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Kirsch v. Brightstar Corp.

United States District Court, N.D. Illinois, Eastern Division

January 13, 2015

LAWRENCE S. KIRSCH, as Shareholders' Representative of LAWRENCE S. KIRSCH, CHARLES W. KRIETE, MICHAEL J. CHASE, and GEORGE PUSZKA, Plaintiff,
v.
BRIGHTSTAR CORPORATION, Defendant

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Lawrence S Kirsch, as Shareholders' Representative, Plaintiff: Brianna L Golan, Laura A. Balson, Margaret Anne Gisch, Matthew Charles Wasserman, LEAD ATTORNEYS, Anita J Pancholi, Ashley Lauren Orler, Golan & Christie, Llp, Chicago, IL.

For Charles W Kriete, Michael J Chase, George Puszka, Plaintiffs: Brianna L Golan, Margaret Anne Gisch, Matthew Charles Wasserman, LEAD ATTORNEYS, Anita J Pancholi, Ashley Lauren Orler, Golan & Christie, Llp, Chicago, IL.

For Brightstar Corp., a Delaware corporation, Defendant: Mark L. Durbin, LEAD ATTORNEY, Carolyn Wendel O'Connell, Barnes & Thornburg LLP, Chicago, IL; Elizabeth A. Peters, Peter N Moore, Edwards Wildman Palmer LLP, Chicago, IL.

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MEMORANDUM OPINION AND ORDER

Rubén Castillo, Chief United States District Judge.

Plaintiff Lawrence S. Kirsch, as Shareholders' Representative of Lawrence S.

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Kirsch, Charles W. Kriete, Michael J. Chase, and George Puszka (collectively " Shareholders" ), brings this diversity action against Brightstar Corporation (" Brightstar" ) alleging common law breach of contract. (R. 1, Compl.) Presently before the Court are Brightstar's motion for partial summary judgment, (R. 117, Def.'s Mot. Summ. J.), and Plaintiff's cross-motion for summary judgment, (R. 124, Pl.'s Mot. Summ. J.). Additionally, Plaintiff moves to strike some of Brightstar's responses to Plaintiff's statement of facts. (R. 174, Pl.'s Mot. to Strike Resp.) For the reasons stated below, the Court grants in part and denies in part Brightstar's motion for partial summary judgment, and grants in part and denies in part Plaintiff's motion for summary judgment. The Court also denies as moot Plaintiff's motion to strike.

RELEVANT FACTS[1]

Before summarizing the facts of this case, the Court first addresses Plaintiff's motion to strike several of Brightstar's responses to Plaintiff's Local Rule 56.1 statement of facts. (R. 174, Pl.'s Mot. to Strike Resp.) Local Rule 56.1 requires the non-movant's response to the movant's statement of facts to contain, " in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon[.]" L.R. 56.1(b)(3)(B). Plaintiff argues that more than half of Brightstar's responses to his statement of facts violate Local Rule 56.1(b)(3)(B) because they are argumentative, fail to cite to the record, or assert new facts. (R. 174, Pl.'s Mot. to Strike Resp.) The Court has carefully reviewed and considered Plaintiff's objections. To the extent that any of Brightstar's responses are argumentative, conclusory, or fail to cite the record, the Court disregards them. See Greene v. CCDN, L.L.C., 853 F.Supp.2d 739, 744 (N.D. Ill. 2011). To the extent that any of Brightstar's responses contain new facts that do not specifically refute Plaintiff's fact statement to which they are responsive, the Court disregards the new facts. Id. Accordingly, Plaintiff's motion to strike is denied as moot.

I. Background

Shareholders are all individuals residing in Illinois or New Hampshire, and Brightstar is a Delaware corporation with its principal place of business in Florida. (R. 146, Def.'s Rule 56.1 Resp. ¶ 1.) Brightstar was founded in 1997 by Marcelo Claure, and is currently the world's largest wireless device distribution company. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 2.) Brightstar's main business is to distribute wireless devices to the " telecom channel," which means retailers, wireless carriers who maintain their own retail stores, and small dealers. ( Id.)

