                                                                                     PUBLISH


                  IN THE UNITED STATES COURT OF APPEALS
                                                                                FILED
                             FOR THE ELEVENTH CIRCUIT                 U.S. COURT OF APPEALS
                                                                        ELEVENTH CIRCUIT
                                      _______________                       NOV - 2 2000
                                                                         THOMAS K. KAHN
                                                                              CLERK
                                        No. 99-11451
                                      _______________

                         D. C. Docket No. 95-03193-CV-RWS-1

THERATX, INC.,

                                                      Plaintiff-Counterclaim defendant-
                                                      Appellee-Cross-Appellant,

                                             versus

JAMES DUNCAN,
TIMOTHY S. SMICK, ET AL.,

                                                      Defendants-Counterclaim plaintiffs-
                                                      Appellants-Cross-Appellee,

                           ______________________________

                      Appeals from the United States District Court
                          for the Northern District of Georgia
                         ______________________________
                                  (November 2, 2000)


Before BIRCH, BARKETT and ALARCON*, Circuit Judges.

_____________
*
 Honorable Arthur L. Alarcon, U.S. Circuit Judge for the Ninth Circuit, sitting by designation.
BIRCH, Circuit Judge:

       Appellee-cross-appellant TheraTx, Inc. appeals the district court's grant of

summary judgment to the Duncan Group on its breach of contract claim.

Appellants-cross-appellees the Duncan Group1 appeal the district judge's

calculation of their damage award. James and Jean Duncan and Timothy and

Bobbi Smick, members of the Duncan Group, also appeal the district court's

determination that they lacked standing to recover damages for shares of TheraTx

stock that were transferred to their respective charitable trusts and shares that they

received as a gift from James F. McCormick.

                                   I. BACKGROUND

A. The TheraTx Stock

       In 1994, TheraTx, a Delaware health care corporation with its principal

place of business in Georgia, began negotiations with the management of

PersonaCare, Inc., a privately held corporation that owned nursing facilities, and

PersonaCare's majority shareholder, Warburg-Pincus. The remaining shares in



       1
          The Duncan Group consists of the following former PersonaCare shareholders and
trusts created by them: James W. Duncan, Jr.; Jean M. Duncan, as Co-Trustee of the Emanuel
Foundation and the Kyrios Foundation; Timothy S. Smick; Bobbi G. Smick, as Co-Trustee of
the Caleb Fund and the Joshua Fund; James F. McCormick; Arthur W. Trump, Jr., Individually,
and as Trustee of the David S. Hungerford, Grantor Retained Annuity Trust #1, and as Trustee of
the David S. Hungerford, Grantor Retained Annuity Trust #2; Dr. David S. Hungerford; and
Travers C. Nelson.

                                              2
PersonaCare were owned by members of the Duncan Group and other individuals.

Warburg-Pincus did not believe that the management of PersonaCare was capable

of building the company into a serious competitor in the health care business, and

sought out a merger partner. Warburg-Pincus was referred to TheraTx. See R7-

59, Ex. E at 11. TheraTx was attractive to Warburg-Pincus because TheraTx's

management was “looking to more rapidly pursue a consolidation in the industry, .

. . appeared to have a better understanding of where the industry was going, and . .

. were just more likely to be able to build a growing company." Id. The

PersonaCare shareholders, including the Duncan Group, expected TheraTx to

grow.

        In May 1994, TheraTx and PersonaCare entered into a merger agreement

(the "Agreement"). See R7-59, Ex. A. Under the Agreement, PersonaCare

shareholders exchanged their stock for restricted, unregistered stock in TheraTx.

Because the parties anticipated that TheraTx would undertake a public offering of

its shares of common stock as soon as practicable following the merger, the

Agreement included a provision that, in the event that TheraTx went public, it

would file a Shelf Registration effective for two years.2 On 24 June 1994, TheraTx

        2
          Section 6.6 reads as follows:
                Warburg Shelf and Demand Registration. (a) Promptly (and in any event within
10 days) following the expiration of any lock-up agreement with the underwriters in connection
with the Initial Public Offering . . . TheraTx shall effect a shelf registration (the "Shelf

                                               3
conducted a successful IPO at $12 per share. On 7 December 1994, TheraTx's

counsel notified the former PersonaCare shareholders that they were free to trade

their TheraTx stock under the Shelf Registration beginning on 12 December 1994.

