Daniel L. Bommer v. George Remington Reynolds, et al.

FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 26, 2012
JOHN LEY
CLERK
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-12115
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D. C. Docket No. 1:09-cv-00784-HTW
DANIEL L. BOMMER,
Plaintiff-Appellee,
versus
GEORGE REMINGTON REYNOLDS,
STEVEN S. GARELECK,
Defendants-Appellants.
_________________________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________________________
(March 26, 2012)
Before EDMONDSON, ANDERSON, and FARRIS, Circuit Judges.*
Honorable Jerome Farris, United States Circuit Judge for the Ninth Circuit, sitting by*
designation.

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EDMONDSON, Circuit Judge:
This state-law case involves a dispute between former business partners
about whether they made a contract. The parties formed a valid and enforceable
contract; the District Court properly granted summary judgment in favor of
Plaintiff.
Background
Telesis Management Corporation, a telecommunications company founded
by Plaintiff Bommer, merged with companies controlled by Defendants Reynolds
and Gareleck. The merger formed Cost Management Group, Inc. (“CMG”). In
consideration for the merger, Plaintiff received 600,000 shares of stock in CMG
and, along with Defendants, became one of the three principal stockholders in
CMG.
Plaintiff and Defendants entered into a Stockholder’s Agreement (“the
Agreement”) for CMG. The Agreement contains a buy/sell provision. Under the
buy/sell provision, any of CMG’s principal stockholders may send a Special
Purchase Notice (“SPN”) to another principal stockholder and offer to buy the
other stockholder’s shares at a price and terms outlined in the SPN. The buy/sell
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provision allows principal stockholders to “buy out” or to be “bought out” of the
business relationship.
In short, under the terms of the Agreement, a principal stockholder who
offers to buy the shares of another principal stockholder is to send an SPN
outlining the purchase price and terms of the deal. The recipient stockholder has
90 days “either to accept the offer or, at his or her sole option, reject the offer and
instead elect to buy all of the Offering Stockholder’s shares of the Stock, for the
Agreement Price and on the Agreement Terms.”
Pursuant to the terms of the Agreement, only two potential outcomes exist
following the issuance of an SPN: (1) the recipient-stockholder either sells his
stock at the price set forth in the SPN, or (2) purchases the issuer-stockholder’s
stock at the price set forth in the SPN. The recipient of the SPN must act in one
way or another, or else, after 90 days, the SPN-recipient-stockholder automatically
does agree “to sell his or her shares of the Stock to the Offering Stockholder.”
On 6 June 2008, Defendants sent Plaintiff an SPN notifying Plaintiff of their
intent to purchase his shares for a total price of $1,920,000. The SPN states that of
the $1.92 million, $1.728 million was payable immediately upon the close of the
transaction. The remaining $192,000 was to be paid pursuant to a Promissory
Note within a period of 2 years and subject to “Additional Terms” listed in the
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SPN. The “Additional Terms” included non-compete, non-solicitation, and
disclosure-of-business-interest clauses. About no competition, the additional
terms included this paragraph:
b. Non-Competition Agreement. You shall execute a non-
competition agreement which provides that for a period of two years
from the Closing Date you will not directly or indirectly compete with
the business of the Corporation by engaging in any business or
enterprise that engages in telecommunication agency and resale
services for telecommunications carriers anywhere within the United
States. The final terms of the non-competition agreement will be
subject to review by each party’s counsel and shall conform to the
requirements of applicable law.
Plaintiff decided to sell his shares to Defendants instead of purchasing all of
Defendants’ shares. Plaintiff wrote to Defendants on 4 September 2008 (within 90
days of the SPN), notifying them of his intention to sell his shares. The letter
states, “Pursuant to Section 10.1 of the Stockholder Agreement please accept this
letter as my acceptance as a shareholder of the Special Purchase Notice dated June
6, 2008.” In the same letter, Plaintiff tenders his 600,000 shares, resigns as an
officer and director of CMG, and asks for the $1.728 million to be wired to his
bank account. Plaintiff’s cover letter makes no mention of the “Additional
Terms,” but the SPN -- which Plaintiff signed and accepted -- includes the
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“Additional Terms” section.
Plaintiff claims the 4 September 2008 letter operates as an acceptance of the
SPN, which creates a binding obligation on Defendants’ part to pay him $1.728
million.
Briefly stated, Defendants say no contract was formed because between
June 2008 and March 2009 each party sent many other offers and counteroffers
and the negotiations never ceased. Defendants especially cite an 11 June 2008
letter from Plaintiff’s lawyer as the first counteroffer which, Defendants say,
terminated the SPN.1
Despite Defendants’ contention that no contract to buy Plaintiff’s stock
exists, Defendants accepted Plaintiff’s resignation, took his keys, and shut down
his company e-mail and other forms of access. Defendants also received the
tender of Plaintiff’s stock; Defendants made no attempt to return the stock until
after Plaintiff filed suit.
