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Kotler v. Shipman Associates, LLC

Court of Chancery of Delaware

August 21, 2019

STACEY KOTLER, Plaintiff,
v.
SHIPMAN ASSOCIATES, LLC, a Delaware limited liability company, Defendant.

          Date Submitted: May 15, 2019

          A. Thompson Bayliss, Esquire, Adam K. Schulman, Esquire and Daniel J. McBride, Esquire of Abrams & Bayliss LLP, Wilmington, Delaware and Steve Wolosky, Esquire and Renée M. Zaytsev, Esquire of Olshan Frome Wolosky LLP, New York, New York, Attorneys for Plaintiff Stacey Kotley.

          Blake Rohrbacher, Esquire, Kevin M. Gallagher, Esquire, John M. O'Toole, Esquire and Ryan D. Konstanzer, Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware, Attorneys for Defendant Shipman Associates, LLC.

          MEMORANDUM OPINION

          SLIGHTS, VICE CHANCELLOR

         Marissa Shipman ("Marissa") began making cosmetics in her kitchen in 1999.[1] She formed The Balm.com, Inc. later that year and changed the company's name to Shipman Associates, Inc. four years later.[2] In 2003, Marissa hired her friend, Stacey Wexler (now Stacey Kotler), to sell The Balm cosmetics as an independent contractor. By all accounts, Kotler was a highly effective salesperson and the Company flourished.

         The Company paid Kotler only on sales commissions. Accordingly, after she had demonstrated her worth to the Company, as reflected in the Company's steady growth, Kotler asked the Company to reward her with equity. Marissa's father, Robert Shipman ("Robert"), had joined the Company soon after its formation to assist his daughter with the business side of the Company's operations. Robert responded to Kotler's inquiry about equity, in essence, by telling her that she deserved equity and assuring her the Company would work with her to make that happen. Over time, as the Company seemed to string her along, Kotler would renew her request for equity and Mr. Shipman would renew his response. Still, nothing happened. All the while, the Company continued to grow.

         Eventually, the discussions turned from providing Kotler with straight equity to granting her a warrant to purchase shares. Over several months in 2006 and early 2007 the parties exchanged drafts of a warrant agreement. Both sides engaged counsel to assist in the negotiations. The Company engaged White & Case LLP; Kotler cannot recall the name of the attorney or law firm she hired.

         The evidence regarding the negotiations leading to the execution of the warrant agreement is thin. Neither side retained emails nor other correspondence and neither side can recall specific discussions. The only contemporaneous evidence of any real value are the various drafts of the warrant agreement. These drafts reflect that the Company wanted to condition the grant of the warrant on Kotler's agreement to a perpetual post-separation non-competition/non-solicitation covenant. Kotler would agree only to a pre-separation non-compete or, at most, a non-compete with an 18-month tail. Neither side recalls ever having altered their respective position on this material term. Nevertheless, both parties believed they had reached agreement and signed a binding warrant agreement in 2007. The problem is, given the haphazard manner in which drafts were exchanged, the parties were not signing the same draft of the agreement and the key non-compete language was never agreed to.

         Kotler eventually left the Company to start a business that sold cosmetics for companies that competed with the Company. She had sporadic contact with the Company after she left. In 2013, as the Company was considering a sale or reorganization that might trigger the warrant, the Company discovered that Kotler had previously sent the Company a signed version of the warrant that contained language, including non-compete language, that neither Marissa nor Robert had seen before much less agreed to. When Kotler was contacted about the discrepancy, she advised the Company that she had a version of the warrant with "wet ink" signatures that contained only a pre-separation non-compete covenant. The Company cried "fraud." Kotler alleged the Company was attempting to shirk its commitment to give her earned equity. She demanded the Company honor the warrant agreement. When the Company refused, this litigation followed.

         In this post-trial opinion, I conclude that Kotler has failed to prove the existence of a binding warrant agreement by a preponderance of the evidence. In reaching this conclusion, I acknowledge that my verdict is quite possibly the product of the harsh reality that trials do not always replicate real life events. Trial outcomes are driven by burdens of proof and evidence as gathered and presented to the factfinder. In this case, Kotler proved to be an incomplete and unreliable historian, the drafting history was inconclusive and the circumstances surrounding the final execution of the warrant agreement supported the Company's version of events as much as, if not more than, Kotler's version. Under these circumstances, judgment must be entered for the Defendant.

