NOT PRECEDENTIAL

            UNITED STATES COURT OF APPEALS
                 FOR THE THIRD CIRCUIT

                        _____________

                         No. 09-1969
                        _____________

          US SMALL BUSINESS ADMINISTRATION,
           as receiver for Acorn Technology Fund, L.P.,

                                v.

         RICHARD D. PROPPER; CHARLES R. SMITH;
        ACORN CONNECTICUT INVESTMENTS, L.P.;
          DANIEL P. BEHARRY; KERRY PROPPER;
        KENNETH M. BOROW; P. TIMOTHY GARTON;
        MICHAEL D. CHERMAK; WILLIAM S. LERACH

             Richard D. Propper, Charles R. Smith,
              Acorn Connecticut Investments, L.P.,
               Daniel P. Beharry, Kerry Propper,
             Kenneth M. Borow, P. Timothy Garton,
                     Michael D. Chermak,

                                             Appellants

        ___________________________________________

         On Appeal From the United States District Court
             for the Eastern District of Pennsylvania
                     Case No. 2-03-cv-05982
           District Judges: Honorable Joel H. Slomsky
        __________________________________________

            Submitted Under Third Circuit LAR 34.1(a)
                         June 11, 2010


Before: AMBRO, CHAGARES, and GREENAWAY, JR., Circuit Judges.
                                  (Filed August 25, 2010)
                                      _____________

                                        OPINION
                                      _____________

CHAGARES, Circuit Judge.

       The United States Small Business Administration (“SBA”), in its capacity as

Receiver for Acorn Technology Fund, L.P. (“Acorn” or the “Partnership”), filed separate

actions against Charles R. Smith, P. Timothy Garton, and Michael D. Chermak

(collectively, the “appellants”) alleging breach of contract. The appellants were

individual limited partners in Acorn. They appeal from the District Court’s order

granting summary judgment in favor of SBA. We will affirm.

                                             I.

       Because we write solely for the benefit of the parties, we will only briefly

summarize the essential facts. Acorn was a small business investment company

(“SBIC”), licensed by the SBA pursuant to the Small Business Investment Act of 1958,

15 U.S.C. § 661, et seq. Acorn was formed in September 1997 as a New Jersey limited

partnership. Acorn Technology Partners, L.L.C. (“ATP”) was the general partner of

Acorn. Acorn Connecticut Investments, L.P. (“ACI”) was a Connecticut limited

partnership formed in January 1999 for the purpose of investing in Acorn. Daniel

Beharry was the general partner of ACI. The appellants initially were all limited partners

in ACI. However, following their initial investments in ACI, the appellants invested

                                             2
directly in Acorn.

       The SBA approved Acorn’s SBIC license application in June 1999. To be eligible

for an SBIC license, the Partnership had to be formed “solely for the purpose of” being an

SBIC under 13 C.F.R. § 107.160. SBA regulations required the Partnership to submit a

copy of its Limited Partnership Agreement (“LPA”) with its license application. 

       According to Acorn’s Subscription Agreement, investors “irrevocably subscribe[]

for and agree[] to purchase the dollar amount of limited partnership interests . . . in the

Partnership indicated on the signature page hereof” and “to be bound by all of the terms

and conditions of the Partnership Agreement.” Appendix (“App.”) 92. Section 3.4 of the

LPA, “Remedies for Failure of a Private Limited Partner to Make a Contribution to

Capital,” lists five remedies available in the event that a private limited partner fails to

make a capital contribution: (1) interest on overdue contributions, (2) termination of the

private limited partner’s right to make further capital contributions, (3) forfeiture of the

limited partner’s interest in the partnership, (4) withholding and application distributions,

and (5) required sale of the private limited partner’s interest in the partnership. App. 121-

24. The LPA required SBA consent for remedies (2), (3), and (5). 

in this appeal is the second remedy, termination of a limited partner’s

right to make further capital contributions, set forth in Section 3.4.2. The LPA

specifically provides that “[t]he Partnership shall not enter into any agreement (whether



                                               3
oral or written), release or settlement with any Partner or take any action under any

provision of the Agreement which defers, reduces, or terminates the obligations of any

such Partner to make contributions to the capital of the Partnership” without the SBA’s

prior written consent. App. 133.

