M.M. Dillon & Co. Group, LLC v Ambre Energy Ltd.Annotate this Case
Decided on June 6, 2013
Supreme Court, Kings County
M.M. Dillon & Co. Group, LLC f/k/a IB Separation LLC d/b/a CRT Investment Banking LLC, Plaintiff,
Ambre Energy LTD, Ambre Energy North America, Inc., and Millennium Bulk Logistics, Inc., Defendants.
Peters, Berger, Koshel & Goldberg, P.C.
26 Court Street
Brooklyn ,NY 11242
Carter Ledyard & Milburn, LLP
2 Wall Street
New York, NY 10005
David I. Schmidt, J.
Upon theforegoing papers, defendants Ambre Energy Ltd., Ambre Energy North America, Inc., and Millennium Bulk Logistics, Inc. (collectively, defendants), move, pursuant to CPLR 3212, for an order awarding them partial summary judgment limiting plaintiff M.M. Dillon & Co. Group d/b/a CRT Investment Banking LLC's (CRT) maximum potential recovery to $1.2 million.
In 2010, defendants Ambre Energy Ltd. and Ambre Energy North America Inc. formed defendant Millennium Bulk Logistics, Inc. (Millennium) in connection with the possible acquisition of a port facility located in the Pacific Northwest. In August 2010, Millennium needed to obtain a [*2]financing commitment for approximately $25 million in order to close on an asset purchase agreement with the owner of the port. On September 28, 2010, Millennium and CRT executed an Engagement Letter (the Engagement Agreement). Under the terms of the Engagement Agreement, CRT was to act as Millennium's non-exclusive financial advisor and placement agent in connection with the placement of debt and/or equity financing. The Engagement Agreement also had a provision setting forth certain financing fees which were to provide for CRT's compensation. In particular, CRT was to be paid a $50,000 retainer fee upon execution of the Engagement Agreement which would be credited against any future placement fees earned. Further, CRT was to "be paid a placement fee upon consummation of any equity offering in an amount equal to 5.00% of the aggregate gross proceeds sold in the offering."[FN1] Finally, the Engagement Agreement had a termination provision stating the either Millennium or CRT could terminate the agreement upon ten days written notice to the other party. This provision also stated that Millennium's "obligations with respect to all fees and expenses due and payable to CRT pursuant to the terms set forth herein shall survive any termination of CRT's engagement hereunder."
On January 11, 2011, non-party Arch Coal West, LLC (Arch) and Millennium Bulk Terminals-Longview, LLC (Longview) entered into a Limited Liability Company Agreement (LLC Agreement) whereby Arch obtained a 38% equity interest in Longview in exchange for the immediate payment of $25 million in "capital contributions" as well as "the commitment to make additional capital commitments described in Sections 6.3(b) and 6.3(c)" of the agreement. With respect to these additional capital commitments, Section 6.3 (b) of the LLC Agreement had provisions whereby Arch was to make four additional contributions totaling $58.5 million provided that certain conditions/contingencies were met. However, it is undisputed that to date, none of the conditions set forth in the LLC agreement have been met and no additional contributions have been made by Arch pursuant to Section 6.3 (b). In addition, Section 6.3 (c) of the LLC Agreement required that Arch make certain "capital call" contributions in proportion to its 38% ownership interest in Longview.
In a written correspondence dated January 24, 2011, CRT sought to collect a $1.2 million fee based upon the equity offering whereby Arch obtained a 38% equity interest in Longview for $25 million. In particular, CRT claimed that under the terms of the Engagement Agreement, it was entitled to a fee equal to 5% of the $25 million less its $50,000 retainer fee. In a written correspondence dated February 7, 2011, Millennium declined to provide CRT with the requested compensation. In this regard, Millennium noted that the Engagement Agreement provided that CRT was to act as Millennium's "non-exclusive" financial advisor and placement agent. Millennium further stated that inasmuch as its agreement with Arch was unrelated to any efforts on CRT's part, CRT was not entitled to any placement fee. Finally, Millennium's correspondence advised CRT that it was terminating the Engagement Agreement between the parties.
On or about June 9, 2011, CRT commenced the instant action against defendants by filing a summons and complaint alleging, among other things, breach of contract, and seeking $1.2 million in damages. During discovery, CRT became aware of the provision in the LLC Agreement whereby Arch committed to make additional contributions (i.e., Section 6.3 (b) of the agreement) to Longview (the contingency investments). Thereafter, on or about February 7, 2012, CRT filed an amended complaint alleging that it has "been damaged in the sum of [$1.2 million] on the initial investment of [$25 million] plus the sum of [$2.925 million] representing 5% of the balance of the investment ($58,500,000.00) pursuant to the [LLC Agreement]."[FN2] [*3]
Defendants now move for partial summary judgment limiting CRT's maximum potential damages to the $1.2 million initially sought by CRT in the original complaint. In particular, defendants maintain that under the clear terms of the fee provision of the Engagement Agreement, CRT is not entitled any fees based upon $58.5 million in contingency investments that were not made while the Engagement Agreement was in effect, have not been made to date, and in fact, may never be made. In support of this argument, defendants note that the fee provision states that CRT was to be paid a placement fee "upon consummation of any equity offering in an amount equal to 5.00% of the aggregate gross proceeds sold in the offering." According to defendants, this language expressly and unambiguously limits CRT's fees to 5% of investments that have actually been made by Arch Coal and received by Millennium. Here, the contingent investments have not been made by Arch or received by Millennium. In addition, defendants aver that the "in the offering" language in the fee provision precludes CRT's theory of recovery. Specifically, defendants point out that the only offering occurred when Arch purchased a 38% interest in Longview for $25 million and any contingent future investment can only occur after the offering. According to defendants, any future investments, even if they occur one day, will not increase Arch's percentage of equity ownership in Longview.
