Siaca v. DCC Operating, Inc.

United States Court of Appeals
For the First Circuit

No. 05-9012

IN RE: OLYMPIC MILLS CORPORATION, d/b/a/ OLYMPIC GROUP,
and COACHMAN INCORPORATED,

Debtors.

DCC OPERATING, INC.,

Plaintiff, Appellee.

v.

LUIS RIVERA SIACA, ENERY ORTIZ-RIVERA,
and CONJUGAL PARTNERSHIP,

Defendants, Appellants,

v.

WAYNE S. FOREN,

Third-Party Defendant.

OLYMPIC MILLS CORPORATION, d/b/a/ OLYMPIC MILLS GROUP,
and COACHMAN INCORPORATED,

Intervenors.

APPEAL FROM THE BANKRUPTCY APPELLATE PANEL
FOR THE FIRST CIRCUIT

Before

Selya and Howard, Circuit Judges,
and Smith,* District Judge.

*
Of the District of Rhode Island, sitting by designation.
 Daniel E. Rosenfeld, with whom Kirkpatrick & Lockhart LLP was
on brief, for appellants.
W. Steven Paleos, with whom Carmen D. Conde, Sarit Zeevi, and
C. Conde & Assoc. were on brief, for appellee.

January 17, 2007
 SMITH, District Judge. Defendant-appellant Luis Rivera

Siaca (“Rivera”) appeals a decision of the Bankruptcy Appellate

Panel (“BAP”) subjecting him to over $3 million in liability for

retaining payments in breach of trust. The progenitor of this

procedural gem, plaintiff-appellee DCC Operating, Inc. (“DCC”),

originally brought suit in diversity in the United States District

Court for the District of Puerto Rico. After obtaining a favorable

summary judgment ruling, nondiverse debtors-in-possession Coachman,

Inc. (“Coachman”), and its wholly-owned subsidiary Olympic Mills

Corp. (“Olympic Mills”), intervened, requesting that the case be

referred to the United States Bankruptcy Court for the District of

Puerto Rico. Digesting the issue for several months, the district

court eventually referred the case to the bankruptcy court, which,

over a year later, awarded damages and entered final judgment.

Rivera appealed the unfavorable ruling to the BAP; unsuccessful

there as well, he appealed to us.

Before we reach the merits of this appeal, we must cut

through a factual and procedural knot of Gordian complexity. This

task calls upon us to examine at the outset whether we have

subject-matter jurisdiction or if it was destroyed by the

intervention of nondiverse intervenors; in turn, whether the

intervenors are indispensable; and ultimately, whether remand would

be appropriate to sort all this out. We cut the knot by stepping

forward to address these issues without remand. Once the

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procedural issues are resolved we move to the merits, which by

comparison present a fairly straightforward issue for resolution.

After careful review, we affirm.

I. BACKGROUND

A. The Hampshire Venture.

This contract dispute began with a $2 million bridge loan

essentially to finance the acquisition of sweaters.1 The lender,

Development Capital Ventures, LP (“DCV”), is an investment company

that provides venture capital to small businesses. The borrower,

now-defunct Coachman, was a small business operating in Puerto

Rico. In connection with the bridge loan, which was to be made in

two $1 million installments (one on February 25, 2000, the other on

March 10, 2000), Coachman delivered to DCV a “CONVERTIBLE

SUBORDINATED DEMAND NOTE” (the “Note”) on February 24, 2000. The

Note had a maturity date of June 30, 2000,2 and provided for the

conversion of the principal amount into company stock at DCV’s

option at any time before the balance was paid in full, or

automatically upon the satisfaction of certain conditions.

The Note identified, described, and attached as annexes

four documents that bore upon the bridge loan. Annex A was a term

1
A bridge loan, also known as a swing loan, is a short-term
high-interest loan to finance a discrete, typically time-sensitive,
project or venture.
2
An amendment to the Note extended the maturity date to
January 31, 2001, and increased the principal amount to $2.5
million.

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sheet detailing the conversion of stock; it, along with a guaranty

embodied in annex C, is not involved in this dispute. Annex B was

a document entitled “ASSET PURCHASE AGREEMENT,” which the Note

identified as the “Hampshire Agreement” and defined in ¶ 1.(viii)

as follows:

“Hampshire Agreement” shall mean the
agreement between the Company [Coachman] and
Hampshire Corporation (“Hampshire”) whereby
the Company establishes a subsidiary to
acquire inventory and equipment from Hampshire
and Hampshire guarantees to acquire a minimum
of 12 million sweaters from such subsidiary
over the next five (5) years, or an average
annual purchase of 2.4 million sweater units.
See draft agreement under Annex B.

The draft version of the Hampshire Agreement identified the

“subsidiary” referenced above as Glamourette/OM, Inc.

(“Glamourette”).3 The last document attached to the Note (as annex

D) was a “SUBORDINATION AND STANDBY AGREEMENT” (the “Subordination

Agreement”). According to the terms of the Note, Rivera,

Coachman’s affluent chairman and sometimes lender, was required to

execute the Subordination Agreement as a condition precedent to the

bridge loan.

Rivera executed the Subordination Agreement, along with

the Note (on behalf of Coachman), on February 24, 2000. At that

time, Coachman owed Rivera approximately $5.75 million on past

loans, but neither the Note nor the Subordination Agreement

3
The record reflects that, at some point after January 24,
2000, the entity’s name was changed to Glamourette/OG, Inc.

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identified the particular loans to be subordinated to DCV’s bridge

loan. Almost a year later, Coachman fell into default. DCV’s

corporate general partner, DCC, demanded that Coachman pay its

balance. When Coachman took no action to satisfy its obligations

under the Note, DCC demanded that Rivera pay all amounts due from

payments he had received from Coachman or its affiliates over the

previous year. (Between February 24, 2000, and October 18, 2001,

Rivera made a series of loans to Coachman, Olympic Mills, and

Glamourette totaling $16.6 million, and was repaid at least $5.6

million.) On November 7, 2001, DCC, alleging various state-law

claims under the Subordination Agreement, sued Rivera in diversity

in federal district court. Shortly thereafter, on November 26,

2001, Coachman, Olympic Mills, and Glamourette filed in bankruptcy

court voluntary petitions for relief under Chapter 11.4

B. The Litigation.

Discovery proceeded in district court for almost a year

before DCC and Rivera filed cross-motions for summary judgment.

DCC argued that Rivera violated his trust obligations under the

Subordination Agreement by retaining certain payments from Coachman

or its affiliates. Specifically, DCC contended that, pursuant to

¶ 4 of the Subordination Agreement, Rivera was required to forward

4
The separately-filed bankruptcy petitions were consolidated
within a week. On December 19, 2002, the bankruptcy court granted
Glamourette’s motion for conversion to chapter 7 liquidation;
Coachman and Olympic Mills followed suit on May 4, 2004.

