Preview
Hearing Date: No hearing scheduled
Location: <>
Judge: Calendar, Y
FILED
9/18/2023 5:44 PM
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS IRIS Y. MARTINEZ
CIRCUIT CLERK
COUNTY DEPARTMENT, LAW DIVISION
COOK COUNTY, IL
FILED DATE: 9/18/2023 5:44 PM 2021L005325
2021L005325
PILLDRILL, INC., a Nevada corporation ) Calendar, Y
) 24421777
Plaintiff, )
)
v. )
)
UPHEALTH SERVICES, INC., an ) Case No. 2021 L 5325
Illinois corporation, UPHEALTH )
HOLDINGS, INC., a Delaware )
corporation, and CHIRINJEEV )
KATHURIA, an individual, )
)
Defendants. )
DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF
THEIR MOTION FOR SUMMARY JUDGMENT
Plaintiff, PillDrill, Inc. (“PillDrill”), is a sophisticated, Silicon-Valley, medical-
technology company. Its CEO and founder, Peter Havas, is a serial entrepreneur with years of
FILED DATE: 9/18/2023 5:44 PM 2021L005325
mergers and acquisitions (“M&A”) experience. Havas has founded, operated, and sold multiple
prominent companies. But despite Havas’s business acumen and past success, PillDrill has
never been profitable. So Havas sought to sell PillDrill.
To this end, in early 2020, PillDrill entered a nonbinding term sheet with Defendant
UpHealth Services, Inc. (“Services”). If the deal closed, Services would acquire PillDrill and
combine it with several other companies as part of a multi-phase transaction. Yet, as is common
in the M&A industry, the parties’ term sheet was not a binding agreement to acquire PillDrill.
Rather, the term sheet expressly contemplated that—unless and until the parties executed
subsequent, definitive transaction documents—there was no binding agreement.
Nevertheless, after the deal fell through, PillDrill filed this suit. PillDrill asserts that—
despite the language of the signed term sheet, despite industry norms, and despite the parties’
established practice of requiring final, written documents to form a binding agreement—the
parties had, during a single phone call, in the middle of months of negotiations, while working
on a potential final deal, entered into a binding oral contract for PillDrill’s acquisition. PillDrill
also asserts that Services’ parent company, Defendant UpHealth Holdings, Inc. (“Holdings”), is
liable under that alleged oral agreement. Finally, PillDrill alleges that, based on alleged oral
promises to acquire PillDrill, Defendants are liable for promissory estoppel.
PillDrill’s claims fail as a matter of law.
First, PillDrill’s breach-of-contract claim fails because, from the outset of negotiations,
the parties established that there could be no binding oral agreements. The parties set out
prospective terms in a nonbinding term sheet that explicitly contemplated definitive written
1
agreements. This is not surprising: as courts have repeatedly recognized, it is inconceivable that
parties to a complex M&A deal worth millions and millions of dollars would commit to closing
FILED DATE: 9/18/2023 5:44 PM 2021L005325
without a written agreement. As PillDrill’s own financial advisor testified in this case: the M&A
industry would come to a “screeching halt,” if—after a potential acquisition fell through—one
party could enforce an alleged oral promise in the face of a nonbinding term sheet. 5/17/2020
Dep. of Susan Tomilo (“Tomilo Tr.,” attached as Exhibit A) at 214:18-23.
Second, PillDrill’s promissory-estoppel claim also fails. Put simply, under the
circumstances here, PillDrill cannot establish reasonable reliance on an unambiguous promise to
acquire PillDrill. The prospective deal was riddled with contingencies and uncertainties.
Defendants’ motion for summary judgment should be granted.
Background
A. Havas, an experienced entrepreneur, founds PillDrill in 2013.
In 2013, Havas incorporated PillDrill. 4/12/2023 Dep. of Peter Havas (“Havas Tr.,”
attached as Exhibit B) at 20:12-21:1. Havas was no novice when he founded PillDrill. Before
doing so, Havas had spent decades starting, operating, merging, and selling technology
companies, including Sandwichdirect.com and Specialty’s Café & Bakery. Id. at 21:5-22:14;
23:18-25:13. So Havas had extensive experience reviewing various documents relating to
potential mergers, including term sheets and letters of intent. 1 Id. at 22:15-23:16; 25:2-13.
The rest of PillDrill’s team are also well-versed in technology and business. For
example, one of PillDrill’s board members, Judi Grupp, spent several decades overseeing
complex M&A activity in the healthcare space, including founding Consumer Health
1
In addition to having vast hands-on experience in business, Havas, a native of Australia, holds dual
degrees from The University of New South Wales: a Bachelor of Commerce (with a specialty in
economics) and Bachelor of Laws. Havas Tr. at 19:6-20:2. Havas also holds a postgraduate degree,
namely, a diploma of practical legal training. Havas Tr. at 20:3-11.
2
Interactive/Coalition, which she sold to WebMD in 2004. 4/18/2023 Dep. of Judi Grupp
(“Grupp Tr.,” attached as Exhibit C) at 24:5-26:2, 64:20-65:7; Havas Tr. at 33:17-34:1.
FILED DATE: 9/18/2023 5:44 PM 2021L005325
B. PillDrill proves unprofitable, so Havas seeks to sell the company.
Since incorporating in 2013, PillDrill has never been profitable. Havas Tr. at 43:8-9;
46:11-23. In 2019, PillDrill’s financial troubles mounted as its investor seed funding was
running out. Havas Tr. at 42:21-43:7. Consequently, PillDrill engaged an investment bank,
Sikich Corporate Finance, LLC (“Sikich”) as its financial advisor to explore a potential sale or
merger to raise funding. Havas Tr. at 30:17-32:8; see also Sikich Engagement Agreement,
attached as Exhibit D. For several months, Sikich Managing Director Susan Tomilo searched for
potential acquirers and merger partners for PillDrill. Havas Tr. at 35:18-21; 37:15-38:14; 40:21-
41:3; Tomilo Tr. 39:24-41:2. But there were no takers. Id. So PillDrill looked for more complex
options, involving more contingencies and higher levels of uncertainty. Tomilo Tr. at 45:19-47:1
C. PillDrill executes a nonbinding term sheet with Services.
Through mutual employees of Sikich and Services, Tomilo was aware that Services was
working on a large, complex business combination. Tomilo Tr. at 37:12-25; 38:24-39:19;
4/11/2023 Dep. of Martin Beck (“Beck Tr.,” attached as Exhibit E) at 29:2-30:11. Yet Tomilo
was initially hesitant to propose a prospective deal with Services to PillDrill, because she
perceived apparent financing risks with the transaction. Tomilo Tr. at 45:19-47:1; 58:2-15;
95:25-97:2; 178:7-179:14. But PillDrill had no other takers. Tomilo Tr. at 39:24-41:2; 45:19-
47:1. So the Services’ deal was put on the table. 2 Id. At the same time, Tomilo emphasized to
Havas that Services’ acquisition of PillDrill was uncertain. Tomilo Tr. at 179:16-180:8. Tomilo
had the impression that these risks resonated given Havas’s M&A experience. Id.
2
Because Sikich and Services had some mutual employees, Havas received required disclosures and
conflict waivers were put in place. Havas Tr. at 36:5-37:14.
