Opinion
IP 98-1058-C-M/S
December 26, 2002
Paul Demarco Waite Schneider Bayless Chesley, Vine Tower Cincinnati, OH.
Gary Lynn Hostetler Hostetler and Kowalik, Indianapolis, IN.
Matthew R Gutwein Baker Daniels, Indianapolis, IN.
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
This cause is now before the Court on motions for summary judgment filed by both the plaintiffs, Garwood Packaging, Inc. ("GPI"), Tony Garwood ("Garwood"), and Peter McNamara ("McNamara") (collectively, the "Plaintiffs") , and the defendants, Allen Co., Inc. ("Allen Co.") and Raymond J. Martin ("Martin") (collectively, the "Defendants"). Plaintiffs have brought claims of breach of an implied-in- fact contract, promissory estoppel and fraud against the Defendants. Both parties argue that summary judgment in their favor is appropriate because there are no genuine issues of material fact on any of the Plaintiffs' asserted claims.
The parties have fully briefed the issues and the motions are ripe for ruling. For the reasons stated herein, the Court DENIES the Plaintiffs' motion for summary judgment, but GRANTS the Defendants' motion for summary judgment.
I. FACTUAL BACKGROUND A. THE PARTIES, THIRD PARTIES, THEIR RELATIONSHIPS
Plaintiff, GPI, attempted to develop and market a food-packaging system that would increase the shelf life of fresh meats and other foods. Defs.' Stmt. of Facts, ¶ 1. Plaintiff, Garwood, was a co-founder, former director of product development and former director of GPI. Id. ¶ 2. Garwood started work on this food-processing system in the 1980s while he resided in Australia. Id. ¶ 3.
Around 1985, Garwood formed Garwood Ltd., a food-packaging business that used his system. Id. ¶ 4. Garwood Ltd. received several Australian government-sponsored economic development loans totaling approximately $20 million after receivership. Id. ¶ 5. Garwood Ltd. never made a profit; by 1988 the company was insolvent and forced into receivership. Id. ¶¶ 6-7. Consequently, a $20 million judgment was entered against Garwood personally because he was a guarantor of Garwood Ltd.'s loans. Id. ¶ 8. Garwood paid approximately $135,000.00 of this judgment. Id. ¶ 9.
Plaintiff, McNamara, was a co-founder, former director and former president and chief executive officer of GPI. Id. ¶ 10. He received a B.A. in economics from Monash University in Melbourne, Australia, and an M.B.A. from Melbourne University. Id. ¶ 11. After working several years as an executive for General Motors Corp., McNamara became an investment banker with Bank of America. Id. ¶ 12. He worked at Bank of America for eight years, becoming a vice president responsible for banking capital markets in Bank of America's main office in Sydney, Australia. Id. ¶ 13.
During his years as an investment banker, McNamara worked on at least twenty to thirty investment-banking deals. Id. ¶ 14. By 1989, McNamara testified that he considered himself a "sophisticated financial analyst." Id. ¶ 15 (quoting McNamara Dep., at 41, 436).
In 1989, while Garwood Ltd.'s receivership was winding down, Garwood and McNamara decided to form a successor business to Garwood Ltd. Id. ¶ 16. To that end, Garwood and McNamara created an offshore Netherlands corporation that they named Seawell. Id. ¶ 17. Then, Garwood and McNamara set up trusts to hold shares of Seawell. Id. ¶ 18. Garwood and McNamara created Seawell to purchase from the bankruptcy receiver the patents and intellectual property rights to Garwood Ltd.'s food-packaging system. Id. ¶ 19. By using Seawell to purchase the assets, Garwood and McNamara hoped to shield the assets from Garwood's and Garwood Ltd.'s creditors. Id. ¶ 20.
In late 1989, Garwood and McNamara moved from Australia to Indiana; in 1990, they formed GPI. Id. ¶ 22. Upon forming GPI, both Garwood and McNamara transferred their GPI stock into offshore trusts. Id. ¶ 23. Then, GPI signed a licensing agreement with Seawell to market the food- packaging system. Id. ¶ 24. GPI called the product the "Stretch Flavaloc" system. Id. ¶ 25.
In 1992, Seawell became insolvent and Garwood and McNamara were forced to sell all of their interest in that entity. Id. ¶ 27. McNamara testified that the two men "had to sell out for a cheap price." Id. ¶ 28 (citing McNamara Dep. at 57).
Late in 1992, McNamara approached Allen Co. about the prospect of investing in GPI. Id. ¶ 29. Sam Baker ("Baker"), an investment banker with Allen Value Partners (an investment fund affiliated with Allen Co.) traveled to Indiana to conduct due diligence and evaluate the attractiveness of GPI as an investment opportunity. Id. ¶ 30. Baker concluded that GPI bordered on bankruptcy. Id. ¶ 31. Baker's understanding at that time was that no other entities were considering investing in GPI. Id. ¶ 32. In addition, Baker believed that GPI was desperate and that McNamara appeared "stressed out." Id. ¶ 33 (quoting Baker Dep. at 28-29). At that time, Allen Co. declined to invest in GPI. Id. ¶ 34.
In 1992, GPI had expenses of approximately $1.5 million and revenue of less than $50,000; thus, GPI lost over $1 million that year. Id. ¶ 35. By January 1993, GPI had never earned a profit and had exhausted all of its funds. Id. ¶ 36. To allow GPI to stay in business, all of GPI's shareholders agreed in March 1993 to loan GPI $360,000.00. Id. ¶ 37.
Also in March 1993, GPI engaged Allen Co., a New York investment bank, to provide investment-banking services and to serve as an exclusive private-placement agent. Id. ¶ 38. Allen Co. agreed, on a "best efforts" basis, to attempt to locate investors willing to put capital into GPI and to assist GPI in restructuring its millions of dollars in debt. Id. ¶ 39. GPI engaged Allen Co. under a contingency-fee arrangement; Allen Co. would receive a fee only if it was successful in raising capital for GPI during the term of the agreement, which was March 1993 to July 31, 1993, or such later date as agreed by GPI and Allen Co. Id. ¶ 40; Martin Aff. Exh. A, Letter, To Garwood Packaging, Inc., From Raymond J. Martin, Vice President, Allen Co., Mar. 4, 1993 ("Engagement Letter"). Between March and September 1993 defendant, Martin, a vice president at Allen Co., contacted dozens of prospective investors around the world, including venture capital organizations, major corporations, banks and individuals. Defs.' Stmt. of Facts, ¶ 41. None of those businesses contacted agreed to invest on terms acceptable to GPI. Id. ¶ 42.
Apparently, Allen Co. viewed its arrangement with GPI as an exclusive one. Martin Dep. at 338. In other words, Allen Co. told GPI that if it dealt with another placement agent, Allen Co. would not work for GPI. Id. McNamara affirms that Martin also told GPI, in September 1993, that it could not deal with any investors not approved or introduced by Allen Co. Garwood Aff. ¶ 3. Apparently, Martin became irate upon learning that an Indianapolis venture capital firm named CID had made a definite proposal to GPI for a deal in which both CID and Allen Co. would invest in GPI, both would own equal shares of GPI, and the deal would close quickly. Pls.' Stmt. of Add'l Facts, ¶ 66. CID would invest at least $1.5 million in GPI. Id. But, Allen Co. would not receive a commission. Id.
On July 2, 1993, McNamara extended another personal loan to GPI. Id. ¶ 43. Further, on or about August 31, 1993, GPI agreed to amend its so-called "take-or-pay" contract with a company called Indiana Packers to eliminate any obligation for Indiana Packers to make guaranteed minimum payments to GPI. Id. ¶ 44. It is unclear why this amendment took place. Id. ¶ 45 (and responses thereto).
By August 1993, Martin had told GPI that Allen Co. would consider investing in GPI and would seek to locate other prospective investors if an agreement could be reached with a suitable strategic partner that would invest similar amounts of capital. Id. ¶ 46 (and responses thereto). McNamara took issue with Allen Co.'s requirement that a strategic partner get involved; he went to New York to discuss this issue with Enrique Senior ("Senior"), Allen Co. Managing Director. McNamara Dep. at 179-80. Specifically, McNamara felt that requirement would
complicate the deal. It was clear that when you get a strategic partner involved like [sic] it turned out to be Hobart [sic] that it would really slow the deal down. In other words, the closing. It would take longer to close. Perhaps another four or five months because you have, first, well, it could be longer.
You have to find such a party. Then selling [sic] them on the idea. Then you have to negotiate all the terms and conditions. . . . I knew we were going to run out of money. I explained that to him.
He said he, [sic] that didn't matter. That Allen [ Co.] would not move forward, would not do the deal unless we had such strategic partner [sic] which had to be approved by Allen [ Co.] and him.
Id. at 179-80.
Garwood testified that a strategic partner "was a requirement." Defs.' Stmt. of Facts, ¶ 50 (quoting Garwood Dep. at 95).
GPI identified Hobart Corporation ("Hobart") as a potential strategic partner. Id. ¶ 51. By September 1993, GPI and Allen Co. were negotiating with Hobart over the terms of a proposed transaction. Id. ¶ 52 (and responses thereto). On October 25, 1993, Richard Gleitsmann ("Gleitsmann"), of Hobart, wrote the following to GPI: "It is understood that this transaction is subject to the negotiation and execution of mutually agreeable definitive agreements with the approval of Hobart's parent company, Premark International, Inc." Id. ¶ 53. From the outset of the negotiations, Allen Co., Hobart and GPI conditioned the proposed investments on GPI's reaching satisfactory arrangements with all of GPI's creditors. Id. ¶¶ 54, 83. As GPI explained in August 1993, "our investment bankers and all prospective investors have made it clear that none of their funds may be used to repay existing debt." Id. ¶ 55. In addition, further into the negotiations, possibly in 1994, Allen Co. also required that the reorganized company hire Robert Sind ("Sind") as part of its management team. Id. ¶ 56.
Late in 1993, McNamara approached CID again, with Martin's prior knowledge and approval, but CID decided against becoming part of the transaction at that time. Pls.' Stmt. of Add'l Facts, ¶ 68.
B. THE ALLEGED UNCONDITIONAL PROMISE
At a meeting of interested parties at Hobart's offices on November 30, 1993, Martin stated that Allen Co. was willing to "put in" $2 million for the restructuring; $1 million would come from Allen Co. and $1 million would come from other investors. Pls.' Add'l Stmt. of Facts, ¶ 12. Garwood testified that Martin told him "unequivocally we are going to do the deal," apparently, some time that same month. Garwood Dep. at 231. Further, Garwood testified that he recalled McNamara asking Martin on November 30, 1993, that "if we agree to [give Allen Co. investors] the sixteen percent, you will do it? You will provide the two million dollars and complete the deal? . . . [Martin] said yes." Garwood Dep. at 92. Of this same conversation, McNamara testified that he "went to considerable trouble to verify with Martin on at least two occasions that this was the deal. All right. Now so there would be no more changes. This is it. People would go forward and it was a deal. [Martin] said yes." McNamara Dep. at 101.
Garwood also testified that on December 28, 1993, when Garwood and McNamara were "despondent," "Martin said words to the effect, come on, guys, we are going to get the deal [done] come hell or high water." Garwood Dep. at 210. See also Pls.' Add'l Stmt. of Facts, ¶ 39. According to Garwood, "the season was having an effect [on Martin] because he knew that [Garwood, McNamara and GPI] were in really pretty desperate conditions." Garwood Dep. at 210.
On or about July 28, 1994, Martin again reassured Garwood and McNamara in a phone conversation that he would provide the $2 million to be invested in GPI and complete the deal. Pls.' Add'l Stmt. of Facts, ¶ 40. Garwood testified that he believed "[t]here were no terms. [Martin] had committed and said that he was going to do the deal come hell or high water." Garwood Dep. at 77. Garwood repeatedly testified that "there were no terms." Id. at 328, 78, 85-86, 89, 94, 109-111, 142-43, 208, 231, 327. 332-33. Garwood affirmed that he used the word "term" synonymously with "condition." Garwood Aff. ¶ 13. In addition, Garwood testified that he believed Allen Co. was obligated to ensure the deal would close even if the parties could not agree on how much stock each was to receive in exchange for its investment. Defs.' Stmt. of Facts, ¶ 119. In other words, Garwood testified that he believed Allen Co. was obligated to close "[i]rrespective of anything." Id. ¶ 123. Further, Garwood testified:
My understanding was that [Martin] didn't need the investors at the end of the day, anyway. It was something he chose to do to pursue other investors. [Allen Co.] had the capability of providing the funding within three minutes if they wanted to. On the occasions that [Martin] unequivocally promised that he was going to provide the two million dollars, there was no discussion about other investors, [Allen Co.] [was] going to provide it.
Garwood Dep. at 360-61. Garwood's only concern was the two million dollars, not where it came from. Id. at 355.
