Appeal from an order of the United States District Court for the Southern District of New York (Chin, J.), finding Defendant-Appellant Surinder Chabra liable for a debt owed Plaintiffs pursuant to a guaranty of that debt.
Certified Question: August 5, 2008
BEFORE: CALABRESI, RAGGI, HALL, Circuit Judges.
This is an appeal from an order of the United States District Court for the Southern District of New York (Chin, J.), finding Defendant Surinder "Sonny" Chabra liable to Plaintiffs Michael Israel and Steven Israel ("the Israels") for debts owed them by AMC Computer Corp. ("AMC") pursuant to Chabra's guaranty of those debts. We previously certified a controlling question of law to the New York Court of Appeals. Having received that Court's answer to the certified question, we now vacate the judgment of the district court and remand for further proceedings.
A detailed recitation of the relevant facts and procedural history can be found in our previous opinion in this case, and we assume the reader's familiarity with that opinion. See Israel v. Chabra, 537 F.3d 86, 88-92 (2d Cir. 2008) ("Israel I"). We set forth herein a condensed version of the facts in order to explain our disposition of the appeal following the answer to the certified question.
In brief: the Israels entered into separate employment agreements with AMC in May 2000, at the same time that AMC was in the process of merging with a third-party investor. See Id.at 89. In a Letter of Intent, which was signed by AMC, both of the Israels, Chabra (who signed both as an individual and as an officer of AMC), and the third-party investor, Chabra promised to pay each of the Israels a $2 million bonus if the third-party investor completed its planned investment in AMC. Id. In July 2000, the parties agreed to what they call the "First Amendment" to the agreements, which made the following changes to the agreements: (1) AMC assumed primary responsibility for paying the bonuses, but Chabra agreed to guaranty the payments; (2) the bonus amount was reduced to $1.75 million for each of the Israels; (3) the bonuses became due upon completion of a proposed merger between AMC and the third-party investor; and (4) the payments were to be made in twelve equal quarterly installments, the first of which would be due three months after the merger. Id.
Pursuant to the First Amendment's requirement that he guaranty the bonuses, Chabra signed an identical Guaranty for each of the Israels, reading in relevant part as follows:
Surinder (Sonny) Chabra ("Guarantor") hereby absolutely, unconditionally and irrevocably guarantees to Israel (i) the full, due and punctual payment, whether at stated payment dates, by acceleration or otherwise, of any amounts owed under Section 3.4 of the Employment Agreement (including interest as described therein), and (ii) the prompt reimbursement of or payment for any and all ... expenses and liabilities (including reasonable attorneys' fees) incurred by Israel in enforcing any rights under this Guaranty (collectively, the "Obligations"), and further guarantee[s] that any such amounts shall be paid when due without presentation, demand, notice or protest of any kind with the same effect as though the Guarantor was AMC in and for the purposes of Section 3.4 of the Employment Agreement; provided, however, that Israel has given Guarantor written notice ("Notice") of AMC's failure to pay any Obligation within 60 days of the occurrence of each failure. Guarantor will then have 30 days to make such payments (or to cause AMC to make such payments).
... The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of ... any change in the time, manner or place of payment of, or in any other term of, all or any of such provisions or the Obligations....
... The Guarantor hereby waives promptness, diligence, dishonor, default, forbearance, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty, except the Notice. ... References to the Employment Agreement shall mean the Employment Agreement immediately after the execution of Amendment No. 1 and shall not be affected by subsequent ...