The opinion of the court was delivered by: MORRIS E. LASKER
Chase Manhattan Bank, N.A. moves for an order under Fed. R. Civ. P. 56(c) granting summary judgment (1) on its claim that Remington Products, Inc. and Victor K. Kiam, II owe Chase fees under an engagement agreement between Chase and Remington and Kiam's accompanying guarantee of payment and (2) on each of the defendants' four counterclaims. The motion is granted.
Remington, headquartered in Bridgeport, Connecticut, is a manufacturer and seller of electric shaving devices and other personal grooming products. This litigation has its origin in Kiam's simultaneous ownership of 100 percent of the voting stock of Remington and a controlling interest in the New England Patriots National Football League franchise. Kiam formed Remington when he acquired the assets of the Sperry-Rand Corporation's Remington Shaver division in a leveraged buyout in 1979. He purchased his interest in the Patriots in 1988 with the proceeds of a loan (the "Patriots Loan") from IBJ Schroder Bank & Trust Company ("IBJ Schroder"). Kiam pledged his Remington stock as collateral for the Patriots Loan.
Kiam's simultaneous ownership of Remington and a majority stake in the Patriots soon became financially untenable. Remington had pledged all of its assets to secure a $ 65 million loan (the "RPI Loan") from a consortium of banks and other lending institutions (the "RPI Lenders"). By the Spring of 1991, the RPI Loan was in default and Remington was having difficulty obtaining seasonal financing -- that is, working capital to enable Remington to manufacture inventory sufficient to meet consumer demands during the holiday shopping season. At the same time, Kiam had problems servicing the Patriots Loan and was under pressure from IBJ Schroder. Kiam's attempts to refinance the Patriots Loan were unsuccessful, at least in part because his most significant asset -- his Remington stock -- was already employed as collateral for the Patriots Loan. Kiam also faced the threat of litigation over loans received from other personal creditors.
During this period, Kiam apparently came to the conclusion that some form of refinancing, merger or sale involving either Remington or the Patriots would be necessary both to meet the debt service on the Patriots Loan and to obtain badly needed working capital for Remington. His initial step in this regard appears to have been toward the investment bank Bear Stearns & Co., Inc.. In April 1991, Kiam sought Bear Stearns' advice as to how Remington's standing with the RPI Creditors might be improved and how Remington might obtain seasonal financing. While Kiam pursued these discussions with Bear Stearns, he sought from various lending institutions a personal loan to be secured by his Manhattan cooperative apartment. The attempt to obtain a mortgage loan was unsuccessful, as were Bear Stearns' early attempts to obtain new financing for Remington.
In May 1991, in search of a mortgage loan, Kiam contacted Gerald Daniello of Chase's Stamford, Connecticut office. During the course of their negotiations, Kiam and Chase also discussed the possibility of Chase's mergers and acquisitions department representing and advising Remington in a sale, merger or refinancing. The parties disagree on the extent, if any, to which Kiam's receipt of a mortgage loan was conditioned on Chase's being retained as Remington's financial adviser. Kiam contends that his desire was to retain Bear Stearns as Remington's financial adviser; Chase, he maintains, used his need for a personal loan to force his hand in favor of selecting Chase. Chase denies any attempt to condition Kiam's Loan on its being hired by Remington and insists that Remington sought its advice as to a strategy to repay the RPI Lenders. In any event, on May 21, 1991, Kiam received a $ 3 million personal loan from Chase's private banking division. While Chase's internal credit approval memorandum did note the fact that Remington had retained Chase's mergers and acquisitions department, the only evidence either party has produced on the factual issue of whether Chase conditioned (or "tied") Kiam's receipt of a mortgage loan on Chase's retention as Remington's financial advisor is conflicting affidavit and deposition testimony.
Its reasons for doing so aside, on May 23, 1991 Remington signed an "engagement letter" with Chase (the "May 23 Letter") naming Chase as its financial advisor in connection with a range of potential transactions, including investments in, or a sale of, Remington. At the same time, Kiam executed a letter of guarantee in favor of Chase, pursuant to which Kiam guaranteed payment of Chase's fee.
On June 26, 1991, in response to mounting pressure to repay, respectively, the RPI Loan and the Patriots Loan, Remington and Kiam jointly entered into an "RPI Sale and Intercreditor Agreement" (the "Intercreditor Agreement") among themselves, the RPI Lenders and IBJ Schroder. The Intercreditor Agreement contained three key provisions. First, Remington and Kiam were obligated to use their "best efforts to effect or cause to be effected (and not hinder the consummation of)" an "Acceptable Transaction" (essentially defined as a transaction generating proceeds sufficient to satisfy the RPI Loan) by May 31, 1992, with an automatic extension to June 30, 1992. Second, the Agreement recognized that Chase had been retained as Remington's financial advisor and obligated Remington to cause Chase to keep the RPI Lenders and Schroder informed as to the progress of their efforts toward closing an Acceptable Transaction. Third, the Agreement required Kiam to grant Chase an irrevocable proxy under which Chase was authorized to vote Kiam's Remington shares in favor of -- and consummate -- an Acceptable Transaction in the event Kiam refused to do so, provided that Chase could in good faith issue an opinion that the terms of the transaction were fair from a financial standpoint to both Remington and Kiam. Under this provision Remington also gave Chase certain requisite powers of attorney.
On June 26, Remington and Chase also signed an amendment to the May 23 Letter ("the Amendment Letter" and, collectively with the May 23 Letter, the "Engagement Agreement"). The effect of the Amendment Letter was to coalesce the terms of the Engagement Agreement with those of the Intercreditor Agreement. Section 1 of the Engagement Agreement -- entitled "Services to be Rendered" -- obligated Chase to provide the following "financial advisory services":
(a) Chase will develop and maintain a continuing familiarity with the financial situation and plans of the Company [i.e., Remington] with a view to fulfilling its role as financial advisor;
(b) Chase will evaluate and recommend financial and strategic alternatives with respect to a Transaction;
(d) Chase will identify and contact potential purchasers, approved in advance by the Company, in respect of a proposed Transaction, advise the Company concerning the strategy and tactics of negotiations with such potential purchasers, and assist in such negotiations;
(e) Chase will advise the company with respect to the timing, structure, and ...