J-A07009-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TELETRACKING TECHNOLOGIES, INC. IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
FRANK J. GORI, MARK JULIANO, GENE
NACEY, LORRAINE NACEY, STEPHEN P.
NASH, BRIAN E. SCHULIGER, INSIGHT
VENTURE MANAGEMENT, L.L.C. AND
INSIGHT TTT, LLC.
Appellee No. 940 WDA 2014
Appeal from the Order Entered June 6, 2014
In the Court of Common Pleas of Allegheny County
Civil Division at No(s): GD 11-006531
BEFORE: BENDER, P.J.E., LAZARUS, J., and MUNDY, J.
MEMORANDUM BY LAZARUS, J.: FILED MAY 28, 2015
TeleTracking Technologies, Inc. (TeleTracking) appeals from the trial
court’s order: (1) reaffirming its May 2011 order finding Insight Venture
Management, L.L.C.’s (Insight) Fourth Offer to purchase the Minority
Shareholders’ stock is a bona fide offer; (2) enjoining TeleTracking from
undertaking any further efforts to impede or prevent the closing on the
Fourth Offer; and (3) directing TeleTracking, upon closing of the Fourth
Offer, to register the transfer of shares in the name of Insight and issue new
stock certificates in its name upon surrender of the Minority Shareholders’
stock certificates. Upon careful review, we affirm.
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In a prior appeal, our Court aptly summarized the relevant facts of the
underlying case as follows:
On April 7, 2011, TeleTracking instituted this lawsuit by
filing a complaint against: 1) Frank J. Gori, Mark Juliano, Gene
Nacey, Lorraine Nacey, Stephen P. Nash, and Brian E. Schuliger
[the Minority Shareholders/Appellees] [and] 2) Insight []. The
following allegations appear in the complaint. TeleTracking, a
privately-held corporation in which the minority shareholders
hold about twenty-seven percent of the stock, is a health-care
information technology company that provides patient flow
solutions to the health care industry.
Pursuant to a February 15, 1999 shareholder agreement,
TeleTracking has a right of first refusal to purchase stock on the
same terms and conditions as any bona fide offer that a
shareholder receives for his shares. The pertinent provision of
the shareholder agreement executed among TeleTracking and its
shareholders, including the minority shareholders, is as follows:
In the event that any Shareholder shall receive a bona
fide written offer to buy such Shareholder share, which
such Shareholder desires to accept, such Shareholder
shall give written notice thereto to the Corporation and the
other Shareholders. The notice shall specify that number
of shares (the “Offered Shares”) the Shareholder intends
to dispose of [and] the identity and the address of the
person to whom the Shareholder proposes to dispose of
such shares. Attached to the notice shall be a copy of the
written offer, including the price, terms and conditions of
the proposed disposition. The notice shall also be
accompanied by a counterpart of the Agreement, executed
by the proposed purchaser of the shares. Appellant shall
have an irrevocable and exclusive first option, but
not an obligation, to purchase some or all of said
shares on the same terms and conditions as set forth
in said offer, exercisable by giving written notice to the
Shareholder proposing to sell within thirty (30) days after
receipt of the notice of the proposed offer.
Exhibit 1 at § 1(a) (emphasis added).
Insight [is an] investment banking firm[]. On March 31, 2011,
the minority shareholders indicated to TeleTracking that they
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had received an offer from Insight, brokered through [another
investment banking firm], for the purchase of their stock and
that [they] intended to sell the stock to Insight. They proffered
that TeleTracking had thirty days to match the offer under the
shareholder agreement. The offer in question was the fourth
offer that Insight had made for the stock, after TeleTracking had
previously maintained that three prior offers from Insight were
not bona fide and did not trigger its right of first refusal.
The complaint contained four counts. In count one,
TeleTracking set forth a declaratory judgment cause of action. It
sought a declaration that its obligation to match Insight’s fourth
offer for the minority shareholders’ stock was not triggered
under the shareholder agreement. Its position was two-fold. It
claimed that the offer was not bona fide and also that it was
impossible for it to purchase the shares on the same terms and
conditions as those set forth in Insight’s offer. In the second
count, TeleTracking sought a preliminary injunction preventing
the minority shareholders from selling the stock to Insight. At
count three, TeleTracking averred that the minority shareholders
had breached the shareholder agreement and, in count four, that
Insight [] had tortuously interfered with that accord.
Simultaneously with the complaint, TeleTracking filed a
motion for preliminary injunction. . . . After a hearing
conducted on April 26, 2011, the trial court denied the motion
for preliminary injunction, thereby resolving count two of the
complaint in favor of Insight and the minority shareholders,
Appellees herein.