         I. FACTUAL BACKGROUND

         I have drawn the facts from the parties' pre-trial stipulation, evidence admitted at trial and those matters of which the Court may take judicial notice.[3] The trial record consists of 415 joint trial exhibits, 553 pages of trial testimony and eight lodged depositions. The following facts were proven by a preponderance of the competent evidence.

         A. Parties and Relevant Non-Parties

         Plaintiff, Stacey Kotler, née Wexler, worked for the Company as a sales consultant from 2003 until she resigned in May or June 2019.[4]

         Defendant, Shipman Associates, LLC, a Delaware limited liability company, does business as "theBalm Cosmetics."[5] Founded by Marissa Shipman in 1999, the Company was originally known as The Balm.com, Inc.[6] It designs and produces cosmetics, which it then sells around the world.[7]

         Non-party, Marissa Shipman, is the Company's founder and CEO.[8] She provides strategic vision and manages the development of the Company's products.[9]

         Non-party, Robert Shipman, Marissa's father, is the President of the Company.[10] He oversees the Company's cash flow, inventory control and sales.[11]He and Marissa together have always made the important strategic and financial decisions for the Company.[12]

         Non-party, Heather Lourie, is the Company's Chief Operating Officer.[13]Before joining the Company in July 2017 as a full-time employee, Lourie was hired as a consultant to ready the Company for a sale process.[14]

         Non-party, Hillary Chassin, née Seegul, was one of the Company's first employees.[15] As explained below, Chassin was given a small equity stake in the Company soon after she joined.

         Non-party, Oliver Brahmst, an attorney at White & Case LLP, assisted the Company with drafting the warrant.[16]

         Non-party, theBalm Cosmetics Holdings, Inc. ("Holdings"), a Delaware corporation, is now the Company's largest unitholder.[17] It has three stockholders: Marissa, Robert and Chassin.[18]

         Non-party, Balm DISC, Inc. ("DISC"), is a Delaware corporation formed by Marissa and Robert in 2014 as an interest charge domestic international sales corporation (IC-DISC) under the Internal Revenue Code.[19]

         B. The Company

         In 1999, after holding a number of jobs in the media industry, Marissa had an idea to start to a new business. She began making cosmetics in her kitchen.[20] Robert, who was then retired, joined Marissa to help develop her business.[21] The Company was incorporated in Delaware that same year.[22] At the time, Marissa, Robert and Chassin were the Company's sole stockholders.[23]

         Today, the Company sells its cosmetics products in over 100 countries.[24]During 2016 and 2017, the Company took part in a sale process during which its financial advisor valued the Company's equity at over $500 million.[25] In a 2017 report, The Wall Street Journal projected the Company's value as $600-$700 million.[26]

         While the Company's revenues saw steady growth, Robert and Marissa continued to run the Company as if it still operated out of Marissa's kitchen. Of particular relevance here, the Company's record retention practices were, at best, careless. It appears that Robert stored corporate records in his homes in Connecticut and Florida, and in several locations in California where Marissa worked.[27] At some point after 2007, the Company lost (or misplaced depending on who one believes) many of its corporate records--including its stock ledger and all issued stock certificates.[28] Consequently, it was forced to hire a consultant to assist in locating or replacing its missing corporate books and records.[29]

         C. Kotler Joins the Company

         In 2001, after moving to San Francisco, Kotler became friends with Marissa.[30]Two years later, in 2003, Kotler joined the Company as a sales consultant, though she had no previous cosmetics experience.[31] Because she was Canadian citizen, she was required to obtain immigration clearance under the North American Free Trade Agreement, which allowed her to work exclusively for the Company.[32] She never signed a written consulting agreement with the Company; instead, she worked under an oral agreement and a handshake.[33] Her compensation was based exclusively on sales commissions. Eventually it was agreed that Kotler would earn fifteen percent commission on all of her sales for the Company.[34] Although apparently an independent contractor, she was enrolled in the Company's healthcare insurance plan.[35]

         By all accounts, Kotler performed very well in her sales role.[36] She quickly took on greater responsibility at the Company and eventually earned the title "Vice President of Sales and Business Development."[37] Though her oral consulting agreement did not contemplate equity in the Company, Kotler soon began requesting equity.[38] Out of over 50 former and current Company employees, only Marissa, Robert, Chassin and Alex Britt had ever possessed equity rights in the Company.[39]

