Credit Suisse Sec. (USA) LLC v Ask Jeeves, Inc.

[*1] Credit Suisse Sec. (USA) LLC v Ask Jeeves, Inc. 2009 NY Slip Op 51839(U) [24 Misc 3d 1241(A)] Decided on August 20, 2009 Supreme Court, New York County Bransten, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 20, 2009
Supreme Court, New York County

Credit Suisse Securities (USA) LLC, f/k/a Credit Suisse First Boston LLC, Plaintiff,

against

Ask Jeeves, Inc., Defendant.



600401/06

Eileen Bransten, J.

Pursuant to CPLR 3212, defendant Ask Jeeves, Inc. ("Ask Jeeves") moves for summary judgment dismissing the complaint. Plaintiff Credit Suisse Securities (USA) LLC f/k/a Credit Suisse First Boston LLC ("Credit Suisse") opposes the motion.

In this breach-of-contract action, Credit Suisse sues its former client, Ask Jeeves, for a $21 million investment advisory fee. It alleges that it had an engagement agreement with Ask Jeeves to act as its exclusive financial advisor in connection with "a Company Transaction," and that such a transaction occurred when Ask Jeeves was acquired by IAC/InterActive Corp., in July 2005. Ask Jeeves contends that Credit Suisse was already paid a $4.4 million investment fee upon Ask Jeeves' acquisition of another company, Interactive Search Holdings, Inc. (ISH), in March 2004, and that it is not entitled to another fee under the engagement agreement for a transaction for which Credit Suisse did nothing.

BACKGROUND

Credit Suisse is a global investment banking firm (Defendant's Rule 19-a Statement, ¶ 2). Ask Jeeves is an Internet search engine company (id., ¶ 1).

In early 2003, Ask Jeeves management began considering a sale of the company (id., ¶ 3). It wanted a quick and quiet review of the likelihood of attracting an offer, because if it was not successful it would pursue an independent growth strategy instead (id., ¶¶ 5-7). At the pitch meeting between Ask Jeeves and Credit Suisse, they discussed the potential sale of Ask Jeeves, and the potential sale of its enterprise software division known as Jeeves Solutions (id., ¶ 10). Ask Jeeves ultimately selected Credit Suisse to serve as its investment advisor in connection with the possible sale of the company and of Jeeves Solutions (id., ¶ 12). During the parties' early discussions, Ask Jeeves requested that Credit Suisse evaluate Ask Jeeves' options quickly and quietly to minimize disruptions to the company and prevent rumors of the sale from arising in the marketplace (id., ¶ 13). Ask Jeeves requested that Credit Suisse complete the evaluation process in time to report it to Ask [*2]Jeeves' Board of Directors' Meeting scheduled in May 2003 (id., ¶ 14). Credit Suisse understood that Ask Jeeves wanted to determine whether a transaction could be effected within a few months (id., ¶ 15). As of February 26, 2003, Credit Suisse estimated that the market value of Ask Jeeves was approximately $300 million, and that it would receive an advisory fee of approximately $4.5 million if its efforts successfully resulted in a sale (id., ¶ 18).

The parties, both represented by counsel, negotiated the engagement letter and several drafts were exchanged (id., ¶¶ 19-23). On March 19, 2003, Credit Suisse and Ask Jeeves executed the engagement agreement ("Engagement Agreement") (id., ¶ 24; Exhibit 13 to Affirmation of Chad M. Leicht, Engagement Agreement). Under the Engagement Agreement, Credit Suisse agreed to act as Ask Jeeves' financial advisor "in connection with (i) a Company Transaction . . . and (ii) a Jeeves Solutions Transaction (as defined below) (each of (i) and (ii) above a "Transaction" and collectively, the "Transactions") on the terms and conditions set forth below" (Exhibit 13 to Leicht Affirm., at 1). The term "Company Transaction" was defined to mean "any sale (whether by sale, merger, joint venture or other business strategic combination or other means and whether in one or a series of transactions) of all or 50% or more of the assets or the capital stock" of Ask Jeeves, as well as any other form of transaction "which results in the effective sale of the principal business and operations of the Company" (id. at 3). The term "Jeeves Solutions Transaction" is defined to include "any sale (whether in one or a series of transactions) of all or a substantial amount of the assets or the capital stock of Jeeves Solutions," and any other form of transaction "which results in the effective sale of the principal business and operations of Jeeves Solutions by the current owners" (id.).

