RG Steel, LLC v. Severstal US Holdings, LLC et al
Filing
23
AMENDED OPINION: #103884 Based upon the conclusions set forth above, Defendant's Motion to Dismiss is granted: Plaintiff's First Cause of Action with respect to the 2010 Transportation Contract, and Second Cause of Action in its entirety, are dismissed. (Signed by Judge Robert W. Sweet on 1/22/2014) (cd) Modified on 1/29/2014 (ca).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----x
RG STEEL, LLC,
PIa
i
13 Civ. 1540
-againstAMENDED OPINION
SEVERS TAL US HOLDINGS, LLC and SEVERSTAL
US HOLDINGS II, LLC,
Defendants.
---x
A P PEA RAN C E S:
A~torne
for ~he Defendants Severstal US Holdi
LLC and Severstal US Hold
s II Inc.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, NY 10036
By:
Scott D. Musoff, Esq.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
155 North Wacker
Chicago, IL 60606
By: Albert L. Hogan, III, Esq.
Amy L. Van Gelder, Esq.
Andrew J. Fuchs, Esq.
Atto
for Plaintiff RG Steel
WILKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, NY 10019
Brian E. O'Connor, Esq.
amin P. McCallen, Esq.
Joshua M. Troy, Esq.
s
Sweet, D.J.
rstal US
Defendants
dings II,
Severstal US
Inc.
ldi
("SUSH") and
s,
("SUSH II")
(collectively
"Severstal" or "Defendants") move pursuant to Rule 12(b} (6) to
partially dismiss the Compla
of Plaintiff RG Steel ("RG
Steel" or Plaintiff").
For the reasons set forth below,
De
s' motion is
granted.
Procedural History
r 3, 2011, Severstal fil
On Oct
seeking a declarato
RG Steel
a complaint
judgment to bar the arbitration sought by
to limit its relief to indemnification.
On
November 7, 2011, RG Steel sought an order to compel
arbitration, appoint an
trator and st
this action.
On
23, 2012, RG Steel's motion was granted.
PIa
2012.
iff broughL the instant action on March 30,
After De
matter juri
s disputed the al
ction, PlainLiff voluntarily
on April 20, 2012.
1
ions on subject
smissed the action
iff refi.-:..'
PIa
Supreme Court of the
fil
their answer, P
y in the
the action the same
or to Defendants
ate of New York.
intiff and affiliat
entities fi ed
protection under Chapter 11 of the Bankruptcy Code, and the
the action.
State Court s
By Notice of Removal
ed March
7, 2013, RG Steel removed the action to this court.
Plaintiff fi'ed the Amended Complaint ("Complaint") on
June 7, 2013.
The Complaint alleges five independent causes of
action and see
in connection wi
to recover for losses
lor damages sustained
RG Steel's purchase of certain steel mills
from Defendants pursuant to the Stock Purchase Agreement (the
"SPA") entered into in 2011, as we 1 as certain declaratory
relief.
On
dismiss.
y 22, 2013, Defendants filed the motion to
On September 30, 2013, the parties st
lat
and
agreed that Plaintiff's Fourth Cause of Action was voluntarily
withdrawn wit
prejudice.
Defendants' motion to
heard and marked fully submitted on October 2, 2013.
2
smiss was
Facts
1. The Part
SPA
------------------
RG Steel is a Delaware limited liability company that
manufactures a variety of steel mill products, including
rolled, cold-roll
,and coated sheets, and tin mill products.
ted Ii
SUSH is a Delaware 1
lity company.
owner of the issued and outstanding
It is
ity interests of SUSH II,
a Delaware corporation and former owner of the e
interests
Sparrows Point, LLC ("Severstal Sparrows Point").
of Seversta
aries of Severstal International, a
SUSH and SUSH II are s
global
sole
ch has
stee~maker
ions in Russia, the United
States and elsewhere.
