RONNIE ABRAMS, District Judge.
Newmont Mining Corporation filed this action against three related corporate entities, AngloGold Ashanti Limited, AngloGold Ashanti North America, Inc., and AngloGold Ashanti USA Incorporated (collectively "AGA") as well as Wayne Chancellor, AGA Americas' Vice President and General Counsel,
This dispute arises from the 2015 sale of the Cripple Creek & Victor Gold Mining Company ("CC&V" or the "Mine"), a gold mine located in Teller County, Colorado, from AGA to Newmont. AGA acquired a two-thirds interest in CC&V in 1999, and the remaining one-third interest in 2008, thereafter owning 100% of CC&V until Newmont's 2015 purchase. AGA 56.1 ¶ 11; Newmont 56.1 ¶ 451. As detailed more below, Newmont acquired 100% of CC&V from AGA pursuant to the Stock Purchase Agreement ("SPA"), which was signed on June 8, 2015 ("Signing"). The transaction closed on August 3, 2015 ("Closing").
In 2008, CC&V sought and received regulatory approval for its first mine life extension ("MLE1"), which extended the mine life—i.e., the time period in which the Mine is able to produce gold—to approximately 2016. AGA 56.1 ¶¶ 15-16. In 2012, CC&V sought and received regulatory approval for a second mine life extension ("MLE2"), which was expected to extend the life of the Mine until at least 2026. AGA 56.1 ¶ 17. Among other things, the MLE2 project involved the construction of a new "high grade mill" at CC&V (the "Mill"), which was intended to "treat higher grade ore containing relatively more gold per ton." AGA 56.1 ¶ 18; Newmont 56.1 ¶ 453.
AGA conducted a review of the MLE2 project prior to implementing it, and prepared a document known as the "Feasibility Study," dated February 2012, which set forth the "technical, engineering, and financial rationales" for the MLE2 project. AGA 56.1 ¶ 19. In particular, the Feasibility Study set out plans for the Mill's process circuit,
The Mill and its process circuit were designed by FLSmidth ("FLS"), a third-party contractor. AGA 56.1 ¶ 47. Throughout the diligence period, Newmont was aware that FLS designed the Mill. AGA 56.1 ¶ 47.
Construction on the Mill began in July 2013. AGA 56.1 ¶ 48. In September 2014, Jeff Winterton, a CC&V employee, was transferred to the Mine to work as its Process Production Manager, whereby he was "in charge of process operations and involved in the commissioning of the [Mill], which included supervising the expansion of the metallurgical test work related to the Mill." Newmont Ex. 101 ("Winterton Decl.") ¶¶ 3-4. As of September 2014, construction of the Mill was approximately 80% completed. Newmont 56.1 ¶ 469. In the fall of 2014, Winterton directed his team at CC&V to conduct additional test work for the Mill (the "Fall Test Work"). AGA-Ch. Resp. ¶ 472. As part of this additional testing, CC&V ran several types of ore and ore blends—including "Cresson Pipe," an ore named after the area of the mine from which it was drilled—through the "pilot plant," which was a "miniature version of the Mill's grinding and flotation circuits." Newmont 56.1 ¶ 477; AGA-Ch. Resp. ¶ 474.
Construction on the Mill was completed in February 2015, although "certain remediation efforts related to the Mill building structure continued thereafter." AGA 56.1 ¶ 49. The Mill's "full plant commissioning process," i.e., the "process of troubleshooting and getting the Mill up and running," began by February 2015. AGA 56.1 ¶ 61.
"Throughput" and "recovery" are two common metrics in the gold mining industry. The term "throughput" refers to a measurement of the "rate at which a mill processes ore," which is "measured in terms of the tons of ore that can be processed through the mill during a given time increment." AGA 56.1 ¶ 20. The Feasibility Study noted that the Mill's throughput was expected to be 250 short tons per hour ("stph"). See AGA Ex. 70 at -8343 ("As part of MLE2, CC&V is designing and planning to construct a HG Mill to process 2.0 Mt per year at 250 tons per hour[.]"). The term "recovery" refers to a "metric that measures gold extracted from ore as a percentage of the gold contained in the ore fed into the Mill." AGA 56.1 ¶ 22. The Feasibility Study noted that the overall projected Mill recovery was 76.5%, see AGA 56.1 ¶ 31, which was rounded to 76% in the text of the Study, see AGA Ex. 70 at -8282.
The parties' estimates differ as to the percentage of gold that would be processed from the Mill in comparison to the entire Mine. Newmont asserts that AGA had calculated that Mill processing would account for "over 55% of the total recovered gold from the Mine." Newmont 56.1 ¶ 492. AGA, however, maintains that it had calculated that "Mill processing would account for approximately 44% of the total recovered gold from the Mine, not 55%." AGA-Ch. Resp. ¶ 492. Based on the financial model that Newmont created during the diligence process, "the ore at CC&V that was intended to be fed to the Mill at the time of the CC&V Transaction constituted only 7.9% of the total ore expected to be mined at CC&V overall." AGA 56.1 ¶ 190.
In late 2014, AGA began exploring the possibility of selling CC&V, either through an outright sale or a joint venture. AGA 56.1 ¶ 68. To assist in the potential marketing and sale of the Mine, AGA hired Bank of Montreal ("BMO") as a financial adviser. Newmont 56.1 ¶ 505. Separately, in November 2014, Newmont contacted AGA to express its interest "in either a partnership, or even an outright sale" of CC&V. AGA 56.1 ¶ 74. In response, AGA informed Newmont that it was not yet in a position to discuss CC&V, but that BMO would be in contact regarding Newmont's interest. AGA 56.1 ¶ 75. According to Newmont, AGA's "core deal team" for the sale of CC&V consisted of Chancellor (Vice President and General Counsel for AGA Americas), Paul Dennison (Senior Vice President of Strategy and Business Development for AGA Ltd.), Charles Carter (Executive Vice President of Strategy and Business Development for AGA Ltd.), and Ria Sanz (General Counsel for AGA Ltd.). Newmont 56.1 ¶ 499.
AGA's exploration of "strategic alternatives" regarding CC&V was code-named "Project Waltz," and was structured as a two-phase process. AGA 56.1 ¶¶ 68-69, 73. During the first phase, AGA sought conditional bids from a broad range of prequalified parties. Newmont 56.1 ¶ 507. Specifically, AGA, through BMO, contacted sixteen potentially interested counterparties, including Newmont, to "solicit their participation in Project Waltz" and to "gauge their interest in either a joint venture or an outright purchase of CC&V." AGA 56.1 ¶ 76. In order to participate in Project Waltz, potential counterparties were required to execute confidentiality agreements. AGA 56.1 ¶ 77. Fourteen of the sixteen potential counterparties, including Newmont, executed confidentiality agreements and entered Phase I. AGA 56.1 ¶ 78.
At the end of Phase I, twelve parties, including Newmont, submitted non-binding bids for all of CC&V, an interest in CC&V, or both. AGA 56.1 ¶ 123. AGA and BMO then invited five of the Phase I parties, including Newmont, to participate in Phase II. AGA 56.1 ¶ 124. During Phase II, the parties were given access to additional documents through the data room, and were provided the opportunity to conduct site visits at CC&V and to submit additional due diligence requests to AGA and BMO. AGA 56.1 ¶¶ 92, 125; Newmont 56.1 ¶ 508; AGA-Ch. Resp. ¶ 509.
The data room made available to the parties in Phase II contained "thousands of documents," including the Feasibility Study, two "preliminary draft versions of the transaction agreement, one reflecting a 50% acquisition and joint venture structure . . . and one reflecting a complete 100% sale of CC&V," and all MLE2 Reports that existed prior to Closing (except for the June 2015 MLE2 Report, which was emailed to Newmont on July 28, 2015). AGA 56.1 ¶¶ 94-95, 98, 103-05. The data room was also supplemented with additional documents throughout this period. AGA 56.1 ¶ 94. Newmont, however, claims that several documents were not uploaded to the data room, including an April 2015 report authored by Rikki Mususumeli, a metallurgist participating in the AGA Young Leaders internship program from February to April 2015, a report prepared by the Advanced Mineral Technology Laboratory, Ltd. regarding two specific ore types at CC&V, and a memorandum that Jeff Winterton wrote with respect to certain challenges at the Mill. See Newmont 56.1 ¶¶ 583, 671, 716.