       On January 13, 1999 (when the appellants were still invested with ACI), John

Torkelson, President and Manager of ATP, sent a Modified Subscription Agreement

(“MSA”) to Beharry. According to the MSA:

       The General Partner represents that in the event that ACI is delinquent by more
       than thirty (30) days in making any part of its capital contribution to the Fund,
       the exclusive remedy available to the General Partner and the Fund will be to
       terminate the right of ACI to make further capital contributions to the Fund,
       in accordance with and subject to the terms of Section 3.4.2. of the Agreement
       of Limited Partnership (the Agreement), any provision of the Agreement to the
       contrary notwithstanding, unless ACI otherwise affirmatively consents.

App. 249.

       The appellants agreed to make capital contributions to Acorn in four installments.

They paid the first three installments, but did not pay the fourth capital call, due on March

15, 2001.

       On March 30, 2001, the SBA issued a memorandum to all SBICs making clear that

“an SBIC cannot forgive, extend or modify an investor’s commitment to contribute

capital to the SBIC without obtaining SBA’s prior approval. SBA, however, will not

generally approve any request that will result in a reduction of Regulatory Capital due to a

default by a limited partner.” App. 417-18. The memorandum also requested each SBIC



                                              4
with unfunded commitments to either submit an updated Capital Certificate or submit a

letter to the SBA certifying that it conducted a review of unfunded commitments and

institutional investors and no changes are required to the Capital Certificate.

       On April 12, 2001, Torkelson reiterated to the appellants via email correspondence

that Acorn could not release any limited partners from their capital obligation without

SBA approval. Specifically, Torkelson wrote, “there seems to have been an unfounded

rumor among some people that defaulting Limited Partners would simply be released

from their obligation to contribute capital and have their existing investment levels

frozen. That is not the case.” App. 420-22.

       On April 24, 2001, Torkelson applied to the SBA for an additional $5 million

commitment in federal funds. The application for more funding included an exhibit,

“Conditions to exercise of right to receive unfunded commitments,” which was filled out

as “N/A.” App. 404. On June 14, 2001, Harry Haskins, on behalf of the SBA, sent

Torkelson a letter (the “Haskins Letter”) committing to reserve leverage in the form of $5

million in securities, subject to SBA regulations and other specified conditions. One such

condition was that the General Partner take action “to collect committed capital called

from the private limited partners and not received.” App. 430. Torkelson agreed to and

accepted the conditions on behalf of Acorn by signing the letter.

       On June 22, 2001, Torkelson sent an email to Mark Mead at the SBA announcing

Torkelson’s intent to invoke Section 3.4.2. with respect to the uncollected capital call if



                                              5
the limited partners in default did not make payment by June 29, 2001. App. 238. The

appellants allege, and the SBA disputes, that Mead verbally approved Torkelson’s

proposed action on June 25, 2001. Later that day, Torkelson sent email correspondence

to each of the appellants in accordance with his June 22, 2001 proposal. None of the

appellants made a payment; thus, on June 29, 2001, Torkelson, on behalf of ATP, issued

an Action of Manager invoking Section 3.4.2 of the LPA and terminating the appellants’

right to make additional capital contributions to Acorn. App. 247. On July 20, 2001,

Haskins wrote a letter to Torkelson, providing that the “SBA does not consent to the

release or termination of any Acorn partner’s obligation to contribute capital to Acorn.”

App. 436.

       In January 2003, the United States commenced a suit against Acorn. United States

v. Acorn Tech. Fund, L.P., Civ. Action No. 03-0070. On January 17, 2003, the District

Court appointed the SBA as Receiver for Acorn. On October 29, 2003, the SBA filed

separate actions against each of the appellants, alleging breach of contract. The SBA

alleged that the appellants breached the Subscription Agreement by failing to make their

entire capital contributions. On July 22, 2008, the SBA moved for summary judgment.

On October 6, 2008, the District Court granted the SBA’s motion in full. Smith,

Chermak, and Garton appeal from the District Court’s order.1




       1
       The original defendants included seven individuals and one limited partnership.
This appeal involves only three of the original individual defendants.

                                             6
                                                II.

       The District Court had jurisdiction pursuant to 15 U.S.C. § 687(d), 687c, and 687h,

and 28 U.S.C. §§ 754, 1345 and 1367. We have jurisdiction under 28 U.S.C. § 1291.2

       When reviewing an order granting summary judgment, we “exercise plenary review

. . . and we apply the same standard that the lower court should have applied.” Bouriez v.