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such payments to DCV for application against the bridge loan.

Rivera responded that the Subordination Agreement covered only

those loans made before January 24, 2000. The disbursements he had

received, Rivera explained, were in payment of loans made after the

execution of the Subordination Agreement. The district court

disagreed and ruled that the Subordination Agreement unambiguously

covered the repayment of all loans, whenever made, until Coachman

satisfied its obligations under the Note. However, the district

court reserved decision on the amount of damages hoping that, in

light of its ruling, the parties would reach an agreement on their

own. The district court entered partial summary judgment on

December 16, 2002.

Nine days later, Rivera moved to dismiss the case for

failure to join Coachman and Olympic Mills. Rivera argued, for the

first time, that these parties were necessary, indispensable, and

(importantly) nondiverse by virtue of their incorporation in

Delaware. (DCC was a Delaware corporation as well.) The next day,

Coachman and Olympic Mills filed in the district court through

special counsel a motion to intervene as of right under Fed. R.

Civ. P. 24(a)(2). Citing DCC’s recent victory, Coachman and

Olympic Mills argued, without actually asserting any claim, that

the payments to Rivera “may be subject to the avoidance powers”

granted to them as debtors-in-possession. Because their interest

in these payments “may preempt” that of DCC, and because “DCC’s

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attempt to collect the funds for its own benefit implicate[s]

numerous core bankruptcy issues,” Coachman and Olympic Mills

requested that the case be referred to the bankruptcy court for

further adjudication. In a text order entered on December 31,

2002, the district court granted the motion to intervene without

discussion (and without addressing Rivera’s motion or soliciting

DCC’s position on either motion), and ordered the parties to appear

at a status conference on January 16, 2003, to address the

intervenors’ referral request. DCC filed a motion opposing

dismissal, intervention, and referral on January 15.

At the status conference, DCC said that it would consent

to referral only if Rivera would deposit over $5 million with the

bankruptcy court. The district court gave Rivera until January 24

to respond, set a briefing schedule on the referral question if

Rivera declined DCC’s offer (which he did), and stated that the

case would proceed to trial on May 27, 2003 if the case were not

referred. Coachman and Olympic Mills submitted a memorandum on

February 24 pursuant to the scheduling order, but, short-circuiting

the process, initiated an adversarial proceeding (No. 03-0042) in

bankruptcy court the very next day. The complaint, filed against

Rivera, DCC, DCV, and others, alleged a variety of claims,

including preferential payments and fraudulent conveyances.

The referral remained under advisement in the district

court for the next two months. With a trial date approaching, the

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district court finally referred the parties’ contract dispute to

the bankruptcy court on May 1, 2003. (Taking care of old business,

the district court also denied as moot Rivera’s January request to

file another indispensability memo.) The case proceeded in

bankruptcy court as a separate adversary proceeding (No. 03-0090),

despite Rivera’s motion in adversary proceeding No. 03-0042 to

consolidate them. DCC moved to dismiss Coachman and Olympic Mills

as intervenors, but the bankruptcy court denied the motion without

discussion in a text order on February 12, 2004. After some

additional discovery, DCC and Rivera filed cross-motions for

summary judgment. Ruling upon the motions in August 2004, the

bankruptcy court, recognizing that the “sole remaining issue” was

the amount of damages DCC should receive, rejected Rivera’s call to

vacate the district court’s previous ruling on liability.5

Calculating the appropriate figure, the bankruptcy court granted

DCC’s motion, denied Rivera’s, and, several days later, entered

final judgment pursuant to Fed. R. Civ. P. 54(b).

Rivera timely appealed to the BAP, which, after a

thorough examination of its authority to review interlocutory

orders of the district court,6 affirmed. Luis Rivera Siaca v. DCC

5
Rivera made the same argument in adversary proceeding No.
03-0042, with the same result.
6
Judge Arthur N. Volotato dissented from the majority’s
decision to review the district court’s interlocutory order
granting partial summary judgment, arguing that, under our opinion
in Brandt v. Wand Partners, 242 F.3d 6, 13-15 (1st Cir. 2001),

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Operating, Inc. (In re Olympic Mills Corp.), 333 B.R. 540 (1st Cir.

B.A.P. 2005). This appeal ensued.

II. DISCUSSION

A. Subject-Matter Jurisdiction.

Before addressing the merits, we must deal with the

procedural tangle and determine if we have jurisdiction, even

though the parties did not originally contest our jurisdiction on

appeal. See Doyle v. Huntress, Inc., 419 F.3d 3, 6 (1st Cir. 2005)

(holding that, even where subject-matter jurisdiction may go

unchallenged on appeal, “we have an obligation to inquire sua

sponte into our jurisdiction over the matter”). Indicating at oral

argument that the integrity of complete diversity in this case was

a matter of primary importance, we permitted the parties to submit

supplemental briefing on whether the intervention of Coachman and

Olympic Mills divested the district court of diversity

jurisdiction. We now conclude that it did not.

1. Complete Diversity. The district courts of the

United States are “courts of limited jurisdiction. They possess

only that power authorized by Constitution and statute.” Kokkonen

v. Guardian Life Ins. Co. Of Am., 511 U.S. 375, 377 (1994). In 28

neither the BAP nor the bankruptcy court possessed the jurisdiction
to do so. We take no position generally on the BAP’s authority to
review interlocutory orders of the district court, but assume, for
the limited purpose of deciding this rather complicated appeal,
that the BAP’s ruling in this respect is appropriate.