The Engagement Agreement provided, in section 1, that Credit Suisse, "shall, as appropriate" advise and assist Ask Jeeves in analyzing and evaluating the company, define objectives, perform valuation analysis, structure and plan a "Transaction," assist in negotiating the terms and conditions of a "Transaction," advise on alternatives, render a fairness opinion if requested, develop and update a list of parties interested in a "Transaction," and perform other financial advisory services (id. at 1). It further provided that, in the event "a Company Transaction is consummated, the Company will pay [Credit Suisse] a Company Transaction Fee,'" which is calculated as a percentage of the aggregate value of the "Company Transaction" (id., at 2). The Engagement Agreement did not have an expiration date, and provided that either party could terminate it upon 10 days prior written notice, and, if Ask Jeeves so terminated the engagement, Credit Suisse was entitled to the full amount of the fee in the event that Ask Jeeves consummated or entered into an agreement for a "Transaction" within 12 months after such termination (id. at 5).

Between March and May 2003, Credit Suisse sought a buyer for Ask Jeeves. It created a list of potential buyers, and contacted 13 companies to gauge their interest in acquiring the company (Defendant's Rule 19-a Statement, ¶ 33). Five companies participated in meetings or calls with Ask Jeeves' management, including Amazon.com, DoubleClick, Microsoft, Yahoo!, and USAInteractive, now known as IAC/InterActiveCorp ("IAC") (id., ¶ 34). At the Ask Jeeves Board of Directors meeting, on May 9, 2003, Credit Suisse reported on its efforts to find a buyer. It identified Yahoo! and IAC as two "potentially interested" parties (Exhibit 6 to Affirmation of Richard F. Schwed, at 8; Deposition of Steven Berkowitz, Exhibit 1 to Schwed Affirm., at 69). Because no potential buyer was willing to purchase Ask Jeeves at a price that was acceptable to the company at that time (Defendant's Rule 19-a Statement, ¶ 37; see Plaintiff's Response to Defendant's Rule 19-a Statement, ¶ 37), it told Credit Suisse to stop actively soliciting buyers (id., ¶ 41). Ask Jeeves decided to focus [*3]on growing as an independent company (Defendant's Rule 19-a Statement, ¶ 42) and engaged Credit Suisse to assist with a $115 million convertible debt offering so that it could raise capital to build the company through acquisitions and internal investment (id., ¶¶ 48-49).

On May 28, 2003, Ask Jeeves sold Jeeves Solutions to Kanisa Inc. for $4.5 million (id., ¶ 46). On August 11, 2003, Ask Jeeves paid Credit Suisse a Jeeves Solutions Transaction Fee of $500,000, pursuant to the Engagement Agreement (id., ¶ 47).

In the fall of 2003, Ask Jeeves entered into discussions with Interactive Search Holdings, Inc. ("ISH"), an online search and media company, regarding Ask Jeeves' potential acquisition of ISH. The discussions were initiated by ISH representatives (id., ¶ 57). Ask Jeeves selected Credit Suisse to provide financial advisory services in connection with this potential acquisition (id., ¶ 58). It agreed to pay Credit Suisse a fee on the ISH transaction in accordance with the fee structure in the Engagement Agreement for "a Company Transaction" (id., ¶ 59). Credit Suisse proposed memorializing the ISH engagement by means of an amendment to the Engagement Agreement, because it thought it "would be simpler to incorporate this transaction into the existing letter rather than drafting a new letter with the exact same terms" (Leicht Affirm., Exhibit 24). Credit Suisse prepared the initial draft of the proposed amendment and David Popowitz negotiated it on its behalf, and Ask Jeeves' General Counsel, Brett Robertson and Claudio Pinkus negotiated the terms on behalf of Ask Jeeves (Defendant's Rule 19-a Statement, ¶¶ 61-62).

The parties executed the Amendment to the Engagement Agreement, dated as of November 21, 2003 (Exhibit 23 to Leicht Affirm.). This Amendment stated that the "purpose of this letter is to confirm that the parties hereby agree that the definition of a Company Transaction' in the Agreement shall be extended to include the Company's proposed acquisition, merger or other business combination with a company known to both of us as Indigo' and that Indigo shall be deemed an Acquired Entity' as defined in the Agreement in connection with such Company transaction" (id.). The Amendment further provided that the Engagement Agreement, "as amended and clarified by this letter amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects" (id.).

