Citations
- 967 F. Supp. 2d 115
Full opinion text
OPINION
ROSEMARY M. COLLYER, District Judge.
TABLE OF CONTENTS
I. FACTS 121
A. The Parties .......................................................121
1. Plaintiffs ......................................................121
2. Defendants.....................................................122
B. April 2008: The RFP...............................................122
C. April and May: Exchanges with Cruise Lines Prior to Bid............126
D. Late May: CCCM Prepares for Bid .................................127
E. May 23: The CCCM Bid............................................130
F. May 30 through June 26: CCCM Awarded Contract; Discussions
About Payment and Taxes Begin; June 3 Meeting..................132
G. June 29 through July 14: Negotiations Continue; Bank Involved.....136
H. July 15 and 16: Agreement on Project Services Agreement #1.........140
I. July 16 through 18: Discussions Shift to Articles of Agreement;
First Draft of Articles of Agreement and Feedback.................142
J. July 24 through 27: Internal CCCM Discussions Prior to RCMP
Meeting.........................................................144
K. July 28, 2008 Meeting and Second Draft of Articles of Agreement.....145
L. July 30 and 31: Negotiations Over Second Draft of Articles of
Agreement......................................................147
M. July 31: Executed Version of Articles of Agreement..................151
N. July 31 through August 19: CCCM Refocuses on Cruise Lines.........154
1. Negotiations with Holland America Start Well.....................155
2. Negotiations with Carnival Stall; CCCM Considers Royal
Caribbean....................................................155
3. Holland America and Royal Caribbean Raise More Tax Con-
cerns ........................................................156
O. August 20 through 27: Bank Financing Talks Stall; RCMP Ship
Tour; Tax Issues Escalate........................................159
P. August 25 through September 5: Tax Issues Continue to Escalate.....162
Q. September 5 through 8: Discussions with Canadian Revenue
Agency; Financing Approved.....................................167
R. September 9 through 12: Parties’ Discussions on Canadian Taxes.....170
S. September 10 through 13: Charter Agreements and Tax Terms
Negotiations With Cruise Lines; RCMP Asks to Raise Contract Amount; Holland America Proposal ..............................173
T. September 15 through 23: CCCM Proposes Contract Clarification;
Further Involvement with CRA; CCCM’s Lawyers Involved;
Negotiations with Royal Caribbean ...............................177
U. September 26 through 30: Normande Morin Replaces Kelly
Meikle as RCMP Contracting Authority; Contractual
Relationship Begins to Break Down...............................180
V. Evening of September 30: CCCM Prepares Nomination
Documents......................................................183
1. Discussion of Nomination of Ships by Class........................183
2. September 30 E-mails Preparing Nomination Documents............185
W. October 1: CCCM Responds to September 30 Letter & Nominates
Ships...........................................................189
X. October 2 through 6: RCMP Response to Nomination; Renewed
Discussions with Cruise Lines; RBC Sends Formal Conditional Credit Offer.....................................................192
Y. October 9 through 15: Increased Urgency Leads to Frayed
Relationships....................................................195
Z. October 16 through 23: Despite Resolution on Some Issues,
Disputes Over Taxes and CPA Review Continue....................196
AA. October 24 Meeting; RCMP States that 90% Letter of Credit
Requirement Is Reimposed, Then Re-waived.......................199
BB. October 28: Threatening to “Walk Away,” CCCM Demands
Assurance on Three Issues........................................204
CC. October 29 through November 7: RCMP’s Response; Final Royal Caribbean Charter Party Agreement; Attorneys Involved; the
Bank Withdraws Financing; Final Holland America Charter
Party Agreement.................................................206
DD. November 10 through 17: Contract Termination......................212
EE. Late November: CCCM’s Actions Post-Termination..................215
FF. November 28 through April 2009: RCMP Issues New RFP and
Contracts Directly with Cruise Lines..............................215
1. Revised RFP...................................................216
2. RCMP-Holland America Charter Party Agreement.................216
GG. Post Facto Issues..................................................217
1. The Sessions Letter of Credit.....................................217
2. The Health Scores............................'...................217
HH. Procedural History................................................218
II. LEGAL STANDARD.....................................................219
A. Summary Judgment................................................219
B. Application of Foreign Law ........................................220
III. ANALYSIS .............................................................220
A. British Columbia Law .............................................221
1. Contract Interpretation..........................................221
2. The “Factual Matrix”...........................................222
3. Promissory Estoppel............................................223
L Repudiation, Fundamental Breach, and Effect of Breach............223
B. Summary of Parties’ Arguments....................................225
C. Status of the Agreements at the Time of Breach......................225
D. Responsibility for Taxes............................................225
1. Whether the Taxes Include CCCM’s Taxes..........................226
2. Parties’Arguments .............................................227
3. The Articles of Agreement Bound RCMP to Pay Canadian Taxes
Imposed on the Cruise Lines...................................227
L The Documents Incorporated in the Final Articles of Agreement
Required RCMP to Pay the Cruise Lines’ Canadian Taxes.....231
5. Promissory Estoppel............................................233
6. Anticipatory Repudiation by Normande Morin.....................236
7. Fundamental Breach............................................238
E. RCMP’s First Breach Argument: Provision of Charter Party
Agreements.....................................................239
F. RCMP’s Second Breach Argument: CCCM’s Inability to Obtain
Financing.......................................................241
G. RCMP’s Third Breach Argument: Health Scores.....................244
H. RCMP’s Fourth Breach Argument: Canada versus United States
Law in Charter Party Agreements.................................245
IV. CONCLUSION..........................................................246
Vancouver, Canada hosted the 2010 Winter Olympic Games. To ensure available hotel rooms for athletes, spectators, and staff, the Canadian government sought alternative housing for the Integrated Security Unit, a multi-agency task force headed by the Royal Canadian Mounted Police (“RCMP”). The Integrated Security Unit was responsible for ensuring the safety of visitors, athletes, and venues during the Olympic Games. RCMP found a creative low-cost solution to the lodging scarcity: it would house members of the Integrated Security Unit on cruise ships docked at Vancouver’s Ballentyne Pier, using the ships as floating hotels for approximately six weeks. Through a competitive bidding process in 2008, Plaintiff Cruise Connections Charter Management 1, LP was selected as the broker to negotiate charters for ships that met RCMP requirements.
Well before the 2010 Olympics, the relationship between RCMP and Cruise Connections broke down completely. In this suit, each party blames the other for their failed agreement. Cruise Connections contends that RCMP reneged on its promise to pay certain taxes that Canada might impose on the cruise lines. Cruise Connections argues that RCMP’s refusal to cover these costs made it impossible for Cruise Connections to finalize charter agreements and bank financing. RCMP insists that it never agreed to pay the taxes in dispute and that Cruise Connections breached its own contract obligations and missed key deadlines. Both parties now move for summary judgment, relying on an extensive written record consisting of the parties’ written agreements, correspondence, depositions, and other (almost entirely) uncontested materials.
