DE 205. 02/07/2020
GDSI is entitled to Specific Performance under the Well-pleaded Allegations of the First Amended Complaint and the Undisputed Facts Already in the Record. .. 4 B. Plaintiff's Well-Pleaded Allegations and the Undisputed Facts Establish GDSI's Entitlement to Specific Performance and Damages Incident to Specific Performance under Florida Law (citations omitted for this post)
GDSI Has a Right to Affirm the SPA and Seek Both Specific Performance and Incidental Damages ............................................................................ 11 4. Damages Incident to a Decree of Specific Performance to Account for the Undisclosed Tax Obligations Are Appropriate
Pursuant to this Court's authorization at the Calendar Call on January 29, 2020, plaintiff Global Digital Solutions, Inc. ("GDSI") moves for a legal ruling establishing that, under Florida law, the Court may enter both a judgment against defendants Joao Alberto Bolzan ("J.A. Bolzan") and Jose Carlos Bolzan ("J.C. Bolzan) for specific performance with respect to their shares in Grupo Rontan Electro Metalurgica, S.A. ("Rontan") and a judgment against defendants J.A. Bolzan, J.C. Bolzan, and Rontan for incidental damages in the amount of the undisclosed, unpaid tax obligations of Rontan.
On January 23, 2020, GDSI filed a motion for entry of default judgment as to all Defendants. [D.E. 193.] Defendants have failed to respond to the motion. Their subsequent failure to appear at the status conference on January 24, 2020 and at the calendar call on January 29 are additional grounds for entry of a default judgment
The Court expressly recognized that, under Florida law, GDSI would be entitled to both specific performance and damages for the same breach if an award of specific performance would not place it in the condition it would have been in had Defendants not breached the SPA: 2 The Defendants' motion to dismiss for lack of personal jurisdiction was denied.
Had Defendants not falsely represented the status of Rontan's tax obligations, GDSI would not have agreed to pay the purchase price set out in the SPA. Instead, the purchase price would have reflected the tax obligations, a significant liability of Rontan that was purposefully misrepresented. Put another way, GDSI bargained to acquireâ?? and Defendants agreed to sellâ??Rontan without the burden of the undisclosed tax liabilities. A judgment for specific performance without an award of incidental damages will only result in GDSI acquiring a much-devalued Rontan as a result of the tax liabilities Defendants did not disclose.
Florida law is clear that, at the upcoming bench trial, GDSI is entitled to seek specific performance of the SPA. It intends to seek such relef, provided that it is allowed to recover damages in the amount of the undisclosed tax obligations as incident to a decree of specific performance.
The SPA provided that the "Purchase Price" consisted of three components: (i) cash payments totaling R$100,000,000, payable "in equal monthly installments over a period of forty eight (48) months following the Closing Dateâ?¦" (SPA at §2.1.1 (emphasis added)); (ii) "R$100,000,000 of shares of [GDSI's] common stock," transferable at Closing (id. at §2.1.2.); and (3) future "earn-out" payments that were contingent upon Rontan's future financial 13 1 performance, with payments starting (if at all) more than two years after Closing (id. at § 2.1.3). Accordingly, ……the SPA did not require GDSI to make any cash payment to the Bolzans at closing.……… 8 This purchase price was predicated on the Defendants' express representation and warranty in the SPA that, as of the execution of the agreement, "Rontan has timely paid all the Taxes due, and complied with all Tax obligations in accordance with the applicable law."
GDSI would seek a reduction of the purchase price equal to the amount of all unpaid tax liabilities that the Defendants failed to disclose, as well as reasonable attorneys' fees and costs. In the event that the amount of the tax undisclosed tax obligations exceeds the purchase price, GDSI would seek a money judgment in the amount of the excess.
ARGUMENT A. GDSI is entitled to Specific Performance under the Well-pleaded Allegations of the First Amended Complaint and the Undisputed Facts Already in the Record. 4 1 In the context of Defendants' motion for summary judgment on specific performance, this has already determined that the SPA may be enforced through a judgment of specific performance. In reaching that ruling, the Court analyzed Florida case law and the record evidence in this case and concluded that specific performance "is an appropriate remedy for breach of contract under the facts of this case." [D.E. 181 at p. 13.] As the Court explained: Here, the undisputed facts are as follows. First, the Bolzan brothers 'are the sole shareholders of, and control ... Rontan.' (DE 94 ~ 2). Second, its shares are not publicly traded. (Kelley Decl. â?10). Third, 'Rontan is one of the largest manufacturers in the industry.' (DE 94) Just like the bottled glass business in Hogan v. Norfleet, 113 So. 2d 437, 439 (Fla. 2d DCA), Rontan is a going business, the value of which would be difficult to ascertain. As its shares are not publicly traded, they have no fixed or readily discernable value. [D.E. 181; Nov. 25, 2019 Order at 9.] Since the Court's entry of that Summary Judgment Order, nothing has changed in the record or in Florida jurisprudence to alter this conclusion.
This post consists of excerpts from DE 205 and does not include Citations.