Credit Suisse rendered investment banking services to Ask Jeeves in connection with the ISH transaction by assisting in negotiating the terms and conditions of the acquisition, conducting due diligence and presenting the information to Ask Jeeves' Board (Defendant's Rule 19-a Statement, ¶ 69). In March 2004, Ask Jeeves announced that it was purchasing ISH for $343 million in cash and stock (id., ¶ 70). Upon the closing of the ISH transaction, Ask Jeeves paid Credit Suisse a Company Transaction Fee of $4,416,866.75 as provided for under the Amendment (id., ¶ 71). Both before and after the ISH transaction, Ask Jeeves met from time to time with various investment banks, including Credit Suisse, to review potential strategic opportunities, including mergers and acquisition (id., ¶ 73).

In August and again in November 2004, Mr. Battle, the executive chairman of the Board of Ask Jeeves, brought up at a Board meeting that they should again consider selling the company (Deposition of Albert George Battle, dated September 10, 2008, at 160, 167 [annexed as exhibits to both Plaintiff's and Defendant's papers]). In November or December 2004, Mr. Battle proposed engaging Allen & Company, an investment bank, to review possible strategic alternatives for the company (Exhibit 28 to Leicht Affirm. at 2). Ask Jeeves considered Allen & Company desirable because of its strong contacts with media companies that might be interested in purchasing Ask [*4]Jeeves, such as IAC and AOL (Defendant's Rule 19-a Statement, ¶ 79). In late December 2004, Ask Jeeves met with representatives of IAC and AOL, both of which expressed interest in buying Ask Jeeves (id.). Allen & Company managed the sale process with IAC, by among other things, negotiating the price and structure of the transaction (id., ¶ 82; see Battle Dep. at 226-228).

On March 21, 2005, Ask Jeeves and IAC publicly announced that they had entered into a merger agreement (Exhibit 33 to Leicht Affirm.). On May 12, 2005, Mr. Popowitz, of Credit Suisse, informed Ask Jeeves' Chief Financial Officer that Credit Suisse was due a "Transaction Fee" of $21 million (Exhibit 39 to Leicht Affirm. at 1; Defendant's Rule 19-a Statement, ¶ 96). In July 2005, the IAC and Ask Jeeves merger closed.

On February 8, 2006, Credit Suisse commenced this action against Ask Jeeves, asserting a single cause of action for breach of contract, and seeking damages in the amount of $20,790,970.16 (Exhibit 3 to Leicht Affirm.). On September 12, 2006, prior to any discovery in this action, Credit Suisse moved for summary judgment. Ask Jeeves cross-moved for summary judgment. On January 11, 2007, this court (Moskowitz, J) concluded that summary judgment was premature, and denied both motions with leave to renew after discovery (Exhibit 40 to Schwed Affirm.).

Discovery is complete. A Note of Issue was filed on September 15, 2008.

Ask Jeeves now moves for summary judgment dismissing the complaint. It contends that the Engagement Agreement is clear and unambiguous. It urges that the agreement provided for only one "Company Transaction," and, therefore, only one "Company Transaction Fee." Ask Jeeves asserts that Credit Suisse received a $4.4 million Company Transaction Fee for its work on the Company Transaction involving the purchase of ISH which closed in May 2004, and is not entitled to a second fee. It urges that Credit Suisse did not perform any services in connection with the IAC merger, and clearly is not entitled to $21 million. Ask Jeeves contends that the Engagement Agreement consistently used the word "a" with the terms "Company Transaction," and that the clear use of the singular limited the scope of Credit Suisse's engagement to only one Company Transaction. Therefore, when Credit Suisse was paid its one Company Transaction Fee in connection with the ISH transaction, each party's performance under the Engagement Agreement was completed and the contract was discharged. Ask Jeeves maintains that this is the only reasonable construction of the agreement. It argues that the purpose of the agreementCredit Suisse was to provide investment banking services in connection with a single contemplated transaction, namely the sale of the companyreinforces this construction. It maintains that the definition of "Company Transaction" confirms that any such transaction would only occur once, since a company can sell itself only once. Ask Jeeves asserts that nothing in the Amendment increases the number of Company Transactions contemplated or indicates that it was either party's intention to do so. Even if the court were to determine that the contract was ambiguous, Ask Jeeves contends that Credit Suisse's interpretation cannot be attributed to Ask Jeeves, because it was never held by Ask Jeeves or communicated to it.