In March 2015, AGA invited the remaining Phase II parties to CC&V for a site visit. Newmont 56.1 ¶ 519. Newmont conducted its site visit on March 17 and 18, 2015. AGA 56.1 ¶ 127. During the first day of the site visit, AGA distributed to Newmont a "Management Presentation," Newmont 56.1 ¶ 529, and following the presentation, CC&V personnel led a general tour of the site, Newmont 56.1 ¶ 533. On the second day of the site visit, CC&V personnel led "breakout sessions" for various substantive groups. Newmont 56.1 ¶ 535.
During Project Waltz, Newmont also conducted its own due diligence on CC&V, including by analyzing "all issues that are likely to impact the success and cost of the . . . acquisition." Newmont AGA Resp. ¶ 109. In particular, Newmont personnel analyzed different subject matter areas with respect to CC&V, and summarized their results in "functional reports." AGA 56.1 ¶ 109. For instance, during Phase I, Jim Orlich, a metallurgist at Newmont, reviewed and analyzed the available test work uploaded to the data room in order to perform an "independent analysis of the Mill's design recovery and throughput," and subsequently prepared a functional report on metallurgy and processing. Newmont 56.1 ¶ 545; AGA 56.1 ¶ 110. His report was dated February 24, 2015, see AGA Ex. 25, and subsequently updated on April 12, 2015, see Newmont Ex. 93. Newmont's "functional representatives" also prepared "final Phase II reports on their subject matter areas," AGA 56.1 ¶ 152, all of which were combined into a Project Waltz Due Diligence Report (the "Newmont Diligence Report"), dated April 16, 2015. See AGA Ex. 26. The Newmont Diligence Report indicated, based on Orlich's recovery calculations, that the "projected overall Mill recovery in Newmont's diligence model varied year-over-year and averaged 75.6%—not the 76.5% projected by AGA and CC&V—over the life of the mine." AGA 56.1 ¶ 165. Additionally, during this period, Newmont's "Value Assurance Team" (the "VAT") created "a financial analysis for the purpose of assessing the acquisition of CC&V." Newmont 56.1 ¶ 561. The VAT reviewed Newmont's Mill recovery assumptions and "built a scholastic model of Mill recovery that estimated an average Mill recovery of 73.7%," i.e., "below the diligence team's 75.6% estimate." AGA 56.1 ¶ 177; see also Newmont 56.1 ¶ 561 (noting that the VAT used a 73.7% recovery rate in its financial modeling).
The parties dispute the extent to which Newmont had knowledge of certain issues and "bottlenecks" that the Mill was experiencing during the diligence period. During the March 2015 site visit, Jim Dodd (Newmont's Senior Director of Process Development) and David McLaren (Newmont's Group Executive of Processing & Metallurgy) met with Winterton for a breakout session on "processing and metallurgical matters, which included an in-office portion and a walk-through of the Mill." AGA 56.1 ¶¶ 129, 132. During this session, Winterton discussed certain "issues and bottlenecks the Mill was experiencing" as of the March 2015 site visit. AGA-Ch. Resp. ¶ 542. According to AGA, the two main "bottlenecks" during the period leading up to Closing were the filter presses and the concentrate pumps. AGA 56.1 ¶¶ 64-65.
Newmont admits that Winterton told its personnel "of his knowledge of certain issues or bottlenecks as of March 2015," but asserts that, "at that point, CC&V still expected the operational problems would be remedied through the commissioning process." Newmont 56.1 ¶ 542. Newmont asserts further that, although the Mill was "barely up and running" at the time of the site visit and was "not expected to be running at design throughput or recovery due to the early stage of commissioning," mills nonetheless typically "ramp up" over several months before reaching design capacity. Newmont 56.1 ¶¶ 521-22; see also Winterton Decl. ¶ 5 (explaining that "[d]uring the commissioning phase, it is normal to encounter issues with new equipment," but "[t]hese commissioning issues are often not indicative of design defects and are commonly encountered in the normal course of commissioning"); id. ¶ 7 ("It is also common during commissioning for a mill to run at lower than design throughput and achieve less than design recovery rates.").
On April 30, 2015, at the conclusion of Phase II, four of the five remaining participants, including Newmont, submitted binding bids for all of CC&V, an interest in CC&V, or both. AGA 56.1 ¶ 191. Newmont's initial binding bid was to acquire 100% of CC&V for $800 million, plus a 2% "net smelter royalty" ("NSR") on the potential future underground resources and price participation for AGA on revenue generated above a "$1,400 an ounce gold price," with "the two capped at $100 million." Newmont 56.1 ¶ 584. Newmont contends that on May 1, 2015, Srinivasan Venkatakrishnan ("Venkat"), AGA's Chief Executive Officer, "reached out to Newmont" and verbally "indicated he would prefer a higher bid." Newmont 56.1 ¶ 585. On May 8, 2015, AGA, through BMO, formally "requested that Newmont alter its bid by increasing the cash consideration component to $875 million, removing the cap on the royalty component and expanding the royalty component from underground production to all production." AGA 56.1 ¶ 193.
On May 16, 2015, Newmont submitted a revised bid. AGA 56.1 ¶ 194. In its revised binding bid, which was "conditioned on exclusivity," Newmont increased its cash component to $820 million, uncapped and increased the percentage of the royalty, and removed the price participation component. AGA 56.1 ¶ 194. According to Newmont, at the time it submitted its revised bid, its average net present value ("NPV") for CC&V was $790 million. Newmont 56.1 ¶ 593. Newmont's "potential fair value" estimate of CC&V, however, was $890 million, which included $100 million in potential upside that Newmont had identified associated with cost and efficiency improvements ($70 million), mine plan optimization ($10 million), and improved mill recoveries ($20 million). Newmont 56.1 ¶ 593.
On May 22, 2015, AGA accepted Newmont's revised bid, and the parties began negotiating "the remaining aspects of the definitive agreement." AGA 56.1 ¶ 195.
On June 8, 2015, AGA and Newmont executed the SPA. See AGA Ex. 1 ("SPA"); see also AGA 56.1 ¶ 215.
In Article VI, the parties agreed to the following covenants:
Section 7.02 provides that Newmont's obligation to purchase CC&V would be subject to the satisfaction of certain conditions, on or prior to Closing, including (1) that the "representations and warranties" that AGA made in Article IV, including in Section 4.14(a), were "true and correct as of the Closing Date as though made on the Closing Date," SPA § 7.02(b)(i); and (2) that AGA had "performed or complied in all material respects with all obligations and covenants required by [the SPA] to be performed or complied with . . . by the time of the Closing," SPA § 7.02(c). Section 7.02(c) also provides that Newmont would receive a "certificate signed by an authorized officer of [AGA] to such effect." Id.
The SPA does not, however, contain any "covenants, representations, warranties or guarantees" concerning the performance of the MLE2 Project, the Mill itself, any equipment within the Mill, the Mill's throughput, the Mill's recovery, or the status of the Mill commissioning. AGA 56.1 ¶¶ 246-48, 251. Moreover, the SPA "contains no contractual guarantee that the Mill will perform at a specific or minimum throughput rate," or that "the Mill will have a specific or minimum recovery rate." AGA 56.1 ¶¶ 249-50.
On July 28, 2015, after the SPA was executed, Doug Livermore, Newmont's Regional Project Director of North America, emailed other Newmont personnel about his calculations for "possible impacts to 2016 CC&V production based on reduced throughput for the Mill." AGA Ex. 57 at -0534. In the handwritten notes attached to his email, Livermore wrote that the "Mill is currently achieving 70-80% of nameplate capacity," and it was "[e]stimate[d] [that] it will take [the] first half of 2016 to correct." Id. at -0535.
