946 F. Supp. 2d 343
S.D.N.Y.2013Background
- Oppenheimer & Co. Inc. seeks fees from Trans Energy and American Shale under an engagement agreement to raise capital for drilling operations.
- A July 22, 2011 engagement defined the Company broadly to include Trans Energy affiliates and successors.
- Chambers Energy Management funded a February 29, 2012 Credit Agreement with American Shale as borrower and issued 19.5% warrants.
- Security interests were granted to lenders via a Guaranty and Security Agreement, with liens on collateral and a cash-out warrant provision.
- Oppenheimer alleges it was entitled to a 3% fee under Section (d)(ii) or a negotiated fee under Section (d)(iv); the Chambers Financing closed April 26, 2012.
- The court granted Defendants’ Rule 12(b)(6) motion in part: Count One survives; Count Two is dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chambers Financing is an equity linked obligation | Oppenheimer argues warrants link debt and equity. | Trans Energy contends it is straight senior debt. | Ambiguity remains; not dismissible at this stage. |
| Whether the loan was senior debt triggering Section (d)(i) | The loan may be equity linked, not plainly senior debt. | The GSA secures priority liens, making it senior debt. | Court finds debt was senior under contract language; affects Count Two outcome. |
| Whether good faith negotiation was required under Section (d)(iv) | Defendants failed to negotiate a fee when Chambers Financing not clearly listed as specific category. | If debt is senior or equity linked, Section (d)(iv) not triggered. | Count Two dismissed as a matter of law. |
Key Cases Cited
- Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168 (2d Cir. 2004) (ambiguity in contract term not dismissible on pleadings)
- Olin Corp. v. American Home Assur. Co., 704 F.3d 89 (2d Cir. 2012) (contract language unambiguous; interpret as law when no ambiguity exists)
- Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir. 1992) (ambiguity exists when term could have more than one meaning)
- Bayerische Landesbank v. Aladdin Capital Mgmt. LLC, 692 F.3d 42 (2d Cir. 2012) (ambiguity may permit extrinsic evidence in contract interpretation)
- Crowley v. VisionMaker, LLC, 512 F.Supp.2d 144 (S.D.N.Y. 2007) (ambiguous contracts preclude dismissal on Rule 12(b)(6))