India Globalization Capital, Inc. v. Apogee Financial Investments, Inc.

Background

India Globalization Capital, Inc. (IGC) and Apogee Financial Investments, Inc. entered into a Purchase Agreement under which IGC would acquire Midtown Partners & Co., LLC in two stages. Apogee was to receive IGC shares, subject to conditions including a $325,000 capital infusion into Midtown and registration of the shares with the Securities and Exchange Commission. Apogee deposited only $219,000 by the December 18, 2014 Initial Closing, although it deposited $344,000 by the end of that year.

The agreement also required Apogee to use its best efforts to obtain approval from the Financial Industry Regulatory Authority (FINRA) for the change in ownership. Apogee never submitted the required Continuing Membership Application, and FINRA never approved the change. IGC later lent Apogee $70,000, which Apogee did not repay.

IGC had appointed John R. Clarke as its Principal Financial and Accounting Officer. IGC later agreed to compensate Clarke with 200,000 shares per year, subject to vesting. Clarke did not receive those shares before IGC terminated him as an officer. He claimed that IGC later reaffirmed its promise to pay the shares; in opposing summary judgment, he instead argued that IGC made a new promise in exchange for a business introduction.

Summary-Judgment Standard

The court applied the summary-judgment standard under Federal Rule of Civil Procedure 56. Summary judgment is appropriate when there is no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment as a matter of law. The parties agreed that New York law governed their contract claims, except that the court assumed Maryland law governed Clarke’s Shares Agreement because both parties relied on Maryland law in briefing the motion.

Apogee’s Claim About the Initial Shares

The court denied summary judgment on Apogee’s claim that IGC breached the Purchase Agreement by issuing restricted, rather than freely tradable, shares. The agreement required IGC to issue common stock but did not specify whether the shares had to be restricted or freely tradable. The court held that this language was ambiguous and that a factual dispute remained about the parties’ intent.

The court nevertheless held that Apogee was entitled to only 673,846 Initial Shares, apart from the 200,000 shares held in escrow, because Apogee had deposited only $219,000 by the Initial Closing. The court rejected Apogee’s argument that its later deposits satisfied the agreement because the contract required the capital infusion before or at the Initial Closing. The court also rejected Apogee’s waiver arguments.

The court did not decide whether Apogee’s own breach prevented it from recovering on its claim against IGC. It also held that the amount of damages could not be resolved on summary judgment. The claim therefore remains for further proceedings.

Apogee’s Failure to Obtain FINRA Approval

The court granted summary judgment for IGC on its claim that Apogee breached the Purchase Agreement by failing to use best efforts to obtain FINRA approval by June 30, 2015. Apogee knew by February 6, 2015, at the latest, that IGC had issued restricted shares, but it accepted 700,000 shares and continued performing under the agreement. It therefore could not rely on IGC’s alleged breach to excuse its own performance.

The court found that Apogee failed to submit the required Continuing Membership Application even though a complete application was ready for approval. Under the agreement and New York law, that failure established a breach as a matter of law. The court ruled that damages for this breach would be determined at trial.

The $70,000 Loan

The court granted IGC summary judgment against Apogee for breach of the Loan Agreement. The parties did not dispute that IGC loaned Apogee $70,000, that repayment was due by May 6, 2015, and that Apogee never repaid the loan. The court entered judgment for $70,000 plus prejudgment interest beginning May 7, 2015.

Clarke’s Shares Claim

The court granted IGC summary judgment on Clarke’s claim for breach of the Shares Agreement. Clarke did not address his earlier position that the agreement had been revived in December 2018 under Maryland’s debt-acknowledgment doctrine, so the court treated that position as abandoned.

The court also rejected Clarke’s attempt to assert a new theory that IGC made a fresh agreement in December 2018 in exchange for a business introduction. That theory was not alleged in the counterclaim and contradicted the allegation that IGC had merely reaffirmed an earlier promise. The court concluded that Clarke’s remaining claim was barred by Maryland’s three-year statute of limitations.

Other Dispositions and Conclusion

Apogee and Clarke abandoned their claims against Ramachandra Mukunda, so the court dismissed Mukunda from the action. The court’s final disposition was that IGC’s motion for summary judgment was denied as to Apogee’s claim that IGC breached the parties’ Share Purchase Agreement and otherwise granted. The court stated that it would issue a final judgment after all claims were resolved. Judge Valerie Caproni also directed the parties to submit a joint status letter addressing settlement and a proposed trial schedule.