For the reasons set forth below, the Court finds that RCMP agreed to pay all Canadian taxes imposed on the cruise lines. When RCMP refused to acknowledge its commitment and then repudiated it, it breached the agreement between the parties in a distinctly fundamental way. In contrast, the claims of RCMP against Cruise Connections relate to duties that were not fundamental to the contract, were waived, or were provoked by RCMP’s breach on tax payments. Summary judgment will be granted to Cruise Connections and denied to RCMP. The Court will set a bench trial to determine damages.
I. FACTS
A. The Parties
1. Plaintiffs
Plaintiffs are Cruise Connections Charter Management 1, LP (a North Carolina limited partnership) and Cruise Connections Charter Management GP, Inc. (a North Carolina corporation). Cruise Connections Charter Management GP, Inc., is the general partner of the limited partnership, of which the limited partners are Michael Sloane; New West Group, LLC (an LLC organized by Mr. Tracey Kelly); and Issumavik Management Limited (an entity organized by Susan Edwards). See CCCM Organizational Documents, RCMP Motion for Summary Judgment [Dkt. 62] (“RCMP MSJ”), Ex. 7 [Dkt. 62-11]. Plaintiffs are referred to collectively as Cruise Connections or CCCM, and references to the “CCCM partners” mean Ms. Edwards, Mr. Kelly, and Michael Sloane. Michael Sloane is also the president of Cruise Connections Charter Management GP, Inc., of which Mr. Kelly and Ms. Edwards are officers. Phillip “Bud” Sloane is the Chief Financial Officer of Cruise Connections Charter Management 1, LP, but not a partner. Decl. of Phillip Sloane (“P. Sloane Deck”), January 15, 2013, CCCM Br. Opp’n RCMP MSJ (“CCCM Opp.”) [Dkt. 67], Ex. 3 [Dkt. 67-3] ¶ 2.
The legal entities comprising CCCM were established on May 23, 2008, immediately before CCCM submitted its bid to RCMP. See CCCM Organizational Documents at CCCM9535 (North Carolina Secretary of State certificate dated May 23, 2008); see also Deposition of Tracey Kelly (“Kelly Dep.”), RCMP MSJ, Ex. 2 [Dkt. 62-6]; Pis. Mot. Summ. J (“CCCM MSJ”) [Dkt. 60], Ex. 5 [Dkt. 60-5]; Defs. Opp. Pis. MSJ (“RCMP Opp.”) [Dkt. 66] Ex. 3 [Dkt. 66-5]; CCCM Opp., Ex. 9 [Dkt. 67-9]; RCMP Reply [Dkt. 69], Ex. 1 [Dkt. 69-2]; at 122-23 (stating that the CCCM partners agreed to form CCCM on May 17, 2008 and incorporated on May 23).
The CCCM partners’ roles for the 2010 Olympics bid were: “Susan Edwards, VP Operations, Project Manager;” “Tracey Kelly, VP Sales and Marketing, Port and Ship Negotiations;” and “Michael Sloane, VP Administration.” See E-mail from Sue Edwards to CCCM Partners titled “Final ISU Bid,” with copy of CCCM Bid (“Bid”), RCMP MSJ, Ex. 17 [Dkt. 62-21], CCCM8248-8320 at CCCM8254; see also CCCM MSJ, Ex. 9 [Dkt. 65-4] (duplicate of Bid). None of the CCCM Partners is an attorney. The Bid listed Sue Edwards’s profession as a “Project Manager, Team Leader, Event Specialist and [ ] Administrative Law Tribunal Member and Member Chair,” with previous experience chartering ships. Id. at CCCM8270. Ms. Edwards was a resident of Victoria, British Columbia, Canada. Id. at CCCM8271. A resident of Seattle, Washington, Mr. Tracey Kelly had worked in the cruise line industry for more than 20 years, including as Vice President of Sales at Holland America Line and Regional Vice President of Sales at Carnival Cruise Lines. Id. at CCCM8276. Michael Sloane owned Cruise Connections, Inc., a travel agency in Winston-Salem, N.C., id. at CCCM8279, that had focused “primarily on full ship charters” for the five years preceding CCCM’s 2008 Olympic bid. Id. at CCCM8278.
2. Defendants
Defendants are Her Majesty the Queen in Right of Canada, the Attorney General of Canada, and RCMP (collectively, “RCMP”). The three RCMP personnel most important to the case are Kelly Meikle, Michael Day, and Normande Morin. Ms. Meikle was the Contracting Authority and CCCM’s primary contact throughout contract formation; her job title was Manager of Contracting, RCMP “E” Division, Vancouver 2010 Integrated Security Unit (“ISU”). See E-mail from Kelly Meikle titled “Use of the Port at Ballentyne Pier & Request for Proposal,” Solicitation No. 2008-00147-ISU, RCMP MSJ, Ex. 9 [Dkt. 62-13]; see also CCCM MSJ, Ex. 3 [Dkt. 65-1] (duplicate of RFP). Michael Day was the Director of Procurement and Contracting for the ISU and Ms. Meikle’s supervisor. See Deposition of Michael Day (“Day Dep.”), CCCM MSJ, Ex. 10 [Dkt. 60-10]; RCMP Opp., Ex. 1 [Dkt. 66-3]; CCCM Opp., Ex. 6 [Dkt. 67-6]; CCCM Reply, Ex. 2 [Dkt. 70-2] at 16-17. Ms. Meikle and Mr. Day were both stationed in Vancouver. The contract in dispute was the largest on which Mr. Day had ever worked and was among the largest he handled in connection with the 2010 Olympics. Day Dep. at 95-96. Normande Morin was the Director of Strategic Procurement for RCMP at RCMP’s headquarters in Ottawa, Ontario. Letter from Normande Morin to CCCM, CCCM MSJ, Ex. 32 [Dkt. 65-22]. Ms. Morin became involved only in late September 2008.
B. April 2008: The RFP
RCMP issued a formal Request For Proposal (“RFP”) in April 2008, for a broker to negotiate shipboard accommodations for the Integrated Security Unit (“ISU”) during the Vancouver Olympics. See RFP, RCMP MSJ, Ex. 9; see also CCCM MSJ, Ex. 3 (duplicate). The RFP contained several annexes in addition to its main text and is the first of several documents that formed the parties’ overall agreement. Its details are described here only as needed to understand the dispute and the contentions of the parties.
Prefatory Section: The RFP contained a prefatory section titled “Statement of Work:”
[RCMP] has been assigned the responsibility to plan and manage policing, security operations and services for the protection of the Vancouver 2010 Winter Olympics and Paralympic Games (the Games). This task will necessitate the deployment of vessels to the Vancouver area in order to provide temporary accommodation of security force personnel for the period of the Games.... [T]he RCMP Vancouver 2010 Integrated Security Unit (ISU) intends to charter a vessel or vessels for its exclusive use in Vancouver, British Columbia for approximately five (5) to six (6) weeks during the period January 2010 to March 2010. It should be noted that all Sections of Annex A, Statement of Work are mandatory requirements.
RFP § 1.2; see also id., Annex A § 1.2 (“All components contained in this statement of work are considered mandatory unless otherwise indicated”).