The letter advised the former PersonaCare shareholders that any transferee of their

shares who wished to sell would have to be listed in the Shelf Registration. The

letter also advised that "it may become necessary to suspend the use of the Shelf

Registration pending [any legally required] amendment." Def. Trial Ex. 6 at 2. On

12 December 1994, TheraTx effected a Shelf Registration covering the TheraTx

common stock distributed to all former PersonaCare shareholders under the

Agreement. That day the shares traded at $19.50. During the next month, the

shares traded between $16.50 and $20.126 per share.

       In November 1994, TheraTx began negotiations to purchase the assets of

eight healthcare companies managed by Southern Management Services, Inc.

("SMS"). TheraTx and SMS entered into an agreement for the purchase of the

SMS assets on 13 January 1995. TheraTx discussed the effect of the SMS

Registration") of all shares of TheraTx Common Stock . . . issued to the PersonaCare
Stockholders in connection with the Merger.
                 ...
                 TheraTx shall cause the Shelf Registration to remain in effect until two years
following the Effective Date.
                 The PersonaCare Stockholders' rights under this Section 6.6 shall not be
assignable and such rights hereunder shall terminate at such time as such stockholder is entitled
to sell all of the Shares held by such stockholder without registration under the Securities Act.
R7-59, Ex. A at 47.

                                                4
purchase on the Shelf Registration with officials at the SEC and concluded that it

was necessary to suspend trading under the Shelf Registration in order to amend it

to include information regarding the SMS transaction. On 12 January 1995,

TheraTx advised the former PersonaCare shareholders by letter that their ability to

trade under the Shelf Registration would be suspended on 13 January 1995.3 On

13 January 1995, TheraTx publicly announced the SMS transaction and suspended

trading of its shares under the Shelf Registration, and TheraTx stock closed at

$18.750 per share.

       On 29 June 1995, TheraTx notified the former PersonaCare shareholders

that the trading suspension would be lifted on June 30.4 During the suspension


       3
         The letter reads:
       As you will recall, by letter dated December 7, 1994, we notified you of the
       effective date of the shelf registration statement registering the shares issued to
       you in connection with the acquisition of PersonaCare by TheraTx. At that time,
       you were informed that TheraTx could find it necessary to suspend the use of the
       registration statement from time to time due to events occurring at TheraTx.

       The purpose of this letter is to notify you that COMMENCING FRIDAY,
       JANUARY 13, 1995, your ability to use the shelf registration statement will be
       SUSPENDED until further notice. We will notify you when you may once again
       commence selling shares under the shelf registration.

       The letter was signed by TheraTx Vice President and General Counsel Jonathan H.
Glenn. R7-59, Ex. L-1.
       4
           The letter, from Laura M. Brower of Brobeck, Phleger & Harrison, reads in part:

              As you were notified in a letter from Jonathan H. Glenn, on January 12,
       1995, the shelf registration statement registering the shares issued to you in
       connection with the acquisition of PersonaCare by TheraTx was temporarily

                                                5
period, the value of TheraTx stock rose to a high of $23.125 on February 3, and

closed at $13.375 on June 30. TheraTx was bought by Vencor, Inc. on a tender

offer of $17.10 per share in March 1997.

B. The Duncan Shares

       During the summer and fall of 1994, Timothy Smick, former PersonaCare

Chairman and Chief Executive Officer, and James Duncan, former PersonaCare

President, met with stock brokers, money managers and a tax attorney regarding

the transfer of their TheraTx stock holdings to charitable remainder trusts in order

to take advantage of the associated tax benefits.

       Smick established two trusts on 13 December 1994, and Duncan established

two trusts on 22 December 1994. On 16 December 1994, Smick gifted at total of

150,000 shares of TheraTx stock to his two trusts. Smick also endorsed his

certificate and delivered it to his stockbroker and the trusts' money manager, Alex.

Brown & Sons, Inc. ("Alex. Brown"). On 27 December 1994, Duncan instructed

Alex. Brown to transfer his TheraTx stock into two trust accounts on the date that



       suspended. The purpose of this letter is to inform you that the shelf registration
       will once again become effective commencing Friday, June 30, 1995 at 12:00
       p.m., eastern time. Accordingly, beginning 12:00 p.m., eastern time, June 30th
       you will be permitted to once again sell shares pursuant to the shelf registration
       under the circumstances and in the manner described in the letter of instructions
       sent to you on December 7, 1994 (copy attached).
R7-59, Ex. L-2.