         From the moment Kotler first requested equity, Robert continued to assure her that the Company would honor her request.[40] When Kotler renewed her request in September 2004 with a more urgent tone, Robert responded, "[b]e patient, you will have equity shortly and there is no imminent sale of the company[, ]" emphasizing he would make it a "priority."[41] During the summer of 2005, Kotler brought up equity again.[42] And, again, Robert dawdled.[43]

         D. The Company Negotiates a Warrant with Kotler

         By early 2007, the Company decided to offer Kotler the right to purchase shares of the Company under certain conditions instead of straight equity.[44] The Company believed a warrant would properly "reward" Kotler for her work and "incentivize" her to remain at the Company.[45]

         As requested by the Company, Oliver Brahmst, a partner at White & Case LLP, assisted in drafting versions of the warrant.[46] Brahmst did not communicate directly with Kotler or anyone representing her.[47] Instead, he communicated with Robert, who would then negotiate with Kotler directly.[48]

         The drafts of the warrant span approximately eight months.[49] Although the Company designated Robert as the person most knowledgeable about the negotiations of the warrant, he remembered almost nothing about them.[50] Kotler, likewise, had little to offer by way of specifics. Indeed, incredibly, she was unable even to recall the name of her counsel or the law firm she engaged to represent her.[51]With memories purportedly faded, in the age of emails and text messages, one would naturally turn to those sources to gain some understanding of what was happening in real time. But none exist-neither side could produce contemporaneous emails or text messages of any relevance.[52] What is left as evidence, then, are the sequential drafts of the warrant agreement and the few emails relating to those drafts produced by White & Case.[53]

         1. The February 25 Draft

         In February 2007, the Company sent Kotler an initial draft of a warrant agreement (the "February 25 Draft").[54] The February 25 Draft was prepared with the assistance of Brahmst and Julia Popowitz, née Schwartzman, a lawyer who also provided services to the Company.[55]

         By all accounts, the February 25 Draft was a "very early version."[56] It granted Kotler the right to purchase "up to 1, 055" shares of the Company's common stock.[57]It was governed by Delaware law and did not contain any forfeiture conditions (including non-compete covenants)-though the draft did envision termination of the warrant rights after 10 years.[58] Kotler did not agree to or sign the February 25 Draft.[59]

         2. The June 8 Draft

         The Company sent a revised draft of the warrant agreement to Kotler in June of 2007 (the "June 8 Draft").[60] This draft stated Kotler would have a right to acquire five percent of the Company's equity on a fully diluted basis, which represented 533 Company shares.[61] This basic understanding remained constant until the very end of the parties' negotiations.

         The June 8 Draft also contained a new Section entitled "Forfeiture," providing Kotler would forfeit her warrant if she breached very broad and perpetual non- compete and non-solicit covenants.[62] From the Company's perspective, the June 8 Draft included the key terms, the departure from which would break the deal: Kotler's right to acquire 5% equity in exchange for a perpetual non-compete/non-solicit.[63] The June 8 Draft also changed the governing law from Delaware to New York, where the Company was advised that a perpetual non-compete provision in a warrant agreement would be enforceable so long as the employee leaves the company voluntarily.[64]

         The June 8 Draft was not ready for execution, however. Kotler's first name was spelled incorrectly in the preamble, there still was no signature line for Kotler and the first page still bracketed the warrant number (for identification in the ledger) and the date.[65] More importantly, Kotler did not approve of the new Forfeiture provision.[66]

         3. The August 6 Draft

         On August 6, 2007, Brahmst sent Robert a redline of the warrant showing Kotler's proposed edits to the June 8 Draft (the "August 6 Draft").[67] Although unclear in the record, it appears the parties were negotiating the warrant after the June 8 Draft and counsel was advising Kotler by this time.[68]

         The August 6 Draft reiterated that Kotler would be granted the right to acquire 533 shares of the Company's common stock.[69] But this draft corrected the spelling of Kotler's name[70] and narrowed the Forfeiture provision by prohibiting Kotler from competing or soliciting only for specified time periods.[71] Kotler-or possibly her counsel-also proposed decreasing the non-solicit lookback period from two years to 18 months.[72]

         Remainder of page intentionally left blank

         The Company rejected Kotler's edits.[73] Neither of the Shipmans were keen to give Kotler equity if she could compete (at any time) after separating from the Company.[74] Thus, neither party signed the August 6 Draft.[75]