Shareholders collectively owned all of the stock of OTBT, Inc. (" OTBT" ).[2] ( Id.

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¶ 3.) In 2010, OTBT was a small technology startup whose business was selling and activating cell phones, accessories, devices, and plans through U.S.-based information technology (" IT" ) resellers. ( Id. ¶ 4.) OTBT's target market was non-consumer resellers, that is, resellers whose primary customers were not retail, but rather institutional, such as businesses, governments, or health care facilities. ( Id.) On August 31, 2010, OTBT was purchased by Brightstar pursuant to a Stock Purchase Agreement (" SPA" ). ( Id. ¶ 3.) Plaintiff was the largest pre-acquisition shareholder and acts as representative of all Shareholders for purposes of this suit. ( Id.) Shareholder Charles Kriete was OTBT's president at the time of the acquisition and worked for OTBT while it was owned by Brightstar. ( Id.)

Similar to Brightstar, Tech Data Corporation (" Tech Data" ) focuses on distribution and logistics; however, unlike Brightstar, Tech Data's primary business is the sale and distribution of IT products (computers, servers, printers, etc.) to resellers and other companies operating in what is referred to as the " IT channel." ( Id. ¶ 7.) The IT channel consists of resellers that primarily service institutional end customers, not consumers. ( Id.) The IT channel includes value added resellers (" VARs" ), which are resellers who sell IT products to customers that are typically businesses (small, medium, or enterprise), governments, or health care institutions. ( Id. ¶ 8.) An " IT reseller" can also refer to a VAR. ( Id.) However, depending on the context, VAR can have a broader meaning as well, such as any technology reseller. ( Id.)

The dispute in this suit involves Brightstar's alleged breaches of certain provisions of the SPA. The SPA dictates that Brightstar, as part of OTBT's purchase price, will pay Shareholders an amount (the " Earn-Out" ) that is based upon OTBT's performance during a subsequent one-year period. The SPA outlines specific requirements for calculating the Earn-Out, and the parties disagree over whether Brighstar followed those requirements and properly calculated the Earn-Out.

II. Brightstar's Interest in OTBT

In late 2009, Patrick Stokes was hired by Brightstar to help grow the U.S. business, and one growth strategy he focused on was developing sales to enterprise customers. (R. 146, Def.'s Rule 56.1 Resp. ¶ 12.) Stokes helped launch Brightstar's enterprise group, which Brian Corey became president of in 2010; the role of the group was to assess the services Brightstar could provide to VARs whose primary end customers were businesses or governments. ( Id. ¶ ¶ 13-14; R. 170, Pl.'s Resp. Add'l Facts ¶ 6.) At the same time, Brightstar was also investigating new lines of business altogether, particularly wireless activation services. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 9.)

In January 2010, Brightstar and Shareholders began discussing a possible acquisition of OTBT. ( Id. ¶ 10; R. 164, Def.'s Resp. Add'l Facts ¶ 6.) OTBT's greatest assets to Brightstar at that time were: (1) its software platform called CellManage; (2) its wireless carrier contracts (a.k.a. activation agreements) with three U.S. carriers, which allowed wireless plans to be activated by VARs and their customers via OTBT's software platform; and (3) its employees, particularly Shareholders Kriete and Michael Chase. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 5; R. 164, Def.'s Resp. Add'l Facts ¶ 4.) Activation agreements were very challenging to obtain and were hugely valuable. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 6.) None of OTBT's carrier contracts

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included territories outside of the United States. ( Id.) Additionally, OTBT had no reseller customers outside of the United States. ( Id.)

