More from the Pot Spot: 11th Circuit Finds Text Message Is a Personal Guaranty

Today in the Pot Repot, the Cannitabloid, the Joint Joint, Reefer Brief, the Leaves of Grass (still working on the name for this new regular feature), we learn from the Eleventh Circuit that a hasty text message can be given legal effect as a personal guaranty for a business obligation.

In 2108, 3 Delta Inc. (3D) contracted with BrewFab LLC (BrewFab) for the construction of a machine that would extract cannibidiol oil.  The parties had no written agreement; rather BrewFab invoiced 3D as the work progressed.  3D paid three such invoices and then stopped.  BrewFab, understandably, suspended work on the extraction machine late in 2019.  I was unaware of the existence of cannibidiol oil extraction machines, and given my general sense that medical marijuana businesses often involve some chicanery, I did some research and discovered that they are definitely a thing. The remaining question is why it would take over a year to construct such a machine.

Be that as it may, in January 2020, 3D really wanted BrewFab to re-commence work, and so the parties had a BrewFab confab.  Afterwards, George Russo, a 3D principal, sent the following text to a BrewFab principal:

As per our conversation on Jan 30th 2020 I george Russo from 3 Delta do promise to pay brew fab in full all outstanding bills as of this date and all agreed upon work done for 3 delta future forward. I thank you for your patience. 

Thereafter BrewFab recommenced its work, but neither 3D nor Russo paid, and within a fortnight, 3D instructed BrewFab to stop all work

In BrewFab LLC v. 3 Delta Inc., the Eleventh Circuit affirmed summary judgment on behalf of BrewFab.  The District Court had found that the text message was both a writing sufficient to satisfy the Statute of Frauds and a personal guaranty.  The Court noted that Mr. Russo’s writing was ambiguous because in that it does not clearly establish whether the “outstanding bills” referenced in the text are personal debts or the debts of 3D.  However, evidence from discovery cleared up that factual ambiguity, as Mr. Russo conceded that the debts in question were 3D’s unpaid invoices.  With that additional information, the Court had no difficulty construing Mr. Russo’s text as a personal guaranty.  

Mr. Russo had a stronger argument in maintaining that by identifying himself as “george Russo from 3 Delta,” he made clear that he was operating in his capacity as an officer of the company.  Unfortunately, Florida law requires a more precise descriptio personae.  In order to avoid personal liability, Mr. Russo would have had to have identified himself as holding a specific office within the corporation.  Not having done so, he was operating in a personal capacity.  The Court treated his statement as though he were Troy McClure saying, “I’m Troy McClure.  You may remember from such uncomfortable encounters as — that meeting we just had in which we acknowledged that we owed you money and promised to pay.”  The Court found that Mr. Russo’s text was a personal guaranty.

Mr. Russo next argued that his text message did not satisfy the Statute of Frauds.  Under Florida law, promises to pay the debts of another must be evidenced by a signed writing.  In this case, Mr. Russo maintained, his text message was insufficient to satisfy the Statute of Frauds because it was not signed and omitted an essential term; viz, consideration given in exchange for Mr. Russo’s promise.  

The Court found that the language “I george Russo from 3 Delta” constituted an electronic signature under Florida law.  As to consideration, the Court found (through an IMHO unnecessary excursion in the unilateral contracts theory) that “Russo’s promise became a binding guaranty agreement when BrewFab accepted Russo’s promise by resuming work and sending 3 Delta additional equipment, after Russo sent the text message.”

Update: early results from our Twitter Poll suggest that the name for this occasional feature on cases arising from the burgeoning legal marijuana industry will be: the Reefer Brief.