         4. The September 5 Execution Draft

         On September 5, 2007, Brahmst sent Robert a revised, unsigned draft of the warrant agreement (the "September 5 Execution Draft"), saving it as version 7 on White & Case's system.[76] From Kotler's perspective, both parties had agreed to all terms of the warrant as of September 6, 2007.[77] The Company thought so too. Accordingly, Brahmst added an execution date-the next day, September 6-as well as a signature line for Kotler (then Wexler).[78]

         On September 12, 2007, Brahmst re-sent the September 5 Draft to Robert because, apparently, Robert had not received Brahmst's September 5 transmittal email.[79] Since Brahmst never keyed Kotler's August 6 edits into White & Case's system, the execution version still misspelled Kotler's first name in the opening paragraph, even though her name was spelled correctly in the signature block.[80]Kotler's other proposed changes also did not appear in the September 5 Execution Draft.[81]

         What did appear in the September 5 Execution Draft were the material terms of the warrant agreement, at least from the Company's perspective: it provided Kotler with the right to purchase 533 shares of common stock of the Company (i.e., 5% of the Company post-exercise), [82] and it included a perpetual non-compete and non-solicit.[83] Marissa testified, "[t]his is the draft, to my knowledge, that I signed and we executed."[84]

         5. The September 12 Draft

         On September 12, Robert sent the latest execution draft he had received from Brahmst to Kotler for signing (the "September 12 Draft").[85] Though Kotler did not sign the September 12 Draft, she did save it to her computer.[86] She then made her edits:[87] she fixed the spelling of her name in the first paragraph[88]; she reduced the two-year non-solicit lookback period to 18 months (as she had proposed in August)[89]; she modified the reference to the Company in the opening paragraph, adding "(dba theBalm)" to the name "Shipman Associates, Inc"[90]; and she changed the Forfeiture provision, adding the limiting phrase "during the time [Kotler] is in a consulting relationship with the Company."[91] This last edit made the restrictive covenant even less favorable to the Company than the 18-month tail period Kotler had proposed, and the Company had rejected, only a month earlier.[92] The Company never agreed to Kotler's suggested language.[93] Indeed, neither Brahmst, Marissa nor Robert had even seen Kotler's Forfeiture language until well after Kotler had left the Company.[94]

         6. The September 17 Draft

         On September 17, 2007, Kotler printed and signed her revised version of the Company's September 12 Draft and then, apparently, sent it to Robert without advising him of the significant changes she had made.[95] It appears Robert did not carefully review the document nor did he send it to Marissa for execution.[96]

         7. Marissa's Signature Page

         The exact circumstances surrounding the transmittal of a signature page to Marissa are unclear and, of course, none of the witnesses had a clear memory of what happened. The most credible version is that Kotler sent either a blank signature page or perhaps her marked-up version of the September 12 Draft (without advising the Company of her changes) by mail to Marissa for signature.[97] Kotler never sent an electronic draft of her version of the warrant agreement to anyone at the Company.[98] Consequently, Brahmst did not see the Kotler-edited draft until months later.[99]

         The signature page Kotler sent to Marissa in San Francisco was accompanied by a return envelope with Kotler's New York address.[100] As noted, what exactly Kotler sent to Marissa is unclear.[101] What is clear is that Kotler sent Marissa at least a blank signature page, which Marissa signed and returned to Kotler.[102]

         Assuming what she received was a signature page for the execution version of the warrant circulated by White & Case, Marissa did not re-read whatever Kotler mailed her or any other version of the warrant agreement.[103] Instead, Marissa called Robert and asked him whether she should sign for the Company.[104] Robert told Marissa he had received Kotler's signature (erroneously assuming it was on White & Case's execution draft) and authorized Marissa to sign for the Company.[105]Marissa executed the warrant around September 17 and returned it to Kotler in New York.[106] Marissa made no copy of the signature page because, at the time, it included only her signature and a blank line for Kotler's signature.[107] The material terms of the warrant Marissa believed she had signed-and intended to sign-were "533 shares, . . . a perpetual noncompete, a perpetual nonsolicit, for 5 percent of the company."[108]

