United States District Court, S.D. New York
OPINION & ORDER
KATHERINE B. FORREST, District Judge.
On February 17, 2012, Axiom Capital Management, Inc. ("Axiom") signed a contract ("the Agreement") with Oracle Mining Corp. ("Oracle") to assist Oracle with raising financing for its Oracle Ridge Copper Project. The dispute giving rise to this lawsuit concerns whether Oracle owes Axiom payment for a financial arrangement entered into with the private equity firm Red Kite Management ("Red Kite") in November 2012. The resolution of this dispute turns on the interpretation of the contract between the parties.
In December 2012, Axiom filed this lawsuit asserting claims for breach of contract (first and second claims for relief), unjust enrichment (third claim for relief), quantum meruit (fourth claim for relief), and declaratory judgment (fifth claim for relief). (ECF No. 1 ¶¶ 24-52.) Oracle answered and counter-claimed for a variety of declarations as to the same issues in its favor. (ECF No. 61 ¶¶ 53-127.) This Court previously denied Oracle's motion for summary judgment on the basis that the record before the Court at that time rendered what ought otherwise to be a straightforward phrase ("introductions to") ambiguous. (ECF No. 48 at 3.) Based on the evidence presented on that motion, it was unclear whether the contract used the phrase "introductions to" with reference to Oracle as a company, or whether it instead meant "introductions to" Oracle's particular financial offering. (Id.) In particular, the preamble of the Agreement, when read in combination with section (A)(1) of the Agreement, rendered ambiguous that which would otherwise have been easily and speedily resolved.
This Court held a bench trial on January 28, 29, and 30, 2014. At that trial, Mark Martino, President of Axiom, and three of Axiom's Managing Directors, Daniela Bendor, Harvey Stober, and Lincoln Crichlow, testified by declaration on direct and were cross-examined live. In addition, Oracle's Alexander Langer (a former Oracle employee), Jason Mercier (Oracle's Senior Vice President and Corporate Secretary), Paul Eagland (Oracle's former CEO, former Chairman of the Board and director), and Gregory K. Liller (an Oracle board member), also testified by declaration on direct and were cross-examined live. Finally, the Court also heard from Douglas Silver of Red Kite. The Court also received into evidence deposition testimony designated by the parties from Oskar Lenowski, CEO of Red Kite, and Barry Feldman, a trader from Oracle, and several dozen documentary exhibits and digital copies of recorded telephone calls.
This Opinion & Order constitutes the Court's findings of fact and conclusions of law. For the reasons set forth below, the Court finds in favor of Oracle as to all claims. Judgment is therefore entered by separate order for Oracle. Each party shall bear its own costs.
I. FINDINGS OF FACT
In February 2010, Paul Eagland, Gregory K. Liller, and others purchased the Oracle Ridge Mine. (Trial Decl. of Paul Eagland ("Eagland Decl."), Court Ex. 6, at ¶ 6, at ECF No. 62.) Later that year, Goldhawk Resources, now known as Oracle Mining Corp., acquired the Oracle Ridge Mine. (Id.) Eagland was the CEO of Oracle for a period commencing in October 2011, and later served as the Executive Chairman of Oracle's Board of Directors, and as a board member until November 2013. (Id. ¶¶ 6, 7.)
During late 2011 and early 2012, Oracle was considering a public offering of securities. (Trial Decl. of Alexander Langer ("Langer Decl."), Court Ex. 4, at ¶ 21, ECF No. 63.) This offering was never completed. (See Trial Tr. 74:22-75:01, 142:04-142:10, ECF Nos. 82, 84, 86.)
In May 2011, a representative of Red Kite, Robert Loewen, contacted Oracle's then-CEO, Kevin Drover, concerning a potential Red Kite investment in Oracle. (Eagland Decl. ¶ 14; Trial Decl. of Gregory K. Liller ("Liller Decl."), Court Ex. 9, at ¶ 13, ECF No. 64; DX03.) During that initial communication, Red Kite stated that it was in the process of creating a fund called "Mine Finance II" ("MF II"), which would also provide equity financing. (Id.)
In September 2011, Alexander Langer, Oracle's then-Vice-President of Capital Markets, was in London for "London Metals Exchange Week." (Langer Decl. ¶ 5.) During that week, Mark Forsyth, an Oracle director, introduced Langer to Andrew Wilson, the Director of Institutional Equity Sales at Haywood Securities (U.K.). (Id. ¶ 6.) Over the course of several additional social events that week, Langer and Wilson discussed procuring equity financing for Oracle. (Id.)
On October 9, 2011, Mark Forsyth, a director of Oracle, communicated with Red Kite's trader, Barry Feldman, regarding a possible Red Kite investment in Oracle. (Eagland Decl. ¶ 15; Trial Decl. of Douglas Silver ("Silver Decl."), Court Ex. 8, at ¶ 15, ECF No. 66; DX04.) Silver recalls that Forsyth again raised the possibility of a Red Kite investment in Oracle during a conference call later in October 2011. (Silver Decl. ¶ 17; DX06.) In November 2011, Forsyth suggested to Eagland that Oracle approach Red Kite for financing. (Eagland Decl. ¶ 15.) Eagland agreed. (Id.) Liller supported working with Red Kite; he believed that an investment by that firm would make Oracle more attractive to other potential investors. (Liller Decl. ¶ 14.)
