Have a look at the Titan vs. Freedom case, decided last December (opinion written by Jacobs). It has remarkable similarities w/ Siga/Pip. Again a "nonbinding" contract which one side thinks isn't a contract; again a merger that doesn't get consummated, with some money changing hands first; again a ruling of a breach of faith; but in this case the Superior Court ruled that it was too speculative to try to figure expectation damages and awarded only Reliance Damages. Jacobs ruled that the Superior Court was right about this, but reversed the damages!
The main difference in the two cases is that the Superior Court ruled that the deal would NOT have closed, while Parsons imagined what the contract might have been HAD it closed.
I'll paste in some parts that will feel like deja vu all over again, in two parts (note some parts deleted):
5. On April 7, 2009, Freedom and Titan entered into a Letter Agreement
and Term Sheet (collectively, the “Titan-Freedom Contract”) that established a
warehouse credit facility. The Titan-Freedom Contract obligated Titan to raise at
least $25 million to be invested in Freedom.
7. By July 2009, changes in the credit market enabled Freedom to increase
its ability to secure credit from other lenders independent of its April 2009
contractual arrangement with Titan. That changed circumstance caused
Middleman, on behalf of Freedom, to repudiate the Titan-Freedom Contract on
July 22, 2009….
[Earlier,] Middleman told a colleague at Freedom that Middleman was “going to
probably pass on the deal but string [Titan] out for a little while in case [Freedom]
9. On August 4, 2009, Freedom’s counsel officially terminated the Titan-
Freedom Contract, based on Context’s and LBC’s nonconforming and nonbinding
Commitment Letters. As support for its conclusion that LBC’s Commitment
Letter was contractually invalid...
Trying to compare Titan v. Freedom to PIP v SIGA is like comparing apples to grapefruits. The Chancery Court ( a court of equity) ruled in PIP's favor on a theory of promissory estoppel, which was NOT the theory of recovery in Titan v. Freedom, which was purely a contractual matter heard in the Superior Court (a court of law).
"Promissory estoppel" - That which arises when there is a promise which promisor should reasonably expect to induce action or forbearance of a definite and substantial character on part of the promisee, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise". Black's Law Dictionary - 5th Edition.
Looks like a pretty similar case to me. Not saying the rulings were the same, but that the cases were. And maybe Judge Jacobs will tell us that the rulings should have been the same. Lucky for you that you don't agree, or your short would look pretty perilous.
Titan Freedom Case Part II
10. In response, Titan brought a breach of contract action against Freedom in the Superior Court on October 28, 2009. After a bench trial, the Superior Court found in its March 27, 2012 order and judgment that: (i) the Contract between Titan and Freedom was legally enforceable; (ii) Middleman’s July 22, 2009 email to Peruzzi constituted a repudiation by Freedom of that Contract; and (iii) Freedom, through its counsel, officially terminated that Contract on August 4, 2009.1 The court further held, however, that (iv) even if Freedom had not breached the Contract, Titan had not presented evidence sufficient to establish that the deal
would have closed…. The Superior Court found “it . . . obvious that this was a deal with no momentum which probably would not have come to a final conclusion.”
11. In calculating Titan’s damages resulting from Freedom’s breach of the Titan-Freedom Contract, the court found that Titan’s potential lost profits were too speculative to merit an award for “expectation” (i.e., benefit-of-the-bargain) damages. The Superior Court held that Titan could recover only its “reliance” damages, which the court calculated as follows:
Titan’s costs and expenses: $135,425.68
Titan’s 1% commitment fee
upon closing the deal: + $250,000.00
Freedom’s deposit to Titan
for Titan’s costs and expenses: - $80,000.00
LBC’s share of the 1%
commitment fee: - $100,000.00
Total “Reliance” Damages: $205,425.68.6
Titan’s appeal and Freedom’s cross-appeal followed.
12. The first issue presented is whether the Superior Court reversibly erred by holding that Freedom repudiated, and thereby breached, the Titan-Freedom Contract when Middleman sent his email to Peruzzi on July 22, 2009. If that email constituted a breach, the issue then becomes whether Titan is legally entitled to any damages as a consequence, and if so, in what amount. MORE TO COME
14. On its appeal, Titan claims that it was entitled to an award of its recoverable lost profits, based on the benefit-of-the-bargain measure of damages. On its cross-appeal, Freedom claims that the trial court erred by holding that Freedom breached the Titan-Freedom Contract, for which reason Freedom should not have been held liable to Titan for any contract damages. Notably, both parties argue that the Superior Court incorrectly adjudicated the treatment of one component of its damages award—the 1% commitment fee that Titan would have received had the Titan-Freedom Contract, in fact, closed.
15. We conclude that the Superior Court correctly determined that Freedom breached the Titan-Freedom Contract on July 22, 2009 by ceasing to continue negotiations with Titan in good faith. Freedom’s email repudiation (in which Middleman informed Titan that Freedom would “do no more work” on the Titan- Freedom Contract) constituted a breach, and the trial court properly so held.
16. On the damages issue, we agree with Freedom that the Superior Court erred in awarding Titan a 1% commitment fee. Because the trial court found that the contract would not have closed—even absent Freedom’s breach—Titan was not entitled to receive the 1% commitment fee that presupposed the opposite conclusion, namely, that the deal would have closed. The court’s finding that the deal would not have closed, and its 1% commitment fee award to Titan, were fatally inconsistent. Given Titan’s inability to establish that the Titan-Freedom Contract would have closed but for Freedom’s breach, Titan is not entitled to damages measured on a “ benefit-of-the-bargain” basis. Rather, Titan was entitled only to its “reliance” damages, measured by its actually-incurred costs and expenses.
17. At this juncture, however, we find it difficult to review the determination of Titan’s recoverable costs and expenses. The Superior Court, without citing to the trial record, established Titan’s costs and expenses at $135,425.