Peabody Holding Co., Inc. v. Costain Group PLC, 4:92CV 2292 SNL.

• Decision Date: 23 February 1993
• Docket Number: No. 4:92CV 2292 SNL.,4:92CV 2292 SNL.
• Citation: 813 F. Supp. 1402
• Parties: PEABODY HOLDING COMPANY, INC., et al., Plaintiffs, v. COSTAIN GROUP PLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

813 F. Supp. 1402

PEABODY HOLDING COMPANY, INC., et al., Plaintiffs, v. COSTAIN GROUP PLC, et al., Defendants.

No. 4:92CV 2292 SNL.

United States District Court, E.D. Missouri, E.D.

February 23, 1993.

COPYRIGHT MATERIAL OMITTED

Michael J. Morris, Michael D. O'Keefe, W. Stanley Walch, Thompson and Mitchell, St. Louis, MO, for plaintiffs.

Glenn E. Davis, Frank N. Gundlach, Mary C. Kickham, Armstrong and Teasdale, St. Louis, MO, Michael Rowe Feagley, Priscilla Peterson Weaver, Michele Louise Odorizzi, Robert W. Quinn, Jr., Mayer and Brown, Chicago, IL, for defendants.

Alan E. Popkin, David W. Sobelman, Husch and Eppenberger, St. Louis, MO, for Altus Finance S.A.

MEMORANDUM

LIMBAUGH, District Judge.

This matter is before the Court upon plaintiffs' Motion for Permanent Injunction and defendants' Motion to Modify or Dissolve this Court's Preliminary Injunction Order. Plaintiffs initiated the above-styled cause by filing a six-count Complaint alleging that defendants: (1) breached contracts between plaintiffs and defendants; (2) tortiously interfered with the contracts; (3) tortiously interfered with plaintiffs' prospective economic advantage; and (4) defrauded plaintiffs under the common law. Additionally, plaintiffs sought application of the doctrines of specific performance and promissory estoppel.

I. FINDINGS OF FACT

A. Preliminary Background

There are two plaintiffs and four defendants remaining in this action. Plaintiff Peabody Resources, Limited (hereinafter "Peabody UK") is a corporation organized under the laws of England and Wales and is a subsidiary of Hanson PLC. Plaintiff Peabody Holding Company, Inc. (hereinafter "Peabody USA") is a New York corporation with its principal place of business in St. Louis and is also a subsidiary of Hanson PLC. Defendants are Costain Group PLC (hereinafter "Costain"); Costain America, Inc. (hereinafter "CAI"); Richard Costain (Holdings) Limited (hereinafter "Holdings"); and Peter Costain (hereinafter "Mr. Costain"). Altus Finance S.A., a corporation organized and existing under the laws of France and owned 67% by Credit Lyonnais S.A. and 33% by Thomson Group S.A., was dismissed from the cause in December, 1992 for lack of personal jurisdiction. Defendant Costain is a public limited company organized and existing under the laws of England and Wales. Defendant Mr. Costain, the Chief Executive of Costain, is an Australian subject who resides in London, England. Defendant Holdings, a subsidiary of Costain, is a corporation organized under the laws of England and Wales. Holdings indirectly owns all of the shares of Costain Resources Limited (hereinafter "CRL"), an Australian Corporation that owns and operates Costain's Australian coal business. Defendant CAI, a subsidiary of Costain, is a corporation organized and existing under the laws of Delaware with its principal place of business in Chicago.

On October 19, 1992 Costain and Peabody UK entered into a written conditional Share Purchase Agreement which contemplated that, if Costain's shareholders and lenders approved, Costain's Australian coal business would be sold to Peabody UK for $200 million and other consideration. That Share Purchase Agreement contained a so-called "fiduciary out" provision (§ 4.1(d)) which provided that in certain specified circumstances and for a $5 million payment to Peabody, Costain could sell that Australian coal business to another buyer instead of Peabody. On November 6, 1992, Costain entered into a second conditional Share Purchase Agreement with an Altus subsidiary which contemplated that, if Costain's shareholders and lenders approved, Costain would sell its Australian coal business and its Australian commercial real estate to that Altus subsidiary for $245 million and other consideration. Peabody then filed this cause alleging breach of the October 19, 1992 Share Purchase Agreement (along with other claims) and seeking specific performance of the Agreement.