According to Shareholder Kriete, Shareholders were at first reluctant to consider Brightstar as an acquirer because Brightstar's focus was seen as consumer- and retail-oriented, and Brightstar did not have access to the channel that OTBT required to scale the business. ( Id. ¶ 10; R. 146, Def.'s Rule 56.1 Resp. ¶ 19.) Shareholder Kriete expressed these concerns to Stokes at an initial dinner meeting, and Stokes told Kriete about Brightstar's existing joint venture with Tech Data in Europe. (R. 146, Def.'s Rule 56.1 Resp. ¶ ¶ 19, 21.) Tech Data did business in the IT channel, like OTBT, and so the possibility of a joint venture between Brightstar and Tech Data, which would include the acquisition of OTBT, was discussed. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 10.) Tech Data had access to the kinds of customers OTBT targeted, while Brightstar had access to a mobility product and a distribution infrastructure that Tech Data did not have; neither had a software platform or the carrier contracts necessary to sell activated mobile devices to enterprise customers in the IT channel in the United States. ( Id. ¶ 11.) Shareholder Kriete believed a joint venture involving OTBT could potentially augment the existing relationship between Brightstar and Tech Data by providing access to business opportunities in the United States that Brightstar did not then have, namely selling to resellers in the IT channel. ( Id. ¶ 13.) This led Shareholders to conclude that an acquisition deal that included a partnership between Brightstar and Tech Data might be a good fit. ( Id. ¶ 11.)

III. SPA Negotiations and the Earn-Out Provision

In April 2010, Brightstar's attorneys drafted a letter of intent reflecting that Brightstar sought to purchase all of the outstanding capital stock of OTBT. (R. 146, Def.'s Rule 56.1 Resp. ¶ 25.) The final version of the letter of intent, dated June 10, 2010, stated that Brightstar would like to purchase OTBT for a total purchase price of $1 million plus debt obligations and payment of a performance-based Earn-Out. (R. 144, Sealed Def.'s Rule 56.1 Resp. ¶ 26.)

According to Corey, who led the negotiations for Brightstar, Shareholder Kriete and Plaintiff were concerned about how the performance-based Earn-Out would be calculated. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 14.) Plaintiff testified in his deposition that one of his main concerns about the Earn-Out was that Brightstar might " play games" by routing sales that should have rightfully been OTBT's through its other subsidiaries and affiliates in order to avoid paying Shareholders their fair Earn-Out. ( Id.) Plaintiff wanted a provision in the SPA that would protect Shareholders from that possibility. ( Id. ¶ 15.) Corey testified in his deposition that Brightstar was willing to provide assurances to Shareholders that revenue fairly belonging to OTBT would stay with OTBT. ( Id. ¶ 16.) Corey agreed that if sales were made to an IT channel customer and activated through OTBT, but OTBT did not actually record the sale for whatever reason, OTBT would still get credit for the sale. ( Id.) Corey testified that Brightstar was selling extensively to non-VAR customers at the time of the acquisition; the protection provided to OTBT would be for business OTBT was bringing to the table, namely, sales to resellers with primarily business customers. ( Id. ¶ 17.)

On June 25, 2010, Brightstar sent Shareholders a first draft of the SPA. ( Id. ¶ 18.) Several drafts of the SPA were exchanged

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between the parties and their attorneys with changes being made to the representation and warranty language (the " Representation and Warranty" ) in the Earn-Out Provision. ( Id. ¶ ¶ 18-23). The final version of the original SPA was executed by both parties on August 31, 2010, and the transaction closed and payment was made on October 1, 2010. (R. 146, Def.'s Rule 56.1 Resp. ¶ 47.) The Earn-Out Provision in Section 2.1(c) of the SPA provides:

[Brightstar] shall pay to the Shareholders a performance based earn-out (the " Earn-Out" ) which shall be deemed additional Purchase Price when paid in accordance with the following:
(i) The Earn-Out shall be linked to tiered milestones of [OTBT's] GAAP-reported revenue (" Revenues" ) and EBITDA derived from any and all sales including, but not limited to, all handsets, information technology devices (including laptops, tablets, netbooks, etc.), accessories, activation commission, airtime, and other ancillary service revenue derived through the following channels: Tech Data channel partners, additional IT product distributor relationships such as Ingram Micro or Synnex, and current and future direct [OTBT] and/or [Brightstar] IT reseller channel partners (including wireless carrier partners that utilize [OTBT] for back office support, such as billing on behalf of or activation services) with primary end customers in the commercial (small-medium-large business or enterprise), health care, and government (state, local, education, and federal) markets, for the twelve (12) month period commencing on April 1, 2011 and ending on March 31, 2012 (the " Earn-Out Period" ) as shown on [OTBT's] financial statements as adjusted pursuant to Section 2.1(c)(ii) below. [Brightstar] represents and warrants that, except as set forth in Section 2.1(c)(ii) below, prior to March 31, 2012, neither [Brightstar] nor any of its Affiliates (except [OTBT]) will directly or indirectly sell any products or services which would generate Revenue.