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U.S.C. § 1332, the sole basis for jurisdiction in this case,7

Congress bestowed upon the district courts original jurisdiction in

civil actions between citizens of different states. The diversity

requirement of § 1332 must be complete. In cases involving

multiple plaintiffs or defendants, the presence of but one

nondiverse party divests the district court of original

jurisdiction over the entire action. See Strawbridge v. Curtiss,

7 U.S. (3 Cranch) 267, 267 (1806).

The complete-diversity rule is not a constitutional

requirement, see State Farm Fire & Casualty Co. v. Tashire, 386

U.S. 523, 530-31 (1967), or even explicitly required by the

7
DCC’s argument that the district court’s original
jurisdiction continued uninterrupted from diversity of citizenship
to bankruptcy jurisdiction is unsupported and mischaracterizes the
circumstances of this case. The theory appears to rely on the
tortured application of a limited exception to the complete-
diversity rule when a plaintiff joins a nondiverse defendant sued
under federal law with a diverse defendant sued in diversity. See
Romero v. Int’l Terminal Operating Co., 358 U.S. 354, 381 (1959)
(“Since the Jones Act provides an independent basis of federal
jurisdiction over the non-diverse respondent . . . the rule of
Strawbridge v. Curtiss . . . does not require dismissal of the
claims against the diverse respondents.”). The exception
recognizes and attempts to ameliorate the “anomaly that would be
created by ‘not allowing a plaintiff to do in one federal suit what
he would be entitled to do in two separate federal suits.’” Hiram
Walker & Sons, Inc., v. Kirk Line, 877 F.2d 1508, 1512 (11th Cir.
1989) (quoting Baker v. J.C. Penney Co., 496 F. Supp. 922, 924
(N.D. Ga. 1980)). The present case is clearly distinguishable
because, at the commencement of the case, there was no independent
basis of original federal jurisdiction that DCC could have invoked
to bring suit against Coachman or Olympic Mills (nondiverse
parties) on its state-law contract claims under the Subordination
Agreement while, at the same time, bringing suit against Rivera (a
diverse party) in diversity.

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governing statute, see § 1332, but it is nonetheless strictly

construed. Acton Co., Inc. of Mass. v. Bachman Foods, Inc., 668

F.2d 76, 79 (1st Cir. 1982). History is in part responsible both

for the rule’s genesis and its rigid application. The historic

primary function of the diversity requirement was “to provide a

‘neutral’ forum for the out-of-state litigant who fears that the

state court may be unduly, if unconsciously and inarticulately,

solicitous for the interests of its own citizens.” Caso v.

Lafayette Radio Elecs. Corp., 370 F.2d 707, 710 (1st Cir. 1966).

The presence of a nondiverse party eliminates this concern over

litigating in the state court. See Wis. Dept. of Corr. v. Schacht,

524 U.S. 381, 389 (1998).

The rule is most inflexibly applied at the time of

filing, for it has long been settled that “the jurisdiction of the

court depends upon the state of things at the time of the action

brought.” Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S.

567, 570 (2004) (quoting Mollan v. Torrance, 22 U.S. (9 Wheat.)

537, 539 (1824)). The postfiling context is more elastic because,

as a general matter, “if jurisdiction exists at the time an action

is commenced, such jurisdiction may not be divested by subsequent

events.” Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426,

428 (1991) (per curiam) (involving substitution under Fed. R. Civ.

P. 25(c)). There are exceptions, however: the postfiling

introduction of a nondiverse party may, in certain circumstances,

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spoil the jurisdiction that obtained when the suit commenced. For

example, in Am. Fiber & Finishing, Inc. v. Tyco Healthcare Group,

LP, 362 F.3d 136, 139 (1st Cir. 2004), we read Freeport-McMoRan to

apply in the context of postfiling transfers of interest under Rule

25, but not in the postfiling addition of a nondiverse party under

Fed. R. Civ. P. 15(a). See also Casas Office Machs., Inc. v. Mita

Copystar Am., Inc., 42 F.3d 668, 674 (1st Cir. 1994) (substitution

of dispensable nondiverse defendants for fictitious defendants

destroyed diversity jurisdiction). Yet the rule championed in

Freeport-McMoRan is one of general application, as we have

observed. Whether intervention under Rule 24(a) fits this mold is

the question to which we now turn.

We are mindful of our remark, in B. Fernandez & Hnos.,

Inc. v. Kellogg USA, Inc., 440 F.3d 541 (1st Cir. 2006), that the

addition of a nondiverse intervenor as of right divested the

district court of diversity jurisdiction. At the puerile stages of

the litigation in Kellogg, a nondiverse company, Kellogg Caribbean

Services, Inc. (“Kellogg Caribbean”), appealed the district court’s

denial of its motion to intervene as of right as a defendant.

Kellogg Caribbean argued that it, not Kellogg USA, Inc. (“Kellogg

USA” — the original diverse defendant), was the proper defendant to

the litigation because Kellogg USA previously had assigned its

rights and obligations under the disputed contract to Kellogg

Caribbean. We began by framing the inquiry:

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 [F]ederal jurisdiction is premised on the
diversity of citizenship between Kellogg USA
(a Michigan company) and [B. Fernandez &
Hnos.] and [Carribean Warehouse Logistics]
(Puerto Rico companies). But, if Kellogg
Caribbean (a Puerto Rico company) is entitled
to intervene as a matter of right under Rule
24(a)(2) and is an indispensable party under
Rule 19(b), the litigation must be dismissed
because there would not be complete diversity.

Kellogg, 440 F.3d at 544. Tackling the intervention issue first,

we concluded that the nondiverse company had satisfied the Rule

24(a)(2) requirements and that the district court had abused its

discretion in denying the motion. Because, as a corollary,

“intervention would destroy complete diversity,” id. at 547, we

then turned to the indispensability analysis mandated by Rule

19(b). The analysis did not get far; observing that the district

court had not independently analyzed the Rule 19(b) question, we

remanded for further findings and an opportunity for the district

court to select the way in which to resolve the problem (i.e.,

dismiss the entire case, retain jurisdiction but limit the relief

available to the nondiverse company, et cetera, see id. at 547-48).

In doing so, however, we suggested strongly that, insofar as

appellees sought an injunction that would affect the assignee’s

interests under the contract, Kellogg Caribbean was an

indispensable party.

In the case under review, the original and amended

complaints alleged only state-law claims, observed that DCC was a

Delaware corporation and Rivera a Puerto Rican resident, and thus

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properly invoked the district court’s diversity jurisdiction.

However, intervenors Coachman and Olympic Mills, were, like DCC,

Delaware corporations, and entered as (nondiverse) party

defendants.8 Because the parties, on appeal at least, do not

assign error to the intervention of Coachman and Olympic Mills per

se, we proceed directly to the Rule 19(b) analysis to determine

whether that intervention divested the district court of subject-

matter jurisdiction. See Kellogg, 440 F.3d at 547; cf. Metro. Life

Ins. Co. v. Ditmore, 729 F.2d 1, 9 (1st Cir. 1984) (holding that a

necessary party under Rule 19(a) would be entitled a priori to

intervene as of right under Rule 24(a)).