         E. Kotler's 'Wet Ink' 'Fully Executed' Warrant

         After sending her signed signature page to Kotler, Marissa believed the parties had a final agreement consistent with the terms of the September 12 Draft.[109] For her part, Kotler signed her September 17 Draft and left to visit her parents in Montreal.[110] Upon her return home on September 24, Kotler stopped off to visit Robert at his home in Connecticut.[111] It appears during this visit that Robert and Kotler agreed to decrease the share count in the warrant from 533 to 502--even though 533 represented 5%.[112] When Kotler returned to her New York apartment on September 25, she changed her Word version of the warrant from 533 shares to 502 shares ("Kotler's September 25 Draft").[113]

         Despite her testimony that she did not understand the impact of the changed share count, [114] the evidence reflects that Kotler knew full well what the change meant to her. Kotler created a detailed spreadsheet during the warrant negotiations to evaluate her potential equity interest in the Company.[115] She performed sophisticated calculations based on the Company's capital structure and confirmed that, while 502 shares represented 5% of the issued and outstanding shares, 533 shares was 5% of the fully diluted post-exercise shares.[116] Even so, Kotler agreed to the lower share count, seemingly without pushback, because Kotler was motivated to get the deal done.[117]

         Robert told Brahmst orally about the share count change and Brahmst then prepared another execution draft on September 25 ("Brahmst's September 25 Draft").[118] In this draft, Brahmst endeavored to include all the deal points the parties had agreed to after the September 5 Draft.[119] It includes the correct spelling of Kotler's name and her right to purchase 502 shares of the Company's common stock.[120] It also includes an 18-month non-solicit lookback period.[121] It does not include Kotler's more narrow non-compete language.[122] If there ever were to be a version of the warrant agreement the Company would sign off on as the final embodiment of the parties' agreement, Brahmst's September 25 Draft likely would have been it.[123]

         Since Brahmst was updating the draft warrant for execution, he revised the effective date on the draft from September 6 to September 25.[124] What happened next is not entirely clear, since memories on the next steps are dim (to put it mildly). But it appears Kotler told Robert she would simply adjust the share count on her version and then retain that version for her records.[125] With that, Robert told Brahmst "not to work on the warrant anymore."[126] Brahmst's September 25 Draft remained uncirculated on White & Case's system until Kotler's "fully executed" warrant surfaced in 2013.[127]

         So, how did Kotler come to have a fully executed warrant in her possession that contained her narrow non-compete Forfeiture language? From the preponderance of the evidence, the best explanation I can muster is that Kotler printed her modified September 25 Draft from her computer, [128] added her own signature and attached Marissa's September 17 signature page.[129] She then kept the document in her files, but did not circulate it or discuss it with anyone at the Company.[130]

         To be clear, Kotler's purported fully executed warrant permits her to compete immediately after ending her consulting relationship with the Company while maintaining her warrant rights.[131] In other words, Kotler's Forfeiture provision effectively gave the Company zero protection.[132] It is not surprising, then, that there is no evidence-beyond Kotler's "fully executed" warrant-that the Company ever agreed to Kotler's version of the non-compete.[133]

         F. Kotler Resigns, Leaves the Company and Immediately Competes

         By 2009, Kotler had come to believe the Company was not adequately valuing her contributions.[134] She decided it was time to renegotiate her compensation package.[135] Foremost, Kotler "want[ed] more [e]quity in theBalm. Not [w]arrants- straight equity."[136] She also wanted a 20% commission on all orders she originated, along with a periodic bonus, and she wanted the arrangement to be memorialized in writing.[137] Lastly, Kotler requested an expanded role in business decisions.[138]

         On May 20, 2009, Kotler presented her demands to Marissa and Robert.[139]The phone conversation did not go well; Marissa and Robert rejected all of Kotler's demands prompting Kotler to announce she would resign from the Company.[140]Nevertheless, Kotler agreed to stay on for an interim period to help onboard her replacements.[141] On May 26, 2009, Kotler could no longer access her Company email account.[142] By June 1, 2009, she was no longer a participant in the Company's health insurance plan.[143]

         As Kotler prepared to the leave the Company, she began to explore her options for next steps.[144] She sent cover letters and her resume to potential new employers.[145] She also brainstormed the idea of starting her own cosmetics consulting business and began to plant seeds to form that business.[146] As part of that process, Kotler began contacting Company accounts and competitors.[147]On May 28, 2009, Kotler reached out to a representative of Sohum Cosmetics, stating that while she was still "enjoy[ing] her position at theBalm Cosmetics," she wanted to pitch an idea for a new competing venture.[148] During this time, Kotler recruited a Company employee, Danielle Crepeau, to work at her new competing firm, Smart Beauty Now.[149]