RCMP Contracting Authority: Ms. Meikle was identified as RCMP’s Contracting Authority, with responsibility for “management of the Contract” and authorizing changes to the contract. Id. § 5.1.
Incorporation of Standard Contracting Terms and RFP Terms into Contract: The RFP incorporated its own terms into any resulting contract. Id. § 2.1. It also incorporated by reference various standard Canadian government contracting clauses. See id. §§ 4.3, 4.3.1 (“All clauses and conditions identified in the title, number and date are set out in the Standard Acquisition Clauses and Conditions Manual issued by Public Works and Government Services Canada (‘PWGSC’).... 9676 (2007/11/30) General Conditions-Serviees apply to and form part of the contract.”). The interpretation and applicability of one of the standard clauses from the “9676 General Conditions” are a focal point of the instant dispute.
Choice of Law: As pertinent to CCCM, the RFP required that the law of British Columbia apply. Id. § 2.4; see also id. § 4.8 (“The Contract must be interpreted and governed, and the relations between the parties determined, by the laws in force in British Columbia.”).
General Requirements for Submitted Bids: The RFP set forth extensive requirements for bids. See RFP § 3.1.1. Annex A detailed services requirements and Annex B detailed financial requirements. As particularly relevant to the matters in dispute, the text of the RFP stated:
Financial Bid. The Bidder must submit its financial bid in accordance with Annex ‘B’, Basis of Payment. The total amount of Goods and Services Tax (GST) or Harmonized Sales Tax (HST) is to be shown separately, if applicable.
Certifications with the Bid: The following certifications must be completed and submitted with the bid: Annex B-(Basis of Payment) Irrevocable Letter of Credit^] ... Health Canada Cruise [S]hip Inspection score of no less than 95% for the year 2006 and 2007.... The bid will be declared non-responsive if it is determined that any certification made by the Bidder is untrue, whether made knowingly or unknowingly.
Mandatory Requirements: The bidder MUST demonstrate in its bid that the vessels and services proposed meet those indicated in Annex A, Statement of Work. These shall include ... all the requirements of the Solicitation^] [and] ... the financial capabilities to perform the requirement.
Id. §§ 3.1.II-.III, 3.2.3 (all emphases in original).
Basis of Payment: Bidders were instructed to provide a per-person, per-day (“PPPD”) rate that would cover the bidder’s costs for ship charters that would satisfy all requirements. The RFP noted that certain costs would be passed through to RCMP for payment and should not be included in the daily passenger rate.
Specifically, Section 4.6.1 of the RFP provided:
The Contractor shall be paid for services rendered and accepted in accordance with the contract an [sic] all inclusive daily charter rate in CDN dollars $ ._.. The all inclusive price per bed per day means all costs associated with providing the vessels and all services as indicated in Annex A at the Port of Vancouver Ballentyne Pier: All port fees, negotiates [sic] costs for federal departments, businesses, or other persons providing port services; licenses; port taxes; fuel for power; water; engine oil;, [sic] port pilots; crew; meals; non-alcoholic beverages (see Annex A) or any other applicable fee or cost; required in consideration of the Contractor satisfactorily completing all of its obligations under the Contract, the Contractor shall be paid a firm price, Goods and Services Tax or Harmonized Sales Tax extra, if applicable.
Id. § 4.6.1. Two sections later, the RFP stated:
All prices and amounts of money in the Contract are exclusive of Goods and Services Tax (GST) as applicable, unless otherwise indicated. The GST is extra to the price herein and will be paid by the RCMP. The RCMP is exempt from Provincial Sales Tax (PST) under exemption number R005521.
The GST shall be extended and incorporated into all invoices and progress claims and must be shown as a separate item on invoices and progress claims. All items that are zero-rated, exempt or to which the GST does not apply, are to be identified as such on all invoices. The Contractor agrees to remit to Canada Customs and Revenue Agency any amounts of GST paid or due.
Id. § 4.6.3.
Financial Security & Payment: Bidders were required to “provide security in the form of [an] irrevocable Letter of Credit from a registered financial institution drawn in favour of the Receiver General for Canada in the amount of ten (10%) percent of the bid value [with its bid], and a second security deposit of ninety (90%) percent of the bid value, on or before April 1, 2009 if a the [sic] bid is successful and contract is awarded.” Id., Annex B § 1. The successful bidder would be paid as follows:
A deposit of seventy-five (75%) of the Contract value shall be payable to the Contractor, after April 1, 2009, providing the contract financial security, in the amount of one-hundred (100%) of the contract value has been received by the ISU. The form of the required security will be as previously indicated in this [RFP]. The balance of the amount payable will be paid in accordance with the payment provisions of the Contract upon completion of delivery and acceptance by Canada of all Work performed in accordance with the Contract and a final claim in the form of an invoice is submitted to the attention of the Contracting Officer.
Id. § 4.6.2.
Contractor’s Obligation to Nominate and Secure Vessels: The RFP allowed only ten days from contract award for a successful bidder to identify and “secure” the ship(s) to house the ISU, and it allowed just twenty days to submit proof to RCMP that the bidder had paid the relevant cruise line(s) 75% of the cost of the charter(s) to guarantee the ship(s)’ presence in Vancouver. Id., Annex A § 4.1. Those deadlines provided little occasion for a bidder to involve RCMP in the selection of ships, but other portions of the RFP show that RCMP clearly intended to have such a role. A few subsections later, Annex A required the successful bidder to:
provide the following information at the time of vessel nomination: Name of the Vessel; Official number, Class, year built, Flag, length, beam, displacement, passenger capacity, proof of Health Canada inspection of no less than 95% in the last two years, proof of Canadian Insurance and permission from the Cruise Ship line Insurance Carrier for multiship inventory to be docked at one location for an extended period of time.
Id., Annex A § 4.7 (emphasis added). The text of the RFP also required the successful bidder to “provide the RCMP with a Standard Cruise Ship Charter party agreement for review and comments.” Id. § 4.18.1. Nothing in the RFP reconciled the differing requirements in Annex A §§ 4.1, 4.5 and 4.18.1; defined the terms “secure” or “nominate;” or explained its short timeline, a full two years before the Vancouver Olympics. It bears emphasis that the RFP appeared to require the successful bidder to negotiate terms (or execute a contract) for one or more acceptable ships within 10 days of contract award and to pay 75% of the charter cost to the cruise line(s) within twenty days of contract award, without allowance for the mandated review and input from RCMP on charter contracts and specific ships. Moreover, the RFP was silent as to how the parties would proceed if RCMP, during its review of “nominated” ships, were to reject them or ask for additional information.
Notwithstanding this set of conflicting provisions, the RFP specified that any: “[fjailure by the Contractor to nominate and secure the ships within the time required will constitute a breach under the agreement and the ISU will take whatever measure at its disposition to resolve the issue.” Id., Annex A § 4.6. Annex B contained similar language that covered a broader scope of requirements. See id., Annex B § 2.
The difficulties posed by these various provisions explain, at least in part, the post-award discussions between RCMP and CCCM.
