Court: District Court of Appeal of Florida; May 25, 2011; Florida; State Appellate Court
Boca Concepts, Inc. appeals a trial court judgment favoring Metal Shield Corp. regarding claims of breach of contract and specific performance related to their operating agreement. Scott Levine, owning Boca Concepts, and Haim Michaeli, owning Metal Shield, formed a Joint Company in January 2000, each holding a 50% interest. Their Operating Agreement included provisions for partner withdrawal in Article XIV, which detailed the process for one partner to offer their interest to the other. The article required written notice of intent to sell, specifying terms and a 30-day irrevocable offer period. If the offer was not accepted, the Offeree would have to buy the Offeror's interest under the same terms. Levine testified that on March 20, 2008, he received a withdrawal notice from Michaeli proposing the sale of his interest in the Joint Company for $400,000, outlining the assets included in the sale and conditions for payment. The agreement stipulated that $100,000 would be deposited into an attorney's trust account within five business days of acceptance. The case centered on whether Michaeli's actions constituted a breach of the operating agreement, warranting specific performance as a remedy.
Acceptance of the offer must occur within thirty days from the date of the letter. Should the offer to purchase Michaeli’s interest be declined, Levine proposed to buy Michaeli’s interest in Boca Concepts, Inc. under the same terms. Both parties recognized that Metal Shield Corp. and Boca Concepts, Inc. existed solely to hold their interests in the Joint Company, with no interests in other entities. Levine did not communicate his decision regarding the acceptance of Michaeli’s offer and remained silent for thirty days, despite knowing the Operating Agreement required Michaeli to purchase Levine’s interest if the offer was not accepted. After thirty days, Levine informed Michaeli that he needed to buy Levine out.
On April 29, 2008, Metal Shield’s attorney sent a letter asserting that, under Article XIV of the Operating Agreement, Metal Shield Corp. was obligated to purchase Levine’s interest at the same price and terms as the March 20 offer. The letter indicated that the parties must proceed according to the Operating Agreement and the original offer, with further details to be outlined in a purchase agreement. Michaeli later sent a letter on May 28, 2008, revoking any offers and asserting that the March 20 letter did not fulfill Article XIV, as it only referred to the sale of Metal Shield Corp.’s assets, not its membership interest in Metal Shield LLC.
Michaeli acknowledged during cross-examination that Metal Shield Corp. had no assets other than its interest in the Joint Company. He also confirmed that his March 20 letter was intended to comply with Article XIV. The trial court found that the March 20 letter was an independent offer and did not reference the Joint Company or Article XIV, thus not satisfying the conditions of Article XIV. Furthermore, the court indicated that if an offer under Article XIV existed, it would obligate Levine to purchase Michaeli’s interest if the initial offer was not accepted within thirty days. Consequently, the court ruled in favor of Metal Shield Corp. on all counts, leading to an appeal by Boca Concepts.
Boca Concepts contends that the trial court erred by ruling that Article XIV was not invoked and by favoring Metal Shield Corp. The argument asserts that the March 20 letter met Article XIV's requirements, constituting an offer; thus, upon Levine's failure to accept within thirty days, Metal Shield Corp. was obligated to purchase Boca Concepts’ interest in the Joint Company under identical terms. The interpretation of a contract by a trial court is reviewed de novo, while factual findings are evaluated under a substantial and competent evidence standard.
The court must assess whether the March 20 letter constituted an offer triggering Article XIV and if a contract was formed. The trial court determined the letter was neither an offer nor written notice as required by Article XIV, noting it did not explicitly reference Article XIV or the Joint Company. Instead, it was characterized as an offer from Michaeli, President of Metal Shield Corp., to sell assets to Levine, President of Boca Concepts, Inc.
Article XIV, Subparagraph B outlines that an offer must be made through written notice to the Offeree, stating the desire to sell all Company Interest, specifying price and terms, and including the Offeror's address. The trial court's conclusion was challenged, as the March 20 letter contained all necessary elements, and its subject line referenced "Notice of Withdrawal/Put Call," associated with Article XIV. The letter also adhered to procedures in Subparagraph A, allowing Levine thirty days to accept, with a closing set for thirty days post-acceptance, and noted that if Levine did not buy Michaeli’s interest, Michaeli would buy Levine’s interest on the same terms.
Despite the letter mentioning Boca Concepts, Inc. and Metal Shield Corp. without explicitly referencing the Joint Company, testimony indicated that Boca Concepts, Inc. was solely for holding Levine's interest in the Joint Company, while Metal Shield Corp. held Michaeli's interest. Thus, the trial court's interpretation that the offer did not pertain to the Joint Company but only to Michaeli’s interest in Metal Shield Corp. lacked practical distinction. Moreover, the Operating Agreement identifies Metal Shield Corp. and Boca Concepts, Inc. as members of the Joint Company, allowing Metal Shield Corp. to offer its interest to Boca Concepts, Inc. The reference to the corporations in the March 20 letter does not preclude it from being a valid Notice of Withdrawal under Article XIV.
References to the individual corporations comprising the Members of the Joint Company were deemed appropriate, although the March 20 letter could have been clearer by specifying each Member corporation’s interests. Michaeli's intent in the letter was reinforced by his attorney's subsequent April 29 letter, which clarified that Michaeli made an offer in the March 20 letter, obligating Metal Shield Corp. to purchase Levine’s interest in the Joint Company at the price and terms stated in that offer. Despite the trial court's conclusion that the attorney's statements had no effect, they indicated that the March 20 letter constituted an offer under Article XIV, necessitating an assessment of whether Boca Concepts' actions or inactions resulted in a binding contract.
The trial court initially ruled that the March 20 letter did not qualify as an offer under Article XIV and that the parties were still negotiating, which precluded mutual assent to essential terms. However, since the letter was found to be an offer under Article XIV, it was essential to determine whether that offer was accepted. Article XIV’s “Failure to Accept” provision states that if the Offeree does not accept the offer within the specified time, the Offeror is obligated to purchase the Offeree's shares at the terms provided in the offer. Levine not only failed to accept the offer but also orally rejected it, thereby triggering Metal Shield Corp.'s obligation to purchase Boca Concepts' interest in the Joint Company.
The trial court identified potential confusion in Paragraph A regarding the obligations of the parties, which appeared to be a typographical error. It concluded that Paragraph D accurately reflected the parties' intent, affirming that if the Offeree does not accept within thirty days, the Offeror must buy the Offeree’s share. Both parties understood Article XIV in the same way, and no ambiguity was raised in the lower court proceedings. Consequently, the trial court was incorrect in concluding that the March 20 letter was not an offer under Article XIV and that no agreement was reached. The ruling was reversed and remanded, with a note that closing should occur within thirty days of acceptance of the offer.
