Court Opinion

ID: 9942007
Source: CourtListenerOpinion
Date Created: 2024-02-20 14:07:25.211238+00
Date Added: 2024-06-11T13:47:35.141116
License: Public Domain

Telefonica S.A. v Millicom Intl. Cellular S.A.
               2024 NY Slip Op 30478(U)
                    February 13, 2024
           Supreme Court, New York County
        Docket Number: Index No. 651838/2020
                  Judge: Andrew Borrok
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                                                                                                                       INDEX NO. 651838/2020
  NYSCEF DOC. NO. 721                                                                                            RECEIVED NYSCEF: 02/13/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53
            -----------------------------------------------------------------------------------X
             TELEFONICA S.A.,                                                                      INDEX NO.         651838/2020

                                                         Plaintiff,                                                   02/24/2023,
                                                                                                   MOTION DATE        02/24/2023
                                                -v-
             MILLICOM INTERNATIONAL CELLULAR S.A., MILLICOM                                        MOTION SEQ. NO.      007 008
             SPAIN S.L.
                                                                                                    DECISION + ORDER ON
                                                         Defendant.
                                                                                                          MOTION
            -----------------------------------------------------------------------------------X

            HON. ANDREW BORROK:

            The following e-filed documents, listed by NYSCEF document number (Motion 007) 351, 352, 353, 354,
            355, 356, 357, 358, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 373, 374,
            375, 376, 377, 378, 379, 380, 381, 382, 383, 384, 385, 386, 387, 388, 389, 390, 391, 392, 393, 394,
            395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 406, 407, 408, 409, 410, 411, 412, 413, 414,
            415, 416, 417, 418, 419, 420, 421, 422, 423, 424, 425, 426, 681, 682, 683, 684, 685, 686, 692, 693,
            694, 695, 696, 697, 715
            were read on this motion to/for                     PARTIAL SUMMARY JUDGMENT                        .

            The following e-filed documents, listed by NYSCEF document number (Motion 008) 427, 428, 429, 430,
            431, 432, 433, 434, 435, 436, 437, 438, 439, 440, 441, 442, 443, 444, 445, 446, 447, 448, 449, 450,
            451, 452, 453, 454, 455, 456, 457, 458, 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470,
            471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483, 484, 485, 486, 487, 488, 489, 490,
            491, 492, 493, 494, 495, 496, 497, 498, 499, 500, 501, 502, 503, 504, 505, 506, 507, 508, 509, 510,
            511, 512, 513, 514, 515, 516, 517, 518, 519, 520, 521, 522, 523, 524, 525, 526, 527, 528, 529, 530,
            531, 532, 533, 534, 535, 536, 537, 538, 539, 540, 541, 542, 543, 544, 545, 546, 547, 548, 549, 550,
            551, 552, 553, 554, 555, 556, 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570,
            571, 572, 573, 574, 575, 576, 577, 578, 579, 580, 581, 582, 583, 584, 585, 586, 587, 588, 589, 590,
            591, 592, 593, 594, 595, 596, 597, 598, 599, 600, 601, 602, 603, 604, 605, 606, 607, 608, 609, 610,
            611, 612, 613, 614, 615, 621, 622, 623, 624, 625, 626, 627, 628, 629, 630, 631, 632, 633, 634, 635,
            636, 637, 638, 639, 640, 641, 642, 643, 644, 645, 646, 647, 648, 649, 650, 651, 652, 653, 654, 655,
            656, 657, 658, 659, 660, 661, 662, 663, 664, 665, 666, 667, 668, 669, 670, 671, 672, 673, 674, 675,
            676, 677, 678, 679, 680, 698, 699, 700, 701, 702, 703, 704, 714
            were read on this motion to/for                 SUMMARY JUDGMENT(AFTER JOINDER                      .

            Upon the foregoing documents, Telefonica’s motion for partial summary judgment is granted

            and Millicom’s motion for summary judgment is denied. The record before the Court and the

            parties’ most recent submissions firmly establish that Millicom’s litigation position that an

             651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                                                    Page 1 of 6
             Motion No. 007 008

                                                                           1 of 6
[* 1]
                                                                                                    INDEX NO. 651838/2020
  NYSCEF DOC. NO. 721                                                                        RECEIVED NYSCEF: 02/13/2024

            endorsement of this transaction is a closing condition of this transaction is just that – a litigation

            position.

            The SPA makes no mention of the word Refrendo or endorsement (see NYSEC Doc. No. 356).

            What is required by the SPA is obtaining the Autorizacion of the Comptroller. However, as

            discussed in prior decisions, when the parties sought Autorizacion of the Comptroller, the parties

            were informed that it is the Sutel (the competition agency) and not the Comptroller who gives

            Autorizacion. The Comptroller subsequently gives an endorsement. Thus, on the face of the

            SPA, no Autorizacion of the Comptroller was required to consummate the transaction – the

            Comptroller does not do that act.

