AXA Inv. Managers UK Ltd. v. Endeavor Capital Mgmt. LLC

• Decision Date: 24 August 2012
• Docket Number: No. 11 Civ. 3221(PGG)(MHD).,11 Civ. 3221(PGG)(MHD).
• Citation: 890 F.Supp.2d 373
• Parties: AXA INVESTMENT MANAGERS UK LIMITED, Plaintiff, v. ENDEAVOR CAPITAL MANAGEMENT LLC and Anthony F. Buffa, Defendants.
• Court: U.S. District Court — Southern District of New York

890 F.Supp.2d 373

AXA INVESTMENT MANAGERS UK LIMITED, Plaintiff,

v.ENDEAVOR CAPITAL MANAGEMENT LLC and Anthony F. Buffa, Defendants.

No. 11 Civ. 3221(PGG)(MHD).

United States District Court, S.D. New York.

Aug. 24, 2012.

Donald F. Luke, Nabeena Chatterjee Banerjee, Jaffe & Asher LLP, Jeffrey Isaac Zimmerman, Liddle & Robinson, LLP, New York, NY, for Plaintiff.

Ronald Barry Weisenberg, Richard B. Weisenberg, P.C., New York, NY, for Defendants.

MEMORANDUM & ORDER

MICHAEL H. DOLINGER, United States Magistrate Judge.

Plaintiff AXA Investment Managers UK Ltd. (“AXA”) has moved for summary judgment against defendants Endeavor Capital Management LLC (“Endeavor”) and Anthony F. Buffa (“Buffa”), the managing general partner of Endeavor, on a breach-of-contract claim. While Endeavor concedes that it breached the put-option agreements ¹ into which it had entered with plaintiff, defendant Buffa asserts that his personal guaranty of these agreements is void for want of consideration. In addition, both defendants argue that the twenty-five-percent interest rate imposed by the liquidated-damages provisions in these agreements is an unenforceable penalty. We find neither of defendants' arguments persuasive and therefore grant summary judgment in favor of plaintiff.²

BACKGROUND

On May 12, 2009, plaintiff and defendants entered into two put-option agreements ³ in which two “AXA-related companies” acquired from Endeavor shares of stock in Clean Air Power, Ltd. (“CAP”), on the condition that Endeavor agree to repurchase the shares should AXA elect to exercise its option. ( See Decl. of Ronald B. Weisenberg in Opp'n to Mot. for Summ. J. or in the Alternative, Mot. for Default (“Weisenberg Decl.”) Exs. A & B (“May 2009 Agreements”) at 1 ⁴). In these agreements,a clause entitled “Miscellaneous” states in part that “Anthony F. Buffa in addition to being a party to this agreement, is also personally guaranteeing that Endeavor will honor and perform in the full payment of the Put if exercised by the Optionee, and will honor all rights of the Optionee under this agreement.” (May 2009 Agreements ¶ 5). On July 29, 2010, plaintiff formally notified defendants of its intention to exercise its options under these agreements. (Weisenberg Decl. Ex. C). Defendants concede that they did not purchase the stock and that “Endeavor was unable to satisfy its obligations under the May 2009 Agreements.” (Weisenberg Decl. ¶ 4; see also Defs.' Stmt. of Undisputed Material Facts (“Defs.' R. 56.1 Stmt.”) ¶ 15).⁵

After lengthy negotiations ( see Compl. ¶ 12), plaintiff and defendants entered into a second set of agreements on December 21, 2010. (Weisenberg Decl. Exs. D & E (“Dec. 2010 Agreements”) at 1). Both of the 2010 agreements are entitled: “Amended and Restated Put Option Agreement and Personal Guaranty.” ( Id.). As presaged by the title, these second agreements each contain a provision designated as the “Personal Guaranty by Buffa” ( id. ¶ 3), and independent signature lines marked: “On the Personal Guaranty,” signed “Anthony F. Buffa.” ( Id. at 5). These agreements set January 31, 2011, as the deadline for plaintiff to exercise its option. ( Id. ¶ 1).

On February 9, 2011, the parties extended their agreements and set a new exercise-by date for the put of July 31, 2011. (Tubbs Decl. Exs. A & B (“Feb. 2011 Agreements”) at 1). These agreements again included a discrete provision labeled “Personal Guaranty by Buffa.” ( Id. ¶ 4). They also incorporated a damages provision according to which, upon default by defendants, a twenty-five percent rate of interest would be imposed upon the option price of any stock that AXA did not sell prior to exercising the option. ( Id. ¶ 10(b)). This interest rate would supercede the ten percent rate imposed from August 1, 2010, as a consequence of defendants' prior default, and would run from the point of the default under the February 2011 Agreements until defendants paid the full amount that they owed plaintiff. ( Id. ¶¶ 1, 10).

