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KLP Enterprises, LLC v. Sassani

United States District Court, D. Connecticut

June 20, 2019

KLP ENTERPRISES, LLC, Plaintiff,
v.
THOMAS J. SASSANI, Defendant.

          RULING ON MOTION TO STRIKE JURY DEMAND

          Michael P. Shea, U.S.D.J.

         Plaintiff KLP Enterprises, LLC (“KLP”) has moved under Fed.R.Civ.P. 39 to strike Defendant/Counterclaim Plaintiff Thomas J. Sassani's demand for a jury trial (ECF No. 30). (See ECF No. 66.) KLP argues that the relevant agreements between the parties contained enforceable waivers of Sassani's jury trial rights, and that those waivers apply to all remaining claims in the case. (See ECF No. 66-1 at 4-5.) Sassani filed an opposition to the motion, and KLP filed a reply. (ECF Nos. 69, 76.) For the reasons set forth below, KLP's motion to strike Sassani's jury demand is GRANTED in part and DENIED in part. (ECF No. 66.)

         I. Background

         I assume the reader's familiarity with the record and set forth only those facts necessary to decide KLP's motion.[1]

         A. The Parties

         KLP is an investor in Zozi, a start-up online reservation, payment and customer management software and system used to book travel tours and activities. (ECF No. 54 at 1.) Sassani was a shareholder in Zozi and, until his termination on January 24, 2017, its CEO. (Id.)

         B. Jury Trial Waivers

         On or about April 11, 2016, KLP and Sassani entered into three related agreements in connection with KLP's $5.7 million loan to Sassani: a Note, Pledge Agreement, and Security Agreement. All three agreements contain virtually identical jury trial waiver provisions.

         The jury trial waiver in the Note provides:

18.1 BORROWER BY EXECUTION HEREOF, AND THE SECURED PARTY BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE HOLDER TO MAKE THE LOAN AND ACCEPT THIS NOTE.

         (See ECF No. 66-7, Exhibit 5-A to the Declaration of Gerry Silver, Esq. (“Silver Decl.”), at § 18.1 (hereinafter the “Note”).) Similarly, the jury trial waiver in the Pledge Agreement provides:

16. Jury Trial Waiver. BORROWER BY EXECUTION HEREOF, AND LENDER BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE, OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO ENTER INTO AND ACCEPT THIS AGREEMENT.

         (See ECF No. 66-7, Silver Decl. Ex. 5-B, at § 16 (hereinafter the “Pledge Agreement”).) Finally, the jury trial waiver in the Security Agreement provides:

Section 21. Waiver of Jury Trial to the Extent Permitted. THE BORROWER BY EXECUTION HEREOF, AND THE SECURED PARTY BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE, OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE SECURED PARTY TO ENTER INTO AND ACCEPT THIS AGREEMENT.

         (See ECF No. 66-7, Silver Decl. Ex. 5-C, at § 21 (hereinafter “Sec. Agreement”).) Sassani is defined as the “borrower” in all three agreements. (See Note at 1; Pledge Agreement at 1; Sec. Agreement at 1.)

         C. KLP's Evidence

         KLP includes as exhibits numerous emails between Sassani, KLP, and attorneys from Gunderson Dettmer Stough (“Gunderson”), a law firm that served as Zozi's outside counsel (ECF No. 76 at 9), reflecting negotiations over the three agreements and Sassani's solicitation of advice from Gunderson about the loan arrangement.

         On March 31, 2016, Sassani emailed KLP's Chief Executive Officer, Elon Boms, requesting a $5.7M loan from KLP secured against his assets, $5M of which would be a direct investment into Zozi. (See ECF No. 76-3, Exhibit 2 to the Reply Declaration of Gerry Silver, Esq. (“Silver Reply Decl.”), at 3.) Sassani explained that he was “very confident in Zozi's future and appreciate the opportunity to participate further in it's [sic] success, ” and explained that the $5M investment would make KLP and Sassani “true partners and [Sassani] would be even more aligned with the success of the company.” (Id. at 3.) Sassani also proposed, as part of Zozi's financing proposal, a third $5M tranche of loans beyond his initial immediate $5M investment, commenting that he was “keenly interested in increasing my ownership in ZOZI as much as possible.” (Id.) The same day, Sassani forwarded this email to George Brencher, KLP's attorney. (Id. at 2.)

