Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

AM General Holdings LLC v. Renco Group, Inc.

Court of Chancery of Delaware

May 17, 2017

AM General Holdings LLC
v.
The Renco Group, Inc.; The Renco Group, Inc.
v.
MacAndrews AMG Holdings LLC

          Date Submitted: February 21, 2017

          Stephen P. Lamb, Esquire Meghan M. Dougherty, Esquire Paul, Weiss, Rifkind, Wharton & Garrison LLP

          Thad J. Bracegirdle, Esquire Wilks, Lukoff & Bracegirdle, LLC

          Kevin G. Abrams, Esquire J. Peter Shindel, Jr., Esquire Abrams & Bayliss LLP

          Joel Friedlander, Esquire Friedlander & Gorris, P.A.

         Dear Counsel:

         The parties have filed cross-motions for partial summary judgment on two counts (Count I for Breach of Contract and Count VII for Declaratory Judgment) of the Verified Second Amended Complaint (the "Complaint"). This decision represents the latest chapter in protracted litigation between the parties as they battle over the distribution of profits from their joint venture.[1] Specifically, Plaintiff, The Renco Group, Inc. ("Renco"), alleges that Defendant, MacAndrews AMG Holdings LLC ("MacAndrews AMG"), used its control over AM General Holdings LLC ("Holdco" or the "Company") as managing member to cause Holdco to distribute $72.8 million to MacAndrews AMG that should have gone to Renco. It is alleged that this wrongful distribution of funds out of the joint venture was in breach of the Limited Liability Agreement of AM General Holdings LLC dated August 10, 2004, that governs the parties' relationship (the "Holdco Agreement").

         The Holdco Agreement, inter alia, sets forth a complex scheme by which the parties agreed that profits and losses of the joint venture should be allocated to each member. The cross-motions for summary judgment identify several provisions of the Holdco Agreement that create and implement this allocation scheme. Both parties agree that the relevant provisions are clear and unambiguous and that a proper construction of the provisions will allow the Court to adjudicate this dispute as a matter of law. Of course, that is where the agreement ends. The parties disagree on what the language says and what it means.

         Our law is settled that "[a] contract is not rendered ambiguous simply because the parties do not agree upon its proper construction."[2] Rather, the court will deem contractual language ambiguous only if the language is "reasonably or fairly susceptible of different interpretations."[3] After carefully reviewing the provisions of the Holdco Agreement at issue here, and the parties' competing constructions of those provisions, I am satisfied that both parties have interpreted the contract reasonably. Consequently, the cross-motions for summary judgment must be denied.

         A. Summary Judgment Standard

         "There is no 'right' to a summary judgment."[4] Summary judgment is only appropriate when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law."[5] "When the issue before the Court involves the interpretation of a contract, summary judgment is appropriate only if the contract in question is unambiguous."[6] In the procedural context of cross- motions for summary judgment, in order to prevail, one of the parties "must establish that [its] construction is the only reasonable interpretation."[7] If both parties offer arguably reasonable constructions, even if one might appear more reasonable than the other, the Court "may, in its discretion, deny summary judgment [so that it may] . . . inquire into or develop more thoroughly the facts at trial in order to clarify the law or its application."[8]

         B. The Dispute Over Distributions

         The gravamen of the dispute is whether $72.8 million MacAndrews AMG distributed to itself in December 2012 and February 2013 should be awarded to Renco in order to restore compliance with the parties' bargained-for balance with respect to their capital interests in the joint venture. Prior to the distributions at issue, MacAndrews AMG valued Holdco at a fair market value of between $1.489 and $1.759 billion. MacAndrews AMG attributed approximately $1.164 to $1.434 billion of that value to the equity value of AM General.[9] When Renco disagreed with that valuation, the parties initiated the appraisal procedure detailed in the Holdco Agreement. At the conclusion of that procedure, an independent appraiser determined that Holdco had a fair market value of $314 million and that AM General had an equity value of $27.5 million. Renco argues that MacAndrews AMG used its inflated valuation to justify the distributions it received and that, based on the new valuation, the equity value of AM General was well below a value that would trigger any right MacAndrews AMG may have had to receive a distribution.

         According to Renco, the revised valuation threw the parties' capital accounts out of balance. To remedy that imbalance, Renco seeks to invoke a series of provisions in the Holdco Agreement that it contends allow it to elect to receive distributions from Holdco (wrongfully taken by MacAndrews AMG) in order to restore the capital accounts to the bargained-for levels.

         C. The Relevant Provisions of the Holdco Agreement

         Several provisions of the Holdco Agreement address the parties' agreement with respect to the maintenance of their capital accounts and the allocation of profits and other amounts to the joint venturers. They are summarized below in the order they appear in the Holdco Agreement.

         Section 4.4 sets forth the definition of Revalued Capital Accounts ("RCA"), a term that appears as a defined term in other relevant provisions. It states:

The Revalued Capital Account of each Member shall be the Capital Account balance such Member would have if all of the assets of [Holdco] were sold for their respective gross fair market values . . . and the resulting Profits, Losses and all other items of income, gain, loss and deduction were ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.