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Maggard v. Essar Global Ltd.

United States District Court, W.D. Virginia, Big Stone Gap Division

April 25, 2014


John R. Owen, Julie S. Palmer, and Lester C. Brock, III, Harman, Claytor, Corrigan & Wellman, Richmond, Virginia, for Plaintiff.

James F. Neale, Meghan Cloud, and Kristin A. Davis, McGuireWoods LLP, Charlottesville, Virginia, for Defendants.


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James P. Jones, United States District Judge.

The plaintiff, Sylvain A. Maggard, has sued the defendants, an international conglomerate and its related entities (herein collectively called " Essar" ) for a finder's fee that he claims is owed him following the $600 million acquisition by Essar of a coal mining company, Trinity Coal Corporation (" Trinity Coal" ). Essar agreed that it hired Maggard, but contends that it was only as a consultant. It paid him a monthly salary and expenses and concedes that he was a " valued and valuable member of Essar's deal team, [who] devoted considerable time and energy to a substantial due-diligence effort." (Defs.' Reply Supp. Mot. Summ. J. 19.) Nevertheless, Essar contends

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that it has paid Maggard all that it owes him and denies that it agreed to pay him a finder's fee. Maggard seeks judgment for " no less than" $8.6 million. (Am. Compl. ¶ 75.)

Following discovery in the case, Essar has filed a Motion for Summary Judgment. It contends that judgment should be entered in its favor because (1) the uncontested facts show that Maggard was not the source of the Trinity Coal opportunity; (2) the oral contract for a finder's fee alleged by Maggard is barred under the New York statute of frauds; and (3) Maggard's alternative claim for quantum meruit recovery fails as a matter of law.

Essar's Motion for Summary Judgment has been briefed and orally argued and is ripe for decision. For the reasons that follow, I will deny the motion.

I. Factual Background.

The following facts taken from the summary judgment record are either undisputed, or where disputed, are stated in the light most favorable to the plaintiff.

In 2008, Essar developed an interest in acquiring a source of metallurgical coal for use in its Essar Steel Algoma, Inc. (" Algoma" ) operations. UBS Investment Bank (" UBS" ), " [a]s part of a decade-long relationship," began to advise Essar on potential acquisitions for Algoma's supply of metallurgical coal. (Mem. Supp. Defs.' Mot. Summ. J. 14.) UBS employee Dan Chu, who had recently assisted Denham Capital, the owner of Trinity Coal, in an unsuccessful initial public offering of Trinity Coal, listed the coal mining company as a " Strategic Coal Opportunit[y]" in a September 2008 presentation to Essar executives. ( Id. Ex. E.) UBS again discussed Trinity Coal in presentations to Essar in January and June 2009, and " [a]round and among these three presentations, Mr. Chu met with Essar in London, New York, and Toronto; with Trinity Coal in Scott Depot, West Virginia; and with Denham Capital in Boston and Houston to further discuss the opportunity," all before Maggard was hired by Essar. (Mem. Supp. Defs.' Mot. Summ. J. 15.)

In an April 7, 2009, internal email, Essar executive Rajiv Saxena attached " the consolidated list of metallurgical coal opportunities received / being considered by Essar . . . ." ( Id. Ex. G.) Trinity Coal was listed among several other potential companies, and Essar intended to " get back to UBS if interested . . . ." ( Id. ) At that time, however, Essar was " seriously considering acquisition" of Grande Cache Coal Corporation, a Canadian coal mining company. ( Id. ) By June 2009, an Essar internal document reported three potential acquisitions -- Grand Cache Coal Corporation, Imagin Natural Resources, and Alloy Mine -- but noted that the company was " [i]dentifying other potential targets through local brokers in mining regions in [the] U.S." (Pl.'s Mem. Opp'n Defs.' Mot. Summ. J. Ex. 4.) To that end, Essar had published a classified advertisement seeking a " Senior Mining Consultant" in newspapers in Charleston, West Virginia, and Pittsburgh, Pennsylvania, and on coal-related websites. The advertisement specified, among other things, that qualified candidates " [m]ust be familiar with North American and in particular Central Appalachian coals," and that a " [r]esident in Central Appalachia is preferred." ( Id. Ex. 5.) It indicated that " [t]he successful candidate will consult with senior members of the corporate team regarding formulating the right strategy for coal mining resource options in North America." ( Id. ) On June 12, 2009, Maggard emailed the following response to the advertisement:

I have high level contacts within every coal company in the U.S. . . . I have a large portfolio of coal properties and reserves available for purchase or

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lease. . . . If you do not consider me for the position, feel free to contact me for property visits. You will not find these properties for sale on any public forum.