Requirements for Vessels: The main text of the RFP and Annex A contained both mandatory and optional specifications for the ships. The instant dispute only involves these specifications in respect to the ships’ health scores. In relevant part, the RFP stated:
There is a requirement in the [RFP] for the bidder to provide a Health Canada Cruise ship Inspection score of no less than 95% for the year [sic] 2006 and 2007. In addition to this requirement, the contractor shall provide to the Contracting Authority, within ten (10) days of the vessel receiving, the Inspection scores for the years 2008 and 2009. It is the responsibility of the contractor to oversee compliance with the cruise ship with respect to all aspects of this Statement of Work, including maintaining a minimum score of 95%. The applicable documentation ensuring remedial action has taken place for a score less than 100% shall also be provided to the contracting officer within ten days of receipt by the cruise ship line.
Id., Annex A §§ 5.1, 5.4.
The RFP allowed the cruise lines to substitute one ship for another as long as “the Contractor and the ISU [are] afforded the opportunity to inspect the proposed substituted vessel at the cruise lines [sic] expense” and approve the substitution. Id. § 4.11. Notwithstanding this allowance, the RFP specified that it would be “imperative [that] the Contractor make[] every attempt to provide the vessels as stated in the contract nomination ....” Id.
Priority of Documents: Forecasting conflict among the provisions of a resulting agreement, the RFP established a priority list of documents:
If there is a discrepancy between the wordings of any documents, which appear on the list, the wording of the document, which first appears on the list, has priority over the wording of any document, which subsequently appears on the list, (a) the Articles of Agreement; (b) 2003 (200711/30) [sic] Standard Conditions; (c) 9676 (2007/11/30) General Conditions-Servicesf;] (c) [sic] All annexes in alphabetical order; (d) The Contractor’s bid dated____
Id. § 4.9.
C. April and May: Exchanges with Cruise Lines Prior to Bid
As noted above, the RFP was issued in April 2008, and CCCM was not formed as a legal entity until May 23, 2008. Sometime during late April or early May, the CCCM partners began working together to collect cost quotes from cruise lines. Holland America Line (occasionally “HAL”) submitted a quote of $145 PPPD for the ms Statendam on May 21, 2008, specifying that “[a]ll passenger-based taxes” and “[a]ll additional taxes” were not included and would be the responsibility of the charterer, CCCM. HAL Quote, CCCM MSJ, Ex. 6 [Dkt. 65-2] at CCCM8491. Holland America also stipulated:
ADDITIONAL TAXES: The quoted CHARTER HIRE makes no provision for income taxes, gross receipts taxes, branch profits taxes, withholding taxes, capital taxes, stamp taxes, luxury or consumption taxes, gross receipts taxes, sales taxes, value added taxes, goods and services taxes or similar taxes or levies on any sum payable by CHARTERER imposed by Canada or any political subdivision thereof.
Id. at CCCM8491-92. A May 22, 2008 quote from Carnival Cruise Lines contained similar language, stating that it did not include “[a]ny government taxes and fees including docking charges in ports for the duration of the charter” and omitting any kind of taxes from the list of costs included in the cost estimate. Carnival Quote, CCCM MSJ, Ex. 7 [Dkt. 65-3] at CCCM53-57.
Cherie Weinstein of Carnival warned Tracey Kelly by email dated May 23, 2008, that a lengthy duration in port in Vancouver might raise tax issues for the cruise lines and/or CCCM. Ms. Weinstein wrote:
Please note that we have uncovered some major unanticipated tax issues around this charter. From my taxation dept....
“There are a host of Canadian taxes that may be applicable to this Vancouver dockside charter. These include the following potential taxes:
1. Customs duty on 25% on a prorated value of the vessel.
2. GST tax of 5% on a prorated value of the vessel.
8. GST tax of 5% on the Charter hire.
4. Canadian payroll taxes on the shipboard crew working in Vancouver— These include:
a) social security type taxes on the employee at 5.5% and the employer portion at 6.5%.
b) individual income tax withholding at 15%.
5. Corporate Income and Branch Profits Tax at a combined effective rate of approximately 51% on the net profits of the charter.
6. Hotel Taxes-10% of the ‘Hotel fee.’[”]
The above is just a list of the potential taxes that I have been advised that could apply to a Canadian full ship dockside charter.
I believe you have anticipated the GST tax and the potential hotel tax. Although you can see there is potential to be double-taxed on the GST.
As far as Canadian Payroll taxes and Corporate income/branch profits tax (at 51%!) these are big issues for us because as an offshore company, we do not pay any of these taxes in our normal course of business. Had I known this, I would have had to factor these into the cost of the charter.
Our corporate taxation dept will consult with a Canadian tax attorney for some counsel on this. If it is determined that these taxes will apply, we will withdraw and reprice our quote to ensure that these additional costs are covered in the charter contract rate. I will be consulting with my counterparts at Holland America and Princess to inquire as to how (or if) they have treated these matters. Apologies for this hiccup.
E-mail Among Tracey Kelly & Cherie Weinstein, et al., RCMP Opp., Ex. 97 [Dkt. 66-99] at CCCM8-9 (emphasis added). After submitting CCCM’s bid to RCMP, Mr. Kelly forwarded Ms. Weinstein’s email to the CCCM partners, advising, “Just an FYI ... Noted that we already addressed these concerns in our Reply to RFP, and they would be vetted out during negotiations.” Id. at CCCM8.
D. Late May: CCCM Prepares for Bid
CCCM made final preparations for submitting its bid to RCMP in late May 2008. However, a problem arose at the eleventh hour. CCCM’s private financial arrangements for a letter of credit for 10% of the bid value, as required by the RFP, fell apart when its financier abruptly withdrew on May 6, 2008. See P. Sloane Deck ¶ 5; Kelly Dep. at 122-23. At that point, CCCM was, in Phillip Sloane’s words, “out of time and out of options” and “had no other viable alternatives for getting the letter of credit before [the] bid was due.” P. Sloane Decl. ¶ 5. CCCM was not yet a formal business entity, Kelly Dep. at 122-23, and had no cash collateral to secure a letter of credit, Deposition . of Phillip Sloane (“P. Sloane Dep.”), RCMP MSJ, Ex. 4 [Dkt. 62-8]; CCCM Opp., Ex. 39 [Dkt. 67-39]; CCCM Reply, Ex. 5 [Dkt. 70-5]; RCMP Reply, Ex. 6 [Dkt. 69-7] at 112.
At almost the last minute, CCCM approached John Sessions, a North Carolina businessman, for help. Although none of the CCCM partners knew Mr. Sessions personally, he had been suggested “[b]y someone else who was interested in being a backer.” Kelly Dep. at 128. With very limited time — Michael Sloane “had to be in Charlotte in an hour and 45 minutes to be on an airplane” to meet the bid deadline in Seattle — CCCM signed a Letter of Intent with Mr. Sessions and received a document purporting to be a Standby Letter of Credit. According to Phillip Sloane, Mr. Sessions “took advantage of the situation, repeatedly raising the price for providing the letter of credit until he eventually demanded a price equal to the amount of the letter of credit ($5,057,500.00),” to which CCCM agreed only because it had no options. P. Sloane Decl. ¶ 5; see also M. Sloane Dep. at 144 (“At the last minute, he went to that dollar for dollar.”), P. Sloane Dep. at 66-67 (“[Mr. Sessions] was to get a dollar for dollar for every dollar he put up, including the letter of credit.”).
