IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

RICHMOND DIVISION 

______________________________________________________________________________ 

VCLF’S MEMORANDUM OF LAW IN OPPOSITION TO BLACK DIAMOND’S 

MOTION FOR PARTIAL SUMMARY JUDGMENT 

______________________________________________________________________________ 

In re: 

PATRIOT COAL CORPORATION, et al., 

 Debtors. 

 Chapter 11 

Case No. 15-32450 (KLP) 

Jointly Administered 

 

BLACK DIAMOND COMMERCIAL FINANCE, LLC, 

 Plaintiff, 

 v. 

VIRGINIA CONSERVATION LEGACY FUND, INC. and 

ERP COMPLIANT FUELS, LLC, 

 Defendants. 

 

Adv. Proc. No. 16-03105 (KLP) 

REDACTED AND FILED 

UNDER SEAL PURSUANT 

TO ECF DOC. NO. 64 

VIRGINIA CONSERVATION LEGACY FUND, INC. and 

ERP COMPLIANT FUELS, LLC, 

 Counterclaim-Plaintiffs, 

 v. 

BLACK DIAMOND COMMERCIAL FINANCE, LLC, 

 Counterclaim-Defendant. 

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Patrick J. Potter 

 PILLSBURY WINTHROP SHAW PITTMAN LLP 

 1650 Tysons Boulevard, Suite 1400 

 McLean, Virginia 22102-4856 

 Telephone: (703) 770-7900 

Facsimile: (703) 770-7901 

E-mail: patrick.potter@pillsburylaw.com 

William M. Sullivan, Jr. (admitted pro hac vice) 

PILLSBURY WINTHROP SHAW PITTMAN LLP 

1200 Seventeenth Street, NW 

Washington, DC 20036-3006 

Telephone: (202) 663-8027 

Facsimile: (202) 663-8007 

E-mail: wsullivan@pillsburylaw.com 

 Andrew M. Troop (admitted pro hac vice) 

Samuel S. Cavior (admitted pro hac vice) 

Joshua I. Schlenger (admitted pro hac vice)

PILLSBURY WINTHROP SHAW PITTMAN LLP 

1540 Broadway 

New York, New York 10036-4039 

Telephone: (212) 858-1000 

Facsimile: (212) 858-1500 

E-mail: andrew.troop@pillsburylaw.com 

Attorneys for Virginia Conservation Legacy Fund, 

Inc. and ERP Compliant Fuels, LLC 

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i 

TABLE OF CONTENTS 

Page 

PRELIMINARY STATEMENT .................................................................................................... 1

FACTS ............................................................................................................................................ 2

A. Black Diamond’s Familiarity with the Patriot Assets and Involvement in the Patriot 

Chapter 11 Proceeding ........................................................................................................ 2

B. The Commitment Letter ...................................................................................................... 3

C. Black Diamond Fails to Provide VCLF Any Draft Loan Documentation .......................... 4

D. Black Diamond Instructs VCLF to Obtain Additional Financing on the Sidelines of 

the Patriot Confirmation Hearing ........................................................................................ 5

E. Black Diamond is Involved in Changes to the VCLF-Patriot APA Between 

September 21 and October 23, 2015 ................................................................................... 6

F. On the Eve of the Scheduled Closing, Black Diamond Demands Material Changes to 

the Commitment Letter ....................................................................................................... 6

G. VCLF Attempts to Cobble Together a Closing with Patriot............................................. 10

H. VCLF Apprises Black Diamond of Its Breach and Offers It a Final Chance to Perform . 10

ARGUMENT ................................................................................................................................ 12

I. BLACK DIAMOND REPUDIATED THE COMMITMENT LETTER BY OCTOBER 

23, 2015................................................................................................................................... 12

A. Legal Standard .................................................................................................................. 12

B. Black Diamond Refused to Finance Under the Terms of the Commitment Letter, 

Demanding Material Changes to the Commitment Letter at the Eleventh Hour on a 

Take-It-Or-Leave-It Basis ................................................................................................. 15

C. Black Diamond’s Repudiation Was Positive and Unequivocal ........................................ 20

D. VCLF’s Attempts on October 23 and 25, 2015 to Persuade Black Diamond to Change 

Its Mind Did Not Constitute a Waiver .............................................................................. 23

II. BLACK DIAMOND’S REPUDIATION IMMEDIATELY RELIEVED VCLF OF ITS 

OWN PERFORMANCE OBLIGATIONS UNDER THE COMMITMENT LETTER ........ 29

CONCLUSION ............................................................................................................................. 30

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ii 

TABLE OF AUTHORITIES 

Page(s) 

Cases 

AG Properties of Kingston, LLC v. Besicorp-Empire Dev. Co., LLC, 

14 A.D.3d 971 (3d Dep’t 2005) .........................................................................................24, 27 

AM Cosmetics, Inc. v. Solomon, 

67 F. Supp. 2d 312 (S.D.N.Y. 1999) ........................................................................................24 

Angelone v. Chang, 

761 N.E.2d 426 (Ind. Ct. App. 2001).......................................................................................27 

BT Triple Crown Merger Co. v. Citigroup Global Mkts., Inc., 

19 Misc. 3d 1129(A), (Sup. Ct., N.Y. Cty. 2008) ....................................................................20 

Crosspoint Seven v. Mfs. Life Ins. Co., 

148 F. App’x 535 (7th Cir. 2005) ......................................................................................26, 27 

De Forest Radio Tel. & Tel. Co. v. Triangle Radio Supply Co., 

243 N.Y. 283 (1926) ................................................................................................................24 

DiFolco v. MSNBC Cable L.L.C., 

831 F. Supp. 2d 634 (S.D.N.Y. 2011) ................................................................................12, 20 

Eden United, Inc. v. Short, 

573 N.E.2d 920 (Ind. Ct. App. 1991).......................................................................................27 

Grp. 1 Auto., Inc. v. Country Imported Car Corp., 

No. 07-CV-1454 RRM WDW, 2012 WL 11955634 (E.D.N.Y. Aug. 15, 2012) ....................24 

Heart Const. Corp. v. Gower, 

6 Misc. 3d 1018(A), 800 N.Y.S.2d 347 (Dist. Ct. Nassau Cty. 2004) ....................................27 

IBM Credit Fin. Corp. v. Mazda Motor Mfg. (USA) Corp., 

92 N.Y.2d 989 (1998) ..............................................................................................................12 

Inamed Corp. v. Kuzmak, 

275 F. Supp. 2d 1100 (C.D. Cal. 2002) .............................................................................28, 29 

Israel Cancer Research Fund, Inc. v. Harvey & Gloria Kaylie Foundation, Inc., 

33 Misc. 3d 1237(A), (Sup. Ct., N.Y. Cty. 2011) ....................................................................13 

Jay Cty. Rural Elec. Membership Corp. v. Wabash Valley Power Ass’n, Inc., 

692 N.E.2d 905 (Ind. Ct. App. 1998).......................................................................................27 

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iii 

Kain Dev., LLC v. Krause Properties, LLC, 

130 A.D.3d 1229 (3d Dep’t 2015) ...........................................................................................29 

Kelly Capital, LLC v. S & M Brands, Inc., 

873 F. Supp. 2d 659 (E.D. Va. 2012) ......................................................................................13 

Long Is. R. R. Co. v. Northville Indus. Corp., 

41 N.Y.2d 455 (1977) ........................................................................................................12, 29 

Mindel v. Image Point Prods., Inc., 

725 F. Supp. 189 (S.D.N.Y. 1989)...........................................................................................24 

Mometal Structures, Inc. v. T.A. Ahern Contractors Corp., 

No. 09-CV-2791 (MKB), 2013 WL 764717 (S.D.N.Y. Feb. 28, 2013) ..................................13 

Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 

92 N.Y.2d 458 (1998) ........................................................................................................12, 27 

