Main Street Baseball, LLC v. Binghamton Mets Baseball Club, Inc.

103 F.Supp.3d 244 (2015)

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Nature of the Case

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Facts

P manages and co-owns several minor league teams including the Wilmington Blue Rocks. Minker is an investor and co-owns the Wilmington Blue Rocks with P. Ps aimed to purchase a Double-A team and move it to Wilmington while selling the Wilmington Blue Rocks to a buyer who would relocate that team. D owns the BMets. The BMets play in the twelve-team Eastern League of Minor League Baseball and are the Double-A affiliate of the New York Mets. Beacon Sports is an investment banking firm for the professional sports industry; they brokered the BMets transaction that is at issue here. Billings is a principal of Beacon Sports. Ps began discussions with Billings to purchase the BMets and signed a confidentiality agreement to obtain relevant information regarding the team. Ps were introduced to D and by December 2014, they had reached an agreement regarding the sale of the BMets. A Letter of Intent (LOI) was to be drafted by attorneys to memorialize the terms. The LOI was executed on January 5, 2015. The nine-page LOI contained a sixty-day 'no shopping' period during which Ds could not negotiate with other buyers. The LOI provided for the negotiation of, and ultimate execution, of an Asset Purchase Agreement (APA). Ps put $100,000 in escrow and Ps' attorney drafted the APA. D made changes to the APA which Ps accepted. On February 25, fifty-one days into the sixty-day no shopping period, D forwarded his lawyer's comments. According to Ps, D made many new demands but remained ready to execute the APA. Ps contend the proposed changes altered the material terms of the LOI, in direct contravention of the LOI. One change related to the indemnification obligations, which Ps claim the LOI provided for without reference to a deductible or cap. Ds contend that a deductible and cap were to be negotiated before the APA was finalized, but that Ps refused to negotiate these terms. Between February 28 and March 11 emails were exchanged between the parties and their attorneys. Ps claim that Ds refused to finalize the APA consistent with the LOI, as required by the LOI. Despite this, D never indicated the deal was off. On March 11, Ds' attorney advised that they remain interested in selling but that the sixty-day no shopping period had expired (as of March 5) and they would simultaneously consider other offers. On March 13, Ds' attorney noticed Ps that they were ceasing negotiations with Ps. Ps sued Ds. Ps argue the LOI was a binding contract for the purchase of the team. Ds contend the LOI is not binding and expired at the end of the sixty-day period. Pursuant to the LOI, usual customary representations and warranties were still to be negotiated in the APA. Ds claim these terms included indemnities, while Ps contend the LOI fully provided for all indemnities. In addition to Ds' allegation that Ps were unwilling to negotiate Ds' proposed changes, Ps themselves made new demands for the APA, such as adding an arbitration provision and the award of prevailing party attorneys' fees which Ds did not agree to, and which were not a part of the LOI. Ds executed an LOI with the new potential buyer on March 13.