                                                6
the stock hit certain target prices, and, about the same time, delivered the stock

certificate and a written assignment. The stock certificates of Duncan and Smick

stated that their shares were "transferable only on the share register of said

corporation, in person or by duly authorized attorney." R13-98-Exs. R, S. On 12

January 1995, Alex. Brown notified TheraTx's stock transfer agent of the wishes of

Duncan and Smick to transfer their stocks to their respective trusts. In each letter,

Duncan and Smick requested that the shares be transferred without restrictions.

Alex. Brown transferred the shares to the trusts and confirmed the transfers to

Duncan and Smick.

          TheraTx's counsel notified TheraTx's stock transfer agent that the transfers

of the "request effective as of January 12, 1995 . . . on behalf of Mr. James W.

Duncan, Jr." and of the "request effective as of January 12, 1995 . . . on behalf of

Mr. Timothy S. Smick" were approved on 13 April 1995 and 23 March 1995,

respectively. R12-96, Exs. F and G; R13-98, Ex. N at 39-41. TheraTx's stock

transfer records show that the transfer from Duncan to his trusts occurred on 18

April 1995, and from Smick to his trusts occurred on 3 April 1995. Smick's federal

income tax return reflected a December 1994 transfer of stock to the trusts.

Duncan's federal income tax return reflected a January 1995 transfer of stock to the

trusts.


                                             7
      The Duncans and Smicks filed a complaint for breach of contract as trustees,

and sought damages on behalf of their respective trusts. The district judge

dismissed these claims, holding that the trusts lacked standing because the

registration rights under section 6.6 of the Agreement were not assignable. The

Duncan Group moved for reconsideration, arguing that Duncan and Smick should

be permitted to "assert their breach of contract claims with respect to those shares

of TheraTx stock transferred in April 1995 to their respective charitable remainder

trusts." R12-96-2. The district judge, however, found that no determination of

when Mssrs. Duncan and Smick transferred sizable portions of their TheraTx

holdings to charitable trusts was necessary, because the undisputed evidence

showed that, as to the shares transferred to the trusts, no damages were suffered by

Duncan and Smick as a result of the breach, regardless of the dates of transfer.

Although the Duncan Group, on reconsideration, requested that the district court

determine the date of transfer, the district court denied the request, noting that

"there are no perils of uncertainty with respect to the charitable trust shares that

should be laid at TheraTx's door and, instead, any belief that recovery may be had

for these shares should be laid to rest." R15-113-3-4.

C. The McCormick Shares




                                           8
       James McCormick received 150,118 shares of TheraTx stock in the merger.

During the fall of 1994, he transferred 18,700 shares of TheraTx stock to Duncan

and transferred 18,700 shares of TheraTx stock to Smick.5 The district judge also

found that Duncan and Smick had no standing to sue or to recover damages with

respect to these shares because they "received the McCormick shares by transfer

after the merger agreement." R15-114-2-3.

D. Other Duncan Group Members

       None of the other Duncan Group Members disposed of their shares until

after the suspension was lifted. After the suspension was lifted, those shares sold

in the range of $13.311 to $18.750 per share until the shares were proffered to

Vencor at $17.10 per share.

E. The Lawsuit

       TheraTx filed an action for declaratory judgment, seeking clarification of the

rights, status and legal relations of the parties under the Agreement regarding the

suspension of the Shelf Registration. The Duncan Group counterclaimed that

TheraTx had violated section 10(b) of the 1934 Securities Act, breached the

Agreement, committed common-law fraud, and made a negligent



       5
         We shall refer to the TheraTx stock transferred by McCormick to Duncan and Smick,
collectively as the McCormick Shares.

                                             9
misrepresentation.6 On the breach of contract claim, the district court found that

the Agreement’s terms requiring the Shelf Registration to remain in effect for two

years was unambiguous and that TheraTx breached the contract when it suspended

trading under the Shelf Registration.

                                       II. DISCUSSION

       On appeal, the Duncan Group argues that the district court erred by

concluding that it could not recover damages for the TheraTx stock transferred to

the charitable remainder trusts. They assert that if the transfers of TheraTx stock to

the trusts occurred after the breach, then Duncan and Smick have standing to

recover damages based upon those shares. They also argue that they have standing

to recover damages based upon the shares they received from McCormick, because

TheraTx acknowledged that transfer on its register. The Duncan Group further

contends that the district court erred in its calculation of damages by deducting

from the award the actual amount for which they sold their TheraTx stock once

trading under the Shelf Registration resumed. TheraTx argues that the district

court incorrectly determined that it breached its obligation under Section 6.6 of the

Merger Agreement by suspending trading as required by the SEC.

