Paraflon Investments, Ltd. v. Fullbridge, Inc.

          FINDINGS OF FACT, RULINGS OF LAW, AND ORDER AFTER A BENCH TRIAL

          RICHARD G. STEARNS, UNITED STATES DISTRICT JUDGE

         Based on the credible testimony and exhibits offered at trial, and the stipulations of the parties, I make the following findings of fact.

         FINDINGS OF FACT

         The Parties

         1. Plaintiff Paraflon Investments, Ltd., is a private limited company with a principal place of business in the British Virgin Islands. Stipulation of Facts (SOF) (Dkt # 95) ¶ 1. It is wholly owned by a family trust, id., of which Michael Sarkesian is the ultimate beneficiary, id. ¶ 2. Sarkesian's role is to present investment opportunities to Paraflon. Tr. Day 1 (Sarkesian) at 38:3-7.

         2. Defendant Fullbridge, Inc., is a Delaware corporation with a principal place of business in Boston, Massachusetts, that provides training to college students, recent graduates, and young professionals to prepare them for the workplace. SOF ¶ 6. Defendants Candice and Peter Olson are the founders of Fullbridge and served as its co-Chief Executive Officers (CEOs) from its founding in June of 2010 until August of 2015. Id. ¶ 7; Trial Ex. 163 at 7. Peter Olson then served as the sole CEO from August of 2015 until his resignation on May 25, 2016. SOF ¶ 8.

         3. Peter Olson is a graduate of Harvard University, Harvard Law School, and Harvard Business School. He previously served as chair and CEO of a major publisher, Random House, before becoming a professor at Harvard Business School. Tr. Day 4 (Mr. Olson) at 31:21-33:18. Candice Olson is a graduate of Stanford University, Harvard Business School, and Teachers College at Columbia University. She previously worked at American Express and Time Warner, before serving as a cofounder and CEO of iVillage, Inc. Tr. Day 3 (Mrs. Olson) at 54:6-57:17.

         Fullbridge's Work in Saudi Arabia

         4. Almost from its inception, Fullbridge was starved for cash and struggled to keep up with operating expenses. As a stopgap, the Olsons turned to the market for new investors and opportunities to expand Fullbridge's business. Trial Ex. 163 at 13.

         5. The Olsons succeeded in winning the Kingdom of Saudi Arabia through a royal subsidiary called Takamol^[1] as a new client. Takamol was established by the Saudi Ministry of Labor to educate and train new entrants to the Saudi labor market. SOF ¶ 17.

         6. On May 5, 2014, Takamol issued a Request for Proposal (RFP), to which Fullbridge responded. Trial Ex. 192 at 5. Fullbridge was thereafter notified electronically and verbally that it had been selected to design and implement a training program, under the designation Wave 1. Mrs. Olson Dep. at 39:11-17.

         7. On August 11, 2014, Takamol and Fullbridge executed a Master Agreement. Trial Ex. 192 at 2. Section 1.4 provided that “[t]his agreement will serve as a framework for the terms of each Work Order. Each Work Order entered between the Parties will serve as a separate contract and will adopt the terms of this Agreement.” Id. at 5.

         8. The Agreement did not, by its terms, limit its application to Wave 1. Id.; Tr. Day 4 (Mr. Olson) at 36:7-9, 77:21-78:6. Fullbridge understood, rather, that the Agreement would govern all of its work for Takamol. Tr. Day 3 (Mrs. Olson) at 71:15-24, 72:4-7.^[2] Takamol representatives and its attorneys told Peter Olson that the Agreement would cover all work going forward, including, as described below, Waves 2 and 3. Tr. Day 4 (Mr. Olson) at 36:16-21.

         9. On November 2, 2014, Takamol issued a second Wave 2 RFP, to which Fullbridge again responded. Trial Ex. 16. Takamol selected Fullbridge as the winning bidder for Wave 2. Id.

         10. On November 27, 2014, Ehab Albakri of Fullbridge sent an email to Khalid AlYousef and Nabil Tuker of Takamol containing the proposed pricing for Wave 2, which AlYousef accepted on behalf of Takamol in a return email the same day. Trial Ex. 16. Albakri understood Takamol's email as “confirming the awarding details and the agreed final price.” Id.

         11. The work orders from Waves 1 and 2 stated that they were “being executed pursuant to the [Master] Agreement . . ., the terms of which are being incorporated herein by reference.” Trial Exs. 193-196.

         12. Takamol had a practice of “perform[ing] now, paper[ing] later.” Tr. Day 3 (Mrs. Olson) at 80:15-19. In other words, Takamol expected Fullbridge to begin working before a contract or work order was formally executed. Tr. Day 5 (Young) at 42:4-6.

         13. Fullbridge began work on Wave 1 before the Master Agreement was signed, relying on Takamol's “paper later” practice. Tr. Day 4 (Mr. Olson) at 75:3-11. Takamol verbally assured Fullbridge that the award had been granted, if not formally reduced to writing. Tr. Day 3 (Mrs. Olson) at 77:7-24.

         14. Fullbridge's work for Takamol on Wave 1 and Wave 2 proceeded without any red flags despite the unfinished formalities. Fullbridge began production in October of 2014 on a Wave 1 project that was completed in March of 2015, but was only “papered” in February of 2015. Tr. Day 3 (Mrs. Olson) at 80:1-19. Fullbridge began production on another Wave 1 project several months before it was papered on April 28, 2015. Id. at 80:24-81:19.

         15. Similarly, Fullbridge began working on Wave 2 projects due for completion in September of 2014 before being papered on August 20, 2014. Tr. Day 3 (Mrs. Olson) at 78:6-16.