(R. 151, Pl.'s Rule 56.1 Resp. ¶ 25.)

Plaintiff testified that in his view, for a sale to be counted toward OTBT's " Revenue" if not actually made by OTBT, it would have to go through one of the channel partners identified in the Earn-Out Provision, to a reseller, who would have to have primary end customers in the commercial, health care, or government markets; consumers are not listed as primary end customers in the Earn-Out Provision. ( Id. ¶ 26.) Plaintiff testified that no one from Brightstar informed him that Brightstar intended to route business opportunities already in place in Europe or Latin American through OTBT. ( Id. ¶ 27.) Plaintiff never told Brightstar that was his expectation, and he also knew of no one from OTBT who expressed such an expectation. ( Id.) Plaintiff testified that he " never said [Brightstar] [was] required to route" existing business to OTBT; the complaint, however, alleges that Brightstar was required to route sales to OTBT. ( Id. ¶ 29.) Shareholder Kriete did not recall informing Brightstar that he expected the activities of any Brightstar affiliate outside the United States to result in revenue credited to OTBT for purposes of the Earn-Out. ( Id. ¶ 30.) Shareholder Kriete also could not recall if anyone from Tech Data had suggested that Brightstar Europe (" BEL" ) or other Tech Data revenue would count towards the Earn-Out. ( Id.)

The Representation and Warranty makes specific reference to Brightstar's Affiliates, and " Affiliate" is defined in the SPA as follows:

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" Affiliate," as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, " control" . . . as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting Securities or by contract or otherwise. For purposes of this definition, a Person shall be deemed to be " controlled by" a Person if such Person possess, directly or indirectly, power to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person.

(R. 146, Def.'s Rule 56.1 Resp. ¶ 34.) " Person" is defined as including natural persons and corporations. ( Id.) Claure, Brightstar's CEO, testified that the Representation and Warranty " [p]retty much [] says that [Brightstar and its Affiliates] will not compete with the product that OTBT has, which in [his] opinion would be activation services or [] billing . . . ." ( Id. ¶ 36.)

The Earn-Out is calculated based on the SPA definition of EBITDA (earnings before interest, taxes, depreciation, and amortization). (R. 146, Pl.'s Rule 56.1 Resp. ¶ 43.) Beyond the common usage of the term EBITDA, the parties negotiated several " add-backs" and/or qualifications of expenses that could be assigned to OTBT and computed in the calculation of the EBITDA:

" EBITDA" means, without duplication, calculated in each case in accordance with GAAP, the sum of (i) net income, plus (ii) interest expense to the extent deducted in computing net income, plus (iii) charges against income for foreign, federal, state and local taxes to the extent deducted in computing net income, plus (v) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing net income. The calculation of EBITDA for purposes of this Agreement shall not include expenses related to (y) the retention portion of the Earn-Out accrual plus any additional compensation paid to a Shareholder for taxes attributable to the Earn-Out or (z) bonuses including, but not limited to, variable compensation, payable to individuals whose compensation is included in the calculation of EBITDA including, but not limited to, former Company executives which, for purposes of this Agreement includes any compensation in excess of accepted base salary industry standards. However, business operating expenses allocated to [OTBT's] business based on a reasonable allocation by Purchaser consistent with allocations to Purchaser's other subsidiaries shall be included in the calculation of EBITDA.

( Id. ¶ 44.)