Plaintiff filed suit to compel payment of the $1.728 million plus interest.
The District Court concluded that a binding contract to purchase shares was
established between the parties pursuant to the Agreement and the SPN. The
Plaintiffs also argue that the SPN is no proper offer because the terms are too uncertain,1
incomplete, and indefinite.
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District Court granted summary judgment to Plaintiff and awarded $1.728 million
plus interest. But the District Court declined to award the additional $192,000
claimed by Plaintiff, finding that Plaintiff never complied with the SPN’s
“Additional Terms.” Defendants appeal.
Discussion
General contract law applies to this case. Shareholder agreements “are
construed according to the principles of the law of contracts.” Simpson v.
Pendergast, 659 S.E.2d 716, 719 (Ga. Ct. App. 2008) (quotations omitted).
Georgia state contract law controls and instructs that a “definite offer and
complete acceptance, for consideration, creates a binding contract.” Fernandez v.
WebSingularity, Inc., 681 S.E.2d 717, 721 (Ga. Ct. App. 2009) (quotations
omitted).
Defendants chiefly argue that no contract was formed either because no
proper offer was made or that if an offer was made, Plaintiff rejected it (by his
counteroffers).
But the text of the SPN was clear enough: the SPN was an offer pursuant to
the Agreement. Defendants even testified that in sending the SPN, Defendants
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intended either to buy out Plaintiff or for Plaintiff to buy out Defendants.
Defendants testified clearly about their goals (and desired outcome) of sending the
SPN. The SPN represented a definite and valid offer.
Plaintiff accepted the terms of the SPN with his 4 September 2008 letter
stating, “Pursuant to Section 10.1 of the Stockholder Agreement please accept this
letter as my acceptance as a shareholder of the Special Purchase Notice dated June
6, 2008.” Plaintiff also actually signed the special purchase notice of 6 June 2008,
signing under an all caps phrase that said, “ACCEPTED AND AGREED TO.”
Considering the Stockholders’ Agreement, negotiations or talks that the
parties engaged in after the 6 June 2008 issuance of the SPN and before the 4
September acceptance do not undermine the unambiguousness and completeness
of Plaintiff’s acceptance. With his acceptance of 4 September, Plaintiff2
performed as fully as he then could: Plaintiff tendered his 600,000 shares,
resigned as an officer and director of CMG, and asked for the $1.728 million to be
wired to his bank account. Plaintiff sufficiently manifested his acceptance of the
terms of the SPN.
Defendants especially draw our attention to the matter of no competition.
For example, in an 11 June 2008 letter, Plaintiff’s lawyer writes: “In addition, this letter2
shall not be construed as a rejection of the offer contained within the Special Purchase Notice[.]”
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They focus on one sentence in particular: “The final terms of the non-competition
agreement will be subject to review by each party’s counsel and shall conform to
the requirements of applicable law.” But we observe that Plaintiff, by his
acceptance, agreed that he would execute a non-competition agreement for a
period of two years to bar his competition anywhere in the United States. We
strongly doubt that Plaintiff was free to compete once he accepted the SPN.3
Furthermore, although the SPN states that the “final terms of the non-competition
agreement will be subject to review by each party’s counsel and shall conform to
the requirements of applicable law,” we believe that the essential terms -- time,
area and so on -- had already been agreed to in the SPN; formalities and details
remained to be worked out. In addition, as we understand the law, the parties to a
contract can agree to bind themselves by that contract to negotiate in good faith
and to work out -- within an agreed framework -- some terms that remain open. Of
course, Georgia law imposes an implied duty of good faith and fair dealing for all
parties in contracts. The parties made an enforceable contract although it
remained executory in part.
The SPN represented a valid and definite offer pursuant to the Agreement.
Plaintiff’s acceptance (for consideration) was total, complete, and definite. No
We are not asked in this suit to enjoin Plaintiff from competing.3
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genuine issue of material fact exists about whether the parties formed a valid
contract. The District Court therefore correctly granted summary judgment in
favor of Plaintiff.
AFFIRMED.
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ANDERSON, Circuit Judge, dissenting.
Very respectfully, I dissent. In my judgment, the acceptance of the offer in
this case was ambiguous with respect to whether he had accepted all material
terms. The negotiations and course of dealing between the parties made clear that
Bommer had not accepted all material terms, including in particular the term
requiring a reasonable covenant not to compete. Because the offer was never
accepted, there was no contract, and therefore I would have reversed the judgment
of the district court.
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