3
Services was a nascent telemedicine company looking to identify and combine
specialized digital healthcare companies into an all-in-one digital platform, administering full-
FILED DATE: 9/18/2023 5:44 PM 2021L005325
service, affordable treatment. 4/17/2023 Dep. of Al Gatmaitan (“Gatmaitan Tr. ,” attached as
Exhibit F) at 21:12-21. Because PillDrill was a potential fit, Services, Sikich, and PillDrill began
discussing a potential deal. See Second Am. Compl. (“SAC,” attached as Exhibits G) ¶¶19-22;
Gatmaitan Tr. at 30:7-31:18.
On April 17, 2020, the parties executed a term sheet (“Executed Term Sheet”)
memorializing the parties’ intent to explore a potential transaction. See Executed Term Sheet,
attached as Exhibit H. Because no definite terms had been reached and no due diligence had
occurred, the Executed Term Sheet expressly provided that no binding agreement would exist
unless a later definitive agreement was executed. Specifically, the Executed Term Sheet stated:
Except for sections below entitled “Confidentiality”, “Non-Solicit”, “Dispute
Resolution”, “Exclusivity”, “Expenses” and “Governing Law”, which are
intended to be, and are, binding agreements between the parties, this Term Sheet
is not a binding agreement on Buyer or Seller to proceed with the transaction
and will not impose any obligation or liability on any such party if the
transactions contemplated herein are not consummated. Any such agreement
will be made only if and when definitive Transaction Documents containing
such agreements are agreed to and executed.
Exhibit H, p. 1 (emphasis added). Havas understood that the term sheet was nonbinding and
would “not impose any obligation or liability on PillDrill or Services if a transaction [was] not
consummated” through final written agreements. Havas Tr. at 55:4-55:16.
D. PillDrill and Services continue exploring a potential acquisition, and PillDrill
prepares a second nonbinding term sheet.
From April to August 2020, Services conducted outreach to potential investors, hoping to
secure the funding needed to acquire and grow target companies. Tomilo Tr. 60:1-61:10; 88:23-
92:16; 95:25-97:2 97:21-98:19. During this time, PillDrill requested and received big-picture
4
updates on those efforts. See, e.g., 7/8/2020 Tomilo E-mail Thread, attached as Exhibit I; Tomilo
Tr. at 66:19-67:2. In the fall of 2020, Services structured the prospective business combination
FILED DATE: 9/18/2023 5:44 PM 2021L005325
in two phases. Gatmaitan Tr. at 70:15-71:19, 72:12-25; Tomilo Tr. at 97:16-100:10, 206:1-207:7;
Beck Tr. at 39:15-40:9; 43:14-44:14; 64:10-65:9; Havas Tr. 68:4-13. In Phase 1, Services,
PillDrill, and several other companies would be consolidated—that is, rolled up—into a soon-to
be-formed holding company (i.e., Holdings). Id. In Phase 2, the consolidated entity would go
public by merging with a publicly traded special purpose acquisition company (“SPAC”). Id.
Eventually, it became clear that PillDrill would not be acquired during the Phase 1 rollup,
as PillDrill’s capabilities were non-additive for the contemplated platform. Gatmaitan Tr. at
36:10-37:10; 100:15-101:12; 4/6/2023 Dep. of Mariya Pylypiv (“Pylypiv Tr.,” attached as
Exhibit J) at 117:22-118:14; 122:8-19; 1/4/2021 Services Email Thread, attached as Exhibit K.
Consequently, on August 4, 2020, Services informed PillDrill that it would not be included in the
rollup. SAC ¶¶42-43. Services explained that, to reduce the complexity of the deal and attract
financing, only a subset of the companies initially targeted for inclusion in the rollup—namely,
those with positive cash flow—would be acquired before the going-public phase of the
transaction. Tomilo Tr. 98:21-100:20; 198:19-199:12. But there was still a possibility that
PillDrill could be acquired in a post-SPAC acquisition, and PillDrill had no other interested
buyers, so Services and Tomilo periodically updated Havas on Services’ efforts to obtain
financing. Tomilo Tr. at 65:10-67:14; 206:1-207:7; Havas Tr. at 66:17-22.
Eventually, in late September 2020, Services executed a letter of intent with a SPAC to
finance the rollup. Pylypiv Tr. at 75:22-76:2. After learning that Services had located a
prospective SPAC, Havas requested a meeting with Services and Tomilo, which occurred on
October 14, 2020. Havas Tr. at 80:14-81:9; 65:21-72:23. PillDrill now alleges that this
5
conversation resulted in a “definitive oral agreement” to acquire PillDrill. SAC ¶62. Yet every
other participant in that call—including PillDrill’s own representative, Tomilo—recalls no such
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agreement. Tomilo Tr. at 201:21-202:5; Gatmaitan Tr. 81:9-83:21; Pylypiv Tr. at 84:4-16.
Less than one month later, and despite the assertion about an alleged “binding” oral
agreement, PillDrill drafted and delivered a proposed second term sheet (“Second Term Sheet”),
which PillDrill says reflects the supposed oral agreement. SAC ¶88; Second Term Sheet,
attached as Exhibit L. Just like the Executed Term Sheet, however, the Second Term Sheet
expressly states that there is no binding agreement. Exhibit L, p. 1-2. The Second Term Sheet
was never executed. Havas Tr. 88:21-93:4. And, although the Second Term Sheet like the
Executed Term Sheet specified the need for the parties to execute final, written documents to
create a binding agreement, no such documents were ever drafted, let alone executed. Id.
E. The parties briefly consider a strategic partnership to help PillDrill show its value.
By late January 2021, Defendants had already completed the first phase of the
transaction—the rollup—by acquiring five target companies. Beck Tr. at 19:16-23; 22:18-23:11;
64:18-65:9. Defendants continued to have some interest in working with PillDrill after Phase 2
(going public via SPAC merger) if doing so added value. Pylypiv Tr. 116:15-116:23; Tomilo Tr.
98:21-100:10; 206:12-208:23.
During a January 7, 2021 videoconference, the parties discussed a potential strategic
partnership agreement (“PA”) under which PillDrill would work in a limited capacity with one of
the rollup companies to prove PillDrill’s value in a potential acquisition. SAC ¶¶ 110-11.
In February 2021, PillDrill sent Defendants a draft PA. 2/24/2021 Tomilo E-mail
attaching PA, attached as Exhibit M. But it was not what Defendants expected. Beck Tr.
114:10-118:9; 2/25/2021 Beck E-mail, attached as Exhibit N. Instead of simply establishing a
6
strategic partnership, the PA that PillDrill proposed required Defendants to provide the funding
to keep PillDrill afloat. Id. The parties did not execute the PA. Tomilo Tr. at 134:16-22;
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137:18-138:7.
Over the next two months or so, Defendants continued working on the highly complex
SPAC phase, but it became increasingly clear that PillDrill would not be part of the business
combination. Pylypiv Tr. at 121:20-124:1; Tomilo Tr. at 133:25-138:12. Around this time,
Havas demanded that Tomilo set up a “one on one” call between Havas and Defendants’ CEO,
Dr. Chirinjeev Kathuria. Tomilo Tr. 210:2-16. The call took place in late April 2021. During
the call, Dr. Kathuria confirmed that PillDrill would no longer be acquired. Still, in a last-ditch
effort to help PillDrill, Dr. Kathuria offered Havas the chance to present to the governing board
of the public entity—UpHealth, Inc.—that would emerge after the SPAC acquisition. Tomilo
Tr. at 208:19-210:1. Havas refused. Id. He threatened to sue.3 Id. at 210:2-15.