Similarly, McNamara testified that he believed Martin's words "we are going to do this deal" meant that Martin promised not only to invest Allen Co.'s $2 million, but also to ensure that Hobart made its investment, which included another $1.52 million. Defs.' Stmt. of Facts, ¶ 116. Specifically, McNamara testified: "[Allen Co.] committed to close the deal and make sure we got all our funding. All of the funding is more than the $2 million. Closing the deal is more than just providing the money." Id. ¶ 117 (quoting McNamara Dep. at 31) (alteration by the Court). Further, McNamara testified that he believed that Allen Co. would close even if Hobart refused to proceed with the proposed deal or regardless of the deal terms. Id. ¶¶ 120-21. McNamara thought Allen Co. was obligated even if GPI, Garwood and McNamara lost the licensing and intellectual property rights required to market their product. Id. ¶ 122.
McNamara had never heard of anyone making the type of unconditional promise the Plaintiffs claim Martin made with his comments; McNamara thought Martin's unconditional promise to invest in GPI and ensure the deal closed was "unusual," "most unusual," "very unusual," and "highly unusual." Id. ¶¶ 166, 168, 169. He testified: "What I can say is that in my investment banking experience, I have not heard of anyone making such a commitment." Id. ¶ 167 (quoting McNamara Dep. at 437).
During his deposition McNamara acknowledged that "[t]he deal was a deal subject to completion of the documentation." Id. ¶ 124. Further, McNamara testified:
Q: Was that agreement subject to finalizing documentation?
A. Yes. It would have been.
* * *
Q. Your position is that Martin told you that the money would be invested if the documents were finalized?
Mr. De Marco: Objection.
Q. Right?
A. Martin — — yes. Right. That is what he said. Yes.
Q. Okay. So if the documents were never finalized, the Allen investors were not obligated to invest, correct?
Mr. De Marco: Objection.
A. Yes. Correct.
Id. ¶ 125 (quoting McNamara Dep. at 156, 164). McNamara also testified that "it is never a deal until the thing is finally done, until the signature is on the piece of paper. I understand that." Id. ¶ 126 (quoting McNamara Dep. at 104-05). Apparently, McNamara realized that Allen Co. would not be required to close the deal under all circumstances because he testified that "presumably if we negotiated something that was pretty bad, they would be able to pull out, I would imagine. I mean, I'm sure that is what they were thinking at the time." McNamara Dep. at 112. See also id. at 190 (responding to a hypothetical in which McNamara was to imagine he was an Allen Co. investor looking at a deal that was no longer attractive enough to warrant an investment, McNamara states: "Well, again, if you are asking me if I was in that position, yes, I believe that I had the right to pull out at that point in time.").
McNamara "understood there was a risk the deal might fall through." Id. at 447. Therefore, McNamara continued to look for alternative investors, apparently with Martin's knowledge, after Allen Co. allegedly promised to invest unconditionally. Bankr. Hr'g Tr., at 22. For example, in December 1993, McNamara asked CID Ventures to invest in GPI. Defs.' Stmt. of Facts, ¶ 146. On January 3, 1994, CID Ventures wrote to McNamara declining GPI's offer. Id. ¶ 147. Similarly, in July 1994, ACI declined GPI's invitation to invest. Id. ¶ 152. McNamara looked to other sources as well and did so constantly.
Id. ¶ 148. He testified that "even during the time that Allen Company were the financial advisors and seeking to raise money, I still was — I still had some back [ups]. I was trying to organize money from other sources just in case that their deal fell through." Bankr. Hr'g. Tr. at 22.
C. THE DEAL FAILS TO CLOSE
In late December 1993, at Martin's suggestion, GPI engaged the New York law firm of Kaye, Scholer, Fierman, Hays Handler ("Kaye Scholer") to assist GPI with negotiations and draft the documents necessary to close any refinancing/reorganization deal. Defs.' Stmt. of Facts, ¶ 57 (and responses thereto). Martin actually contacted his friend, Joe Hansen ("Hansen"), at Kaye Scholar to describe the deal. Pls.' Add'l Stmt. of Facts, ¶ 14. Although Martin denies that he told Hansen that Allen Co. was investing in GPI, Hansen's handwritten notes taken during his conversation with Martin about the deal read, in pertinent part:
2.0 20% ----- Allen Co. ----- Hobart ----- 5 Present Investors Pls.' Opp'n Exh. 30. Further, Kaye Scholar's intake form for GPI contains a handwritten note over Hansen's initials that states, in pertinent part: "P.S. Allen Co. asked us to handle this client, in which they are investing." Id.The attorney at Kaye Scholar who became responsible for the work on the GPI restructuring was T. Brent Costello ("Costello"). Defs.' Stmt. of Facts, ¶ 58. Because of his role as document drafter, Costello was required to know the terms of the proposed deal. Id. ¶ 59. Everything Costello knew about GPI and the proposed deal he learned through his representation of GPI. Id. ¶ 60.
However, McNamara never told Costello that McNamara had interpreted Martin's comments to be an unconditional promise by Allen Co. to close the deal irrespective of terms. Id. ¶ 163. Moreover, McNamara never asked Costello whether Martin's comments constituted a binding contract or a promise on which GPI could rely. Id. ¶ 164. Further, neither McNamara nor Garwood asked Kaye Scholer to prepare a formal document memorializing Allen Co.'s alleged unconditional promise to close the deal irrespective of the terms. Id. ¶ 165. McNamara testified that he did not tell Costello about this because he did not believe Costello was trustworthy. McNamara Dep. at 589-91.
When GPI engaged Kaye Scholer, Costello understood that Allen Co. "had a high level of interest in the transaction," but that "it was subject to numerous conditions including financial and budget plans to the satisfaction of the investors." Defs.' Stmt. of Facts, ¶ 61 (quoting Costello Bankr. Dep. at 67). Further, Costello testified that he knew that Allen Co. "wanted a lot of conditions satisfied before they were [sic] willing to fund." Id. ¶ 62 (quoting Costello Bankr. Dep. at 130). Costello also testified that he knew that Allen Co. would not agree to close the proposed transaction unless and until it had agreed with all the terms and conditions of the deal. Id. ¶ 64.
From December 1993 to August 1994 the parties negotiated numerous terms and conditions. Id. ¶¶ 65, 175. For example, the parties negotiated over (i) the number of shares of each participant, (ii) the class of share of each participant, (iii) details of corporate governance, (iv) shareholder voting rights, (v) rights of first refusal on the issuance of new shares, (vi) so called "tag along/drag along rights," (vii) the payment of Hobart's legal fees, and (viii) the terms of employment agreements with GPI's executives. Id. ¶ 66. McNamara testified to some of these terms stating: "We are talking about, you know, in principle the major terms we all agreed to. They were the funding terms. For example, on the machine license agreement or the construction agreement with Hobart Corporation, I mean, that had to be negotiated. That was one of the terms that had to be negotiated." Id. ¶ 68 (quoting McNamara Dep. at 105). Further, McNamara testified:
A. Well, from November 30, 1993, onward Ray Martin told us on numerous occasions that we, in effect, had the money. All right. So it was a done deal, if you will.
Q. Had what money to do what?
A. Well, that our packaging, that it was a, that all we had, that in effect, G.P.I. would get the two million dollars. All we had to do was finish negotiating these agreements that I mentioned before.
Id. ¶ 70 (quoting McNamara Dep. at 111). Allen Co. continued to make demands, and GPI, in response continued to make concessions. Id. ¶ 176. When asked why GPI would make concessions after Allen Co.'s alleged unconditional promise for funding, McNamara answered, in part, "Because all negotiations were not finalized." Id. ¶ 177.
To assist the parties in keeping track of the items that needed resolved for the proposed deal to close, Kaye Scholer and others prepared "Open Points/To Do Lists." Id. ¶ 71. The dates on these "lists" run from December 30, 1993, to July 25, 1994. Id. ¶ 72. McNamara understood that the items on these various "Open Points/To Do Lists" "had to be done." Id. ¶ 73 (and responses thereto, quoting McNamara Dep. at 564). In other words: "[T]he open points/to do lists, that was a list of things that had to be completed." McNamara Dep. at 564. McNamara also testified that the "Open Points/To Do Lists" items had to be resolved before the documentation of the transaction could be completed and he "very much doubted if [the deal] would close without the documentation being complete." Id. at 412.
Costello testified that he explained to McNamara that, if the deal were to close, GPI had to satisfy the conditions that Allen Co. and the other parties imposed. Costello Dep. at 132.
Costello also testified that negotiations with Hobart proved particularly difficult. Defs.' Stmt. of Facts, ¶¶ 75, 78 (citing Costello Bankr. Dep. at 47). For example, in September 1993, Hobart appeared willing to contribute $1.5 million in capital in exchange for a 7.4% equity interest in GPI. Id. ¶ 76. But, on November 30, 1993, Hobart demanded that it receive, in exchange for a $1.7 million investment, no less than a 20% equity interest in GPI. Id. ¶ 77. According to Costello, "there were probably 10, 20, 30, 50 issues that Hobart was raising." Id. ¶ 79 (quoting Costello Bankr. Dep. at 71). Costello testified that difficulties with Hobart "made it look like there was a possibility that the deal would not close." Id. ¶ 78 (quoting Costello Bankr. Dep. at 47).
Apparently, another stumbling block was that Hobart and Martin refused to allow Mobil to invest. Id. ¶ 153 (and responses thereto). McNamara testified that "Rich Gleitsmann was very much opposed to Mobil putting any money into [GPI] in exchange for shares or doing anything to the company in exchange for shares. So what I mean by that is if Mobil were to get shares, then Hobart would not participate." Id. ¶ 154. Garwood testified that he did not know if Mobil would have invested in GPI. Id. ¶ 155.
In addition to difficulties with Hobart, the parties also had difficulties with Seawell. Id. ¶ 82. GPI had failed to pay royalties or make loan payments it owed to Seawell and, consequently, GPI was in default of its licensing agreement for the Stretch Flavaloc system. Id. ¶ 80. Therefore, the parties had to negotiate with Seawell the terms of a new licensing agreement as well as a sublicensing agreement between GPI and Hobart. Id. ¶ 81.
On January 24, 1994, GPI wrote to its creditors stating:
Hobart Corporation and Allen Company, Inc., have requested, as a condition of proceeding with their material and capital contributions, that the creditors of Garwood Packaging, Inc., enter into an arrangement which provides for a moratorium on debt collection activities for a period of sixty (60) days to enable them, along with the debtor [(GPI)], to complete a recapitalization agreement. Along those lines, enclosed with this letter is a proposed Composition and Extension Agreement which we are requesting that you sign and return . . . as soon as possible.
Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1. The terms of the Composition and Extension Agreement provided that creditors having claims less than $19,999.99, would be paid in full seven days from the date of closing the arrangement between Hobart, Allen Co. and GPI. Id. Creditors with claims of $20,000.00, or greater, would be paid 20% of their claim in cash within seven days of closing, receive a three-year term note for 30% of the outstanding indebtedness, and for the balance of their claim, receive non-convertible, Series B preferred stock. Id. at 2. Further, the letter stated: "It is believed by the debtor [(GPI)] that unless satisfactory arrangements are reached along the terms outlined herein, Hobart Corporation and Allen Company, Inc., will not go forward with their financing arrangements as outlined, and the debtor will have no alternative other than to cease its operations." Id.
On June 1, 1994, Martin sent a memorandum to Gleitsmann and Jones that outlined some suggested changes to the restructuring proposal to satisfy the group of investors Allen Co. had assembled. Pls.' Summ. J. Exh. 10, Memorandum, To: Rich Gleitsmann, Thad Jones, From: Ray Martin, June 1, 1994. The memorandum also stated, in part:
[A]s of this writing, we have received $1,150,000 in re-approvals from the assembled group of Allen investors and are working with two individuals, one outside and one within the firm for commitments of $350,000 and $500,000 respectively. We expect to have final commitments from these individuals by Friday.
Id.
On July 5, 1994, GPI sent, under Garwood's signature, another letter to creditors that provided:
"As a condition to making their investment, the New Investors are requiring that" the creditors execute releases. Defs.' Stmt. of Facts, ¶ 87. The letter stated, in part, "unless satisfactory arrangements are reached with the New Investors, including the execution by each of the Subject Creditors of the enclosed Release Agreement, the New Investors will not go forward with their financing arrangement, and Garwood will have no alternative than to cease its operations." Id. ¶ 88.
On July 15, 1994, Hobart informed GPI and Allen Co. that it would continue to negotiate only if six conditions were satisfied. Id. ¶ 94. One of those conditions was: "All creditors have signed releases prior to closing." Id. ¶ 95 (quoting Defs.' Exh. 16, Letter, To: Anthony Garwood, Garwood Packaging, Inc., From: Richard P. Gleitsmann, Jr., Hobart Corp., July 15, 1994). Gleitsmann wrote on behalf of Hobart, in part: "As you are aware, each time we think that we have resolved all the issues, something new has been added that has required further negotiation and changes. If we are ever going to reach an agreement, we need to stop the moving target very soon." Id. ¶ 96. GPI had to negotiate arrangements with over seventy creditors. Id. ¶ 89. It became apparent that some creditors would refuse to compromise their claims. Id. ¶ 90.
Around this time, the Defendants recall that Hobart told Martin that if the deal were to close, Hobart would only offer Garwood a short-term employment contract (six to twelve months), would only allow Sind to serve as GPI's CEO for six months, and would not offer McNamara any type of employment contract. Id. ¶ 104 (and responses and exhibits thereto). See also Gleitsmann Dep. at 209. Gleitsmann affirmed in his affidavit that he speculated in conversations with other parties to the deal that McNamara would probably not be retained post-closing because of insufficient funds. Gleitsmann Aff. ¶ 5.