2. Indispensability. This task requires us to decide

whether Coachman and Olympic Mills are indispensable; if they are,

the entire case must be dismissed for want of subject-matter

8
Coachman and Olympic Mills appear to have entered the
contract dispute (later adversary proceeding No. 03-0090) as
defendant intervenors, although their alignment is not entirely
clear from the record. We have the authority to determine this
matter for ourselves, see City of Indianapolis v. Chase Nat’l Bank,
314 U.S. 63, 69 (1941) (courts have a “duty” to “look beyond the
pleadings and arrange the parties according to their sides in the
dispute”); Gabriel v. Preble, 396 F.3d 10, 14 (1st Cir. 2005), but
the inquiry is academic: Coachman and Olympic Mills are nondiverse
no matter whom they are aligned against in this case. The
adversary complaint filed on behalf of Coachman and Olympic Mills
in adversary proceeding No. 03-0042 identifies Coachman and Olympic
Mills as Delaware corporations with their principal place of
business in Puerto Rico. Consequently, even if an analysis of the
parties’ actual interests more accurately pitted Coachman and
Olympic Mills against Rivera, and we were to realign the parties
accordingly, citizens of Puerto Rico would then stare at each other
from across the “v.” See § 1332(c)(1).

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jurisdiction. See Provident Tradesmens Bank & Trust v. Patterson,

390 U.S. 102, 116-19 (1968). As we stated in Kellogg, “Rule 19(b)

provides that, if a nonparty is deemed necessary to litigation but

joining that nonparty would deprive the court of jurisdiction, the

court should permit the action to proceed only to the extent that

‘equity and good conscience’ warrant.” Kellogg, 440 F.3d at 547

(quoting Provident Tradesmens Bank & Trust, 390 U.S. at 109). Four

factors guide the inquiry:

[F]irst to what extent a judgment rendered in
the person's absence might be prejudicial to
the person or those already parties; second,
the extent to which, by protective provisions
in the judgment, by the shaping of relief, or
other measures, the prejudice can be lessened
or avoided; third, whether a judgment rendered
in the person's absence will be adequate;
fourth, whether the plaintiff will have an
adequate remedy if the action is dismissed for
nonjoinder.

Fed. R. Civ. P. 19(b). From these factors, the Supreme Court has

identified four corresponding interests: (1) the interest of the

outsider whom it would have been desirable to join; (2) the

defendant's interest in avoiding multiple litigation, inconsistent

relief, or sole responsibility for a liability it shares with

another; (3) the interest of the courts and the public in complete,

consistent, and efficient settlement of controversies; and (4) the

plaintiff's interest in having a forum. H.D. Corp. of P.R. v. Ford

Motor Co., 791 F.2d 987, 992 (1st Cir. 1986) (citing Provident

Tradesmens Bank & Trust, 390 U.S. at 108-11).

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 We pause momentarily to address a wrinkle. The above

factors and interests require fact-intensive analysis, “involve the

balancing of competing interest[,] and must be steeped in

‘pragmatic considerations.’” Travelers Indem. Co. v. Dingwell, 884

F.2d 629, 635 (1st Cir. 1989) (quoting Advisory Committee Notes).

For these reasons, the findings and conclusions of a district court

are entitled to deference on appeal, id., and the absence of

independent analysis (or any analysis at all) is a reason for

remand. See Kellogg, 440 F.3d at 548. In the present case, the

district court’s text order granting intervention did not address

the dispensability or indispensability of Coachman and Olympic

Mills, and there is nothing in the record in the five months

separating intervention from referral that sufficiently indicates

what consideration, if any, the district court gave the matter.

Yet in this situation remanding this case to the district court,

which, as we have said, is in the “preferred position” to make Rule

19(b) determinations, Travelers Indem. Co., 884 F.2d at 635, would

be nothing short of Kafkaesque. As the above recitation makes

clear, the travel of this case to date borders on the bizarre, and

we see little wisdom in further complicating it. Here, the BAP did

address the question and concluded that Coachman and Olympic Mills

were not indispensable. Given the procedural tangle described

above, and the impracticality (bordering on absurdity) of remand,

we will proceed to decide the matter without remand under the

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plenary standard normally used in reviewing the legal conclusions

of the BAP. See Carvalho v. Fed. Nat’l Mortgage Assoc. (In re

Carvalho), 335 F.3d 45, 49 (1st Cir. 2003); Takeda v. Nw. Nat’l

Life. Ins. Co., 765 F.2d 815, 818 n.2 (9th Cir. 1985) (“Although in

some cases it might be desirable to remand to allow a district

court to determine whether a nondiverse party is indispensable, we

have the power to decide the joinder issue on appeal.”).

A review of the factors and interests outlined above

leads us inexorably to the conclusion that Coachman and Olympic

Mills are not indispensable.

Rivera’s argument that Coachman and Olympic Mills are

indispensable because they have competing claims over the same res

ignores the posture of this case. First, the causes of action

involved in the district court (later adversary proceeding No. 04-

0090) and the bankruptcy court (adversary proceeding No. 03-0042)

were completely different. In district court, DCC pursued Rivera

in his personal capacity for violating ¶ 4 of the Subordination

Agreement, which required Rivera (1) to hold in trust any cash or

collateral received from Coachman in payment of the principal of

the subordinated debt, and (2) immediately to pay over to DCV the

cash or collateral held in trust for application to the senior debt

until the senior debt was repaid in full. Coachman and Olympic

Mills had no such claim against Rivera (before or after they filed

for bankruptcy), and instead sued him in bankruptcy court in

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adversary proceeding No. 03-0042, alleging fraudulent conveyances

and other related causes of action. See Torcise v. Cmty. Bank of

Homestead (In re Torcise), 116 F.3d 860, 865-66 (11th Cir. 1997)

(secured creditor that initiated separate state-law action against

bank was not indispensable party to adversary proceeding brought by

Chapter 11 debtors’ unsecured creditors committee against bank to

recover fraudulent and preferential payments). Second, and

relatedly, Coachman and Olympic Mills were independently capable of

making a run at Rivera’s money using different means from the point

in time when they filed for Chapter 11 protection, November 26,

2001. Cf. Baker v. Minn. Min. and Mfg. Co., Inc., 99 Fed. Appx.

718, 723-24 (6th Cir. 2004) (partial subrogee not an indispensable

party because it can recover whatever it is owed in a separate

action); Dainippon Screen Mfg. Co. v. CFMT, Inc., 142 F.3d 1266,

1272 (Fed. Cir. 1998) (licencee of patent is not indispensable

because it could cause the patent owner to bring a separate action

for infringement).

Rivera also relies unduly on Coachman’s obligations under

the Subordination Agreement to support his indispensability pitch.

Under the terms of the Subordination Agreement, the subordination

and trust obligations ran from Rivera (the obligor) to DVC (the

obligee). Coachman was a signatory to the Subordination Agreement,

but its participation was perfunctory: Coachman simply promised

that Rivera’s obligations under the Subordination Agreement would

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not impair its obligations under the Note, under which it was the

sole obligor. Even if we were to conclude that Coachman was a co-

obligor under the Subordination Agreement — as opposed to a mere

promissor — it is clear that co-obligors generally are not

indispensable parties in contract disputes that do not involve

reformation, cancellation, rescission, or otherwise challenge the

validity of the contract. See, e.g., Universal Reinsurance Co. v.