Barely a month later, PillDrill filed this lawsuit. 4
Legal Standard
A court should grant summary judgment “if the pleadings, depositions, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2–
3
When Tomilo learned from Havas that he was considering pursuing litigation, she “didn’t think he was
serious,” as she thought there was no basis to support his claim. Tomilo Tr. at 213:24-215:7. From
Tomilo’s perspective, the M&A industry would come to a “screeching halt” if a claim about an alleged
oral contract—that is, a claim like Havas was threatening to bring—could proceed in the face of
negotiations like the parties engaged in here. Tomilo Tr. at 214:18-23. When it turned out Havas was
serious, Sikich terminated its relationship with PillDrill, because, when PillDrill walked away from
conversations with Defendants, PillDrill eliminated its only viable pathway toward acquisition. Tomilo
Tr. at 214:1-9; 224:21-225:7.
4
In its initial complaint and first amended complaint, PillDrill brought claims for fraudulent and negligent
misrepresentation against Defendants and Dr. Kathuria. The Court dismissed the misrepresentation
claims, and dismissed all claims against Dr. Kathuria. The only remaining claims are for breach of an
alleged oral contract and promissory estoppel against Services and Holdings.
7
1005(c). Although the Court must view evidence in the light most favorable to the nonmoving
party, “[m]ere speculation, conjecture, or guess is insufficient to withstand summary judgment.”
FILED DATE: 9/18/2023 5:44 PM 2021L005325
Sweis v. Founders Ins. Co., 2017 IL App (1st) 163157, ¶¶ 35-36 (alterations in original).
Argument
A. PillDrill’s breach-of-contract claim fails as a matter of law because an enforceable
contract was never formed.
PillDrill alleges breach of an oral contract. “Although the intent of the parties to
an oral contract is ordinarily a question of fact, it may become a question of law if the [relevant,
material] facts are undisputed and there can be no difference in the judgment of reasonable men
as to the inferences to be drawn from them.” Tindall Corp. v. Mondelez Int'l, Inc., 248 F. Supp.
3d 895, 905 (N.D. Ill. 2017) (cleaned up) (rejecting oral-contract claim where written documents
clearly contemplated additional steps for formation of binding agreement). To quote the
Appellate Court, although a trial court considering summary judgment is “required to construe
facts in the light most favorable to the nonmovant,…the trial court [i]s not required to make
unreasonable inferences or ignore reasonable ones.” In re Est. of Frakes, 2020 IL App (3d)
180649, ¶ 22 (emphasis added). In Illinois, “formation of an oral contract is a matter of law
where the parties intend for a written or formal contract to follow negotiations.” Id. (cleaned
up). Here, summary judgment should be granted on PillDrill’s breach-of-contract claim, because
the parties’ conduct shows that there was no intent to form a binding oral agreement.
1. From the outset, the parties contemplated the need for final, written documents
to create a binding contract.
From the outset, the parties recognized that, unless final written agreements were
executed, there was no binding deal. Consider two points.
8
First, the Executed Term Sheet expressly stated that (a) a binding agreement was
contingent on final definitive agreements and (b) there could be no oral agreement. See Exhibit
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H, p. 1. In the face of such agreements, courts have rejected oral-contract claims. Tindell Corp.,
248 F. Supp. 3d at 905.
To be sure, at the motion-to-dismiss stage, the Court here found that the existence of the
Executed Term Sheet did not conclusively preclude the possibility of an oral agreement. But the
motion-to-dismiss stage is not the summary-judgment stage. See id. at 909. And—after
extensive discovery—PillDrill has failed to establish that the plain language of the Express Term
Sheet should be disregarded.
Second, courts applying Illinois law have long recognized the utility of term sheets,
reasoning that when parties negotiate complex deals involving substantial amounts of money,
they may reach interim, nonbinding agreements while also contemplating a final written
agreement. See, e.g., Ocean Atlantic Dev. Corp. v. Aurora Christian Sch., Inc., 322 F.3d 983,
994-95 (7th Cir. 2003) (recognizing that deals often occur in stages and that, by “tying material
obligations…to the subsequent execution of a contract, the offers suggest that the putative
agreements were tentative and inchoate.”). “Illinois . . . allows parties to approach agreement in
stages, without fear that by reaching a preliminary understanding they have bargained away their
privilege to disagree on the specifics,” and “[a]pproaching agreement by stages is a valuable
method of doing business.” Empro Mfg. Co., Inc. v. Ball-Co Mfg., Inc., 870 F.2d 423, 426 (7th
Cir. 1989). Indeed, “[e]ven if parties agree, point by point, on all the terms of a contract, if they
understand that the execution of a formal document shall be a prerequisite to their being bound
there is no contract until the document is executed.” Solaia Tech. LLC v. ArvinMeritor, Inc., No.
02 C 4704, 2006 WL 695699, at *4–5 (N.D. Ill. Mar. 16, 2006).
9
Courts consider several factors when determining whether parties intended to require a
writing before an agreement would be legally binding upon the parties, including: “whether the
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type of agreement involved is one usually put into writing, whether the agreement contains many
or few details, whether the agreement involves a large or small amount of money, whether the
agreement requires formal writing for the full expression of the covenants, and whether the
negotiations indicated that a formal written document was contemplated at the completion of the
negotiations.” Tindall Corp., 248 F. Supp. 3d at 905 (quoting Ceres Ill., Inc. v. Ill. Scrap
Processing, Inc., 114 Ill. 2d 133, 144 (1986)). In conducting this analysis, courts look “at the
totality of circumstances, including the parties’ negotiation history and industry practices” in
determining whether an oral contract was intended. Laminet Cover Co. v. Home Depot USA,
Inc., No. 06 C 0548, 2009 WL 2163257, at *7 (N.D. Ill. July 20, 2009).
Here, every conceivable factor weighs against the existence of an oral contract. Start at
the outset of the parties’ negotiations: in April 2020, the parties established a precedent of
negotiating prospective terms for PillDrill’s acquisition orally, and then reducing those terms to a
nonbinding writing that contemplated the execution of subsequent “definitive Transaction
Documents.” See Exhibit H, p. 1. This practice is commonplace in the M&A industry. Because
these deals often involve high-risk, multi-phase transactions worth substantial sums of money,
they are almost always reduced to writing. See, e.g., PFT Roberson, Inc. v. Volvo Trucks N. Am.,
Inc., 420 F.3d 728, 730 (7th Cir. 2005) (observing that “[s]uch caution is to be expected in a
multi-million-dollar deal.”); see generally Thom Rumberger, Jr., The Acquisition and Sale of
Emerging Growth Companies: The M & A Exit § 3:5 (2d ed. 2017).
The contemplated acquisition of PillDrill is no exception: it was to occur as part of a
multi-phase merger valued at hundreds of millions of dollars culminating in a go-public event.
10
By entering the Executed Term Sheet, Services signaled to PillDrill that no binding agreement to
acquire PillDrill would exist absent the creation of a formal written contract. PillDrill has
FILED DATE: 9/18/2023 5:44 PM 2021L005325
offered no reasonable explanation as to why Services would suddenly change course and enter an
oral contract for the PillDrill acquisition in the middle of ongoing negotiations that pre-dated and
post-dated the alleged oral contract. See Laminet Cover Co., 2009 WL 2163257, at *8 (granting
summary judgment on oral-contract claim where plaintiff offered “no explanation for why it
believed that [defendant] would make this 180-degree turn in the way it did business”).