In two missives dated February 25, 2011, AXA provided defendants notice that it had elected to exercise the options. (Weisenberg Decl. Ex. H, at 1, 3; see also Tubbs Decl. ¶ 14). Endeavor was to pay by March 7, 2011, but the parties agreed to extend that deadline to March 14, 2011. ( See Tubbs Decl. ¶ 14). By defendants' own admission, “Endeavor was unable to purchase the CAP stock at the agreed upon price.” (Defs.' R. 56.1. Stmt. ¶ 20; Opp'n Mem. at 3). Defendants admit that Endeavor defaulted under the February 2011 Agreements and that they have, to date, made no payments to AXA, but they deny that Buffa has any personal contractual obligation to plaintiff. (Defs.' R. 56.1 Stmt. ¶¶ 7–8, 12). By letters dated March 30, 2011, AXA gave Endeavor and Buffa timely written notice of their defaults. ( Id. ¶ 10). Plaintiff commenced the present action in response to these defaults, filing a complaint on May 12, 2011.

Subsequent to filing, plaintiff and defendants entered into a period of informal discovery. (Pl.'s Mem. of Law in Supp. of Mot. for Summ. J. and/or Default J. (“Pl.'s Mem.”) at 4; Opp'n Mem. at 3). When this process proved fruitless for contested reasons ( see Pl.'s Mem. at 4; Opp'n Mem. at 3), plaintiff sent defendants a letter dated November 2, 2011, requesting formal discovery under Rule 26 of the Federal Rules of Civil Procedure. (Decl. of Donald F. Luke in Support of Pl.'s Mot. for Summ. and/or Default J. (“Luke Decl.”) Ex. J). The parties agree that formal discovery was not completed, but defendants assert that plaintiff was not prejudiced because it had “the relevant information and documents”. (Opp'n Mem. at 8).

Plaintiff filed a motion for summary judgment on April 5, 2012. In the alternative, it seeks a default judgment for discovery derelictions.

In support of its Rule 56 motion, plaintiff notes that the damages sought have been reduced “through its sale, in March 2012, of the CAP stock that Endeavor was required to purchase.” (Pl.'s Mem. at 31). Having thus mitigated its damages, plaintiff seeks to collect both the difference in price between what it ultimately received for the shares and what defendants had contracted to pay for them and the default interest due under the damages provisions in the Agreements. (Tubbs Decl. ¶ 9). Defendants agree that plaintiff is entitled to the difference between the contracted-for price and the price actually received for the shares. (Opp'n Mem. at 5, 7). They contend, however, that a judgment to that effect would be enforceable only with respect to Endeavor because the alleged guaranty is not binding upon Buffa and that that judgment should not include the twenty-five percent default interest, which they argue constitutes a penalty. ( Id. at 5–7).

JURISDICTION, VENUE AND CONSENT TO APPEAR

“Diversity jurisdiction exists over ‘civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States.’ ” Hallingby v. Hallingby, 574 F.3d 51, 56 (2d Cir.2009) (quoting 28 U.S.C. § 1332(a)(1)). To satisfy the “citizens of different States” requirement, each plaintiff's citizenship must be different from each defendant's citizenship, resulting in complete diversity. Id.

Here, plaintiff is “a corporation organized and existing under the laws of the United Kingdom, having its principal place of business in London, England” (Compl. ¶ 1), while Buffa is domiciled in Connecticut and Endeavor has its principal place of business in Connecticut. (Compl. ¶¶ 2–3). The parties are therefore completely diverse. The amount currently sought is £ 670,588.99 plus interest for the period of April 1, 2012 to the date of a judgment in this matter, as well as legal fees and expenses from March 1, 2012 to the date of a judgment. (Tubbs Decl. at 8). We understand that amount, given an exchange rate of £1 = $1.60, to be approximately $1,072,800.00 in U.S. currency, plus the interest, fees and expenses. ( See Pl.'s Mem. at 3). Consequently, plaintiff satisfies the diversity and the amount-in-controversy requirements for subject-matter jurisdiction.

Parties may contractually stipulate to personal jurisdiction and venue. “Jurisdiction by consent satisfies constitutional requirements of due process.” Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Frasch, 751 F.Supp. 1075, 1078 (S.D.N.Y.1990) (citing Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315–16, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964)). Similarly, contractual provisions designating an agreed-upon venue are widely enforced. See, e.g.,14D Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3803.1 (3d ed.2012). Indeed, “individuals are free to regulate their purely private disputes by means of contractual choice of forum.” Nat'l Union Fire, 751 F.Supp. at 1078 (quoting Red Bull Assocs. v. Best W. Int'l, Inc., 862 F.2d 963, 967 (2d Cir.1988)). Pursuant to 28 U.S.C. § 636(c), parties may also consent to the jurisdiction of a Magistrate Judge. See Roell v. Withrow, 538 U.S. 580, 585, 123 S.Ct. 1696, 155 L.Ed.2d 775 (2003).

Here, both of the February 2011 Agreements include provisions consenting to the exclusive jurisdiction and venue of federal and state courts located in Manhattan, New York. (Feb.2011 Agreements § 11(d)). Moreover, all parties have consented to the jurisdiction of a Magistrate Judge for all proceedings save trial. ( See Sept. 19, 2011 Civil Case Mgmt. Plan & Scheduling Order at 1). Accordingly, all preliminary jurisdictional requirements are satisfied, and we turn to an analysis of plaintiff's motion.

ANALYSIS

I. Motion for Summary Judgment

A. Standard of Review

The court may enter summary judgment only if it concludes that there is no genuine dispute as to the material facts and that, based on the undisputed facts, the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d...