St. Paul Fire & Marine Ins. Co., 312 F.3d 82, 87 (2d Cir. 2002)

(joint obligors not indispensable); Janney Montgomery Scott,

Inc. v. Shepard Niles, Inc., 11 F.3d 399, 405 (3d Cir. 1993) (co-

obligor/non-obligee not indispensable); Brackin Tie, Lumber & Chip

Co., Inc. v. McLarty Farms, Inc., 704 F.2d 585, 586-87 (11th Cir.

1983) (co-obligors/non-obligees are not indispensable); Bio-

Analytical Servs., Inc. v. Edgewater Hosp., Inc., 565 F.2d 450,

452-53 (7th Cir. 1977) (guarantor/co-obligor not indispensable);

Trans. Pacific Corp. v. S. Seas Enters., Ltd., 291 F.2d 435, 436

(9th Cir. 1961) (per curiam) (joint obligors not indispensable when

the suit is not for rescission, but for damages for breach of

contract); 7 Charles Alan Wright et al., Federal Practice &

Procedure § 1613, at 177-78 (3d ed. 2001) (“Joint obligors thus

typically are treated as Rule 19(a) parties, but are not deemed

indispensable under Rule 19(b).”); c.f. H.D. Corp. of P.R., 791

F.2d at 993 (nondiverse parent corporation was indispensable

because it was a signatory to the agreements at issue in the

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litigation and plaintiffs’ claims were largely directed against it,

not the diverse defendant subsidiary corporation); Acton Co., Inc.

of Mass., 668 F.2d at 77-78 (nondiverse parent corporation was

indispensable because it was a party to the agreements at issue in

the litigation, played a substantial role in the negotiation of

those agreements, and stood to lose a sizable deposit).

Finally, Rivera’s assertion that DCC sought injunctive

relief against Coachman and Olympic Mills misrepresents the record.

If true, such a request might weigh heavily in favor of

indispensability. See, e.g., Kellogg, 440 F.3d at 548 (stating

that nondiverse intervenor was indispensable insofar as plaintiff

sought an injunction that affected the intervenor’s interests under

the agreements); Acton Co., Inc. of Mass., 668 F.2d at 81-82

(seeking recision of a contract makes all parties to that contract,

and others having a substantial interest in it, indispensable

parties); 7 Charles Alan Wright et al., Federal Practice &

Procedure § 1613, at 196 (3rd ed. 2001) (“[I]n an action seeking

specific performance of a contract all persons who will be required

to act to carry out a court order compelling performance have been

held to be indispensable parties.”). But review of the amended

complaint shows that DCC sought only to prevent Rivera, in his

capacity as chairman and chief executive officer, from directing

Coachman and Olympic Mills to repay his subordinated loans until

DCV’s senior loan was paid in full. DCC sought nothing from

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Coachman or Olympic Mills directly or in any way that would affect

their interest under the Subordination Agreement.

Under these circumstances, where pragmatism strongly

militates against a finding of indispensability and Rivera has not

persuaded us otherwise, the plaint falls far short of the mark.

3. Divestiture. Whether dispensable, nondiverse

defendant-intervenors destroy complete diversity is a question we

have not addressed squarely. An insensitive reading of Kellogg —

but one that would not necessarily be inconsistent with our strict

construction of the complete-diversity rule — would seem to suggest

that nondiverse intervenors are incompatible with the tenets of the

rule. But “[j]udges expect their pronunciamentos to be read in

context,” Wisehart v. Davis, 408 F.3d 321, 326 (7th Cir. 2005), and

the broader context of Kellogg does not support such an absolutist

approach. Kellogg involved a likely indispensable party that, as

assignee under the contract at issue, sought (effectively) to

substitute itself for the diverse defendant by means of

intervention as of right. Intervention was thus the product of the

plaintiff-appellees’ choice to sue the diverse assignor instead of

the nondiverse assignee. This was untenable in Kellogg because a

plaintiff cannot circumvent complete diversity by artful pleading;

otherwise, “a plaintiff could leave non-diverse defendants out of

the original lawsuit and then wait for them to be impleaded or

otherwise joined.” Acton Co., Inc. of Mass., 668 F.2d at 79; see

-22-
also Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374-75,

377 (1978).

The circumstances surrounding the intervention of

Coachman and Olympic Mills in the present case are strikingly

different from those in Kellogg. DCC did not need the

participation of Coachman or Olympic Mills to collect the money

Rivera had retained in breach of the Subordination Agreement. When

Coachman and Olympic Mills eventually sought intervention as of

right, the interests they advanced flowed directly from their

status as debtors-in-possession. Critically, these interests did

not arise until Coachman and Olympic Mills filed for bankruptcy on

November 26, 2001, almost a month after DCC filed suit against

Rivera. See Freeport-McMoRan, Inc., 498 U.S. at 428 (a nondiverse

dispensable party that had no interest in the outcome of the

litigation until sometime after suit was commenced did not defeat

diversity jurisdiction); Aurora Loan Servs., Inc. v. Craddieth, 442

F.3d 1018, 1025 (7th Cir. 2006) (holding that diversity

jurisdiction was not destroyed by the intervention of a nondiverse

party whose claims arose in the course of a foreclosure proceeding

after it obtained the certificate of sale); Salt Lake Tribune

Publ’g Co., LLC v. AT & T Corp., 320 F.3d 1081, 1095-97 (10th Cir.

2003) (similar, but in the context of a disputed option to purchase

the assets of a newspaper operation). There was thus no two-step

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evasion of the diversity requirement here such as was lurking

behind the pleadings in Kellogg.

In similar situations, the weight of authority holds that

claims launched by necessary but dispensable, nondiverse defendant-

intervenors do not defeat the original jurisdiction (diversity)

that obtained at the commencement of the action.9 See, e.g.,

Mattel, Inc. v. Bryant, 446 F.3d 1011, 1013 (9th Cir. 2006) (per

curiam); Aurora, 442 F.3d at 1025-26; Grimes v. Mazda N. Am.

Operations, 355 F.3d 566, 573 (6th Cir. 2004); Viacom Int’l, Inc.,

212 F.3d at 726-28; United Capitol Ins. Co. v. Kapiloff, 155 F.3d

488, 492 (4th Cir. 1998); Dev. Fin. Corp. v. Alpha Hous. & Health

Care, Inc., 54 F.3d 156, 160 (3d Cir. 1995); see also Freeport-

McMoRan, 498 U.S. at 428 (citing Wichita R.R. & Light Co. v. Pub.