Recall, too, that the PillDrill team involved in the potential deal included highly
sophisticated individuals with established business acumen. Havas and Grupp, for example,
have decades of M&A experience; they have founded, operated, and sold companies numerous
times. Each of those transactions, moreover, involved written (not oral) definitive agreements.
To quote PillDrill’s financial advisor again, Havas is a “sophisticated . . . CEO,” and it “wasn’t
as if . . . this was the first time he was selling a company.” Tomilo Tr., 214:19-215:7. Not
surprisingly, in assessing whether a contract was formed, courts charge parties with the level of
sophistication they possess in complex commercial dealings. See Solaia Tech., 2006 WL
695699, at *7 (stating that it was “highly unlikely that … sophisticated parties involved in this
litigation would leave their obligations under such complex terms to the vagaries of memory”).
2. The parties’ conduct after allegedly entering into an oral agreement was entirely
inconsistent with the existence of an oral agreement.
Courts readily grant summary judgment on oral-contract claims where the parties’
conduct after the alleged agreement suggests that there was no agreement in the first place. See
George J. Priester Aviation Serv., Inc. v. Gates Learjet Corp., No. 85 C 7109, 1988 WL 64064,
at *4 (N.D. Ill. June 10, 1988) (granting summary judgment where subsequent writings
evidenced that parties did not intend to be bound by prior oral agreement). So it is here.
11
The parties’ conduct after allegedly entering into an oral agreement shows there was no
agreement at all. For example, less than a month after the oral contract was allegedly formed,
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PillDrill drafted the Second Term Sheet—which contained the exact same nonbinding language
as the Executed Term Sheet. Exhibit L, p. 1. PillDrill says that it drafted the Second Term Sheet
only to show it to other investors to try to obtain funding pending a potential deal with
Defendants. But if that were the case, wouldn’t a binding term sheet have been more effective?
Courts considering similar circumstances have asked similar questions. And promptly granted
summary judgment for the defendant. See Tindall Corp., 248 F. Supp. 3d at 907 (“If the Email
was intended as a ‘recap’ of the contract terms, as Palumbo has since alleged … why not state
that the Items reflect Palumbo's understanding of the agreement, instead of the ‘discussion’
regarding an agreement?”) (emphasis in original).
Summary judgment should be granted on PillDrill’s breach-of-contract claim.
B. PillDrill’s promissory-estoppel claim fails because PillDrill cannot establish
reasonable reliance on an unambiguous promise.
To establish a promissory-estoppel claim, a plaintiff must show, among other things, that
“defendants made an unambiguous promise to plaintiff” and “plaintiff relied on such promise” to
its detriment. Ross v. May Co., 377 Ill. App. 3d 387, 393 (1st Dist. 2007). Here, PillDrill can
establish neither.
1. PillDrill cannot establish reasonable reliance.
Start with reasonable reliance. Courts across the country have found that it is
unjustifiable as a matter of law to rely on promises that are the subject of a nonbinding term
sheet that contemplates execution of a later definitive agreement. See, e.g., BPI Energy
Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131, 139 (7th Cir. 2011) (rejecting
promissory-estoppel claim because it is “reckless” and therefore unreasonable to rely on
12
promises reflected in a nonbinding agreement); Bennett v. Itochu Int’l, Inc., No. 09-CV-1819,
2012 WL 3627404, at *21 (E.D. Pa. Aug. 23, 2012) (concluding that “[i]t was unreasonable as a
FILED DATE: 9/18/2023 5:44 PM 2021L005325
matter of law for [the plaintiff] to rely on Itochu’s oral promise to purchase [the plaintiff’s]
shares as this statement contradicted several signed written documents under which such a
transaction required the execution of a final, binding, written contract”) (emphasis in original).
Here, the parties’ negotiations—including the Executed Term Sheet covering the
potential PillDrill acquisition—establish that there would be no binding agreement absent a
definitive, final, written agreement. And PillDrill cannot get around this by arguing that it relied
on alleged oral promises that PillDrill would be acquired. See Gruen Indus., Inc. v. Biller, 608
F.2d 274, 277-281 (7th Cir. 1979) (affirming summary judgment on promissory-estoppel claim
because, in light of prior negotiations, plaintiff could not reasonably rely on a statement that
defendants “had a firm commitment” to sell assets); Firestone Fin., LLC v. Meyer, No. 13-CV-
07241, 2017 WL 714110, at *10 (N.D. Ill. Feb. 23, 2017) (concluding that “it was unreasonable
as a matter of law for an experienced businessman and former attorney to conclude from
McAllister’s representations that Firestone would [fund the purchase] without any further
review, particularly in light of the parties’ prior dealings.”) (emphasis added).
Further, as explained above, Havas—a sophisticated businessman with extensive
experience in founding, operating, and selling companies—was aware of the risks associated
with the potential deal. Courts routinely grant summary judgment on promissory-estoppel
claims where a sophisticated party alleges reliance on an oral promise in connection with a large
transaction: such purported reliance exceeds the bounds of commercial reasonableness. See, e.g.,
Laminet Cover Co., 2009 WL 2163257, at *8–9 (granting summary judgment where plaintiff
13
“was not an inexperienced person without business experience[,]…had worked on agreements of
this sort before[,]…[and] knew the…importance placed on written documents”). 5
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Here, in light of the PillDrill team’s vast business experience, PillDrill simply cannot
establish reasonable reliance. This is especially so because the subject deal posed substantial
funding and timeline risks, which PillDrill knowingly assumed while PillDrill was failing
financially. See, e.g., Classic Cheesecake Co., Inc. v. JPMorgan Chase Bank, N.A., 546 F.3d
839, 846–47 (7th Cir. 2008) (“For the plaintiffs to treat the bank loan as a certainty because they
were told by the bank officer…that it would be approved was unreasonable, especially if, as the
plaintiffs’ damages claim presupposes, the need for the loan was urgent.”) (emphasis added).
For this reason alone, the Court should enter summary judgment against PillDrill on its
promissory-estoppel claim.
2. PillDrill cannot establish an unambiguous promise.
Statements that amount to “expressions of optimism and determination” do not constitute
promises, and therefore do not give rise to a viable promissory-estoppel claim. Garwood
Packaging, 378 F.3d at 703-05 (finding that a former investment banker’s reliance on a
businessman’s promise that a deal to save a failing company would go through “come hell or
high water” was unreasonable); see also Nibeel v. McDonald's Corp., 97 C 7203, 1998 WL
547286, at *5, 11-12 (N.D. Ill. Aug. 27, 1998) (granting summary judgment on promissory-
estoppel claim despite defendant’s statements that plaintiff would “have plenty of opportunities
down the road to expand and grow” and “[w]e’re going to take care of you.”).
5
As one court nicely summarized: “[W]hat is a reasonable, and indeed actual, understanding will often
depend on the knowledge that the promisee brings to the table. McNamara, with whom Martin primarily
dealt, is a former investment banker, not a rube. He knew that in putting together a deal to salvage a
failing company there is many a slip ‘twixt cup and lips.” Garwood Packaging v. Allen & Co., 378 F.3d
698 (7th Cir. 2004).
