Botanical Research Institute, Inc. et al.
Tien-Tsai Lin et al No. 134817
MEMORANDUM AND ORDER ON PLAINTIFFS' MOTION FOR
PARTIAL SUMMARY JUDGMENT
P. Leibensperger, Justice
dispute arising from an investment of $5 million by
defendants (" the Lin Family") in Botanical
Research Institute, Inc. (" BRI") commenced in
2008. BRI was organized by plaintiffs, Lin-Huey Chen and Dr.
Lan Bo Chen (" the Chen Family"). The Lin Family
made the investment in 2004, on the basis, allegedly, of an
oral agreement with the Chen Family that they would implement
a written business plan that had been presented by them to
the Lin Family. In exchange for the $5 million investment,
the Lin Family received 50% ownership of BRI while, pursuant
to the oral agreement, the Chen Family retained 50% ownership
as " sweat equity" for their expected work to
implement the business plan.
2008, the Lin Family became aware of facts they found
disturbing regarding the Chen Family's stewardship of
BRI. Through their counsel in Boston, Don M. Kennedy, a
partner in the firm of Goodwin Procter LLP, they raised
claims of fraud, breach of fiduciary duty and mismanagement
of BRI by the Chen Family. The Chen Family denied the claims
made by the Lin Family and countered with their own claims.
The Chen Family and BRI were represented at all times by
counsel from the firm of DLA Piper LLP, Bruce E. Falby. Both
firms and the individual lawyers are skilled counsel,
experienced in the resolution of sophisticated business
series of phone conversations, letters, emails and exchanges
of draft settlement documents, the parties, through their
counsel, negotiated about a settlement of all disputes. Among
other important terms, the settlement discussions involved
the Lin Family surrendering their shares in BRI for a price
and agreeing not to use the names or goodwill of the Chen
Family in any way. Negotiations continued from late 2008
until 2011, at least. The Chen Family and BRI assert that on
several occasions from February 2009 to February 2011, the
parties reached an agreement to settle all issues between
them. It is undisputed, however, that at all times the
parties contemplated that the settlement was to be documented
by a single, written document entitled Settlement Agreement
to be signed by all relevant parties. It is also undisputed
that such a Settlement Agreement was never executed.
Accordingly, the issue presented is whether the parties'
preliminary manifestations of assent to the terms of a
settlement gave rise to an enforceable contract.
Chen Family and BRI commenced this action to enforce the
Settlement Agreement. They seek a declaration that the
Settlement Agreement is enforceable, an order of specific
performance, and damages for the Lin Family's failure to
perform under the Settlement Agreement. The Chen Family and
BRI move for partial summary judgment. Specifically, they
move for a determination that there is a Settlement Agreement
that is an enforceable contract binding on the Lin Family.
The Lin Family opposes summary judgment on the ground that
there are genuine disputes of fact regarding whether the
parties intended to enter into an enforceable settlement by
any means other than a fully executed, written Settlement
Summary judgment is appropriate where there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law. Mass.R.Civ.P. 56(c). The moving
party bears the burden of affirmatively demonstrating the
absence of a triable issue and that the summary judgment
record entitles the moving party to judgment as a matter of
law. Pederson v. Time, Inc., 404 Mass. 14, 16-17,
532 N.E.2d 1211 (1989). When deciding a motion for summary
judgment, the court views the evidence in the light most
favorable to the nonmoving party, but does not weigh
evidence, assess credibility, or find facts. Attorney
Gen. v. Bailey, 386 Mass. 367, 370-71, 436 N.E.2d 139
(1982). " Where, as here, 'intent is at the core of
a controversy, summary judgment seldom lies.'"
Bray v. Community Newspaper Company, Inc., 67
Mass.App.Ct. 42, 43, 851 N.E.2d 1087 (2006), quoting
Madden v. Estin, 28 Mass.App.Ct. 392, 395, 551
N.E.2d 550 (1990).
Chen Family's burden on this summary judgment motion is
to establish as an undisputed fact that the parties intended
to be bound by their communications preliminary to the
execution of the formal Settlement Agreement. " It is
axiomatic that to create an enforceable contract, there must
be agreement between the parties on the material terms of
that contract, and the parties must have a present intention
to be bound by that agreement." Situation Mgmt.