On July 29, 1994, Hobart informed GPI in writing that Hobart was ceasing all negotiations. Defs.' Stmt. of Facts, ¶ 97. In an effort to persuade Hobart to reenter the negotiations, McNamara asked Martin to write a letter confirming that Allen Co. had raised $2 million. Id. ¶ 98. On August 4, 1994, Martin sent GPI a letter, which stated in part:
This letter is to confirm to you that Allen Company Incorporated ("Allen") has currently raised two million dollars ($2,000,000) to be invested in Garwood Packaging, Inc. pursuant to the recapitalization and private placement transaction we have been negotiating. The portion of the two million dollars representing investments from persons outside the Allen group is currently being held in a segregated Allen escrow account earmarked for Garwood and the portion of the two million dollars representing investments from persons within the Allen group is of course currently being held in Allen accounts.
We understand that there are a number of business and legal issues which remain to be resolved and we are prepared to negotiate in good faith and endeavor to resolve said issues as quickly as possible.
Once again, we would like to express Allen's firm interest in consummating the transactions contemplated. We look forward to hearing from you.
Id. ¶ 99 (quoting Defs.' Exh. 20, Letter, To: Anthony J. M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 4, 1994). Martin wrote another letter to GPI dated August 9, 1994, which stated, in part:
This letter is to confirm to you that Allen Company Incorporated ("Allen") has currently raised two million dollars ($2,000,000) to be invested in Garwood Packaging, Inc. ("Garwood") pursuant to the recapitalization and private placement transaction we have been negotiating. . . .
We understand that the parties are near resolution of the few remaining business and legal issues and we look forward to resolving the issues promptly and working with you to complete the financing subject to documentation satisfactory to everyone.
Once again, we would like to express Allen's firm interest in consummating the transaction contemplated. We look forward to hearing from you.
Id. ¶ 101 (quoting Defs.' Exh. 24, Letter, To: Anthony J. M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 9, 1994). During his deposition, Martin testified that the statement in his letter that Allen Co. had raised $2 million to be invested in GPI was false if taken on its face because "by the 4th, [Allen Co.] had approval from Herb [Allen] for the bridge and then [Martin] had indications of interest from potential investors that, if the deal came to — — if all the terms and conditions and the documentation was done, they would be prepared to invest the money into the company, into GPI." Martin Dep. at 345. In other words, with Martin's qualifications, what he said in the letter was true; without them, it was false. Id.
In July or August 1994, McNamara approached an Australian firm named ACI, with Martin's prior knowledge and approval, to gauge ACI's interest in investing in GPI. McNamara Aff. ¶ 14.
On August 9, 1994, GPI, through Thad Jones ("Jones"), a GPI director, attempted to convince Hobart to resume negotiations by offering Hobart an additional 5% equity interest for its investment, which would have brought Hobart's equity interest up to 25.5%. Defs.' Stmt. of Facts, ¶ 102. Apparently, these discussions were somewhat fruitful because the Plaintiffs still thought closing was around the corner. GPI did not offer Allen Co. any additional equity for its investment. Id. ¶ 103.
Further, around the beginning of August 1994, GPI provided financial statements to Martin that indicated the company's position was "soft." Defs.' Exh. 3, Memorandum, To: Directors — Garwood Packaging, Inc. — Tony Garwood, Thad Jones, Lew Fetterman, John Wagner, From: Peter McNamara, Aug. 18, 1994, ¶ 3. On or about August 16, 1994, McNamara expressed his concern to Martin about the accuracy of those financial statements because of a personnel problem; McNamara told Martin he "would ensure the financials were fixed by" August 18, 1994. Id. ¶¶ 3-4. Apparently, GPI had also indicated to Martin (either via the financial statements or otherwise) that there would only be fourteen to fifteen months worth of cash available after closing, rather than the nineteen or twenty months originally estimated. Id. ¶ 1.
On August 16, 1994, Kaye Scholar sent to the parties draft closing documents, including red-lined or first drafts. Defs.' Stmt. of Facts, ¶ 108. The letter accompanying the documents "note[d] that (i) the enclosed is forwarded subject to the review and comment of Garwood Packaging, Inc. and (ii) the dollar and share amounts in the documents are not yet finalized." Id. (quoting Defs.' Exh. 5, Letter, To: Persons on Attached Distribution List, From: Ilene D. Penn, Kaye, Scholer, Fierman, Hays and Handler, Re:
Garwood Packaging, Inc., Aug. 16, 1994). Apparently, at this time, the parties had not reached agreement on how many shares of GPI stock each participant would receive. Id. ¶ 109 (and responses thereto).
Costello also testified that at this time, to his knowledge, "all of the parties had not come to a final agreement on the terms." Id. ¶ 110 (and responses thereto).
On August 18, 1994, Martin informed McNamara at GPI that Allen Co. would withdraw from the restructuring. Defs.' Exh. 3, Memorandum, To: Directors — Garwood Packaging, Inc. — Tony Garwood, Thad Jones, Lew Fetterman, John Wagner, From: Peter McNamara, Aug. 18, 1994. Apparently, Martin also spoke with Gleitsmann at Hobart on August 18, 1994. Gleitsmann Bankr. Dep. at 56. Gleitsmann testified
that the reason [Martin] could not get any of these people to finally come up with the money, with enough money, was that the numbers on the — I think it was balance sheet from Garwood Packaging had changed yet again, and that gave the investors pause, and that they decided they did not want to come forward with the money.
Id. Gleitsmann also testified that Martin cited changes in the balance sheet, or the amount of post-closing cash available in the transaction, as the reason the investors pulled out. Gleitsmann Dep. at 177. Although Martin testified that he objected to Hobart's "demand" that Tony Garwood and Peter McNamara be terminated post-closing, apparently, Martin never mentioned this concern to Gleitsmann when he communicated to Gleitsmann Allen Co.'s intent to pull out of the proposed deal. Gleitsmann Aff. ¶ 5.
In addition, in a handwritten note, Martin wrote that five out of the nine investors that Allen Co. had assembled had withdrawn their support for the transaction "due to the last round of changes in the deal structure which would have left the company insufficiently capitalized. . . ." Pls.' Exh. 27, Handwritten Note, Undated, Unsigned. In another handwritten, undated note, Martin stated: "GARWOOD . . . HELP HANGING OUT TO DRY." Pls.' Exh. 28, Handwritten Note, Undated, Unsigned. The Defendants were well aware that GPI would be forced into bankruptcy and lose its rights under the Seawell license if the restructuring did not take place. Pls.' Stmt. of Facts, ¶ 14.
Around the time that Martin indicated Allen Co. would not participate in the restructuring, McNamara was looking for ways to restructure the deal to increase the amount of post-closing cash. McNamara Dep. at 231, 239, 244.
By the time the proposed deal failed, the parties' attorneys had drafted over forty separate documents to close the transaction. Defs.' Stmt. of Facts, ¶ 91. The Investment Agreement, which identified the shareholders and the number of their shares, required agreement by fifteen parties. Id. ¶ 92.
D. NON-PLAINTIFF PARTIES' INVOLVEMENT IN AND UNDERSTANDING OF THE TRANSACTION
Jones was a GPI director during part of 1993 and part of 1994. Id. ¶ 133. Apparently, in 1994, he was informed of Martin's promise to provide $2,000,000.00 in funding and complete the deal. Pls.' Add'l Stmt. of Facts, ¶ 43. Jones was actively involved in some of GPI's efforts to negotiate and close the proposed deal. Defs.' Stmt. of Facts, ¶ 134. Specifically, Jones affirmed that he personally attended several of the negotiating sessions with Hobart, Allen Co. and Mobil; he participated in conference calls with the parties to the proposed deal, during which the parties negotiated terms and conditions under which they would consider closing the deal; he had conversations with GPI's counsel, Kaye, Scholar; he spoke one-on-one with Hobart's representative, Gleitsmann; and, he spoke regularly with McNamara and Garwood about the proposed transaction. Id. ¶ 135. Apparently, after Hobart had provided GPI with formal notice on July 29, 1994, that Hobart was ceasing all further negotiations, Jones, on behalf of GPI, wrote to Hobart with a proposal that offered Hobart increased economic advantage in the proposed deal.
Id. ¶ 136.
Further, Jones understood that Allen Co. had not made an unconditional promise to close the proposed deal. Id. ¶ 137. Specifically, Jones affirmed:
5. Throughout the entire course of the negotiations, I, in my capacity as a GPI director and as a representative of Central Soya, understood and believed that Allen Company would not agree to complete the proposed transaction unless and until the parties agreed to terms that Allen Company found to be satisfactory.
6. Throughout the entire course of the negotiations, I, in my capacity as a GPI director and as a representative of Central Soya, also understood and believed that the proposed transaction would not close unless and until all the necessary parties, including GPI, Hobart, Allen Co., Seawell, and Mobil, agreed to the terms and conditions.
7. For example, I, in my capacity as a GPI director, understood and believed that Allen Co. was not obligated to invest in GPI or to close the proposed transaction irrespective of the terms and conditions demanded by other parties, such as Hobart.
Id. ¶ 137 (quoting Jones Aff. ¶¶ 5-7).
Costello, at Kaye Scholar, always knew that, for any number of reasons, the proposed deal might not close. Id. ¶ 138. Costello explained, for example, that "Hobart raised a lot of objections to the transaction and to the terms of the transaction. So to that extent Hobart's reluctance to go forward on the terms was an impediment to finalizing the deal." Id. ¶ 139 (quoting Costello Dep. at 18). Further, Costello testified that Hobart was
raising numerous, numerous problems with the transaction in terms of, as I recall, how much equity they were going to get in the deal. They had a problem with the [employment] agreements that were being considered for Tony and Peter at that time. They had done some due diligence, I believe, that they had many questions on. I don't remember a specific one — deal point, but they had many many deal points that when you add them up, seemed to be a big problem.
Id. ¶ 140 (quoting Costello Bankr. Dep. at 47-48). Costello also testified that he knew that GPI's creditors could cause the proposed deal to fail. Id. ¶ 141. He remembered that a few creditors had not agreed to the package presented to them when the deal failed. Id. ¶ 142. Costello testified that he had advised GPI that the deal would not close unless and until all of the parties agreed to all of the terms. Id. ¶ 160. However, Costello was on vacation in August 1994 when the transaction was scheduled to close. Pls.' Add'l Stmt. of Facts, ¶ 46.
McNamara testified that he did not share all information with Kaye Scholer attorneys, including Costello, because he did not trust them and felt that they were compromised by their relationship with Allen Co. Id. ¶ 45.
By affidavit dated March 25, 2002, Gleitsmann at Hobart affirmed that:
All of us (Hobart, GPI, and the other parties to the transaction) were repeatedly turning to Ray Martin for assurances, and he was repeatedly giving us assurances that he would complete his part of the deal and that the funding would be forthcoming. All of us were ready to complete the deal, but the funding (which was Ray Martin's responsibility) never came in. Ray Martin promised the $2 million in funding, but in the end he just did not deliver it. That is why the GPI deal did not close. In retrospect, although I did not know it at the time, I have the sense that Ray Martin was promising more than he could deliver.
Gleitsmann Aff. ¶ 4. However, to the extent this affidavit conflicts with Gleitsmann's prior sworn testimony on the subject, Gleitsmann stands by his earlier testimony. Gleitsmann Dep. at 157, 167-68. Specifically, Gleitsmann testified that Hobart was still waiting to resolve issues with some creditors before the deal could close. Id. Moreover, Gleitsmann testified that he never heard Martin "promise" any funding; Gleitsmann remembers getting assurances from Martin. Id. at 179.
Senior, Allen Co. Managing Director, testified that he had an interest in investing in GPI subject to satisfactory terms and conditions. Defs.' Stmt. of Add'l Facts, ¶¶ 96 97.
E. ALLEGED MISREPRESENTATIONS
The Plaintiffs assert that Martin made misrepresentations about at least two subjects, that he had raised $2 million to be invested in the GPI restructuring and that he had final commitments from investors for the money. In addition to the facts regarding Martin's assertions above, the Plaintiffs offering the following facts in support of their allegations.
First, in at least one document Martin created during his involvement with the GPI deal, he referred to some investors interested in the GPI restructuring using terms such as "the investment group being assembled by Allen [Co.] . . . for the $2.0 million cash portion of the financing[,]" "the group assembled by Allen [Co.] . . .," and "the assembled group of Allen investors. . . ." Pls.' Opp'n Exh. 10. Further, a lawyer associated with Allen Co. provided GPI's attorneys with a list of persons who, according to her testimony, "were the prospective purchasers who had expressed interest in purchasing in this deal." Lico Dep. at 9-10. The fax containing the list stated, in relevant part: "Set forth below is a list of the purchasers who are part of the Allen group." Pls.' Opp'n Exh. 20.