QK Healthcare, Inc. v. InSource, Inc., 

108 A.D.3d 56 (2d Dep’t 2013) ...............................................................................................29 

In re Randall’s Island Family Golf Centers, Inc., 

261 B.R. 96 (Bankr. S.D.N.Y. 2001), aff’d, 272 B.R. 521 (S.D.N.Y. 2002) ..........................24 

REA Express, Inc. v. Interway Corp., 

538 F.2d 953 (2d Cir. 1976).....................................................................................................13 

Rhodes v. Davis, 

628 F. App’x 787 (2d Cir. 2015) .................................................................................13, 14, 15 

Seven-Up Bottling Co. (Bangkok), Ltd. v. PepsiCo, Inc., 

686 F. Supp. 1015 (S.D.N.Y. 1988) .........................................................................................24 

SPI Commc’ns v. WTZA-TV Assoc. Ltd. P’ship, 

229 A.D.2d 644 (3d Dep’t 1996) .......................................................................................12, 13 

Rules 

Federal Rules of Civil Procedure, 

Rule 30 ...................................................................................................................................3, 7 

Federal Rules of Bankruptcy Procedure, 

Rule 7030 ...................................................................................................................................3 

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Virginia Conservation Legacy Fund, Inc. and ERP Compliant Fuels, LLC (collectively, 

“VCLF”) respectfully submit this Memorandum in Opposition to Black Diamond Commercial 

Finance, LLC’s (“Black Diamond”) Motion for Partial Summary Judgment (ECF Doc. No. 

209).1

PRELIMINARY STATEMENT 

At oral argument on March 21, 2017, counsel for Black Diamond stated unequivocally 

that 

2

 This assertion was the basis for Black Diamond’s motion to compel (which it 

subsequently withdrew) and its now-pending motion for sanctions. Indeed, at the deposition of 

Jason McCoy, the VCLF witness that Black Diamond apparently believes was “shopping” for 

alternative closing financing between September 21, 2015, and October 23, 2015, Black 

Diamond’s counsel utilized a total of 45 exhibits in an attempt to procure an admission to this 

effect. But Black Diamond was unable to procure any evidence from Mr. McCoy or any other 

witness supporting its contention, and to this day, it has adduced no evidence that VCLF 

breached the non-solicitation provision of the Commitment Letter—because it did not. 

Now, astonishingly, after eleven depositions in this case, Black Diamond comes before 

this Court and has the temerity to argue that the case can be resolved in its favor without 

resolving the very issue that Black Diamond claimed was at the heart of this case. If nothing 

 

1

 Black Diamond’s supporting memorandum of law is referred to herein as “BD Mem.” 

2 See Declaration of William M. Sullivan, Jr. in Support of VCLF’s Opposition to Black Diamond’s Motion for 

Partial Summary Judgment (“Sullivan Declaration” or “Sullivan Dec.”), Ex. A (3/21/17 Hearing Tr. 4:1-15). 

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else, Black Diamond’s motion practice in this adversary proceeding is a startling picture of 

inconsistency and unfocused litigation tactics. If it is something else, it is evidence of a pattern 

by Black Diamond: making something unequivocally clear (like repudiating the Commitment 

Letter) and then ignoring that fact by subsequent conduct (like commencing this lawsuit). 

Black Diamond’s present motion for partial summary judgment is without merit and 

should be denied. The documentary evidence and the testimony developed at depositions 

establish conclusively that (1) Black Diamond repudiated the Commitment Letter by October 23, 

2015, by demanding that VCLF agree to material changes to the Commitment Letter, on a takeit-or-leave-it basis, and (2) VCLF’s subsequent conduct did not violate the Exclusivity provision 

of the Commitment Letter because Black Diamond had already repudiated. This evidence does 

not merely raise an issue of material fact sufficient to require denial of Black Diamond’s 

summary judgment motion; rather, it requires granting summary judgment on these issues in 

VCLF’s favor, pursuant to VCLF’s initial motion for partial summary judgment (ECF Doc. No. 

132).3

FACTS 

A. Black Diamond’s Familiarity with the Patriot Assets and Involvement in the 

Patriot Chapter 11 Proceeding 

 

 

3

 VCLF incorporates herein by reference its papers in support of its own motion for partial summary judgment, as 

well as its Statement of Facts, Alleged by Black Diamond to be Material, as to Which VCLF Contends a Genuine 

Issue Exists, filed contemporaneously herewith. 

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3 

Ehrlich Dep. Tr.4

 46:22-54:3. Likewise, 

 Id. 52:5-12. 

B. The Commitment Letter 

 See Murphy 

Dep. Tr.5

 127:19-25. 

 See Ehrlich Dep. Tr. 66:13-72:16. 

 See Deckoff 

Dep. Tr.6

 80:1-86:7; Sullivan Dec., Ex. E. 

 Id. 

 

4

 “Ehrlich Dep. Tr.” refers to excerpts of the transcript of the deposition of Black Diamond’s Richard Ehrlich, taken 

on October 17, 2017, attached to the Sullivan Declaration as Exhibit B. Though Mr. Ehrlich signed an errata 

sheet for his deposition transcript on January 11, 2018, that errata sheet was untimely under Fed. R. Civ. P. 30(e), 

applicable to these proceedings pursuant to Fed. R. Bankr. P. 7030, because the court reporter delivered the 

deposition transcript to the parties on November 1, 2017, more than 30 days prior to the submission of the errata 

sheet. Accordingly, Sullivan Dec., Ex. B does not include Mr. Ehrlich’s untimely errata sheet. 

5

 “Murphy Dep. Tr.” refers to excerpts of the transcript of the deposition of Brendan Murphy, formerly of Teneo, 

taken on October 19, 2015, with the witness’s errata sheet, attached to the Sullivan Declaration as Exhibit C. 

6

 “Deckoff Dep. Tr.” refers to excerpts of the transcript of the deposition of Black Diamond’s Stephen Deckoff, 

taken on October 31, 2017, attached to the Sullivan Declaration as Exhibit D. Though Mr. Deckoff signed an 

errata sheet for his deposition transcript on January 11, 2018, that errata sheet was untimely under Fed. R. Civ. P. 

30(e) because the court reporter delivered the deposition transcript to the parties on November 13, 2017, more 

than 30 days prior to the submission of the errata sheet. Accordingly, Sullivan Dec., Ex. D does not include Mr. 

Deckoff’s untimely errata sheet. 

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 See Sullivan Dec., Ex. F (9/20/15 e-mail from R. Ehrlich to T. Clarke). 

September 21, 2015, VCLF and Black Diamond’s loan origination entity, Black Diamond 

Commercial Finance, LLC (“BDCF”),7

 signed the Commitment Letter 

. Ehrlich Dep. Tr. 158:6-12. The signatory for VCLF was Thomas 

Clarke and the signatory for BDCF was Stephen Deckoff. See Declaration of C. William 

Phillips, dated Dec. 14, 2017 (“Phillips Dec.”), Ex. A (Commitment Letter). 

 See Ehrlich Dep. Tr. 104:2-14. 

 See Clarke Dep. Tr.8

 36:12-21. Ultimately, 

Blackhawk and VCLF were the winning bidders at the auction. 

C. Black Diamond Fails to Provide VCLF Any Draft Loan Documentation 

Despite VCLF’s repeated requests, neither Black Diamond nor its lawyers ever presented 

VCLF with any draft loan documentation pursuant to the Commitment Letter. At his deposition, 

Mr. Clarke explained 

 

7

 This is distinguished from Black Diamond Commercial Management, LLC (“BDCM”). 