RG Steel, SUSH, SUSH II and Severstal Sparrows Point
entered into
March 1, 2011 SPA, which provided that RG Steel
would purchase the equity
from SUSH. The facil
Ma
three U.S.-based steel companies
ies are located in
and, Warren, Ohio and Wheeli
,West Vir
rows Po
a and were
acquired by Severstal between May 2008 and August 2008. In
connect
with the transaction, RG Steel purchased all of t
of Severstal Sparrows Point, which in turn owned all of
the outstanding
ity in Severstal Warren LLC ("Warren" or
3
rstal Wheeling Inc.
"Severstal Warren") and
(Compl.
to
~
7; SPA
followi
1.01, 1.04.)
§§
subject to a pur
$125
Ilion in cash,
amount of
se price adjustment based on
~
company at closing (Id.
working capital at t
mill
(l)
of a note (the "Note"), t
in the
").
, RG Steel ag
In
payment schedule:
("Wheeli
8.)i
(2) $100
princ
which was due five years after closing (id.);
(3)
1 of
repayment of
$317 million of third-party bank debt owed by the Severstal
entit
s
(id.) and (4) $36 million in cash to
Severstal subsidiar
s within one year of closing.
transaction closed on March 31, 2011.
1. The Pu
paid to two
.
The
37.)
e Price
Section 1.01 of the SPA provides that
cons
~
(Id.)
ration to be pa
"aggregate
by [RG Steel] at the Closing .
shall be (i) the Note, plus (ii) cash in the amount equal to the
Initial purchase Price (as adjusted pursuant to Section 1.04,
the
nal Purchase Price)."
The Note has a principal amount of $100 million, with
a maturity date of March 2 , 2016, and quarterly interest
payments
beginni
on June 3C, 2012, until the entire
4
(Exhibit 1,
ipal amount is repaid in full.
require immediate payment of
~he
~ote
The
yment events
ory
Note also sets forth certain
1.1.)
t
in full,
§
including, for
nge of control or certain sales, transfers, and
example, a
dispositions of RG Steel's interest in the acqui
(Exhibit 1 Preamble,
§
1.5.)
of an event of default, incl
Severstal may
ion, upon the occurrence
In
ng RG Steel's bankruptcy,
clare all or a portion of the Note immediately
due and payable.
(Id.
2.1,2.3.)
§§
Section 1.04(a) of the SPA defines the I
Purchase
businesses.
tial
ce as $125 million, subject to an upward or downwa
adjustment
sed on the acquired business's net work
tal and
certain indebtedness as of the Closing Date, also known as the
"Ef
ctive Time," as compa
the SPA.
(SPA
ustment.
§
1.04.)
with
The SPA prov
seline amounts set forth in
s for two phases of this
First, pursuant to a calculat
before the Closing,
n two
siness
ys
Initial Purchase Price was subject to an
initial upward or downward adjustment bas
on Severstal's
estimate of the net working capital and certain indebtedness as
of
Clos
in the SPA.
Date, as compared with
,
• J
seline amounts set forth
The estimates of net working
indebtedness resulted in RG Steel
5
tal and
ing only $85 million at the
cv-6922
Holdings LLC v.
Several
osing.
St
/ LLC, Case No. 11
(RWS), 865 F. Supp. 2d 430 (S.D.N.Y. 2012).
, the SPA provides
to the pu
se p
calculations
0
r another, final adjustment
ce based on t
renee between final
net working capital
and Severstal's estimate of net wor
certain indebt
ss,
capital and certa
indebtedness of Severstal Sparrows Point and its subsi
as of the Closing Date.
(SPA
§
1.04(b).) The second a
is conducted through a multi-st
between t
2.
a
es,
ustment
of calculations
1 Purchase Price.
rties and yie
(Id. )
tration Process
--------------------------
In the event that t
parties were unable to agree on
the amount of this final adjustment, Article I of t
provides
r either party to re
accounting firm.
Price.
r their disputes to an
.
§§
1.04(b) (iii)
tes to calculate the
(Id. §§ 1.04 (a) (i),
nal Purchase
(b) (iii), and (b) (iv).)