B. Procedural History

Peabody filed this suit on November 9, 1992 in the Circuit Court of the City of St. Louis. On November 13, 1992, the Costain defendants removed the case to this Court. On December 1, 1992, the Court denied plaintiffs' Motion to Remand. On December 11, 1992, this Court granted Altus' Motion to Dismiss for Lack of Personal Jurisdiction, but denied the Costain defendants' Motions to Dismiss for Lack of Personal Jurisdiction and Forum non Conveniens. 808 F.Supp. 1425

On December 15, 1992, plaintiffs filed a Motion for a Temporary Restraining Order. The Court set an expedited discovery schedule and scheduled and held an evidentiary hearing on that motion on December 28-29. Costain voluntarily postponed the closing of the Altus transaction from December 22, 1992 to December 30, 1992. Upon defendants' motion, this Court treated plaintiffs' motion as a motion for a preliminary injunction so that either party could immediately appeal an adverse decision. On December 30, 1992, the Court issued a preliminary injunction enjoining the scheduled closing of the Altus transaction pending further hearing. Defendants immediately filed a Notice of Appeal with the Court of Appeals for the Eighth Circuit. The Court of Appeals denied defendants' Motion for an Emergency Stay Pending Appeal on January 31, 1992. Peabody was later required to post $16 million bond.

During the period between December 30 and January 19, 1993, the parties conducted further written and oral discovery. On January 14, 1993, the Eighth Circuit Court of Appeals issued an Order stating that the Court of Appeals remanded the matter to this Court, with jurisdiction retained by the Eighth Circuit, for the limited purpose of allowing this Court to: "(a) consider and rule on any motions to modify or dissolve the preliminary injunction or bond; and (b) consider and rule on plaintiffs' motion for permanent injunctive relief or any other motion that is filed seeking a ruling on the merits of the case." On January 15, plaintiffs unconditionally agreed to extend their promise to go forth with the Peabody Share Purchase Agreement through February 28, 1993. The permanent injunction hearing was held over eight days, between January 19-22 and January 25-28, 1993.

C. Facts

In May, 1992, Costain publicly announced that it was contemplating the flotation or public offering of 49% of CRL. In response, Irl F. Englehardt, Chief Executive Officer of Peabody USA, telephoned Mr. Costain on or about June 26, 1992, to inquire whether Costain might be interested in selling Costain Coal, Inc. (hereinafter "CCI"), Costain's United States coal operation. Mr. Englehardt also expressed an interest in CRL. Mr. Costain responded that the Costain Board had already considered the issue and authorized him to hire Goldman, Sachs & Co. (hereinafter "Goldman") and to provide information to potential buyers. Mr. Costain told Mr. Englehardt to call Eric Grubman at Goldman to obtain information about the U.S. coal assets.

In July, negotiations between Peabody and Costain commenced. Jack Lushefski, Chief Finance Officer for Peabody, was the principal business negotiator for Peabody. Peter Hill, Head of Corporate Development for Costain, was the principal business negotiator for Costain. Before receiving any information, Peabody signed a confidentiality agreement, dated July 2, 1992, in which Peabody agreed to keep confidential whatever non-public information Costain disclosed to it. Def.Ex.TT. Mr. Lushefski testified that on July 9, 1992, Mr. Lushefski and Thomas H. Parker, a principal negotiator for Costain, reached a confidentiality agreement with regards to information provided by Peabody to Costain. Later in July, Costain agreed to supply information to Peabody concerning its Australian coal assets as well. The July 2 confidentiality agreement was amended to include that information also. Def.Ex.TT. In July, Peabody embarked on an extensive due diligence investigation of Costain's U.S. and Australian coal assets, including a trip to Australia.

From August 31 to September 2, Peabody and Costain met in St. Louis and discussed in detail Peabody's proposed acquisition of Costain's Australian and U.S. coal assets. On September 3, 1992, Mr. Englehardt, for Peabody, forwarded a letter to Goldman with two non-binding term sheets attached: one for the Australian properties and one for the U.S. properties. Pl.Ex. 2. Mr. Englehardt's letter stated that those term sheets "outline the general provisions to be included in the two purchase agreements" and were not "intended to be a firm offer or commitment by Peabody...." Pl.Ex. 2.

On the same day, Mr. Hill, for Costain, responded in writing to Mr. Englehardt's letter. Pl.Ex. 1. Mr. Hill's letter stated in the fourth paragraph:

So long as good faith negotiations between the parties for the combined purchase of the Australian and American coal holdings are continuing, Costain agrees to exclusively negotiate with Peabody. During such period, Costain will not (i) engage in any efforts to sell its Australian or American coal holdings by trade sale; (ii) solicit any offers from third parties for such holdings; (iii) provide information to or hold discussion with other potential purchasers; or (iv) issue a prospectus for the Australian coal business or make an offering of CRL shares. Without limiting the circumstances under which good faith negotiations may be terminated or deemed no longer to be continuing, it is our mutual understanding that Costain may terminate such negotiations if no binding agreement with respect to the Australian holdings has been executed by September 21, 1992, in which event this paragraph shall be of no further effect.

Pl.Ex. 1. The letter went on to state that the fourth paragraph was the only part of the letter which created any legally binding obligations on Costain. Pl.Ex. 1.

On September 18, 1992, Mr. Englehardt called Mr. Costain to discuss the status of the negotiations. In that conversation, Mr. Englehardt...