8

 “Clarke Dep. Tr.” refers to excerpts of the transcript of the deposition of VCLF’s Thomas Clarke, taken on 

November 10, 2017, together with the witness’s errata sheet, attached to the Sullivan Declaration as Exhibit G. 

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Clarke Dep. Tr. 196:10-24. 

 Id. 197:4-16. 

 (id. 198:4-200:5), 

. 

Black Diamond’s failure to provide any loan documentation (among other things) also 

. See Clarke Dep. Tr. 34:5-36:21, 54:19-55:13, 76:7-12, 

115:7-10, 150:24-151:3. 

D. Black Diamond Instructs VCLF to Obtain Additional Financing on the 

Sidelines of the Patriot Confirmation Hearing 

The confirmation hearing in the Patriot chapter 11 case took place the week of October 5, 

2015. On the eve of the confirmation hearing, and with Black Diamond’s knowledge and 

blessing, 

. See Clarke Dep. Tr. 12:4-14:20. 

. See id. 170:3-20. 

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E. Black Diamond is Involved in Changes to the VCLF-Patriot APA Between 

September 21 and October 23, 2015 

Real-world developments following September 21, 2015, necessitated updates to the 

VCLF-Patriot APA, as executed on August 16, 2015. For example, Patriot informed VCLF that 

. See Clarke Dep. Tr. 54:15-25, 63:2-64:14 ( 

); id. 209:14-210:16 (

); id. 175:6-25, 212:11-23 (

).9 In turn, Black Diamond itself 

. Id. 105:14-23. 

F. On the Eve of the Scheduled Closing, Black Diamond Demands Material 

Changes to the Commitment Letter 

 See Ehrlich Dep. Tr. 264:16-265:15. This was a practical necessity: As 

Patriot had advised the Court and stakeholders in the chapter 11, coal prices had fallen 

dramatically and Patriot was expecting to run out of cash just before the end of the month. See 

Clarke Dep. Tr. 100:24-103:9; Sullivan Dec., Ex. H (10/8/15 Confirmation Hr’g Tr. 69:18-

70:12) (based on Patriot’s projections, “the company runs out of cash or goes negative cash in 

week 28, which is the week beginning October 24[, 2015]”); see also Sullivan Dec., Ex. I 

 

9

 See also Clarke Dep. Tr. 312:8-21 (

); id. 313:8-16 

); id. 317:24-319:6

). 

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(10/7/15 Confirmation Hr’g Tr. 106:9-10) (Marc Puntus of Centerview, representing Patriot: “I 

believe it is a matter of weeks before the debtors will run out of cash.”). 

Knowing this, 

 

• A reduction of the term loan amount from $10 million to $5 million, none of 

which could be drawn at closing; 

• Replacement of the asset-based loan facility with a receivables purchase facility, 

, 

rather than a 17% interest rate on amounts advanced under the terms of the 

Commitment Letter;11

• New financial covenants 

,

12 and that

;

13

 

10 See Clarke Dep. Tr. 295:10-20 

.

11

See Clarke Dep. Tr. 71:5-10. 

. See id. 187:14-188:3, 208:12-209:13. 

. See id. 53:10-56:11; 65:5-69:24. 

12

 See Gravenhorst Dep. Tr. 162:25-164:22 

. “Gravenhorst Dep. Tr.” refers to excerpts of the transcript of deposition of Black Diamond’s 

Hugo Gravenhorst, taken on October 10, 2017, attached to the Sullivan Declaration as Exhibit J. Though Mr. 

Gravenhorst signed an errata sheet for his deposition transcript on January 11, 2018, that errata sheet was 

untimely under Fed. R. Civ. P. 30(e) because the court reporter delivered the deposition transcript to the parties on 

October 23, 2017, more than 30 days prior to the submission of the errata sheet. Accordingly, Sullivan Dec., Ex. J 

does not include Mr. Gravenhorst’s untimely errata sheet. 

13

 See K. McCoy Dep. Tr. 173:7-176:19 (

); Clarke Dep. Tr. 56:3-11 REDACTED

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• A personal guarantee of 50% of Black Diamond’s projected internal rate of return 

by Mr. Clarke; and 

• Limitations on the amounts VCLF could pay its professionals at closing. 

Mr. Clarke himself conducted a “back-of-the-envelope” modeling on the morning of 

October 23, 2015. See Phillips Dec., Exs. MM-NN. Based on this modeling, 

14

 See Clarke Dep. Tr. 55:7-13, 154:9-155:6, 

277:5-278:24, 280:11-283:15. 

 on October 23, 2015, Mr. Ehrlich instructed Hugo Gravenhorst of BDCF—an 

individual who had no prior involvement with this transaction, and who had never before 

communicated with Mr. Clarke—to send Mr. Clarke a series of e-mails memorializing the 

“modif[ications]”15 that Black Diamond was demanding to the Commitment Letter (the 

“Gravenhorst E-mails”).16 See Phillips Dec., Exs. P -S (Gravenhorst E-mails, sent at 10:24 a.m., 

 

). “K. McCoy Dep. Tr.” refers to excerpts of the deposition of VCLF’s 

Kenneth McCoy, taken on October 26, 2017, with the witness’s errata sheet, attached to the Sullivan Declaration 

as Exhibit K. 

14 Black Diamond points to

 See BD Mem. 11 (citing Phillips Dec., Ex. O). 

 Murphy Dep. Tr. 239:6-23. 

15 To be clear, when the Gravenhorst E-mails state, “These new terms and conditions will modify our existing 

commitment letter dated September 21, 2015” (Phillips Dec., Exs. P-S), they are not using the term “modify” as 

Merriam-Webster defines it, “to make minor changes in.” Rather,

See Ehrlich Dep. Tr. 293:6-20; see also id. 382:5-10 

). 

16 As of the time of Mr. Ehrlich’s deposition, and notwithstanding VCLF’s demand, Black Diamond was still 

withholding the six e-mails by which Mr. Ehrlich transmitted the text of the Gravenhorst E-mails to Mr. 

Gravenhorst, even though there is nothing privileged about them. See Sullivan Dec., Ex. L. Brazenly, Black 

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1:20 p.m., 2:04 p.m., and 2:18 p.m.). Following the transmission of each of these e-mails, 

17

 See Clarke Dep. Tr. 

47:3-49:6, 56:12-58:25, 68:4-69:24, 74:4-77:19, 81:16-83:8, 142:9-144:25. 

 See 

id. 285:17-288:11 (

). 

At no point in 

. See Clarke Dep. Tr. 288:12-22. 

. See id. 295:10-

297:10. 

 

Diamond waited to produce these e-mails until three days after Mr. Ehrlich’s deposition had passed, towards the 

end of the deposition of Black Diamond’s restructuring lawyer, Adam Harris. Black Diamond has agreed to the 

reopening of Mr. Ehrlich’s deposition so that he can be examined regarding these six e-mails, and the deposition 

has tentatively been scheduled for January 26, 2018. At Mr. Ehrlich’s reopened deposition, the issue of 

repudiation will likely be revisited, given the centrality of the six e-mails to that topic. 

17 Mr. Clarke gave this testimony despite the fact that 

. See Clarke Dep. Tr. 5:25-6:7. Black Diamond’s counsel clearly believed that 

, but Mr. Clarke gave truthful and complete testimony nonetheless. 

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G. VCLF Attempts to Cobble Together a Closing with Patriot 

With Black Diamond’s refusal to perform under the Commitment Letter and Black 

Diamond’s clear statements that it would only do a deal incorporating the new terms in the 

Gravenhorst E-mails, VCLF’s representatives understood that Black Diamond had reneged on its 

signed financing commitment. Accordingly, beginning late in the day on October 23, 2015, 

VCLF consulted with Patriot, the UMWA, and other potential lenders to obtain replacement 

closing financing or consideration to consummate the VCLF-Patriot transaction. Mr. Clarke 

believed that 

. See Clarke Dep. Tr. 95:7-96:7, 102:18-103:9. 

