Butler v. Balolia

Facts

Defendant wanted to purchase Plaintiff’s invention. The two parties signed a letter of intent, which included a purchase price (to be paid upon closing) and covenants of confidentially and exclusivity. The letter stated the parties’ intention to negotiate and enter into a separate purchase agreement on a specific date. It also stipulated that the parties would use their best efforts to negotiate and attempt to agree to terms for the purchase agreement. Plaintiff was also prohibited from negotiating with any other prospective purchaser before the signing deadline. Plaintiff stated that he did decline inquiries from other potential buyers. However, the transaction did not take place, and no purchase agreement was ever signed because Defendant claimed to have found deficiencies in the technology. Plaintiff stated that Defendant used those allegedly false claims as a basis for attempting to rescind the letter of intent and renegotiate the agreement. Plaintiff then brought suit in state court. Plaintiff sought a declaration that the letter of intent was an enforceable contract. Defendant removed the case to federal court based on diversity jurisdiction. Defendant then filed a motion to dismiss. The trial court granted the motion, holding that the letter of intent was not an enforceable contract. Butler appealed.