Reference no: EM131657393

Question: Ellefson and Mustaine are original members of the heavy metal rock band, Megadeth. The band was initially formed in 1983, with Mustaine as the lead guitarist, lead vocalist, and lead songwriter, and Ellefson as the band's bassist. In 1990, they formed a formal corporation, Megadeth, Inc., with Mustaine receiving 80 percent of the stock and Ellefson 20 percent. Years later, Ellefson claimed that Mustaine, Megadeth, Inc., and others ("the Megadeth defendants") had defrauded him out of his share of the corporation's profits. Beginning in October 2003, Ellefson and the Megadeth defendants entered into negotiations to settle their disputes. On April 16, Ellefson's attorney, Abdo, received an initial draft of a proposed "Settlement and General Release," whereby Ellefson's interest in the corporation and various other licensing/recording agreements would be purchased. Negotiations over this proposed settlement continued uneventfully over the next four weeks as the attorneys incorporated various comments and changes. The pace of negotiations accelerated in May, however, because Mustaine imposed a deadline of five o'clock on Friday, May 14, 2004, for completion of the settlement. To that end, the parties' attorneys began working in earnest to put together a final draft of the agreement by the end of the week. On the morning of Thursday, May 13, Abdo received an e-mail reminding him "that Dave Mustaine has instructed us to pull the offer to Ellefson off the table and to terminate this deal as of 5 PM PST on Friday 5/14/04, if we do not have a signed agreement in hand." The following day, Friday, May 15, attorneys for both sides worked to finalize a draft of the agreement in time to meet the five o'clock deadline. After an exchange of e-mails between the attorneys, Abdo e-mailed Lurie, the Megadeth defendants' lawyer, that he was faxing his final comments, and that Lurie should "make the changes and we are done."

At 4:45 PM PST, 15 minutes prior to expiration of the offer, Lurie sent Abdo a finalized copy of the agreement. In a covering document to the final agreement, Lurie stated that "attached is an execution copy of the above-referenced Settlement Agreement," reiterated the five o'clock deadline, and stated that defendants reserved "the right to make further changes pending our finalizing Exhibits A and B and the full execution of the agreement early next week." In the final e-mail of the day between the attorneys, sent on Friday, May 14, 2004, 5:16 PM, Abdo e-mailed Lurie and stated that "Dave Ellefson told me he signed and faxed the signature page to you. Thanks for the drafting work." Ellefson did sign and fax a completed signature page shortly after receiving the final agreement at 4:45 PM on Friday, but there was no evidence that the fax was sent prior to the 5 PM deadline. On Thursday, May 20, 2004, four business days after Ellefson's signature fax was received, the Megadeth defendants' attorney, Lurie, sent all the parties fully executed copies of the agreement by regular mail. On May 24, four days after Lurie had mailed the agreement and 10 days after Ellefson had faxed the signed signature page, Lurie received an e-mail from Abdo stating that Ellefson "withdraws from these negotiations and withdraws all proposals." In response to this e-mail, Lurie stated, "we are not certain what you are talking about, but, as you know, there is a signed settlement agreement in place, which Dave [Ellefson] faxed to us more than a week ago." Finally, nine days later, on June 2, 2004, Abdo received the finalized agreement that Lurie had mailed on May 20, 2004. Ellefson filed suit against the Megadeth defendants. The Megadeth defendants moved to enforce the settlement agreement and dismiss Ellefson's action, arguing that any and all disputes between the parties were resolved by an agreement entitled "Settlement and General Release" and signed by all of the parties. Are they correct?