As a result of these discussions, VCLF extracted an additional $5 million loan from 

UMWA, as well as a purchase money note from Patriot for $6 million. With these last minute 

accommodations, VCLF was able to close with Patriot on October 27, 2015. In light of Black 

Diamond’s repudiation of the Commitment Letter, VCLF did not convey any equity interests to 

Black Diamond at the closing.18

H. VCLF Apprises Black Diamond of Its Breach and Offers It a Final Chance to 

Perform 

In light of Black Diamond’s repudiation of the Commitment Letter on October 23, 2015, 

VCLF’s representatives temporarily ceased communications with Black Diamond. Black 

 

18 As this Court is aware, VCLF

. See Clarke Dep. Tr. 218:11-223:24; 

K. McCoy Dep. Tr. 198:3-206:25; J. McCoy Dep. Tr. 233:22-235:14. “J. McCoy Dep. Tr.” refers to excerpts of 

the transcript of deposition of VCLF’s Jason McCoy, taken on November 2, 2017, with the witness’s errata sheet, 

attached to the Sullivan Declaration as Exhibit M. 

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Diamond, 

. See Clarke Dep. Tr. 91:5-92:23. 

Among other things, 

. See Murphy Dep. Tr. 362:17-25 

. 

On Sunday, October 25, 2015, VCLF’s counsel, Patrick Potter, sent a letter to Black 

Diamond’s counsel, Adam Harris, recounting the ways that Black Diamond had repudiated the 

Commitment Letter. Although there was no doubt that Black Diamond had reneged, VCLF gave 

Black Diamond one last opportunity to change its mind and again agree to finance VCLF’s 

acquisition under the terms of the Commitment Letter. See Phillips Dec., Ex. EE, at BDCF00077232 – 35. Mr. Harris’s response, that same day, confirmed that Black Diamond was not 

prepared to finance under the terms of the Commitment Letter, but rather was willing to proceed 

only on the basis of the terms set forth in the Gravenhorst E-mails: “Black Diamond is prepared 

to proceed with consummation of the financing for VCLF on the terms set forth in Mr. 

Gravenhorst’s emails to Mr. Clarke from Friday, October 23rd . . . .” Id., Ex. FF (emphasis 

added). Mr. Potter responded later that evening, noting that Mr. Harris had confirmed Black 

Diamond’s October 23, 2015, repudiation of its lending commitment. Id., Ex. GG. Though Mr. 

Harris further responded to Mr. Potter, at 11:34 p.m. on October 25, 2015, suggesting that Black 

Diamond might be willing to “document and consummate a financing transaction for VCLF 

based upon the terms of the September 21st Commitment Letter,” that so-called offer was 

illusory because it was conditioned on a return to the “Asset Purchase Agreement executed by 

VCLF and Patriot on August 16, 2015”—which Black Diamond knew was impossible, given all 

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of the developments that had occurred since then and changes to the transaction Black Diamond 

had endorsed and, in some cases, encouraged. See id., Ex. C. Indeed, Mr. Harris’s e-mail 

plainly made the point that Black Diamond, in fact, was only willing to lend on the terms 

“outlined in Mr. Gravenhorst’s emails to VCLF on Friday[, October 23, 2015].” Id.

This lawsuit was commenced by Black Diamond the very next day. 

ARGUMENT 

I. BLACK DIAMOND REPUDIATED THE COMMITMENT LETTER BY 

OCTOBER 23, 2015 

A. Legal Standard 

Under New York law, anticipatory repudiation constitutes a breach of contract, “entitling 

the nonrepudiating party to recover damages for a total breach and excusing it from further 

performance.” SPI Commc’ns v. WTZA-TV Assoc. Ltd. P’ship, 229 A.D.2d 644, 645 (3d Dep’t 

1996) (citing Long Is. R. R. Co. v. Northville Indus. Corp., 41 N.Y.2d 455, 463-64 (1977)) 

(emphasis added). Repudiation is assessed objectively; whether a party subjectively intended to 

repudiate is “irrelevant.” See DiFolco v. MSNBC Cable L.L.C., 831 F. Supp. 2d 634, 642 

(S.D.N.Y. 2011) (“The law is clear . . . that whether Plaintiff repudiated the contract is based on 

an objective, not a subjective, standard. . . . Plaintiff’s subjective intent is irrelevant.”). The 

communication of intent not to perform can be based on the repudiating party’s “words or 

deeds,” and must be unequivocal. Norcon Power Partners, L.P. v. Niagara Mohawk Power

Corp., 92 N.Y.2d 458, 463 (1998). 

As relevant to this case, a party anticipatorily repudiates a contract by adopting a “take-itor-leave-it” position by refusing to perform the contract unless the other party accepts new terms 

or an untenable construction of an essential term. See IBM Credit Fin. Corp. v. Mazda Motor 

Mfg. (USA) Corp., 92 N.Y.2d 989, 993 (1998) (plaintiff’s “insistence on an untenable 

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interpretation of a key contractual provision, and refusal to perform otherwise, constituted an 

anticipatory breach of the contract”); see also REA Express, Inc. v. Interway Corp., 538 F.2d 

953, 955 (2d Cir. 1976) (“Under New York law, insistence upon terms which are not contained 

in a contract constitutes an anticipatory repudiation thereof.”) (cited favorably in Kelly Capital, 

LLC v. S & M Brands, Inc., 873 F. Supp. 2d 659, 677 (E.D. Va. 2012) (applying New York 

law)). Anticipatory repudiation “can be grounded upon a finding that the other party . . . has 

communicated its intent to perform only upon the satisfaction of extracontractual conditions.” 

SPI Commc’ns, 229 A.D.2d at 645.19

Repudiation can be established at the summary judgment stage by, among other things, 

showing that a counterparty demanded material changes to a preliminary agreement (such as a 

term sheet) on the eve of the closing of the definitive agreement. See Rhodes v. Davis, 628 F. 

App’x 787, 790 (2d Cir. 2015) (“Davis’s insistence on additional terms beyond those stated in 

the Stipulation or reasonably necessary to effect closing constituted an anticipatory breach”). In 

a strikingly similar case, the Rhodes Court held that one party repudiated a preliminary 

stipulation by presenting to the counterparty, the day before the closing deadline, a 12-page draft 

definitive agreement whose terms were at odds with the stipulation, including by requiring the 

counterparty to assume personal obligations not set forth in the stipulation: 

The 12–page stock purchase agreement that Davis sent Rhodes the 

day before the closing deadline contained several terms at odds 

with the Stipulation, including, for example, substitution of new 

entity ASI Services, Inc., for Davis himself as purchaser of 

 

19 See also Mometal Structures, Inc. v. T.A. Ahern Contractors Corp., No. 09-CV-2791 (MKB), 2013 WL 764717, 

at *8 (S.D.N.Y. Feb. 28, 2013) (finding that plaintiff repudiated a subcontract by sending a letter stating it would 

not perform unless defendant “agreed to modify the terms of the Subcontract” to reflect seven substantial 

modifications, such as requiring the defendant to “pay the steel escalation costs and storage costs,” and to void a 

portion of the subcontract “pertaining to liquidated damages”); Israel Cancer Research Fund, Inc. v. Harvey & 

Gloria Kaylie Foundation, Inc., 33 Misc. 3d 1237(A), at *2 (Sup. Ct., N.Y. Cty. 2011) (holding, on a motion to 

dismiss, that allegations that defendant failed to make payments despite plaintiff’s repeated requests and that 

defendant had “explicitly taken the position that it will continue to withhold that funding unless [plaintiff] takes

on obligations beyond those set forth in the [Agreements]” sufficiently supported claim for repudiation). 

