Opinion ID: 216819
Heading Depth: 3
Heading Rank: 3

Heading: Increased Costs of the Original $15.00 Purchase Price in U.S. Dollars

Text: Ventas next argues that it is entitled to damages based on the increased cost of the original $15.00 purchase price in U.S. dollars, as a result of exchange rate fluctuations in the international currency markets. ( See Ventas Br. at 69.) Ventas explains as follows: Ventas contacted to acquire Sunrise on April 2, 2007 for $15 per share, a total of C$1,137,712,410 . . . plus assumption of Sunrise's debt. HCP's interference forced Ventas to delay the closing to April 26[, 2007]. By April 26, 2007, the value of the U.S. dollar declined against the Canadian dollar from .89366 to.86565. The C$1,137,712,410 price cost $31,867,325 more in U.S. dollars on April 26[, 2007] than on April 2[, 2007]. ( Id. (internal record citations omitted).) In an August 27, 2009 oral ruling, the district court denied Ventas' claim for this measure of damages. The court reasoned that Ventas did not have an expectancy that could be proven to acquire the company on a specific date and certainly not at a particular value of the Canadian dollar. (Tr.7A at 28.) Rather, the district court held, Ventas' expectancy was to purchase the company at $15 Canadian. ( Id. at 50.) The district court also noted that the risk of currency changes is a risk everybody faced. ( Id. ) Ventas makes two arguments on appeal. The first is factual, that whether Ventas had a contractual expectation that the acquisition would close on April 2, 2007 is a fact issue for the jury. (Ventas Br. at 69.) The second is legal, that a decline in currency value is a direct and foreseeable consequence of a delay in contractual performance and is compensable. ( Id. (citing Walther & Cie v. U.S. Fid. & Guar., 397 F.Supp. 937, 945 (M.D.Pa.1975).)) Ventas contends that the tortfeasor should bear the risk of fluctuations in market prices during a period of delay caused by its wrongful conduct. ( Id. (citing Payne v. Wood, 62 F.3d 1418 (6th Cir.1995) (table).)) Additionally, Ventas argues that the increased currency cost was part of Ventas'[] reasonable costs to mitigate its loss by extending the shareholder vote on approval of the deal at $16.50. ( Id. (citing Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1237-38 (10th Cir.2006); Restatement of Torts § 919).) We reject Ventas' arguments and affirm the decision of the district court. As an initial matter, we agree with the district court that, as a matter of law, Ventas did not have a contractual expectancy to acquire Sunrise on a specific date and certainly not at a particular value of the Canadian dollar. (Tr.7A at 28.) The sole claim at trial was for tortious interference with a prospective advantage, which by its terms requires the plaintiff to prove an expectancy with which the defendant tortiously interfered. The right to recover. . . consequential damages can hardly be divorced from the tort that allegedly caused them, QSI-Fostoria D.C., LLC v. Gen. Elec. Cap. Bus. Asset Funding Corp., 389 Fed.Appx. 480, 486 (6th Cir.2010), and as the district court aptly noted: It seems to me that in the tort of the expectancy . . . the expectancy sued upon is the expectancy to purchase the company, to acquire the company, and to acquire the company at 15. I don't think there was an expectancy that could be proven to acquire the company on a specific date and certainly not at a particular value of the Canadian dollar. So I think that in terms of the tort of tortious interference with business expectancy, that expectancy that I have been defining it is to acquire the company at 15. It is undisputed that Ventas voluntarily obligated itself in the Purchase Agreement to acquire Sunrise, a Canadian company, at a fixed amount of Canadian dollars. (App. at 281.) The Purchase Agreement with which HCP tortiously interfered did not address the risk of currency fluctuations. Ventas cites to no evidence that it selected April 2, 2007 as the original closing date because of any expectation that the exchange rates would be of a certain value. Because Ventas' underlying tort claim alleges interference with an agreement completely divorced from the international currency markets, Ventas' instant claim for damages fails as a matter of law. Cf. Humphrey, 272 U.S. at 519, 47 S.Ct. 166 (A suit in this country is based upon an obligation existing under the foreign law at the time when the suit is brought, and the obligation is not enlarged by the fact that the creditor happens to be able to catch his debtor here.). Moreover, any subjective expectation that Ventas had of closing the deal on April 2, 2007 was destroyed by its own actions. On