The Letter of Intent was a four-page document executed by Mr. Sessions and each of the CCCM partners. See E-mail & Letter of Credit (“LOC”), RCMP MSJ, Ex. 67 [Dkt. 62-71]; CCCM Opp., Ex. 36 [Dkt. 67-36] (duplicate); Sessions Letter of Intent, RCMP Opp., Ex. 75 [Dkt. 66-77]. Because the Sessions Letter of Intent figures prominently in RCMP’s defense to this suit, its relevant provisions are quoted in full:
This Letter of Intent is offered by John Sessions (“Sessions”) to identify the terms upon which he is willing to enter into a business relationship with both of you and your company, “Cruise Connections Charter Management 1, LP” (the “Partnership”), in order to provide certain accommodation to assist you in submitting a response to Solicitation Number 2008-00147-ISU issued by the Royal Canadian Mounted Police, Vancouver, 2010ISU11411 No. 5 Road, Richmond, B.C.V7A4E8. The definitive arrangement between Mr. Sessions and/or his nominee and yourselves shall include but not necessarily be limited, at the discretion of Mr. Sessions, to the following:
In exchange for providing an unredeemable, non payable Letter of Credit in the amount of $5,057,500.00, Mr. Sessions shall be granted assignable rights to receive Warrants at no cost to him for special limited partnership interest in the Partnership which he or his assignee solely at their election may either cause the Partnership to redeem or convert to special limited partnership interests.
If the Partnership is the successful bidder and enters into a contract providing services for the Royal Canadian Mounted Police (the “RCMP Contract”), and if Sessions or his assignee elects to exercise his right to receive a special limited partnership interest in the Partnership or demand that the Partnership redeem the Warrants, Sessions or his assignee shall receive allocations and distributions from the Partnership in an amount equal to the sum of (i) $5,057,500.00 plus (ii) two (2) times the amount of additional capital advanced, loaned, or provided by Mr. Sessions or advanced, loaned, invested or provided with the assistance of Mr. Sessions or his nominee together with the principal amount so advanced, loaned, or provided with his assistance ....
If the Partnership is the successful bidder and enters into the contract contemplated herein, the Partnership shall pay Sessions’ choice of either the redemption for special limited partnership interest or if the Warrants are exercised allocations and distributions of the amounts described above within 10 days after the Partnership receives its initial payment from the Royal Canadian Mounted Police or Government of Canada or the contracting authority whomever that should be (currently expected to be 75% of the total project fee) (the “Initial Fee Installment”).
This Letter of Intent is offered upon your express representations that the parties will work in good faith toward the preparation and execution of a definitive Limited Partnership Agreement with Warrants as described herein that reflects the terms set forth in this Letter of Intent; that the Partnership will be duly formed as a North Carolina limited partnership; that there are not now and will not in the future be any outstanding warrants, or options, or liens or encumbrances of any kind, which would prevent the issuance of warrants for special limited partnership interest to Sessions free of all claims and assessments.
The terms of the Letter of Credit to which Sessions agrees are attached hereto----It is specifically understood that Sessions is making no commitment to provide any further accommodation, letter of credit or loan, and, at this time, is only arranging for the issuance of the initial Letter of Credit pursuant to the terms attached hereto. In the event the contract is awarded to agent or owner or other entity which pays any of the parties to this agreement a fee of any kind, that party shall pay to Sessions 35% (thirty-five percent) of the fee any party receives within 10 days of receipt.
Sessions Letter of Intent at CCCM1513233.
Dated May 22, 2008, the Sessions Letter of Credit was titled “Irrevocable Standby Letter of Credit.” LOC at CCCM12394. It listed the Southern Community Bank and Trust “We” Credit Administration Department, Winston Salem, NC as the “advising” bank; Canada as the Beneficiary; CCCM as the “Applicant;” and Carolina Shores Leasing, LLC, as the “co-applicant.” Id. The face amount of the Sessions Letter of Credit was $5,057,500.00 and its “Expiry date” was July 1, 2008. Id. It further stated:
We hereby issue our Standby Letter of Credit in favour of the Crown, in the amount of Five million fifty-seven thousand five hundred dollars and zero center ($5,057,500.00), subject to the following terms: This Letter of Credit may not be drawn upon under any circumstances, and is provided only to show that applicant has the ability to provide a Letter of Credit. Notwithstanding the foregoing, for greater clarity, this Letter of Credit shall not be drawn upon even if the applicant is the successful bidder in the above referenced RFP.
Id.
The legal effect of the Sessions Letter of Intent is put at issue by RCMP, which argues that the Sessions Letter of Intent created a definitive debt obligation that CCCM wrongly did not disclose when it sought financing from the Royal Bank of Canada and, had it done so, CCCM would have received no financing to meet contract requirements. See infra § III.F.
E. May 23: The CCCM Bid
The CCCM Bid (“Bid”), submitted on May 23, 2008, is reproduced in the record as Exhibit 17 to RCMP’s Motion for Summary Judgment, Dkt. 62-21, and as Exhibit 9 to CCCM’s Motion for Summary Judgment, Dkt. 65-4. The Bid identified Victoria, British Columbia, as CCCM’s location. Bid at CCCM8249. In its “Acceptance of Statement of Work,” CCCM responded to each clause of the RFP — i.e., either agreement or a request for a change. As an “Overview,” CCCM indicated:
We agree with and/or support the intent of every clause in the Statement of Work as required. We have identified those Clauses that are, in our interpretation, in conflict with the primary focus (jf this RFP, which is to deliver the Iqwest daily cost per bed with all required Operational and Service levels met.
To the Clauses that we support the intent of, but do interpret them as conflicting to the primary focus, we have offered alternatives that are consistent with the Charter Cruise Ship Industry and that also illustrate our commitment to providing the lowest price per bed with all required Services on the most appropriate ship.
CCCM8260. CCCM proposed that “during Contract Negotiations, it would be our responsibility to negotiate in turn with the Cruise Line to add in any specific Clauses that the ISU may wish to have included in the [Charter Party Agreement] on this issue.” Id. at CCCM8265.
The Bid offered RCMP two price options, each giving a fee of “Per person Charter Hire per bed per day” plus “Per person per day (estimate) Firm Price pass through Service Provider Costs, Taxes (GST.50 per person per day) — invoices will be given directly to RCMP for payment.” Id. at CCCM8252. Option 2 proposed to use one Holland America ship with a capacity of 1,258 passengers and two Carnival ships with a capacity of 2,052 passengers each, for a total of 5,362 passengers. Id. at CCCM8262-63, CCCM8298-300.