            Section 5.1(b) of the SPA defines “Regulatory Approval” as those approvals which the parties

            would use their best efforts to procure and included those approvals required to consummate the

            transactions contemplated by the SPA (i.e., approvals required before closing):

                   Without limiting the generality of Section 5.4(a), Purchaser and Seller shall use
                   their reasonable best efforts to obtain any action, approval, authorization,
                   clearance, order, Permit or waiver of all Governmental Authorities required to
                   consummate the transactions contemplated in this Agreement, including but not
                   limited to the Closing Regulatory Approval (each a “Regulatory Approval”)

            (NYSCEF Doc. No. 356, § 5.4[b]).

            Section 6.1 of the SPA provides that these Regulatory Approvals are only those approvals

            “permitted by applicable law:”

                   Conditions to the Parties’ Obligations. Subject to Section 2.3, the respective
                   obligation of each Party to consummate the transactions contemplated hereby is
                   subject solely to the satisfaction or waiver, to the extent permitted by applicable
                   Law, on or prior to the Closing Date of the following conditions:
             651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                                  Page 2 of 6
             Motion No. 007 008

                                                           2 of 6
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                                                                                                   INDEX NO. 651838/2020
  NYSCEF DOC. NO. 721                                                                      RECEIVED NYSCEF: 02/13/2024

                       (a) the Regulatory Approvals set forth in Section 6.1 of the Disclosure Schedule
                       (the “Closing Regulatory Approvals”), shall be in full force and effect and any
                       related waiting periods required by Law shall have expired or been terminated.

                       (b) No Governmental Authority shall have enacted, issued, promulgated, enforced
                       or entered any Law or Order that is in effect and would (i) make the Closing
                       illegal or (ii) otherwise prohibit or enjoin the Closing

            (Id., § 6.1[a]-[b] [emphasis added]). Thus, on the face of the SPA, to the extent that the

            Comptroller does not grant Autorizacion, Millicom was not entitled to claim this act as a closing

            condition that did not occur because this is not a Closing Regulatory Approval that is available or

            permitted by applicable law.

            In any event, when the parties learned that the Comptroller does not grant an Autorizacion, the

            parties jointly demonstrated through their conduct that they interpreted the SPA to mean that the

            reference in the SPA to Autorizacion meant that obtaining an endorsement from the Comptroller

            was appropriate.1 As discussed above, first, the parties went to the Comptroller to seek its

            Autorizacion. Then, when they learned that Autorizacion was granted by the Sutel (and not the

            Comptroller) the parties first obtained the Sutel’s Autorizacion and then the other government

            authorizations required under the SPA. At that point, the parties themselves then sought

            endorsement from the Comptroller and agreed to work together to obtain the Comptroller’s

            endorsement.

            Having agreed to this course of conduct with Telefonica, Millicom could not then subvert the

            parties’ agreed conduct by unilaterally declining to sign an addendum to the SPA and declaring a

            1
                The parties both agree that they SPA was not amended by conduct.
                651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                             Page 3 of 6
                Motion No. 007 008

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                                                                                                                  INDEX NO. 651838/2020
  NYSCEF DOC. NO. 721                                                                                    RECEIVED NYSCEF: 02/13/2024

            failure of condition to avoid their obligation to close.2 That is, the parties themselves through

            their conduct chose to interpret the SPA to mean that Autorizacion included obtaining all

            approvals for the transaction including the endorsement of the Comptroller when it became

            apparent that the parties’ initial understanding of what was required as to government approvals

            was not in fact correct. Having mutually agreed that obtaining the endorsement was appropriate,

            Millicom could not then arbitrarily and opportunistically enforce an end date of May 2020,

            especially when Telefonica offered (arguably gratuitously) additional compensation to extend the

            2
             The SPA does not contain a definition for the term “Autorizacion.” In the initial briefing of the competing
            summary judgment motions, the parties did not address whether there was agreement on the definition of the term
            Autorizacion. The Court asked for a supplemental Joint Rule 19-A Submission addressing:

            (1)     What is the simple definition as translated of the words “autorizacion” and “referendo” (which term does not
            appear in the SPA). The parties must agree to a source for the definition – i.e., a single dictionary for translation.
            (2)     Inasmuch as the Sutel looks at antitrust concerns and the Comptroller seems to endorse whether all approvals
            are in place, can an endorsement be obtained pre-transfer or does the Comptroller require consummation of the
            transaction subject to endorsement?
            (3)     What is the legal effect if no endorsement is procured?

            In response to the first question, the parties agreed on the Royal Spanish Academy’s Spanish Language
            Dictionary. However, the parties do not agree as to whether this was the correct source to understand the
            definition. Telefonica asserts that the dictionary definition indicates that Autorizacion means the “act and effect of
            authorizing” or “the act of an authority by which someone is given permission to act where otherwise prohibited.”
            Referendo means the “act and effect of endorsing.” These are two wholly separate terms with different temporal
            meanings. One ex ante. One post. Telefonica asserts that the term was intentionally used in the SPA, that that they
            specifically avoided using the term Referendo to avoid exactly the situation here. Millicom’s position is that under
            its technical meaning (i.e., as opposed to its plain meaning) under Costa Rica law, Autorizacion means the effect of
            authorizing or giving or recognizing the ability to do so something and Refrendo means corroborating something by
            affirming it. Thus, they claim the term Autorizacion is broad and inclusive of obtaining an endorsement.