On July 30, 2015, AGA and Newmont entered into the Amendment to the Stock Purchase Agreement ("SPA Amendment"), which amended and restated several sections and schedules of the original SPA signed on June 8, 2015. Newmont 56.1 ¶ 743. The SPA Amendment did not amend Schedule 4.14 to disclose any Material Adverse Effects. Newmont 56.1 ¶ 744.
On August 3, 2015, the CC&V transaction between AGA and Newmont closed. AGA 56.1 ¶ 286. Chancellor attended the Closing in New York. Newmont 56.1 ¶ 746. At Closing, AGA provided Newmont with a "compliance certificate," signed by Ben Guenther, AGA-NA's President, Newmont 56.1 ¶¶ 747, 749, in which AGA certified that the representations and warranties it had made in various sections of the SPA, including Section 4.14(a), were "true and correct" as of Closing, and that AGA had "performed and complied in all material respects with all obligations and covenants required" by the SPA "to be performed or complied with" by Closing. See Newmont Ex. 103 at -4264.
At the time of Closing, Mill commissioning was not yet complete, and the Mill was not achieving 250 stph throughput. AGA 56.1 ¶ 67.
In April 2015, Rikki Mususumeli, a metallurgist participating in AGA's Young Leaders internship program from February to April 2015, completed a report that analyzed the recovery characteristics of Cresson Pipe ore, one type of ore at the Mine, and investigated "gold recovery in ore from the Cresson Pipe formation." Newmont 56.1 ¶ 573; AGA-Ch. Resp. ¶ 573. On April 23, 2015, Mususumeli submitted his report (the "Mususumeli Report"), to Winterton, Lowe Billingsley (CC&V's General Manager at the time), and Kevin Riley (CC&V's Operational Manager at the time). Newmont 56.1 ¶ 575; see Newmont Ex. 25 (Mususumeli Report). On April 27, 2015, Winterton summarized the "import of the Mususumeli Report" in a memo sent to Billingsley and Riley. Newmont 56.1 ¶ 580. The following day, Billingsley distributed the Mususumeli Report and Winterton's summary to Helcio Guerra (who Newmont states was Senior Vice President of Operations for AGA Americas) and Ron Largent (AGA's COO). Newmont 56.1 ¶ 581; see Newmont Ex. 25 at -6955. In his cover email, Billingsley noted that "[t]he material impact to CC&V is believed to be very low[.]" Newmont Ex. 25 at -6955.
AGA did not upload the Mususumeli Report or Winterton's summary to the data room or otherwise provide it to Newmont before Closing. Newmont 56.1 ¶ 583. The parties dispute whether AGA was obligated or required to do so. Newmont asserts that the Mususumeli Report was "responsive to [its] request for test work, more detailed and or frequent reports with regard to the status and progress of [the] Mill [s]tart up," as well as for "all available geo-chemistry information" related to the ore planned to be fed into the Mill. Newmont 56.1 ¶ 582. AGA asserts that the existence of the Mususumeli Report was "repeatedly disclosed in four consecutive monthly MLE2 reports," which stated that "an `AGA Young Leader' candidate was working on a project focused on `improving recovery in Cresson Pipe,'" and that if Newmont believed the Mususumeli Report was responsive to any of its requests, or that Cresson Pipe was relevant to its assessment of CC&V, Newmont would have specifically asked for that report. AGA-Ch. Resp. ¶ 582. AGA also maintains that the Mususumeli Report "merely confirmed the findings previously made available to Newmont in the Fall Test Work that Cresson Pipe ore exhibited poor recovery in the leach circuit." AGA-Ch. Resp. ¶ 573. AGA states that Cresson Pipe represents "only a miniscule portion of the relevant ore body" at the Mine. AGA-Ch. Resp. ¶ 573. For instance, J. Todd Harvey, one of Newmont's experts, estimated that Cresson Pipe constituted no more than 3.9% of the ore expected to be fed to the Mill at the time of the transaction, see AGA Reply Ex. 155 (Harvey Rebuttal Report) at 29 n.6, and Winterton testified at his deposition that Cresson Pipe constituted "less than 1 percent" of the overall ore body at CC&V. See AGA Reply Ex. 137 (Winterton Tr.) at 193:7-12.
AGA also engaged a third party, the Advanced Mineral Technology Laboratory, Ltd. ("AMTEL") to perform a study of two specific ore bodies at CC&V: Cresson Pipe and Dante. Newmont 56.1 ¶ 659; AGA-Ch. Resp. ¶ 659. AMTEL's analysis culminated in a report, dated June 17, 2015, entitled "AMTEL Deportment of Gold in Cripple Creek & Victor Future Feeds Report" (the "AMTEL Report"). Newmont 56.1 ¶ 659; see Newmont Ex. 49 (AMTEL Report). In particular, the AMTEL Report analyzed how these two different ore types, Cresson Pipe and Dante, "would respond to either direct cyanidation or flotation recovery of gold." Newmont 56.1 ¶ 660.
The AMTEL Report concluded that the ideal "indicated processing route" for the Cresson Pipe and Dante ore samples that it tested would include a "pressure oxidation process" after the flotation circuit, meaning that the "indicating processing route" would include a "pressure oxidation process" step between the flotation and leach circuits. Newmont 56.1 ¶ 664; AGA-Ch. Resp. ¶ 664. But the Mill, as constructed, "did not have a pressure oxidation process to convert sulfide to oxide for the flotation concentrate." Newmont 56.1 ¶ 665. AGA states that the 2012 Feasibility Study specifically noted that "an autoclave pressure oxidation process would be cost prohibitive, both in terms of the capital cost to build it and the ongoing operating costs to run it." AGA-Ch. Resp. ¶ 455; see AGA Ex. 70 at -8235 ("The capital and operating costs for an autoclave were far higher than vat leaching, so the autoclave approach was rejected.").
The parties attach different significance to the AMTEL Report. According to Newmont, the AMTEL Report concluded that Cresson Pipe had low cyanide leach recovery, and that Cresson Pipe had "similar characteristics to Dante and other ores at CC&V." Newmont 56.1 ¶ 661. AGA maintains that the AMTEL Report did not conclude that Cresson Pipe and Dante shared "similar characteristics" or that Cresson Pipe ore "had similar `characteristics' to `other ores at CC&V,'" as it did not test such "other ores." AGA-Ch. Resp. ¶ 661. According to AGA, the AMTEL Report noted only that the "rock mineralogy" of the Cresson Pipe ore sample was "broadly `similar' to that of the Dante ore sample." AGA-Ch. Resp. ¶ 661. AGA also contends that, like the Mususumeli Report, the AMTEL Report "merely confirmed the findings previously made available to Newmont in the Fall Test Work that Cresson Pipe ore exhibited poor recovery in the leach circuit." AGA-Ch. Resp. ¶ 661; see also AGA-Ch. Resp. ¶ 663 (stating that both the Mususumeli Report and the AMTEL Report "merely confirmed the low leach recovery for Cresson Pipe" that had been determined in prior test work). In a June 23, 2015 email, Winterton wrote that the results of the AMTEL Report "pretty much confirm that the Cresson Pipe is a waste unless [they] can do something else with it." See Newmont Ex. 55 at -4359. Winterton also stated that his opinion was that "[t]here is no way to grind [Cresson Pipe ore] fine enough to liberate" the gold. Id.
