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Asesores Y Consejeros Aconsec Cia, S.A., D/B/A Coronel Y Perez Abogados v. Global Emerging Markets North America

January 10, 2012


The opinion of the court was delivered by: Cedarbaum, J.


Delaware investment bank Global Emerging Markets North America, Inc. ("GEM") retained the Ecuadorian law firm of Asesores y Consejeros Aconsec CIA, S.A ("Asesores") to conduct due diligence on an Ecuadorian consumer electronics company, Artefacta, which GEM planned to acquire. Asesores completed the project and delivered its results, but the deal failed to close because GEM was unable to obtain financing. GEM then refused to pay any fee on the ground that the agreement between the parties did not require payment unless the acquisition of Artefacta took place. Asesores sued for breach of contract and equitable relief.

Beginning October 25, 2011, I conducted a two-day bench trial of Asesores' claim against GEM. Three witnesses testified: Cesar Coronel Jones, Daniel Pino, and Julio Marquez. Each of the witnesses' native language is Spanish, but each is fluent in English, and testified in English. After considering all of the evidence including the credibility of the witnesses, I make the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a).


In November 2007, Andres Portaluppi, an Ecuadorian businessman, approached GEM regarding an opportunity to acquire a majority share of two related Peruvian and Ecuadorian companies that sold consumer electronics and major appliances. Portaluppi was a minority shareholder in both companies and sought to buy out his business partners with GEM's assistance. GEM required extensive due diligence to be conducted on each of the companies. Once GEM decided to acquire the South American companies, GEM sent one of its managing directors, Julio Marquez, to Ecuador to meet with law firms possessing the requisite due-diligence expertise.

Portaluppi arranged for Marquez to meet with Cesar Coronel Jones ("Coronel") and Hernan Perez ("Perez"), the founding partners of Asesores, in Ecuador on December 13, 2007. In addition to discussing the firm's credentials, representatives of Asesores informed Marquez that the firm's practice was to bill by the hour for its services. The following day, at a second meeting, Marquez informed Asesores that GEM intended to retain the firm's services. Daniel Pino also attended this meeting. At that time, Pino was a senior associate who would be primarily responsible for the due diligence. Asesores was retained to conduct due diligence on Artefacta*fn1 and to assist in drafting the employment contracts that would carve up post-acquisition powers and responsibilities between GEM and Portaluppi. According to all the witnesses, Marquez did not, at that time, inform Asesores that GEM's payment of attorney's fees would be contingent on GEM's acquisition of Artefacta. Marquez testified that, at most, he told Asesores that it was GEM's "preference or . . . practice . . . or custom . . . to pay . . . if and when the deal closes."

The following Monday, December 17, 2007, Marquez requested that Pino send him a preliminary due diligence list and a draft of the firm's engagement agreement. The engagement letter Pino sent to Marquez stated that Asesores' lawyers and staff charged between $60 and $270 per hour, that any substantial expenses would be an additional charge, and that the firm expected a retainer of $20,000. The letter specified that invoices in both English and Spanish would be sent to GEM monthly. Further, the letter provided that bills must be paid upon receipt and that interest would be charged on any balances outstanding more than thirty days. Coronel testified that although signed engagement letters are not required by Ecuadorian law to prove a right to payment of legal fees, the firm had a general practice of drafting agreement letters. At this time, Marquez also instructed Pino not to wait for the engagement letter to be signed and returned before starting work because due diligence was needed urgently.

On December 28, 2007, since he had not received a signed agreement from GEM, Coronel asked Marquez whether GEM would be signing the engagement letter. Marquez assured Coronel that it would and requested that the letter be resent. Eventually, on January 7, 2008, Marquez asked for two minor changes to the terms of the proposed agreement: that Asesores correct a section in which it had mistakenly substituted another company's name for GEM's, and that Asesores change the agreement so that future correspondence, including invoices, would be directed to Marquez's direct superior, Christopher Brown. Marquez did not object to the payment terms, nor did he inform Asesores that GEM would not pay any legal fees if the acquisition of Artefacta did not take place. Pino made the requested changes and returned the revised agreement to Marquez. Despite repeated inquiries by Coronel and Pino, neither Marquez nor Brown, nor anyone else at GEM, ever signed or returned the engagement letter. At one point, Marquez asked Asesores for wiring instructions so that GEM could remit the $20,000 retainer, but GEM never transferred any money.

Despite not having received GEM's signature on the engagement letter, Asesores continued to perform due diligence on Artefacta with the intention of completing the project by the initial target closing date of February 2008. Asesores' attorneys recorded their billable hours, and Asesores sent monthly billing records to Marquez by e-mail. The bills did not contain the term "invoice." Marquez testified that the e-mails containing the charges were caught by his e-mail system's spam filter and delivered to a junk mail folder. According to Marquez, he did not see the invoices until mid-April, when Asesores began demanding payment. Coronel testified and e-mail records corroborate, however, that Coronel and Pino personally emailed Marquez as early as the end of February and throughout the succeeding months to inform him that GEM owed over $110,000 in unpaid legal fees. In response, Marquez did not object to the claim for payment. Rather, he either offered reassurances that payment was forthcoming or dodged the issue entirely. As late as April 2008, Marquez told Asesores that he would seek payment of the invoices from Brown.

Asesores completed the bulk of the work by the end of January 2008 and delivered a report to GEM documenting the results of the due diligence it had performed. By the end of March 2008, Asesores had completed all remaining work for GEM. GEM was unable to obtain sufficient financing to acquire Artefacta, however, and the deal was delayed repeatedly before eventually falling apart entirely.*fn2 On May 13, 2008 -- roughly two months after Asesores finished the last of its work for GEM -- Marquez emailed Pino to inform Asesores for the first time that GEM did not intend to pay its legal fees. Marquez claimed that payment was not required because the deal did not close. He suggested that Asesores help GEM close the deal so that Asesores could be paid. Pino replied immediately that Asesores never agreed to payment only in the event of GEM's acquisition of Artefacta and insisted on full payment of the outstanding invoices as was required by the engagement letter. Negotiation between the parties to settle the outstanding debt was unsuccessful.

Billing Period Number of Hours Total Fees Expenses December 1, 2007 January 11, 2008 522.60 $68,792.70 $0 January 12, 2008 243.26 $38,950.50 $299.27

Marquez testified that GEM believed the fees charged by Asesores were excessive. According to Marquez, Bellido, the Peruvian law firm that investigated the Peruvian company, charged GEM roughly $30,000 in legal fees and expenses. Coronel testified that, each day, all Asesores professionals filled out time sheets showing the number of hours he or she worked that day and providing a brief description of the work completed. The time sheets were then reviewed by a supervising attorney and consolidated into a billing record. Asesores' billing records show that, during the relevant time period, its lawyers and staff billed the following number of hours resulting in the following fees plus expenses:

January 31, 2008 February 1, 2008 - February 28, 2008 107.25 $15,375.00 $174.89 March 1, 2008 - March 31, 2008 57.25 $8,572.50 ...

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