In this case, at the conclusion
of calculat
(iv).) The
independent accounting firm's
parties would then use t
resolution of their di
SPA
0
, RG Steel proposed
6
the parties'
ustments to
ce that could,
final purchase
ce to zero.
cash purchase
val
Severstal disputed the
ty of nearly all of these pu
rted a
ustments.
purchase price
Severstal's calculation of
Steel would owe it $29 million.
Under
ustment,
dings LLC
See Severstsal US
865 F. Supp. 2d 430
v. RG Steel,
ed, essentially reduce
if
(S.D.N.Y. 2012).
On
it was
September 3, 2011, RG Steel notified Severstal t
parties' disputes to arbitration pursuant to
referring t
Section 1. 04 (b) (iii) of the SPA.
Id. at 431.
The parties selected an individual within
independent accounting firm to serve as arbitrator and
negotiat
and executed an engagement letter.
On December 27,
2011, the independent accounting firm issued a schedule for the
arbitration, including a st
red exchange of submissions and a
decision date of May 11, 2012.
pr
a f
to rende
I
(Exhibit 2.)
On March 8, 2012,
decision, the independent accounting
firm resigned as arbitrator due to a conflict of interest
involving RG Steel.
(Compl.
81.)
On May 31, 2012, RG Steel filed a voluntary
for relief under
Unit
States
(Compi. 'lI 1.)
er 11 of the Unit
ion
States Code in the
strict Court for the District of Delaware.
Pursuant to the bankruptcy stay,
7
t
arbitration
was suspended for
roximately one
worked to locate
engage a new a
agreed upon a s
until the part
rator.
s t
Ie that concl
s
The parties have
2013.
arbitration
(CompI. '!l 81.)
sentations and Warrant
3.
In ne
s
iating the SPA, t
parties bargained for and
'!l 8.)
obtained certain representations and warranties.
particular, the preamble to Art
II of the SPA p
"[e]xcept as
a schedule to
se set
representation and warranty
Schedules") ,
Purchaser t
lectively, the"
Company and Parents represent
Section 8.02 of the SPA provides
hold harmless RG Steel for
representation or warranty made by Severstal
fai
des that,
particular
sclosure
warrant to
t all of the statements contained in this Article
II are true as of the date of this Agreement.
indemnify
In
to perform or
"
(Id.
'!l 30.)
t Defendants must
of
Article II or
fill any covenant contained in the SPA:
Subject to
provisions of
s Article II,
after the Closi ,Parents
11, jointly and
severally,
ify Purchaser and its Affiliates
. in respect of, and hold
harmless from
against, any
all Losses suf red, incurred or
8
and
susta
. by reason of or resulting from (i)
inaccura
or breach of a
sentation or warranty
of Parents and the Company contained in Article II of
this
eement or (ii) any non Ifillment of or
failure to perform any covenant or agreement on t
part of any of the Parents or, with respect to
covenants or agreements to
performed prior to t
Closing, the Company, contained in this
(Compl.
':II
32; SPA
damages,
§
8.02.) "Loss" is defined as "any
s) • "
(Compl.
':II':II
and warranties that form the
expire either 18 months a
Closing, 30
Notice was t
(Id.
9.01(a).)
§
c section, the
sis
§
rs after the
icable statute of 1
8.01.)
resentations
r indemnification claims
er the Closing, f
ys after the
expires, or never.
32 33; SPA
i
ng on the
not
ses (including reasonable
ilities, costs and
attorneys'
all
tations
If a Claim Notice or Indemnity
ly provided, a representation or warranty does
ire until the rela
indemnification cIa
is resolved.
(Id. )
Sections 8.02(c)
(h) and 8.03-8.07 set forth
additional detailed provisions applicable to the parties'
ification obligations and detailed procedures for making
an
fication cIa
8.03 sets forth the process
indemnifying party and
As part of those
deliver
process for
9
s, Section
a
aim Notice to the
fying party to
assume control of t
8.06 provi
VII s
defense of a t
s that an indemnification c
11 be the exclus
inaccuracy
remedy of the parties "for
or
of warranty or nonfulfil
brea
in Article
im set
srepresentation,
sentation or warranty,
any
ction
rd-party action.
ilure to be perfo
of any covenant or agreement contained" in the SPA.