       6
          The Duncan Group alleged in district court that TheraTx fraudulently or negligently
failed to disclose its plans for large acquisitions that could result in a suspension of trading under
the Shelf Registration. The district court granted summary judgment for TheraTx on these
claims, and the Duncan Group has not appealed this decision. See R8-79-16-21.

                                                 10
      We review de novo the district court's order granting summary judgment.

See Williams v. Vitro Services Corp., 144 F.3d 1438, 1441 (11th Cir. 1998). A

motion for summary judgement should be granted when "the pleadings,

depositions, answers to interrogatories, 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." Fed. R. Civ. P.

56(c). There is no genuine issue for trial “[w]here the record taken as a whole

could not lead a rational trier of fact to find for the non-moving party.” Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356

(1986). In making this assessment, we must “view all the evidence and all factual

inferences reasonably drawn from the evidence in the light most favorable to the

nonmoving party,” Stewart v. Happy Herman's Cheshire Bridge, Inc., 117 F.3d

1278, 1285 (11th Cir. 1997), and “resolve all reasonable doubts about the facts in

favor of the non-movant.” United of Omaha Life Ins. v. Sun Life Ins. Co., 894 F.2d

1555, 1558 (11th Cir. 1990).

      The parties agreed that "[t]he laws of the State of Delaware . . . govern the

validity of [the Agreement], the construction of its terms, and the interpretation and

enforcement of the rights and duties of the parties.” R13-98-Ex. A at 58.

Accordingly, we apply Delaware contract law.


                                          11
A.    Breach

      In determining that TheraTx breached its contractual duty under section 6.6

of the Agreement, the district judge reasoned that the “core purpose, indeed the

only purpose, of the Shelf Registration Statement was to give PersonaCare

shareholders the right to trade at any time after TheraTx publicly offered its stock”

and that, by promising to maintain the effectiveness of the Shelf Registration,

TheraTx had promised “that action w[ould] be taken to ensure that the [Shelf

Registration] continue[d] to perform its core purpose.” R8-79-14.

      On appeal, TheraTx argues that its obligation "to cause the Shelf

Registration to remain in effect for two years" under section 6.6 of the Agreement

must be interpreted by giving the word "effect" its meaning as a term of art in the

context of securities regulations governing the Shelf Registration. According to

this argument, the Shelf Registration remained "in effect" following TheraTx's

merger with SMS despite the suspension of trading that prevented the Duncan

Group from selling its shares of TheraTx stock. TheraTx contends that the Shelf

Registration was still “in effect” when it suspended trading under the Shelf

Registration in order to amend its prospectus, and, given its stated strategy of

growth via acquisitions, it was unreasonable for the PersonaCare shareholders to




                                         12
expect that TheraTx would not complete any acquisitions which might require such

a suspension of trading under the Shelf Registration.

      Under Delaware law, courts seeking to resolve contract disputes look first to

the terms of the contract itself. See Continental Insurance Company v. Rutledge

& Company, Inc., 750 A.2d 1219, 1228 (Del. Ch. 2000). In doing so, we "give the

terms of contracts their plain meaning" and should "not look behind the terms and

provisions of a clear and unambigous contract." Id. A contract is clear and

unambiguous when its terms "establish the parties' common meaning so that a

reasonable person in the position of either party would have no expectations

inconsistent with the contract language." Eagle Industries, Inc. v. DeVilbiss Health

Care, Inc., 702 A.2d 1228, 1232 (Del. 1997). Only when a contract provision is

"fairly susceptible of different interpretations" should a court "look beyond the

language of the contract to ascertain the parties' intentions." Id.

      We agree with the district judge that section 6.6 of the Agreement is clear

and unambiguous, and should, therefore, be interpreted according to the plain

meaning of its terms. We also conclude that the rules governing the effective date

of a registration statement and amendments thereto, codified at 15 U.S.C. § 77g, do

not utilize the word "effective" in a unique or distinctive manner, thereby creating




                                          13
a special meaning or making the word a term of art within the arena of securities

law.

