DELAWARE (CN) - The Delaware Supreme Court reversed a ruling in favor of Athenian Venture Partners in a contract dispute with GMG Capital Investments LLC over the wording of an agreement involving a $6 million note after a stock purchase.
     Justice Henry du Pont Ridgely, writing for the five-judge panel, found that the agreement's ambiguity precluded a damages award to Athenian.
     In 1999, GMG and Athenian, two venture capital funds, both invested in technology start-up, Alloptic Inc. They later became the firm's two largest equity holders.
     In 2005, after the start-up struggled to obtain financing because of a downturn in the venture capital market, Ritchie Capital Management agreed to invest in Alloptic - on the condition that it could install a new board of directors.
     According to the court document: "That condition meant that GMG and Athenian would have to relinquish their board seats. Athenian had a contractual right to its board seat and initially refused to accept Ritchie's condition.
     "GMG and Athenian then negotiated for the sale of Athenian's Alloptic stock to GMG, in a deal that would enable GMG to offer Athenian's board seat to Ritchie," the opinion states.
     The agreement between the parties included a note for $6 million. But GMG defaulted on its monthly payment of $15,000 after it decided not to make a payment for January 2008, or any subsequent months.
     After Athenian filed suit against GMC for breach of the note, the Delaware Superior Court ruled in favor of Athenian and awarded attorney fees. In doing so, it rejected GMG's argument that Athenian's only remedy for the breach was recourse to the Alloptic securities it pledged under the agreement in exchange for the note.
     But Ridgely found that it was an error for the court to side with Athenian because both parties' "interpretation of the agreement regarding Athenian's remedies for a breach" were reasonable.
     "We reaffirm that, in a dispute over the proper interpretation of a contract, summary judgment may not be awarded if the language is ambiguous and the moving party has failed to offer uncontested evidence as to the proper interpretation," Ridgely stated.
     "Here, the parties' agreement is susceptible to two equally reasonable, but conflicting, interpretations. That gives rise to an unresolved issue of material fact that renders summary judgment inappropriate. Extrinsic evidence, such as prior communications and course of dealing, must be considered by the factfinder to resolve the ambiguity as to Athenian's remedy. Accordingly, the Superior Court erred in holding that the agreement was unambiguous and in granting summary judgment in favor of Athenian," the judge wrote.
     The court also reversed the award of attorney fees to Athenian.