(Id.
§
8.06.)
In Section 2.16, Severstal represented and warranted
Schedule 2.16 contained an accurate list of all "Material
y.
Contracts" to which Sparrows or an affiliate was a
§
2.16(a)-(n).)
A Material Contract is one t
(SPA
"involves the
payment or receipt of an amount in excess of $1,000,000."
aintiff contends that Defendants
(Id.)
esented to RG
Steel that it was assuming the benefits of ten-year coke supply
agreements that provided the steel
redient coke at relatively
fixed conversion prices for the life of the agreements,
Compl.
~~
44 46), but that RG Steel did not rece
contractual benefits for which it
agreements include: the Have
Agreement, and the Se
the "Co
id.
(Id.
~
11 Agreement, t
the
53.) The
Jewell
ce Provision Agreement
Supply Agreements"} .
(see
Defendants, purport
lectively,
y in
violation of these warranties, failed to disclose a letter dated
10
January 31, 2011
C
land Inc.
sed coke,
fi
"January 31 Letter"),
(t
("ArcelorMittal"), through whom Sparrows
in which ArcelorMit
by Sparrows was
(Id.
(Id.
'Il 50.)
the price from $22.00 fixed/$20.90 variable
$10.10fixed/$22.00 variable
re
favorable
and the price to be paid
stantially higher.
ArcelorMittal rais
h.
1 stated that
had been
ice provis
reements,
ttal
from Arcelo
r the Haverhill and Jewell
ively, to $37.50 fixed/$37.50 variable under
'Il 51.)
Plaintiff all
s that this caused RG Steel
ed liability of $80.7 million.
to incur an une
(Id.)
Plaintiff also asserts that Defendants failed to
sclose the existence of a t
rtation contract pursuant to
which Sparrows was burdened with an additional
of $1,425,450.00.
provided PIa
(Compl. 'Il 65.)
ure obligation
Specifically, Defendants
iff with a 2007 contract in whi
subsidiary, WCI Steel,
Inc.
(the predecessor-
a Sparrows
interest to
Severstal Warren), agreed to transport no less than 215,000 tons
of coke per
r for 15 years with Norfolk Southern Rai
Company ("Norfolk Southern") and its subsi
"2007 T
ation Contract") .
(Id.
y
ary railroads
'Il'll 60-61.)
(the
s
De
purportedly did not disclose that the 2007 Transportation
Contract was terminated in light of Severstal Warren's
and replaced with a contract executed December 1, 2010
11
("the
(Id.
"2010 Transportation Contract") .
~~
62-63.) The 2010
Transportation Contract specified that "no tonnage was shipped
under [the 2007 Transportation Contract] in 2009,
resulting in a
215,000 ton deficit and an obligation to pay [Norfolk Southern]
$1,425,450" (the "Accrued Liability"), and further provided that
Norfolk Southern "shall forgo collection of the Accrued
Liability and 215,000 tons is hereby added to the Prior Minimum
Volume for 2024."
(Id.
~
64.)
Further, Plaintiff alleges that Defendants failed to
adequately disclose the unfavorable terms of the amendment to a
pellet purchase contract between Sparrows and Cliffs Sales
Company ("Cliffs").
(Compl.
~~
Subsequent to the
54-59.)
closing, Cliffs asserted a claim for breach of contract against
RG Steel, which proceeded to arbitration.
(Id.
~~
56-57.)
The
arbitration panel found in favor of Cliffs and rendered an award
against RG Steel for $18,963,465.40 in damages, plus $1,524.53
in daily interest and $7,127.18 in arbitration fees.
54-59.)
(Id.
~~
Plaintiff contends that Defendants also failed to
disclose ten additional Material Contracts pursuant to which
Sparrows was obligated to sell tin plate to third parties at
prices below the cost of production.
(Compl.
~~
66-68.)
RG
Steel has suffered more than $38 million in losses as a result
of these agreements.
(Id.
~
69.)
12
t Defendants failed to
nally, Plaintiff maintains
disclose t
stence of changes to
s
by the Co
e Agreements and t
(Compl.
