Alantra LLC v. Apex Indus. Techs. LLC

636 F.Supp.3d 223

ALANTRA LLC, Plaintiff and Counterclaim-Defendant, v. APEX INDUSTRIAL TECHNOLOGIES LLC, Defendant and Counterclaim-Plaintiff.

Civil Action No. 20-10852-FDS

United States District Court, D. Massachusetts

Signed October 19, 2022

Steven J. Torres, Ryan A. Rucki, Torres, Scammon, Hincks & Day, LLP, Boston, MA, for Plaintiff and Counterclaim-Defendant.

Brian J. Lamb, Pro Hac Vice, Jesse Jenike-Godshalk, Pro Hac Vice, Thompson Hine LLP, Cleveland, OH, David A. Wilson, Thompson Hine LLP, Washington, DC, for Defendant and Counterclaim-Plaintiff.

MEMORANDUM AND ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

SAYLOR, Chief Judge

This is an action arising out of a contract dispute. Plaintiff Alantra LLC entered into a contract with defendant Apex Industrial Technologies LLC to serve as Apex's exclusive financial advisor in connection with its efforts to raise capital and attract outside investment. The terms of that agreement were executed in an Engagement Letter, signed by both parties.

The Engagement Letter contained contingent-compensation provisions whereby Alantra was to be paid a transaction fee for debt-financing or equity-capital transactions that involved Apex. According to the complaint, during the course of the agreement, Alantra identified a company, Fastenal, as a potential strategic investor for Apex; however, Apex instructed Alantra not to pursue Fastenal as an investor. Not long thereafter, Apex entered into an asset-purchase agreement with Fastenal for $125 million. Alantra then sought a transaction fee in connection with that sale, but Apex declined to pay the fee, asserting that the transaction was not one for which Alantra was entitled to compensation under the terms of the agreement.

Alantra then sued Apex for breach of contract and unjust enrichment. In its answer, Apex asserted counterclaims for breach of contract and breach of fiduciary duty, alleging that Alantra disclosed confidential information by publicly filing the complaint and attaching the Engagement Letter as an exhibit.

The parties have cross-moved for summary judgment. Alantra has moved for summary judgment on its breach of contract claim as well as Apex's counterclaims, and Apex has moved for summary judgment as to liability on all claims and counterclaims.

There are two principal issues before the Court. The first is whether the Engagement Letter requires Apex to pay Alantra a contingent fee for a transaction involving the sale of assets, as opposed to a debt-financing or equity-capital transaction. The Court concludes that the unambiguous terms of the Engagement Letter, read as a whole, demonstrate that it does not. The second is whether there is a genuine dispute of material fact concerning the existence of damages resulting from the alleged disclosure of confidential information by Apex. The Court concludes that there is.

Accordingly, and for the following reasons, the motions will be granted in part and denied in part.

I. Background

A. Factual Background

Alantra LLC is a Massachusetts investment-banking firm that provides business advice to clients by identifying potential sources of funding and investment. (Emery Dep. at 24-25). Apex Industrial Technologies LLC is an Ohio company that provides supply-chain products and technologies. (Savage Decl. ¶ 1).

In 2019, Apex began seeking outside investment to raise capital for the company. (Savage Dep. at 41-42; Emery Dep. at 39-40). To that end, it enlisted the services of Alantra to identify and attract outside investors. (Savage Dep. at 40-42, 46).

In June 2019, the parties executed a nondisclosure agreement and began to negotiate the terms of an agreement. (Savage Decl. ¶ 4; Savage Dep. at 50-51, 122-23). On August 13, the parties finalized the agreement in an engagement letter (the "Engagement Letter").

1. The Engagement Letter

a. Alantra's Obligations Under the Letter

According to the Engagement Letter, Apex appointed Alantra to act as its "exclusive financial advisor in connection with its contemplated debt and/or equity capital raising (the "Assignment")." (Engagement Letter at 1). Alantra was to assist Apex by providing advice as to market conditions, identifying potential sources of investment, conducting due diligence, and evaluating proposed transactions. (Id. ¶ 1.1). For example, the letter states that Alantra was expected to assist in "[e]xamining the market for potential lenders and investors and identifying a universe of parties who should be contacted in relation to the proposed transaction (the "Investors")." (Id.). Similarly, the letter states that Alantra was expected to assist in "[g]athering and analyzing information relevant to the market and the proposed transaction." (Id.).