         G. The Shipmans Learn of Kotler's 'Fully Executed' Warrant

         On July 24, 2009, approximately one week before she incorporated her competing venture, Kotler subito sent a letter to the Company in which claimed she held a 502-share warrant and requested notice of any Triggering Event (the "Confirmation Letter").[150] Kotler sent the Confirmation Letter by certified mail and copied an attorney.[151] She did not enclose her version of the warrant, however.[152] From Marissa's perspective, therefore, the warrant to which Kotler referred was for 533 shares with a Forfeiture provision that contained a perpetual non-compete and non-solicit.[153] Since Marissa had never seen a draft of a warrant for 502 shares, "nothing [in the Confirmation Letter] made sense" to her.[154] Upon receipt of the Confirmation Letter, Marissa "called [Robert] and said, I got this weird letter. And he said, put it in a file. I said, Okay. I put it in a file."[155] Since the Company had no reason to believe Kotler was in violation of the Forfeiture clause of the warrant agreement, it did not respond to the Confirmation Letter or send it to White & Case.[156]

         In mid-August 2009, not long after receiving Kotler's Confirmation Letter, members of the Shipman family, including Robert, saw that Kotler had a booth for her business at the New York Gift Show very close to the Company's booth.[157] The next day, the Shipmans took screenshots of Kotler's Facebook page to demonstrate she was competing with the Company.[158] From then on, Marissa assumed whatever warrant Kotler had was void.[159]

         Four years later, in 2013, when the Company was experiencing significant growth and was considering a possible reorganization, the Shipmans collected relevant Company books and records and saw, for the first time, a copy of the warrant agreement with Kotler's signature.[160] They promptly sought legal advice on July 10, 2013.[161] Brahmst recommended that the Shipmans gather evidence of Kotler's competition.[162] Because they had already done so, the Shipmans were able to assemble their evidence very quickly.[163]

         H. The Company Reorganizes

         After experiencing significant growth, the Shipmans sought to decrease their tax liability.[164] In January 2014, Shipman Associates, Inc. switched from a C-corporation to an S-corporation in order to avoid double taxation.[165] In October 2014, the Shipmans formed DISC, an interest charge domestic international sales corporation, again for income tax purposes.[166] Marissa and Robert originally wholly owned DISC, but they "agreed to offer [Chassin] shares in [DISC] in the same percentage as [her] ownership in [the Company]" in recognition of Chassin's loyalty as a Company stockholder.[167]

          The Company completed the reorganization on December 31, 2014.[168] First, the Company's stockholders transferred all of their Company stock to Holdings in exchange for an equal number of Holdings common shares.[169] Then, the Company was converted into an LLC, with Holdings becoming the Company's sole holder of Class B units.[170] Finally, the Company issued Class A units of Shipman Associates, LLC to Holdings, Robert and Chassin.[171]

         The Company also began to make distributions to equity holders in 2014.[172]After its reorganization, the Company made distributions to its holders of Class A units: Holdings, Robert and Chassin.[173] Holdings then paid dividends to its three stockholders: Marissa, Robert and Chassin.[174] DISC also paid dividends to its stockholders for tax years 2014-18.[175]

         I. The Company Pursues a Sale

         The Company launched a sale process in 2016 and hired a team of advisors.[176]Specifically, the Company retained Lazard Middle Market LLC as its financial advisor and White & Case as its legal advisor.[177] The Company then hired Heather Lourie as a consultant to "prophylactically analyze the [C]ompany from a potential buyer's perspective and help the [C]ompany prepare for a transaction."[178] The Company also engaged a controller and a staff accountant to repair and improve its recordkeeping.[179]

         After reviewing the Company's files, Lourie found the Kotler-signed September 17 Draft of the warrant in Robert's Connecticut office-but she did not find any fully executed version or any 502-share version.[180] For the sake of achieving clarity as the Company prepared itself for sale, Lourie recommended that the Company "investigate" and "resolve" the warrant matter.[181]

         In July 2016, the Company retained Jonathan Dennis, a California attorney who had previously worked at White & Case, to contact Kotler and determine what versions of the warrant she had in her possession.[182] On August 23, 2016, Kotler replied through counsel, who provided a copy of her version of the warrant.[183] After receiving Kotler's "fully executed" version of the warrant, Marissa's husband, Andre Hakkak, who had been friendly with Kotler prior to her involvement with the Company, reached out to the Kotlers in a botched effort to resolve the dispute that was beginning to percolate.[184] When those efforts failed, litigation followed.

