United States District Court, D. Connecticut
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,
...