## Facts

- Curtis Cox agreed to provide business-development, promotional, and marketing assistance to SNAP, Inc., including approximately $240,000 in support, to help SNAP obtain federal procurement contracts.
- The parties executed a written memorandum of understanding dated January 12, 2006, treated as a binding contract.
- The contract stated that on January 12, 2006, SNAP would issue Cox a non-qualified stock option to purchase 308 shares, representing 5% of SNAP’s outstanding shares.
- The contract included a repurchase mechanism: SNAP could repurchase after January 1, 2008, and Cox could require repurchase any time after January 1, 2011, with payment over five years plus interest at the then-current prime rate.
- SNAP never formally issued the option documents.
- Cox attempted to exercise his contractual right to require SNAP to repurchase the options in March 2011 and again in October 2015; SNAP did not repurchase.
- Cox sued in the Eastern District of Virginia for breach of contract; the district court granted summary judgment to Cox and awarded $637,867.42 (value of the options plus interest).
- SNAP appealed, disputing liability and damages and invoking, among other arguments, lack of option issuance and Cox’s alleged nonperformance.

## Issues

1. Whether the contract language stating SNAP “will issue” an option “on January 12, 2006” created an immediately effective grant of option rights or only an executory promise requiring later issuance as a condition precedent to Cox’s repurchase right.
2. Whether, if issuance were a condition precedent, SNAP could avoid liability by relying on nonoccurrence of a condition it failed to bring about.
3. Whether the repurchase-price formula term “sales in calendar year 2005” referred to SNAP’s actual 2005 sales or some other measure.
4. Whether SNAP preserved a “first material breach” defense based on Cox’s alleged failure to perform his promotional obligations.

## Decision

- The Fourth Circuit affirmed summary judgment for Cox and affirmed the damages award.
- The court held the contract itself granted Cox stock option rights as of January 12, 2006, and SNAP materially breached by failing to issue the option documents and by refusing to repurchase upon Cox’s demand.
- Alternatively, even if issuance were a condition precedent, the prevention doctrine barred SNAP from invoking that condition because SNAP’s own failure to issue the options prevented the condition from occurring.
- The court upheld the district court’s reading of “sales in calendar year 2005” as SNAP’s actual 2005 sales and affirmed the $637,867.42 award (including interest).
- The court treated SNAP’s “first material breach” theory as waived because SNAP did not press it in summary-judgment briefing.

## Legal Principles

- Contract interpretation turns on the text read as a whole; language such as “will issue” can effectuate present rights when tied to a contemporaneous effective date and accompanied by definite terms.
- A party that prevents the occurrence of a condition precedent may not rely on the condition’s failure to avoid its own contractual obligations (prevention doctrine).
- Repurchase-price and valuation terms are construed according to their ordinary meaning absent contractual language indicating a specialized or forward-looking definition.
- An affirmative defense not properly pursued at summary judgment may be treated as waived on appeal.

## Conclusion

The Fourth Circuit enforced the stock-option arrangement, rejected SNAP’s attempt to avoid repurchase obligations based on its own failure to issue the options, affirmed interpretation of the valuation formula using actual 2005 sales, and left SNAP bound to pay $637,867.42 in damages and interest.


Cox v. SNAP, Inc., 859 F.3d 304 (4th Cir. 2017)