Contract.
<[
70.)
r practices occasioned
2010 Transportation
Pursuant to Section 2.15 of
S
Defendants represented and warranted t
as set forth in S
dule 2.15, since
r
30, 2010 to the date of this Agreement: (i)
Business has been conduct
in the ordinary course
consistent with prior practices;.
(x) nei
r the
Company nor any of its Subsidiaries has amended,
terminated, cancel
or compromised any mate al
aims or waived
r rights of substantial
value; .
neither the Company on [sic]
of
s Subsidiaries has
fied in any material re
cts
s payment practices
th any of its mater
suppliers .
. ']( 71.)
Defendants pu
rt
to disclose that (1)
ly violated this p
sion by
rrows materially modifi
practices under the Co
Supply Agreements in
31 Letter (Id. '](']( 42-53), and (2) pursuant to t
Transportation Contract,
practices with Nor
its
materially
lk Southern.
4. Covenants
13
(See id.
2010
its
60-65. )
Article IV of the SPA is titled "Covenants and
reements."
Section 4.14 sets
orth a number of covenants
rding the termination of intercompany agr
pre
sting agreements between Severstal entit
s, which are
s that would
remain with Severstal, on the one hand, and those that were sold
hand.
to RG Steel, on the
Section 4.14(d)
rrows Point to
Steel to cause its subsidiary
obligates RG
to
Severstal's affiliates all outstanding intercompany trade
payables in an amount not to exceed $36
to the first ann
llion
sary of the Closing Date."
"[o~n
(Id.
or prior
§
4.14(d).)
The Applicable Standard
In cons ide
12(b) (6),
ng a motion to di
ss pursuant to Rule
Court construes the complaint liberally, accepting
all factual allegations as true and drawing all reasonab
s in
in
Corp.
r
plaintiff's favor.
12 F . 3d 11 7 0 , 11 7 4 ( 2 d Ci r.
Mills v. Polar Molecular
1 9 9 3) .
The i s sue "i s not
whether a plaintiff will ultimately prevail but whether
claimant is entitled to of
Villa
1995)
r evi
nce to support the claims."
Pond, Inc. v. Town of Darien,
(quoting Scheuer v. Rhodes,
Ct. 1683, 40 L.
. 2d 90
(1974)).
14
56 F.3d 375, 378
(2d Cir.
416 U.S. 232, 235 36, 94 S.
To survive dismissal, "a complaint must contain
sufficient factual matter, accepted as true, to 'state a claim
to relief that is plausible on its face.'"
Ashcroft v.
556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868
Iqbal,
(2009)
(quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007)).
Plaintiffs must allege
sufficient facts to "nudge [
J
their claims across the line from
conceivable to plausible."
Twombly,
550 U.S. at 570.
"The
plausibility standard is not akin to a 'probability
requirement,' but it asks for more than a sheer possibility that
a defendant has acted unlawfully."
Cohen v. Stevanovich,
Supp. 2d 416,
Though the court must accept
423 (S.D.N.Y. 2010).
772 F.
the factual allegations of a complaint as true, it is "not bound
to accept as true a legal conclusion couched as a factual
allegation."
Iqbal,
556 U.S. at 678.
(quoting Twombly,
550 U.S.
at 555).
"Under New York law .
lS
. judgment as a matter of law
appropriate if the contract is unambiguous.
Contract
language is unambiguous when it has a definite and precise
meaning, unattended by danger of misconception in purport of the
[contract] itself, and concerning which there is no reasonable
basis for a difference of opinion."
Smartlens Corp.,
Photopoint Techs., LLC v.
335 F.3d 152,160 (2d Cir. 2003)
(internal
15
-------------_.
-_. __..- - -
tations omitted); see also Crane Co. v. Collec Indus., Inc.,
171 F.3d 733, 737
(2d Cir. 1999)
("If the
rties'
ent is
unambiguously conveyed by the plain meaning of the agreements,
inte
tat
is a matter of law.").
