Mircal v. Flacks

Background

Mircal sued Michael Flacks to enforce a personal guarantee connected to a Securities Purchase Agreement. Under that agreement, Artemyn Minerals France, a company owned by Flacks Group, acquired securities in businesses within the Imerys Group, including a company that owned a kaolin mine in Pará, Brazil. Flacks personally guaranteed up to €15 million of the agreement’s upfront purchase price.

The agreement required the upfront price to be paid in installments. Artemyn paid the first €5 million installment but did not pay the second €5 million installment, due October 3, 2024, or the reduced third installment of €4.506 million, due December 31, 2024. The total unpaid amount was €9.506 million.

After Artemyn took control of the mine, the environmental authorities in Pará suspended its operating license. Flacks argued that Mircal and the vendors had concealed regulatory and environmental concerns during the negotiations. Artemyn’s companies challenged the purchase agreement in a related proceeding in France and argued that Mircal owed Artemyn a net-cash adjustment. No final net-cash statement had been issued under the purchase agreement.

The Guarantee and the Motions

The guarantee stated that Flacks absolutely, unconditionally, and irrevocably guaranteed payment of the upfront purchase price when due. It also stated that a finding that the purchase agreement or related agreements were invalid or unenforceable would not reduce Flacks’s obligations. Flacks further waived defenses, counterclaims, and offsets to his liability under the guarantee.

Mircal moved for summary judgment, which is a decision without a trial when the evidence shows there is no genuine dispute over a fact that could affect the result. Flacks opposed the motion, arguing that the purchase agreement’s validity, the alleged concealment, and the possible net-cash adjustment created factual disputes. He also asked the court to delay its decision so he could obtain additional discovery under Federal Rule of Civil Procedure 56(d).

Court’s Analysis

Applying New York law, the court found the guarantee’s language unambiguous. The court held that Flacks owed the two unpaid installments because the guarantee required payment when the installments became due, and Artemyn undisputedly had not paid them.

The court also held that the net-cash-adjustment provisions did not permit Artemyn to withhold the installments. Those provisions applied after a final net-cash statement was issued. Because the parties had not completed the required process and no final statement had been issued, the possible adjustment did not affect Artemyn’s obligation to pay the upfront purchase price or Flacks’s guarantee of that obligation. The court noted that the purchase agreement provided other ways to apply a later adjustment if one were ultimately established.

The court rejected Flacks’s fraud-based defense. It concluded that the guarantee’s broad language waived defenses based on the validity or enforceability of the purchase agreement and foreclosed the asserted fraudulent-concealment defense. The court also denied Flacks’s request for additional discovery because the requested discovery concerned that foreclosed defense and therefore could not defeat summary judgment.

Ruling and Relief

The court granted Mircal’s motion for summary judgment. It ruled that Mircal was entitled to:

- €5,000,000, with interest at 10% per year from October 3, 2024; - €4,506,000, with interest at 10% per year from December 31, 2024; and - all out-of-pocket costs and expenses, including attorneys’ fees, incurred to obtain performance of or collect the guaranteed payments.

The court stated that the amount of Mircal’s expenses and attorneys’ fees would be determined separately. It directed the parties to submit a joint letter by August 29, 2025, proposing how that amount should be determined.