Basis of Payment: The Bid responded to the RFP’s payment clauses, RFP § 4.6, in a section of the Bid labeled “Part 6” and “Part 6.3” at CCCM8302. CCCM proposed that: (1) Port Fees would be “a direct pass through cost” paid by RCMP; (2) Government Fees, Taxes and docking fees would also be a direct pass through cost, id,.; (3) the two taxes identified by the ISU, Goods and Services Tax (GST) and Harmonized Sales Tax (HST), would be paid by RCMP and no Provincial Sales Tax (PST) would be paid because RCMP is exempt; (4) “Any additional taxes identified by the Cruise Lines are questionable, and a tax lawyer will be consulted on these issues after the Bid Award;” and, finally, (5) “In any case, all taxes are not the responsibility of the Charterer, they are additional and a pass through cost to the Government of Canada.” Bid at CCCM8302 (emphasis added). The final clause was “specific language” CCCM put into its Bid as a response to the “consistent feedback and concerns voiced by the cruise lines” about “the potential that Canadian government taxes would be assessed against the cruise lines, due to the fact that the ships would be docked in a Canadian port for an extended period of time.” Kelly Dep. at 213-15; Declaration of Tracey Kelly, November 29, 2012 (“I Kelly Decl”), CCCM MSJ, Ex. 8 [Dkt. 60-8] ¶¶ 4, 6. The cruise lines “informed [CCCM] that whatever Canadian government taxes were imposed against them as a result of the charter, in whatever amount, would be additional to the charter fare.” I Kelly Decl. ¶ 7. “[T]he cruise lines did not know which specific taxes would ultimately be assessed, and did not know how much those taxes would be,” so CCCM “could not include a specific amount in its bid price to cover the amount of the taxes” and instead “included a provision in its bid stating that the RCMP would be responsible for paying any such taxes as a pass-through cost to the RCMP.” Id. ¶¶ 6, 8. Mr. Kelly explained the cruise lines’ concerns as follows:
In the cruise industry, cruise lines are structured to avoid paying corporate taxes. They sail foreign flagged ships and normally are in port for less than 24 hours. These conditions help the cruise lines avoid taxes. However, after Hurricane Katrina, one cruise line inserted ships in Gulf coast ports for an extended period of time, to house rescue workers and others. The cruise line was subsequently charged a substantial amount in taxes by the United States government. After that experience, the cruise lines were generally unwilling to charter ships for extended stays in port without assurance that they would not be responsible for resulting taxes.
Id. ¶ 5.
CCCM Bid § 4.6.3, in response to RFP § 4.6.3, is one of the centerpieces of the parties’ dispute about allocation of tax responsibilities.
Payment and Security: CCCM proposed an alternative to the RFP requirement that “proof of payment to the vessel provider (minimum 75%)” had to be received by RCMP twenty days after contract award. RFP Annex A § 4.1. CCCM first noted that a successful bidder would need approximately $CDN100M of available funds, on which interest alone would raise the daily passenger rate charged to RCMP by more than $150.00. It then proposed a resolution:
Strategy: In addition to irrevocable contractual agreements with the Cruise lines we will also establish a separate Trust for Receivership Fund to add further security on both the payments made by the ISU and the payments received by the Cruise Lines as per the Charter Cruise Ship Industry standards and practices, and this meets the focus of not creating additional costs to the ISU as outlined above ($171.43) as we interpret these added costs to be in conflict with the lowest rate requirement. We accept, based on the following interpretation, that Contract Award is the execution of signatures between the Contractor and the ISU. The Contractor shall identify and secure the vessel or vessel(s) with ten (10) days of contract award.
Proof of security of the vessel will be provided within ten (10) days of contact award.
Proof of payment to the vessel provider to be received by the ISU Contracting Authority is agreed. [However,] [p]roof of payment timeline in the Charter Cruise Ship Industry is set via the Cruise Line’s Charter Party Agreement (CPA) which has yet to be executed. That document will dictate the payment schedule to the Contractor. The Contractor is under obligation to the contractual agreements of the CPA. We wish to further discuss the reasoning behind this Clause by the ISU so that we may create and implement a solution to that reasoning that also complies with the Cruise Line requirements.
Bid at CCCM8307-08 (emphasis added). CCCM also indicated that it accepted RFP Annex A § 4.5 (RCMP would “confirm acceptance of the vessels within forty-eight (48) hours of receipt of the vessel nomination”) and Annex A § 4.7 (contractor would provide detailed “information at the time of vessel nomination”). Id. at CCCM8308.
Provision of Charter Party Agreement: In response to the RFP obligation to provide “a Standard Cruise Ship Charter party agreement for review and comments,” RFP § 4.18.1, the Bid proposed: “Our interpretation of this Clause is that the RCMP will be provided with the Terms and Conditions of the Charter Party Agreement between the contractor and the cruise lines.” Bid at CCCM8304.
Requirements for Vessels: CCCM agreed to RFP Annex A § 5.4, which required the contractor to “provide a Health Canada Cruise ship Inspection score of no less than 95% for the year [sic] 2006 and 2007,” and added that it had provided “Health Inspection Scores ... for all cruise ships currently under consideration” in an appendix to the Bid. Bid at CCCM8309.
Priority of Documents: CCCM proposed a materially different priority order for documents than the RFP. The Bid placed the Bid first, listing controlling documents as follows: “a) The Contractor’s bid, dated, May 23, 2008; b) The Cruise Lines Charter Party Agreement; c) The Articles of Agreement; d) All annexes in alphabetical order; e) 2003 (200711/30) Standard Conditions; f) 9676 (200711130) General Conditions-Services[;] g) Services for Charterer to provide Vessel Accommodation for RCMP 2010 Integrated Security Unit, Solicitation No 2008-00147-ISU, and all Annexes.” Bid at CCCM8303.
F. May 30 through June 26: CCCM Awarded Contract; Discussions About Payment and Taxes Begin; June 3 Meeting
CCCM was awarded the contract on May 30, 2008, by e-mail from Ms. Meikle to Ms. Edwards. E-mail from Kelly Meikle to Susan Edwards, RCMP Opp., Ex. 41 [Dkt. 66-43] at CAN3188 (“Hi Susan, Congratulations, you are the successful bidder! I am happy to award you the contract for Charterer services for cruise ships to be provided for security personnel for the 2010 Vancouver Integrated Security Unit. The Ships (Carnival) will be required from January 31, 2010 to March 2, 2010, with an option to extend on or before June 15, 2008.”). Ms. Meikle had read the Bid “from cover to cover” before accepting it. Deposition of Kelly Meikle, May 16, 2012 (“Meikle Dep.”), CCCM MSJ Ex. 4 [Dkt. 60-4]; RCMP Opp., Ex. 4 [Dkt. 66-6]; CCCM Opp., Ex. 4 [Dkt. 67-4]; CCCM Reply, Ex. 1 [Dkt. 70-1]; at 124.