It is black letter
"[a] contract should be construed so as to give
law
meaning and ef
to all of its provisions,"
I
"[r]ather
rewrite an unambiguous agreement, a court should enforce the
plain meaning of that
Inc.,
164 A.D.2d 275,277
" Am.
Express Bank v. Uniroyal,
(N.Y. Sup. Ct. 1990).
I. efendants' Motion to Dismiss is Granted
D
Severstal has moved to dismiss the
Action in
rt, and the Second Cause of Act
rst Cause of
in its entirety,
r failure to state a claim.
1. Because Plaintiff fails to Al
Tran
ion Contract Gives
se
as to That Contract in
Plaintiff's First Cause of Action
are
smissed
De
ndants move to dismiss the portion of RG Steel's
rst Cause of Action re ating to the 2010 contract with Nor
Southern,
lk
"2010 Norfolk Southern Transportation Agreement")
which Plaintiff alleges De
s
in a loss of $1,425,450.
16
iled to disclose resulting
Both parties agree that Defendants disclosed a
transportation agreement between Severstal Warren and Norfolk
Southern Railway dated February 9, 2007
Southern Transportation Agreement") .
(the "2007 Norfolk
(Compl.
~
60.)
This
agreement has a 15 year term (through 2024) and required
Severstal Warren to transport with Norfolk Southern no less than
215,000 tons of coke per year from a coke plant located in
Haverhill, Ohio.
(Id.
<]I
61.)
Severstal Warren failed to ship a
certain 215,000 tons under the 2007 Norfolk Southern
Transportation Agreement, which gave rise to a $1,425,540
liability.
(Id.
<]I
62.)
Severstal Warren subsequently entered into the 2010
Norfolk Southern Transportation Agreement, which provides that
Norfolk Southern will forgo collection of the $1,425,450, and
Severstal Warren shall instead ship the missed 215,000 tons in
2024
(in addition to the original tonnage for 2024).
64-65.)
(Id.
<]I~
According to RG Steel, Severstal's failure to disclose
the subsequent 2010 Norfolk Southern Transportation Agreement,
"that obligated Severstal Warren, LLC to pay the Accrued
Liability," by increasing the required tonnage in a post-closing
liability, rather than a pre-closing $1,425,450 Accrued
Liability as assessed under 2007 Transportation Contract, was a
material breach under
§
2.16.
(Id.
17
<]I
6S.)
In § 2.16 of the SPA, Severstal represented and
warranted that Schedule 2.16 contained an accurate list of all
"Material Contracts," which include:
(e) any agreement, commitment or other Contract
relating to Indebtedness of the Company or a
Subsidiary thereof in an amount in excess of
$1,000,000;
(i) any agreement, invoice, purchase order or other
arrangement with any supplier or for the furnishing of
services under the terms of which the Company or any
of its Subsidiaries (i) is likely to payor otherwise
give consideration of more than $1,000,000 in the
aggregate during the calendar year ending in December
31, 2011 or any calendar year thereafter or (ii) is
likely to payor otherwise give consideration of more
than $5,000,000 in the aggregate over the remaining
term of such agreement, in each case, that is
not otherwise included under Section 2.16(d);
(j) any agreement, invoice, sales order or other
arrangement for the sale of inventory or for the
furnishing of services by the Business that (i) is
likely to involve consideration of more than
$1,000,000 in the aggregate during the calendar year
ending in December 31, 2011 or any calendar year
thereafter or (ii) is likely to payor otherwise give
consideration of more than $5,000,000 in the aggregate
over the remaining term of such agreement, in each
case, that is not otherwise included under Section
2.16 (d) .
(SPA §§ 2.16 (e),
(i), and (j); Compl. 'l1 41.)
In Section 8.02,
Severs tal agreed to indemnify RG Steel for "Losses suffered,
incurred, or sustained by [RG Steel] by reason of or resulting
18
from (i) any inaccuracy or breach of a represent at
"
warranty of [Severstal]
RG Steel
Nor
(SPA § 8.02.)
for
(See SPA
§
2.16(j).)
rtation
claimed
2007 Nor
lk Southern
reement, which was disclosed, not from the 2010
The 2010 Norfolk Sout
rn Transportation Agreement
does not give rise to the loss,
Southern "shall
obligation provi
altered from a
does not
furnishing
However, t
$1,425,450 liability results from t
tons at issue
1
Business" with consideration
ces by
Contract.
er
was a
Contract," in that it was an "agreement
\\$1,000,000."