In November 2011, Wilson of Haywood Securities introduced Oracle's Alexander Langer to Red Kite's Grant Gilmour. (Eagland Decl. ¶ 16; Langer Decl. ¶ 7; Silver Decl. ¶ 18; DX08, at RK-00000006.) Langer shared Oracle's "corporate presentation" with Gilmour. (Langer Decl. ¶¶ 8, 9; DX07, at RK-00001796.) That presentation contained information regarding, inter alia, Oracle's plan to have "minimal long term debt." (Id. at RK-00001818.) Gilmour and Langer scheduled a call for the following week that would include Eagland. (Langer Decl. ¶¶ 10, 11.) During that call, Eagland, Langer, and Gilmour spoke for over an hour about Oracle's financing needs, including the fact that Oracle preferred equity financing to other types of financing. (Eagland Decl. ¶ 17; Langer Decl. ¶ 11.) During that call, Gilmour discussed Red Kite's interest in various forms of financing, including debt, equity, royalties, offtakes, and streaming deals. (Eagland Decl. ¶ 17; Langer Decl. ¶ 11.) Oracle and Red Kite had another conference call on December 12, 2011, during which they discussed, inter alia, the types of ores Oracle expected from the mine. (Silver Decl. ¶ 19; DX06.)
In late 2011, Oracle was in discussions with Credit Suisse regarding a $70 million credit facility. (Eagland Decl. ¶ 9; Trial Declaration of Jason Mercier ("Mercier Decl."), Court Ex. 7, at ¶ 17, ECF No. 65.) The parties signed a term sheet in late February 2012. (Eagland Decl. ¶ 9; Mercier Decl. ¶ 17.) Oracle was also in discussions with two other companies, Glencore and Trafigura, regarding debt and "offtake" financing during the same period. (Eagland Decl. ¶ 9.) Oracle was also seeking equity investment. (Id. ¶ 10.) Eagland was more interested in equity than debt financing; debt financing must be repaid by a date certain, irrespective of when the mine becomes productive. (Id.) In contrast, equity provides a cash infusion that does not need to be repaid. (Id. ¶ 11.) In mining, off take and royalty arrangements, which provide for payment in the form of output once the mine is productive, are additional methods of financing. (Id. ¶ 12.)
In January 2012, Langer received an email from Red Kite's Douglas Silver suggesting a mine visit, and informed Eagland that Silver would visit the Oracle mine in February 2012. (Id. ¶ 18; Langer Decl. ¶ 13; Liller Decl. ¶ 15; DX12.) Langer was subsequently involved details relating to Silver's visit. (Langer Decl. ¶¶ 16, 17.) Eagland had first met Silver in the 1980s; while he had not communicated with Silver since the 1980s, Eagland advised Langer that Silver would see the value in the mine. (Eagland Decl. ¶ 18.) Silver confirmed that he had worked with Eagland in the 1980s. (Silver Decl. ¶ 5.)
Separately, by mid-January 2012, Liller was in regular telephonic communication with Eagland about a potential investment by Red Kite. (Liller Decl. ¶ 16.) Prior to Silver's mine visit, Liller met at length with Luis Saenz, Oracle's chief geologist and the individual who would be conducting the tour. (Liller Decl. ¶¶ 17-19.) Liller discussed project data, including technical matters and financial information, such as expected capital expenditures for infrastructure needs and the status of financing, with Saenz. (Id. ¶ 19.)
Langer had known Axiom's Lincoln Crichlow since he had worked at a previous job. (Langer Decl. ¶ 23.) At the beginning of 2012, Crichlow, who had just started working at Axiom, reached out to Oracle to assist it with finding investors. (Id.) Bendor, Crichlow, and Carl Bronstein of Axiom met with Mercier of Oracle in January 2012. (Trial Decl. of Daniela Bendor ("Bendor Decl."), Court Ex. 2, at ¶ 6, ECF No. 92.) Crichlow represented to Mercier that Axiom was heavily focused on and had significant contacts in the mining sector. (Mercier Decl. ¶ 19.) The Axiom team continued to have conversations with Oracle about working together. (Bendor Decl. ¶ 7.) In mid-February, Langer and Mercier discussed Oracle's requirements with Axiom. (Mercier Decl. ¶ 20.) In particular, Mercier and Langer explained to Bendor that Oracle wanted to reach out to new potential investors. (Id.) Axiom stated that they could expand Oracle's U.S.-based contacts. (Id.)
In early February 2012, Langer met with Gilmour in South Africa; Langer confirmed that everything was in order for Silver's mine visit later that month. (Langer Decl. ¶ 18.)
