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RCJV Holdings, Inc. v. Collado Ryerson, S.A. de C.V.

United States District Court, S.D. New York

May 8, 2014

RCJV HOLDINGS, INC., Plaintiff,
v.
COLLADO RYERSON, S.A. DE C.V., CORYER, S.A. DE C.V., and NATIXIS, Defendants

Page 535

[Copyrighted Material Omitted]

Page 536

For RCJV Holdings, Inc., Plaintiff: Alan J. Martin, PRO HAC VICE, Law Offices of Alan Martin, Chicago, IL; Stefan Brant Kalina, Steven David Skolnik, Cox Padmore Skolnik & Shakarchy LLP, New York, NY.

For Collado Ryerson, S.A. de C.V., Coryer, S.A. de C.V., Defendants: Seth T. Taube, LEAD ATTORNEY, Jennifer Collins Stewart, Melissa Jane Armstrong, Baker Botts LLP (NY), New York, NY; Ian Hugh Hummel, Maxim Group LLC, New York, NY; Mark K. Glasser, PRO HAC VICE, Baker Botts LLP, Houston, TX.

For Natixis, Intervenor: Wendy Helene Schwartz, LEAD ATTORNEY, Binder & Schwartz LLP, New York, NY; Brandon David Cunningham, Reed Smith LLP, New York, NY; Danica Sophia You, Reed Smith (NYC), New York, NY.

OPINION

Page 537

OPINION AND ORDER

Ronnie Abrams, United States District Judge.

Plaintiff RCJV Holdings, Inc. (" RCJV" ) brings this breach of contract action against Collado Ryerson, S.A. de C.V. (" Collado" ), and Coryer, S.A. de C.V. (" Coryer" ), to recover $2,655,000 plus interest allegedly owed by Collado on a promissory note and by Coryer as guarantor of Collado's obligations under that note. Defendants claim that the promissory note does not permit them to pay RCJV until they have satisfied a debt to Intervenor-Defendant Natixis incurred under a credit facility agreement. Before the Court are the parties' cross-motions for summary judgment on RCJV's claims.

For the following reasons, the parties' cross-motions for summary judgment with respect to Collado's liability are denied, but RCJV's motion for summary judgment is granted with respect to Coryer's liability.

BACKGROUND

A. Factual Background[1]

1. The Joint Venture

RCJV is an affiliate of Ryerson, Inc. (" Ryerson" ), and Coryer is an affiliate of Grupo Collado, S.A. de C.V. (" Grupo" ), a Mexican corporation. (Full 56.1 ¶ ¶ 1-3.) In 2003, Ryerson and Grupo, through RCJV and Coryer, entered into a transnational joint venture to form Collado, which fabricated and processed steel in Mexico for sale to the joint venturers' customers. (Id. ¶ ¶ 3-4.) Ryerson owned 49.99% of Collado through RCJV, while Grupo owned the majority of Collado through Coryer. (Id. ¶ 5.)

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2. Financing the Joint Venture

On August 19, 2004, Collado entered into an Uncommitted Credit Facility Letter Agreement with Natixis. (Id. ¶ 18.) Under this original Credit Facility, Natixis made revolving credit loans of up to $10,000,000 available to Collado for a specified period of time ending on May 31, 2005. (Id. ¶ ¶ 10, 12.) Although Natixis was permitted to revoke the Credit Facility at any time, it was also permitted to extend the termination date by amendment, as it did three times between 2005 and 2007. (Id. ¶ ¶ 9, 12, 18-20.)

On October 1, 2008, Collado and Natixis amended the Credit Facility a fourth time (the " October 1, 2008 Amendment" ), extending the termination date to December 29, 2008, (Id. ¶ 21.) This Amendment also added a covenant (the " October 1, 2008 Covenant" ) that prohibited Collado from " pay[ing] any indebtedness, accounts payable, or other amount due by [Collado] to either [Grupo] or Ryerson Inc., or any of their respective affiliates or subsidiaries until the Loans and all other amounts due and owing under the [Credit Facility] ha[d] been paid and satisfied in their entirety." (Id. ¶ 22; Def. Ex. C at COLLADO_000205.) The Credit Facility states that the breach of any covenant constitutes an " Event of Default." (Def. Ex. B at COLLADO_003999-4000.)

3. Termination of the Joint Venture

In the spring of 2008, Ryerson advised that it wanted to liquidate the joint venture, citing the two sides' inability to agree on operations or strategy. (Full 56.1 ¶ ¶ 24, 26-27.) Grupo expressed interest in buying Collado, rather than liquidating it or selling it to a third party. (Id. ¶ 24.) Natixis, however, was reluctant to continue its participation, as Collado's debt under the Credit Facility would need to be treated as a Mexican loan if Ryerson exited the joint venture. (Id. ¶ 28.) Consequently, Grupo committed to pay Natixis S3,000,000 in cash, Natixis was involved in the buyout negotiations, and the final agreement was subject to Natixis's approval. (Id. ¶ ¶ 30, 33.)