Util. Comm’n of Kan., 260 U.S. 48, 54 (1922) (“Jurisdiction once

9
From this perspective, the proper alignment of Coachman and
Olympic Mills becomes more than an academic exercise, see supra
note 8, because the intervention of a nondiverse party as a
plaintiff raises a suspicious judicial eyebrow under § 1332. See,
e.g., Aurora, 442 F.3d at 1025-26; Viacom Int’l, Inc. v. Kearney,
212 F.3d 721, 726-28 (2d Cir. 2000); accord Acton Co., Inc. of
Mass., 668 F.2d at 79. Although this is a close call (perhaps
because it is difficult to quantify and compare the parties’
competing and complex interests), the record does not support
realigning Coachman and Olympic Mills as plaintiff intervenors.
Coachman and Olympic Mills intervened to forestall DCC from
collecting on a favorable judgment it had received just ten days
earlier, and then sued DCC (plus Rivera and others) when the
district court did not immediately refer the case to the bankruptcy
court. Certainly the intervenors had interests adverse to
Rivera’s, but, on balance and in light of the circumstances
surrounding the intervention, DCC was the more antipodean player as
competitor for Rivera’s ill-gotten gains.

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acquired . . . is not divested by a subsequent change in the

citizenship of the parties. Much less is such jurisdiction

defeated by the intervention, by leave of the court, of a party

whose presence is not essential to a decision of the controversy

between the original parties.”)). The present case offends the

complete-diversity rule even less: in adversary proceeding No. 03-

0090 (the case at bar), Coachman and Olympic Mills made no claims

against any party and no party made any claims against them. (This

is not the case, of course, in adversary proceeding No. 03-0042,

which is not before us.)10

Confident in our jurisdiction, we proceed directly to the

merits.

B. The Contract Claims

1. Subordination. The parties dispute the capture of

the term “Subordinated Debt” as defined in ¶ 1.a the Subordination

Agreement. DCC contends, and the lower courts unanimously agreed,

10
In its supplemental brief, DCC suggests that, were we to
hold that intervention had defeated the district court’s
jurisdiction (which we do not), we should exercise our power under
Fed. R. Civ. P. 21 and, to preserve diversity, dismiss the case as
to Coachman and Olympic Mills. See Newman-Green, Inc. v. Alfonzo-
Larrain, 490 U.S. 826, 837 (1989). DCC’s suggestion is puzzling.
Although neither party brought this fact to the Court’s attention,
our independent review of the record reveals that Coachman and
Olympic Mills were to be dismissed from adversary proceeding No.
03-0090 in accordance with a settlement stipulation in adversary
proceeding No. 03-0042. This dismissal alone would have cured any
jurisdictional defect ailing the case up to that point and
invocation of Rule 21 would be superfluous as a result. Cf.
Caterpillar, Inc. v. Lewis, 519 U.S. 61, 65, 68-69 (1996).

-25-
that the plain language in the Subordination Agreement subordinates

all of Rivera’s loans to Coachman and its affiliates, irrespective

of the time they were made. Rivera disputes this conclusion and

argues that the plain language subordinates only loans made before

the execution of the Subordination Agreement or, in the

alternative, that the language is ambiguous and should thus be

construed against its drafter, DCC. This distinction is critical

because Rivera submits that the contested payments apply only to

his loans that post-date the Subordination Agreement, not his

previous loans that, under the Subordination Agreement, constitute

subordinated debt.

The parties identify two provisions in the Subordination

Agreement as evidence tending to support their respective

positions. The first is defining “Subordinated Debt,” provided

below in full:

“Subordinated Debt” shall mean all
principal, interest, fees, costs, enforcement
expenses (including legal fees and
disbursements), collateral protection expenses
and other reimbursement and indemnity
obligations that the Subordinating Creditor
[Rivera] has loaned to the Borrower [Coachman]
or any of its affiliates.

The second details “Subordination,” and reads in pertinent part:

7. Subordination. The Senior Debt [DCV’s
$2 million bridge loan] and the Note and any
and all other documents and instruments
evidencing or creating the Senior Debt and all
guaranties, mortgages, security agreements,
pledges and other collateral guarantying or
securing the Senior Debt or any part thereof

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 shall be senior to the Subordinated Debt
irrespective of the time of the execution,
delivery or issuance of any thereof.

Both DCC and Rivera agree (ignoring Rivera’s alternate argument for

the moment) that these provisions are unambiguous, but in opposite

ways. Displaying its conjugative prowess, DCC argues that “shall

mean” indicates “the future progressive tense and, as the main verb

phrase in this definitional section, use of the those words require

that the entire definition is to be read at the time the

[Subordination Agreement] is being enforced, not the time at which

it was executed.” Not to be syntactically outplayed, Rivera

responds that “has loaned” can only refer to loans outstanding as

of the date of the Subordination Agreement, and cannot possibly

encompass loans made after that date. The grammatical acrobatics

continue with competing interpretations of the “Subordination”

clause, specifically with respect to the following language:

“irrespective of the time of the execution, delivery or issuance of

any thereof.” DCC posits that this language modifies “Subordinated

Debt,” which is the closest noun; Rivera argues that it modifies

“Senior Debt,” which is the direct object of “shall be senior.”

DCC also invokes two provisions in the Note to support

its interpretation of the Subordination Agreement. The first is

the Note’s definition of the Subordination Agreement, which is

attached to the Note as an annex, provided in ¶ 1.(xiv):

“Subordination and Standby Agreement”
shall mean the agreement (Annex D) by Mr. Luis

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 Rivera to subordinate and defer repayment of
the principal of any loan by him to the
Company [Coachman], Olympic Mills Corp.,
Olympic Group, Inc. or the new entity pursuant
to the Hampshire Agreement until this Note is
converted and repaid.

The second, a condition precedent to DCV’s loan under the Note, is

provided in ¶ 5.1:

Subordination and Standby Agreement. Mr
Luis Rivera Siaca shall execute an irrevokable
Subordination and Standby Agreement, in the
form attached here to as Annex D, whereby his
loans to the Company [Coachman] or its
affiliates are subordinated to this Note and
he agrees to defer payment of principal on
such loans until this Note is either converted
into Series E preferred Stock or is repaid.