       While we agree with TheraTx that it seems implausible that the "expert

securities lawyers" representing both parties to the Agreement did not anticipate

the possibility that TheraTx, a company with a stated strategy of growth by

acquisition, would be required by securities regulations to suspend trading under

the Shelf Registration as a result of some future merger or acquisition, see

Amended Brief of Appellee-Cross-Appellant at 50, we conclude that TheraTx was

in the best position to fully appreciate the parameters of its growth strategy and

anticipate the impact this strategy would have upon its commitments under the

Agreement. Therefore, it was incumbent upon TheraTx to appropriately tailor its

contractual obligation under section 6.6 to account for the possibility that it might

engage in a merger which would necessitate the suspension of trading under the

Shelf Registration. The PersonaCare shareholders were entitled to rely on the

contract terms as written. Accordingly, we conclude that TheraTx breached its

contractual obligation under section 6.6 of the Agreement when it suspended

trading under the Shelf Registration following its merger with SMS.

B.     Standing

       1. Trust Shares


                                          14
      The district judge determined that the trustees of the charitable remainder

trusts created by Duncan and Smick did not have standing to collect damages

associated with TheraTx's breach of the Agreement because the rights provided to

the PersonaCare shareholders by section 6.6 of the Agreement were not assignable.

The district judge did not determine the effective date of Duncan and Smick's

transfer of their TheraTx stock to the respective charitable trusts, because he

concluded that Duncan and Smick had not suffered actual monetary damages with

regard to the TheraTx stock transferred to the trusts as a result of the breach. The

district judge reasoned that "[t]he only monetary benefit that Messrs. Duncan and

Smick received from donating TheraTx shares to the charitable trusts was their

ability to claim charitable tax deductions based on the value of the stock at the time

of the transfer.” R14-103-3. He concluded that, because the suspension of trading

had not delayed or affected Duncan and Smick's ability to transfer the stock to the

trusts, TheraTx's breach of contract had not affected the value of the charitable

donations made by Duncan and Smick and the associated tax deductions.

      On appeal, the Duncan Group argues that if Duncan and Smick continued to

hold all of their TheraTx stock at the time of TheraTx's breach, and the transfer of

their TheraTx stock to charitable remainder trusts did not become effective until

after the breach, then they have standing to sue for the damage caused by to them


                                         15
by the breach regardless of their subsequent disposition of the stock. The Duncan

Group further argues that Duncan and Smick were damaged by TheraTx's breach

because the suspension of trading caused a reduction in the trust income that they

were entitled to receive annually during their lifetimes by interfering with the

trusts’ ability to sell the shares and reinvest the proceeds elsewhere. We find,

however, that ownership of the shares was transferred prior to the date of the

breach, and as a result, the trusts have no standing to sue for damages.

      Delaware law governs our analysis. At the time of the breach, 13 January

1995, § 8-313 of Delaware’s Uniform Commercial Code (“U.C.C.”) set forth the

requirements for when transfer of a security to a purchaser occurs. See DEL. CODE.

ANN. tit. 6, § 8-313 (1995). A recipient by gift is a purchaser under the Delaware

U.C.C. See DEL. CODE. ANN. tit. 6, § 1-201(32) (1995). Section 8-313 lists

several ways that transfer may occur, depending on whether the security being

transferred is certificated or uncertificated. The securities held by Duncan and

Smick were certificated securities because they were represented by instruments

that specified Duncan and Smick as the owners and provided that transfer could be

registered on the books of the corporation. See R13-98-Exs. R,S: see also DEL.

CODE. ANN. tit. 6, § 8-102(1)(a) (1995) (defining a certificated security).




                                         16
      According to the U.C.C. provisions then in force, certificated securities were

deemed transferred to a purchaser only:

      (a) At the time he or a person designated by him acquires possession of a
      certificated security; . . .

       (c) At the time his financial intermediary acquires possession of a
certificated security specially endorsed to or issued in the name of the purchaser;

      (d) At the time a financial intermediary, not a clearing corporation, sends
him   confirmation of the purchase and also by book entry or otherwise identifies
as    belonging to the purchaser
             (i) a specific certificated security in the financial intermediary’s
             possession ;
             (ii) a quantity of securities that constitute or are part of a fungible bulk
             of certificated securities in the financial intermediary’s possession . . .

DEL. CODE. ANN. tit. 6, § 8-313(1) (1995).

      Application of this statute is complicated by the fact that both Duncan and

Smick were trustees of their respective trusts. Certain facts, however, are clear.