Carnegie Mellon Univ., 

, 771 (3d Cir. 2009) (quoting Farrell v. Planters

Lifesavers Co., 

, 278 (3d Cir. 2000)). Summary judgment is appropriate “if

the pleadings, the discovery and disclosure materials on file, and any affidavits show that

there is no genuine issue as to any material fact and that the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(c). In making this determination, we “view the

facts in the light most favorable” to the nonmoving party. Holmes v. Kimco Realty Corp.,

, 118 (3d Cir. 2010). “A disputed fact is ‘material’ if it would affect the

outcome of the suit as determined by the substantive law.” Gray v. York Newspapers,

Inc., 

, 1078 (3d Cir. 1992).3

                                               III.

                                                A.

       The appellants argue that the District Court erred when it concluded that there was


       2
       On October 6, 2008, the District Court entered summary judgment against all the
defendants except one; therefore the October 6 order was not a final judgment. On March
6, 2009, the District Court entered summary judgment against the remaining defendant,
and entered a final judgment.
       3
           It is undisputed that New Jersey law governs this action.

                                                7
no genuine issue of material fact as to whether the SBA consented to ATP’s termination of

the appellants’ capital contribution obligations. It is undisputed that ATP’s decision to

invoke this remedy required the SBA’s consent. The appellants argue that ATP had three

forms of consent from the SBA before it acted. First, the appellants point to the Haskins

Letter. In particular, they argue that the following passage provided SBA consent:

       The General Partner will take action in accordance with the Company’s
       Agreement of Limited Partnership dated September 30, 1997 to collect
       committed capital called from the private limited partners and not received.
       Further, the Company will remove any partners failing to respond to any capital
       call in a timely manner from its list of Institutional Investors and their
       corresponding unfunded commitment from its Regulatory Capital and provide
       written notice of such event to the SBA.

App. 243. We disagree. The appellants ignore the Haskins Letter’s clear directive to

“collect committed capital.” This directive is consistent with the SBA’s unequivocal

representations to ATP, prior to the Haskins Letter, that it did not consent to, nor plan to

consent to, the release of limited partners from their capital contribution obligations.

Further, the instruction to remove defaulted partners from the list of institutional investors

and exclude defaulted commitments from the regulatory capital does not constitute

permission to terminate the partners’ right to make further capital contributions. Instead,

this portion of the Haskins Letter reiterates Haskins’s March 30, 2001 direction to SBICs

to report any changes in the status of its unfunded commitments and regulatory capital.

That letter explains that “[m]isstatements of Regulatory Capital can be a violation of

Federal law and subject to criminal prosecution and civil penalties.” App. 418. Requiring



                                              8
Acorn to report accurately the status of its regulatory capital does not constitute consent to

release defaulted partners from their obligations.

       Second, the appellants contend that Mead verbally consented to Torkelson’s

proposal to invoke Section 3.4.2. on June 25, 2001. We reject this argument. The LPA

does not permit the SBA to provide verbal consent. Section 5.2.3. requires “prior written”

consent before the partnership enters into “any agreement . . . release or settlement with

any Partner or take[s] any action under any provision of the Agreement, which defers,

reduces, or terminates the obligations of any such Partner to make contributions to the

capital of the Partnership.” App. 133. Thus, the appellants’ second basis for consent fails

as a matter of law.

       Third, according to the appellants, the SBA gave implied consent when it failed to

comment on Torkelson’s email to Mead on June 22, 2001. Assuming, without deciding,

that Torkelson’s email was valid notice under the terms of the Agreement, Haskins’s letter

of July 20, 2001 4 served as a timely rejection of Torkelson’s proposed action.

       We hold that the appellants have failed to adduce evidence that establishes a

genuine issue as to whether the SBA consented to their release from their capital

contribution obligations.

                                              B.



       4
         In his July 20, 2001 letter, Haskins wrote, “Please be advised that SBA does not
consent to the release or termination of any Acorn partner’s obligation to contribute
capital to Acorn.” App. 436.

                                              9
       The appellants argue that the District Court erred in concluding that there were no

disputed material facts with respect to the appellants’ affirmative defenses.5 The District

Court rejected the appellants’ affirmative defense that Acorn’s antecedent breach of the

parties’ agreement relieves them of any obligation to pay the final capital call. “When

there is a breach of a material term of an agreement, the non-breaching party is relieved of

its obligations under the agreement.” Nolan v. Lee Ho, 

, 146 (N.J. 1990).