IV. The Quartering Provision and Formation of the Joint Venture with Tech Data

Section 2.1(c)(iii) of the original SPA provided a schedule of revenue thresholds, and corresponding EBITDA caps, which would apply to the Earn-Out calculation. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 31.) If, during the Earn-Out period, OTBT received at least the gross revenue set forth in Column A, then the Earn-Out was set to be OTBT's EBITDA up to the cap specified in Column B:

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Column A

Column B

(Revenues Threshold)

(EBITDA Cap)

$20 million

$0.5 million

$30 million

$1.0 million

$40 million

$1.5 million

$50 million

$2.0 million

$60 million

$2.5 million

$70 million

$3.0 million

$80 million

$3.5 million

$90 million

$4.0 million

$100 million

$4.5 million

Over $100 million

$5.0 million

( Id.) Section 2.1(c)(iv)(y) of the SPA (the " Quartering Provision" ) provides:

[Brightstar] further acknowledges and agrees that if it does not enter into a joint venture or similar relationship with one of the JV Partners (the " JV Relationship" ) on or prior to March 31, 2011 . . . the Earn-Out table set forth in Section 2.1(c)(iii) above shall be modified by dividing each of the Revenue Thresholds set forth in Column A by four (4) and leaving the corresponding EBITDA Cap set forth opposite such Revenue Threshold as is.

( Id. ¶ 32).

Throughout the entirety of the negotiations of the SPA, the parties discussed and intended that Brightstar would form a joint venture (" JV" ) with Tech Data to run OTBT. (R. 146, Def.'s Rule 56.1 Resp. ¶ 38.) The intended focus of the JV would be Tech Data's IT channel/VAR customers in the United States; Tech Data had already been selling IT products to these resellers, and Brightstar brought the ability to sell mobility products to these customers, while OTBT would provide the bundled activation services which neither parent company had at that time. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 33.)

After the SPA was executed, Brightstar and Tech Data quickly began working toward forming a JV to jointly own OTBT. ( Id. 34.) By October 15, 2010, a steering committee for the JV had been established, and additional steering committee meetings were held thereafter. ( Id. ¶ 35.) The Shareholders' Agreement between Brightstar, Tech Data, and OTBT (the " JV Shareholders' Agreement" ), relating to the operation of OTBT, was executed on March 23, 2011. ( Id. ¶ 36.) The JV Shareholders' Agreement identified the operating territory for the JV as the 50 United States and Puerto Rico. (R. 153, Sealed Pl.'s Rule 56.1 Resp. ¶ 36.) Fully executed copies of both the JV Shareholders' Agreement and the Stock Purchase Agreement between Tech Data and Brightstar (the " JV SPA" ) were circulated on March 28, 2011. (R. 151, Pl.'s Rule 56.1 Resp. Id. ¶ 36.) The JV SPA specified that the transaction would close by April 29, 2011. (R. 144, Sealed Def.'s Rule 56.1 Resp. ¶ 59.) Tech Data, Brightstar, and OTBT executed their Services Agreement on September 16, 2011. ( Id. ¶ 63.) The Services Agreement set forth the contributions both Tech Data and Brightstar would make to the JV and specified what operating expenses would be charged to the JV. ( Id. ¶ 64.) The Services Agreement provided that Tech Data and Brightstar could charge OTBT for services provided to

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OTBT, such as employee's services and IT services, as well as management fees. ( Id. ¶ ¶ 65-66.) The Services Agreement also stated that the JV Shareholders' Agreement was effective as of April 29, 2011. (R. 166, Sealed Def.'s Resp. Add'l Facts ¶ 19.)

