Facts

Plaintiff Gordon Edmonds and two other partners founded Gateworks. In September 2000, he sold the company to defendant I-Bus/Phoenix Inc., a subsidiary of Maxwell Technology in San Diego. The sale entitled plaintiff and his partners to $500,000 in cash and at least $6.3 million in non-publicly traded I-Bus shares under a minimum purchase price agreement. Plaintiff and his partners received an aggregate defined closing payment of $6.8 million. Plaintiff received 48 percent of the cash and shares commensurate with his ownership interest.

The sale also included a share put agreement that entitled plaintiff and his partners, at their election, to require that on Jan. 25, 2002, defendant repurchase shares valued at 49.9 percent of the defined closing payment, less the $500,000 they were paid. Plaintiff and his partners later attempted to compel defendant to purchase $2,893,200 in shares under the put agreement, but defendant only repurchased $1,196,600, claiming that this was the amount compelled by the agreement.

PLAINTIFF'S CONTENTIONS:
Plaintiff sued defendant for breach of contract damages, less mitigation resulting from his eventual ability to sell his shares after they became publicly traded. Plaintiff's partners were not parties to this action as they had arrived at a resolution with defendant.

Plaintiff claimed that defendant incorrectly calculated the total number of shares it was required to repurchase. He argued defendant was required, pursuant to the put agreement formula, to purchase 438,155 shares at $6.18 per share.

DEFENDANT'S CONTENTIONS:
Defendant argued that its calculation was consistent with the formula in the put agreement. It contended that the decline in I-Bus stock price clearly indicated that its calculation was accurate and that plaintiff declined to accept its offer. Instead, plaintiff waited for the shares to be eligible for public trading in order to sell them on his own, making the value of his shares subject to market price fluctuations. Defendant argued that plaintiff had the right to wait for that opportunity, but that it did not owe him any damages because he elected to administer his equity in that manner.

Settlement Discussions

Plaintiff made a pretrial demand of $450,000, and later reduced this to $350,000. Defendant's offer was $25,000 which was later increased to $100,000.

Damages

Plaintiff argued he was due 48 percent of the difference between the $2,893,200 that defendant should have paid for the shares and the $1,196,600 that was repurchased, less the mitigation amount received for selling the shares publicly. Plaintiff's accounting expert calculated the difference at $490,000. Defendant argued that it had no involvement in plaintiff's decision to sell the shares publicly and was not accountable for any discrepancy between the selling amount and what he felt they were worth. Defendant further asserted that even if plaintiff was entitled to the difference, the value of his shares on Jan. 25, 2002 was only $153,000 as calculated by the defense's accounting expert.

Result

The jury found in favor of plaintiff, finding that defendant breached its contract with plaintiff and that he was entitled to $230,000 plus interest. After this jury award, defendant agreed to pay plaintiff $435,000 in exchange for its waiver of an appeal and plaintiff's agreement to abandon his request for attorney fees and costs.

Deliberation

two days

Poll

9-3

Length

five days