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Emerging Europe Growth Fund, L.P. v. Figlus

Court of Chancery of Delaware

December 10, 2018

EMERGING EUROPE GROWTH FUND, L.P., and HORIZON CAPITAL GP LLC, a Delaware limited liability company, Plaintiffs,
v.
IHOR FIGLUS, Defendant. IHOR FIGLUS, Plaintiff,
v.
NATALIE A. JARESKO, and HORIZON CAPITAL GP LLC, a Delaware limited liability company, Defendants, and EMERGING EUROPE GROWTH FUND, L.P., Nominal Defendant.

          Submitted: October 11, 2018

          John G. Harris and Sean A. Meluney, BERGER HARRIS LLP, Wilmington, Delaware; Attorneys for Plaintiff.

          Richard P. Rollo and Kevin M. Gallagher, RICHARDS, LAYTON & FINGER P.A., Wilmington, Delaware; Attorneys for Defendants and Nominal Defendant.

          MEMORANDUM OPINION

          MONTGOMERY-REEVES, VICE CHANCELLOR.

         Pending before me are cross-motions to enforce a settlement agreement. These parties are no strangers to litigation. The two lead actors, an ex-husband and wife, began their first legal battle with a divorce in 2011. Second, in 2012, the limited partnership in which both are members sued the ex-husband for leaking its confidential information. Third, in 2017, the ex-husband sued his ex-wife and the limited partnership for breach of contract and breach of fiduciary duties. The parties appear to have come to their senses and decided to settle, and they reached a settlement agreement on December 11, 2017.

         The parties are now before me on cross-motions to enforce the settlement agreement. There are very few factual disputes; the parties generally agree about the applicable legal standards; and the parties seek specific performance. They dispute the scope of the "mutual general release" that they agreed to as part of the December 11, 2017 settlement. In particular, I must decide whether the parties intended to release their Ukrainian divorce proceedings, including an ongoing case the ex-wife filed regarding unpaid alimony.

         In this opinion, I hold that the parties did not intend to release the Ukrainian divorce proceedings, and I grant the ex-husband's motion and deny the ex-wife's motion.

         I. BACKGROUND

         The parties agree that on December 11, 2017, they reached an enforceable settlement agreement (the "Settlement Agreement") resolving two pending cases between the parties in Delaware.[1] They dispute the meaning of the Settlement Agreement, and the parties move to enforce the version they argue the parties agreed to.

         A. Parties

         Ihor Figlus and his ex-wife Natalie Jaresko, who divorced in 2011, are limited partners in Emerging Europe Growth Fund, L.P. ("Emerging"), a Delaware limited liability partnership.[2] Horizon Capital GP LLC ("Horizon Capital") is Emerging's general partner.[3] I will refer to Jaresko, Emerging, and Horizon Capital collectively as the "Horizon Parties."

         B. Facts

         On October 10, 2012, Horizon Capital and Emerging filed a lawsuit (C.A. No. 7936-VCMR) (the "First Delaware Action") against Figlus, asking this Court to enjoin Figlus from disclosing nonpublic information about Emerging to the press in Ukraine, in violation of Emerging's partnership agreement.[4] This Court entered a temporary restraining order[5] and later a preliminary injunction[6] against Figlus.

         On May 15, 2017, Figlus filed this lawsuit (C.A. No. 2017-0373-TMR) (the "Second Delaware Action") against Horizon Capital and Jaresko for breach of fiduciary duty and breach of contract.[7] Thereafter, the parties began settlement discussions, and by December they were close to an agreement.

         On December 6, 2017, Figlus's counsel made the following offer to the Horizon Parties:

[W]e are authorized to counter your client's pending offer with the following terms: (i) a total cash settlement payment of $249, 000, to be delivered in one-lump [sic] sum upon full execution and delivery of the settlement agreement; (ii) the purchase of Mr. Figlus's partnership interest; and (ii) [sic] a mutual, general release, which would include, without limitation, any claims/defenses that relate to or otherwise arise out of the loans, notes, or security agreements between [Emerging]/the Horizon entities and Ms. Jaresko and Mr. Figlus.[8]

         On December 7, the Horizon Parties' counsel sent Figlus's counsel an email saying, "Thank you for the call earlier today. As discussed, the client is willing to pay $175k in exchange for (i) Mr. Figlus's partnership interests and (ii) mutual general releases."[9] On December 8, Figlus's counsel responded, "Mr. Figlus is willing to settle this matter for $205, 000, along with the terms set forth in Jack's email below, which is dated December 6th."[10] On December 11, counsel for the Horizon Parties and counsel for Figlus spoke by phone and discussed the terms of the settlement. No counsel submitted an affidavit or any other admissible evidence regarding the December 11 phone call. Thus, there is no contemporaneous evidence before me that reflects the contents of that phone call.