Systems, Inc. v. Malouf, Inc., 430 Mass. 875, 878, 724
N.E.2d 699 (2000). " The controlling fact is the
intention of the parties." McCarthy v. Tobin,
429 Mass. 84, 87, 706 N.E.2d 629 (1999).
parties' Consolidated Rule 9A(b)(5) Statement of Material
Facts (" SMF") discloses a fundamental dispute with
respect to the parties' intentions during the period from
2008 to 2011. That dispute is whether the parties intended at
all times during their communications that no party would be
bound unless and until the formal Settlement Agreement
document was executed by all parties, signatures notarized,
and the Chen Family received a written representation that
Goodwin Procter had the authority to represent the Lin Family
shareholders. An affidavit from Mr. Kennedy, on behalf of the
Lin Family, states, in essence, that the insistence on an
executed, formal Settlement Agreement before a party was to
be bound was the premise upon which the negotiations
proceeded. An affidavit of Mr. Falby, on behalf of the Chen
Family, concedes that his clients did not want an agreement
to be effective until after execution of a formal Settlement
Agreement, but denies that a party could not be "
bound" by an earlier expression of agreement to the
terms of a settlement. SMF ¶ 1 of Defendants'
Statements of Additional Facts; Affidavit of Don M. Kennedy,
¶ 7; Supplemental Affidavit of Bruce Falby, ¶
¶ 4-5. This dispute over the parties' understanding
and intent lies at the " core of the controversy."
Bray, cited supra . The dispute prevents
summary judgment for the Chen Family.
Chen Family argues that the court should discount the
affidavit of Mr. Kennedy because (1) he does not specify a
particular conversation or representation by Mr. Falby
stating that preliminary communications would not be binding,
and (2) there allegedly was no insistence by the Chen Family,
as evidenced by the documentary record, on the execution of a
formal Settlement Agreement before an agreement could be
binding. Both arguments fail.
Kennedy's affidavit (¶ 7) stating " [d]uring
all of our communications concerning possible settlement, on
behalf of the BRI parties, Mr. Falby insisted that settlement
would become effective and binding on the parties once they
(a) signed a written settlement agreement, and (b) had all of
the signatures notarized, and (c) the Lin Parties represented
in the written settlement agreement that Goodwin Procter had
the authority to represent the Lin Family shareholders in the
negotiation of any settlement agreement" is well
supported in the record. For example, Mr. Falby's letter
of November 11, 2008, which served as the commencement of the
negotiations demanded that " [a]ny settlement must also
include the following elements as a condition to
settlement " (emphasis added). The letter then
detailed the terms or elements. They included that the Lin
Family surrender their shares in BRI and provide full and
completed notarized general releases, as well as "
notarized proof from each of the Lin Family members of (a)
the number of shares that they own, and (b) that they have
given Goodwin Procter the authority to represent them in this
matter." By use of the words " as a condition to
settlement" in the settlement offer an issue of fact is
created as to whether a condition precedent to the formation
of a binding contract was created. " A condition
precedent defines an event which must occur before a contract
becomes effective or before an obligation to perform arises
under the contract." Massachusetts Municipal
Wholesale Electric Company v. Danvers, 411 Mass. 39, 45,
577 N.E.2d 283 (1991). To ascertain whether the parties
intended to create a condition precedent, " a court
considers the words used by the parties, the agreement taken
as a whole, and surrounding facts and circumstances."
Id. at 45-46.
addition, Mr. Falby included in the first draft of a
settlement agreement, and in every version thereafter, the
" The Agreement shall become effective, and the
obligations hereunder shall be triggered, only upon
execution of the Agreement by all signatories thereto."
Agreement, ¶ 12 (emphasis added). The use of these and
similar words convey an intent not to be bound by preliminary
agreements. See 20 Atlantic Avenue Corp. v. Allied Waste
Industries, Inc., 482 F.Supp.2d 60, 74 (U.S.D.C.,
D.Mass. 2007) (" consummation of the Transaction is
subject to, among other things, execution of the
Agreement" indicates no binding agreement until
execution); Reprosystem, B.V. v. SCM Corp., 727 F.2d
257, 261-62 (2d Cir. 1984), cert. denied, 469 U.S. 828, 105
S.Ct. 110, 83 L.Ed.2d 54 (1984) (drafts conditioned the
parties' obligations on receipt of opinion of counsel
that agreement has been duly authorized, executed and
delivered; thus, no binding agreement until execution).
Moreover, Massachusetts law recognizes that parties may
employ an " invalidating clause" or reservation of
agreement until execution of later final documents.
Targus Group International, Inc. v. Sherman, 76
Mass.App.Ct. 421, 433, 922 N.E.2d 841 (2010) (agreement in
principle reached in mediation with independent mediator
enforced where parties did not use an invalidating clause).
Here, the conditions imposed by Mr. Falby and the ...