Martin testified that "there was no Allen group of investors. There is a — these are prospective investors. . . . I assembled a group of investors. Some of them were within Allen [Co.] and some of them were outside of Allen [Co.]. . . . There was no Allen group." Martin Dep. at 42. Martin explained: "Persons within the Allen group? There was no Allen group. There were individual in — prospective individual investors. Some of them worked for Allen [Co.] And so it's — I'll say it again. There was no formal Allen group." Id. at 43. In addition, Martin testified that "what you're calling the Allen group is a group of investors that Allen [Co.] attempted to assemble to put money into a restructured company." Id. at 256. He also stated that "what you've referred to as the Allen group, is a group of potential investors that were interested in investing in GPI under certain terms and conditions. . . ." Id.
Next, Martin indicated in a memo dated June 1, 1994, that he "expect[ed] to have final commitments" from two individuals "by Friday," June 3, 1994, including one "commitment" of "$350,000." Pls.' Opp'n Exh. 10. In addition, on July 21, 1994, Martin sent a letter to investor, Harry Evans Sloan ("Sloan"), that stated in relevant part: "Garwood is finally approaching closing! We are ready for investors to wire their portion of the funds to an Allen [Co.] account. The closing is scheduled to be Thursday, July 28, 1994. Please wire your portion in the amount of $350,000 to the following account. . . . We will have documentation to you very soon." Pls.' Opp'n Exh. 18. When Martin was asked in his deposition how much Sloan was going to invest in GPI, the transcript reads:
Q. How much was Harry Evans Sloan going to invest in Garwood Packaging?
A. Three hundred —
MR. GUTWEIN: Objection. Vague as to the word "invest."
A. He was considering investing $350,000.
Martin Dep. at 46.
Martin also referred to getting "final commitments" from investors. Pls.' Opp'n Exh. 10. At his deposition, Martin was questioned about his use of the term "final commitments" in the memo he wrote date June 1, 1994. Pls.' Add'l Stmt. of Facts, ¶ 29. The deposition testimony on this point states, in relevant part:
Q. Do you know whether those commitments, whether you did have final commitments from these individuals?
MR. GUTWEIN: Objection, vague as to the term "commitments" and "final."
A. Well, I mean, these — these were indications — these were indications of interest on the part of these individual investors because there were still a large number of issues that had not been finalized yet. So these were strong indications of interest, subject to documentation and — and resolution of the outstanding issues.
Martin Dep. at 115. Later in Martin's deposition, when he was again referred to the same language of his June 1, 1994, memo, the testimony reads:
A. . . . [I]t was up to the individual investors to make the final decision whether they were going to participate in the deal or not.
Q. Right. And that decision, I guess we can call the final commitment.
A. That's correct.
Martin Dep. at 203.
But, when asked to state reasons why Sind and Martin had decided not to go through with the GPI restructuring, Martin testified, in part, that:
A. . . . The documentation was not complete or anywhere close to it.
Q. You're saying the documentation was not anywhere close to being completed?
A. As far as I recall, there were redlined copies of all different types of documents being circulated with lots of open points in them, and to-do lists and open points, plus it was a very strict requirement of Gleitsman [sic] and Hobart that all the creditors, the current creditors of Garwood, sign off on the restructuring before closing could take place.
Q. So it's your testimony that the documentation was not anywhere close to be [sic] completed, correct?
A. There were many open points and lists of things that had to be completed, and those papers, to my recollection, were not anywhere close to being signed.
Q. When you say to your recollection, then, it's possible your recollection is wrong and that they actually were completed.
A. There's — — I guess that's a possibility, but the drafts that I had seen were — — had lots of red lines in them and open space.
Martin Dep. at 275-76.
F. RELIANCE ON MARTIN'S ALLEGED PROMISES
Garwood testified in his deposition that he believed Martin's two promises, that Allen Co. would do the deal "come hell or high water;" and that Martin had raised $2 million, "right until the time [he] was told [Martin] was pulling out." Garwood Dep. at 140. Garwood said, "I relied on his promise." Id. Specifically, Garwood testified that he relied upon those promises when the shareholders of GPI, including he and McNamara, had extended personal loans to GPI. Id. at 243-44. However, Garwood testified that these loans were made before Allen Co. or Martin had made any "unconditional," "unequivocal," or "unambiguous" promises to provide funding for GPI. Id. at 244. McNamara similarly testified that he and Garwood had made loans to GPI, however, McNamara could not remember when those loans were made. McNamara Dep. at 127-28. The Plaintiffs' Amended Answers to Martin's Interrogatories indicate that the last recorded loans either Garwood or McNamara made to GPI occurred on or about July 2, 1993. Defs.' App. at 1519-20. Those loans continued to accrue interest until GPI filed for bankruptcy. Id.
In addition, Garwood and McNamara assert that they worked without pay in reliance on Martin's promises. Garwood testified that he and McNamara relied on Martin's promises because they "continued to do things without pay. [They] continued promoting the products that GPI had under incredible [sic] difficult conditions." Garwood Dep. at 132. By June 10, 1994, Garwood and McNamara had accrued at least $200,000.00 of back wages. Defs.' App. at 1767, Memorandum, From Peter McNamara, Proposal Re: Back Wages and Bridge Loans Owing to Tony and Peter, June 10, 1994.
Further, the Plaintiffs assert that Garwood and McNamara moved GPI to Ohio, and Garwood moved his family to Ohio, in reliance on Martin's promises. Garwood testified that between February 15, 1994, and May 18, 1994, "it had been decided that [the Plaintiffs] should close the GPI office in Indianapolis. [Garwood] was to move to Troy, Ohio, and work out of the Hobart office." Garwood Dep. at 126. Further, Garwood stated that the decision to move GPI was made "by the others, it was not [McNamara] and [Garwood] that made that decision, it was a suggestion, [Garwood] believe[d] Rich made that decision, Rich Gleitsmann from Hobart, it was a good idea in terms of reducing costs." Id. at 127. Apparently, the "others" Garwood referred to included Martin, Sind and Gleitsmann, who Garwood averred were making the plans for the future of GPI at that time. Id. at 128-29. However, Garwood testified that he agreed with the decision stating: "I did not have a problem with it." Id. Furthermore, Garwood testified that "[t]here was not really a decision to be made at that point because [the Plaintiffs] were broke." Id. at 129.
The Plaintiffs also assert that GPI defaulted on its obligations to creditors, but secured releases from some of them on reliance on Martin's promises. Specifically, Garwood testified that after Martin made promises to provide $2 million in financing, "come hell or high water," Garwood "was going out there and talking to our customers and representing that to them as well as creditors." Garwood Dep. at 111. Further, GPI sent a letter to its creditors explaining that "Hobart Corporation and Allen Company, Inc., have requested, as a condition of proceeding with their material and capital contributions, that the creditors of Garwood Packaging, Inc., enter into an arrangement which provides for a moratorium on debt collection activities for a period of sixty (60) days. . . ." Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1. Another letter stated, in pertinent part:
"As a condition to making their investment, the New Investors are requiring that" the creditors issue releases. Defs.' Stmt. of Facts, ¶ 87. Garwood testified that to his recollection, GPI had obtained releases from all of its creditors in early 1994. Garwood Dep. at 266.¶
Gleitsmann affirmed that as negotiations progressed and Martin gave assurances that he had raised financing for the GPI restructuring, Hobart began renovations at its Hillsboro, Ohio, plant for building GPI machines, and hired an engineer to work on GPI manufacturing. Gleitsmann Aff. ¶ 3.
II. SUMMARY JUDGMENT STANDARD
As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). See also United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir. 1990), cert. denied, 111 S.Ct. 1317 (1991). Motions for summary judgment are governed by Rule 56(c) of the Federal Rules of Civil Procedure, which provides in relevant part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials which "set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). A genuine issue of material fact exists whenever "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The nonmoving party bears the burden of demonstrating that such a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Oliver v. Oshkosh Truck Corp., 96 F.3d 992, 997 (7th Cir. 1996), cert. denied, 520 U.S. 1116 (1997). It is not the duty of the Court to scour the record in search of evidence to defeat a motion for summary judgment; rather, the nonmoving party bears the responsibility of identifying the evidence upon which he relies. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). When the moving party has met the standard of Rule 56, summary judgment is mandatory. See Celotex, 477 U.S. at 322-23; Shields Enters., Inc. v. First Chi. Corp., 975 F.2d 1290, 1294 (7th Cir. 1992).
In evaluating a motion for summary judgment, a court should draw all reasonable inferences from undisputed facts in favor of the nonmoving party and should view the disputed evidence in the light most favorable to the nonmoving party. See Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir. 1996), cert. denied, 519 U.S. 1109 (1997). The mere existence of a factual dispute, by itself, is not sufficient to bar summary judgment. Only factual disputes that might affect the outcome of the suit in light of the substantive law will preclude summary judgment. See Anderson, 477 U.S. at 248; JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 273 (7th Cir. 1996). Irrelevant or unnecessary facts do not deter summary judgment, even when in dispute. See Clifton v. Schafer, 969 F.2d 278, 281 (7th Cir. 1992).
Furthermore, "[i]f the nonmoving party fails to establish the existence of an element essential to his case, one on which he would bear the burden of proof at trial, summary judgment must be granted to the moving party." Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996), cert. denied, 519 U.S. 1115 (1997).
III. DISCUSSION
Both the Plaintiffs and the Defendants have moved for summary judgment on the Plaintiffs' claims for breach of an implied-in-fact contract, promissory estoppel and fraud.1 The Court will address the parties arguments for each of the Plaintiffs' claims in turn.
The Court notes that it is undisputed that Martin was an agent of Allen Co. with respect to Allen Co.'s involvement with the refinancing or restructuring of GPI. Therefore, with respect to the transaction at issue here, the Court will refer to Allen Co. as the contracting party and Martin as the agent in the negotiations without continued reference to those relationships.
A. IMPLIED-IN-FACT CONTRACT 1. Plaintiffs' Motion for Summary Judgment
To support their motion for summary judgment on their implied-in-fact contract claim, the Plaintiffs aver that the actions and conduct of the parties indicate that the Defendants promised to invest $2 million in GPI in exchange for a percentage of GPI's stock. The Plaintiffs claim that Martin cannot recall many conversations, therefore, their assertions that he made such unequivocal promises must be accepted as true.
Moreover, Plaintiffs argue that other parties involved in the proposed restructuring of GPI also thought the Defendants had promised to invest $2 million in exchange for a percentage of GPI's stock. Specifically, Gleitsmann testified to the following regarding his understanding of the Allen Co./GPI relationship in July 1993:
Q: What was your understanding as of the July meeting of the relationship, if any, between Mr. Martin and Garwood Packaging?
A: As I sit here today, I can't recall when I knew all of these facts, but I believe at the meeting it was represented that Allen Company had some kind of contractual arrangement with Garwood to help them secure funding to advance technology, and I am certain I didn't know any of the details beyond that fact.
Q: Okay. At that time it was all [sic] represented to you that Allen Company was considering investing in Garwood Packaging in some way shape or form?
A: My recollection is it was stated considerably stronger than that and that — in fact, Ray Martin indicated that Allen Company had looked at this. They thought it was a good deal. They had the monies to go forward, but what they really thought would make the deal whole would be to find a strategic partner to play a role in the deal, hence, the meeting with Hobart.
Gleitsmann Dep., Mar. 11, 1996, at 19-20. Further, the Plaintiffs rely upon Martin's letters of August 4, 1994, and August 9, 1994, for the proposition that Martin reaffirmed Allen Co.'s promise to invest $2 million. The Plaintiffs aver that Martin's letter to Sloan on July 21, 1994, also comports with the notion that Allen Co. had agreed to invest $2 million in GPI because in that letter Martin asked Sloan to wire his portion of the investment to Allen Co.
The Plaintiffs also point to Martin's handwritten notes that contain references to "everyone has agreed" and that the "documentation" was "completed" to support their allegation that Martin and Allen Co. intended to be bound to their promise to invest $2 million in GPI in exchange for stock. Moreover, the Plaintiffs aver that all the parties were ready to close the deal on August 19, 1994, until Allen Co. pulled out.
The Defendants dispute that Martin ever unequivocally promised to invest $2 million in GPI in exchange for stock. Martin does not recall ever making such a statement. Further, the Defendants argue that the Plaintiffs cannot point to the terms of the alleged contract. Specifically, Garwood testified that there were no terms to the promise; the only contract was a promise by Allen Co. to provide $2 million to GPI in exchange for 16% of GPI's stock. Garwood Dep. at 332-33. Finally, the Defendants argue that the conduct of the parties evidence that there was never a meeting of the minds on the proposed deal because the negotiations between the parties never stopped. McNamara Dep. at 257-58, 456-57. Even the paperwork prepared by Kaye Scholar did not contain dollar amounts or stock percentages because those details were not finalized.
Under the circumstances of this case, the Court finds that the undisputed facts do not evidence an intent by the parties to be bound to the simple contract as alleged by the Plaintiffs. Indiana recognizes implied-in-fact contracts when the acts and conduct of the parties evidence a meeting of the minds and the clear intent of the parties to the agreement to be bound. See McCart v. Chief Exec. Officer in Charge, Indep. Fed'l Credit Union, 652 N.E.2d 80, 85 (Ind.Ct.App. 1995). An implied-in-fact contract requires the same elements as express contracts, offer, acceptance and consideration; however, it is the conduct of the parties that expresses agreement. See Ind. Constr. Corp. v. Chi. Tribune Co., 648 F. Supp. 1419, 1424 (N.D.Ind. 1986). Therefore, the Court must view the undisputed facts in light of the surrounding circumstances to determine whether GPI and Allen Co. intended to contract.
