Miller v. Glegenheimer

161 A.3d 524 (2016)

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Nature of the Case

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Facts

P and D are joint owners of a document shredding company. Each partner currently owns half of the stock in the company. P and D did not work well together. They hired an outside CEO and put in place a three-person advisory board to resolve their disputes independently. They considered selling the company but could not agree on the price. The outside CEO left and D became CEO. P withdrew from day-to-day operations for both business and personal reasons. P and D then spent months and $30,000 to agree on a buy-sell agreement so one partner could buy the other out. P refused to sign the deal. Fifteen days after negotiations had broken down over the buy-sell agreement, D sent P an e-mail offering terms of sale for his stock in the company. D offered to sell the company at a price reflecting the average of two appraisals they had previously commissioned and also with a claw-back provision in place. The “claw-back provision” provided that if the buyer sold the company for a higher price within two years, the seller would receive half of the difference between the value at which he sold the company and the value his partner received when he resold it. D was also prepared to purchase all of P's shares on the same terms and conditions. Five days later, P replied by e-mail that “I will accept” the offer, acknowledged the claw-back, and that seller should expect “definitive documents” with “customary provisions” within about two weeks. P sent a short e-mail and attached a twelve-page Stock Purchase Agreement and a six-page Confidentiality, Non-Competition, and Non-Solicitation Agreement (Non-Compete Agreement). In the Non-Compete Agreement, D would agree not to compete with the company or solicit employees or customers of the company for three years. The Non-Compete Agreement referred to itself as “a condition precedent” of the Stock Purchase Agreement. The agreements also lowered the price P offered D for his shares by $50,000, assigning that consideration to the Non-Compete Agreement. D responded that he had reviewed the Stock Purchase Agreement and Non-Compete Agreement and would be withdrawing his offer to sell his shares. D also told P that he would be stepping away from the day-to-day operations of the company by March 31. P sued D requesting specific performance. D moved for summary judgment. The court found that P and D had entered into an agreement by exchanging their December e-mails and as such both were required to negotiate the remaining terms of the contract in good faith. D appealed. P cross appealed.