On August 14, 2019, the firm won a complete victory in the Second Circuit, which affirmed in its entirety the order of the District Court for the Southern District of New York dismissing all claims against our client, Mercuria Energy Trading, and several affiliated entities. This was a highly contentious contract dispute in which Mercuria’s former employee claimed that Mercuria owed him more than $32 million in carried interest payments. The plaintiff, Jeff Miller, had worked as a senior oil-and-gas trader at Mercuria between 2008-2012. During that time, Miller helped source and complete Mercuria’s acquisition of an Argentine oil company named Glacco, and in exchange for this work had received all of the Class A preferred shares in Glacco’s parent company. Those shares, which were governed by the parent company’s by-laws, carried certain redemption and payout rights upon the occurrence of a dissolution or restructuring of the company. In 2012, Miller resigned from Mercuria. Before he resigned, Miller had been working on a deal that would merge Glacco and other Mercuria oil/gas assets in Argentina with another Argentine company: Roch S.A. It was anticipated that following the merger, Mercuria and Roch would take the combined company public on the Toronto Stock Exchange. So Miller negotiated—as part of his departure from Mercuria—an agreement that if the Mercuria/Roch merger were consummated and otherwise triggered a redemption payment on his Glacco shares, and if that merged company went on to undergo an IPO or a sale of its equity to a third party, then instead of his ordinary redemption payment Miller would be entitled to exchange his Glacco shares for (far more valuable) shares in the pre-IPO Mercuria/Roch company. This agreement was memorialized in a Separation Agreement between him and Mercuria signed at his departure.
Unfortunately for Miller, the Mercuria/Roch merger deal was never completed, leaving Miller with only his existing Glacco shares. Then, last year, Mercuria entered into an entirely different and unrelated transaction to form a company called Phoenix Global Resources. Miller, seeing public reports of the Phoenix Global transaction, claimed that Mercuria owed him a redemption payment on his Glacco shares using the valuation formula set forth in his Separation Agreement—which was specific to the Mercuria/Roch merger and share exchange for Mercuria/Roch shares—but this time using the value of the Phoenix Global transaction as a proxy for the Mercuria/Roch merger value. When Mercuria refused to pay, Miller filed suit in the Southern District of New York, claiming that Mercuria acted in bad faith and breached the Separation Agreement. Miller sought more than $32 million in damages.
The firm moved to dismiss the claims based on the plain language of the contract. In March 2018, the District Court for the Southern District of New York issued a 32-page opinion agreeing with our position across the board and dismissing the complaint in its entirety, with no opportunity to replead. The Court concluded that the plain language of the Separation Agreement provided for a redemption payment (in the form of an exchange of shares) only upon the occurrence of the Mercuria/Roch merger, which had never occurred. Therefore, the Court held, Miller was not entitled to any payment as a result of the Phoenix Global transaction, and Mercuria breached no contractual or other duties by refusing to pay him.
Miller appealed the District Court’s order to the Second Circuit. On August 14, 2019, the Second Circuit affirmed the District Court’s order in its entirety, fully adopting the reasoning set forth in Judge Rakoff’s opinion and our briefs, and dismissing Miller’s claims with prejudice.