Notwithstanding the difficulty of ignoring the fact that Allen Co. and GPI had a written contract about their respective roles in the pursuit of financing for the failing GPI, the Court cannot agree with GPI that the undisputed facts evidence a meeting of the minds. First, Martin denies having made a promise that Allen Co. would invest $2 million in GPI in exchange for 16% of GPI's stock. This alone creates a genuine issue of material fact on whether or not Allen Co. accepted GPI's offer.
Second, the undisputed evidence shows that GPI, Allen Co. and others, including Hobart, negotiated terms of the proposed refinancing or restructuring of GPI both prior to and after Martin's alleged promise in November 1993. For example, by August 1993, Martin had informed GPI that Allen Co. would consider investing in GPI if an agreement could be reached with a suitable strategic partner.
Garwood testified that this was a condition of Allen Co.'s investment. Garwood Dep. at 95. Further, GPI knew in January 1994 that it had to reach satisfactory agreements with its creditors as a condition to receiving financing from either Hobart or Allen Co. Its letter to creditors dated January 24, 1994, stated, in relevant part: "It is believed by [GPI] that unless satisfactory arrangements are reached along the terms outlined herein, Hobart Corporation and Allen Company, Inc., will not go forward with their financing arrangements as outlined. . . ." Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1. Along the same lines, on July 15, 1994, Hobart informed GPI and Allen Co. by letter that it would continue negotiations only if six conditions were satisfied, including creditor releases from all GPI creditors. Defs.' Exh. 16, Letter, To: Anthony Garwood, Garwood Packaging, Inc., From: Richard P. Gleitsmann, Jr., Hobart Corp., July 15, 1994.
Even with the continued assurances from Martin that Allen Co. had raised $2 million for the recapitalization plan, the undisputed conduct of the parties indicates that the terms of any contract between GPI and Allen Co. were more complicated than a simple exchange of money for stock and that Allen Co. never accepted the terms during the relevant time period.
For these reasons, the Court finds that the Plaintiffs' motion for summary judgment on their implied-in-fact contract claim should be DENIED.
2. Defendants' Motion for Summary Judgment
The Defendants argue that summary judgment in their favor is appropriate on the Plaintiffs' implied- in-fact contract claim for three reasons. First, the Defendants assert that the parties "understood" that the final agreement would be memorialized in formal closing documents; therefore, because no such documents were executed, there is no implied-in-fact contract. Defs.' Br. in Supp. of Summ. J., at 11-12 (citing Wolvos v. Meyer, 668 N.E.2d 671, 675 (Ind. 1996)). Next, the Defendants aver that even an implied-in- fact contract must have terms that are definite and specific, but the Plaintiffs claim there were no terms to the contract between the parties here; therefore, there is no implied-in-fact contract. Id. at 12-13 (citing, inter alia, E. Nat'l Gas Corp. v. Aluminum Co. of Am., 126 F.3d 996, 1002 (7th Cir. 1997); Ind. Constr. Corp. v. Chi. Tribune Co., 648 F. Supp. 1419, 1424 (N.D.Ind. 1986)). Finally, the Defendants argue that there was no meeting of the minds because the undisputed evidence shows that the parties never stopped negotiating. Id. at 13-14 (citing F. McConnell Sons, Inc. v. Target Data Sys., Inc., 84 F. Supp.2d 961, 975 (N.D.Ind. 1999)).
The Plaintiffs counter that the undisputed facts evidence a meeting of the minds because Martin promised three times that Allen Co. would provide $2 million in exchange for GPI stock. Further, terms of the restructuring were outlined by the parties at a meeting in Troy, Ohio, on November 30, 1993. The Plaintiffs aver that Martin's subsequent conduct confirms that Allen Co. had accepted the offer of stock in exchange for $2 million. Such conduct included his phone conversations with Garwood and McNamara on or about July 28, 1994, and his letters dated August 4, 1994, and August 9, 1994, where Martin reiterated that Allen Co. had raised $2 million to be invested in GPI. Pls.' Br. in Opp'n, at 34. Further, by letter dated July 21, 1994, Martin requested that investor Sloan wire his portion of the Allen Co. investment to Allen Co. Id. In addition, the Plaintiffs point to Martin's undated, handwritten notes that state "everyone has agreed" and "documentation complete" as evidence of Allen Co.'s intent to be bound by the contract. Id. (citing Pls.' Exh. 9, Handwritten Note, Undated, Unsigned). Moreover, the Plaintiffs claim that Martin set a specific date for closing and that the final documents were ready for signatures at the offices of Kaye Scholar when Allen Co. "breached the contract" by withdrawing its $2 million investment. Id.
The Court finds that the undisputed evidence shows no meeting of the minds on the alleged implied- in-fact contract. As discussed above, Indiana recognizes implied-in-fact contracts when the acts and conduct of the parties evidence a meeting of the minds and the clear intent of the parties to the agreement to be bound. See McCart, 652 N.E.2d at 85. The Plaintiffs claim that the implied-in-fact contract between GPI and Allen Co. was some amount of stock in exchange for $2 million in cash. However, the uncontroverted evidence establishes that the "deal" contemplated by GPI and Allen Co. involved much more than the simple exchange thus described.
The Plaintiffs admit that there were other "terms" to the contract. For example, Garwood testified that before Allen Co. would invest, GPI needed to find a strategic partner. Garwood Dep. at 95.
Further, GPI wrote letters to its creditors that made clear that neither Hobart, GPI's identified "strategic partner," nor Allen Co. would invest unless GPI reached satisfactory arrangements with its creditors.
See Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994; Defs.' Exh. 94, Letter, To: Certain Creditors of Garwood Packaging, Inc., From: Anthony J. M. Garwood, Garwood Packaging, Inc., July 5, 1994. In addition, the evidence shows that Allen Co., Hobart and GPI continued to negotiate the interest each of the investing parties would receive in GPI. The last draft of the closing documents contained no numbers in this regard, which suggests that the parties had no meeting of the minds on that issue.
Moreover, the uncontroverted conduct of the parties evidences an intent to memorialize the entire deal in a formal contract and that the parties were continuing to negotiate the terms. In that instance, the Court must find that an implied-in-fact contract did not exist; the parties merely had an agreement to agree. See Wolvos v. Meyer, 668 N.E.2d 671, 675-76 (Ind. 1996) (quoting 1 ARTHUR LINTON CORBIN JOSEPH M. PERILLO, CORBIN ON CONTRACTS § 2.8, at 133-34 (rev. ed. 1993)). GPI hired Kaye Scholar to draft all the necessary closing documents. McNamara Dep. at 562-63. The draft documents sent to the parties to review before closing did not include the percentages of stock that each participant would receive in exchange for their proposed investments. See Defs.' Exh. 5, Letter, To: Persons on Attached Distribution List, From: Ilene D. Penn, Kaye, Scholer, Fierman, Hays and Handler, Re: Garwood Packaging, Inc., Aug. 16, 1994; Defs.' Stmt. of Facts, ¶ 109. In addition, Jones, a GPI director, was negotiating investment terms with Hobart as late as August 9, 1994. Defs.' Stmt. of Facts, ¶ 102. The Plaintiffs offer no evidence that these terms, which are central to the Plaintiffs' proposed implied-in-fact contract (an exchange of equity in GPI for $2 million cash), were satisfactory to Allen Co. at the time of closing. In fact, McNamara testified that around the time that Martin indicated to GPI and Hobart that Allen Co. would not participate in the restructuring, McNamara was looking for ways to restructure the deal to increase the amount of post-closing cash. McNamara Dep. at 231, 239, 244. McNamara also testified that "[t]he deal was a deal subject to completion of the documentation." McNamara Dep. at 150. Although the Plaintiffs argue that the completed documents evidence the contract was formed, other than allegations in their briefs, the Plaintiffs present no evidence that the documents were either complete in all their terms or that Allen Co. or its representative ever assented to or signed those documents. The conduct of the parties suggests that they never stopped negotiating.
The Plaintiffs argue that Martin's handwritten notes stating that "everyone had agreed" and "documentation complete" evidence that Allen Co. had agreed to invest $2 million in exchange for some amount of GPI stock. However, there is no evidence of when these notes were taken or in what context.
Further, the document itself does not memorialize to what each party had agreed. These ambiguous references cannot counter the uncontroverted evidence that the parties had not finalized the salient terms of the contract as of August 16, 1994.
The Court finds that the undisputed facts fail to evidence that GPI and Allen Co. had a meeting of the minds about the terms of an investment arrangement between them. Further, the facts evidence that the parties intended for signed documents to memorialize the agreement between them; therefore, because no documents evidence the final intent of the parties or bear signatures, there is no implied-in-fact contract.
For these reasons, the Defendants' motion for summary judgment on the Plaintiffs' implied-in-fact contract claim should be GRANTED.
B. PROMISSORY ESTOPPEL 1. Plaintiffs' Motion for Summary Judgment
The Plaintiffs argue that summary judgment is appropriate on their promissory estoppel claim because Martin repeatedly promised that Allen Co. would complete the restructuring "come hell or high water" and invest $2 million in cash in GPI, that Martin and Allen Co. knew the Plaintiffs would rely upon those promises, that the Plaintiffs reasonably relied upon Martin's promises and that injustice can be avoided only by enforcing the promise. The Plaintiffs argue that their evidence of Martin's promises and their reliance on his promises is incontrovertible; therefore, summary judgment is appropriate. In support of these propositions the Plaintiffs cite First National Bank of Logansport v. Logan Manufacturing Co., 577 N.E.2d 949, 954 (Ind. 1991), DG Stout, Inc. v. Bacardi Imports, Inc., 805 F. Supp. 1434, 1445-56 (N.D.Ind. 1992) and Hoo Siong Chow v. Transworld Airlines, 544 N.E.2d 548 (Ind.Ct.App. 1989).
To the contrary, the Defendants argue that Martin repeatedly denied that he made any unconditional promises to the Plaintiffs regarding completion of the restructuring or Allen Co.'s investment in GPI. Defs.' Resp. to Pls.' Mot. for S.J., at 2-3 (citing Martin Dep. at 93, 244, 298, 239-30, 456). In addition, the Defendants aver that the Plaintiffs did not rely to their detriment on any alleged promise. Id. at 8. The Defendants also argue that there is no evidence that Gleitsmann, Hobart, Seawell, or any of GPI's creditors took any steps based on what Martin said. Id. at 9. Further, the Defendants assert that even if the Plaintiffs did rely on Martin's alleged statements, there is evidence that suggests such reliance was not reasonable. For example, McNamara and Garwood knew there were conditions upon which Allen Co.'s investment was predicated, they failed to ask a lawyer's advice about the alleged promises and they ignored the advice of GPI's attorney that it needed to satisfy the parties' conditions before the deal would close. Id.
The Court agrees with the Defendants that, at the very least, there is a question of fact on at least three elements of the Plaintiffs' promissory estoppel claim: whether Martin made an unconditional promise that Allen Co. would invest in GPI; whether the Plaintiffs took any actions in reliance on Martin's promises; and whether any reliance on the part of the Plaintiffs was reasonable. The parties agree on the elements of a promissory estoppel claim in Indiana: (1) a promise by Martin and Allen Co. (2) made with the expectation that GPI, McNamara and Garwood would rely thereon (3) which induced reasonable reliance by GPI, McNamara and Garwood (4) of a definite and substantial nature and (5) injustice can be avoided only by enforcement of the promise. First Nat'l Bank of Logansport, 577 N.E.2d at 954. See also DG Stout, Inc., 805 F. Supp. at 1444. In this instance, the Court must view the facts in the light most favorable to the non-moving party in this motion, Martin and Allen Co.
With respect to the first element, the Defendants assert that Martin repeatedly stated that he did not make an unequivocal promise that Allen Co. would invest in GPI. The Plaintiffs argue that Martin's failure to remember other facts should make his assertions less credible. The Court will not decide issues of credibility on summary judgment. See Alexander v. Wis. Dep't of Health Family Servs., 263 F.3d 673, 681 (7th Cir. 2001). However, under the procedural posture of this case, the fact remains that McNamara and Garwood state that Martin made certain unequivocal promises and Martin denies having made such promises. Therefore, there is a question of fact on whether Martin, on behalf of Allen Co. ever made an unequivocal promise to close the restructuring deal or invest $2 million in GPI.