CCCM (in the persons of Ms. Edwards and Mr. Kelly) and RCMP (in the persons of Ms. Meikle, Mr. Day and RCMP Inspector Donna Kaluza) met on June 3, 2008, to discuss unresolved issues. CCCM was most interested in how it could provide adequate financial security to RCMP and receive payment from RCMP. Representatives for RCMP provide very limited information about the meeting. Mr. Day could not recall any details and remembered only that he was there for “less than half an hour,” Day Dep. at 96; the record contains no statements from Ms. Meikle concerning the meeting; and Inspector Kaluza’s handwritten notes provide only sketchy information about topics, not the content of the discussion. See Notes of CCCM7RCMP Meeting by Donna Kaluza, RCMP Opp., Ex. 13 [Dkt. 66-15]. Mr. Kelly and Ms. Edwards provide similar detail in declarations that are not contested by RCMP. See Second Declaration of Tracey Kelly (“II Kelly Deck”), January 15, 2013, CCCM Opp., Ex. 1 [Dkt. 67-1] & Second Declaration of Susan Edwards, January 14, 2013 (“II Edwards Deck”), CCCM Opp., Ex. 2 [Dkt. 67-2] ¶4. For simplicity’s sake, Mr. Kelly is cited.
Mr. Kelly declares that “a goal of this meeting was to agree to a schedule for payment to Cruise Connections as well as to address the RCMP’s financial security concerns.” II Kelly Deck ¶ 9. Mr. Kelly and Ms. Edwards asked Ms. Meikle to explain why RCMP wanted the contractor to execute letters of credit for 100% of the contract price no later than April 1, 2009, prior to the date CCCM would receive any payment from the RCMP. Id. ¶ 10. Ms. Meikle explained “that the RCMP needed some type of financial security in place to make sure that the RCMP did not pay Cruise Connections tens of millions of dollars, only to have Cruise Connections fail to deliver the ships when it came time for the Olympics,” and “letters of credit in favor of the RCMP for 100% of the contract price would allow the RCMP to recoup any payments already made to Cruise Connections if Cruise Connections ultimately failed to deliver the ships.” Id. ¶¶ 11-12. CCCM responded that “obtaining letters of credit for 100% of the contract price before receiving any payment from the RCMP was simply not possible, especially when coupled with a requirement that Cruise Connections also pay the cruise lines at least 75% of the cruise fare before receiving any payment from the RCMP.” Id. ¶ 13.
Mr. Kelly and Ms. Edwards declare that the parties reached a mutually satisfactory compromise with three points that were significantly different from the RFP and Bid:
[T]he “contract financial security” to be delivered to the RCMP by April 1, 2009 would not be letters of credit totaling 100% of the contract price, but would instead be fully signed, non-cancellable charter party agreements naming the ISU as having exclusive use of the vessels during the time period the ships were to be in Vancouver Harbor for the Olympics.... [CCCM] would submit the fully signed charter party agreements to the RCMP by April 1, 2009 ... because the signed charter party agreements were being used as a substitute for the contract financial security originally referenced in the [RFP], [which] called for contract financial security to be submitted to the RCMP by April, 2009.
[The] first payment from the RCMP would not be due to [CCCM] until a reasonable time after [CCCM] submitted the signed charter party agreements to the RCMP, [¿a,] April 30, 2009. Either Mr. Day or Ms. Meikle explained that the funds necessary to pay [CCCM] could not be appropriated until after April 1, 2009, since the RCMP’s fiscal year commences on April 1. Since [CCCM] could arrange to make its initial payments to the cruise lines in May 2009, this payment schedule was agreeable.
[I]nstead of paying the cruise lines 75% of the cruise fare prior to receiving payment from the RCMP, as contemplated by the [RFP], Cruise Connections would obtain letters of credit securing 70% of the cruise fare within 30 days of entering the charter party agreements with the cruise lines. These letters of credit would secure the ships for the RCMP well before [CCCM’s] first payment to the cruise lines came due.
II Kelly Decl. ¶¶ 14-17.
Officer Kaluza’s contemporaneous notes reflect that taxes were discussed but do not provide any substance of that discussion. Notes of CCCM/RCMP Meeting at CAN20650. Mr. Kelly described the discussion on taxes at his deposition:
I said that it was impossible to know what taxes would be applied; that because the ships are acting as — for lack of a better term — a static hotel, we didn’t know what ramifications would mean for Canadian taxes. We talked about this for a while. We talked specifically about a number of different taxes that could be potential for this charter. Michael Day and Kelly Meikle both understood and agreed that we couldn’t come up with a hard number for that, and I believe it was Michael and Kelly Meikle who also believed that — and I won’t get this exactly right, but that the government, by taxing the RCMP, it’s taking money from one pocket and putting it into another pocket of the same suit. And I believe that that’s where these potential and questionable taxes, would they or would they not be applied, was their position of they didn’t even know if they would be applied.
Kelly Dep. at 216.
A few days after the June 3 meeting, Mr. Kelly recounted the discussion on Government Taxes in an email to Messrs. Phillip and Michael Sloane and Ms. Edwards:
As noted within the Response to RFP there are costs that the Cruise Line and Cruise Connections Charter Management must pass thru to the RCMP.... 3. Government Taxes. As noted in the Response to RFP any and all Canadian Government Taxes imposed as a result of this Charter will be the responsibility of the RCMP. Kelly Meikle notes “I do not think any GST will apply ... Anything over 28 days is not applicable. But the Contract is with CCCM and not the Cruise Lines and CCCM is providing a “service” and so we are including in our Budget the 5% GST.” Michael Day notes “Since our contract is with CCCM and not the cruise lines, there should be no Hotel Tax (cannot pay GST plus Hotel Tax). We are PST exempt.” Also noted is that [the Canadian Border Services Agency (“CBSA”) ] states no need for “working visas.”
E-mail from Tracey Kelly to Messrs. Sloane & Susan Edwards, RCMP Opp., Ex. 9 [Dkt. 66-11]. Mr. Kelly proposed drafting an agreement to reflect the June 3 meeting with RCMP. Id. at CCCM171. In response, Ms. Edwards expressed some concern about GST and the Hotel tax. Email from Susan Edwards to CCCM Partners, RCMP Opp., Ex. 10 [Dkt. 66-12] at CCCM178 (“It is a fact that hotel accommodation is being supplied — is it by us or by Carnival? ?”). Mr. Kelly wrote back: “3. The point about GST vs. HTL Tax, CCCM is providing a ‘service’ w/ the charter ships. Specifically, Mike [Day] said that this cannot be viewed as both a service and Htl? It was his quote.” E-mail from Tracey Kelly to CCCM Partners, RCMP Opp., Ex. 11 [Dkt. 66-13] at CCCM179.
Ms. Edwards was not entirely convinced and worried in a June 12 email about visas for crewmembers, hotel taxes, Canada Revenue Agency income taxes and other costs. See E-mail from Susan Edwards to CCCM Partners, RCMP Opp., Ex. 14 [Dkt. 66-16] at CCCM206. Mr. Kelly responded: “In our RFP response, did we not write that all Taxes (associated w/ the Vancouver stay) will be a Pass Thru?” Email from Tracey Kelly to CCCM Partners, RCMP Opp., Ex. 15 [Dkt. 66-17] at CCCM209.