In opposition, Credit Suisse first argues that the court decided on the prior summary judgment motions that the Engagement Agreement was ambiguous, and that determination is law of the case. Next, it contends that Ask Jeeves has not met its burden of demonstrating that its interpretation of the Engagement Agreement is the only reasonable interpretation. Credit Suisse asserts that the purpose of the Engagement Agreement was to retain Credit Suisse for a sale of Ask Jeeves. It further maintains that the Amendment memorialized the parties' agreement to engage [*5]Credit Suisse for an additional transaction, the ISH purchase, while keeping the original Engagement in full force and effect.

Credit Suisse contends that Ask Jeeves' interpretation requires the court to read the Amendment as altering the fundamental purpose of the Engagement Agreement so that Credit Suisse was no longer engaged for the sale of Ask Jeeves. It urges that particular words, such as "a," must not be given undue force, and must be considered in light of the obligation as a whole, and the intention of the parties. Credit Suisse asserts that if the phrase "a Company Transaction" necessarily meant that there could only be one Company transaction, then the phrase "a Transaction," which is used throughout the agreement, would mean only one transaction. However, Credit Suisse argues, the Engagement Agreement provides that Credit Suisse was engaged for more than one transaction—both the sale of the company and the Jeeves Solutions Transaction.

Moreover, the Amendment explicitly extended the scope of the relationship to include Credit Suisse's engagement as advisor for the ISH purchase in addition to the sale of Ask Jeeves to another company. Ask Jeeves' reading of the Amendment alters the purpose of the Engagement Agreement so that Credit Suisse would no longer be engaged for the sale of Ask Jeeves. Credit Suisse further argues that substantial evidence in the record supports its interpretation of the Engagement Agreement and Amendment.

ANALYSIS

The motion for summary judgment is denied.

Whether an agreement is ambiguous or not is a question of law to be resolved by the courts (see W.W.W. Assocs. v Giancontieri, 77 NY2d 157, 162 [1990]). The agreement should be read as a whole to determine its purpose and intent, and it should be construed to give effect and meaning to all provisions (id.; see also American Express Bank Ltd. v Uniroyal, Inc., 164 AD2d 275, 277 [1st Dept 1990], appeal denied 77 NY2d 807 [1991]). Words and phrases are given their plain meaning (American Express Bank Ltd. v Uniroyal, Inc., 164 AD2d at 277). "Particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought" (Willaim C. Atwater & Co. v Panama Railroad Co., 246 NY 519, 524 [1927]).

In determining whether an agreement is ambiguous, the inquiry is whether " the agreement on its face is reasonably susceptible of more than one interpretation[,] . . . [and a] party seeking summary judgment has the burden of establishing that the construction it favors is the only construction which can fairly be placed thereon'" (Kibler v Gillard Constr., Inc., 53 AD3d 1040, 1042 [4th Dept 2008][quotations omitted]). A contract is unambiguous if the language it uses has a " definite and precise meaning unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion'" (Greenfield v Philles Records, Inc., 98 NY2d 562, 569-70 [2002], quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]). If the contract is reasonably susceptible of more than one interpretation, summary judgment is inappropriate (NFL Enterprises LLC v Comcast Cable Communications, 51 AD3d 52, 58 [1st Dept 2008]; see also Nagel v Nagel, 52 AD3d 258 [1st Dept 2008] [contract ambiguous where more than one reasonable interpretation]; LoFrisco v Winston & Strawn LLP, 42 AD3d 304 [1st Dept 2007]; see also American Express Bank Ltd. v Uniroyal, Inc., 164 AD2d at 277 [triable issue where necessary to refer to extrinsic facts to determine parties' [*6]intent]).