Second, the Plaintiffs aver that they took several actions in reliance on Martin's alleged promises. Specifically, the actions include (1) McNamara and Garwood's extension of personal loans to GPI, (2) McNamara and Garwood working without pay, (3) GPI's move from Indianapolis to Hobart's Troy, Ohio, facility, (4) Garwood's move from Indianapolis to Dayton, Ohio, (5) GPI's assurances to Seawell that the restructuring would be completed, and (6) GPI's securing of releases from creditors upon continual reassurance that the restructuring would be completed. Pls.' Mem. in Supp. of S.J., at 11. The Defendants presented evidence, however, that McNamara and Garwood's loans to GPI occurred before Martin's alleged promises. Defs.' Stmt. of Facts, ¶¶ 37, 43. Similarly, the evidence shows that McNamara and Garwood were working without pay prior to Martin's alleged promises. Defs.' App. at 1767, Memorandum, From: Peter McNamara, Proposal Re: Back Wages Bridge Loans Owing to Tony Peter, June 10, 1994. In addition, the Court cannot find evidence that GPI continued to receive an extended license from Seawell upon reassurances that the restructuring would be completed. To the contrary, the evidence suggests that all parties were negotiating with Seawell to ensure that any new entity or restructured entity would have access to the primary technology. Garwood Dep. at 314. The evidence also suggests that GPI was in default of its Seawell license before Martin made any alleged promises. McNamara Dep. at 346. It is unclear how continued negotiations were done in reliance upon a promise from Martin. Furthermore, the letters that GPI sent to its creditors indicated that releases from them were a necessary component to the restructuring deal. Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1; Defs.' Exh. 94, Letter, From: Anthony J.M. Garwood, Garwood Packaging, Inc., TO CERTAIN CREDITORS OF GARWOOD PACKAGING, INC., July 5, 1994. Again, it is unclear how any releases that resulted from these letters were obtained on reliance on Martin's promise. Arguably, GPI relied upon Martin's alleged promises in sending out the letters; however, it is unclear how GPI was damaged in the process.
The Court does see a more direct connection between Martin's alleged promises to complete the restructuring deal and/or provide $2 million in funding and Garwood's decision to move his family to Dayton, Ohio, and GPI's decision to move its headquarters to Hobart's facility in Troy, Ohio. The Defendants provide some facts that suggest Garwood and McNamara agreed with the decisions to make these moves in light of the financial problems GPI faced. Garwood Dep. at 127-29. From those facts a jury could infer that the moves were made for legitimate business reasons rather than in reliance upon Martin's alleged promises.
In light of the facts just outlined, the Court finds that there are questions of fact on whether the Plaintiffs took any actions in reliance upon Martin's alleged promises.
With respect to the reasonableness of the Plaintiffs' reliance on Martin's promise, the Court finds that the Defendants have evidenced a question of fact on this element as well. The Plaintiffs suggest that they relied upon Martin's unconditional promise to complete the restructuring "come hell or high water."
They assert that such reliance is reasonable because of the multiple times that Martin assured them that Allen Co. would come through with the necessary financing and because other people also made decisions based on Martin's assurances. However, the evidence proffered by the Defendants suggests that the Plaintiffs knew that Allen Co.'s financing contained conditions, such as finding a partner and obtaining releases from existing creditors. Moreover, McNamara was an experienced investment banker who admitted that a deal such as the one contemplated by these parties was not complete until the paperwork was signed. See Defs.' Stmt. of Facts, ¶¶ 12-15; McNamara Dep. at 104-05, 150, 156, 164. Further, McNamara admitted that investors who saw financial statements change shortly before a closing might have legitimate reasons to back away from an investment in a restructuring plan. McNamara Dep. at 112, 190.
McNamara's experience with investment banking is not the only fact that suggests the Plaintiffs' reliance upon Martin's alleged unconditional promises was unreasonable. As late as July 1994, GPI was still seeking releases from its creditors, which it acknowledged was a condition for closing the restructuring plan required by Allen Co. and Hobart. Defs.' Exh. 94, Letter, From: Anthony J.M. Garwood, Garwood Packaging, Inc., TO CERTAIN CREDITORS OF GARWOOD PACKAGING, INC., July 5, 1994. This evidence suggests that the Plaintiffs knew that the restructuring may not close and that the Plaintiffs recognized that Allen Co. would not invest unless certain conditions were satisfied. In light of this knowledge, a jury could infer that the Plaintiffs did not reasonably rely upon Martin's alleged promises because the Plaintiffs knew the promises were contingent upon actions by third parties over which Martin or Allen Co. had no control.
Finally, the Plaintiffs point to the reliance on Martin's alleged promises by other parties as evidence of the reasonableness of their own reliance. However, there is little evidence that anyone else did so rely.
Gleitsmann affirmed that Martin gave assurances that he could obtain the necessary financing. Gleitsmann Aff. ¶ 3. In earlier testimony, Gleitsmann confirmed that he never heard Martin promise to invest; Martin gave assurances about the future investment. Gleitsmann Dep. at 157, 167-68. In addition, Gleitsmann testified that Hobart had made some capital investments in their plant to accommodate manufacture of the GPI machines and had hired an engineer to help with that project. Gleitsmann Aff. ¶ 3. However, Gleitsmann never testified or averred that Martin assured he or Hobart that Allen Co. would complete the restructuring "come hell or high water," or that Hobart's decisions to make these investments in capital and human resources were in reliance upon Martin's alleged promise to complete the restructuring "come hell or high water," or on Martin's alleged unconditional promise to provide $2 million in funds. Further, as discussed briefly above, the Plaintiffs provide no evidence beyond their own affidavits that either Seawell or other GPI creditors took action based upon Martin's alleged promises; the creditors relied upon assurances from Garwood and McNamara.
Moreover, McNamara testified that he never told GPI's attorneys about Martin's alleged promises because he did not trust Kaye Scholar. However, none of the Plaintiffs apparently sought the advice of another attorney whom they did trust about those alleged promises or even the terms of the proposed restructuring. The Court recognizes that the Plaintiffs were faced with financial difficulties at all times relevant to this suit, however, a jury could infer that not seeking objective advice under the circumstances was unreasonable.
For these reasons the Court finds that the Defendants have evidenced a material question of fact on whether the Plaintiffs' reliance upon Martin's alleged promises was reasonable. Having found that there are material questions of fact on at least three elements of the Plaintiffs' promissory estoppel claim, the Court should DENY the Plaintiffs' motion for summary judgment on that claim.
2. Defendants' Motion for Summary Judgment
The parties spilled much ink on the credibility of Costello and Jones' testimony regarding whether Martin's promise was conditional or whether the Plaintiffs' reliance on the promise was reasonable. The arguments focus on the credibility of the witnesses, however, their testimony does not change the substantive facts of the case in a way that would change the outcome of this motion. In other words, the arguments of the parties are not about matters material to the dispute. In addition, the Court must construe the facts in the light most favorable to the Plaintiffs, in which case Costello's opinions about Martin's promises have no bearing on the issue of whether the Plaintiffs' promissory estoppel claim fails, and Jones' testimony directly conflicts with the affidavit of another GPI board member. Therefore, for purposes of this motion for summary judgment, the Court will rely upon the assertions by the GPI board member favorable to its position and assume that version of the facts is the true version.
The Defendants have also moved for summary judgment on the Plaintiffs' claim for promissory estoppel. For purposes of their own summary judgment motion, the Defendants accept as true that Martin said that Allen Co. would close the deal "come hell or high water." Defs.' Br. in Supp. of S.J., at 15.
The Defendants argue that summary judgment in their favor is appropriate because the Plaintiffs failed to evidence a material question of fact on one or more elements of their promissory estoppel claim. As stated above, the parties do not dispute the elements of a promissory estoppel claim in Indiana: (1) a promise by Martin and Allen Co. (2) made with the expectation that GPI, McNamara and Garwood would rely thereon (3) which induced reasonable reliance by GPI, McNamara and Garwood (4) of a definite and substantial nature and (5) injustice can be avoided only by enforcement of the promise. First Nat'l Bank of Logansport, 577 N.E.2d at 954. See also DG Stout, Inc., 805 F. Supp. at 1444.
First, the Defendants argue that the alleged unconditional promise to invest $2 million "come hell or high water" lacks sufficient definiteness. Id. at 16 (citing Wood v. Mid-Valley, Inc., 942 F.2d 425, 428 (7th Cir. 1991); Dunnaville v. McCormick Co., 21 F. Supp.2d 527, 534-35 (D.Md. 1998); Security Banking Co. v. Bogard, 494 N.E.2d 965, 969 (Ind.Ct.App. 1986)). In other words, Martin's comment was no more than a pep talk or an expression of intention or hope rather than an unconditional promise to perform. Id. Further, the Defendants argue that the Plaintiffs admitted that they knew Martin's promise was not unconditional in several instances: McNamara testified that the deal was subject to completion of documentation and subject to resolution of items on an open point/to do list; GPI sent letters to its creditors acknowledging that a condition of closing the restructuring plan was the receipt of releases from GPI's creditors; McNamara and Garwood testified that Allen Co. required GPI to find a strategic partner as a condition of financing; and McNamara and Garwood testified that they knew Allen Co. could not force third parties to close the transaction. Id. at 17-20. Moreover, the Defendants aver that other GPI directors, namely Jones, understood that no unconditional promises by Martin and/or Allen Co. had been made to complete the proposed restructuring deal. Id. at 21-22.
In contrast, the Plaintiffs argue that Martin's statements that Allen Co. would provide $2 million and complete the deal "come hell or high water" can form the basis for a promissory estoppel claim because they were reasonably definite. Pls.' Br. in Opp'n, at 10-11 (citing Secon Sys., Inc. v. St. Joseph Bank Trust Co., 855 F.2d 406 (7th Cir. 1988); Ziese v. Ramada Inns, Inc., 462 F.2d 1058, 1060 (7th Cir. 1972); Advanced Marine Tech. v. Burnham, 16 F. Supp.2d 375, 383 (S.D.N.Y. 1998); Security Bank Trust Co. v. Bogard, 494 N.E.2d 965 (Ind.Ct.App. 1986); Hartung v. Architects Hartung/Odle/Burke, Inc., 301 N.E.2d 240, 244 (Ind.Ct.App. 1973); Cont'l Bank, N.A. v. Village of Ludlow, 777 F. Supp. 92, 95 (D.Mass. 1991); Colo. Interstate Corp. v. CIT Group/Equip. Fin., Inc., 993 F.2d 743, 749 (10th Cir. 1993)). The Plaintiffs aver that several facts support an inference that Martin had unconditionally promised to finance the restructured GPI in the amount of $2 million. Specifically, Garwood and McNamara testified that in several phone conversations Martin assured them that he had raised the requisite capital. Garwood Dep. at 92, 101, 210, 231; Pls.' Add'l Stmt. of Facts, P 40. In addition, upon request by the Plaintiffs, Martin put in writing that he had gathered a group of investors who would provide $2 million for the restructuring. Pls.' Summ. J. Exh. 10, Memorandum, To: Rich Gleitsmann, Thad Jones, From: Ray Martin, June 1, 1994; Defs.' cite. At least two of these letters were written within days of Allen Co.'s decision to withdraw from the deal. Defs.' Exh. 20, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 4, 1994; Defs.' Exh. 24, Letter, To: Anthony J.M. Garwood Peter J.M. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 9, 1994. Although many terms of the deal were still up in the air, the Plaintiffs argue that a jury might infer from Martin's continued assurances that he had raised the requisite capital that he had made a promise to provide that amount to GPI for any deal in the future.
The Court finds that Martin's statements that he and Allen Co. would provide unconditionally $2 million and complete the deal "come hell or high water" were not sufficiently definite to constitute a promise. Expressions of intent cannot form the basis of a promise. See Security Bank Trust Co., 494 N.E.2d at 968-69 (citing 17 Am.Jr.2d Contracts § 3 (1964) (citing E.I. DuPont De Nemours Co. v. Clairborne-Reno Co., 64 F.2d 224 (8th Cir.), cert. denied, 290 U.S. 646 (1933))). The undisputed facts evidence that Martin's comment was an expression of intent rather than a promise to close the deal. For months after Martin allegedly made this comment, the parties negotiated terms of the proposed restructuring, sought further investments from other sources, sought releases from GPI's creditors and renegotiated already settled terms to keep Hobart interested. See Defs.' Stmt. of Facts, ¶¶ 66, 68. The Defendants' intent to close the deal in November and December 1993 cannot change the fact that the parties, including the Plaintiffs, knew closing the transaction was contingent upon the agreement of multiple parties to a myriad of condition. McNamara testified that he knew the deal was not complete until the paperwork was signed. McNamara Dep. at 104-05, 156, 164. In addition, McNamara testified that despite having the Defendants' promise to provide unconditionally $2 million and complete the deal, he continued to look for back-up investors. Defs.' Stmt. of Facts, ¶¶ 46-48, 152; Bankr. Hr'g Tr. at 22.
Moreover, the letters the Plaintiffs claim support an inference that Martin's promise was unconditional evidence the contingent nature of those very promises. The August 4, 1994, letter stated, "[Allen Co.] understand[s] that there are a number of business and legal issues which remain to be resolved and [Allen Co. is] prepared to negotiate in good faith and endeavor to resolve said issues as quickly as possible." Defs.' Exh. 20, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 4, 1994. Similarly, the August 9, 1994, letter stated, "[Allen Co.] understand[s] that the parties are near resolution of the few remaining business and legal issues and [Allen Co.] look[s] forward to resolving the issues promptly and working with you to complete the financing subject to documentation satisfactory to everyone." Defs.' Exh. 24, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 9, 1994. Clearly, there were issues that needed resolved before the transaction could close or before Allen Co. would provide $2 million in capital funding.
