FASTARCHIVER SOFTWARE, LLC & Others v. ARCSERVE (USA) LLC & Another.

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).

COMMONWEALTH OF MASSACHUSETTS

APPEALS COURT

24-P-383

FASTARCHIVER SOFTWARE, LLC & others1

vs.

ARCSERVE (USA) LLC & another.2

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

This dispute arises from a contract between FastArchiver

Software, LLC (FastArchiver), and Arcserve (USA) LLC (Arcserve)

for the purchase of FastArchiver's assets. Claiming, among

other things, that it did not receive money that was owed under

the contract and that the contract was induced by fraud,

FastArchiver and its members brought suit against Arcserve and

an associated company, Marlin Management Company, LLC (Marlin).

On the defendants' motion for summary judgment, a Superior Court

1 Peter Alex, Seda Alex, and Stephen Catanzano.

2 Marlin Management Company, LLC.
judge dismissed the complaint, and the plaintiffs appeal. We

affirm.3

Background. The following facts are undisputed. We

reserve discussion of other facts as they become pertinent to

our analysis.

FastArchiver, Arcserve, and Marlin are all Delaware limited

liability companies. FastArchiver created and developed an

e-mail archiving software, which in 2016 Arcserve and Marlin

expressed an interest in buying. Marlin is a venture capital

firm that owned an interest in Arcserve, which sold data-

protection software.

On October 12, 2016, FastArchiver and Marlin signed a

letter of intent for Arcserve to acquire FastArchiver's software

for $90,000 plus "contingent consideration in the form of an

earn-out." A final deal was reached on January 30, 2017,

through an asset purchase agreement (agreement) signed by

FastArchiver and Arcserve. The agreement provided that Arcserve

would purchase FastArchiver's software for $90,000, paid in

three installments within sixty days of closing, plus earn-out

payments "within the Earn-out Period . . . equal to thirty

3 After the appeal was docketed in this court, then counsel
for Arcserve moved to withdraw on the ground that Arcserve's
assets had been assigned and Arcserve had consented to
proceeding unrepresented. The motion was allowed, and no
successor counsel entered an appearance or filed a brief on
behalf of Arcserve.

2
percent . . . of the Gross Margin [attributable to sales of the

software] . . . during [each] Calculation Period."4 The "Earn-

out Period" would end on the date on which the sum of all earn-

out payments totaled $3,250,000 (the "Maximum Earn-Out") or on

the thirty-six month anniversary of the closing date, whichever

was earlier.

Importantly for our purposes, the agreement provided that

"[t]he Parties understand and agree that . . . the Earn-out

Payments . . . are speculative and subject to numerous factors

outside the control of Buyer or its Affiliates"; "there is no

assurance that the Seller will receive any Earn-out Payment and

none of Buyer or its Affiliates has [sic] promised that any

Earn-out Payment would be made"; and "the Parties solely intend

the express provisions of this Agreement and the other documents

and agreements delivered hereunder at the Closing to govern

their contractual relationship." The agreement further provided

that, "[f]rom and after the Closing, Buyer and its Affiliates

shall have the right to use the Purchased Assets[5] in any way

that Buyer deems appropriate . . . and Buyer shall have no

4 The defined terms "Gross Margin" and "Calculation Period"
are not pertinent to our analysis.

5 The agreement defines "Purchased Assets" to include the
software and all assets, properties, and rights related to the
software.

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obligation to operate its businesses in order to achieve or

maximize the Earn-out Payments . . . or otherwise have any

obligation to continue the sales of the Purchased Assets for any

period of time following the Closing."6 In addition, the

agreement contained a general merger clause, which provided that

"[t]his Agreement, the Disclosure Schedules, and the documents

to be delivered hereunder constitute the sole and entire

agreement of the Parties with respect to the subject matter

contained herein, and supersede all prior and contemporaneous

understandings and agreements, both written and oral, with

respect to such subject matter."