Ms. Edwards then began an effort to procure a signed acknowledgment from RCMP concerning the parties’ agreements at the June 3 meeting. She sent Ms. Meikle an e-mail on June 18, 2008, with an attachment named “Contractor Outline.doc,” explaining: “Here is a document from Tracey re: contract details. We would look to have these points agreed to in any Contract.” E-mail from Susan Edwards to Kelly Meikle & CCCM Doc., CCCM MSJ, Ex. 12 [Dkt. 65-6] at CAN568; see also CCCM Reply, Ex. 6 [Dkt. 70-6]. The Contractor Outline is referred to in the record as “Minutes” of the June 3 meeting or as an effort to “memorialize” the meeting. In relevant part, the Minutes stated:
This Document is to formalize our Agreement to the Terms identified in our Response to the ISU RFP as discussed in our meetings, emails and phone calls from Tuesday, June 3rd 2008, through June 23, 2008.
Components of the Contract Price. As noted within the Response to RFP there are costs that the Cruise Line and Cruise Connections Charter Management One, LP must pass thru to the RCMP.
... [Fuel Surcharge; Insurance Premiums]
Government Taxes. As noted in the Response to RFP any and all Canadian Government Taxes imposed as a result of this Charter will be the responsibility of the RCMP. CCCM is providing a Service and the RCMP is paying the 5% GST in addition to $298. pppd.
Id. at CAN9671-72. The document also noted that “the original bid award of 3 ships (2 Fantasy Class Carnival Ships, 1 S Class Holland America Line Ship) will move forward.” Id. Procurement by RCMP was customarily accomplished through only a purchase order, and Ms. Meikle issued a Purchase Order to CCCM on June 20, 2008. E-mail from Susan Edwards to Tracey Kelly, Bud Sloane & Mike Sloane, Confirmation Letter, Purchase Order & General Conditions 9676, RCMP MSJ, Ex. 58 [Dkt. 62-62]; see also CCCM MSJ, Ex. 24 [Dkt. 65-15] (duplicate). Ms. Meikle hesitated to adopt any other process and did not sign the Minutes.
At the same time, restrictions on space for rafted ships at the Ballentyne Pier forced CCCM to reconsider its plan to use a combination of Holland America and Carnival ships. See June 19, 2008 E-mail from Susan Edwards to Tracey Kelly, RCMP MSJ, Ex. 89 [Dkt. 62-93] at CCCM354; see also RCMP Opp., Ex. 95 [Dkt. 66-97], CCCM was also investigating financing options to secure letters of credit. See E-mail Chain Between Susan Edwards & Kelly Meikle, CCCM MSJ, Ex. 14 [Dkt. 65-8]. While Ms. Edwards was worried that it might be financially infeasible for CCCM to fulfill the contract and wanted to convey her worries to Ms. Meikle, Mr. Kelly responded, “We are not going to provide the RCMP with ‘choices.’ We will provide them with ‘solutions.’ Please do not provide Kelly the Options. You can only say, how we got here (to this situation) and that we are confident that we will have a solution that will work.” Id.
On June 24, 2008, Ms. Edwards sent an updated copy of the Minutes of the June 3 meeting to Ms. Meikle, now described as a Project Services Agreement. E-mail Chain Between Susan Edwards & Kelly Meikle at CAN9671-73. This was CCCM’s second effort to obtain more formal sign-off on the topics and agreements from the June 3 meeting and thereafter, in part for CCCM’s protection and in part for the cruise lines and banks that wanted to see a “contract,” not merely a purchase order. Ms. Edwards wrote:
Went to the bank today:)
They need a copy of a contract (see attached [Project Services Agreement] on RCMP letterhead). This will enable the bank to send the [Letters of Credit] to the Cruise Lines. The contract illustrates what we have discussed and agreed previously.... If you could pis review, print off and sign 2 original copies.
Id. at CAN7228.
On June 26, 2008, Ms. Meikle and Ms. Edwards both signed the version that had been sent to Ms. Meikle on June 18, 2008, i.e., the so-called Minutes of the June 3 meeting. See Executed Version of June 3, 2008 Meeting Minutes, CCCM MSJ, Ex. 13 [Dkt. 65-7] at CCCM13790. Ms. Edwards signed on behalf of Messrs. Kelly and Sloane. Id. Ms. Meikle testified at her deposition that she “believe[d] this document was a document of minutes of what was discussed.... Whether or not I agreed to everything in it was not my intent. My intent was a — this basically was what they wanted and what we had talked about.” Meikle Dep. at 135.
On June 26, Ms. Meikle also reminded Ms. Edwards that RCMP needed signed charter party agreements with the cruise lines. Ms. Edwards promised to ask Mr. Kelly about their delivery date. E-mail from Susan Edwards to CCCM Partners, RCMP Opp., Ex. 81 [Dkt. 66-83] at CCCM556.
G. June 29 through July 14: Negotiations Continue; Bank Involved
At least by June 29, 2008, CCCM was deep in discussions with Cindy Brand of the Royal Bank of Canada (also “the Bank”) about financing. Negotiations for financing are relevant because RCMP argues that CCCM would never have been able to get the necessary funding and therefore could never have performed under the contract. RCMP also argues that because CCCM could not get the requisite financing, RCMP is not liable to CCCM even if RCMP itself breached the contract. See infra § III.F. Ms. Brand notified Ms. Edwards on June 29 that the Bank would need various confirmations from Mr. Day concerning the contract and payment schedule “prior to moving forward with [CCCM’s] financing request.” E-mail Chain Among Susan Edwards, Cindy Brand & Tracey Kelly, et al, CCCM Opp., Ex. 40 [Dkt. 67-40] at CCCM636. Ms. Brand also sought “Confirmation of the financial ability of CCCM to provide some level of financial backup for the financing requested. We could start with Bankers references for each of the limited partners.” Id.
The record then reflects silence in the three-way discussions among CCCM, the Bank, and RCMP for approximately two weeks. However, during the lull on financing issues, Mr. Kelly received additional information on the still-burgeoning tax issue, by way of a detailed e-mail from Mark O’Brien, Chief Tax Strategic Officer of Carnival Corporation. See E-mail Chain Between Tracey Kelly & Carnival, RCMP MSJ, Ex. 42 [Dkt. 66-44] at CCCM965-67. Mr. O’Brien’s e-mail is repeated here nearly in full, as it is the most complete and contemporaneous exposition of the tax issues in the entire record:
Below is a summary of the taxes that applies to our transaction. As discussed, we recommend [sic] that our Canadian tax advisor talk to your Canadian tax advisor so that we are all in agreement with the issues. Note that our tax advisor works at Miller Thomson LLP. Let me know the name and number of your tax advisor and we will set up a call.
Customs Duty: Upon importation, duty is payable under the Customs Tariff, Chapter 89, at the rate of 25% of the value; however, the “Vessel Duties Reduction or Removal Regulations” would generally apply to remit the duty on cruise ships to $0 provided there is no suitable Canadian duty paid or Canadian registered vessel available.
GST: GST is applicáble at the rate of 5% of the duty paid value of the