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Rhodes’s shares, as well as that entity’s assumption of post-closing 

obligations (including liabilities) that the Stipulation specifically 

assigned to Davis individually. The agreement also required 

Rhodes to make representations and grant warranties not agreed to 

in the Stipulation, and to assume indemnification obligations for 

breach of representations in the purchase agreement. Further, 

while the purchase agreement represented that it constituted the 

entire agreement between the parties, it notably omitted a 

Stipulation provision requiring defendants to indemnify Rhodes for 

any post-January 1, 2008 liability. Meanwhile, a membership 

agreement that Davis sent Rhodes on the closing date further 

expanded Rhodes’s indemnification, non-disparagement, and 

warranty obligations beyond those agreed to in the Stipulation. 

. . . 

On this record, we conclude as a matter of law that Rhodes 

satisfactorily demonstrated a breach by Davis, and Rhodes’s 

willingness and ability to perform his obligations when due under 

the Stipulation. Before the closing deadline passed, Davis 

unequivocally and positively repudiated the Stipulation by insisting 

on terms that were not agreed to in the Stipulation, and not 

necessary to effect the closing called for therein. 

Id. at 790-91 (emphasis added). The Court recognized that, “[w]hile the question of anticipatory 

breach is generally an issue of fact for the jury, where, as here, the relevant communications are 

in writing and unambiguous, the issue may be decided as a matter of law.” Id. at 790. The Court 

therefore affirmed the district court’s granting of summary judgment in favor of Rhodes (the 

non-repudiating party) based on the new terms insisted on by Davis. Id. at 793. 

Importantly, the cases cited by Black Diamond for the legal standard for repudiation are 

inapposite. They either do not involve repudiation via demand for material change of terms on a 

take-it-or-leave-it basis (a standard applied in New York, but not all U.S. jurisdictions), or else 

do not apply New York law at all. Notably, Black Diamond chose New York as the governing 

law for the Commitment Letter. See Phillips Dec., Ex. A (Commitment Letter), at BDCF00028160 (“This Commitment Letter shall be governed by, and construed in accordance with, 

the laws of the State of New York.”). 

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B. Black Diamond Refused to Finance Under the Terms of the Commitment 

Letter, Demanding Material Changes to the Commitment Letter at the 

Eleventh Hour on a Take-It-Or-Leave-It Basis 

Black Diamond here did to VCLF exactly what the repudiating party did in Rhodes: On 

the eve of the closing of the VCLF-Patriot APA, Black Diamond informed VCLF that the terms 

of the Commitment Letter were no longer operative, insisting on new, onerous, and materially 

different terms as conditions to financing the transaction. 

 See Clarke Dep. Tr. 301:19-

302:18. It would not lend on the previously agreed terms in the Commitment Letter. This is a 

hornbook instance of repudiation under New York law. 

As set forth above, the terms Black Diamond demanded in the Gravenhorst E-mails on 

October 23, 2015, were materially different from those in the Commitment Letter—to VCLF’s 

detriment. Specifically, on the eve of closing, Black Diamond conditioned its lending on: 

(1) reducing its commitment from $25 million to $20 million; (2) restructuring the financing 

from an asset-based loan to a receivables purchase facility such that VCLF would receive $0 at 

closing and only receive the first $2.5 million of needed working capital on December 2, 2015 

(more than a month after closing); (3) Mr. Clarke personally guarantying 50% of Black 

Diamond’s desired 44% internal rate of return; (4) imposing new financial covenants that Black 

Diamond’s witnesses confirmed are not typical, and that VCLF’s witnesses confirmed would put 

VCLF in default almost immediately, allowing Black Diamond to assume control over the 

Federal 2 Mine and control ERP Settlement, LLC, without having advanced any funds (or, at 

least, any substantial funds); and (5) limiting the amount VCLF could pay its restructuring 

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professionals’ fees to $2 million—even though Black Diamond knew those fees were much 

higher.20

Black Diamond’s insistence on these terms was unequivocally on a take-it-or-leave-it 

basis. Throughout the day on October 23, 2015, Mr. Clarke repeatedly 

. See, e.g., Clarke Dep. Tr. 278:5-281:11 (Mr. 

Clarke explained 

); id. 301:19-302:18 (

). But 

 Id. 47:3-49:6. As 

Mr. Clarke recounted: 

Id. 301:19-302:18 (emphasis added). confirms that Black Diamond was 

unwilling to negotiate regarding the Gravenhorst E-mails, a fact confirmed two days later when 

 

20 See Ehrlich Dep. Tr. 341:8-21; Clarke Dep. Tr. 48:22-49:3 

). 

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Black Diamond’s counsel, Mr. Harris, wrote to VCLF that Black Diamond was only “prepared 

to proceed with consummation of the financing for VCLF on the terms set forth in Mr. 

Gravenhorst’s emails to Mr. Clarke from Friday, October 23rd.” Phillips Dec., Ex. C, at BDCF00077292. 

The timing of the Gravenhorst E-mails also confirms that Black Diamond was 

strategically looking to “jam” VCLF with new, take-it-or-leave-it terms on the business day 

before the scheduled closing of the VCLF-Patriot transaction. As late as October 25, 2015, 

. Ehrlich Dep. Tr. 264:16-265:15; see also Clarke Dep. Tr. 100:24-103:9 ( 

). 

. See Clarke Dep. Tr. 109:8-110:16. Indeed, the Court was so advised of this fact at the 

confirmation hearing on October 8, 2015: 

[THE COURT:] You have no reason to believe that the 

company’s forecasts [which, among other things, showed Patriot 

running out of cash] are inaccurate? 

[ANDERS MAXWELL, representing the administrative agent for 

the Patriot term facility:] I am not challenging the company’s 

forecasts. 

Q. Okay. Can you take a look and just tell me when the company 

is going to run out of money, based on the company’s forecasts, if 

a plan is not confirmed? 

A. Your Honor, on page 14, I had summarized what is 

traditionally referred to as static pool analysis. It’s intended to 

show the thirteen-week rolling forecast going out over the – into 

the future, and we had used that to make some general objections. 

And based on these forecasts, which are no longer current – I 

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gather there’s been at least one more recent forecast prepared, 

which I have not reviewed, but based on these schedules on page 

14 – again, these are not my projections; these are the company’s 

projections – the company runs out of cash or goes negative cash 

in week 28, which is the week beginning October 24[, 2015]. 

Q. And you can’t identify any other means that Patriot has to 

address its liquidity crisis other than selling the company soon? 

A. Well, conceptually, I can certainly think of other things one 

could do, but I have no alternatives to offer the company, sitting 

here today. 

Sullivan Dec., Ex. H, at 69:15-70:12 (emphasis added).21 Black Diamond knew this—its counsel 

appeared at that hearing telephonically (see id. at 3)—and intentionally waited until the very last 

minute to spring new terms on VCLF.

That Black Diamond demanded changes to the Commitment Letter and accompanying 

term sheet to “memorialize” these new terms, rather than engaging in drafting and negotiation 

over loan documents themselves, confirms Black Diamond’s intent not to close on the terms of 

the Commitment Letter. 

 See Harris Dep. Tr.22 220:7-17 

(noting, 

). The only 

logical inference is that Black Diamond refused to incur the expense necessary to produce and 

negotiate draft loan documents because it had decided that it was not lending to VCLF on the 

 

21 See also supra at 6-7. 

22 “Harris Dep. Tr.” refers to excerpts of the transcript of deposition of Adam Harris, taken on October 20, 2017, 

attached to the Sullivan Declaration as Exhibit N. 