2010
s sufficiently alleged that
lk Southern Transportation
of
or
provides
Norfolk
rgo collection" of the pre
sting $1,425,450
that Severstal Warren will sh
2024.
(Id.
~
64.)
the 215,000
That the obligation was
closing liability to a
t
osing liabili
underlying liability is not
the fact t
or breach of a r
the result of "any inaccura
resentation or
warranty of [Severstal],U (see SPA § 8.02), but rather was
disclosed by Defendants
t
2007 T
Steel there
e
a loss related to the 2010
fails to
rtation Contract.
Norfolk Southern Transportation Agreement, and Plaintiff's
allegations as to that contract are di
19
ssed.
RG
Practices
the 2010
2.
Plaintiff's Second Cause of Act
letter rega
the 2010 Nor
ng the pricing of the Coke Supply Agreements and
k Southern Transportation Agreement, both of
which Defendants failed to disclose, const
§
2.1
of the SPA.
uted changes in
of the representation and warranty
payment practices in
in
alleges that a
(S PA
§
2. 15 . )
Pursuant to Section 2.15 of
SPA, Severstal
sented and warranted to RG Steel that between
ember 30,
2010, and March 1, 2011, there was an absence of certain changes
in its business, specifically that,
(i) "the Bus
ss has been conducted in the ordinary
course consistent with prior practice" and (xvi)
"neither
Company or any of its Subsidiaries
s
modified in any material respects its payment
practices with any of its material suppliers."
(SPA
§
2.15 (a)
(i) and (
)
.)
Plaintiff contends that on
January 31, 2011, Defendants received a letter modifying the
payment provisions of
Coke Supply Agreements.
(Compl. ']I
0)
The Coke Supply Agreements are grounded in a Service Provision
Agreement, which provides that,
20
Upon delive
of
Sparrows Point Coke to the
Del
ry Point (as
fined
the Co
Supply
Agreements) relating to the
rrows Point
ility,
(i) Rec ient [Severstal Sparrows Point LLC] shall
notify Provider [Arcelo
ttalJ in writing of t
occurrence of such deli ve
[and] (ii) Recipient
shall pay Provider in all cash amounts owed by
Provi r for
Sparrows Point Co
pursuant to t
appli
le Co
Supply
reement.
(Compl.
the Co
~
49.)
s disclosed the existence of
Although De
Supply Agreements, Defendants did not disclose a
January 31, 2011 letter from ArcelorMittal to Severstal N.A., in
which
favorable fixed price provision had been removed and
price to be
id by Severs tal Sparrows Po
increased, equating to an
million over t
LLC had been
regate price increase of $80.7
term of the contracts.
(Compl.
~~
In
50 51.)
tion, "in or about December 1 2010,H Severstal entered into
the 2010 Nor
lk Southern Transportation
ement, which
transformed a pre-closing Accrued Liability into a post clos
igation to transport an additional 215,000 tons of co
Nor
lk Southern.
both t
Janua
~~
(Id.
63-64.)
The Complaint alleges t
31 letter and the 2010 Norfolk Sout
Transportation Agreement material
practices in breach of
§
with
t
rn
changed Defendants'
yment
2.15.
se assertions, though, are the same as those
supporting Plaintiff's cla
in its First Cause of Action for
21
resentations and
Severstal's purported breach of its
warranties
(Id. g[g[ 44- 53, 87.)
r Section 2.16 of the SPA.
RG Steel
rting its claims in
not plead new facts
Second Cause of Action, but merely incorporates the paragr
to its Section 2.16 claims in
in its Complaint pertai
its First Cause of Action.
(Id. 'l1 72.)
To be meaningful,
Sections 2.15 and 2.16 must constitute representations and
warranties about dif
See, e.g., Muzak Corp. v.
rent conduct.