On May 10, 2011, Appellees answered the complaint and
moved for partial summary judgment as to count one of the
complaint, which, as noted, sought a declaration that Appellant’s
right of first refusal was not triggered by Insight’s fourth offer
that was submitted to TeleTracking on March 31, 2011.
Appellees’ petition[ed] for a ruling that Insight’s fourth offer was
bona fide and that TeleTracking’s matching rights and obligations
under the shareholder agreement were triggered when that offer
was delivered to TeleTracking on March 31, 2011.
The trial court ordered that discovery relevant to the
summary judgment motion be conducted. After the submission
of exhibits and briefs by the parties, on May 26, 2011, the trial
court granted the motion for partial summary judgment. It ruled
that the offer in question was a bona fide offer and that
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Appellant’s matching rights and obligations under the
shareholder agreement were triggered when that offer was
delivered to it on March 31, 2011. On June 22, 2011, the court
entered a final order dismissing the two remaining breach of
contract and tortious interference claims set forth in the
complaint. TeleTracking assented, without prejudice, to the
dismissal of the complaint since the breach of contract and
tortious interference causes of action were premised upon the
position that the offer in question did not trigger its right of first
refusal.
TeleTracking Technologies, Inc., v. Gori, et al., No. 1066 WDA 2011, at
1-5 (Pa. Super. filed April 10, 2013). TeleTracking appealed from the trial
court’s order, asserting that the court erred in determining that the Fourth
Offer was “bona fide” and that it erred in concluding that the Fourth Offer
was structured in such a way that TeleTracking could match it on the same
terms and conditions as Insight.
On appeal, our Court affirmed the trial court’s order dismissing
TeleTracking’s complaint finding Insight’s offer to be bona fide as between
the offeror and offeree (but does not require that the offer be bona fide in
terms of its effects on TeleTracking) and that TeleTracking’s matching
rights and obligations under the shareholder agreement were triggered
because TeleTracking had been given the right to purchase the shares under
the same terms and conditions outlined in the stock purchase agreement
that the Minority Shareholders had executed with Insight.
In coming to its decision, our Court found that TeleTracking had
repeatedly obstructed the Minority Shareholders from selling their stock by
not providing any information to potential purchasers in connection with
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prospective sales, id. at 12, indirectly preventing any proposed purchaser
from performing the requisite due diligence procedure applicable to stock
transactions, id. at 13, intentionally failing to support any sales initiative by
not collaborating in the sales processes, id., and amending the company’s
bylaws and articles of incorporation so as to diminish the value of the
minority shares and preclude the election of a board member by the minority
shareholders. Id. at 14. In effect, TeleTracking's actions prevented the
minority shareholders from consummating three prior offers to buy their
company stock, as well as the instant Fourth Offer.1
TeleTracking proceeded to file a reargument petition in this Court,
which was denied on June 7, 2013. Subsequently, TeleTracking filed a
petition for allowance of appeal with the Pennsylvania Supreme Court, which
was denied on December 27, 2013.
Following appellate disposition, the Minority Shareholders attempted to
coordinate the transfer of stock with TeleTracking. However, TeleTracking
again refused to cooperate, asserting that a provision in the parties’
agreement requiring that the Minority Shareholders complete the sale with
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1
The Fourth Offer, tendered on March 31, 2011, committed to the purchase
of the Minority Shareholders’ stock for $37.35 million, with $16,805,762 to
be placed in escrow. The agreement also provided that Insight would be
compensated $6 million if TeleTracking exercised its right of first refusal,
representing a reimbursement fee for the substantial amount of time and
money Insight had invested in the protracted stock purchase negotiations.
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Insight within 120-days2 had expired and that the Minority Shareholders
were required to re-submit the offer, thus triggering compliance with the
right of first refusal procedures once again. In April 2014, the Minority
Shareholders filed a motion to enforce the trial court’s prior determinations
so that the Fourth Offer could be consummated. The court granted the
motion and this appeal ensued.
On appeal, TeleTracking presents the following issue for our
consideration:
Whether the court erred as a matter of law in ruling that
Defendants could close on an offer to purchase TeleTracking
stock, when Defendants were bound by a Shareholder
Agreement with a right of first refusal provision containing a
120-day closing deadline, and more than 120 days had passed
since Defendants had presented the offer to TeleTracking.