Ask Jeeves has failed to meet its burden of establishing that its construction is the only reasonable one that can fairly be placed on the Engagement Agreement with the Amendment. Each party's interpretation finds some support in the contract language; thus, there is a triable issue as to what the parties intended. Ask Jeeves' view is that the Engagement Agreement required Credit Suisse to work on "a Company Transaction," and that the parties used the modifier "a" to make clear that there was to be only one Company Transaction. In fact, the very first sentence of the Engagement Agreement addresses the scope of Credit Suisse's engagement to act as Ask Jeeves' "exclusive financial advisor in connection with . . . a Company Transaction" (Exhibit 13 to Leicht Affirm., § 1). The Engagement Agreement uses the singular form of "a Company Transaction" throughout the agreement, including in section 1, enumerating specific services to be provided by Credit Suisse; in section 2, referring to Credit Suisse's entitlement to "a Company Transaction Fee" if "a Company Transaction" is consummated; in section 4, in relation to providing a fairness opinion for "a Company Transaction;" as well as in section 5 (confidentiality provision regarding "a Company Transaction"), section 9 (Credit Suisse may hold positions in "a Transaction"), and section 10 (public announcements regarding "a Transaction"). This makes sense, Ask Jeeves argues, because the agreement was for a single contemplated transactionsale of the company. The Amendment could support this position by its consistent use of the singular in expressing its purpose "that the definition of a Company Transaction' in the [Engagement] Agreement shall be extended to include" the proposed ISH acquisition (Exhibit 23 to Leicht Affirm.).

Credit Suisse, however, has also presented support for its conflicting interpretation of the Engagement Agreement and the Amendment. While the Engagement Agreement uses the word "a," this word should not be considered in isolation, and be given undue force. Before the Amendment, the only "Company Transaction" covered by the Engagement Agreement was the sale of the company, which could only occur once. Therefore, the use of the word "a" had no particular significance. In addition, the Engagement Agreement also used the word "a" in situations that referred to more than one. For instance, in identifying the potential services Credit Suisse would provide, the Engagement Agreement repeatedly used the terms "a Transaction." (Exhibit 13 to Leicht Affirm., § 1 [b]-[d]). The agreement, however, expressly provided that Credit Suisse was engaged for more than one transaction — it was engaged for "a Company Transaction" and the separate transaction referred to as a "Jeeves Solutions Transaction."

In addition, the language of the Amendment suggests that there may be a further transaction meeting the definition of "Company Transaction," which may entitle Credit Suisse to a second fee. The parties entered into the Amendment to memorialize their agreement to engage Credit Suisse for the ISH transaction. Thus, the Amendment provided that the parties "agree[d] that the definition of a Company transaction' in the Agreement shall be extended to include [Ask Jeeves'] proposed acquisition [of ISH]" (Exhibit 23 to Leicht Affirm.). This language could be interpreted as extending the relationship to include Credit Suisse's engagement as an advisor regarding the ISH acquisition in addition to the sale of Ask Jeeves to another company. The Amendment does not state that it operated to terminate the Engagement Agreement or that the parties thereafter would have no obligations to one another. Instead, it specifically states that the Engagement Agreement "is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects" (id.). This language suggests that the parties intended to extend the engagement of Credit Suisse to include [*7]the ISH acquisition, while at the same time leaving the remainder of the engagement in full force and effect.

Because the Engagement Agreement and its Amendment are reasonably susceptible to more than one interpretation, it is ambiguous. The extrinsic evidence, moreover, is insufficient to resolve the ambiguity. Both Ask Jeeves and Credit Suisse submit conflicting deposition testimony from the parties involved in drafting the agreements, regarding their intent (see Deposition of Brett Robertson, dated September 19, 2008, at 264-265, 266-267; Deposition of Emmanuel DeSousa, dated October 7, 2008, at 67; Deposition of George Boutros, dated August 5, 2008, at 63-64, 67-68, 72-73; Robertson Dep. at 76-77). Additionally, contrary to Credit Suisse's contention that it is entitled to a fee despite not performing any substantial work in bringing about the deal, other than introducing IAC to Ask Jeeves over two years before, the Engagement Agreement can be construed to require Credit Suisse to have performed a role and completed the services listed in section 1 of that agreement.

The court has considered the remaining arguments of the parties' and finds them to be without merit.

Accordingly, it is ORDERED that the motion of defendant Ask Jeeves, Inc. for summary judgment is denied.

This constitutes the Decision and Order of the Court.

Dated: New York, New York

August, 2009

ENTER:

Hon. Eileen Bransten