            As to the second question, the parties did not agree on a response. Telefonica’s position was that a Comptroller’s
            endorsement had not been done before under Costa Rica’s General Law of Telecommunications and it is not clear
            whether it would have been done here. Telefonica also asserts that the endorsement ultimately was never submitted
            because Millicom refused to sign the needed addendum to the SPA. Millicom’s response is that this has happened
            pre-transfer albeit under a different Costa Rican law. Millicom claims that Telefonica understood that this could be
            done pre-transfer, which is why they offered money to extend the end date of the SPA from May 2020 to September
            2020.

            As to the third question, the parties agree that if no endorsement is ultimately procured the addendum changing the
            parent guarantor would not be legally effective under Costa Rican law, thus Telefonica could be guaranteeing
            something it no longer owned.

            The parties agree that this presents an issue of contract interpretation for the Court.

                651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                                            Page 4 of 6
                Motion No. 007 008

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  NYSCEF DOC. NO. 721                                                                                    RECEIVED NYSCEF: 02/13/2024

            end date to September 2020. Thus, Telefonica’s motion for partial summary judgment is granted

            and Millicom’s motion is denied.

            Telefonica is entitled to prejudgment interest from the closing date – i.e., the earliest

            ascertainable date the cause of action for breach existed (CPLR 5001[b]) and it is entitled to

            prejudgment interest on the full contract price (not just $62 million) up until the date of the

            replacement transaction – i.e., the time of mitigation (Trehan v. Truli, 2016 WL 67775501

            [S.D.N.Y August 23, 2016]). Although compensatory damages are equal to the difference in the

            contract price and the fair market value (Emposimato v. CIFC Acquisition Corp., 89AD.3d 418

            [2011]) and, as Millicom submits in its papers, “[b]oth experts agree that the damages start with

            the difference between the Millicom deal price and the replacement deal (Liberty) price”

            (NYSCEF Doc. No. 615, p. 24 citing Kruskol ¶¶ 74-84, Floyd at 16), this amount is not

            sufficient to compensate Telefonica for the “inability to use the funds that the defendants should

            have returned” (Trehan, at *1-2).3 As such, Telefonica can submit judgment including

            3
              Trehan involved a breach of contract stemming from an agreement to invest the plaintiff’s money in certain art for
            $550,000. The plaintiff made a demand for repayment. The defendant promised to sell paintings at auction to be
            able to pay the money back. Neither the auction nor repayment occurred. The plaintiff then sued and the defendant
            defaulted. The matter was subsequently referred for inquest to determine damages. As to compensatory damages,
            the court recommended that the plaintiff’s damages were equal to the difference between the $550,000 obligation
            and the value of paintings the plaintiff was delivered to it (i.e., $215,100) or $334,900. The court declined to
            recommend the award of lost profits damages because the assertion that the art was rising in value was too
            speculative. As relevant, however, on the issue of prejudgment interest, the court recommended that (i) prejudgment
            interest runs from the “earliest ascertainable date the cause of action existed until the date of the judgment” relying
            on CPLR 5001(b) and that (ii) Trehan was entitled to prejudgment interest on the entire $550,000 and not just the
            $334,000, reasoning:

                      [N]otwithstanding the receipt of the two paintings, Trehan has not had use of his $550,000 since
                      that date. The value of the paintings is sufficient to reduce the damages the defendants must pay,
                      but it is not sufficient to compensate Trehan for his inability to use the funds that the defendants
                      should have returned to him. Accordingly, the Court should award Trehan nine percent annual
                      interest on the full amount due, $550,000, from March 22, 2010, until the date judgment is entered
            (Trehan, WL 6775501 at *5). To the extent that Millicom relies on Emposimato to limit prejudgment interest, the
            case is inapposite. As discussed above, it addresses the amount of damages which, in this case, the parties do not
            dispute.

                651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                                            Page 5 of 6
                Motion No. 007 008

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  NYSCEF DOC. NO. 721                                                                        RECEIVED NYSCEF: 02/13/2024

            compensatory damages on the difference between the contract price and the replacement

            transaction price and including prejudgment interest on the entire contract amount up until the

            replacement transaction occurred.

            The Court has considered the parties remaining arguments and finds them unavailing.

            Accordingly, it is hereby

            ORDERED that Plaintiff’s motion for partial summary judgment is granted and the Plaintiff may

            submit judgment on notice; and it is further

            ORDERED that Defendants’ motion for summary judgment is denied.

                    2/13/2024
                      DATE
             CHECK ONE:                 X   CASE DISPOSED                NON-FINAL DISPOSITION

                                        X   GRANTED             DENIED   GRANTED IN PART             OTHER

             APPLICATION:                   SETTLE ORDER                 SUBMIT ORDER

             CHECK IF APPROPRIATE:          INCLUDES TRANSFER/REASSIGN   FIDUCIARY APPOINTMENT       REFERENCE

             651838/2020 TELEFONICA S.A. vs. MILLICOM INTERNATIONAL                                Page 6 of 6
             Motion No. 007 008

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