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2
This provision, found in the Shareholder Agreement, states:
If neither the Corporation nor the remaining Shareholders
individually or collectively elect to purchase all Offered Shares by
the end of the twenty day Further Notice period, the Shareholder
receiving such offer referenced in Section 1(a) [of the
Shareholder Agreement] may accept the same and sell all
Offered Shares in accordance with such offer and in accordance
with the provisions of this Agreement if such sale is completed
within one hundred twenty days (120) of the giving of notice to
the Corporation, but if such sale is not completed within said one
hundred twenty (120) day period, such shares shall not be sold
without again complying with the terms of this Section.
Shareholder Agreement, 2/15/99, at ¶1(c).
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The trial court cogently states that the majority shareholder of
TeleTracking, who is also the CEO and chairman of the board of directors,
has “use[d] the legal system to continue to exercise control over
TeleTracking, thus preventing [the Minority Shareholders from] selling the
shares . . . from which they had, for so long, seen no return on their
investment in a successful corporation.” Trial Court Opinion, 8/20/14, at 2-
3. TeleTracking has repeatedly maintained that offers made to the
shareholders, over the span of a decade, were not bona fide. When
TeleTracking demanded that the shareholders withdraw the instant offer, its
fourth, the shareholders refused, asserting that the offer was, in fact, bona
fide. TeleTracking claims that Insight’s offer did not provide a definite price
and that its terms were structured to favor the seller and disadvantage the
buyer; hence, the offer was not made in good faith. Despite its claims, the
trial court settled these issues back in May of 2011 in favor of the Minority
Shareholders, when it determined that the Insight offer was bona fide and
that the shareholders’ rights were triggered by the delivery of the offer, thus
denying TeleTracking’s request for an injunction. This decision was handed
down just 57 days after the offer was presented to TeleTracking, well within
the 120-day time frame set forth in the shareholder agreement.3
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3
The remaining claims in TeleTracking’s underlying lawsuit were finally
dismissed 37 days before the 120-day closing deadline.
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The trial court concluded that TeleTracking’s intentional protraction of
litigation underlying the sale of the stock by the Minority Shareholders is the
exact reason why the shareholders were not able to consummate the sale
within the prescribed timeframe provided in the parties’ agreement. To
permit TeleTracking to rely upon this provision now to prevent the sale of
the stock is, in essence, using the contractual 120-day time limit as a sword,
rather than a shield, when the provision’s intent was to eliminate uncertainty
about ownership of company stock when an offer has been tendered.4
Instantly, TeleTracking refuses to permit Insight to close on the deal
with the Minority Shareholders unless the latter resubmits its offer and
complies with the first refusal procedures again. In fact, a section of the
instant stock purchase agreement provides that, as a condition of closing a
sale, there be no pending litigation challenging the consummation of the
transactions contemplated. Therefore, by its commencement of litigation
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4
While TeleTracking claims that the time has expired within which the sale
had to be consummated and that the minority shareholders were required to
seek a stay pending appeal to stop the 120-day clock from running, it also
acknowledged that “it was impractical for [the minority shareholders] to
close given the appeal.” N.T. Motion to Enforce, 6/3/14, at 21. This
sentiment especially rings true when TeleTracking’s initial appeal to this
Court in 2011 asked us to resolve whether Insight’s Fourth Offer even
triggered TeleTracking’s first refusal obligation. Moreover, as counsel for the
minority shareholders argued at the motion to enforce hearing, TeleTracking
refused to release control of the shares of shareholder Gene Nacey, and his
wife, Lorraine, further frustrating any proposed sale. Id. at 29-33.
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and endless pursuit of appeals, the company effectively created a stalemate
in the transfer of stock between the Minority Shareholders and Insight.5
Because it is well established that a party who prevents performance
creates an excuse for nonperformance, Iron Trade Products Co. v.
Wilkoff Co., 116 A. 150 (Pa. 1922), the trial court correctly enforced its
prior order directing the sale of the stock after the expiration of the 120-day
time limit. The trial court was well within its authority to grant the motion to
enforce the sale of stock based upon equitable principles. Goodwin v.
Rodriguez, 554 A.2d 6 (Pa. 1989); see also Valora v. Pennsylvania
Employees Benefit Trust Fund, 939 A.2d 312, 322 (Pa. 2007) (courts are
empowered to examine methods and timing that party to contract resorts to
in attempting to enforce specific terms of agreement). Thus, we affirm.
Order affirmed.
MUNDY J., joins the majority.
BENDER PJE., files a Dissenting Memorandum.
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5
The defendants sought a third-party purchase for their shares due to the
fact that for several years they saw no return of capital on their
shareholdings despite the company’s monetary success. N.T. Motion to
Enforce, 6/3/14, at 4.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/28/2015
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