The 11th Circuit Court of Appeals has reversed a judgment entered by a Florida district court and entered judgment as a matter of law in favor of Hernandez Schaedel & Associates client, NF Energy.
In 2004, Robert Dawley had loaned money to NF Energy, secured by two convertible promissory notes. In 2006, NF Energy began to seek prospective buyers. In order to take the debt off the books, it persuaded Mr. Dawley to convert his notes to stock. At the same time, Mr. Dawley and NF Energy entered into a “Consulting Agreement,” drafted by Mr. Dawley himself. The Agreement provided that upon conversion of his notes, Mr. Dawley would be engaged in “consulting services” for NF Energy for an annual salary of $60,000. The Agreement did not describe any of Mr. Dawley’s duties and further provided that it could not be voided and remained in effect until abandonment by Mr. Dawley.
At trial, the district court magistrate judge found the notes to have been properly converted to stock. The judge also found the Consulting Agreement to be “not sufficiently definite enough to make enforcement feasible” under Florida law. Instead of ending there, the judge went on to reform the contract, ordering NF Energy to repurchase Mr. Dawley’s $400,000 in shares and to pay Mr. Dawley 12% interest from the time of the conversion to the time of repurchase, totaling over $130,000 at the time the judgment had been entered.
NF Energy appealed the judgment to the 11th Circuit Court of Appeals. It argued that the Consulting Agreement was a vague and therefore unenforceable lifetime employment contract. It further argued that the reformation performed by the district court was improper, since neither party had requested such relief and the situation did not fit the requirements for reformation to be an available remedy.
After thorough briefing and oral argument from both parties, the 11th Circuit found in favor of NF Energy. The Court agreed that, because neither side had requested reformation as a remedy, NF Energy did not have an opportunity to properly defend itself. Further, the Court agreed that reformation was also inappropriate because the circumstances did not meet the necessary requirements. The Court thereby reversed the lower court’s judgment, entered judgment in favor of NF Energy, and ruled that NF Energy was entitled to recover its costs.
Said Don Hernandez, “I am extremely proud of the fine effort put forth by our team in obtaining this result. That we were able to successfully represent a China-based client in appealing a judgment of the Florida District Court before the 11th Circuit Court of Appeal in Atlanta demonstrates not only our adaptability, but, I believe, our strong research and writing skills. I also am proud that we can demonstrate to our client the importance of our independent judiciary and the rule of law.”
The team included Don Hernandez, Robert Olson and Jamie Jung, with litigation support from Fermin Rodriguez, Tawny Elgatian, and Jillian Way.