For these reasons, the Court finds that Martin's statements about providing $2 million in funding and completing the deal "come hell or high water" are insufficiently definite to form the basis of the Plaintiffs' promissory estoppel claim.
Even if the comments were sufficiently definite, any reliance by the Plaintiffs on the promises would not have been reasonable. The Defendants aver that the Plaintiffs' reliance on any alleged "unconditional" promise by Martin to provide $2 million and complete the deal is manifestly unreasonable when: a) McNamara and Garwood admit that Allen Co. was not obligated to close the deal unless the parties finalized the closing documents; b) GPI had not reached satisfactory arrangements with its creditors and the parties had not resolved the issues on the open points/to do lists; c) GPI had not reached an acceptable agreement with a strategic partner; and d) all the relevant parties had not agreed to the terms of the proposed deal. Defs.' Br. in Supp. of Summ. J. at 25. In addition, the Defendants argue that despite having received an "unconditional" promise from Martin to close the deal, McNamara and Garwood continued to negotiate terms of the transaction with Allen Co. and GPI continued to make concessions to Allen Co. Id. at 26. The Defendants also argue that McNamara's experience as an investment banker and his admissions that he had not ever before heard of anyone making such an unconditional promise to invest evidences the unreasonableness of the Plaintiffs' reliance on Martin's promise. Id. at 27.
The Plaintiffs aver that Martin's statements were intended to induce the Plaintiffs' reliance because Martin was aware of the "bleak financial situation that GPI faced." Pls.' Br. in Opp'n, at 14. Moreover, the Plaintiffs argue that the Court would be in error to hold as a matter of law that the Plaintiffs' reliance upon Martin's "repeated promise that Allen [ Co.] would invest $2 million in GPI and complete the deal" was unreasonable; reasonableness is a question of fact. Id. at 15 (citing Pippenger v. McQuik's Oilube, Inc., 854 F. Supp. 1411, 1427 (S.D.Ind. 1994); Fleetwood Corp. v. Mirich, 404 N.E.2d 38, 45 (Ind.Ct.App. 1980); Medtech Corp. v. Ind. Ins. Co., 555 N.E.2d 844, 850 (Ind. Ct. Ap. 1990); Plohg v. NN Investors Life Ins. Co., 583 N.E.2d 1233, 1237 (Ind.Ct.App. 1992)). Many other companies relied upon Martin's promises, which the Plaintiffs assert evidence the reasonableness of their own reliance.
Further, the Plaintiffs aver that Martin's continued assurances that Allen Co. would provide the money and the deal would close and the Plaintiffs' actions in reliance on that promise indicate a triable issue on whether the Plaintiffs' reliance was reasonable. Id. (citing Ziese, 462 F.2d at 1060; Goldstick v. ICM Realty, 788 F.2d 456, 462-63 (7th Cir. 1986)). The fact that the parties were still negotiating is not dispositive. Id. at 16.
Generally, when evidence conflicts, the question of whether reliance is reasonable or justified is a matter for the jury. See Biberstine v. N.Y. Blower Co., 625 N.E.2d 1308, 1316 1317 (Ind.Ct.App. 1994) (citing Parke County v. Ropak, Inc., 526 N.E.2d 732, 736 (Ind.Ct.App. 1988), trans. denied).
"However, where the evidence is so clear as to be susceptible of only one reasonable inference, it is for the [C]ourt to determine as a matter of law whether [the Plaintiffs were] justified in relying on the representation." Id. (citing Plymale v. Upright, 419 N.E.2d 756, 763 1317 (Ind.Ct.App. 1981)).
In this case, the Court finds that the evidence is so clear as to be susceptible to only one reasonable inference: the Plaintiffs could not have reasonably relied upon Martin's promise to provide $2 million unconditionally, or on a promise to close the deal. Both McNamara and Garwood were sophisticated businessmen. McNamara had been an investment banker and had dealt with similar complex commercial transactions in the past. Defs.' Stmt. of Facts, ¶¶ 14 15. Garwood started and ran a company in Australia, negotiated the business through a bankruptcy process, and, with McNamara, transferred intellectual property assets of that company to an offshore concern. Id. ¶¶ 16-20. In addition, the two men started a business in Indiana and negotiated a licensing agreement with an offshore concern. Id. ¶¶ 22-25. Clearly, both McNamara and Garwood were not naive entrepreneurs unfamiliar with the process of negotiating and finalizing detailed business agreements.
Furthermore, McNamara admitted that the unconditional promise that the Plaintiffs purport Martin made was "unusual," "most unusual," "very unusual," and "highly unusual." Defs.' Stmt. of Facts, ¶ 166, 168, 169. He testified: "What I can say is that in my investment banking experience, I have not heard of anyone making such a commitment." McNamara Dep. at 437. The Plaintiffs offer no evidence about why this circumstance would be any different from other circumstances in McNamara's experience in which an investment bank was helping a corporation find ways to restructure itself.
The evidence confirms that the Plaintiffs knew the transaction was not extraordinary, or in this case, the completion of the transaction was subject to completion of documentation, agreement by third parties to the transaction, and releases by creditors. McNamara testified that "[t]he deal was a deal subject to completion of the documentation." Defs.' Stmt. of Facts, ¶ 124. And, that if the documents were never finalized, Allen Co. was not obligated to invest. McNamara Dep. at 164. Further, McNamara stated that he "understood there was a risk the deal might fall through." Id. at 447. In fact, he was always looking for back up investors. Bankr. Hr'g Tr. at 22. Similarly, the Plaintiffs continued making concessions to Allen Co. even after Martin had made promises to invest $2 million "[b]ecause all negotiations were not finalized." McNamara Dep. at 456-57.
The evidence also clearly shows that the Plaintiffs were aware that third parties must agree to the proposed transaction before the deal would close. By August 1993, before the alleged unconditional promise to invest, Allen Co. had made clear to the Plaintiffs that its investment in GPI was predicated on reaching an agreement with a suitable strategic partner, which would invest similar amounts of capital. Defs.' Stmt. of Facts, ¶ 46 (and responses thereto). McNamara visited Allen Co. headquarters in an attempt to dissuade Allen Co.'s management from this course; however, he was unable to do so. McNamara Dep. at 179-80. In addition, once GPI got Hobart involved in the transaction, the Plaintiffs knew Hobart's agreement to participate in the restructuring was predicated on several factors, including releases from existing creditors. Defs.' Stmt. of Facts, ¶¶ 53, 54, 83, 87, 88; Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1; Defs.' Exh. 16, Letter, To: Anthony Garwood, Garwood Packaging, Inc., From: Richard P. Gleitsmann, Jr., Hobart Corp., July 15, 1994. Moreover, when Hobart informed GPI in July 1994 that it would cease all negotiations, GPI quickly moved to renegotiate terms with Hobart to keep it in the transaction. Defs.' Stmt. of Facts, ¶¶ 98, 102. In addition, McNamara approached another third party, ACI, as late as July or August 1994 to gauge that company's interest in investing in GPI. McNamara Aff. ¶ 14. Clearly, the Plaintiffs knew that agreement and investment by a third party was a necessary component of the proposed financing from Allen Co.
Additionally, the evidence clearly shows that the Plaintiffs knew that Martin's promise that Allen Co. would invest $2 million was conditional. By letter dated January 24, 1994, GPI informed its creditors that, as a condition of proceeding with their capital investment, Hobart and Allen Co. required a moratorium on debt collection activities for sixty days. Defs.' Exh. 85, Letter, To: The Creditors of Garwood Packaging, Inc., From: Hostetler Kowalik, Jan. 24, 1994, at 1. Furthermore, with closing scheduled for some time in August 1994, GPI sent a letter to its creditors dated July 5, 1994, that stated, in pertinent part: "As a condition to making their investment, the New Investors are requiring" releases. Defs.' Exh. 94, Letter, To: Certain Creditors of Garwood Packaging, Inc., From: Anthony J.M. Garwood, Garwood Packaging, Inc., July 5, 1994. GPI admitted that "unless satisfactory arrangements are reached with the New Investors, including the execution by each of the Subject Creditors of the enclosed Release Agreement, the New Investors will not go forward with their financing arrangement. . . ." Id. In addition, McNamara testified that around the time that Martin indicated Allen Co. would not participate in the transaction, McNamara was looking for ways to restructure the deal to increase the amount of post-closing cash, a concern that Martin had expressed after he reviewed GPI's August 1994 financial statements. McNamara Dep. at 231, 239, 244; Defs.' Exh. 3, Memorandum, To: Directors — Garwood Packaging, Inc. — Tony Garwood, Thad Jones, Lew Fetterman, John Wagner, From: Peter McNamara, Aug. 18, 1994, ¶¶ 1, 3-4. This evidence clearly demonstrates that the Plaintiffs knew that despite Martin's oral comments about providing $2 million and closing the transaction, Allen Co. would not close unless certain conditions were met, including, but not necessarily limited to, buy-in by a third party partner, creditor releases and adequate post-closing financial strength. Martin's written correspondence about the proposed investment also communicated the conditional nature of the Allen Co. funding. See Defs.' Exh. 20, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 4, 1994; Defs.' Exh. 24, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 9, 1994. McNamara and Garwood clearly did not ignore these written clues because they suggested to GPI's creditors that the investors had conditioned their investment as late as July 1994, because McNamara continued to look for alternative sources of financing, and because McNamara was looking for ways to restructure the deal after he learned that Allen Co. had concerns about GPI's August 1994 financial statement's estimate of the amount of post-closing cash.
The Plaintiffs also argue that other parties' reliance on the Defendants' unconditional promises to invest $2 million support an inference that their reliance was reasonable. However, the evidence the Plaintiffs cite does not support this inference. Gleitsmann, of Hobart, affirmed that as negotiations progressed and Martin gave assurances that he had raised financing for the GPI restructuring, Hobart began renovations at its Hillsboro, Ohio, plant for building GPI machines; it also hired an engineer to work on GPI manufacturing. Gleitsmann Aff. ¶ 3. Gleitsmann's affidavit does not state, however, that Hobart believed Martin's promises were unconditional. In his earlier deposition, Gleitsmann testified that Hobart was still waiting to resolve issues with creditors before the deal would close. Gleitsmann Dep. at 157, 167-68. Moreover, he testified that he had never hear Martin "promise" any funding; Gleitsmann remembered getting assurances from Martin. Id. at 179.
In addition, it is clear that Hobart was still making its decision to move forward with the transaction and close the deal for reasons other than reliance on Martin's assurances. In other words, Hobart's decision to make investments in its business in preparation for a restructured GPI were made for reasons independent of Martin's assurances. On July 15, 1994, Hobart informed GPI and Allen Co. that it would continue negotiations only if six conditions were satisfied. Defs.' Exh. 16, Letter, To: Anthony Garwood, Garwood Packaging, Inc., From: Richard P. Gleitsmann, Jr., Hobart Corp., July 15, 1994. All of the conditions are independent from Martin's alleged promises. See id.
Further, it is clear from Gleitsmann's July 1994 correspondence that Hobart considered contingent its participation in the restructuring. The letter reads, in part,
[Hobart] is ready to move forward, but only on the following conditions. . . . The above list is not meant to be exhaustive of all of the points that Hobart considers open nor is it intended to preclude additional negotiations by the parties. However, I am optimistic that we can wrap this up quickly and turn our energies to building machines.
Id. The contingent nature of Hobart's commitment is confirmed by evidence that it notified the Plaintiffs of its intent to cease negotiations later in July 1994. Defs.' Stmt. of Facts, ¶ 97. Although the Plaintiffs asked Martin to reaffirm Allen Co.'s commitment in writing in an effort to reopen discussions with Hobart, the Plaintiffs point to no evidence that Hobart reentered negotiations in reliance upon any of Martin's promises. Furthermore, as discussed above, Martin's letters in response to the Plaintiffs' request confirm the contingent nature of the Defendants' participation in the transaction.
In addition to Gleitsmann's alleged reliance, the Plaintiffs also rely upon affidavits from two creditors to show that the Plaintiffs' own reliance was reasonable. However, both affidavits state that the creditors issued releases to the Plaintiffs because of the Plaintiffs' representation to them of Martin's promise to provide $2 million and complete the deal. The affidavits state (with substitution of the relevant creditor name), in relevant part:
4. As Administrator of the [Muncie Industrial Revolving Loan Fund (MIRLF)], I recall approval of the loan to GPI and subsequently followed GPI's progress in a restructuring that was proposed during the period 1993 to 1994. During this period, I was informed by Tony Garwood and Peter McNamara that Allen Company had committed funding in the amount of $2 million in return for preferred Series A stock in GPI in the restructuring. I was routinely kept informed by Tony Garwood and Peter McNamara of important developments in GPI.
5. It is my understanding that Allen Company now denies telling Peter McNamara and Tony Garwood that they [sic] had committed to the provision of $2 million in funding to complete the restructuring. I recall that, in 1994, Tony Garwood and Peter McNamara informed the MIRLF that Allen Company and its investors would provide the $2 million in funding for GPI and complete the restructuring. The MIRLF, in its capacity as a GPI creditor, relied on that information when it executed released to GPI during 1994 for the purpose of allowing GPI to complete the restructuring. If Allen Company had not made that commitment, as Tony Garwood and Peter McNamara told the MIRLF, the MIRLF would not have authorized the execution of the release for GPI. Therefore, when Allen Company refused to fulfill their [sic] commitment and go forward with the GPI restructuring, it came as a great shock and disappointment to me and those involved at the MIRLF.