On April 11, 2011, Shareholder Kriete e-mailed Mike Reilly, Brightstar's director of finance of global enterprise, to inquire whether Reilly had an issue " starting the hiring/onboarding process for the JV," before the agreement officially closed. (R. 166, Sealed Def.'s Resp. Add'l Facts ¶ 12.) When Shareholder Chase questioned whether OTBT's website should reference Tech Data, Corey responded: " In less than 10 days when we officially close we can mention [Tech Data] Until then, look and feel like bstarcorp.com with as little content as possible." ( Id. ¶ 14.) On April 26, 2011, Brightstar's attorney, Christopher Tillson, wrote to Shareholder Kriete about his " preparation[s] for the implementation of [the OTBT] joint venture." ( Id. ¶ 16.) On May 1, 2011, Shareholder Chase asked Corey what they should put up on OTBT's website now that the JV is " official." ( Id. ¶ 17.) Lastly, in a July 2011 e-mail, Reilly stated that the JV " started in May." ( Id. ¶ 18.)

V. The Second Amendment to the SPA

During negotiations for the JV with Brightstar, Tech Data stated that it would not run its laptop sales through the JV. (R. 146, Def.'s Rule 56.1 Resp. ¶ 55.) Jeremy Evans, Tech Data's director of corporate development, explained in his deposition that routing sales of Tech Data's laptops through OTBT was not financially viable for tax reasons. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 38.) On March 12, 2011, Reilly contacted Shareholders via e-mail to propose a revised schedule for calculating the Earn-Out under the SPA. ( Id.) In his e-mail, Reilly explained that contrary to prior assumptions, OTBT would not be credited with revenue from sales of laptops made through Tech Data, although OTBT would be credited with activation commissions. ( Id.) " To account for this loss of revenue," Brightstar offered to reduce the revenue thresholds stated in Section 2.1 (c)(iii) of the SPA by 21.3%, based on the previous assumption in the JV financial models that laptop sales would account for 21.3% of OTBT's revenues. ( Id.; R. 166, Sealed Def.'s Resp. Add'l Facts ¶ 24.) Corey testified that the offered amendment was to " make up for the fact that [Brightstar] couldn't get laptop revenue to be credited." (R. 166, Sealed Def.'s Resp. Add'l Facts ¶ 24.)

In a March 23, 2011 e-mail, Plaintiff appeared to object to Brightstar's proposed amendment, claiming that the Earn-Out Provision of the SPA spells out in great detail that Brightstar will need to incorporate Tech Data laptop revenue in any Earn-Out calculation. (R. 151, Pl.'s Rule 56.1 Resp. ¶ 39.) Corey then arranged a call with Plaintiff to explain why the amendment would be " good for" Shareholders. ( Id.) Shortly thereafter, Plaintiff asked Brightstar to draft the language for the amendment. ( Id.)

The Second Amendment to the SPA (" Second Amendment" ) was executed on March 31, 2011, and provides that Section 2.1(c)(iii) of the SPA is amended with a new schedule of revenue and EBITDA:

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Column A

Column B

(Revenues Threshold)

(EBITDA Cap)

$15.7 million

$0.5 million

$23.6 million

$1.0 million

$31.4 million

$1.5 million

$39.3 million

$2.0 million

$47.2 million

$2.5 million

$55.1 million

$3.0 million

$63 million

$3.5 million

$70.8 million

$4.0 million

$78.7 million

$4.5 million

Over $78.7 million

$5.0 million

( Id. ¶ 40.) The Second Amendment does not make any other substantive changes to the SPA. ( Id.)

The Second Amendment does not provide any benefit to Brightstar, or new obligation by Shareholders, not already contained in the SPA. ( Id. ¶ 41.) Plaintiff testified that in his view, the Second Amendment does not provide for the exclusion of laptop sales in the calculation of OTBT's Revenue. ( Id.) Plaintiff could not articulate any reason the Second Amendment benefitted Brightstar; he instead stated, " Thank you Brightstar, I guess," and replied that he could not " be responsible if people don't pay attention to detail." ( Id.) Shareholder Kriete likewise would not acknowledge any reason for Brightstar to reduce the revenue thresholds in the Second Amendment. ( Id.) Shareholder Chase also could not identify what Brightstar received in exchange for agreeing to reduce the revenue thresholds. (R. 191, Pl.'s Add'l Rule 56.1 Resp. ¶ 42.) In his answers to Brightstar's interrogatories, Plaintiff cited nothing Brightstar received for the Second Amendment and stated that he agreed to the Second Amendment because it contained no objectionable language. ( Id. ¶ 43.) Also in his answers to Brightstar's interrogatories, Plaintiff asserted that Tech Data's laptop sales should have been included in OTBT's Revenue for purposes of the Earn-Out. ( Id.)