Collado, Grupo (through Coryer), Ryerson (through RCJV), and Natixis consummated their transaction on November 28, 2008. (Id. ¶ ¶ 35, 38.) Ryerson and Collado entered into a termination agreement that concluded Ryerson's investment in Collado. (Id. ¶ 39.) Ryerson also sold its interest in Collado to Grupo for $2,655,000 in the form of a promissory note (the " Note" ) from Collado in favor of RCJV. (Id. ¶ ¶ 34-36, 74, 100; Def. Ex. A at Ex. A.[2]), In addition, Coryer executed a guaranty (the " Guaranty" ) of Collado's obligations under the Note in favor of RCJV. (Full 56.1 ¶ ¶ 106-07; Def. Ex, A at Ex, A, 5.) Natixis approved the termination agreement and Note and received its $3,000,000 payment. (Full 56.1 ¶ ¶ 43-44, 72.)

Collado and Natixis also executed an additional amendment to the Credit Facility (the " November 28, 2008 Amendment" ) reflecting Natixis's approval and payment, (Id. ¶ ¶ 47, 64; Pl. Ex. 10 at COLLADO_2268, 2270-72.) This Amendment purported to be a " final extension of the [Credit Facility]" to December 28, 2009, " in order to afford [Collado] the opportunity to find a replacement lender." (Pl. Ex. 10 at COLLADO_002268.) The Amendment also modified the October 1, 2008 Covenant in order to permit the payment of transitional employee expenses and net trade payables to Ryerson. (Id. at COLLADO_002269; Full 56.1 ¶ ¶ 64-65.)

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The Note states that Collado promises to pay RCJV the principal amount of $2,655,000 plus interest on April 15, 2011. (Def. Ex. A at Ex. A, 1.) After various paragraphs explaining the parties' rights and obligations, the Note contains a subordination provision (the " Subordination Provision" ):[3]

o [Collado] covenants and agrees that notwithstanding anything to the contrary herein, but subject to the terms of the next sentence, this Note and the obligations hereunder (the " Subordinated Debt" ) are subordinated in right of payment to all obligations of [Collado] to Natixis (f/k/a Natexis Banques Populaires), New York Branch (the " Bank" ) under that certain Uncommitted Credit Facility Letter Agreement dated as of August 19, 2004 between the Bank and [Collado] (as amended from time to time, the " Natixis Credit Facility" ), now existing or hereafter arising (the " Senior Debt" ); provided, that the aggregate principal amount of the Senior Debt shall not exceed $11,400,404.00.
o Notwithstanding the foregoing, [Collado] shall be permitted to make (and [RCJV] shall be permitted to retain) any payment to [RCJV] under the terms of this Note for all or any part of the Subordinated Debt; provided, however,
(i) that no such payment may be made until such time as the Subordinated Debt becomes due and owing hereunder;
(ii) at the time of such payment, no default or event of default shall have occurred and be continuing under the Natixis Credit Facility (provided, however, if the Bank shall have voluntarily extended the maturity of the Natixis Credit Facility beyond the Due Date, [Collado] shall be permitted to make (and [RCJV] shall be permitted to retain) any payment hereunder if at the time of such payment, no default or event of default shall have occurred and be continuing as a result of [Collado's] failure to pay any amount owing to the Bank under the Natixis Credit Facility); and
(iii) the making of such payment would not create or cause a default or event of default to occur under the Natixis Credit Facility (it being understood that this clause (iii) shall not apply to any covenant added to the Natixis Credit Facility after the date hereof expressly prohibiting payment of this Note).
o If any default or event of default shall exist under the Natixis Credit Facility, any payment due hereunder not made during the existence of such default shall be paid forthwith upon any cure or waiver of such default.
o Notwithstanding anything to the contrary herein, the terms contained in this paragraph shall not apply if all or any part of the Natixis Credit Facility is assigned by the Bank to any other lender or if any portion of the Natixis Credit Facility shall be replaced by any successor credit facility.

(Id. at Ex. A, 2.)

Immediately after the Subordination Provision, the Note contains the following provision (the " Event of Default Provision" ):

Each of the following shall constitute an event of default under this Note (each, an " Event of Default" ):

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(a) [Collado] fails to pay the entire Principal Amount, together with all accrued and unpaid interest thereon, on the Due Date (whether or not [Collado] is permitted to make such payment under the terms of the immediately preceding paragraph [ i.e., the Subordination Provision]); . . . .
If [an] Event of Default occurs and is continuing, then, upon written notice by [RCJV] to [Collado], the entire outstanding portion of the Principal Amount and all accrued and unpaid interest hereunder and all other unpaid amounts and obligations due by [Collado] hereunder shall become immediately due and payable without protest, demand, presentment, or further notice of any kind.

(Id. at Ex. A, 2-3.)

On the last page of the Note, after the signatures of Collado's counsel, appears the Guaranty signed by Coryer's counsel:

[Coryer] hereby irrevocably and unconditionally guaranties the full and complete payment and performance of all of [Collado's] obligations under this Note, as and when due, whether for the payment of money, the performance of obligations, or otherwise as more specifically set forth in this Note. It shall not be necessary for [RCJV] to exhaust its remedies against [Collado] prior to asserting its remedies against Coryer under this Guaranty. This Guaranty is a guaranty of performance and payment, and not ...

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