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terms previously negotiated. And, here, VCLF 

. See Clarke Dep. Tr. 99:10-16, 196:3-197:24. 

Black Diamond’s intent to force new, onerous terms on VCLF is also confirmed by the 

fact that 

. See Clarke Dep. Tr. 59:2-14, 75:7-17, 

137:18-138:23; Gravenhorst Dep. Tr. 141:18-20. Mr. Clarke testified that 

. See Clarke Dep. Tr. 142:9-25. Indeed, 

 Gravenhorst Dep. Tr. 260:3-16. There can be no doubt that Black 

Diamond used Mr. Gravenhorst for the specific purpose of conveying that Black Diamond 

intended to lend to VCLF only on the new and onerous terms contained in the Gravenhorst Emails. Mr. Ehrlich, who had been one of Mr. Clarke’s main points of contact at Black Diamond, 

 (see Sullivan Dec., Ex. 

L), and could easily have sent the e-mails himself. 

Black Diamond’s attempt to rebut this conclusion by claiming after-the-fact that 

. Mr. Ehrlich confirmed that 

. See Ehrlich Dep. Tr. 113:2-114:16. Likewise, when VCLF’s counsel 

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pointed out to Mr. Deckoff that 

 he 

responded, and conceded that 

. See Deckoff Dep. Tr. 253:15-254:19. The evidence demonstrates 

that Mr. Gravenhorst’s participation was in no way required, but rather was exploited to push 

materially different terms on VCLF perceiving its back was to the wall. 

C. Black Diamond’s Repudiation Was Positive and Unequivocal 

Repudiation is assessed objectively, and whether a party subjectively intended to 

repudiate is “irrelevant.” See DiFolco, 831 F. Supp. 2d at 641-43. As demonstrated above, the 

objective facts demonstrate that Black Diamond repudiated the Commitment Letter by October 

23, 2015: The Gravenhorst E-mails could not be more clear and unequivocal, and Mr. Harris’s 

confirmation on October 25, 2015, that Black Diamond would close only on the basis of the 

Gravenhorst E-mails, was equally clear and unequivocal. 

These objective facts are confirmed by the contemporaneous perceptions of VCLF’s 

representatives that Black Diamond was repudiating the Commitment Letter. Under New York 

law, the perception of the non-repudiating party of the repudiator’s conduct, in light of all the 

circumstances, is relevant to the objective assessment of whether a repudiation occurred. See BT 

Triple Crown Merger Co. v. Citigroup Global Mkts., Inc., 19 Misc. 3d 1129(A), at *5 (Sup. Ct., 

N.Y. Cty. 2008) (holding, in a case dealing with alleged repudiation of a Commitment Letter by 

a party that demanded allegedly conflicting new terms, that “Barns’ and Brizius’ perception that 

the defendants were threatening them with non-performance, when coupled with the rather 

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ominous tone of the defendants’ internal emails,” could be sufficient to demonstrate that “the 

defendants presented the plaintiffs with an ultimatum”).23

Here, VCLF’s witnesses all understood that Black Diamond’s transmission of the 

Gravenhorst E-mails was intended to be a repudiation of the Commitment Letter and an attempt 

to force new terms on VCLF at the last minute. Mr. Murphy of Teneo, 

Murphy Dep. Tr. 247:10-20. Mr. Ken McCoy, for his part, testified 

 K. McCoy Dep. 

Tr. 119:6-10. As noted above, Mr. Clarke, who was interfacing directly with Black Diamond on 

October 22 and 23, 2015, likewise understood that 

. 

 

23 In this case, the court determined that there remained a disputed fact as to whether an ultimatum was given. See 

BT Triple Crown, 19 Misc. 3d 1129(A), at *5. In the present case, because we have (i) the statements of the 

repudiating party in writing (i.e., the Gravenhorst E-mails and Mr. Harris’s e-mails on the evening of October 25, 

2015, confirming that the Gravenhorst E-mails meant exactly what they said and reflected the new terms on which 

Black Diamond would lend), (ii) Mr. Ehrlich’s statements to Mr. Clarke that 

, and (iii) the undisputed perception of the recipient (i.e., VCLF) that these 

statements were a repudiation, there is no genuine issue of material fact requiring a trial. 

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Black Diamond’s conduct also confirmed what 

. See K. McCoy Dep. Tr. 141:22-142:7 (after 

receiving the Gravenhorst E-mails, Mr. McCoy and Mr. Clarke noted that they 

 

); J. McCoy Dep. Tr. 134:23-137:21 

 

Clarke Dep. Tr. 35:18-25 

. As Mr. Jason 

McCoy explained, with the sending of the Gravenhorst E-mails on October 23, 2015, 

 J. McCoy Dep. Tr. 157:9-158:22. 

The only evidence Black Diamond points to in support of its argument that VCLF did not 

truly believe that Black Diamond had repudiated is a selective misquotation of an e-mail VCLF’s 

counsel Patrick Potter sent Patriot’s counsel Ross Kwasteniet, on the evening of October 23, 

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2015. See BD Mem. 4 (discussing Phillips Dec., Ex. E). Black Diamond claims that, in that email, Mr. Potter wrote: 

 See BD Mem. 4. BD misinterprets this sentence to 

mean that even Mr. Potter believed, as of 8:54 p.m. EDT on October 23, 2015, that the 

Commitment Letter transaction was still alive and being negotiated, and had not been repudiated 

by Black Diamond. Astonishingly, Black Diamond fails to quote the very next sentence of Mr. 

Potter’s e-mail, which makes clear that the “BD Deal” to which Mr. Potter referred was not the 

financing transaction embodied in the Commitment Letter, but rather the new, material, and 

onerous terms demanded by Black Diamond, on a take-it-or-leave-it basis, in the Gravenhorst Emails: 

Phillips Dec., Ex. E (emphasis added). This sentence establishes, unambiguously, that Mr. Potter 

was referring to the terms demanded in the Gravenhorst E-mails, as the Commitment Letter 

terms did not provide for a personal guaranty. See Phillips Dec., Ex. A (Commitment Letter). 

And, if this were not clear enough, Mr. Potter confirmed this meaning at his deposition. See 

Potter Dep. Tr.24 230:6-231:23 

. 

D. VCLF’s Attempts on October 23 and 25, 2015 to Persuade Black Diamond to 

Change Its Mind Did Not Constitute a Waiver 

Black Diamond maintains that the letter VCLF’s counsel sent Black Diamond on 

October 25, 2015, which asked “Black Diamond [to] advise VCLF as to whether [it] intends to 

 

24 “Potter Dep. Tr.” refers to excerpts of the transcript of deposition of VCLF’s counsel Patrick Potter, taken on 

October 16, 2017, with the witness’s errata sheet, attached to the Sullivan Declaration as Exhibit O. 

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close tomorrow under the BD Commitment (without modification),” is proof that Black 

Diamond did not repudiate the Commitment Letter because, “[h]ad Defendants believed that 

Black Diamond had repudiated the Commitment Letter on October 23, it would not have sought 

assurances that Black Diamond would perform on October 25.” BD Mem. 28. This statement is 

unsupported as a matter of fact and law because (1) VCLF’s counsel’s letter made clear that 

Black Diamond had repudiated, and (2) VCLF simply gave Black Diamond an opportunity to 

change its mind and provide the financing it had agreed to in the Commitment Letter. 

New York law is clear that a non-repudiating party’s attempts to persuade the repudiator 

to perform as originally agreed do not constitute a waiver of the breach. See In re Randall's 

Island Family Golf Centers, Inc., 261 B.R. 96, 101-02 (Bankr. S.D.N.Y. 2001), aff'd, 272 B.R. 