14
Here, PillDrill has pointed to a variety of alleged “promises.” But those “promises”
amount to nothing more than generally optimistic or enthusiastic statements about a prospective
FILED DATE: 9/18/2023 5:44 PM 2021L005325
deal. See, e.g., 8/13/2020 Pylypiv E-mail to Havas, attached as Exhibit O (“We are also looking
Preview
Hearing Date: No hearing scheduled Location: <> Judge: Calendar, Y FILED 9/18/2023 5:44 PM IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS IRIS Y. MARTINEZ CIRCUIT CLERK COUNTY DEPARTMENT, LAW DIVISION COOK COUNTY, IL FILED DATE: 9/18/2023 5:44 PM 2021L005325 2021L005325 PILLDRILL, INC., a Nevada corporation ) Calendar, Y ) 24421777 Plaintiff, ) ) v. ) ) UPHEALTH SERVICES, INC., an ) Case No. 2021 L 5325 Illinois corporation, UPHEALTH ) HOLDINGS, INC., a Delaware ) corporation, and CHIRINJEEV ) KATHURIA, an individual, ) ) Defendants. ) DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT Plaintiff, PillDrill, Inc. (“PillDrill”), is a sophisticated, Silicon-Valley, medical- technology company. Its CEO and founder, Peter Havas, is a serial entrepreneur with years of FILED DATE: 9/18/2023 5:44 PM 2021L005325 mergers and acquisitions (“M&A”) experience. Havas has founded, operated, and sold multiple prominent companies. But despite Havas’s business acumen and past success, PillDrill has never been profitable. So Havas sought to sell PillDrill. To this end, in early 2020, PillDrill entered a nonbinding term sheet with Defendant UpHealth Services, Inc. (“Services”). If the deal closed, Services would acquire PillDrill and combine it with several other companies as part of a multi-phase transaction. Yet, as is common in the M&A industry, the parties’ term sheet was not a binding agreement to acquire PillDrill. Rather, the term sheet expressly contemplated that—unless and until the parties executed subsequent, definitive transaction documents—there was no binding agreement. Nevertheless, after the deal fell through, PillDrill filed this suit. PillDrill asserts that— despite the language of the signed term sheet, despite industry norms, and despite the parties’ established practice of requiring final, written documents to form a binding agreement—the parties had, during a single phone call, in the middle of months of negotiations, while working on a potential final deal, entered into a binding oral contract for PillDrill’s acquisition. PillDrill also asserts that Services’ parent company, Defendant UpHealth Holdings, Inc. (“Holdings”), is liable under that alleged oral agreement. Finally, PillDrill alleges that, based on alleged oral promises to acquire PillDrill, Defendants are liable for promissory estoppel. PillDrill’s claims fail as a matter of law. First, PillDrill’s breach-of-contract claim fails because, from the outset of negotiations, the parties established that there could be no binding oral agreements. The parties set out prospective terms in a nonbinding term sheet that explicitly contemplated definitive written 1 agreements. This is not surprising: as courts have repeatedly recognized, it is inconceivable that parties to a complex M&A deal worth millions and millions of dollars would commit to closing FILED DATE: 9/18/2023 5:44 PM 2021L005325 without a written agreement. As PillDrill’s own financial advisor testified in this case: the M&A industry would come to a “screeching halt,” if—after a potential acquisition fell through—one party could enforce an alleged oral promise in the face of a nonbinding term sheet. 5/17/2020 Dep. of Susan Tomilo (“Tomilo Tr.,” attached as Exhibit A) at 214:18-23. Second, PillDrill’s promissory-estoppel claim also fails. Put simply, under the circumstances here, PillDrill cannot establish reasonable reliance on an unambiguous promise to acquire PillDrill. The prospective deal was riddled with contingencies and uncertainties. Defendants’ motion for summary judgment should be granted. Background A. Havas, an experienced entrepreneur, founds PillDrill in 2013. In 2013, Havas incorporated PillDrill. 4/12/2023 Dep. of Peter Havas (“Havas Tr.,” attached as Exhibit B) at 20:12-21:1. Havas was no novice when he founded PillDrill. Before doing so, Havas had spent decades starting, operating, merging, and selling technology companies, including Sandwichdirect.com and Specialty’s Café & Bakery. Id. at 21:5-22:14; 23:18-25:13. So Havas had extensive experience reviewing various documents relating to potential mergers, including term sheets and letters of intent. 1 Id. at 22:15-23:16; 25:2-13. The rest of PillDrill’s team are also well-versed in technology and business. For example, one of PillDrill’s board members, Judi Grupp, spent several decades overseeing complex M&A activity in the healthcare space, including founding Consumer Health 1 In addition to having vast hands-on experience in business, Havas, a native of Australia, holds dual degrees from The University of New South Wales: a Bachelor of Commerce (with a specialty in economics) and Bachelor of Laws. Havas Tr. at 19:6-20:2. Havas also holds a postgraduate degree, namely, a diploma of practical legal training. Havas Tr. at 20:3-11. 2 Interactive/Coalition, which she sold to WebMD in 2004. 4/18/2023 Dep. of Judi Grupp (“Grupp Tr.,” attached as Exhibit C) at 24:5-26:2, 64:20-65:7; Havas Tr. at 33:17-34:1. FILED DATE: 9/18/2023 5:44 PM 2021L005325 B. PillDrill proves unprofitable, so Havas seeks to sell the company. Since incorporating in 2013, PillDrill has never been profitable. Havas Tr. at 43:8-9; 46:11-23. In 2019, PillDrill’s financial troubles mounted as its investor seed funding was running out. Havas Tr. at 42:21-43:7. Consequently, PillDrill engaged an investment bank, Sikich Corporate Finance, LLC (“Sikich”) as its financial advisor to explore a potential sale or merger to raise funding. Havas Tr. at 30:17-32:8; see also Sikich Engagement Agreement, attached as Exhibit D. For several months, Sikich Managing Director Susan Tomilo searched for potential acquirers and merger partners for PillDrill. Havas Tr. at 35:18-21; 37:15-38:14; 40:21- 41:3; Tomilo Tr. 39:24-41:2. But there were no takers. Id. So PillDrill looked for more complex options, involving more contingencies and higher levels of uncertainty. Tomilo Tr. at 45:19-47:1 C. PillDrill executes a nonbinding term sheet with Services. Through mutual employees of Sikich and Services, Tomilo was aware that Services was working on a large, complex business combination. Tomilo Tr. at 37:12-25; 38:24-39:19; 4/11/2023 Dep. of Martin Beck (“Beck Tr.,” attached as Exhibit E) at 29:2-30:11. Yet Tomilo was initially hesitant to propose a prospective deal with Services to PillDrill, because she perceived apparent financing risks with the transaction. Tomilo Tr. at 45:19-47:1; 58:2-15; 95:25-97:2; 178:7-179:14. But PillDrill had no other takers. Tomilo Tr. at 39:24-41:2; 45:19- 47:1. So the Services’ deal was put on the table. 2 Id. At the same time, Tomilo emphasized to Havas that Services’ acquisition of PillDrill was uncertain. Tomilo Tr. at 179:16-180:8. Tomilo had the impression that these risks resonated given Havas’s M&A experience. Id. 2 Because Sikich and Services had some mutual employees, Havas received required disclosures and conflict waivers were put in place. Havas Tr. at 36:5-37:14. 3 Services was a nascent telemedicine company looking to identify and combine specialized digital healthcare companies into an all-in-one digital platform, administering full- FILED DATE: 9/18/2023 5:44 PM 2021L005325 service, affordable treatment. 