Hotel Taft Corp., 1 N.Y.2d 42, 46
7 (1956)
("The rules of
construction of contracts require us to adopt an inte
which gives meaning to every
tation
sion of a contract or, in the
negative, no provision of a contract should be left wi
force
subd.
effect.")
[c]).
(citing 1 Restatement, Contracts, § 235,
Section 2.15 is not applicable to an all
failure to disclose Material Contracts, but rather contains only
representations and warranties that Severstal would not
materially change certain business and pa
Plaintiff does not anywhere p
dis
Norf
brea
ose the amendments to
how
Coke S
nt practices.
alleged
ilure to
ly Agreements and 2010
k Southern Transportation Agreement constitutes such a
of the
sentations and warranties in Section 2.15
and (xvi), and is not a mere
ilure to disclose a material
contract under § 2.16.
T'l1 96-97; see also id. 'l1'l1 70
(i)
22
2)
Because Plaintiff does not allege facts in support of
r Section 2.15 other than t
its claim
claim
se that allege a
r failure to disclose Material Contracts pursuant to
Section 2.16, Plaintiff's Second Cause of Action is dismis
to both the Co
reements and the 2010 Nor
Supply
as
lk Southern
Transportation Contract. 1
II.
plaintiff's Motion to Replead is Denied
In the event RG Steel's allegations are
insufficient,
intiff
sts leave to
its
ssed
claims.
Absent undue del
ility,
bad
ith, undue prejudice, or
"mandate" under Rule 15 (a) (2) to freely grant
leave to amend "is to
heeded." Foman v. Davis
371 U.S. 178,
In further support, Defendants contend that § 4.0: of the SPA, which sets
forth Severstal's covenants during the ti~e between the execution of the SPA
and closing, demonstrates that § 2.: does not
for mere failures to
disclose Material Contracts.
Section 4.10 contains a covenant that the
shal "not enter into, material y amend or terminate any Materia
Contract., or viaive any mate
right thereunder."
(PA § 4.10(k).)
According to Defendants, if the anguage in Sections 4. Ora) and (r), which
is ident
to the anguage in Sections 2.
(i) and (xvi), included
representa ions and warranties related to the disclosure of Material
Contracts, then it would have been unnecessary to include
ion (k) in
Section 4.10, showing that Section 2.1
(i) and (xvi) did not include
representations
warranties related to disclosure of Material Contracts.
(Defendants Memorandum in
of Motion to Dismis , "Def. Mem."; at 20
(ci::ing Muzak Corp. v. Hotel Taft Corp., 1 N.Y.2d 42, 46-47 (1956) ("The
rules of contruction of contracts
re us to
an interpretation which
ion of
contract or, in the negative, no
sion of a contract should be
force and effect.")).)
1
23
182 (1962); see also
Servs. Gas Holdi
of Am. N.A., 626 F.3d 699, 725 (2d Cir. 2010)
this Circuit has been to allow a
Co. v. Bank
('''The
rty to amend its pleadi
the absence of a showing by the nonmovant of prej
faith.'V)
e in
s in
or bad
(quoting Block v. First Blood Assocs., 988 F.2d 344,
350 (2d Cir.1993)).
This case
scovery has
s been
to
in.
cause no material delay in
since
A second amended
laint would
resolution of this case.
However, amendment would be futile.
PIa
iff's cIa
conclusive.
PIa
iff has not cited any additional
to overcome the provisions of t
states
s it
contract, but
"any amendment would simply of
the issues discussed in this motion."
r clarity on
(Pl. Opp. at 19-20.)
such, Plaintiff's request for leave to amend t
cIa
fail on
of the SPA, which is unambiguous and
the plain
would pI
il 2012 and
dismissed
is deni
Conclusion
Based upon the cone Ius
Defendant's Motion to
set
h above,
smiss is granted: Plaintiff's First
Cause of Action with respect to the 2010 Transportation
24
As
Contract, and Second Cause of Action in its entirety, are
smissed.
It is so ordered.
New York, NY
January
j.,V,
2014
ROBERT W. SWEET
U.S.D.J.
25
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?