Filed: Feb. 14, 2013
Latest Update: Mar. 26, 2017
Summary: 12-2566-cv Vector Capital Corp. v. Ness Technologies Inc. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a party must cite either the Federal Appendix or an electronic database (with t
Summary: 12-2566-cv Vector Capital Corp. v. Ness Technologies Inc. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a party must cite either the Federal Appendix or an electronic database (with th..
More
12-2566-cv
Vector Capital Corp. v. Ness Technologies Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or
after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and
this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a
party must cite either the Federal Appendix or an electronic database (with the notation “summary
order”). A party citing a summary order must serve a copy of it on any party not represented by
counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 14th
day of February, two thousand thirteen.
PRESENT:
JOHN M. WALKER,
JOSÉ A. CABRANES,
RICHARD C. WESLEY,
Circuit Judges.
_____________________________________
VECTOR CAPITAL CORPORATION,
Plaintiff-Appellant,
v. No. 12-2566-cv
NESS TECHNOLOGIES INCORPORATED,
Defendant-Appellee.
_____________________________________
FOR PLAINTIFF-APPELLANT: ROBERT KNUTS, Park & Jensen, LLP, New
York, NY.
1
FOR DEFENDANT-APPELLEE: THOMAS J. FLEMING (Renee M. Zaytsev, on
the brief), Olshan, Frome, Wolosky, LLP, New
York, NY.
Appeal from a judgment and order of the United States District Court for the Southern
District of New York (P. Kevin Castel, Judge).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the March 21, 2012 judgment is VACATED, and the case
is REMANDED for further proceedings consistent with this order.
Plaintiff-Appellant Vector Capital Corp. (“Vector”), a privately-held company which invests
in technology businesses, appeals from the District Court’s March 21, 2012 judgment dismissing its
complaint against defendant-appellee Ness Technologies Inc. (“Ness”) for failing to state a claim on
which relief can be granted. Vector also appeals the District Court’s May 23, 2012 order denying its
motion for relief from the judgment. On appeal, Vector argues that it stated a breach of contract
claim which was plausible on its face and that the District Court erred in dismissing its complaint.
We assume the parties’ familiarity with the facts and procedural history of this case, to which we
refer only as necessary to explain our decision to vacate the judgment. Unless otherwise noted, the
facts presented below are undisputed.
On March 16, 2011, Vector and Ness entered into an Exclusivity Agreement (“Agreement”)
that created certain conditions for the parties during an “exclusivity period” lasting until May 20,
2011. As relevant here, Ness agreed not to, directly or indirectly,
(a) initiate, solicit or encourage any inquiries, discussions or proposals
regarding, (b) continue, participate in any way in, propose or enter
into any negotiations or discussions with respect to, (c) provide any
non-public information relating to or in connection with, or (d)
authorize, propose or enter into any confidentiality agreement, term
sheet, letter of intent, purchase agreement or other agreement,
arrangement or understanding regarding, in all cases, (i) a merger,
reorganization, business combination or similar transaction involving
[Ness], (ii) the acquisition of all or a material portion of the assets
(including the capital stock of subsidiaries of [Ness]) of [Ness] or (iii)
2
the acquisition of all or a material portion of the outstanding capital
stock of [Ness] . . . in each case other than involving . . . [Vector] or
any of its Affiliates . . . .
Ness also agreed to notify Vector “promptly (and in any event within one business day) of
any inquiry, discussion or proposal” made to it “regarding an Alternative Transaction, including a
summary of the material terms thereof.”
Vector’s complaint alleges that Ness breached the Agreement by, inter alia, “(a) actively
discussing an offer submitted by Citi Venture Capital International (“CVCI”) during the term of the
Exclusivity Agreement; [and] (b) failing to disclose certain information concerning the CVCI offer
and communications to Vector, as required by the Exclusivity Agreement . . . .” Vector further
alleged that it had “expended more than $1 million in order to negotiate and complete the
acquisition of Ness pursuant to the terms of the [Agreement],” and sought to recover “all damages
. . . arising from Ness’ breaches of the [Agreement],” including for “out-of pocket expenses and lost
profits.”
On March 19, 2012, the District Court granted Ness’s motion to dismiss the complaint for
failure to state a claim upon which relief can be granted, see Fed. R. Civ. P. 12(b)(6). Vector Capital
Corp. v. Ness Techs., Inc., No. 11-CV-6259, 2012 WL 913245, at *8 (S.D.N.Y. Mar. 19, 2012). This
appeal followed.