         On April 4, 2016, Brencher sent Sassani “draft documents relating to the proposed loan from KLP to [Sassani].” (ECF 66-3, Silver Decl. Ex. 1, at 2.) The attachments, which are omitted from the exhibit, appear to be drafts of the Note, Pledge Agreement, and Security Agreement. (Id.)

         In an April 7, 2016 email, Sassani indicated to Brencher that “[m]y counsel just got back to me with comments/questions.” (See ECF No. 76-5, Silver Reply Decl. Ex. 4, at 1.) Later the same day, Sassani e-mailed Brencher again, attaching “docs with comments from counsel and a few additions/questions from me responding to their questions for me in the docs.” (ECF No. 76-2, Silver Reply Decl. Ex. 1, at 2.)[2] Sassani's email copies, among others, Joshua C. Cook, a Gunderson attorney. (Id.) The email attaches drafts of the Note, Security Agreement, and Pledge Agreement. (Id. at 4-42.) Each draft contains the caption “GDS Comments 4/5/16” and numerous comments and edits in tracked changes, as well as various “[n]ote[s] to TJ [Sassani]” or “[n]ote[s] to Josh [Cook]” in footnotes. (See, e.g., Id. at 11, 26.) There are no substantive comments or edits to the jury waiver provisions in any of the three agreements. (See Id. at 11, 21, 38.)

         On April 8, 2016, Brencher sent Sassani revised versions of the three agreements. (ECF 66-5, Silver Decl. Ex. 3, at 2.) His cover email states, in part, as follows: “Attached are clean and marked versions of the Note, Security Agreement and Pledge Agreement . . . . The marked versions show differences between your comments and the attached drafts. Elon and I went over the comments this morning and, as you will see, we accepted most of them, but not all.” (Id.) Sassani responded to Brencher stating in relevant part that he “will reach out to Elon [Boms, KLP's CEO] to discuss any questions, and our counsel is reviewing now.” (Id. at 1.) Sassani copied Boms, Cook, and others on the email. (Id.) In the same response, Sassani also challenged a change to the Security Agreement that expanded his pledged collateral to include all of his personal property and assets, present or in the future. (Id.)

         Early on April 11, 2016, Sassani sent an email to Brencher, Cook, Boms, and others, asking Cook and another individual to “review all changes [to the documents from Brencher], approve, and let us know.” (ECF No. 76-7, Silver Reply Decl. Ex. 6, at 2.) Sassani also asked for the lawyers' input on the appropriate method to distribute the loan to avoid triggering an IRS audit. (Id. at 3 (“[W]ould this loan be just as defensible and valid if it were wired from Elon directly on my behalf so as to not cause any undue concern from the IRS regarding money moving through my account?”; “[I]s it ok to have ZOZI pass those funds along to me, or best to have Elon initiate two wires . . .?”). Later that day, Sassani forwarded to Cook and others an email from Brencher proposing that Sassani and KLP sign a side letter to purchase Zozi stock. (ECF No. 76-6, Silver Reply Decl. Ex. 5.) In the email, which was also copied to Brencher, Sassani asked, “Gunderson, can you please confirm this makes sense?” (Id. at 2.)

         KLP also includes Sassani's Linked In page as an exhibit. (ECF No. 66-6, Silver Decl. Ex. 4, at 2-4.) The page states in relevant part:

Entrepreneur since the age of 12. Technology entrepreneur, investor, advisor, & avid adventurer. CEO, Chairman & founder of ZOZI.
Part of several technology companies prior to ZOZI. Most recently as a member of early founding team at Lux Research, ...

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