AGA did not upload the AMTEL Report to the data room or otherwise provide it to Newmont prior to Closing. Newmont 56.1 ¶ 671. Similar to the Mususumeli Report, the parties dispute whether AGA was obligated or required to provide Newmont with the AMTEL Report prior to Closing. Newmont asserts that the AMTEL Report was responsive to its "outstanding diligence request" for "all available geo-chemistry information" related to the ore planned to be fed into the Mill. Newmont 56.1 ¶ 670. AGA disputes that the AMTEL Report was responsive to the request cited by Newmont, and maintains that the existence of the AMTEL Report was "disclosed in two consecutive monthly MLE2 reports." AGA-Ch. Resp. ¶ 670. AGA also maintains that if Newmont believed the AMTEL Report was responsive to any of its requests, it would have specifically asked for the report. AGA-Ch. Resp. ¶ 670. Instead, AGA contends, Newmont "did not bother to ask AGA for the AMTEL Report or otherwise exhibit any interest in it." AGA-Ch. Resp. ¶ 670.
Ben Guenther visited CC&V on June 16, 2015. Newmont 56.1 ¶¶ 679-80. Shortly thereafter, he instructed the CC&V management team to create a "ramp up implementation plan" for the Mill. Newmont 56.1 ¶ 683. CC&V personnel subsequently prepared a "draft ramp up plan" following a template that Guenther had provided. Newmont 56.1 ¶¶ 684-85. On July 16, 2015, Guenther requested an updated draft of the ramp up plan. Newmont 56.1 ¶ 701. The following day, Ryan Miles, AGA's Principal Advisor for Integrated Planning, sent Guenther a revised draft of the plan, which was now entitled "Mill Ramp-Up Plan Progress Summary and Execution Plan." Newmont 56.1 ¶¶ 702-03; see Newmont Ex. 62. The draft sent to Guenther on July 17, 2015 had been "primarily revised" by Winterton and included "several pages of substantive discussion of the Mill's current status and performance." Newmont 56.1 ¶ 704.
The ramp up plan was finalized in July 2015; the final version is referred to as the "Winterton Memo." Newmont 56.1 ¶ 708; see Newmont Ex. 89 ("Winterton Memo"). The Winterton Memo detailed problems that had arisen in the Mill, including various defects with the Mill's gravity circuit, flotation circuit, concentrate pumps, leach circuit, filter presses, and chutes and conveyers. Newmont 56.1 ¶ 710; see also Winterton Decl. ¶ 11 ("I drafted the status report on the Mill ramp-up which included a substantive discussion of the numerous problems that had arisen in the Mill and CC&V's conclusions on the import of those problems.").
In his declaration filed in connection with Newmont's opposition briefs (the "Winterton Declaration"), Jeff Winterton states that the Winterton Memo concluded that, "based on the totality of problems and CC&V's attempts to fix those problems, the Mill—as a total unit—suffered from such severe deficiencies that it would never be capable of reaching design recovery or throughput without significant modifications." Winterton Decl. ¶ 15. He asserts that this conclusion was based on "the Mill's operational data and results through July 2015, CC&V's months-long attempts to fix the various problems, and test work presented in April and June of 2015 (including the reports by Rikki Mususumeli and AMTEL)." Id. ¶ 16.
On August 4, 2015, the day after Closing, Winterton sent a copy of the Winterton Memo to members of Newmont's metallurgic team. Newmont 56.1 ¶ 751. AGA did not provide a copy of the Winterton Memo to Newmont prior to Closing. Newmont 56.1 ¶ 716. According to Winterton, he did not provide this document to Newmont until after the transaction closed because he "was instructed by AGA at the outset of the sales process not to provide any additional test work, reports, or operational data directly to other parties unless specifically asked to." Winterton Decl. ¶ 14. Moreover, Winterton asserts that he "included extensive details regarding the multitude of problems with the Mill" in the report because he wanted his new employer, Newmont, "to know that [they] understood the extent of the problems and were anxious to try to start remedying them." Id. ¶ 12.
On July 7, 2015, Terry Briggs, a Newmont employee, emailed Korey Christensen, AGA's in-house counsel, to follow up on Newmont's request for the MLE2 Report for June 2015, among other things. Newmont 56.1 ¶ 717. On July 9, 2015, Christensen responded, copying Chancellor, and stated that the June MLE2 report was not yet ready, but that they would pass it along when it was. Newmont 56.1 ¶ 718. According to AGA, drafts of the MLE2 reports were circulated internally among AGA-NA and CC&V personnel around the middle of the succeeding month. AGA-Ch. Resp. ¶ 719. Newmont states that these reports were typically sent by Jose Barron, AGA's Project Manager, or Douglas Nespoli, on behalf of Barron. Newmont 56.1 ¶ 719. Nespoli sent the June MLE2 Report to Chancellor and various others on July 15, 2015. See Newmont Ex. 45. Nespoli's email did not indicate whether the attached June MLE2 report was completed or was still a draft. Newmont 56.1 ¶ 721.
On July 23, 2015, Briggs asked Chancellor for a copy of the June MLE2 report. See Newmont Ex. 46 at -5438. Chancellor responded that same day, stating that he "checked yesterday while at CC&V and the report is not completed." Id. Briggs asked for a copy of the report again on July 24, 2015, noting that Newmont would accept a "Project report" rather than the "full site report" if necessary. See Newmont Ex. 41 at -5141. On that same day, Chancellor forwarded Briggs' email to Billingsley, asking him to help secure the report, and Billingsley responded by attaching the June MLE2 report. See Newmont Ex. 108 at -4327. The report that Chancellor received from Billingsley on July 24, 2015 was exactly the same as the report that Nespoli circulated on July 15, 2015. Newmont 56.1 ¶ 727.
Before sending the report to Newmont, on July 27, 2015, Chancellor responded to Billingsley's July 24, 2015 email, stating that he did not see "any reference to the various equipment issues being addressed by Kevin [Riley] and his team (e.g. Jeff Winterton)," and asking whether he had "miss[ed] it," and if not, whether there should be "some reference to the issues in terms of potential design concerns, inadequate specs, etc." See Newmont Ex. 41 at -5141. Billingsley responded that Chancellor was correct; the report did not reference these "various equipment issues." See id. at -5140. As to these issues, Billingsley also stated, "I don't believe that Newmont can claim not being on notice — Ron [Largent (AGA's COO)] has spoken with [Newmont's] COO about the major challenges (ore body model and mill filters). I (and Kevin [Riley] spoke at length and toured with Jack Henris through the plant and discussed all of the major challenges. I am certain that Doug Livermore will also hear of the mill challenges when he is on site Thursday." Id.
In late 2014 and early 2015, several potential claims arose involving CC&V and the contractors and subcontractors involved in the design and construction of the Mill, including FLS. In November 2014, CC&V learned that there were certain structural defects with the Mill, and suspended activities at the Mill from November 15, 2014 to November 21, 2014. Newmont 56.1 ¶ 481; AGA-Ch. Resp. ¶ 483. Specifically, "flaws were discovered in the design of the Mill building structure that prevented the Mill from being operated in certain weather conditions," such as "high winds" or "certain snow loads." AGA 56.1 ¶ 50; Newmont 56.1 ¶ 482. At this point, FLS admitted that there was an error in the Mill's design, Ch. 56.1 ¶ 376, and began working to "retrofit" the building to ensure that "it would safely withstand snow, wind, and other loads and forces." Newmont 56.1 ¶ 485. In December 2014, the Mill was "temporarily configured to allow operation of the grinding and gravity circuits with the aim of producing `first gold,'" but approximately four hours into the run, "the trunnion bearing on the discharge end of the rod mill spun out of the base leading to a complete failure of the rod mill bearings and trunnions." Newmont 56.1 ¶¶ 494-95. Following this incident, CC&V worked with FLS and other third parties to "repair and resurface the Mill trunnions, replace the bearings, and upgrade the high and low pressure lube systems," Newmont 56.1 ¶ 496, which took six weeks to complete, AGA-Ch. Resp. ¶ 497. On January 26, 2015, Chancellor informed AGA's outside counsel and Meghan Martelon, an AGA-NA attorney, that he needed to "stay abreast of matters as they develop with FLS." See Newmont Ex. 32 at -9961.