Arcserve paid FastArchiver the initial consideration of

$90,000 in accordance with the agreement. Also, pursuant to a

separate agreement, Arcserve hired one of FastArchiver's

members, Stephen Catanzano, as a consultant to educate

Arcserve's sales team about the software. Ultimately, however,

according to Arcserve's calculations, Arcserve did not earn

enough revenue from sales of the software during the thirty-six

months following the closing for any earn-out payment to be due.

Arcserve recorded its calculations in periodic earn-out reports,

which it provided to FastArchiver.

6 Arcserve did have an obligation under the agreement not to
"take any action with the specific purpose of reducing or
otherwise eliminating the Earn-out Payments."

4
In May 2020 the plaintiffs filed the underlying complaint,

raising claims of breach of contract and breach of the implied

covenant of good faith and fair dealing against Arcserve, and

claims of fraud, negligent misrepresentation, violations of

G. L. c. 93A, conspiracy, and aiding and abetting against both

defendants.7 The defendants filed a joint motion for summary

judgment, which the judge allowed after a hearing. This appeal

followed.

Discussion. We review a grant of summary judgment de novo.

See Boazova v. Safety Ins. Co., 462 Mass. 346, 350 (2012).

Summary judgment is appropriate if the record, viewed in the

light most favorable to the nonmoving parties, shows that there

is no genuine issue as to any material fact and the moving

parties are entitled to judgment as a matter of law. See Carey

v. New England Organ Bank, 446 Mass. 270, 278 (2006). "Only

those facts that, if true, provide a basis for a reasonable jury

to find for a party are material." Id. Where, as here, the

nonmoving parties would have the burden of proof at trial, the

moving parties can prevail on summary judgment by demonstrating

that the nonmoving parties have "no reasonable expectation of

7 The plaintiffs voluntarily dismissed an eighth claim for
breach of fiduciary duty against Marlin.

5
proving an essential element of [their] case." Kourovacilis v.

General Motors Corp., 410 Mass. 706, 716 (1991).8

1. Breach of contract. The plaintiffs argue that genuine

issues of material fact exist with regard to its breach of

contract claim, precluding the entry of summary judgment. In so

arguing, the plaintiffs identify seven alleged breaches of the

agreement committed by Arcserve. The plaintiffs make three of

those allegations summarily, with no explanation as to why

summary judgment was improper, so we do not consider them.9 See

Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1628

(2019). Moreover, the plaintiffs have waived their argument

that Arcserve breached the agreement by "fail[ing] to be

8 With respect to which State's substantive law applies to
this dispute, we note that the agreement contains a provision
stating: "This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware
without giving effect to any choice or conflict of law provision
or rule (whether of the State of Delaware or any other
jurisdiction)." Nevertheless, the plaintiffs maintain that
Massachusetts law, not Delaware law, governs all of their
claims. We can assume, without deciding, that that is correct
because the defendants were entitled to summary judgment under
Massachusetts law, for the reasons discussed below.

9 Those allegations are that Arcserve "took action to reduce
or eliminate the earn-out or portions thereof," "prohibit[ed]
the cross-selling to existing end-users," and "reduc[ed]
marketing dollars for the sale of the [software]."

6
solvent" because they did not adequately raise that issue to the

judge. See Carey, 446 Mass. at 285.10

We turn to the remaining allegations. Two are related --

that Arcserve "failed to report sales of the [software]" and

"failed to pay [FastArchiver] the 30% earn-out on those sales."

In support, the plaintiffs rely solely on an affidavit submitted

by Catanzano, in which he asserted that Arcserve "failed to

provide earn-out statements and thus failed to disclose sales";

"[t]he earn-out reports provided did not accurately disclose

earn-outs on the sales made of the [software]"; "Arcserve

provided . . . deceptive and misleading earn-out statements

showing no sales"; and "Arcserve lied" when it told him "there

were no sales."