4/17/2023 Dep. of Al Gatmaitan (“Gatmaitan Tr. ,” attached as Exhibit F) at 21:12-21. Because PillDrill was a potential fit, Services, Sikich, and PillDrill began discussing a potential deal. See Second Am. Compl. (“SAC,” attached as Exhibits G) ¶¶19-22; Gatmaitan Tr. at 30:7-31:18. On April 17, 2020, the parties executed a term sheet (“Executed Term Sheet”) memorializing the parties’ intent to explore a potential transaction. See Executed Term Sheet, attached as Exhibit H. Because no definite terms had been reached and no due diligence had occurred, the Executed Term Sheet expressly provided that no binding agreement would exist unless a later definitive agreement was executed. Specifically, the Executed Term Sheet stated: Except for sections below entitled “Confidentiality”, “Non-Solicit”, “Dispute Resolution”, “Exclusivity”, “Expenses” and “Governing Law”, which are intended to be, and are, binding agreements between the parties, this Term Sheet is not a binding agreement on Buyer or Seller to proceed with the transaction and will not impose any obligation or liability on any such party if the transactions contemplated herein are not consummated. Any such agreement will be made only if and when definitive Transaction Documents containing such agreements are agreed to and executed. Exhibit H, p. 1 (emphasis added). Havas understood that the term sheet was nonbinding and would “not impose any obligation or liability on PillDrill or Services if a transaction [was] not consummated” through final written agreements. Havas Tr. at 55:4-55:16. D. PillDrill and Services continue exploring a potential acquisition, and PillDrill prepares a second nonbinding term sheet. From April to August 2020, Services conducted outreach to potential investors, hoping to secure the funding needed to acquire and grow target companies. Tomilo Tr. 60:1-61:10; 88:23- 92:16; 95:25-97:2 97:21-98:19. During this time, PillDrill requested and received big-picture 4 updates on those efforts. See, e.g., 7/8/2020 Tomilo E-mail Thread, attached as Exhibit I; Tomilo Tr. at 66:19-67:2. In the fall of 2020, Services structured the prospective business combination FILED DATE: 9/18/2023 5:44 PM 2021L005325 in two phases. Gatmaitan Tr. at 70:15-71:19, 72:12-25; Tomilo Tr. at 97:16-100:10, 206:1-207:7; Beck Tr. at 39:15-40:9; 43:14-44:14; 64:10-65:9; Havas Tr. 68:4-13. In Phase 1, Services, PillDrill, and several other companies would be consolidated—that is, rolled up—into a soon-to be-formed holding company (i.e., Holdings). Id. In Phase 2, the consolidated entity would go public by merging with a publicly traded special purpose acquisition company (“SPAC”). Id. Eventually, it became clear that PillDrill would not be acquired during the Phase 1 rollup, as PillDrill’s capabilities were non-additive for the contemplated platform. Gatmaitan Tr. at 36:10-37:10; 100:15-101:12; 4/6/2023 Dep. of Mariya Pylypiv (“Pylypiv Tr.,” attached as Exhibit J) at 117:22-118:14; 122:8-19; 1/4/2021 Services Email Thread, attached as Exhibit K. Consequently, on August 4, 2020, Services informed PillDrill that it would not be included in the rollup. SAC ¶¶42-43. Services explained that, to reduce the complexity of the deal and attract financing, only a subset of the companies initially targeted for inclusion in the rollup—namely, those with positive cash flow—would be acquired before the going-public phase of the transaction. Tomilo Tr. 98:21-100:20; 198:19-199:12. But there was still a possibility that PillDrill could be acquired in a post-SPAC acquisition, and PillDrill had no other interested buyers, so Services and Tomilo periodically updated Havas on Services’ efforts to obtain financing. Tomilo Tr. at 65:10-67:14; 206:1-207:7; Havas Tr. at 66:17-22. Eventually, in late September 2020, Services executed a letter of intent with a SPAC to finance the rollup. Pylypiv Tr. at 75:22-76:2. After learning that Services had located a prospective SPAC, Havas requested a meeting with Services and Tomilo, which occurred on October 14, 2020. Havas Tr. at 80:14-81:9; 65:21-72:23. PillDrill now alleges that this 5 conversation resulted in a “definitive oral agreement” to acquire PillDrill. SAC ¶62. Yet every other participant in that call—including PillDrill’s own representative, Tomilo—recalls no such FILED DATE: 9/18/2023 5:44 PM 2021L005325 agreement. Tomilo Tr. at 201:21-202:5; Gatmaitan Tr. 81:9-83:21; Pylypiv Tr. at 84:4-16. Less than one month later, and despite the assertion about an alleged “binding” oral agreement, PillDrill drafted and delivered a proposed second term sheet (“Second Term Sheet”), which PillDrill says reflects the supposed oral agreement. SAC ¶88; Second Term Sheet, attached as Exhibit L. Just like the Executed Term Sheet, however, the Second Term Sheet expressly states that there is no binding agreement. Exhibit L, p. 1-2. The Second Term Sheet was never executed. Havas Tr. 88:21-93:4. And, although the Second Term Sheet like the Executed Term Sheet specified the need for the parties to execute final, written documents to create a binding agreement, no such documents were ever drafted, let alone executed. Id. E. The parties briefly consider a strategic partnership to help PillDrill show its value. By late January 2021, Defendants had already completed the first phase of the transaction—the rollup—by acquiring five target companies. Beck Tr. at 19:16-23; 22:18-23:11; 64:18-65:9. Defendants continued to have some interest in working with PillDrill after Phase 2 (going public via SPAC merger) if doing so added value. Pylypiv Tr. 116:15-116:23; Tomilo Tr. 98:21-100:10; 206:12-208:23. During a January 7, 2021 videoconference, the parties discussed a potential strategic partnership agreement (“PA”) under which PillDrill would work in a limited capacity with one of the rollup companies to prove PillDrill’s value in a potential acquisition. SAC ¶¶ 110-11. In February 2021, PillDrill sent Defendants a draft PA. 2/24/2021 Tomilo E-mail attaching PA, attached as Exhibit M. But it was not what Defendants expected. Beck Tr. 114:10-118:9; 2/25/2021 Beck E-mail, attached as Exhibit N. Instead of simply establishing a 6 strategic partnership, the PA that PillDrill proposed required Defendants to provide the funding to keep PillDrill afloat. Id. The parties did not execute the PA. Tomilo Tr. at 134:16-22; FILED DATE: 9/18/2023 5:44 PM 2021L005325 137:18-138:7. Over the next two months or so, Defendants continued working on the highly complex SPAC phase, but it became increasingly clear that PillDrill would not be part of the business combination. Pylypiv Tr. at 121:20-124:1; Tomilo Tr. at 133:25-138:12. Around this time, Havas demanded that Tomilo set up a “one on one” call between Havas and Defendants’ CEO, Dr. Chirinjeev Kathuria. Tomilo Tr. 210:2-16. The call took place in late April 2021. During the call, Dr. Kathuria confirmed that PillDrill would no longer be acquired. Still, in a last-ditch effort to help PillDrill, Dr. Kathuria offered Havas the chance to present to the governing board of the public entity—UpHealth, Inc.—that would emerge after the SPAC acquisition. Tomilo Tr. at 208:19-210:1. Havas refused. Id. He threatened to sue.3 Id. at 210:2-15. Barely a month later, PillDrill filed this lawsuit. 4 Legal Standard A court should grant summary judgment “if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2– 3 When Tomilo learned from Havas that he was considering pursuing litigation, she “didn’t think he was serious,” as she thought there was no basis to support his claim. Tomilo Tr. at 213:24-215:7. From Tomilo’s perspective, the M&A industry would come to a “screeching halt” if a claim about an alleged oral contract—that is, a claim like Havas was threatening to bring—could proceed in the face of negotiations like the parties engaged in here. Tomilo Tr. at 214:18-23. When it turned out Havas was serious, Sikich terminated its relationship with PillDrill, because, when PillDrill walked away from conversations with Defendants, PillDrill eliminated its only viable pathway toward acquisition. Tomilo Tr. at 214:1-9; 224:21-225:7. 