521 (S.D.N.Y. 2002) (“He may refuse, for a time, to acquiesce in the repudiation, and urge the 

repudiator to perform without waiving any of his rights.”) (internal citations omitted); Mindel v. 

Image Point Prods., Inc., 725 F. Supp. 189, 194 (S.D.N.Y. 1989) (“This effect of Mindel’s 

repudiation was not altered by Image Point's attempts to convince Mindel to change his mind, 

nor was it altered by Image Point’s proposal for amicable termination.”); AM Cosmetics, Inc. v. 

Solomon, 67 F. Supp. 2d 312, 318 (S.D.N.Y. 1999) (“However, a party’s reluctance to terminate 

a contract upon a breach and its attempts to encourage the breaching party to adhere to its 

obligations under the contract do not necessarily constitute a waiver of the innocent party’s rights 

in the future.”) (citing Seven-Up Bottling Co. (Bangkok), Ltd. v. PepsiCo, Inc., 686 F. Supp. 

1015, 1023 (S.D.N.Y. 1988)); Grp. 1 Auto., Inc. v. Country Imported Car Corp., No. 07-CV1454 RRM WDW, 2012 WL 11955634, at *16 (E.D.N.Y. Aug. 15, 2012) (“Although plaintiff 

here attempted to help Country and IRL cure their defaults under the Amended Agreement and 

Promissory Note, those efforts do not go so far as to constitute a waiver of plaintiff's rights under 

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those agreements.”); AG Properties of Kingston, LLC v. Besicorp-Empire Dev. Co., LLC, 14 

A.D.3d 971, 971 (3d Dep’t 2005) (“[W]here a nonrepudiating party affords the repudiating party 

an opportunity to repent, but it does not do so, the nonrepudiating party's subsequent failure to 

perform is not a breach.”) (citing De Forest Radio Tel. & Tel. Co. v. Triangle Radio Supply Co., 

243 N.Y. 283, 292-93 (1926)). 

VCLF twice urged Black Diamond to retract its repudiation, but Black Diamond failed to 

do so. First, as noted above, Mr. Clarke 

. Clarke Dep. Tr. 286:6-

288:11, 295:10-297:10, 301:19-302:18. Second, on Sunday, October 25, 2015, VCLF’s counsel 

formally described to Black Diamond all the ways that Black Diamond had repudiated the 

Commitment Letter, but nonetheless offered Black Diamond a final opportunity to finance under 

its terms: 

Black Diamond’s conduct permits no interpretation other than that 

it is anticipatorily breaching or otherwise repudiating the BD 

Commitment. Reducing the amount of funds, demanding a 

personal guarantee, and otherwise adversely changing the terms on 

which Black Diamond will proceed is not a modification of the BD 

Commitment that VCLF can or will accept. Black Diamond is 

proposing a fundamentally different (and materially worse for 

VCLF) financing, which is entirely inconsistent with the BD 

Commitment. Indeed, the lack of any meaningful legal work to 

prepare for Monday’s closing strongly suggests that Black 

Diamond concluded weeks ago not to proceed – I note that, as of 

the sending of this letter, Black Diamond and its counsel have not 

provided a single draft of any document, even though the closing is 

scheduled for tomorrow. 

Patriot has emphasized to VCLF that the VCLF transaction must 

close tomorrow, and has intimated that there may be damage 

claims against VCLF if VCLF does not close. And, while we 

contend that Black Diamond has anticipatorily breached or 

repudiated the BD Commitment (and in any event does not plan to 

perform thereunder), thus relieving VCLF of any obligation to 

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close, we hereby demand that Black Diamond advise VCLF as to 

whether Black Diamond intends to close tomorrow under the BD 

Commitment (without modification), and under the original form 

of APA acceptable to Patriot as modified during the course of the 

confirmation process and last Thursday’s negotiations (not the 

version tendered by Black Diamond to VCLF on Wednesday 

evening). . . . 

Phillips Dec., Ex. EE, at BDCF-00077234. Mr. Potter’s e-mail could not have been clearer that 

VCLF understood Black Diamond to have repudiated, but was giving Black Diamond a final 

chance to repent. 

This case could not be more different from Crosspoint Seven v. Mfs. Life Ins. Co., 148 F. 

App’x 535 (7th Cir. 2005), a case Black Diamond claims is “directly analogous” to the present 

one. See BD Mem. 24. Crosspoint is distinguishable from this case in at least four key ways. 

First, in Crosspoint, the court held that a party’s request to the other party to restructure 

an agreement to account for newly acquired information failed to amount to a repudiation. See 

148 F. App’x at 537-38. But here, as noted above, Black Diamond did not merely request that 

VCLF consider changes to the Commitment Letter: Black Diamond demanded that VCLF do so, 

on a take-it-or-leave-it basis, on the eve of the scheduled closing or there would be no funding. 

See Clarke Dep. Tr. 280:11-16. This was not the case in Crosspoint. 

Second, the party alleging repudiation in Crosspoint “continued to take actions necessary 

to close the deal” with the repudiating party, signaling that the non-repudiating party did not 

think that the other party had in fact repudiated. See 148 F. App’x at 358. For example, the 

party alleging repudiation “applied for no alternative financing, paid no other lender any fees, 

and entered into no additional contracts or agreements,” indicating that the party did not 

materially change its position in reliance on the repudiation. Id. Here, it is undisputed that, after 

Mr. Clarke had exhausted his efforts with Mr. Ehrlich on October 23, 2015, VCLF did just that: 

suddenly without financing to close on the deal with Patriot, it conferred with Patriot, the 

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UMWA, and potential lenders beginning on the evening of October 23, 2015, in an effort to 

cobble together minimal financing to close on the VCLF-Patriot APA. VCLF had relied upon 

Black Diamond to close the deal, and—once Black Diamond repudiated—VCLF undertook 

stopgap efforts to accomplish the closing with Patriot. 

Third, despite Black Diamond’s desperate attempts to equate Mr. Potter’s October 25, 

2015 letter to Black Diamond with the “non-repudiating” party’s letter in Crosspoint merely 

requesting clarification of the counter-party’s intention, the two letters could not be more 

different. As noted above, Mr. Potter’s October 25th letter did not seek clarification of Black 

Diamond’s intent at all: it twice affirmatively stated that Black Diamond had repudiated the 

Commitment Letter no later than October 23, 2015, and, at most, “while [contending] Black 

Diamond has anticipatorily breached or repudiated the BD Commitment (and in any event does 

not plan to perform thereunder),”25 it offered Black Diamond a final opportunity to reverse 

course, to “repent.” See AG Properties, 14 A.D.3d at 971. Black Diamond’s characterization of 

Mr. Potter’s letter as a “request for clarification” (which influenced the Court in Crosspoint to 

conclude that even the non-repudiating party was unclear whether there had been a repudiation) 

is belied by the letter itself. 

Fourth and finally, the Crosspoint court applied the legal standard for repudiation 

developed under Indiana case law—a much more rigorous standard than the one under New 

York law.26 But even applying Indiana law, Black Diamond’s unilateral demand of new terms 

 

25 Phillips Dec., Ex. EE, at BDCF-00077234. 

26 See Jay Cty. Rural Elec. Membership Corp. v. Wabash Valley Power Ass’n, Inc., 692 N.E.2d 905, 911 (Ind. Ct. 

App. 1998) (“Repudiation of a contract must be positive, absolute, and unconditional in order that it may be 

treated as an anticipatory breach.”); Angelone v. Chang, 761 N.E.2d 426, 429 (Ind. Ct. App. 2001) (“[T]he 

requirement that the repudiating statement be clear and absolute is a strict one.”). For example, while the doctrine 

of implied repudiation does not appear to be well-defined or even accepted by the vast number of Indiana courts, 

New York courts broadly apply the doctrine. See Norcon, 92 N.Y.2d at 463; Heart Const. Corp. v. Gower, 6 

Misc. 3d 1018(A), 800 N.Y.S.2d 347 (Dist. Ct. Nassau Cty. 2004) (“[R]epudiation may be express or implied.”).