DISCUSSION
“We review a district court’s grant of a motion to dismiss under Rule 12(b)(6) de novo,
accepting as true all facts alleged in the complaint and drawing all reasonable inferences in favor of
the non-moving party.” Ashland Inc. v. Morgan Stanley & Co., Inc., 652 F.3d 333, 337 (2d Cir. 2011).
“For a complaint to be sufficient, the claim asserted must be one that, in light of the factual
allegations, is at least ‘plausible.’” Anderson News, L.L.C. v. Am. Media, Inc.,
680 F.3d 162, 182 (2d
Cir. 2012) (citing Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
3
Under New York law, which the parties agree governs this dispute, “[t]o establish a prima
facie case for breach of contract, a plaintiff must plead and prove: (1) the existence of a contract; (2) a
breach of that contract; and (3) damages resulting from the breach.” Nat’l Mkt. Share, Inc. v. Sterling
Nat’l Bank, 392 F.3d 520, 525 (2d Cir. 2004). The District Court assumed the existence of a valid
contract, but found that Vector had not sufficiently alleged a contractual breach, or resulting
damages. Vector,
2012 WL 913245, at *3. Specifically, the District Court held that “[t]he Agreement
cannot reasonably be read to prohibit Vector from internal discussions of unsolicited proposals,”
and that “Vector fails to make any well-pleaded factual allegation that external discussions took
place.” Id. at *4-5. In addition, the District Court found that Ness’s alleged failure to disclose an
April 7, 2011 letter from CVCI did not allege a contractual breach because “Ness was not required
to disclose letters setting forth no material terms.” Id. at *5. Finally, the District Court held that
Vector’s allegations of damages did not “plausibly allege damage that was caused by [Ness’s]
breaches.” Id. at *7 (“There is no plausible allegation that [Vector’s] due diligence lost [its] value
because Ness employees discussed the CVCI offer internally, [or] did not inform Vector of the April
7 CVCI letter that announced no new material terms . . . .”).
The District Court erred in concluding that Vector failed to make any well-pleaded
allegations that discussions occurred between CVCI and Ness during the exclusivity period. For
instance, Vector alleged that CVCI submitted an offer to purchase Ness only seven business days
after the end of the exclusivity period and that “it was not physically possible for CVCI to complete
all relevant due diligence” in such a short period of time. This allegation pleads “factual content that
allow[ed] the court to draw the reasonable inference that [Ness was] liable for the misconduct
alleged,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), namely engaging in external acquisition
discussions with a third-party during the exclusivity period of the Agreement.
4
Likewise, the District Court construed too narrowly the reporting provision of the
Agreement, which stated that Ness was obliged to notify Vector of “promptly . . . [of] any inquiry,
discussion or proposal” made to it during the exclusivity period “regarding an Alternative
Transaction, including a summary of the material terms thereof.” (emphasis added). The April 7 letter
was not required to set forth “material terms,” to fall within the ambit of the reporting provision.
By its plain terms, the letter deals with “the opportunity to explore a transaction [between CVCI and
Ness] if and when the time were to arrive that [Ness is] not in an exclusivity period.” Further facts
are not required to plausibly allege that CVCI made an inquiry into, or had a discussion about, an
Alternative Transaction with Ness.
Third, and finally, the District Court erred in holding that Vector had not alleged damages
because “[w]ith notice of CVCI’s proposal, Vector’s due diligence would [only] have allowed Vector
to decide whether to stand pat or make a higher offer.” Vector, 2012 WL 913245, at *7. It is a
reasonable inference that had Vector been aware of the fact, and scale, of acquisition-related
communications between Ness and CVCI, it would have affected Vector’s negotiating strategy and
its post-breach, out-of-pocket expenses, which might have been avoided entirely absent the alleged
breach. At the pleading stage, Vector is not required to make further allegations to survive a motion
to dismiss.
We hold that the District Court erred in dismissing Vector’s complaint for failure to state a
claim.
5
CONCLUSION
Accordingly, the March 21, 2012 judgment is VACATED, and the case is REMANDED
for further proceedings consistent with this order, including a period of pre-trial discovery and, if
appropriate in the view of the District Court, additional motion practice. We have not considered
the significance vel non of the “newly discovered evidence” to which Vector has drawn our attention,
but on remand this evidence can and should be the subject of discovery processes and motion
practice in the normal course. Of course, we intimate no view on the legal significance of this
evidence.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
6