         On December 11, after the phone call, the Horizon Parties' counsel sent Figlus's counsel an email saying, "I have confirmed that $195k is acceptable, and will send a more formal acceptance once I am in front of a computer."[11] The parties agree that they reached an enforceable settlement agreement on December 11; the terms included (1) payment of $195, 000 to Figlus, (2) purchase of Figlus's limited partnership interests, and (3) mutual general releases.[12]

         On December 21, 2017, the Horizon Parties sent Figlus a draft settlement agreement (the "December 21 Draft") reflecting what the Horizon Parties considered to be the agreed-upon terms.[13] The December 21 Draft purports to release claims "that arise out of, relate to, or are connected in any manner, directly or indirectly, with the Delaware Actions, this Settlement Agreement or the underlying events, actions, negotiations and other information arising out of, relating to, or connected in any manner, directly or indirectly, thereto."[14] The December 21 Draft defines the Delaware Actions as "Emerging Europe Growth Fund, L.P. et al. v. Ihor Figlus, C.A. No. 7936-VCMR (Del. Ch.) and Ihor Figlus v. Natalie Jaresko et al., C.A. No. 2017-0373-TMR (Del. Ch.)."[15]

         On December 26, Figlus's counsel responded with a revised draft settlement agreement, which included changes he characterized as "fairly minor." Figlus's counsel added the following language to the end of Section 3(b) of the December 21 Draft: "This release shall not apply to any liabilities, debts, alimony, property distributions, and/or other liabilities pursuant to, or arising out of, a past or future divorce decree."[16] The Horizon Parties objected on December 27, saying that Figlus's proposed carve out was not contemplated in the December 11 Settlement Agreement.[17] The parties then exchanged emails about who had agreed to what and when, the scope of the release, and the inclusion of the carve out.[18] Because of the dispute over terms, the parties never executed the same version of the settlement agreement.

         On October 11, 2018, Figlus filed a letter with this Court stating that on July 12, 2018, Jaresko filed an individual civil complaint in Ukraine (the "Ukrainian Complaint") to collect alimony for the maintenance of minor children based on a previous Ukrainian court judgment (all divorce actions in Ukraine collectively, the "Ukrainian Divorce Proceedings").[19] Figlus argues that the Ukrainian Complaint represents "probative, admissible evidence showing that Jaresko did not intend for the settlement agreement at issue here, which was negotiated and drafted last December, to release domestic-related claims like the one asserted" in Ukraine.[20]

         The Ukrainian Complaint states that the claim is based on an action that was initiated on December 4, 2012, when Jaresko filed papers attempting to recover alimony for the maintenance of minor children from Figlus.[21] On June 30, 2016, a Ukrainian state official terminated the action and directed the parties to pursue the case in a different manner.[22] On May 18, 2017, the District Court of Kyiv overturned the state official's termination and required the state official to restart proceedings.[23]On September 18, 2017, the enforcement hearings to update the alimony were reinstated.[24] On January 10, 2018, the state official again terminated the case, this time because Jaresko had not sent in the required documents.[25] Jaresko claims in the Ukrainian Complaint that she did not receive notice of the September 18, 2017, and January 10, 2018 decisions. On June 25, 2018, Jaresko submitted an application to the state official to restore the action again.[26] In the attached July 12, 2018 filing, Jaresko requests that the Ukrainian court reinstate the case because of the notice failure.[27]

         II. ANALYSIS

         The parties do not dispute that they reached the Settlement Agreement on December 11, 2017. They agree on all three terms of the agreement. They agree on the need for specific performance. They only disagree on the scope of the mutual general release.

         The Horizon Parties argue that the parties agreed to a full mutual general release that covers all of the disputes between the parties, including the Ukrainian Divorce Proceedings, because the release contains no carve outs. Figlus argues that the parties agreed to enter into a mutual general release of claims that "arise out of, relate to, or are connected in any manner, directly or indirectly, with the Delaware Actions."[28] Figlus argues that there was no need for a carve out because the parties never intended the release to cover anything more than the Delaware Actions.[29] Thus, I must determine the scope of the "mutual general releases."

         General releases are a powerful tool under Delaware law.

[T]he concept of a general release [is] one which is intended to cover everything-what the parties presently have in mind, as well as what they do not have in mind, but what may, nevertheless, arise. Such general releases are in common use, and their potency, if it renders them too dangerous for careless handling, is at the same time ...

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