Investment banking advisor loses suit claiming lost fee

Where an investment banking advisor claimed it lost a significant fee when another company purchased the target company, its tortious interference claim failed because the successful purchaser’s conduct was not the reason for the first failed deal.

Background

Jason Syversen and Rampart Holdings LLC, a limited liability company with Syversen as the sole member, signed an engagement letter with Chertoff Capital LLC on Nov. 15, 2018, in which Chertoff agreed to provide “investment banking advisory services” in support of a “potential management buyout [(“MBO”)] acquisition of” Siege Technologies LLC.

Ultimately the MBO did not proceed to closing. Braes Capital LLC then stepped in and purchased Siege. In this lawsuit, Chertoff alleges that Braes’ conduct constituted a tortious interference with contract under Virginia law. Pending before the court is Braes’ motion for summary judgment.

Analysis

To establish a claim for tortious interference with contract under Virginia law, Plaintiff must prove: “(1) the existence of a valid contractual relationship … ; (2) knowledge of the relationship … on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship … ; and (4) resultant damage to the party whose relationship … has been disrupted.”

In its original complaint, Chertoff alleged that Syversen and Rampart breached the engagement letter by failing to consummate the acquisition of Siege with plaintiff as the exclusive investment banking advisor, and further alleged that Braes tortiously interfered by “induc[ing] Mr. Syversen to breach the [engagement letter].” A federal district court in Delaware has resolved plaintiff’s breach of contract claim against Syversen and Rampart, granting summary judgment in favor of Syversen and Rampart.

Even if Syversen and Rampart did not breach the agreement, however, plaintiff may still contend that defendant wrongfully procured termination of the engagement letter. However, plaintiff’s claim nonetheless fails because the undisputed factual record squarely rebuts the contention that defendant induced or caused the termination of the contractual relationship between plaintiff and Syversen/Rampart.

Specifically, the undisputed factual record discloses that: (i) the engagement letter was terminated prior to defendant’s efforts to acquire Siege and (ii) regardless of the date of termination of the engagement letter, Syversen and Rampart’s offer to acquire Siege failed for reasons wholly unconnected to any actions by defendant.

In closing, it is worth emphasizing that, under the terms of the engagement letter, Plaintiff would receive payment for its services only if Syversen and Rampart successfully acquired Siege, and Syversen and Rampart were free to walk away from the acquisition at any time. Accordingly, the engagement letter entailed a substantial risk that plaintiff would not receive payment for its services. Plaintiff’s contractual risk ultimately materialized: the Syversen/Rampart MBO failed, and plaintiff received no payment.

In essence, this action seeks, inappropriately, to convert defendant into an ex-post insurer for the risk that plaintiff willingly assumed. But because plaintiff has failed to offer any proof that defendant caused a breach or termination of the contractual relationship between plaintiff and Syversen/Rampart, summary judgment must be granted in defendant’s favor.

Defendant’s motion for summary judgment granted.

Chertoff Capital LLC v. Braes Capital LLC, Case No. 1:20-cv-0138, May 27, 2022. EDVA at Alexandria (Ellis). VLW 022-3-236. 12 pp.