The Engagement Letter limited Alantra's duties to those expressly stated in the letter:

The only duties or obligations Alantra owes [Apex] in relation to the Assignment are those set out expressly in this letter[.] Alantra does not owe [Apex] any other or further duties or obligations (whether arising from the fact that Alantra is acting as your adviser or otherwise) in relation to the Assignment.

(Id. ¶ 8.1).

b. Fee Provisions

The Engagement Letter required that Apex pay an initial $20,000 retainer to Alantra, followed by up to four monthly payments of $15,000. (Id. ¶ 2.1). Those fees were labeled "Professional Fees" and were "non-cancelable and payable in full" regardless of whether the agreement was terminated. (Id.). However, the Professional Fees could be credited against any obligation to pay a "Transaction Fee," as long as that fee exceeded $750,000. (Id. ¶¶ 2.1, 2.3).

The Engagement Letter defined "Transaction Fee" and "Transaction" as follows:

The contingent portion of Apex's obligation under this Assignment is the "Transaction Fee" which is paid in connection with any debt financing or equity capital raise (except by or from Kent Savage [Apex's President and CEO], or one o[r] more of his affiliates) (a "Transaction") that involves Apex including current vendors and customers of [Apex] provided that any credit accommodations, account adjustments, payment arrangements, forbearances, waivers, or other allowances of any kind by any such vendors or customers shall not be deemed to be a Transaction.

(Id. ¶ 2.2).

The letter then set forth two methods for calculating a "Transaction Fee," depending on the circumstances of the transaction at issue. The first was as follows:

The Transaction Fee is computed upon the closing (the "Closing") and, for all Transactions for which Alantra is entitled to a Transaction Fee pursuant to this engagement letter, the Transaction Fee(s), in the aggregate, will be equal to the greater of $750,000 (the "Minimum Fee") or the following:

• 2.75% of the first $20 million of 1st lien debt and 2.5% thereafter; plus

• 5% of the amount raised in equity, subordinated debt or mezzanine from Investors on the first $10 million; 4.5% on the next $10 million and 4% thereafter.

Alantra's Transaction Fee shall be payable with respect to all Investors (other than Kent Savage and any of his affiliates), provided that with respect to any Investor designated by [Apex] on the attached Annex A (the "Designated Investors"), the Transaction Fee(s) payable by Apex with respect to a debt or equity capital raise by or from any Designated Investors will be reduced by 50% provided the term sheet is fully executed 45 days from the execution of this engagement letter further provided that in no event will the discounted Transaction Fee(s) for all such loans or capital raises by or from any Designated Investors be less than $600,000 . . . . Further, [Apex] shall not have the right to include any additional Designated Investors during the term of the engagement beyond those identified in Annex A upon execution of the engagement letter.

(Id. ¶ 2.3).

The second calculation method concerned larger transactions:

In the event that [Apex] elects to raise capital or sell shares that results in a transfer of greater than 50% of the current fully diluted shares, then in lieu of, and not in addition to, the Transaction Fees provided for in Paragraph 2.3, Alantra shall be entitled at the Closing to the Transaction Fees as outlined below:

• 2.0% of the Transaction Value up to $100 million, plus

• 2.5% of the Transaction Value above $100 million.

For the purpose of this letter, the term "Transaction Value" shall mean the Enterprise Value on a cash free and debt free basis. For the avoidance of doubt, Enterprise Value shall mean the aggregate of any amounts paid or committed for stock or assets plus the value of all net interest bearing debt, including the value of any debt like items, assumed by the buyer, plus any current assets retained by the seller on or after the date hereof as part of the consideration. The Transaction Value for any Transaction (including a recapitalization) that involves more than 50% of the equity voting rights or results in a change of control will be equal to the implied Enterprise Value for 100% of the stock or assets.

(Id. ¶ 2.4).

The Engagement Letter also contained two "tail" provisions that required payment of a contingent fee, under certain circumstances, after a transaction closed, or even after the expiration of the Engagement Letter. The first of those provisions concerned subsequent investments to transactions executed during the agreement period:

Provided there is a Closing and additional debt or equity is raised or invested, as the case may be, in the 12 months from Closing by an Investor or Designated Investor which participated in a debt financing or equity capital raise for which Alantra is entitled to a Transaction Fee pursuant to the terms of this engagement letter, Alantra would be entitled to an additional Transaction Fee as outlined in Paragraph 2.3 or 2.4, as the case may be, on the additional debt financing or capital raise by or from such Investor or Designated Investor (the Minimum Fee shall not apply).

(Id. ¶ 2.5).

The second provision concerned...