, Goodman cannot prove that

he was injured by any reliance on Murphy’s promise. As addressed above, Goodman testified

that he billed and was paid for some of the time he devoted to the IPO and merger. Therefore, if

Goodman had billed for all of the time he devoted to the transactions, it can be assumed that he

would have been properly paid.

                                        CONCLUSION

       Goodman is unable to prove that a valid contract existed for the payment of any success

fees for his involvement in Aironet’s IPO and merger with Cisco. Furthermore, Goodman has

not shown that Cisco was unjustly enriched by Goodman’s involvement in the transactions.

Finally, the requirements of promissory estoppel have not been met in this action.

       For the foregoing reasons, we AFFIRM the judgment of the district court.

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