Separately, in December 2014, two of the Mill's subcontractors, Ames Construction, Inc. and Northern Electric, Inc., asserted claims against CC&V arising out of "alleged delays and increased costs of performance incurred as a result of allegedly improper, deficient or late design work." Ch. 56.1 ¶ 378; AGA 56.1 ¶ 211.
In addition to the claims described above, by June 2015, CC&V also began exploring "claims against FLS relating to certain aspects of the Mill's equipment, which also had been designed by FLS." Ch. 56.1 ¶ 380. According to Newmont, in June 2015, the Mill's process circuit suffered "various failures," and AGA thus began "investigating its rights" to recover damages from FLS related to the "faulty design of the Mill structure and equipment." Newmont 56.1 ¶ 686. AGA retained Davis Graham & Stubbs ("DGS") in connection with CC&V's potential claims against FLS. See Ch. Ex. 119.
Prior to signing the SPA, Newmont became aware that AGA "was considering a potential claim against FLS that related to the problems with the structure of the Mill in that it could not withstand snow and high winds," as well as "two other claims that subcontractors were asserting against CC&V for delay damages." Newmont 56.1 ¶¶ 619-20.
During this time, Newmont also received and marked up a draft of the SPA disclosure schedules, which reflected the claims brought against CC&V by Ames Construction, Inc. and Northern Electric, Inc. and the claim that CC&V had threatened against FLS related to its role in connection with the Mill. AGA 56.1 ¶ 211. Newmont asserts that its discussion with AGA regarding the contractor claims was limited to only these three claims: i.e., "an affirmative claim AGA was considering against FLS that related to the structure of the Mill" and "two other claims subcontractors were asserting against CC&V." Newmont AGA Resp. ¶ 210.
Ultimately, in Section 9.10 of the SPA, the parties agreed that AGA would indemnify Newmont for "all Designated Matters Losses" and that AGA would be entitled to "all Designated Matters Recoveries." SPA § 9.10(a). "Designated Matters" is defined as "all legal causes of action and Proceedings arising out of the construction of the High Grade Mill,
During the diligence period, Newmont submitted various due diligence requests, including a request for a status update on "potential litigation by CC&V against [FLS] over performance/warranty issues associate[d] with the [Mill]." See AGA Ex. 62 at 1; AGA 56.1 ¶ 273. In response to this request, AGA stated that "AGA Legal will meet with Newmont reps and provide general overview of the status and plan forward," but noted that "[s]pecific documents will not be provided until post-closing." See AGA Ex. 85 at page 1 of 2. Newmont nonetheless contends that "the only potential litigation against FLS that [it] was aware of [during the diligence period] was specific to the structure of the mill and the rod/ball mill," Newmont AGA Resp. ¶ 273, and that "at no point during the discussion[s] [regarding how to allocate costs and recoveries associated with potential claims] did AGA inform Newmont that it was considering pursuing affirmative claims against FLS related to the equipment circuits in the Mill." Newmont AGA Resp. ¶ 210.
On June 24, 2015, AGA's in-house counsel and representatives from DGS met with various members of CC&V's management team, including Winterton. Newmont 56.1 ¶ 687. In a memorandum dated July 7, 2015 (the "July 7 Memo"), DGS recommended that AGA send a letter to FLS notifying them of CC&V's claims related to "defective Work in designing and/or constructing the [Mill], and installing equipment for the Mill." See Newmont Ex. 38 (July 7 Memo) at -1098. The July 7 Memo contained a list of 14 bullet points, including one bullet point labeled "client action item," under "Other FLS equipment issues," identifying specific components of the Mill's process circuit that had suffered defects. Id. at -1099-1100. In a subsequent formal memorandum dated July 15, 2015, and updated July 22, 2015 (the "DGS Memo"), DGS detailed the "specific issues" with the Mill's structure and equipment as of those dates, including issues that arose after the signing of the SPA and, Newmont claims, "numerous defects noted as developing after due diligence and initial commissioning." Newmont 56.1 ¶ 692; see Newmont Ex. 40 (DGS Memo).
On July 16, 2015, Chancellor and Ria Sanz, AGA's General Counsel, met with Newmont's in-house counsel, including Terry Briggs, Nancy Lipson (Newmont's Deputy General Counsel), and Gavin Janguard (Newmont's Regional General Counsel), Newmont 56.1 ¶ 693; Ch. 56.1 ¶ 410, to "discuss potential and threatened litigation by and against CC&V and certain contractors involved in the construction of the Mill." AGA 56.1 ¶ 276.
In an email that Chancellor sent Carter following the meeting, he stated that AGA "did disclose the new claim for equipment issues created by [FLS]," but noted that the parties "did not dwell on it," and that it "was not a point of discussion" with Newmont. See AGA Ex. 67 at -1531. Carter replied "Great" to that email. Id.
During Project Waltz, Chancellor reviewed draft copies of transaction-related documents when requested to do so by AGA personnel. Ch. 56.1 ¶ 353. Chancellor, along with Marcelo Ortiz (Senior Vice President of Finance for AGA Americas) and Tim Thompson (Senior Vice President of Exploration and Ground Fields Developments for AGA Americas), was also tasked with overseeing uploads to the data room, and had responsibility for specific subject matters. AGA-Ch. Resp. ¶ 499; Newmont 56.1 ¶ 512.
Chancellor asserts that he was not involved in the initial drafting of the SPA or the initial discussions with Newmont regarding the terms and conditions of the SPA, and that he did not have the authority to agree to or approve any terms of the SPA. Ch. 56.1 ¶¶ 362, 367. While the SPA was being negotiated, Chancellor had "some limited opportunities to review and provide input on the terms of the SPA from the perspective of a U.S. lawyer familiar with the operations at CC&V." Ch. 56.1 ¶ 366. Newmont, however, disputes Chancellor's characterization of his involvement as "limited." Newmont Ch. Resp. ¶ 366. Newmont maintains that Chancellor was "a member of AGA's four-person `core team,'" "the only member physically located in North America,"
After the SPA was signed, Chancellor was tasked with "facilitating the exchange of information for integration purposes leading up to closing," and in doing so, his point of contact at Newmont was Terry Briggs. Ch. 56.1 ¶¶ 391-92. Chancellor and Briggs met periodically in person and corresponded via email to discuss Newmont's integration-related requests. Ch. 56.1 ¶ 398. They also maintained a chart, which they periodically updated, to track Newmont's requests and AGA's responses. Ch. 56.1 ¶¶ 399, 403. Chancellor responded directly to Newmont's requests related to "land or legal issues," but distributed any other request to the "relevant functional or subject matter group within AGA or CC&V" and was not involved in determining the substance of those responses. Ch. 56.1 ¶¶ 400-02.
On June 15, 2015, Chancellor emailed AGA personnel, including AGA senior executives and members of the "core deal team," stating that he was "beginning to receive requests from Newmont to access people, site, and information" as they entered the pre-Closing phase of the transaction. See Newmont Ex. 27 at -3809. Chancellor stated that "some access under controlled circumstances . . . is fine (and perhaps appropriate)," but that he believed allowing Newmont personnel "to review and copy files so they can run title prior to closing" would "go too far" and "may be a `recipe' for disaster." See id.
On June 17, 2015, Chancellor sent Briggs an email entitled "Rules of Engagement," in which he explained that the AGA management team responsible for the "handoff of CC&V" met to discuss the "`rules of engagement' regarding Newmont's access to people, property, and information (records, etc.) during the period between signing and closing." See Newmont Ex. 28 at -8340. In this email, Chancellor conveyed to Briggs "the AGA management team's proposed terms for Newmont's pre-closing access to CC&V, its employees and its records." Ch. 56.1 ¶ 394. Chancellor explained that, as both parties "want the site to continue to function as efficiently and productively as possible" and therefore must "do everything possible to minimize disruptions and any corresponding impact on productivity," Newmont's "[a]ccess to people, property, or information . . . should be the exception rather than the rule, and should focus on those things that must be accomplished prior to closing, such as pre-closing conditions, compliance with covenants of the agreement, and matters that are truly time-sensitive[.]" See Newmont Ex. 28 at -8340. Newmont contends that these "rules of engagement" terms were "unilaterally imposed by AGA after Signing without any negotiation with Newmont nor reference to the SPA's governing covenants or obligations." Newmont Ch. Resp. ¶ 394.