Using this language, and corresponding language in the

Subordination Agreement that it claims expressly incorporates the

Note by reference (i.e., the recital that identifies the execution

of the Subordination Agreement as a “condition precedent to the

Lender’s [DCV] willingness to make a loan to the Borrower

[Coachman] pursuant to the Note”), DCC argues that the

“Subordinated Debt” unambiguously applies to all of Rivera’s loans

to Coachman and its affiliates. Rivera concedes that the

Subordination Agreement “refers to and describes the Note,” but

denies that it incorporates the Note by reference. Also, Rivera

argues that the Note is “outside the four corners” of the

Subordination Agreement, and, for the purposes of deciding their

contract dispute, constitutes extrinsic evidence.

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 We review de novo the decisions of the district court

(liability) and the bankruptcy court (damages) granting summary

judgment, and owe no particular deference to the conclusions of the

BAP. See Razzaboni v. Schifano (In re Schifano), 378 F.3d 60, 66

(1st Cir. 2004). We also review de novo questions of contractual

interpretation, unless disputed and genuine issues of material fact

(over extrinsic evidence, for example) bear upon the interpretation

of ambiguous language. See Liberty Mut. Ins. Co. v. Greenwich Ins.

Co., 417 F.3d 193, 197 (1st Cir. 2005).

It is undisputed that, pursuant to ¶ 12 of the

Subordination Agreement (and ¶ 16 of the Note), Delaware provides

the governing substantive law. Under Delaware law, “[t]he basic

rule of contract construction gives priority to the intention of

the parties.” E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498

A.2d 1108, 1113 (Del. 1985). “In upholding the intentions of the

parties, a court must construe the agreement as a whole, giving

effect to all provisions therein.” Id. “Moreover, the meaning

which arises from a particular portion of an agreement cannot

control the meaning of the entire agreement where such inference

runs counter to the agreement’s overall scheme or plan.” Id.

“Where the contract language is clear and unambiguous, the parties’

intent is ascertained by giving the language its ordinary and usual

meaning.” Nw. Nat’l Ins. Co. v. Esmark, Inc., 672 A.2d 41, 43

(Del. 1996). “Courts consider extrinsic evidence to interpret the

-29-
agreement only if there is an ambiguity in the contract.” Id. “A

contract is not rendered ambiguous simply because the parties do

not agree upon its proper construction. Rather, a contract is

ambiguous only when the provisions in controversy are reasonably or

fairly susceptible of different interpretations.” Rhone-Poulenc

Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196

(Del. 1992).

To our knowledge, the Delaware Supreme Court has not yet

had occasion to apply, as we have, the long-recognized principle

that,

in the absence of anything to indicate a
contrary intention, instruments executed at
the same time, by the same contracting
parties, for the same purpose, and in the
course of the same transaction will be
considered and construed together as one
contract or instrument, even though they do
not in terms refer to each other.11

11 Richard A. Lord, Williston on Contracts § 30:26 at 239-42 (4th

ed. 1999) (citing Bailey v. Hannibal & St. Joseph R.R. Co., 84

11
This principle is associated with but distinct from a
court’s consideration of a separate writing expressly incorporated
by reference — something the Delaware Supreme Court has recognized
(but with material limitations) and what DCC argues should permit
this court to read the Subordination Agreement along side the Note.
Compare 11 Williston on Contracts § 30:25 (“Writing Expressly
Incorporated By Reference”), with id. § 30:26 (“Writing Implicitly
Incorporated By Reference”); see Delaware v. Black, 83 A.2d 678,
681 (Del. 1951) (holding that a contract may incorporate by
reference provisions in another instrument but only to the extent
that the incorporated matter is specifically set forth or
identified); see also Realty Growth Investors v. Council of Unit
Owners, 453 A.2d 450, 454 (Del. 1982) (similar); Pauley Petroleum,
Inc. v. Cont’l Oil Co., 231 A.2d 450, 456 (Del. Ch. 1967) (same).

-30-
U.S. 96 (1872)); see Crowe v. Bolduc, 365 F.3d 86, 95-97 (1st Cir.

2004) (using other documents in same transaction to find that

contract was not ambiguous under Maine law); Crowe v. Bolduc, 334

F.3d 124, 137 (1st Cir. 2003) (using principle to find contract

ambiguous under Maine law); cf. Senior v. NSTAR Elec. & Gas Corp.,

449 F.3d 206, 219 (1st Cir. 2006) (using principle to construe an

ambiguous collective bargaining agreement). We think it fair to

predict that, were the Delaware Supreme Court presented with this

question, it would read the disputed language of the Subordination

Agreement in light of the pertinent provisions of the Note.12 Both

contracts were signed on the same day (February 24, 2000) between

substantially the same parties (Rivera signed the Note as

Coachman’s chairman) as facets of the same transaction (the

12
We observe that Delaware’s Chancery courts, in the
figurative trenches of contract interpretation, have recognized and
applied this precept in making ambiguity determinations. Gildor v.
Optical Solutions, Inc., No. 1416-N, 2006 WL 1596678 at *6 n.16
(Del. Ch. June 5, 2006) (Strine, V.C.) (unpublished); Simon v. The
Navellier Series Fund., No. 17734, 2000 WL 1597890 at *7 & n.33
(Del. Ch. Oct. 19, 2000) (Strine, V.C.) (unpublished); Crown Books
Corp. v. Bookstop, Inc., No. 11255, 1990 WL 26166 at *6 (Del. Ch.
Feb. 28, 1990) (Allen, C.J.) (unpublished). The lower federal
courts in Delaware have recognized this principle as well. See
Magten Asset Mgmt. Corp. & Law Debenture Trust Co. of N.Y. v. Nw.
Corp. (In re Nw. Corp.), 313 B.R. 595, 601 (Bankr. D. Del. 2004)
(“Under Delaware law, all related documents and instruments in a
single transaction together are harmonized to the extent
possible.”); Huyler’s v. Ritz-Carlton Rest. & Hotel Co. of Atlantic
City, 1 F.2d 491, 492 (D. Del. 1924) ( “It is true that the
principle by which instruments executed at the same time, by the
same parties, for the same purpose, and in the course of the same
transaction are considered as one, and receive the same
construction as if embodied in one instrument, is of wide
application and the illustrative cases are many.”).

-31-
infusion of capital into the Coachman enterprise) for a unitary

purpose (to fund the acquisition of sweaters). As further evidence

of symbiosis, the execution of the Subordination Agreement was

listed as a condition precedent to the Note, and the document was

physically attached to the Note as an annex. Also, neither

document contains a merger clause or any indication of the parties’

intent to read each contract in isolation.