This affidavit is insufficient to create a genuine dispute

of material fact. "Where the movant has supported the motion

for summary judgment by admissible evidence, a nonmoving party

may not rest on unsupported allegations; instead, the nonmoving

party must come forward with admissible evidence setting forth

specific facts showing that there is a genuine issue for trial."

Ortiz v. Morris, 97 Mass. App. Ct. 358, 362 (2020). Here,

Arcserve supported its motion with the earn-out reports, which

10 The judge wrote that he did not consider the issue
because it was "not developed" and the plaintiffs did "not cite
to specific supporting evidence within the record."

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showed its calculations of whether earn-out payments were owed

based on revenue from sales of the software. Catanzano's bare

assertions that these reports were incomplete or inaccurate and

that Arcserve "lied" do not create a disputed issue of fact

because the affidavit does not set forth the basis of his

knowledge. See id. at 364-365 ("Because it is not based on

personal knowledge, the statement in the affidavit is not

admissible evidence").

The plaintiffs' last allegation -- that Arcserve breached

the agreement by "fail[ing] to be truthful" -- fails as a matter

of law. The part of the agreement cited by the plaintiffs is

titled "Release by Seller" and imposes no obligations on

Arcserve. In arguing otherwise, the plaintiffs point to a

clause that states: "provided, however, that nothing contained

herein shall operate to release any obligations of Buyer under

this Agreement or any claim based on fraud or intentional

misrepresentation in connection with the transactions

contemplated by this Agreement." But this clause merely

preserves FastArchiver's right to bring certain claims; it does

not impose any contractual obligation on Arcserve to be

truthful. Arcserve's alleged untruthfulness could be a basis

for a fraud or misrepresentation claim but does not support the

plaintiffs' claim in contract.

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2. Breach of implied covenant of good faith and fair

dealing. The basis of the plaintiffs' claim for breach of the

implied covenant of good faith and fair dealing is that Arcserve

"fail[ed] to take action to market and sell" the software,

"caus[ing] the unfair result of depriving [the] [p]laintiffs the

benefits of the three (3) year earn-out payments." This claim

fails as a matter of law. It is well settled in Massachusetts

that "[t]he scope of the [implied] covenant is only as broad as

the contract that governs the particular relationship" and does

not "create rights and duties not otherwise provided for in the

contract" (quotations omitted). Chokel v. Genzyme Corp., 449

Mass. 272, 276 (2007). Where the agreement expressly provided

that Arcserve "shall have no obligation to operate its

businesses in order to achieve or maximize the Earn-out Payments

. . . or otherwise have any obligation to continue the sales of

the [software] for any period of time following the Closing,"

the plaintiffs cannot invoke the implied covenant to impose on

Arcserve an obligation to the contrary. See id. at 276-278.

3. Fraud and negligent misrepresentation. The plaintiffs'

claims for fraud and negligent misrepresentation rest on the

same set of essential allegations -- namely, that, to induce the

plaintiffs to agree to the earn-out payment structure, the

defendants falsely represented that Arcserve was financially

sound, had the financial backing of Marlin, and would actively

9
market the software to its customer base, and made false

assurances that the plaintiffs would receive the maximum earn-

out payment of $3,250,000 because customer demand was so high.

In actuality, the plaintiffs allege, the defendants knew "that a

significant number of key management personnel were leaving

Arcserve," and the defendants had no intent to market the

software or pay the plaintiffs any consideration beyond the

upfront payment of $90,000.

To prevail on a claim for either fraudulent or negligent

misrepresentation, a plaintiff must prove that its "reliance on

any such [mis]representation was reasonable and justifiable."

Cumis Ins. Society, Inc. v. BJ's Wholesale Club, Inc., 455 Mass.

458, 474 (2009). The question of reasonable reliance can be

decided on summary judgment "where the undisputed facts permit

only one conclusion." Id. That is the case here. It "is a

rule of long standing" in Massachusetts that "[i]t is

unreasonable as a matter of law to rely on prior oral

representations that are (as a matter of fact) specifically

contradicted by the terms of a written contract." Masingill v.