Since Closing, CC&V has operated as a wholly owned subsidiary of Newmont. AGA 56.1 ¶ 286. After acquiring CC&V, Newmont conducted two "post-investment reviews" ("PIRs") of the Mine. AGA 56.1 ¶ 292. In its first PIR, submitted on September 20, 2016, Newmont valued CC&V at $831 million on an NPV basis. AGA 56.1 ¶¶ 295-96; Newmont 56.1 ¶ 775.
In Newmont's second PIR, submitted on April 6, 2018, it valued CC&V at $842 million on an NPV basis. AGA 56.1 ¶¶ 299-300; Newmont 56.1 ¶ 777.
On December 21, 2016, Newmont sent a letter to AGA entitled "Notice of Breach of Representation and Warranty under the [SPA]/Notice of Obligation for Indemnity and Continued Demand for Purchase Price Adjustment" (the "Notice of Breach"). See Newmont Ex. 136. In the Notice of Breach, Newmont asserted that "AGA failed to disclose the [Mill] defects which constitutes a breach of warranty set out in Section 4.14 of the SPA, entitling Newmont to indemnification and other damages. Such facts also give rise to other forms of misrepresentation claims sounding in tort and carrying additional categories of damages." See id. at -9948. The Notice of Breach specifically referenced the Mill's "250 tpd nameplate capacity," which Newmont claimed AGA had represented would be reached by September 2015. See id. at -9947. The Notice of Breach did not, however, mention "the Mill's recovery rate, the 76.5% recovery projection or the characteristics of the ore at CC&V." AGA 56.1 ¶ 306.
Newmont filed this action on October 20, 2017. Dkt. 7. On September 30, 2018, the Court granted AGA's motion to compel arbitration as to one part of the case, granted Defendants' motion to dismiss another aspect of it, and denied Chancellor's motion to dismiss for lack of personal jurisdiction. See Dkt. 65. Following the close of discovery, AGA and Chancellor each moved for summary judgment. See Dkts. 108, 114. The Court held oral argument on January 9, 2020. See Dkt. 141 ("Tr.").
To prevail on a motion for summary judgment, the movant must show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under the governing law," and it is "genuinely in dispute" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 2008) (citations omitted). "When a motion for summary judgment is properly supported by documents or other evidentiary materials, the party opposing summary judgment may not merely rest on the allegations or denials of his pleading; rather his response, by affidavits or otherwise as provided in the Rule, must set forth `specific facts' demonstrating that there is `a genuine issue for trial.'" Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009) (quoting Fed. R. Civ. P. 56(e)). On a motion for summary judgment, the Court must "construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant." Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir. 2011) (citation omitted).
To prevail on a claim for breach of contract under New York law,
Pursuant to Section 4.14, AGA represented that, "[e]xcept as set forth in Schedule 4.14 or as expressly required or permitted by [the SPA], since December 31, 2014, (a) there has not been any Company Material Adverse Effect within the meaning of [the definition set forth in Section 10.05(b)(ii)], (b) the business and operations of the JV Entities
"Company Material Adverse Effect" is defined in Section 10.05(b), in relevant part, as "any change, effect, event, occurrence, circumstance or state of facts that . . . (ii) is or would reasonably be expected to be materially adverse to the business, results of operations, condition (financial or otherwise) of . . . the Mine." SPA § 10.05(b). The SPA also expressly lists certain exceptions to the definition of a Company MAE, including "any change, effect, event, occurrence, circumstance or state of facts" relating to "the failure to meet any projections or forecasts (it being understood that that [sic] the facts or causes underlying or contributing to such failure may be considered in determining whether a Company Material Adverse Effect has occurred unless otherwise excluded pursuant to any of the other clauses of this definition)." Id.
Newmont contends that the following three "circumstances" or "state[s] of facts" constitute Company MAEs within the meaning of the SPA: (1) that during the MAE Period, "AGA received the Mususumeli and AMTEL Reports, which established that AGA built the wrong type of mill" (the "First Alleged MAE"); (2) that during the MAE Period, "severe design defects arose that would prevent the Mill from ever reaching design throughput" (the "Second Alleged MAE"); and (3) that during the MAE Period, "AGA determined in the Winterton Memo that the Mill, in its entirety, suffered from critical deficiencies that would prevent it from ever reaching design throughput and recovery" (the "Third Alleged MAE"). See Opp'n at 39-40. For the reasons discussed below, the Court concludes that none of these circumstances rise to the level of a Company MAE within the meaning of the SPA.s
MAE provisions are "a common feature of many contracts, and are subject to the same rules of interpretation as any other contract provision." In re Lyondell Chem. Co., 567 B.R. 55, 122 (Bankr. S.D.N.Y. 2017). Under New York law, "a written contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed." Terwilliger, 206 F.3d at 245. In interpreting the SPA, the Court "bears in mind that, `when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms'—particularly when, as here, the contract `was negotiated between sophisticated business people at arm's length.'" Newmont Mining Corp. v. AngloGold Ashanti Ltd., 344 F.Supp.3d 724, 747 (S.D.N.Y. 2018) (quoting Skanska USA Bldg. Inc. v. Atl. Yards B2 Owner, LLC, 98 N.E.3d 720, 723 (N.Y. 2018)).
The SPA's definition of a Company MAE must be analyzed in the context of the SPA as a whole and construed in accordance with the parties' intent. See In re Lyondell, 567 B.R. at 122 ("District courts in the Southern District of New York have emphasized, . . . in the summary judgment context, that a [material adverse effect] clause must be read in conjunction with other contemporaneous evidence of the parties' intent."); see also AGA Mot., Dkt. 109, at 31; Opp'n at 21. Indeed, New York courts interpret MAE provisions "in the context of the entire agreement, and in conjunction with other evidence of the parties' intent," including separately executed and/or contemporaneous other documents. In re Lyondell, 567 B.R. at 123; see In re JC's East, Inc., No. 95 Civ. 1870 (MGC), 1995 WL 555765, at *3 (S.D.N.Y. Sept. 19, 1995), aff'd, 84 F.3d 527 (2d Cir. 1996) (interpreting MAE provision in light of buyer's "explicit waiver of reliance upon any warranties or representations" by seller). Courts also consider "whether the alleged material adverse change was within the contemplation of the parties at the time they executed the agreement, whether it was within the control of the parties, and the magnitude of the impact on the relevant party's business." In re Lyondell, 567 B.R. at 123. Moreover, because merger and acquisition agreements are "heavily negotiated and cover a large number of specific risks explicitly," an MAE provision—even where it is "broadly written"—is "best read as a backstop protecting the acquiror from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally-significant manner." In re IBP, Inc. Shareholders Litig., 789 A.2d 14, 68 (Del. Ch. 2001) (applying New York law). In other words, "[a] short-term hiccup in earnings should not suffice; rather the Material Adverse Effect should be material when viewed from the longer-term perspective of a reasonable acquiror." Id.
Based on the plain language of the SPA, as well as applicable New York law, the Court determines that no Company MAE occurred during the MAE period. First, the plain language of the Company MAE definition excludes "the failure to meet any projections or forecasts" from serving as the basis of a Company MAE. SPA § 10.05. Second, the Company MAE definition refers to the Mine as a whole, and not just the Mill. To constitute a Company MAE, the adverse effect must therefore be materially adverse to the entire Mine, which Newmont has not established. Third, in light of the disclaimers contained in the SPA, the Alleged MAEs cannot constitute a Company MAE under New York law. And finally, the evidence in the record demonstrates that no Company MAE occurred during the relevant time period.