Both provided their stock certificates to Alex. Brown with instructions to transfer

ownership to their respective trusts. Alex. Brown issued statements indicating that

it had transferred TheraTx stock from the individual donees to the trust accounts, in

December 1994 for Smick and January 1995 for Duncan.

      Alex. Brown was the stockbroker for the trusts. We find that when Duncan

and Smick endorsed their stock certificates and provided them to Alex. Brown with

instructions to transfer the stock to the trusts, Alex. Brown acquired possession of


                                          17
the certificated security on behalf of the trusts, thereby satisfying § 8-313(1)(a). It

is possible that, because Alex. Brown qualifies as a “financial intermediary” as

defined in § 8-313(4), that other subsections of § 8-313 were also satisfied. We

express no opinion as to these other possible methods of transfer as the

requirements of § 8-313(1)(a) were satisfied. We do note, however, that while the

transfers of the shares were not reflected on TheraTx’s books until after the breach,

§ 8-313 imposes no such requirement on the validity of a transfer. Indeed, § 202

of Delaware’s corporations code, which controls over sections of the U.C.C.,

provides that restrictions on the transfers of security “may be enforced against the

holder of the restricted security” or her successor, but do not provide for

enforcement against the corporation. DEL. CODE. ANN. tit. 8, § 202(a) (1995).

Duncan and Smick intended to transfer their shares to charitable remainder trusts,

and the records of Alex. Brown reflect that those intentions were carried out. To

allow Duncan and Smick to enforce trading restrictions against themselves in order

to collect damages thwarts both their original intent to transfer their shares prior to

the date of the breach and the parties’ contractual agreement that contract rights,

including remedies for breach, were not to be transferrable.

      2. McCormick Shares




                                          18
      The district judge also determined that Smick and Duncan did not have

standing to recover for breach of the Agreement with respect to the McCormick

shares because the rights granted to PersonaCare shareholders in section 6.6 of the

Merger Agreement were not assignable. On appeal, the Duncan Group argues that,

because TheraTx recorded the transfer from McCormick to Duncan and Smick on

its stock register in October 1994 and subsequently reflected the transfer of

ownership from McCormick to Duncan and Smick in the Amended Shelf

Registration under which trading resumed on 30 June 1995, TheraTx

acknowledged the rights of Duncan and Smick to have the McCormick Shares

included in the Shelf Registration and should be estopped from asserting that

Duncan and Smick did not have the right granted by section 6.6 of the Agreement

to have those shares registered. In making this argument, the Duncan Group

attributes TheraTx's failure to include the McCormick shares in the names of

Duncan and Smick, respectively, as an oversight and mistake.

      TheraTx counters that it was not obligated to register any shares of TheraTx

stock received by PersonaCare shareholders after the Agreement was executed.

Accordingly, TheraTx was not obligated to include the McCormick shares

acquired by Duncan and Smick in the Shelf Registration. Further, TheraTx asserts

that the crediting of the McCormick shares to Duncan and Smick in the Amended


                                         19
Shelf Registration after the January 1995 breach does not estop it from denying

that Duncan and Smick have contractual rights with regard to the McCormick

Shares.

      We have determined that the rights of the PersonaCare stockholders were

not assignable under the clear terms of Section 6.6. Therefore, when McCormick

gifted a portion of his TheraTx stock to Duncan and Smick, McCormick's

contractual right for those shares to be included in the Shelf Registration was not

transferred to Duncan and Smick. Further, Duncan and Smick have failed to

demonstrate any conduct on the part of TheraTx which suggests that Duncan,

Smick, or any other person who received restricted shares of TheraTx stock after

the execution of the Agreement would be entitled to sell that stock under the Shelf

Registration under an estoppel theory. The 7 December 1994 letter from TheraTx's

attorney to PersonaCare stockholders explained that if the PersonaCare

stockholders chose to gift their TheraTx stock to another individual or entity, the

recipient would receive restricted stock and the recipient stockholder would have

to be listed in the Shelf Registration Prospectus in order to be able to sell the gifted

stock. The letter further requested that the PersonaCare stockholders provide

TheraTx a list of any potential gift recipients. The letter, however, did not

undertake any new obligation to include such gift recipients in the Shelf


                                          20
Registration. Indeed, it specifically discussed the possibility that trading under the

Shelf Registration would be suspended. Therefore, the Amended Shelf

Registration's reflection of the gift could not have suggested to Duncan and Smick

that they were entitled to trade the McCormick shares under the initial Shelf

Registration at the time the breach occurred. See Wilson v. American Insurance

Co., 209 A.2d 902, 903-904 (Del. 1965) (requiring lack of knowledge of truth and

detrimental reliance to establish estoppel). Therefore, we conclude that the district

court correctly determined that Duncan and Smick were not entitled to recover

damages for the breach of contract with regard to the McCormick shares.