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constituted repudiation. “The demanding of the other party a performance to which the party has 

no right under the contract constitutes [] an anticipatory breach.” Eden United, Inc. v. Short, 573 

N.E.2d 920, 929 (Ind. Ct. App. 1991) (party’s conduct at closing suggesting that it would only 

abide by its own interpretation of the agreement amounted to repudiation). 

Black Diamond also improperly relies on Inamed Corp. v. Kuzmak, 275 F. Supp. 2d 1100 

(C.D. Cal. 2002), for the proposition that a party’s threat to abandon a contract if the parties’ 

dispute cannot be resolved does not amount to a repudiation. BD Mem. 21, n.31. Once again, 

Black Diamond relies on factually distinguishable case law, and in the process, mischaracterizes 

the appropriate legal standard. 

Inamed involved a disagreement between parties over the interpretation of a preliminary 

letter agreement and its legal consequences. More specifically, the parties had agreed to a 

preliminary letter agreement in January 2000 outlining terms of a settlement agreement; 

subsequently, in February 2000, one of the parties transmitted to the counter-party a “proposed 

draft of the Settlement Agreement.” 275 F. Supp. 2d at 1114. The counter-party then sent a 

letter in March 2000 identifying a few inconsistencies between the January 2000 letter agreement 

and the February 2000 draft settlement agreement, but significantly, “[n]owhere in the letter [did 

the party] state that his client [would] not settle the dispute on the terms outlined in the January [] 

2000 letter agreement . . . .” Id. Additionally, “[n]owhere in the letter [did the party] state that 

his client . . . refuse[d] to continue negotiations regarding a formal settlement agreement.” Id. 

Here, Black Diamond’s communications with VCLF on October 23, 2015, had nothing to 

do with its interpretation of the Commitment Letter. It is undisputed that Black Diamond 

transmitted new terms to VCLF and not mere interpretations of the Commitment Letter; indeed, 

each one of the Gravenhorst E-mails pointedly stated, “These new terms and conditions will 

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modify our existing commitment letter dated September 21, 2015.” Phillips Dec., Exs. P-S 

(emphasis added). Not only that, but as Mr. Clarke testified, 

. See Clarke Dep. Tr. 58:10-25, 60:5-21, 138:7-23, 144:18-

25, 148:3-11, 282:5-283:15, 292:4-8, 301:19-302:4. This situation therefore cannot be 

analogized to Inamed. 

II. BLACK DIAMOND’S REPUDIATION IMMEDIATELY RELIEVED VCLF OF 

ITS OWN PERFORMANCE OBLIGATIONS UNDER THE COMMITMENT 

LETTER 

It is well-established under New York law that an anticipatory breach by one party to a 

contract excuses performance by a nonrepudiating counter-party. See Long Is. R. R. Co., 41 

N.Y.2d at 463 (“[R]epudiation entitles the nonrepudiating party to claim damages for total 

breach.”); Kain Dev., LLC v. Krause Properties, LLC, 130 A.D.3d 1229, 1232 (3d Dep’t 2015) 

(“Upon a showing of [] anticipatory repudiation, the nonrepudiating party is entitled to forgo 

further performance and to claim damages for total breach.”); QK Healthcare, Inc. v. InSource, 

Inc., 108 A.D.3d 56, 63 (2d Dep’t 2013) (“Under the doctrine of anticipatory repudiation, where 

one party repudiates its contractual obligations prior to the time designated for performance, the 

nonrepudiating party may immediately claim damages for total breach and be absolved from its 

obligations of future performance.”). 

Black Diamond’s repudiation of the Commitment Letter occurred no later than the 

afternoon of October 23, 2015, when 

. Under New York law, this repudiation 

immediately relieved VCLF of its own performance obligations under the Commitment Letter, 

REDACTED

REDACTED

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including obligations in the “Exclusivity” section. See Clarke Dep. Tr. 52:3-7 (

. In other words, once Black Diamond repudiated, VCLF was 

free to solicit alternative closing financing and it was no longer obligated to convey any equity 

interests to Black Diamond. 

It is undisputed that the solicitations of alternative financing identified in Black 

Diamond’s motion papers did not occur until after Black Diamond had demanded the terms in 

the Gravenhorst E-mails and confirmed that it would accept nothing less than those terms.27

 

Likewise, VCLF did not re-allocate the equity interests in ERP Federal Mining Complex, LLC 

and ERP Settlement, LLC, until the closing of the VCLF-Patriot Transaction on October 27, 

2015. In either instance, VCLF’s actions were undertaken well after Black Diamond had already 

repudiated, and do not constitute a breach of the Commitment Letter. 

CONCLUSION 

Black Diamond’s motion for partial summary judgment should be recognized for what it 

is—a bait-and-switch attempt quite similar to the one perpetrated by Black Diamond on VCLF 

on October 23, 2015. Notwithstanding Black Diamond’s eleventh-hour attempt to redefine the 

issues in this case, the evidence is decidedly against the determinations Black Diamond now asks 

this Court to make. Accordingly, VCLF respectfully submits that this Court deny Black 

 

27 Black Diamond’s claim that UMWA’s loan to VCLF was a breach of the Commitment Letter is without basis for 

a separate reason: 

. See Clarke Dep. Tr. 12:4-

14:20. . See id. at 170:3-

20. 

REDACTED

REDACTED

REDACTED

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Diamond’s motion for partial summary judgment and grant VCLF’s motion for partial summary 

judgment. 

Respectfully submitted, 

Dated: January 19, 2018 /s/ Patrick J. Potter 

 McLean, Virginia Patrick J. Potter (VSB No. 39766) 

 PILLSBURY WINTHROP SHAW PITTMAN LLP 

 1650 Tysons Boulevard, Suite 1400 

 McLean, Virginia 22102-4856 

 Telephone: (703) 770-7900 

Facsimile: (703) 770-7901 

E-mail: patrick.potter@pillsburylaw.com 

William M. Sullivan, Jr. (admitted pro hac vice) 

PILLSBURY WINTHROP SHAW PITTMAN LLP 

1200 Seventeenth Street, NW 

Washington, DC 20036-3006 

Telephone: (202) 663-8027 

Facsimile: (202) 663-8007 

E-mail: wsullivan@pillsburylaw.com 

 Andrew M. Troop (admitted pro hac vice) 

Samuel S. Cavior (admitted pro hac vice) 

Joshua I. Schlenger (admitted pro hac vice)

PILLSBURY WINTHROP SHAW PITTMAN LLP 

1540 Broadway 

New York, New York 10036-4039 

Telephone: (212) 858-1000 

Facsimile: (212) 858-1500 

E-mail: andrew.troop@pillsburylaw.com 

Counsel to Virginia Conservation Legacy Fund, 

Inc. and ERP Compliant Fuels, LLC

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CERTIFICATE OF SERVICE 

I hereby certify that, on January 19, 2018, I filed the foregoing Memorandum of Law in 

Opposition to Black Diamond’s Motion for Partial Summary Judgment by uploading it to this 

Court’s CM/ECF system, which will send notification of such filing to all CM/ECF participants, 

and that I served a copy on opposing counsel of record in this adversary proceeding by e-mail 

and Federal Express overnight. 

 /s/ Patrick J. Potter 

 Patrick J. Potter 

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