         The Wave 3 Award

         16. On April 29, 2015, Takamol issued a third RFP. Trial Ex. 31. The Wave 3 RFP stated that the winning “[b]idder shall be notified in writing directly and solely by Takamol, ” and “shall sign a Framework Agreement within the period so specified by Takamol.” Id. § 7.14. The executive summary similarly provided that “Takamol will enter into 3-year framework agreements . . . with each successful Bidder.” Id. § 1.

         17. On May 27, 2015, Fullbridge submitted a bid for the Wave 3 project. Trial Ex. 44.

         18. On August 17, 2015, Fullbridge employees Stephen Young (Relationship Manager) and Abeer AlHashimi (Chief Fullbridge Representative in the Middle East) met with Takamol's representatives Ghadeer Khali (Product Development), Fahad AlRabaa (Procurement Representative), and Tuker in Saudi Arabia to discuss the Wave 3 RFP, while Fullbridge's Peter Olson, Elena Butler (Vice President of International Business, and Caroline Young (Director of Product Development) participated in the meeting by phone. Tr. Day 4 (Mr. Olson) at 83:11-84:8-19.

         19. Khali informed Fullbridge that it had won a substantial share of the Wave 3 project and would be paid $40 million over three years. Tr. Day 4 (Mr. Olson) at 84:20-85:18, 86:10-19. More specifically, Khali and AlRabaa stated that Takamol would purchase approximately 8, 000 learning hours from Fullbridge capped at $4, 800 per hour. Id. at 85:21-86:8.^[3]

         20. In an August 17, 2015 email, Butler memorialized the “[t]op line” of the meeting by stating that it “went great - much better than we were expecting, ” and that they had reached “[h]igh level agreement on price with [the] promise of 8, 000 learning hours volume at an average of $4, 800” per learning hour for a total of “$40M [in] revenue over the next 3 years.” Trial Ex. 70. Butler elaborated that “we will be the top vendor awarded . . . [and] will have the greatest scale if we reach an agreement on price.” Id.

         21. In another August 17, 2018 email, Stephen Young, quoting from his meeting notes, stated that “Fullbridge [was] slated to be awarded a large portion of wave 3 families (highest among any bidder) pending final pricing offer, ” and that “[s]pecific details of how many courses [are] to be awarded and which families cannot be disclosed until an agreement on price is reached.” Trial Ex. 71. Young also wrote that “[o]nce an agreement has been reached, it should take 2 to 3 weeks for necessary documents to be finalized / signed and course production can begin.” Id. That same day, he followed up with Khali and AlRabaa about “reach[ing] an agreement in terms of pricing for wave 3 very soon.” Id.

         22. On August 18, 2015, AlHashimi sent an email to Rivera, among other Fullbridge employees, indicating that “initial feedback on the pricing we sent was good, ” and that Fullbridge expected to hear from Takamol “on the exact volume and families awarded in the next two days.” Trial Ex. 74.

         23. Fullbridge did not believe that a new Master Agreement had to be signed for Wave 3 since one already existed. Tr. Day 5 (Young) at 79:12-80:3.

         24. Fullbridge, in sum, understood that it had agreed “on the price, on the number of hours, and the duration of three years; and that rested on top of a master contract, a master framework contract.” Tr. Day 3 (Mrs. Olson) at 41:16-20. As Candice Olson noted in a September 16, 2015 email, “Takamol indicated that [Fullbridge had] won 40% of total $100mm Wave 3 project, or $40mm over 3 years” and that “[t]he contract is expected to begin in Q4, ramping up to full production by Q1.” Trial Ex. 84.

         25. Fullbridge and Takamol had not, however, agreed on the “second layer” of course details, namely which families of courses Takamol desired and the cost and duration of each course. Tr. Day 3 (Mrs. Olson) at 97:24-101:6.

         26. Fullbridge immediately began work on Wave 3 by, among other things, mapping out course hours, determining production time and the cost of each course, hiring translators and writers, and finding office space. Tr. Day 3 (Mrs. Olson) at 86:12-87:20.

         27. By the summer of 2015, Fullbridge had been working with Takamol for a year and a half and had received over $5 million in payments. Tr. Day 3 (Mrs. Olson) at 91:13-21. Since the spring of 2015, Stephen Young had been working in Takamol's offices in Saudi Arabia three or four days per week as the “go-to person” for technical issues. Tr. Day 5 (Young) at 44:6-21. He also helped find appropriate speakers, video productions, and actors with the appropriate Saudi dialect and accent. Id. at 53:10-55:12.

         28. Fullbridge remained in regular contact with Khali about Wave 3 regarding, inter alia, video production locations, studio rentals, and hiring choices. Tr. Day 4 (Mr. Olson) at 87:12-22; Tr. Day 3 (Mrs. Olson) at 44:8-14, 45:1-9. Emails between Fullbridge and Takamol from June of 2015 onward discussed logistics, pricing, and families of courses for Wave 3. Tr. Day 1 (Rivera) at 107:4-11.

         29. In September of 2015, Peter Olson instituted weekly meetings for Fullbridge's projects that AlHashimi participated in from Saudi Arabia by video. Tr. Day 4 (Mr. Olson) at 91:7-15. Each week, Peter Olson asked if it was fair to represent to investors that Fullbridge had won the Wave 3 award, and AlHashimi repeatedly confirmed that the deal was still on. Id. at 91:11-92:9.

         30. In January of 2016, Fullbridge invested in an apartment in Riyadh to house two of its employees. Tr. Day 5 (Young) at 57:18-58:13.

         Fullbridge's Finances and Wave 3 Developments

         31. At all relevant times, Fullbridge retained Bradley Woods & Co., Ltd., as its strategic and financial advisor in matters of raising capital, analyzing financial documents, creating financial, business, and strategic plans, and assembling and leading broker ...