R.A. Mackie & Co., L.P. v. Petrocorp Inc.

• Decision Date: 13 February 2003
• Docket Number: No. 02 CIV.1984 (JGK).,02 CIV.1984 (JGK).
• Citation: 244 F.Supp.2d 279
• Parties: R.A. MACKIE & CO., L.P. and Wein Securities Corp. Plaintiffs v. PETROCORP INCORPORATED and Petrocorp Acquisition Corp., as successors in interest to Southern Mineral Corp., and as individual corporations. Defendants.
• Court: U.S. District Court — Southern District of New York

244 F.Supp.2d 279

R.A. MACKIE & CO., L.P. and Wein Securities Corp. Plaintiffs

v.

PETROCORP INCORPORATED and Petrocorp Acquisition Corp., as successors in interest to Southern Mineral Corp., and as individual corporations. Defendants.

No. 02 CIV.1984 (JGK).

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

February 13, 2003.

Timothy P. Kebbe, Lehman & Eilen, Uniondale, NY, for plaintiffs.

Sabrina Renate Der Bagdasarian, William A. Maher, Wollmuth, Maher & Deutsch, LLP, New York City, for defendants.

OPINION AND ORDER

KOELTL, District Judge.

This is an action brought by R.A. Mackie & Co., L.P. ("Mackie") and Wein Securities Corporation ("Wein") (collectively "the plaintiffs") for breach of contract, tortious interference with contract, and unjust enrichment arising out of an agreement (the "Warrant Agreement") entitling the plaintiffs to perpetual warrants to purchase the stock of the Southern Mineral Corporation ("Southern Mineral"), a corporation whose assets were acquired via merger and whose liabilities were succeeded to by PetroCorp Acquisition Corp., a wholly owned subsidiary of PetroCorp Incorporated ("PetroCorp") (collectively "the defendants"). Pursuant to the Merger Agreement between Southern Mineral and PetroCorp Acquisition, all outstanding warrant holders, including the plaintiffs, were given an effective date by which they could exercise their options to receive PetroCorp stock and if they failed to opt for PetroCorp stock by the date specified, they could only receive cash consideration for their warrants. The plaintiffs contend that the terms of the Merger Agreement breached the terms of the Warrant Agreement by effectively converting perpetual warrants into options that were only exercisable by a date certain. The Amended Complaint raised five causes of action, including (1) breach of contract, alleging that the Merger Agreement violated the terms of the Warrant Agreement creating perpetual warrants; (2) breach of contract, alleging that the Merger Agreement violated the terms of the Warrant Agreement by failing to provide fair provisions enabling warrant-holder to receive Petro-Corp stock; (3) unjust enrichment; and (4) tortious interference with contractual relations. The plaintiffs also seek a declaratory judgment that the former Southern Mineral warrant holders are entitled to perpetual warrants for PetroCorp stock and that the Merger Agreement breached the terms of the Warrant Agreement.

The defendants have moved for summary judgment on the breach of contract claims, arguing, among other things, that the terms of the Warrant Agreement permitted the defendants to require that the warrant holders exercise their warrants in the manner specified in the Merger Agreement. The plaintiffs have also moved for summary judgment, with respect to all of their claims, with the exception of the claim for unjust enrichment, arguing that the unambiguous terms of the Warrant Agreement provided that the warrant holders could exercise their rights to purchase PetroCorp stock in perpetuity, and therefore the defendants breached their obligations by requiring the plaintiffs to exercise their options within a specified time period.¹

I.

The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs. Ltd. P'ship., 22 F.3d 1219, 1223 (2d Cir.1994). "The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224. The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will identify those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold. Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994). If the moving party meets its burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed R. Civ. P. 56(e). The nonmoving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of Neiv York, 996 F.2d 522, 532 (2d Cir. 1993); see also Scotto v. Almenas, 143 F.3d 105, 114-15 (2d Cir.1998) (collecting cases).

Normally, when both parties seek summary judgment, the Court must "`evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.'" Abrams v. United States, 797 F.2d 100, 103 (2d Cir.1986) (quoting Schwabenbauer v. Bd, of Educ, 667 F.2d 305, 314 (2d Cir.1981)).