On February 17, 2012, Bendor provided Langer and Mercier with a proposal that stated that Axiom's goal was "to increase Oracle's investor base." (Mercier Decl. ¶ 21; PX8, at ACM000058; DX15, at ACM000058.) At the time, Bendor understood that Oracle was in the process of selecting a lead banker for the planned offering. (Bendor Decl. ¶¶ 7, 10.) She viewed the Agreement as temporary, pending selection of a lead bank and execution of a more extensive bank syndication agreement. (Id. ¶¶ 10, 11; PX10, at ACM001469.)
Langer reviewed every draft of the Agreement that Axiom presented to Oracle. (Langer Decl. ¶ 26.) He testified that the "introduction" language in the preamble of the Agreement was included at the specific request of Oracle and that it was very important to Oracle. (Id. ¶¶ 29, 30; Tr. 289:09-18, 323:22-24; DX21, at ACM000121.) Langer stated that one of the key points of the Agreement for Oracle was the "introduction" language. (Tr. 289, 291.) He further testified that the addition of the "introduction to" language in the preamble was to "reaffirm that introduction point." (Tr. 291:11.)
The "introduction to" language is standard in finder's fee agreements. (Tr. 324:08-10; 574:10-575:06.) Langer understood that an "introduction to" the Company meant an initial introduction; he had never used the term in any other way. (Tr. 299:03-07, 323:22-325:07.) Langer also understood the agreement between Oracle and Axiom to provide for payment to Axiom of a fee if it made an initial introduction to Oracle of an investor that purchased securities in Oracle. (Tr. 297:15-299:07; Langer Decl. ¶ 31.) Langer did not view Red Kite as a new introduction to Oracle, because Oracle had a prior relationship with Red Kite. (Tr. 322:25-323:04, 328:15-18; Langer Decl. ¶ 32.) Langer communicated his understanding of the "introduction to" language to Bendor, Crichlow and Bronstein. (Tr. 298:05-300:23.)
Mercier reviewed each draft of the Agreement before it was executed. (Mercier Decl. ¶¶ 24-26.) He understood and intended that Axiom would only be paid in the event that it introduced a new investor to Oracle that purchased securities in Oracle. (Mercier Decl. ¶ 27; Tr. 574:10-575:16.)
Bendor drafted the initial version of the Agreement. (Tr. 97:12-15; see also Bendor Decl. ¶ 10; Mercier Decl. ¶ 23.) She had only recently joined Axiom and had no prior experience on mine deals. (Tr. 85:07-86:09; Bendor Decl. ¶ 4.) She had never before been involved in an engagement in which she was hired to act as a finder and not as a placement agent. (Tr. 100:08-21.) She cut-and-pasted the phrase "If, as a result of the introduction(s) made by or through Axiom to Company" from another engagement letter that someone else at Axiom had previously drafted. (Tr. 112:21-113:22; 114:04-07.) She did not have any communications with anyone at Axiom regarding the language of the Agreement. (Tr. 114:08-16.) Bendor assumed that the "introduction" language was "regular placement" agent language. (Tr. 114:12-13.)
Like Langer, Bendor testified that Oracle requested the insertion of the phrase "introduced by the Placement Agent" in the first sentence of the preamble. (Tr. 117:15-118:11; Bendor Decl. ¶ 13; see also DX21.) Oracle's proposed changes were made to the Agreement. (DX01, at OMC-00494.)
Every version of the Agreement states that it is "non-exclusive." (DX17, at OMC-000480; DX19, at ACM000100; DX20, at ACM00110; DX21, at ACM000119; DX22, at ACM000131; DX23, at ACM000143.) Every version of the Agreement states that Axiom would be paid for investors or purchasers "whom Axiom had introduced to the Company." (DX17, at OMC-000481; DX19, at ACM000101; DX20, at ACM000111; DX21, at ACM000120; DX22, at ACM000132; DX23, at ACM000144.) Other members of the Axiom team, including Harvey Stober, a Managing Director of investment banking, and Lincoln A. Crichlow, also a Managing Director, played no role in drafting the Agreement. (Tr. 340; Trial Declaration of Harvey S. Stober ("Stober Decl."), Court Ex. 5, at ¶ 5, ECF No. 94; Trial Declaration of Lincoln A. Crichlow ("Crichlow Decl."), Court Ex. 3, at ¶ 9, ECF No. 93.)
The Agreement provides as follows:
This letter (the "Agreement") constitutes the agreement between Oracle Mining Corp., a Canadian corporation (the "Company") and Axiom Capital Management, Inc. ("Axiom" or the "Placement Agent") whereby Axiom has agreed to serve as a placement agent for the Company, on a non-exclusive and "best efforts" basis, in connection with the proposed offer and private placement (the "Offering" or "Private Placement") by the Company of the Company's securities which may be comprised of senior debt, preferred stock, convertible notes, common stock, and warrants in any combination... (the "Securities") to accredited investors introduced by the Placement Agent.... This agreement shall exist for a period of 120 days.... It is agreed that Oracle will enable Axiom to place a minimum of five million dollars ($5, 000, 000).... If, as a result of the ...