( Id. Ex. 6.) On June 21, 2009, Madhu Vuppuluri, an Essar executive in New York, telephoned Maggard at his home in Pound, Virginia. According to Maggard, in this conversation, he proposed for his services $750 per day, an additional $500 for any overnight travel, reimbursement of expenses, and a three percent commission " for any opportunity that [he] presented that led to an investment." (Pl.'s Mem. Opp'n Defs.' Mot. Summ. J. 8.) Vuppuluri responded, " Fair enough, when can you come to New York to meet with [Essar founder] Ravi Ruia[?]" (Mem. Supp. Defs.' Mot. Summ. J. Ex. I at 497:3-4.) That same month, Maggard did travel to Essar's New York office to deliver an informational presentation on coal and a description of the properties in his portfolio.[1] After the presentation, Vuppuluri informed Maggard that Ruia wanted to make a larger investment than originally contemplated and requested a revision of the commission arrangement. Maggard subsequently agreed to a " 3-2-1" structured commission, wherein he would receive three percent of the first $100 million of any investment, two percent of the second $100 million, and one percent of any amount in excess of $200 million. ( Id. at 187:3.)

After this initial meeting, Maggard began arranging mine visits and communicating with executives at coal mining companies in several different states. On July 23, 2009, Maggard emailed Karan Ahluwalia, an Essar Steel Minnesota associate, and stated, " I can talk to Ben Hatfield at ICG, Ken Woodring [President and Chief Executive Officer] at Trinity, Gary Cox at Premier Elkhorn and set up appointments at your request." (Mem. Opp'n Defs.' Mot. Summ. J. Ex. 20.) Maggard then arranged the first site visit to Trinity Coal's West Virginia metallurgical mines and the first meeting between Essar and Trinity Coal executives on July 29.

By early August 2009, Maggard had obtained the execution of a nondisclosure agreement between Trinity Coal and Essar, facilitating the exchange of information in the acquisition negotiations. In an August 6 email to Maggard, Woodring proposed an itinerary for additional site visits between August 15 and August 25, and indicated that Trinity Coal was " pleased to hear Essar is interested in looking further at [its] metallurgical properties." ( Id. Ex. 25.)

On August 17, Maggard indicated that " [t]here are three people besides Essar at the table" with Trinity Coal; he expressed concern that Essar's failure to visit per the itinerary " would be considered [a] lack of interest," and he requested " an Essar representative to satisfy their agenda." ( Id. Ex. 29.) On August 18, Ahluwalia, Vuppuluri, and Maggard traveled to Trinity Coal's office in Scott Depot, West Virginia and " [three] structures [were] broadly discussed [with Trinity Coal executives] for potential transaction with Essar." ( Id. Ex. 30.) On August 19, Maggard emailed Essar executives after speaking with Woodring and notified them that the " [s]tructure between Essar and Trinity was discussed with Den ham [sic] today. Ken does not foresee a problem with structure details. But does think it may be Friday before

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they have details [sic] structure to forward to Essar." ( Id. Ex. 31.) On Friday, August 21, Woodring emailed Maggard and Essar executives to confirm that Trinity Coal executives " spent a couple of hours on the phone with the Denham folks to bring them up to speed with our thinking . . . . and we will deliver the conceptual proposal to [Essar] early next week." ( Id. Ex 32.) No one from UBS was included in these emails. In fact, Chu and UBS were later retained by Denham Capital, not Essar, in finalizing the acquisition.

Although Maggard had been working for Essar for several months, a written employment agreement had not been executed, raising concerns among some Essar executives, including Narasimha Ramakrishnan, the Director of Finance at Essar Steel Minnesota, that he might be considered an employee rather than an independent contractor. In September 2009, because he was working more than originally anticipated, Maggard renegotiated his compensation to $4,000 per month, and on September 17, Ahluwalia requested from Ramakrishnan an emergency transfer of funds to Maggard, assuring Ramakrishnan that he would " ensure all the paper work is complete once [he is] back in NY." ( Id. Ex. 48.) On October 2, Ramakrishnan forwarded a copy of Essar's form contract for independent contractors to Ahluwalia, and remarked, " Let the compensation be mentioned as $4,000 per month. Do not specify the hours." ( Id. Ex 44.) Confirming the new arrangement, Vuppuluri wrote the following in a November 17, 2009 correspondence to Maggard:

You will be paid at the end of each month a rate of $4,000.00. In addition to this monthly fee, Essar Steel Minnesota will reimburse you for all of your out-of-pocket expenses, including food, accommodations, travel, cell phone, ...

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