Date: 03-27-1997

Case Style: Thomas G. Ward v. Albert Cinelli

Case Number: 96-CI-735

Judge: Gary D. Payne

Court: Circuit Court, Fayette County, Kentucky

Plaintiff's Attorney: Mark J. MacDougall and Tracy B. McKibben of of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C., and Thomas L. Gabelman, and Kevin Matthews of Vorys, Sater, Seymour and Pease LLP, Cincinnati, Ohio

Defendant's Attorney: Keith Moorman and Medrith Lee Hager of Brown, Todd & Heyburn PLLC, Lexington, Kentucky for Cinelli. John R. Leathers and Stephen G. Allen of Buchanan Ingersoll, Lexington, Kentucky for KDL, Wright Businesses, et al.

Description: Arthur Wright and A. D. Wright (the Wrights) were sole shareholders of two family-owned corporations: Wright Businesses, Inc. (WBI), and Kentucky Data Link, Inc. (KDL). The entities were engaged in the telecommunication business. WBI and KDL were in default on a loan agreement with Communications Credit Corporation. It appears, however, that the Wrights were not exposed to personal liability thereon. The Wrights sought to raise capital to avert the imminent foreclosure of their businesses. In such vein, the Wrights began negotiating with appellee, Thomas G. Ward (Ward), to sell the controlling interests of WBI and KDL. In furtherance thereof, they entered into a "no-shop" agreement, which prevented the Wrights from negotiating with third parties. The no-shop agreement expired in September 1995. On September 15, 1995, the parties entered into an "Agreement" (the Agreement). The Agreement's legal import is a matter of much contention between the parties.

In its most basic form, the Agreement contemplated that at a future date Ward would "lend" to the Wrights $2.65 million, which would be evidenced by a promissory note. At Ward's option, the promissory note could be converted into stock representing 54% of WBI's and KDL's outstanding shares. Needless to say, the proposed transaction between the parties never took place. It is asserted that negotiations reached an impasse over three basic issues:

(1) whether the Wrights would accept personal responsibility for any breaches [sic] of warranty or representation made by Data Link or Wright Businesses;

(2) whether the Wrights would accept employment provisions which allowed for them to be summarily terminated from the companies they created and developed; and

(3) whether the Wrights would agree to allow Ward to have day-to-day control over Data Link and Wright Businesses (in addition to majority stock control).

In any event, by letter dated January 12, 1996, the Wrights notified Ward that negotiations were terminated. It appears that the Wrights, sometime in November 1995, entered into negotiations with appellee, Albert Cinelli (Cinelli). On January 15, 1996, Cinelli and the Wrights entered into a contract whereby Cinelli acquired 51% of WBI's and KDL's outstanding shares in exchange for $3 million.

On March 1, 1996, Ward filed the instant action against the Wrights for breach of the Agreement, for breach of the implied duty of good faith and fair dealing, and for conspiracy to deprive him of an advantageous business relationship. Cinelli was also named as a defendant for tortious interference with existing and prospective contractual relationships.

Outcome: The jury ultimately returned a verdict in favor of Ward in the amount of $987,000.00 against the Wrights and $867,000.00 against Cinelli.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: Reversed by the Court of Appeals of Kentucky on January 8, 1999.