All three Alleged MAEs are expressly excluded from the SPA's contractual definition of a Company MAE because they fall within the exception for missed projections or forecasts. See SPA § 10.05(b). As an initial matter, the Second and Third Alleged MAEs essentially boil down to the same underlying contention: that certain deficiencies and defects affected the Mill's ability to achieve a "design throughput" of 250 stph and/or a "design recovery" of 76.5%.
Although it is a closer question, the First Alleged MAE is also based on an assertion about missed projections, and therefore excluded from the Company MAE definition as well. The First Alleged MAE is premised on the Mill's "failure to reach design recovery rates." See Opp'n at 24. While Newmont asserts that this Alleged MAE occurred when AGA apparently determined, based on several reports received during the diligence period, that it had built the "wrong type of mill for the ore body at CC&V," the crux of its argument is nonetheless that the Mill could not produce gold at the recovery rates that had been previously estimated. See id.
The Court is not persuaded by Newmont's argument that its Alleged MAEs are premised on the "underlying causes" of these "missed projections," and not the missed projections themselves. See id. at 2. Newmont seems to suggest that, as long as it can point to an underlying cause for the failed projections, its Alleged MAEs are exempt from the "missed projections" exception. See id. at 23. In doing so, Newmont relies on the parenthetical that immediately follows the exception, which states that "the facts or causes underlying or contributing to such failure [to meet any projections or forecasts] may be considered in determining whether a Company Material Adverse Effect has occurred unless otherwise excluded pursuant to any of the other clauses of this definition." SPA § 10.05(b). Newmont, in the Court's view, misreads this language. Newmont's interpretation would transform an otherwise narrow carve-out into an exception that swallows the rule, as it would allow virtually any set of circumstances to constitute a Company MAE as long as it could identify a purported underlying cause for a failure to meet projections or forecasts. The Court agrees with AGA that this "caveat" was "clearly intended to avoid an absurd result whereby a true Company MAE could be excluded because it happened to impact projections, among other things." AGA Reply, Dkt. 130, at 4. To allow Newmont to proceed on its theory "would read the missed projections or forecasts exclusion out of existence since it is difficult to fathom a scenario in which a buyer would not be able to identify some underlying cause for a missed projection." Id. at 5. Based on the text of the SPA, the Court determines that the parties' intent in including the parenthetical was to clarify that, where an underlying cause or set of facts fits within the Company MAE definition but also results in a failure to meet a projection, that underlying cause or set of facts may still be asserted as a Company MAE even though it contributed to a missed projection. In other words, where a materially adverse event occurs that plainly would constitute a Company MAE "because [it] is catastrophic in and of itself," such as an "arsonist raz[ing] the Mill and all other mine equipment to the ground," that event is not excluded from the SPA's definition of Company MAE simply because it also resulted in the Mine missing forecasts or projections. See id. at 4.
The terminology that Newmont's own personnel and experts used to describe throughput and recovery confirms that both figures are "projections" within the meaning of the SPA. See, e.g., AGA Ex. 26 (Newmont Diligence Report) at -0536 (referring to "flotation recovery projections"); AGA Ex. 75 (Reeves Rebuttal Report) at 15 (referring to both the "250 tons/hour" and the "76.5% overall gold recovery" figures as "projections," around which there is "an expectation of some variance"); id. at 30 (asserting that among the Mill's problems were its "failure to meet recovery and throughput projections"); AGA Ex. 76 (Rigby Rebuttal Report) ¶ 56 (referring to the "failure to meet throughput and recovery projections"); id. ¶¶ 112, 114, 118 (referring to the Mill's "recovery projections"); Newmont Ex. 151 (Harvey Report) at 4 (explaining that "design criteria" provides "details as to the expected performance of the mill in both throughput and gold recovery"). Newmont's characterizations of the Alleged MAEs further demonstrate that they are based on the Mill's failure to achieve its design throughput and recovery, and not on any "underlying causes" of such failures. See Opp'n at 24 (explaining that, as to the First Alleged MAE, AGA's receipt of certain "new reports," namely the Mususumeli Report and the AMTEL Report, established that "AGA built the wrong type of mill for the ore body at CC&V," which caused the Mill to fail to reach its "design recovery rates"); id. at 29 (explaining that, as to the Second Alleged MAE, certain "design defects" arose starting in June 2015, which prevented the Mill from ever reaching "design throughput"); id. at 34 (explaining that, as to the Third MAE, AGA determined in the Winterton Memo that "the Mill, in its entirety, suffered from underlying deficiencies that would prevent it from ever achieving throughput or recovery"). The Mill's failure to meet certain throughput and recovery targets thus cannot serve as a basis for a Company MAE.
Additionally, the Company MAE definition evinces the parties' intent to only include within the definition of Company MAE a "change, effect, event, occurrence, circumstance or state of facts" that is or would be "materially adverse" to the Mine. SPA § 10.05(b). It therefore follows that any given Alleged MAE must have a materially adverse effect on the Mine as a whole, and not just on the Mill. At the time of the transaction, CC&V was undergoing an expansion—the MLE2 project—and as part of that expansion, was in the process of constructing a high grade mill that was intended to "treat higher grade ore containing relatively more gold per ton." See AGA 56.1 ¶ 18; Newmont 56.1 ¶ 453. But the construction of the Mill was not the only component of the MLE2 project. See, e.g., AGA Ex. 65 at -2848 (explaining that the MLE2 project involved, among other things, construction of three new facilities: the Mill, a new valley leach facility, and a new adsorption, desorption and recovery facility). Moreover, Newmont bought the entire Mine, not just the one Mill, and was aware that the Mill was still being commissioned at the time the transaction closed. See AGA 56.1 ¶ 67.
Newmont does not dispute that "Company MAE" in the SPA is defined in terms of the entire Mine, and not just the Mill. See Tr. at 62. Yet all three of the Alleged MAEs are described in terms of the Mill's failure to reach its throughput and recovery projections. Newmont has premised its Alleged MAEs on merely one part of CC&V—which, it asserts, failed to achieve the targets that had been set. If Newmont wanted the Company MAE definition to include materially adverse effects measured in terms of the Mill, it should have bargained for such a definition. Notwithstanding Newmont's assertion that the Mill was a "hugely important piece of the [M]ine," Tr. at 40, and that it was the "centerpiece" and "jewel" of the CC&V transaction, Tr. at 62, under the plain language of the SPA, Newmont must demonstrate that its Alleged MAEs had a materially adverse effect on the Mine as a whole.
Although the parties dispute the percentage of gold that was intended to be recovered from the Mill, as compared to the Mine as a whole, the Mill's gold production was never expected to account for the entirety of CC&V's gold production. Based on an except from the "Waltz Model" —the draft financial model created during Project Waltz, which was distributed to potential counterparties, including Newmont, see AGA 56.1 ¶¶ 86, 104—Newmont asserts that AGA had calculated that "Mill processing would account for over 55% of the total recovered gold from the Mine." See Newmont 56.1 ¶ 492. AGA, on the other hand, maintains that it had calculated that "Mill processing would account for approximately 44% of the total recovered gold from the Mine, not 55%." See AGA-Ch. Resp. ¶ 492.
As the Court "consider[s] the entirety of the agreement . . ., rather than reading the [materially adverse effect] clause in isolation" when discerning the parties' intent, it is also mindful that the SPA contains a number of express disclaimers. See In re Lyondell, 567 B.R. at 150. Section 1.08, for instance, provides that Newmont's acquisition of CC&V would be "without any representation or warranty as to merchantability or fitness for any particular purpose, in an `as is' condition and on a `where is' basis, except as otherwise expressly set forth" in the SPA and related documents. SPA § 1.08. Additionally, in Section 9.08, Newmont made certain acknowledgements and express disclaimers of reliance, including that it had been "permitted full and complete access to the books and records, facilities, equipment, Tax Returns . . ., contracts, insurance policies . . . and other properties . . . that [it had] requested to see or review," and that it had "had a full opportunity to meet with the officers and employees of the JV Entities to discuss the business of the JV Entities." SPA § 9.08. Newmont also expressly acknowledged that AGA had not "made any representation or warranty, express or implied, as to any JV Entity or the accuracy or completeness of any information regarding the JV Entities furnished or made available to [it], except as expressly set forth in [the SPA], the other Transaction Documents or the Schedules," and that it had "not relied on any representation or warranty or any other statement" from AGA in deciding to execute the SPA, "except for the representations and warranties expressly set forth in [the SPA] and the other Transaction Documents." SPA § 9.08(i)-(ii). Newmont further acknowledged that AGA would not be liable for any information or documents distributed to Newmont during the diligence period, such as the Confidential Information Memorandum and "any information, documents or material made available to [Newmont] in any `data rooms', management presentations or in any other form in expectation of the Transactions." SPA § 9.08(iii).