March 24, 2007, Ventas sent a letter to Sunrise in which it expressly waive[d] its right under the Purchase Agreement to insist that the Sunrise convene a unitholder meeting by March 31, 2007, which would permit the closing to occur on April 2, 2007. (App. at 1294-95.) Ventas instead requested that Sunrise postpone the unitholder meeting until April 11, 2007, so that the parties could update proxy materials to: 1) disclose that Sunrise's financial performance in the fourth quarter is materially worse than street estimates; and 2) describe the decision of the Ontario Court of Appeal. The letter explained that Ventas believes that it would be appropriate to give Unitholders 10 business days after release of the financial and other information described [in the letter] to evaluate such information. ( Id. at 1295.) Furthermore, although Kentucky courts have not addressed the question, we believe that Kentucky law would deny recovery of compensatory damages arising from currency market fluctuations wholly unrelated to the defendant's conduct. These damages are unforeseeable. See, e.g., Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP, 336 Or. 329, 83 P.3d 322, 329-30 (2004) (holding that claimed damages caused by market forces during a delay caused by a defendant were unforeseeable as a matter of law). Ventas offers no citation to anything in the record to suggest otherwise. (Ventas Br. at 69-70; Ventas Rep. at 18-21.) We considered a similar issue in Layne v. Bank One, Kentucky, N.A., 395 F.3d 271 (6th Cir.2005) (applying Kentucky law). In Layne, two individuals obtained a loan from a bank that was secured by their pledge of shares of stock in an internet company as collateral. The internet bubble burst in February of 2001, and as a result, the value of the collateral substantially declined. The loans eventually went into default, after which the debtors discussed with the bank either paying down the balance, or pledging additional collateral, rather than have the bank liquidate the collateral. The discussions were unsuccessful, and the bank liquidated the shares for a fraction of their former price. The debtors brought a diversity action in federal court against the bank alleging, among other things, breach of a duty under Kentucky law to preserve the value of their collateral. The district court granted summary judgment to the bank on this claim, and we affirmed. We held, as a matter of Kentucky law, that the duty of preservation does not extend to protecting against market declines. Id. at 276. The investment risk, we held, is properly placed on the borrower given the volatility of the stock market. Id. at 277 (internal quotation marks and citation omitted). We then set forth a general rule that stock market fluctuation is unforeseeable as a matter of law, where the defendant has no knowledge of a pre-defined event that will impact the value of the security. See id. at 277 n. 7 (internal quotation marks and citations omitted). The same reasoning applies with equal force to the present case. The risk of market fluctuations is an uncontrollable, background risk that lurks in every commercial transaction. See, e.g., In re Callister, 15 B.R. 521, 533 (Bankr.D.Utah 1981) (stating that a market player is at the mercy of events beyond its control). More importantly, the risk is constant, and no more affects a plaintiff on one day rather than the next. Although the risk may have enured to Ventas' detriment in this case, Ventas could have received a windfall had the fluctuation differed. Mutuelles Unies v. Kroll & Linstrom, 957 F.2d 707, 714 (9th Cir.1992). We believe that it is only when a defendant's conduct is connected to the movements in the markets, or the defendant has knowledge of a pre-determined future event, that Kentucky courts will permit recovery of consequential damages arising from market fluctuations. [15] See Layne, 395 F.3d at 276-77 & n. 7. Cf. Burstyn v. Worldwide Xceed Grp., Inc., No. 01 CV 1125, 2002 WL 31191741, at  (S.D.N.Y. Sept. 30, 2002) (holding, in the securities law context, that the misrepresentations, and not the market forces behind the dot com collapse, must be the proximate cause of plaintiffs' injuries). Here, it is undisputed that HCP's tortious conduct was not directed at the currency markets; Ventas makes no allegation that HCP's tortious conduct in any way affected the U.S./Canadian dollar exchange rate. HCP's conduct simply provide[d] the occasion by which the injury was made possible. Clay v. Chesapeake & O. Ry. Co., 239 S.W.2d 231, 232 (Ky.1951). Accordingly, we AFFIRM the grant of judgment as a matter of law for HCP on Ventas' claim for damages on account of fluctuations in the currency markets.