II.

Unless otherwise noted, the following facts are not in dispute. On September 29, 2000, in connection with Southern Mineral Corporation's ("Southern Mineral") bankruptcy reorganization plan, Southern Mineral and the American Stock Transfer & Trust Company entered into a Series B Perpetual Warrant Agreement, under which 3,667,000 Series B Perpetual Warrants were issued to Southern Mineral's common shareholders, option holders and warrant holders of record. (Pis.' Rule 56.1 Stmt. 11111-2; Defts.' Resp. Rule 56.1 Stmt. H111-2.) The warrants began trading on the NASD's Over-the-Counter Bulletin Board as of October 16, 2000 and were delisted from the board on June 7, 2001, one day after a merger between Southern Mineral and PetroCorp Acquisition Corporation, a subsidiary of Petro-Corp, was completed. (Pis.' Rule 56.1 Stmt. II3; Defts.' Resp. Rule 56.1 Stmt. 113.) The plaintiffs, Wein and Mackie, purchased and sold warrants issued by Southern Mineral. (Pis.' Rule 56.1 Stmt. 118; Defts.' Resp. Rule 56.1 Stmt. II 8.)

Pursuant to the terms of the Warrant Agreement, the Southern Mineral warrants were to be perpetual, subject to the other terms and conditions in the Warrant Agreement, and could not be called. (Pis.' Rule 56.1 Stmt. 11114, 27; Defts.' Resp. Rule 56.1 Stmt. II4, 27.) The terms and conditions of the Warrant Agreement are binding on the successors of Southern Mineral, which by virtue of the Merger Agreement, included PetroCorp. (Pis.' Rule 56.1 Stmt. 17; Defts.' Resp. Rule 56.1 Stmt. I 7.)

On December 22, 2000 Southern Mineral entered into an Agreement and Plan of Merger (the "Merger Agreement"), and on June 6, 2001 PetroCorp completed its acquisition of Southern Mineral. (Pis.' Rule 56.1 Stmt. 19; Defts.' Resp. Rule 56.1 Stmt. 19.) The Merger Agreement established the terms for the treatment of the warrants that were held by the warrant holders. (Pis.' Rule 56.1 Stmt. 110; Defts.' Resp. Rule 56.1 Stmt. 110.) At the time of the merger, the Southern Mineral stock was valued at $4.71 per share and the warrant exercise price was $4.21 per share. (Defts.' Rule 56.1 Stmt. 15; Pis.' Resp. Rule 56.1 Stmt. 14.) The warrant holders were given notice by Southern Mineral on May 8, 2001, implementing the terms of the Merger Agreement governing warrants. (Pis.' Rule 56.1 Stmt. II12, 19; Defts.' Resp. Rule 56.1 Stmt. II12, 19.) The Merger Agreement provided that in exchange for each share of Southern Mineral stock, each Southern Mineral shareholder would receive merger consideration of $4.71 in cash, or, if the shareholder timely elected, in PetroCorp common stock valued at $10.00 per share or .471 shares of PetroCorp common stock for each share of Southern Mineral stock. (Defts.' Rule 56.1 Stmt. U 8(a).) Similarly, each warrant holder would receive the same right to acquire cash, or if a timely exercise were made, cash and PetroCorp stock, as each shareholder did. (Defts.' Rule 56.1 Stmt. 118(d); Pis.' Rule 56.1 Stmt. H1110-11.) As of December 31, 2001, 124,961 warrants to buy PetroCorp stock — which were originally warrants to purchase Southern Mineral stock — remained outstanding. (Pis.' Rule 56.1 Stmt. 1124; Defts.' Resp. Rule 56.1 Stmt. 1124.)

IV.

The plaintiffs and the defendants have both moved for summary judgment on the first two counts in the Amended Complaint, the breach of contract claims. The central issue with respect to whether summary judgment is appropriate on the breach of contract claims is whether the terms of the Merger Agreement breached the terms of the Warrant Agreement.

Determining whether the Merger Agreement does, in fact, breach the Warrant Agreement depends on the interpretation of the Warrant Agreement. The interpretation of the Warrant Agreement is, by its terms, governed by Texas Law. (See Series B Perpetual Warrant...