The language of the Subordination Agreement quickly comes

into focus when viewed through the lens of the Note. The most

obvious blow to Rivera’s interpretation of the Subordination

Agreement is the Note’s use of “any loan” in ¶ 1.(xiv), without any

accompanying prospective limitation. In fact, subsequent language

in ¶ 1.(xiv) shows that such a limitation could not have been

intended. In pertinent part, ¶ 1.(xiv) explains that the

Subordination Agreement would require Rivera “to subordinate and

defer repayment of the principal of any loan by him to the Company

[Coachman], Olympic Mills Corp., Olympic Group, Inc. or the new

entity pursuant to the Hampshire Agreement until this Note is

converted and repaid.” (Emphasis supplied.) However, prior to

February 24, 2000, Rivera had extended loans to Coachman and

Olympic Mills only; he did not extend any loans to the “new entity”

(a/k/a/ Glamourette) until afterwards. (It is unclear even whether

Glamourette existed on the date of the signing.) Further, ¶ 5.1

provides that DCV’s loan would issue only if Rivera would agree

-32-
that “his loans to the Company [Coachman] or its affiliates [not

simply “and its affiliate Olympic Mills”] are subordinated to this

Note.” (Emphasis supplied.) The Subordination Agreement uses

similarly broad language in ¶ 1.(xiv): “the Subordinating Creditor

[Rivera] has loaned to the Borrower [Coachman] or any of its

affiliates.” (Emphasis supplied.)

We are unwilling to endorse, as Rivera would have us do,

an interpretation of “has loaned” that would render the above

language meaningless or superfluous, see Crowe, 365 F.3d at 97, and

that would run counter to the overall scheme that these documents

were designed to effect.13 See E.I. du Pont de Nemours, 498 A.2d

at 1113. Because the disputed language is not reasonably

susceptible of different interpretations, see Rhone-Poulenc, 616

A.2d at 1195, we hold that the Subordination Agreement, when

properly read in conjunction with the Note, unambiguously covers

the post-Subordination Agreement loans at issue in this case.14 We

13
Rivera’s argument that the phrase “pursuant to the Hampshire
Agreement” in ¶ 1.(xiv) of the Note limits subordination to
“specific indebtedness” lacks merit. As an initial matter, it is
debatable whether this language imports a subject-matter restraint
on the Subordination Agreement or simply associates the “new
entity” with the Hampshire venture. But even giving Rivera the
benefit of the doubt, he admits that the loans that post-date the
Subordination Agreement were to provide additional capital for the
acquisition of Hampshire assets, presumably after the depletion of
DCV’s loan.
14
We reach this conclusion in spite of DCC’s assertion that
“shall mean,” as it is used to define “Subordinated Debt” in ¶ 1.b
of the Subordination Agreement, independently denotes the very
specific intention that DCC assigns to it (without any further

-33-
are therefore not required (or permitted), under Delaware law, to

consider evidence extrinsic to these documents. See Eagle Indus.,

Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del.

1997).15

2. Equitable Estoppel. In a last-ditch attempt to

avert liability, Rivera contends that the doctrine of equitable

estoppel precludes DCC from enforcing the Subordination Agreement.

Specifically, Rivera argues that president of DCC and then Coachman

director Wayne Foren “expressly consented to or knowingly

acquiesced in” the repayment of Rivera’s loans.16 To support his

argument, Rivera touts (1) an April 14, 2000 letter in which Foren

proposed that Rivera provide a $3 million short-term credit line

that would be exempt from the Subordination Agreement, and (2) the

indication here that “shall mean” bears on the question presented).
Such language is common in defining contractual terms, as
exemplified by the very contracts in this case: both defined terms
in the Subordination Agreement (“Senior Debt” is the other, in ¶
1.a), and all fourteen in the Note, employ “shall mean” to convey
the terms’ intended meaning.
15
We need not, and therefore do not, address the parties’
competing interpretations of the “Subordination” clause in ¶ 7 of
the Subordination Agreement. Assuming without deciding that
“irrespective of the time of the execution, delivery or issuance of
any thereof” modifies the term “Senior Debt,” this interpretation
is not at all inconsistent with our holding with respect to the
definition of “Subordinated Debt” in ¶ 1.b and the related
provisions in the Note.
16
Foren was elected to Coachman’s board of directors as a
condition precedent to the bridge loan, pursuant to ¶ 5.3 of the
Note. Although his term in office was to continue “as long as any
amount is outstanding” under the Note, Foren resigned in February
2001 when Coachman defaulted.

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December 12, 2000 board minutes that do not indicate whether Foren

objected to the prospect that Coachman would use proceeds from the

Puerto Rico Industrial Incentive Fund to repay Rivera’s $4 million

loan that pre-dated the Subordination Agreement. Ignoring the fact

that Rivera did not present the April 14 letter to the district

court in his opposition to DCC’s summary judgment motion, the

dispositive flaw in this evidence is that it fails to show how

Rivera was induced to rely — let alone detrimentally — on Foren’s

conduct. See VonFeldt v. Stifel Financial Corp., 714 A.2d 79, 87

(Del. 1998) (requiring a showing of detrimental reliance to support

a claim of equitable estoppel). Without more, we are bound to

reject this argument.

3. Damages. Rivera’s contention that the bankruptcy

court’s award does not accurately reflect expectation damages, see

Duncan v. Theratx, Inc., 775 A.2d 1019, 1022 (Del. 2001) (requiring

the breaching promisor to compensate the promisee for the

promisee’s reasonable expectation of the value of the breached

contract), is waived on at least two grounds. First, as presented

to the district court (and later reiterated to the bankruptcy

court), the argument was fatally undeveloped, comprising only four

sentences, a citation to a district court opinion, and no analysis

whatsoever. See McCoy v. Mass. Inst. of Tech., 950 F.2d 13, 22

(1st Cir. 1991) (“theories not raised squarely in the district

court cannot be surfaced for the first time on appeal”). Second,

-35-
as presented to us, the argument impermissibly depends on an

entirely new factual predicate: that “Olympic and Glamourette had

many other creditors besides Rivera Siaca to whom money was owned

and who could have been paid without violating the Subordination

Agreement.” See Cochran v. Quest Software, Inc., 328 F.3d 1, 11

(1st Cir. 2003) (“a party may not advance for the first time on

appeal either a new argument or an old argument that depends on a

new factual predicate”). For these reasons, we decline to

entertain it.

III. CONCLUSION

To sum up, we hold first that the intervention of

nondiverse Coachman and Olympic Mills has not destroyed diversity

jurisdiction, and that we have jurisdiction to decide the merits of

this appeal as a result; second, that the Subordination Agreement,

when properly read in tandem with the Note, unambiguously governs

the loans disputed in this case; and third, that Rivera’s remaining

arguments are either without merit (equitable estoppel) or waived

(damages). The judgment of the BAP is therefore

Affirmed.

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