         J. Procedural Posture

         Kotler filed this lawsuit on June 16, 2017.[185] The Court held a two-day trial on November 27 and 28, 2018. Having read the pretrial briefs, I made clear at the start of trial that my verdict would likely turn on the credibility of witnesses since the applicable law was relatively straightforward and basically undisputed.[186]

         During her deposition, it became clear that Kotler intended to rest her case on her "fully executed" warrant with its "wet ink" signatures.[187] She recalled virtually nothing about the warrant negotiations or execution.[188] At the pretrial conference, I emphasized that Kotler would "have a burden to demonstrate that there was an agreement."[189] Apparently, this admonition sparked a recuperation of her memory at trial.[190]

         II. ANALYSIS

         "To prevail on a breach of contract claim, the plaintiff must [first] prove the existence of a contract."[191] Kotler was obliged to meet this burden with proof by a preponderance of the evidence.[192] In deciding whether Kotler carried her burden of proving that a binding contract was created, I must first consider whether Kotler proved that the parties reached a meeting of the minds.[193]

         A. Kotler Failed To Demonstrate a Meeting of the Minds

         To form an enforceable contract, the parties must have a meeting of the minds on all essential terms.[194] "Whether both of the parties manifested an intent to be bound is to be determined objectively based upon their expressed words and deeds as manifested at the time rather than by their after-the-fact professed subjective intent."[195] "[I]f the Court finds substantial ambiguity regarding whether both parties have mutually assented to all material terms, then the Court can neither find, nor enforce, a contract."[196] As our Supreme Court recently reiterated, "all essential or material terms must be agreed upon before a court can find that the parties intended to be bound by it and, thus, enforce an agreement as a binding contract."[197]

         At first glance, a wet ink, signed version of a contract looks to be solid evidence of a meeting of minds. But it is not evidence so powerful that it negates all other evidence to the contrary. Put another way, even if a purported agreement is executed by both parties, when the parties' "understandings of [a contractual] prohibition or permission are incompatible," and where the plaintiff "offered no further evidence indicating" a meeting of the minds, "no enforceable agreement [is] created."[198]

         Kotler's proffered "wet ink," "fully executed" version of the warrant agreement does not overcome the credible and convincing evidence that these parties were not operating from the same page, or more precisely the same agreement, as they negotiated its material terms. The circumstances surrounding the execution of the warrant agreement, cloudy as they are, reflect it is just as (if not more) likely Marissa believed she was signing a version with a perpetual non-compete as one with Kotler's diluted covenants. This is particularly so since Kotler could recall nothing of importance regarding the negotiations or circumstances surrounding the execution of the warrant agreement. Incredibly, she could not even recall who she engaged as counsel to represent her during the negotiations, thereby cutting off a likely source of contemporaneous evidence. The Company had already rejected Kotler's proposed 18-month tail.[199] Yet Kotler could recall nothing about the circumstances surrounding the Company's abrupt decision to agree to a Forfeiture clause that contained no forward-looking non-compete. Given that this was the key area of disagreement, it is reasonable to expect that the party who got the better of this deal term would remember something about when and how that occurred. That Kotler could not undermined her credibility.

         Other contemporaneous and after-the-fact circumstantial evidence further reveals the disconnect.[200] If Kotler's warrant reflected the final operative agreement, why did White & Case prepare the Brahmst September 25 Draft-the draft that was, from the Company's perspective, meant to be the final execution draft-and why did that draft not contain Kotler's more narrow Forfeiture clause? [201] If Kotler's warrant reflected the final operative agreement, why would the Shipmans have scrambled to gather evidence of Kotler's post-employment competition?[202] That evidence would serve no purpose if the parties had agreed Kotler could compete the moment she separated from the Company.

         Moreover, while perhaps not as focused on details as one might expect of a CEO, Marissa's testimony that she would never agree to the Forfeiture language in Kotler's warrant-language that would allow Kotler to take equity in the Company and then leave to compete with the Company the next day-was credible.[203] Absent credible evidence as to why the Company would have agreed to this, I have no reason to believe the ...


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