The appellants assert that Acorn breached a material obligation to comply with all

applicable laws and SBA regulations.

       The LPA expressly provides that, upon the SBA’s imposition of restricted

operations, limited partners are required to contribute “any amount of their respective

Commitments not previously contributed to the Partnership, [and] the obligation to make

such contributions shall not be subject to any conditions set forth in the Agreement . . . .”

App. 132 (emphasis added). Furthermore, 13 C.F.R. § 107.1820(f)(3) provides the SBA

with authority to require all commitments to be funded upon the occurrence of any

restricted operations condition.6 The SBA placed Acorn in restrictive operations as of


       5
       The appellants present arguments in support of three of the nine affirmative
defenses that they originally asserted and that the District Court rejected. They have
waived all other affirmative defenses on appeal. See Laborers’ Int’l Union v. Foster
Wheeler Corp., 

, 398 (3d Cir. 1994) (“An issue is waived unless a party
raises it in its opening brief . . . .”).
       6
        The SBA Annex PS, which was incorporated into the Agreement, provides in
Section 4.1(b) that the “Partners hereby consent to the exercise by the SBA of all of the
rights of the SBA under 13 C.F.R. § 107.1820 and agree to take all actions which the
SBA may require in accordance with 13 C.F.R. § 107.1820.” App. 327

                                              10
July 15, 2002. App. 473. Having agreed to be bound by these terms, the appellants cannot

now allege that their contribution of the final capital call was contingent upon Acorn’s

compliance with SBA regulations. Accordingly, we conclude that the District Court did

not err in rejecting the appellants’ antecedent breach defense.

       The appellants also argue that the District Court erred by rejecting its affirmative

defenses of election of remedies and promissory estoppel. We have considered these

claims and are convinced that they are without merit. We reject them without further

discussion.7

                                               C.

       The appellants argue that the District Court erred in awarding interest to the SBA

on its judgments. Section 3.4.1 of the LPA provides that, in the event that a limited

partner fails to make a required contribution,

       the General Partner may, in its sole discretion, elect to charge . . . interest at
       an annual rate equal to ten percent (10%) on the amount due from the date
       such amount became due until the earlier of (i) the date on which such
       payment is received by the Partnership or (ii) the date of any notice given to
       such Private Limited Partner by the General Partner pursuant to Sections
       3.4.2., 3.4.3. or 3.4.5.




       7
         The District Court held that even if the affirmative defenses had merit, the
appellants “cannot use state or local laws to avoid their obligations of repayment and that
the affirmative defenses would be contrary to SBA’s preference in liquidation, to which
all Defendants agreed.” App. 17 n.5. Because we conclude that the appellants have
failed to demonstrate a genuine issue of material fact with respect to their affirmative
defenses, we need not address the District Court’s alternative basis for rejecting the
appellants’ affirmative defenses.

                                               

(emphasis in original). The appellants first argue that this provision does not

authorize the District Court’s award of ten percent interest because the award of interest

lies within the sole discretion of the General Partner and the SBA is not Acorn’s General

Partner. This argument fails, as the District Court’s Order for Operating Receivership

granted SBA, as receiver, “all powers, authorities, rights and privileges heretofore

possessed by the [General Partner] . . . .” App. 534.

       Second, the appellants argue that because the General Partner gave notice invoking

Section 3.4.2. on June 29, 2001, no interest could accrue after that date. The notice to

which the appellants refer is the Action of Manager that Torkelson executed and sent to

the appellants purporting to terminate their right to make additional capital contributions.

However, we agree with the District Court that Torkelson’s attempt to release the

appellants from their capital contribution obligations was not valid because it was done

without the consent of the SBA. Because Torkelson failed to invoke validly Section

3.4.2., the SBA is entitled to interest pursuant to Section 3.4.1. of the LPA, as ordered by

the District Court.

                                              D.

       Finally, the appellants argue that there is a genuine issue as to the validity of the

MSA, which provided that the exclusive remedy for delinquent capital contributions

would be to terminate the right of ACI to make further capital contributions in accordance

with Section 3.4.2. The District Court held that the MSA was invalid because, inter alia,



                                              12
the SBA did not approve it as required by the terms of the LPA. We agree with this

conclusion for the reasons set forth in the District Court’s opinion.

                                             IV.

       For the foregoing reasons, we will affirm the order of the District Court.




                                              13