4 In its initial complaint and first amended complaint, PillDrill brought claims for fraudulent and negligent misrepresentation against Defendants and Dr. Kathuria. The Court dismissed the misrepresentation claims, and dismissed all claims against Dr. Kathuria. The only remaining claims are for breach of an alleged oral contract and promissory estoppel against Services and Holdings. 7 1005(c). Although the Court must view evidence in the light most favorable to the nonmoving party, “[m]ere speculation, conjecture, or guess is insufficient to withstand summary judgment.” FILED DATE: 9/18/2023 5:44 PM 2021L005325 Sweis v. Founders Ins. Co., 2017 IL App (1st) 163157, ¶¶ 35-36 (alterations in original). Argument A. PillDrill’s breach-of-contract claim fails as a matter of law because an enforceable contract was never formed. PillDrill alleges breach of an oral contract. “Although the intent of the parties to an oral contract is ordinarily a question of fact, it may become a question of law if the [relevant, material] facts are undisputed and there can be no difference in the judgment of reasonable men as to the inferences to be drawn from them.” Tindall Corp. v. Mondelez Int'l, Inc., 248 F. Supp. 3d 895, 905 (N.D. Ill. 2017) (cleaned up) (rejecting oral-contract claim where written documents clearly contemplated additional steps for formation of binding agreement). To quote the Appellate Court, although a trial court considering summary judgment is “required to construe facts in the light most favorable to the nonmovant,…the trial court [i]s not required to make unreasonable inferences or ignore reasonable ones.” In re Est. of Frakes, 2020 IL App (3d) 180649, ¶ 22 (emphasis added). In Illinois, “formation of an oral contract is a matter of law where the parties intend for a written or formal contract to follow negotiations.” Id. (cleaned up). Here, summary judgment should be granted on PillDrill’s breach-of-contract claim, because the parties’ conduct shows that there was no intent to form a binding oral agreement. 1. From the outset, the parties contemplated the need for final, written documents to create a binding contract. From the outset, the parties recognized that, unless final written agreements were executed, there was no binding deal. Consider two points. 8 First, the Executed Term Sheet expressly stated that (a) a binding agreement was contingent on final definitive agreements and (b) there could be no oral agreement. See Exhibit FILED DATE: 9/18/2023 5:44 PM 2021L005325 H, p. 1. In the face of such agreements, courts have rejected oral-contract claims. Tindell Corp., 248 F. Supp. 3d at 905. To be sure, at the motion-to-dismiss stage, the Court here found that the existence of the Executed Term Sheet did not conclusively preclude the possibility of an oral agreement. But the motion-to-dismiss stage is not the summary-judgment stage. See id. at 909. And—after extensive discovery—PillDrill has failed to establish that the plain language of the Express Term Sheet should be disregarded. Second, courts applying Illinois law have long recognized the utility of term sheets, reasoning that when parties negotiate complex deals involving substantial amounts of money, they may reach interim, nonbinding agreements while also contemplating a final written agreement. See, e.g., Ocean Atlantic Dev. Corp. v. Aurora Christian Sch., Inc., 322 F.3d 983, 994-95 (7th Cir. 2003) (recognizing that deals often occur in stages and that, by “tying material obligations…to the subsequent execution of a contract, the offers suggest that the putative agreements were tentative and inchoate.”). “Illinois . . . allows parties to approach agreement in stages, without fear that by reaching a preliminary understanding they have bargained away their privilege to disagree on the specifics,” and “[a]pproaching agreement by stages is a valuable method of doing business.” Empro Mfg. Co., Inc. v. Ball-Co Mfg., Inc., 870 F.2d 423, 426 (7th Cir. 1989). Indeed, “[e]ven if parties agree, point by point, on all the terms of a contract, if they understand that the execution of a formal document shall be a prerequisite to their being bound there is no contract until the document is executed.” Solaia Tech. LLC v. ArvinMeritor, Inc., No. 02 C 4704, 2006 WL 695699, at *4–5 (N.D. Ill. Mar. 16, 2006). 9 Courts consider several factors when determining whether parties intended to require a writing before an agreement would be legally binding upon the parties, including: “whether the FILED DATE: 9/18/2023 5:44 PM 2021L005325 type of agreement involved is one usually put into writing, whether the agreement contains many or few details, whether the agreement involves a large or small amount of money, whether the agreement requires formal writing for the full expression of the covenants, and whether the negotiations indicated that a formal written document was contemplated at the completion of the negotiations.” Tindall Corp., 248 F. Supp. 3d at 905 (quoting Ceres Ill., Inc. v. Ill. Scrap Processing, Inc., 114 Ill. 2d 133, 144 (1986)). In conducting this analysis, courts look “at the totality of circumstances, including the parties’ negotiation history and industry practices” in determining whether an oral contract was intended. Laminet Cover Co. v. Home Depot USA, Inc., No. 06 C 0548, 2009 WL 2163257, at *7 (N.D. Ill. July 20, 2009). Here, every conceivable factor weighs against the existence of an oral contract. Start at the outset of the parties’ negotiations: in April 2020, the parties established a precedent of negotiating prospective terms for PillDrill’s acquisition orally, and then reducing those terms to a nonbinding writing that contemplated the execution of subsequent “definitive Transaction Documents.” See Exhibit H, p. 1. This practice is commonplace in the M&A industry. Because these deals often involve high-risk, multi-phase transactions worth substantial sums of money, they are almost always reduced to writing. See, e.g., PFT Roberson, Inc. v. Volvo Trucks N. Am., Inc., 420 F.3d 728, 730 (7th Cir. 2005) (observing that “[s]uch caution is to be expected in a multi-million-dollar deal.”); see generally Thom Rumberger, Jr., The Acquisition and Sale of Emerging Growth Companies: The M & A Exit § 3:5 (2d ed. 2017). The contemplated acquisition of PillDrill is no exception: it was to occur as part of a multi-phase merger valued at hundreds of millions of dollars culminating in a go-public event. 10 By entering the Executed Term Sheet, Services signaled to PillDrill that no binding agreement to acquire PillDrill would exist absent the creation of a formal written contract. PillDrill has FILED DATE: 9/18/2023 5:44 PM 2021L005325 offered no reasonable explanation as to why Services would suddenly change course and enter an oral contract for the PillDrill acquisition in the middle of ongoing negotiations that pre-dated and post-dated the alleged oral contract. See Laminet Cover Co., 2009 WL 2163257, at *8 (granting summary judgment on oral-contract claim where plaintiff offered “no explanation for why it believed that [defendant] would make this 180-degree turn in the way it did business”). Recall, too, that the PillDrill team involved in the potential deal included highly sophisticated individuals with established business acumen. Havas and Grupp, for example, have decades of M&A experience; they have founded, operated, and sold companies numerous times. Each of those transactions, moreover, involved written (not oral) definitive agreements. To quote PillDrill’s financial advisor again, Havas is a “sophisticated . . . CEO,” and it “wasn’t as if . . . this was the first time he was selling a company.” Tomilo Tr., 214:19-215:7. Not surprisingly, in assessing whether a contract was formed, courts charge parties with the level of sophistication they possess in complex commercial dealings. See Solaia Tech., 2006 WL 695699, at *7 (stating that it was “highly unlikely that … sophisticated parties involved in this litigation would leave their obligations under such complex terms to the vagaries of memory”). 