D.E. Shaw Laminar Portfolios, LLC v. Archon Corp.
755 F. Supp. 2d 1122
D. Nev.2010Background
- Archon issued Exchangeable Redeemable Preferred Stock (EPS) in 1993 with a liquidation preference and cumulative dividends under the Certificate.
- Plaintiffs (hedge funds and money managers) purchased thousands of EPS shares from 2004–2007 (various periods totaling hundreds of thousands of shares).
- The Certificate sets dividend mechanics, liquidation priority, and permits in-kind dividends in early years, with cumulative unpaid dividends accruing thereafter.
- Archon redeemed all EPS on August 31, 2007 for $5.241 per share, claiming this amount included accrued dividends; Plaintiffs alleged improper calculation under the Certificate.
- This Court previously held in 2008 that the Certificate was unambiguous and Plaintiffs’ compound-dividend interpretation was correct, and considered a mitigation defense only later.
- Plaintiffs move for final summary judgment, final judgment, prejudgment interest, and to strike a mitigation defense; the Court grants these requests and fixes damages at $9,515,579.50 total.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mitigation defense viability | Plaintiffs relied on the unambiguous Certificate in purchasing EPS. | Mitigation defeats damages when plaintiffs could have acted differently after learning of Archon’s non-compounding. | Mitigation defense unavailable; court will not relitigate prior ruling. |
| Entry of final judgment and damages calculation | Damages computed by Liquidation Preference minus paid amount, using 8% dividend rate and accruals as defined. | Certificate does not support Plaintiffs’ calculated damages; miscalculation possible. | Final judgment granted; damages computed as $7,240,523.64 plus pre-judgment interest totaling $2,275,055.86, for a total of $9,515,579.50. |
| Prejudgment interest rate and accrual | Nevada law requires interest at prime rate plus 2% from breach; amounts tied to share-period calculations. | Interest should be calculated differently based on the Certificate terms. | Nevada § 99.040(1) controls; interest calculated from August 31, 2007 on specified principal amounts per period. |
Key Cases Cited
- Conner v. S. Nev. Paving, Inc., 103 Nev. 353, 741 P.2d 800 (Nev. 1987) (duty to mitigate damages)
- A.I. Credit Corp. v. Gohres, 299 F.Supp.2d 1156 (D. Nev. 2004) (mitigation when reasonable alternative exists)
- In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002) (jurisdictional considerations for prejudgment interest)
- Kerala Props., Inc. v. Familian, 122 Nev. 601, 137 P.3d 1146 (Nev. 2006) (state law principles for prejudgment interest calculations)