Baldwin Aff., ¶¶ 4-5. See also Wagner Aff. ¶¶ 3-4. There is no language from which a jury could draw the inference that either creditor relied upon Martin's promise directly; it is only McNamara and Garwood's representation of Martin's promise upon which they relied. The Plaintiffs present no evidence that either Garwood or McNamara were agents for either Martin or Allen Co. such that either could make binding promises for the Defendants. In addition, the creditors reliance on assurances from Garwood and McNamara that the Defendants had promised to provide the funding and close the transaction was unreasonable as a matter of law in light of the written documentation they received from GPI that indicated Allen Co. would not close unless all creditors had issued releases. Other than Garwood's self-serving affidavit on the issue, there is no evidence that all creditors had issued the necessary releases when the transaction fell through.
The Plaintiffs also rely upon affidavits of a GPI board member, John Wagner ("Wagner"), and Garwood's wife, Julie Garwood, to show reasonable reliance. Both Wagner and Julie Garwood's affidavits indicate that neither party relied upon assurances or promises Martin made directly to them, they relied upon McNamara and/or Garwood's representation of Martin's promise to provide $2 million and complete the restructuring. The Plaintiffs present no evidence that either Garwood or McNamara were agents for either Martin or Allen Co. such that either could make binding promises for the Defendants. Moreover, GPI had the knowledge of Garwood and McNamara, board members who knew, by admission and otherwise, that Martin's promises were conditional. See Madison County Bank Trust Co. v. Kreegar, 514 N.E.2d 279, 280 (1987) (stating that "the knowledge of an agent acquired while acting in the course of employment will be imputed to the corporation") (citing Prudential Ins. Co. of Am. v. Winans, 325 N.E.2d 204 (1975)). Therefore, another board member's alleged reliance on statements from Garwood and McNamara about Martin's promises would also be unreasonable.
The Plaintiffs also rely upon DG Stout, Inc. v. Bacardi Imports, Inc., 923 F.2d 566 (7th Cir. 1991) ("DG Stout I"), on remand, 805 F. Supp. 1434 (N.D.Ind. 1992) ("DG Stout II"), for the proposition that reliance upon a promise made amid continued negotiations is reasonable. In DG Stout, the Seventh Circuit found, in part, a question of fact on whether a liquor distributor's reliance on Bacardi's oral promise of a continued relationship, unless business conditions changed, was reasonable. DG Stout I, at 570. On remand, the district court found that the distributor's reliance on Bacardi's promise was reasonable as a matter of fact. DG Stout II, 805 F. Supp. at 1448-50.
In DG Stout, a liquor distributor was facing a decision between selling out or scaling back operations. DG Stout I, 923 F.2d at 567. Its relationship with its major suppliers, Bacardi and Hiram Walker, were essential to any decision to stay in business. See id. At a meeting with the distributor's president, Bacardi "emphatically avowed that it had no intention of taking its line to another distributor. . . ." Id. The promise was open ended to the extent that business conditions did not change. See id.
At about the same time it received Bacardi's promise, the distributor began negotiations to sell its business to a competitor. See id. Bacardi was aware of these negotiations. See id. Within three weeks, negotiations were concluded for the sale, with only the final decision remaining. At that time Bacardi again reassured the distributor of its commitment to the distributor. See id. A day or two later, the distributor rejected the offer of sale. That same afternoon, Bacardi withdrew its line from the distributor. See id. When Hiram Walker learned of this event, it also withdrew its line from the distributor. See id. Subsequently, when the distributor approached the buyer, the buyer offered a substantially reduced price for the business. See id. The Seventh Circuit held that whether the reasonableness of the distributor's reliance on Bacardi's promise was a question for trial. Id. at 569.
On remand, and after a trial, the district court found that the conditional nature of Bacardi's promise did not make the distributor's reliance unreasonable. DG Stout II, 805 F. Supp. at 1448. The district court reasoned, in part, that the factors that made Bacardi's promise conditional did not change between the time of the promise and the time it changed its position. Id. at 1450. Therefore, the distributor's reliance on the promise was reasonable. Id.
The promise in this case was equally conditional on whether the parties could reach terms satisfactory to all the parties. The undisputed facts in the instant case indicate that Martin's promise was conditional and the conditions for closing the deal changed between the time Martin made the promises and the time he indicated that Allen Co. would withdraw from the deal. As described in detail above, the Plaintiffs knew that Allen Co.'s investment was conditional on many factors including finding a partner, releases from creditors, and adequate post-closing financial strength. Further, the letters from Martin to GPI dated August 1994 indicated to the Plaintiffs the Defendants' position that several business and legal issues remained and negotiations were to continue. Defs.' Exh. 20, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 4, 1994; Defs.' Exh. 24, Letter, To: Anthony J.M. Garwood Peter J. McNamara, Garwood Packaging, Inc., From: Raymond J. Martin, Aug. 9, 1994.
The undisputed facts also indicate that the parameters of the contemplated transaction in this case changed as late as August 9 and 18, 1994. On July 29, 1994, Hobart informed GPI that it would cease all negotiations. Defs.' Stmt. of Facts, ¶ 97. Martin's letters of August 4 and 9, 1994, were apparently written to entice Hobart back into negotiations. Id. ¶ 98. In addition, on August 9, 1994, GPI, through Jones, attempted to convince Hobart to resume negotiations by offering it an additional 5% equity interest for its investment, which would have brought Hobart's equity interest up to 25.5%. Id. ¶ 102. Clearly, the terms of the transaction had changed as of August 9, 1994, when GPI offered Hobart additional equity for its contributions to the deal.
In addition to that change, around the same time frame of early August 1994, GPI had provided new financial statements to Martin, who described the company's position as "soft." Defs.' Exh. 3, Memorandum, To: Directors — Garwood Packaging, Inc. — Tony Garwood, Thad Jones, Lew Fetterman, John Wagner, From: Peter McNamara, Aug. 18, 1994, ¶ 3. In addition, Martin communicated to the Plaintiffs his concern about a change in the amount of post-closing cash that would be available to the restructured GPI. Id. ¶ 1. McNamara indicated that a problem with personnel caused the change in financials and he "would ensure the financials were fixed by" August 18, 1994. Id. ¶¶ 3-4. However, McNamara testified that he was looking for ways to restructure the deal to increase the amount of post- closing cash at this time. McNamara Dep. at 231, 239, 244. Based on these undisputed facts, significant terms of the transaction changed in the days leading up to the Defendants' decision to pull out of the deal, and the Plaintiffs were aware that such changes could scuttle the transaction.
In light of these facts, no reasonable businessmen would rely upon Martin's verbal assurances that Allen Co. would unconditionally provide $2 million in financing. There were too many terms of the transaction left unresolved. Therefore, as a matter of law, the Plaintiffs have failed to provide evidence of a material question of fact on the reasonable reliance element of their promissory estoppel claim.
Therefore, summary judgment in favor of the Defendants should be GRANTED on the Plaintiffs' promissory estoppel claim.
C. FRAUD 1. Plaintiffs' Motion for Summary Judgment
The Plaintiffs argue that Martin made at least four statements of fact that he knew to be false, or with reckless disregard of their truth or falsity. Those statements are: a) Allen Co. had obtained commitments from a group of individuals to invest $2 million in GPI; b) Allen Co. had the funds in its accounts needed to proceed with the $2 million investment; c) Allen Co. had raised $2 million to be invested in GPI; and d) the necessary money was either being held in Allen Co. accounts or in an Allen Co. escrow account earmarked for GPI. Pls.' Mem. in Supp. of S.J., at 7-10. The Plaintiffs aver that they relied upon those statements when Garwood and McNamara extended personal loans to GPI, when Garwood and McNamara worked without pay, when GPI moved its offices from Indianapolis to Hobart's Troy, Ohio, facility, when Garwood moved his family from Indianapolis to Dayton, Ohio, in 1994, when GPI continued to reassure Seawell that the restructuring would be completed, and when GPI secured releases from its creditors after having defaulted on its obligations. Id. at 11. The Plaintiffs assert that the reasonableness of their reliance is evidenced by the contemporaneous reliance of other parties including Hobart, Seawell and other creditors. Id. at 12. Furthermore, the Plaintiffs aver that they incurred substantial damages because GPI collapsed after the Defendants pulled out of the restructuring transaction.
Id. at 13.
The Defendants argue that Martin's statements were not fraudulent because they were qualified by later language or course of dealing. Defs.' Resp., at 5-6. Further, other evidence shows that Martin told the Plaintiffs on other occasions that he was still trying to find additional investors. Id. at 7. Further, the Defendants argue that Garwood testified that he did not rely upon Martin's alleged statements that Allen Co. had commitments from investors because he believed Allen Co. could provide the entire $2 million without additional individual investors. Id.
Essentially, the parties agree on the elements of fraud in Indiana: (1) the Defendants made a representation of past or existing fact that (2) was false, (3) made the representation with knowledge or in reckless disregard of its falsity, (4) upon which the Plaintiffs reasonably relied, that (5) proximately caused the injury or damage complained of which the Plaintiffs complain. See Lycan v. Walters, 904 F. Supp. 884, 897 (S.D.Ind. 1995); Biberstine, 625 N.E.2d at 1315; Scott v. Bodor, Inc., 571 N.E.2d 313, 319 (Ind.App. 1991).
The Court finds that the Plaintiffs' motion for summary judgment on their fraud claim should be denied because even if the statements were false when made, the Plaintiffs have not shown that they relied upon those statements or that such reliance was reasonable. The Plaintiffs do not dispute that Garwood testified that whether Martin had obtained investors or not, Allen Co. had the capability of providing $2 million; Garwood's only concern was the $2 million, not where it came from Garwood Dep. at 360-61, 355. Moreover, the evidence suggests that the actions that the Plaintiffs' allegedly took in reliance on these statements were made before the statements were made. For example, the letters from Martin that state Allen Co. had raised $2 million to be invested in GPI were dated August 4, 1994, and August 9, 1994. But, GPI moved its offices to Troy, Ohio, and Garwood moved his family to Dayton, Ohio, in July 1994 (the plans for those moves started in May 1994). Similarly, Garwood and McNamara claim they loaned money and did not take salaries in reliance on Martin's alleged misrepresentations, however, the evidence suggests that the last time either man loaned money to GPI was July 2, 1993, and that they had been working unpaid prior to the dates of Martin's alleged misrepresentations. Defs. Stmt. of Facts, ¶ 43; Garwood Dep. at 132 (stating he and McNamara "continued" working without pay); Defs.' App. at 1767, Memorandum, From: Peter J. McNamara, Proposal Re: Back Wages Bridge Loans Owing to Tony Peter, June 10, 1994. Perhaps most importantly, as discussed in detail above, the Plaintiffs' reliance on these assertions as Allen Co.'s unequivocal commitment to provide $2 million in capital was unreasonable as a matter of law.
For these reasons, the Court finds that the Plaintiffs' motion for summary judgment on their fraud claim should be DENIED.
2. The Defendants' Motion for Summary Judgment
The Defendants argue that summary judgment in their favor is appropriate on the Plaintiffs' fraud claim because the Plaintiffs cannot establish that the Defendants made a false representation of existing fact, that the Plaintiffs relied upon those misrepresentations to their detriment, that the Plaintiffs' reliance was reasonable, or that the Plaintiffs suffered harm because of their alleged reliance on Martin's misrepresentations.
The Plaintiffs argue that Martin's statements were misrepresentations of existing fact because Sind and Senior testified that they had not committed money for the restructuring of GPI. In addition, the Plaintiffs relied upon the misrepresentations to their detriment because they moved GPI's offices to Troy, Ohio, because Garwood moved his family to Dayton, Ohio, because GPI continued to reassure Seawell that the restructuring would be completed, and because GPI secured releases from its creditors upon reassurances that the restructuring would be completed. Moreover, the Plaintiffs assert that the reasonableness of their reliance is a jury question.
The Court finds that the Defendants motion for summary judgment on the Plaintiffs' fraud claim should be granted. The Plaintiffs offer no evidence that connect the alleged misrepresentations and their alleged acts in reliance on those misstated facts. Furthermore, in many cases, the Plaintiffs' actions occurred before the alleged misrepresentations of fact. The Plaintiffs provide no factual connections between the alleged misrepresented facts and their reliance. In addition, as discussed in detail in the section granting the Defendants' motion for summary judgment on the Plaintiffs' promissory estoppel claim, the Plaintiffs' reliance on Martin's assurances that he had raised $2 million to be invested in GPI was unreasonable as a matter of law.
Therefore, the Defendants' motion for summary judgment on the Plaintiffs' claim for fraud should be GRANTED.
IV. CONCLUSION
For the foregoing reasons, the Plaintiffs' motion for summary judgment is DENIED as to all of their claims. In addition, the Defendants' motion for summary judgment is GRANTED as to all of the Plaintiffs' claims. Parties shall pay their own costs.