2. The parties’ conduct after allegedly entering into an oral agreement was entirely inconsistent with the existence of an oral agreement. Courts readily grant summary judgment on oral-contract claims where the parties’ conduct after the alleged agreement suggests that there was no agreement in the first place. See George J. Priester Aviation Serv., Inc. v. Gates Learjet Corp., No. 85 C 7109, 1988 WL 64064, at *4 (N.D. Ill. June 10, 1988) (granting summary judgment where subsequent writings evidenced that parties did not intend to be bound by prior oral agreement). So it is here. 11 The parties’ conduct after allegedly entering into an oral agreement shows there was no agreement at all. For example, less than a month after the oral contract was allegedly formed, FILED DATE: 9/18/2023 5:44 PM 2021L005325 PillDrill drafted the Second Term Sheet—which contained the exact same nonbinding language as the Executed Term Sheet. Exhibit L, p. 1. PillDrill says that it drafted the Second Term Sheet only to show it to other investors to try to obtain funding pending a potential deal with Defendants. But if that were the case, wouldn’t a binding term sheet have been more effective? Courts considering similar circumstances have asked similar questions. And promptly granted summary judgment for the defendant. See Tindall Corp., 248 F. Supp. 3d at 907 (“If the Email was intended as a ‘recap’ of the contract terms, as Palumbo has since alleged … why not state that the Items reflect Palumbo's understanding of the agreement, instead of the ‘discussion’ regarding an agreement?”) (emphasis in original). Summary judgment should be granted on PillDrill’s breach-of-contract claim. B. PillDrill’s promissory-estoppel claim fails because PillDrill cannot establish reasonable reliance on an unambiguous promise. To establish a promissory-estoppel claim, a plaintiff must show, among other things, that “defendants made an unambiguous promise to plaintiff” and “plaintiff relied on such promise” to its detriment. Ross v. May Co., 377 Ill. App. 3d 387, 393 (1st Dist. 2007). Here, PillDrill can establish neither. 1. PillDrill cannot establish reasonable reliance. Start with reasonable reliance. Courts across the country have found that it is unjustifiable as a matter of law to rely on promises that are the subject of a nonbinding term sheet that contemplates execution of a later definitive agreement. See, e.g., BPI Energy Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131, 139 (7th Cir. 2011) (rejecting promissory-estoppel claim because it is “reckless” and therefore unreasonable to rely on 12 promises reflected in a nonbinding agreement); Bennett v. Itochu Int’l, Inc., No. 09-CV-1819, 2012 WL 3627404, at *21 (E.D. Pa. Aug. 23, 2012) (concluding that “[i]t was unreasonable as a FILED DATE: 9/18/2023 5:44 PM 2021L005325 matter of law for [the plaintiff] to rely on Itochu’s oral promise to purchase [the plaintiff’s] shares as this statement contradicted several signed written documents under which such a transaction required the execution of a final, binding, written contract”) (emphasis in original). Here, the parties’ negotiations—including the Executed Term Sheet covering the potential PillDrill acquisition—establish that there would be no binding agreement absent a definitive, final, written agreement. And PillDrill cannot get around this by arguing that it relied on alleged oral promises that PillDrill would be acquired. See Gruen Indus., Inc. v. Biller, 608 F.2d 274, 277-281 (7th Cir. 1979) (affirming summary judgment on promissory-estoppel claim because, in light of prior negotiations, plaintiff could not reasonably rely on a statement that defendants “had a firm commitment” to sell assets); Firestone Fin., LLC v. Meyer, No. 13-CV- 07241, 2017 WL 714110, at *10 (N.D. Ill. Feb. 23, 2017) (concluding that “it was unreasonable as a matter of law for an experienced businessman and former attorney to conclude from McAllister’s representations that Firestone would [fund the purchase] without any further review, particularly in light of the parties’ prior dealings.”) (emphasis added). Further, as explained above, Havas—a sophisticated businessman with extensive experience in founding, operating, and selling companies—was aware of the risks associated with the potential deal. Courts routinely grant summary judgment on promissory-estoppel claims where a sophisticated party alleges reliance on an oral promise in connection with a large transaction: such purported reliance exceeds the bounds of commercial reasonableness. See, e.g., Laminet Cover Co., 2009 WL 2163257, at *8–9 (granting summary judgment where plaintiff 13 “was not an inexperienced person without business experience[,]…had worked on agreements of this sort before[,]…[and] knew the…importance placed on written documents”). 5 FILED DATE: 9/18/2023 5:44 PM 2021L005325 Here, in light of the PillDrill team’s vast business experience, PillDrill simply cannot establish reasonable reliance. This is especially so because the subject deal posed substantial funding and timeline risks, which PillDrill knowingly assumed while PillDrill was failing financially. See, e.g., Classic Cheesecake Co., Inc. v. JPMorgan Chase Bank, N.A., 546 F.3d 839, 846–47 (7th Cir. 2008) (“For the plaintiffs to treat the bank loan as a certainty because they were told by the bank officer…that it would be approved was unreasonable, especially if, as the plaintiffs’ damages claim presupposes, the need for the loan was urgent.”) (emphasis added). For this reason alone, the Court should enter summary judgment against PillDrill on its promissory-estoppel claim. 2. PillDrill cannot establish an unambiguous promise. Statements that amount to “expressions of optimism and determination” do not constitute promises, and therefore do not give rise to a viable promissory-estoppel claim. Garwood Packaging, 378 F.3d at 703-05 (finding that a former investment banker’s reliance on a businessman’s promise that a deal to save a failing company would go through “come hell or high water” was unreasonable); see also Nibeel v. McDonald's Corp., 97 C 7203, 1998 WL 547286, at *5, 11-12 (N.D. Ill. Aug. 27, 1998) (granting summary judgment on promissory- estoppel claim despite defendant’s statements that plaintiff would “have plenty of opportunities down the road to expand and grow” and “[w]e’re going to take care of you.”). 5 As one court nicely summarized: “[W]hat is a reasonable, and indeed actual, understanding will often depend on the knowledge that the promisee brings to the table. McNamara, with whom Martin primarily dealt, is a former investment banker, not a rube. He knew that in putting together a deal to salvage a failing company there is many a slip ‘twixt cup and lips.” Garwood Packaging v. Allen & Co., 378 F.3d 698 (7th Cir. 2004). 14 Here, PillDrill has pointed to a variety of alleged “promises.” But those “promises” amount to nothing more than generally optimistic or enthusiastic statements about a prospective FILED DATE: 9/18/2023 5:44 PM 2021L005325 deal. See, e.g., 8/13/2020 Pylypiv E-mail to Havas, attached as Exhibit O (“We are also looking