C.    Calculation of Damages

      The district judge purported to calculate the damages of the Duncan Group

using a "modified conversion" analysis. Accordingly, he concluded that the

Duncan Group was entitled to recover the difference between the highest

intermediate value that the TheraTx stock reached during a reasonable time after

trading was suspended and the actual price they were ultimately paid for their

stock. This reasonable time period was the ten days the district judge calculated

that it would have taken the Duncan Group to dispose of their TheraTx stock

without adversely affecting the stock price, according to historical trading volumes.

He determined that the highest value reached by the TheraTx stock during this ten


                                          21
day period was $19.75. The district judge then subtracted the actual price at which

the PersonaCare stockholders sold their TheraTx stock. He reasoned that it was

appropriate to subtract the actual price the PersonaCare shareholders received for

their TheraTx stock, rather than the average stock price during a reasonable period

of time after the suspension of trading under the Shelf Registration was lifted,

because the PersonaCare shareholders ultimately sold their TheraTx stock for a

higher price than that at which they could have sold it during a reasonable period

following the suspension of trading, and they were “‘not entitled to be placed,

because of [the] breach, in a position better than that which [they] would have

occupied had the contract been performed.’” R 16-130 at 5 (quoting Madison

Fund, Inc. v. Charter Co., 427 F. Supp. 597, 608 (S.D.N.Y. 1977) (applying

Florida law)).

      The Duncan Group argues that the district judge’s reasoning was incorrect,

because, although they might have sold during the period that trading was

suspended under the Shelf Registration, they nevertheless took a risk and made a

new investment decision to hold their stock once the trading suspension was lifted.

TheraTx argues that, although Delaware courts have not addressed specifically the

proper method for calculating damages in a case involving breach of a contract by

suspension of trading under a Shelf Registration, the district judge’s analysis was


                                         22
consistent with general principles of Delaware contract law. See American Gen’l

Corp. v. Continental Airlines Corp., 622 A.2d 1, 8 (Del. Ch. 1992) (finding the

measure of damages is usually that which is necessary to put the claimant in as

good a position as he would have occupied if the contract had been performed);

E.I. DuPont de Nemours and Co. v. Pressman, 679 A.2d 436, 445 (Del. 1996)

(stating contract damages are awarded to compensate the injured party and not to

punish the breaching party).

      Our review of Delaware law reveals no binding authority establishing a

specific method for measuring contract damages in circumstances similar to those

presented in this case. Thus, while we do not suggest that the district judge’s

method of computing damages was inconsistent with Delaware law, we conclude

that this case presents an unsettled question of Delaware law. Therefore, because

the method of calculation of damages is dispositive of the claims in this case, and

because it raises an important issue of state law, we certify the following question

to the Supreme Court of Delaware, pursuant to Del. S.Ct. Rule 41:

      WHAT IS THE PROPER MEASURE OF DAMAGES WHEN A
      DEFENDANT’S CONTRACTUAL OBLIGATION TO CAUSE A SHELF
      REGISTRATION, UNDER WHICH PLAINTIFF IS ENTITLED TO
           TRADE A RESTRICTED STOCK, TO REMAIN IN EFFECT FOR
A     SPECIFIED PERIOD OF TIME IS BREACHED BY DEFENDANT’S
      TEMPORARY SUSPENSION OF PLAINTIFFS’ ABILITY TO TRADE
      THE RESTRICTED STOCK?


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The phrasing of this certified question is not intended to limit the Delaware

Supreme Court’s consideration of the various issues posed by this case. The entire

record and the briefs of the parties shall be transmitted to the Supreme Court of

Delaware to assist in its determination, should it accept our certification.

                                III. CONCLUSION

      Because we find that TheraTx breached its obligations under Section 6.6 of

the Agreement, and that Duncan and Smick have no standing to sue for damages

for shares received as gift from McCormick or transferred by them to charitable

remainder trusts, we AFFIRM in part and CERTIFY the question of the

appropriate method of calculating damages in this case to the Supreme Court of

Delaware.




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