Vogel v. Boris

Background

Stephen Vogel sued David Boris and Marshall Kiev for breach of contract and sought a constructive trust. The dispute concerned Forum Capital Management LLC, an entity created by Vogel, Boris, and Kiev to manage Forum Merger Corporation I, a special-purpose acquisition company. The parties executed an operating agreement in September 2017.

Section 7.02(b) of the agreement restricted managers and members from providing services for another special-purpose acquisition company or investing in one, subject to stated exceptions and unanimous approval by all managers. The provision did not expressly state how long the restriction would last. Other parts of the agreement described Forum Capital’s purpose as managing the first venture and provided for dissolution when the sponsor was liquidated, unless all managers agreed otherwise.

After Forum Merger Corporation I completed its business combination with ConvergeOne Holdings, Inc., the related entities were wound up. Vogel later pursued a separate special-purpose acquisition company. Boris and Kiev formed and worked on Forum Merger Corporation II without Vogel. Vogel claimed that this violated Section 7.02(b) and sought damages based on the value of the shares he allegedly would have received had he participated.

Motions and Legal Standard

The parties filed cross-motions for summary judgment under Federal Rule of Civil Procedure 56. Vogel sought judgment on his breach-of-contract claim, damages, and fees. Boris and Kiev sought judgment dismissing Vogel’s claims and awarding fees. Summary judgment is appropriate when the record shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law.

Court’s Analysis

The court applied Delaware contract law. It held that Section 7.02(b)’s silence about duration made the provision ambiguous because it could reasonably be read either as perpetual or as lasting only through the operating agreement. The court therefore considered evidence outside the agreement, including the parties’ term sheets, communications, and conduct.

The court found that the undisputed evidence showed the restriction was time-limited. The term sheets repeatedly stated that the restriction on participation in other special-purpose acquisition companies lasted “until the merger is complete.” Vogel testified that he understood the term sheet to limit the restriction to the first venture. The court also relied on Kiev’s communications stating that the restriction should be tied to completion of the first business combination, as well as Vogel’s contemporaneous statement that the agreement governed only until a business combination was completed.

Reading the agreement as a whole, the court concluded that Forum Capital was created to carry out the initial venture. A second venture under the Forum Capital structure would have required all three parties to agree. The agreement’s references to the initial business combination, Forum Merger Corporation I, and the parties’ obligations until completion of that combination supported that interpretation.

The court next held that the operating agreement terminated automatically under Section 11.01(c). That provision required Forum Capital to be dissolved and wound up upon liquidation of the sponsor unless all managers agreed in writing otherwise. After the first business combination, Forum Investors I distributed its assets and was dissolved. The court interpreted “liquidation” according to its ordinary meaning, which included winding up and dissolving the sponsor or distributing its assets. The court found that the later filings of certificates of cancellation were administrative formalities rather than the events that first terminated the agreement.

The court also held that Section 7.02(b) did not survive termination of the operating agreement. Reading it as a continuing restriction would have created a perpetual and unlimited restraint on the parties’ ability to pursue special-purpose acquisition companies. The court found that such a reading was inconsistent with the agreement’s structure and commercial context.

Because the agreement had ended before Boris and Kiev’s second venture became a completed business combination, the court alternatively found that Vogel had not shown recoverable damages even if Boris and Kiev had briefly breached the agreement. The court did not address Boris and Kiev’s other affirmative defenses because it found them moot.

Disposition

Judge Victor Marrero denied Vogel’s motion for summary judgment and granted Boris and Kiev’s motion for summary judgment. The court dismissed the case. The order also directed the parties to submit a proposed briefing schedule within 14 days for Boris and Kiev’s motion for fees and costs.