EMC Corp., 449 Mass. 532, 541 (2007). Thus, "if the contract

was fully negotiated and voluntarily signed, [then] plaintiffs

may not raise as fraudulent any prior oral assertion

inconsistent with a contract provision that specifically

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addressed the particular point at issue" (quotations omitted).

Id.

The plaintiffs' reliance on any promise by the defendants

that they would actively market the software, or on any

assurance that sales would be so robust that earn-out payments

were guaranteed, was unreasonable as a matter of law because any

such reliance conflicted with the terms of the agreement.

Again, the agreement provided that Arcserve "shall have no

obligation to operate its businesses in order to achieve or

maximize the Earn-out Payments . . . or otherwise have any

obligation to continue the sales of the [software] for any

period of time following the Closing." Moreover, the parties

agreed that the earn-out payments were "speculative," that there

was "no assurance" that FastArchiver would "receive any Earn-out

Payment," and that neither Arcserve nor "its Affiliates ha[d]

promised that any Earn-out Payment would be made." These

provisions are consistent with the letter of intent signed by

FastArchiver and Marlin, which stated that "Arcserve shall have

the right to terminate all [FastArchiver] activities at any time

at its sole discretion."

In light of these provisions, the plaintiffs could not

reasonably have relied on any contrary promises or assurances

made by the defendants prior to execution of the agreement,

especially where the agreement also stated that the parties

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intended for its "express provisions . . . to govern their

contractual relationship" and that the agreement "supersede[d]

all prior and contemporaneous understandings and agreements."

That Marlin was not a party to the agreement does not change the

result because the falsity of the defendants' purported

representations, whether made by Arcserve or Marlin, should have

been "readily apparent or 'obvious'" from the terms of the

agreement. Kuwaiti Danish Computer Co. v. Digital Equipment

Corp., 438 Mass. 459, 468 (2003), quoting Restatement (Second)

of Torts § 541 (1977). Where the agreement unequivocally stated

that earn-out payments were not assured and that Arcserve had no

obligation to market the software to achieve or maximize earn-

out payments (and indeed could discontinue selling the software

at any time), the plaintiffs' reliance on any contrary

representations made by the defendants during negotiations was

not reasonable as a matter of law. Summary judgment was thus

appropriate. See Masingill, 449 Mass. at 542 (where plaintiff

"signed her contract knowing that she had not received all of

the terms she wanted . . ., she cannot later raise the content

of negotiations to contradict what is finally and unequivocally

agreed upon in the final version of the contract, without

creating the [legally unacceptable] result that the language of

the contract simply would not matter any more" [quotations

omitted]); McCartin v. Westlake, 36 Mass. App. Ct. 221, 231

12
(1994) ("The deliberate, uncoerced, and businesslike process by

which the parties reached final, written agreements cannot be

undone merely on the claim, later asserted, that the plaintiffs

understood that the commitment and obligations of the

parties were otherwise than as stated in the signed contract

documents").

4. Remaining claims. The plaintiffs' claim under G. L.

c. 93A and their claims for conspiracy and aiding and abetting

are derivative of their contractual and tort claims, as they are

based on the same underlying conduct. Thus, because the

plaintiffs have no viable contractual or tort claims, the

remaining claims were properly dismissed. See Go-Best Assets

Ltd. v. Citizens Bank of Mass., 463 Mass. 50, 64 (2012); Park

Drive Towing, Inc. v. Revere, 442 Mass. 80, 85-86 (2004); Bartle

v. Berry, 80 Mass. App. Ct. 372, 383-384 (2011).

Judgment affirmed.

By the Court (Henry, Shin &
Brennan, JJ.11),

Clerk

Entered: May 29, 2025.

11 The panelists are listed in order of seniority.

13