In further support of their motion, defendants argue that their interpretation of the plain language in the fee provision of the Engagement Agreement is supported by the language in the agreement's termination clause. Specifically, defendants note that the termination clause provides that Millennium's "obligations with respect to all fees and expenses due and payable to CRT pursuant to the terms set forth herein shall survive any termination of CRT's engagement hereunder." Defendants maintain that this language must be interpreted to mean that only those fees which are due and payable to CRT during the life of the Engagement Agreement survive the termination of the agreement. Here, the contingent investments were not actually made during the life of the Engagement Agreement. Accordingly, defendants aver that whatever right CRT may have had to fees arising out the contingent investments did not survive the termination of the Engagement Agreement.
Finally, defendants argue that interpreting the Engagement Agreement in the manner advocated by CRT would produce an absurd and commercially unreasonable result. In particular, defendants maintain that an investment bank such as CRT should not be entitled to up-front fees set as a percentage of investments that have yet to occur and may never occur.
In opposition to defendants' motion, CRT notes that the LLC Agreement between Arch and Longview which provided for the contingency investments was entered into while the Engagement Agreement was still in effect. CRT also contends that no new negotiation or agreement was required to obligate these future payments. As such, CRT avers that under the unambiguous terms of the fee provision, it is entitled to 5% of these investments "should the milestones be met." Finally, CRT maintains that it is entitled to 5% of the capital call payments made by Arch to Longview.
It is well-settled that a contract must be construed in accordance with the parties' intent, which is generally discerned from the four corners of the contract document (Archstone v Tocci Build. Corp. of New Jersey, Inc., 101 AD3d 1062, 1064 ). A contract that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (Smith v Ebenezer Baptist Church, Inc., 97 AD3d 809, 810 ). Whether a contract is ambiguous is a question for the court to resolve and ambiguity is present if language is written so imperfectly that it is susceptible to more than one reasonable interpretation (Dobbs v North Shore Hematology-Oncology Assoc., P.C., __AD3d__, 2013 NY Slip Op 03295 [2d Dept 2013]). When a clause or term in the contract is found to be ambiguous, it is for the trier of fact to resolve the ambiguity (id.).
As an initial matter, the court finds that fees provision of the Engagement Agreement clearly and unambiguously limits CRT's fees to 5% of the money actually paid by an outside investor pursuant to an equity offering. In this regard, the language in the clause limits CRT's fees to "5% [*4]of the aggregate gross proceeds sold in the offering." Thus, CRT is not entitled to the immediate payment of a fee equal to 5% of contingent investments that have yet to made since potential future payments are not proceeds. Further, if the future payments called for in Section 6.3 (b) of the LLC Agreement are not made at some future date due to the failure to meet the triggering conditions, CRT will never be entitled fees based upon these contingent payments. Indeed, CRT appears to concede this point in its opposition papers wherein it states that defendants "will owe $2,925,000.000 should the milestones be met."
However, with respect to the issue of whether or not CRT will be entitled to a fee equal to 5% of the contingent payments that are actually made by Arch at some future date, the court finds that there are issues of fact which preclude the granting of defendants' summary judgment motion so as to limit CRT's maximum potential recovery to $1.2 million. In this regard, the contingency payments called for in Section 6.3 (b) of the LLC Agreement were not separate and apart from the equity offering. To the contrary, under Section 6.2 (b) of the LLC Agreement, this "commitment to make . . . additional Capital Contributions" was part of the consideration Arch paid (along with the immediate payment of $25 million) for a 38% ownership interest in Longview. In addition, it is undisputed that at the time the LLC Agreement was entered into, the Engagement Agreement between Millennium and CRT was still in effect. Finally, the "Termination" provision of the Engagement Agreement provides that Millennium's obligation with respect to all fees due and payable to CRT shall survive any termination of the Engagement Agreement. Accordingly, there are issues of fact as to whether CRT maximum potential recovery may exceed $1.2 million should the contingency payments set forth in Section 6.3 (b) of the LLC Agreement be made.
Accordingly, defendants' motion for summary judgment limiting CRT's maximum potential recovery to $1.2 million is denied.
This constitutes the decision and order of the court.
E N T E R,
J. S. C.
Footnote 1: Under the Engagement Agreement, CRT was also entitled to a placement fee upon consummation of any debt offering in an amount equal to 1.00% of the aggregate gross proceeds sold in the offering.
Footnote 2: The amended complaint does not allege that CRT is entitled to additional fees based upon the capital call contributions set forth in Section 6.3 (c) of the LLC Agreement. However, CRT does claim that it is entitled to such fees in its opposition papers.