Revenues from Tech Data's laptop sales were not included in OTBT's Revenue. (R. 164, Def.'s Resp. Add'l Facts ¶ 27.) OTBT was credited with the activation commission for those sales, however, if the laptops were activated. ( Id.)

VI. Operation of OTBT as a Joint Venture

Claure testified that after acquiring OTBT, Brightstar's enterprise group was rolled into the OTBT JV with Tech Data. (R. 191, Pl.'s Add'l Rule 56.1 Resp. ¶ 44.) Corey was the President of the JV until his departure in September 2011. ( Id.) On September 21,2010, Brightstar issued a press release entitled " Brightstar Enters Activation Business in the United States by Acquiring OTBT." ( Id. ¶ 46.) The press release states: " In addition to the core offering and activation services, Brightstar will also be able to provide U.S.-based VARs with data devices, software, hardware, accessories, technical support, billing management, asset management, training services, and installation services." ( Id.) Corey is quoted in the press release, saying that while Brightstar launched a European presence in 2007 to

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attempt to sell to the IT reseller channel, the " acquisition of OTBT is a great first step for our United States presence." ( Id.)

As a joint venture, OTBT's focus was on United States customers. ( Id. ¶ 45.) Evans testified that there was no question that Shareholders Kriete and Chase were aware that the intended scope of the JV was the United States and Puerto Rico. ( Id.) In an April 4, 2011 Brightstar press release entitled " Tech Data and Brightstar Announce U.S. Joint Venture: [OTBT]," Shareholder Kriete is quoted as follows: " Brightstar and Tech Data bring a new level of wireless distribution expertise in the U.S. market with an offering that is completely unique in this space." ( Id. ¶ 47.) Also in the press release, Tech Data's CEO states, " We are thrilled to be partnering again with Brightstar to form this U.S.-based joint venture, and to accelerate our participation in the U.S. mobility market." ( Id.) Further, the press release states that OTBT will offer Tech Data's U.S.-VARs a centralized and customized service. ( Id.)

Shareholder Kriete testified that he and the other Shareholders discussed taking OTBT globally during their initial meetings with Brightstar, and that during the Earn-Out period some attempts were made to take the OTBT platform outside the United States. (R. 191, Pl.'s Add'l Rule 56.1 Resp. ¶ 50.) In late 2010, Corey had hopes of using OTBT's software and business model globally. (R. 144, Sealed Def.'s Rule 56.1 Resp. ¶ 49; R. 166 Sealed Def.'s Resp. Aff 1 Facts ¶ 10.) However, Kriete testified that as of the date of his deposition, the software platform was still not ready to be taken globally. (R. 191, Pl.'s Add'l Rule 56.1 Resp. ¶ 50.) Kriete believed that the reason the software had not been used globally was due to the delay in implementing the platform by both Brightstar and Tech Data. ( Id. ¶ 51.) Corey likewise testified that by the time he left Brightstar in September 2011, there had been no use of OTBT's personnel or software platform outside of the United States, nor was OTBT's platform usable outside the United States. ( Id.) Corey explained that if the OTBT platform had proven successful in the United States, he would have tried to expand it outside the United States. ( Id. ¶ 52.) Claure, Brightstar's CEO, also testified that OTBT could be taken globally only after it was a proven success in the United States. ( Id.)

A Brightstar June 27, 2011 S-1 statement filed with the Securities and Exchange Commission (" SEC" ) describes Brightstar's " Government and VARS Services," which includes: (1) acting as the master agent, where it activates wireless devices; (2) providing a customized billing platform; and (3) distributing and selling software products. ( Id. ¶ 48; R. 164, Def.'s Resp. Add'l Facts ¶ 1.) Claure testified that this section of the SEC statement referred to the services Brightstar intended to ...


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