Section 4.14 and the Company MAE definition in Section 10.05 must be interpreted in light of Newmont's explicit disclaimers of reliance and liability on the part of AGA. See In re Lyondell, 567 B.R. at 123 (noting that courts "read the MAC clause in the context of the entire agreement, and in conjunction with other evidence of the parties' intent," such as "a separately executed but integrated agreement" or "a contemporaneous affidavit") (citations omitted); In re IBP, 789 A.2d at 67 (stating that the contractual language of an MAE provision "must be read in the larger context in which the parties were transacting"). As was the case in In re JC's East, Inc., in light of Newmont's repeated waivers and disclaimers, "the scope of the material and adverse change clause must be limited by at least two considerations": first, "the clause must be limited to events that were outside the contemplation of the parties at the time of the transaction," and second, the clause "must be limited to events outside [the buyer's] control." JC's East, 1995 WL 555765, at *3.
Analyzing the Company MAE definition under these principles, the Court finds that it would "conflict with [the disclaimers in the SPA] if it included events which were foreseeable at the time of the transaction since . . . [Newmont] expressly assumed the risk that such events might occur," JC's East, 1995 WL 555765, at *3, particularly since Newmont entered into the transaction on an "as is" and "where is" basis, see SPA § 1.08. The Mill's throughput and recovery rates were undoubtedly within the contemplation of the parties at the time of the transaction. During Phase I, for instance, Jim Orlich reviewed and analyzed the available test work uploaded to the data room in order to perform an independent analysis of the Mill's throughput and recovery estimates, and subsequently prepared a functional report on metallurgy and processing. See AGA Ex. 25 (Orlich Functional Report) at -4808 (discussing CC&V's metallurgical recovery data); id. at -4811 (discussing throughput and recovery projections); AGA Ex. 26 (Newmont Diligence Report) at -0535-0536 (discussing throughput and recovery projections); AGA 56.1 ¶ 165 ("As a result of Mr. Orlich's recovery calculations, the projected overall Mill recovery in Newmont's diligence model varied year-over-year and averaged 75.6%—not the 76.5% projected by AGA and CC&V—over the life of the mine."). In addition, the fact that the Mill was "not attaining 250 stph throughput was repeatedly disclosed to Newmont in the MLE2 Project Progress Reports," and Newmont was aware of this both when the SPA was signed and when the transaction closed. AGA 56.1 ¶¶ 259-60; see AGA Ex. 59 (March 2015 MLE2 Report) at -4948 ("The primary objective was to stabilize operations at 180 stph."); AGA Ex. 35 (April 2015 MLE2 Report) at -7455 (same); AGA Ex. 36 (May 2015 MLE2 Report) at -2379 ("Overall average throughput rate was 180 stph. Rates of 200 stph were achieved for extended periods."); AGA Ex. 37 (June 2015 MLE2 Report) at -4039 (same). The March, April, and May 2015 MLE2 Progress Reports also indicated that the overall Mill recovery at those times was low as compared to the budgeted recovery of 76.5%. See AGA Ex. 59 (March 2015 MLE2 Report) at -4948 (5.9% recovery); AGA Ex. 35 (April 2015 MLE2 Report) at -7455 (49.6% recovery); AGA Ex. 36 (May 2015 MLE2 Report) at -2379 (54.2% recovery).
Not only did Newmont specifically consider throughput and recovery during the diligence period, but it was aware that there was a risk these targets may not be reached. See, e.g., AGA Ex. 26 (Newmont Diligence Report) at -0544 (noting that "there are some possible deficiencies in recovery projections and overall plant design that will likely need to be addressed"); id. at -0585 (noting "operating problems are expected anticipated [sic] resulting in increased risk to throughput, costs, and ultimately overall recovery in the heap" among the processing "weaknesses"); id. at -0590 (listing "[a]bility to maintain projected throughput at given ore grade to mill from open pit and underground ores may be difficult and could result in higher percentage of mill ore tons from the pit at lower grade (as well as lower mill recovery)" among the potential processing "threats"). Newmont also recognized these challenges in the period between Signing and Closing, yet never sought to include any representations as to throughput or recovery in the SPA. See, e.g., AGA Ex. 44 at -2176 (Dodd states that the Mill was "at a throughput rate of about 200 tph" and that "apparently they are struggling to get up to design"); AGA Ex. 60 at -9035 (Orlich states that "[d]esign throughput is 250tph," but that the "last numbers [he] saw from April was an average of about 150," and his understanding was that "throughput is being limited by tailings thickening/filtration"); AGA Ex. 55 at -0627 (Livermore notes indicate that the "[c]urrent average is 200tph versus 250tph design" and that the "tails filtration is bottleneck"); AGA Ex. 46 at -1380 (McLaren states to Orlich and Dodd, "Your mill recovery sucks [smiley face], no pressure!"); AGA Ex. 57 at -0535 (Livermore notes indicate that the Mill was "currently achieving 70-80% of nameplate capacity," and that it was estimated to "take [the] first half of 2016 to correct").
Even if it is true that Newmont was not aware of the specific design defects disclosed after Closing in reports such as the Winterton Memo, it cannot be said that Newmont was unaware of the risk that the Mill's throughput and recovery projections would not be met over time. Newmont could have protected against such an occurrence by contracting for a specific representation or warranty as to those targets in the SPA. Indeed, if Newmont wanted to rely on any representations or warranties with respect to the Mill's performance, including its ability to meet certain throughput or recovery targets, it should have bargained for such language to be included in the SPA. See JC's East, 1995 WL 555765, at *3 (finding that the departures of key employees were not covered by the MAE provision because "the need to retain key employees (or at least, to mitigate the consequences of their departure) was something which [the buyers] could have anticipated and done something about"); In re Lyondell, 567 B.R. at 149-50 (rejecting argument that impending Chapter 11 filing constituted an alleged MAE and explaining that, as the "parties were clearly capable of drafting a solvency requirement," the court would not "infer a solvency requirement where none was drafted by the parties"). By failing to negotiate for specific representations related to the Mill's performance, and given the express disclaimers contained in the SPA, Newmont assumed the foreseeable risks associated with the Mill. See JC's East, 1995 WL 555765, at *3 ("In light of an explicit waiver of warranties, a foreseeable occurrence does not become a `material and adverse change' simply because it would require the expenditure of money to remedy or ameliorate. . . . Accordingly, such an event could not be within the scope of the material and adverse change clause."); In re Lyondell, 567 B.R. at 150 ("The parties had the opportunity to include an ongoing solvency provision in the [Agreement] when it was drafted and executed . . ., but they did not. The Defendants cannot now stretch the MAC clause to include it.").
That the parties did not include in the SPA any representations as to throughput or recovery evinces their intent that no such guarantees or minimum requirements would apply. See In re Lyondell, 567 B.R. at 150. This is particularly true since the parties specifically allocated certain risks, liabilities, and rewards in other parts of the SPA, and therefore knew how to do so when they intended to. See, e.g., SPA § 1.01(d) (allocating a royalty for "net smelter returns"); SPA § 9.10 (allocating liabilities and recoveries for potential litigation related to the construction of the Mill). The Court will not rewrite the SPA to provide for greater protection than that which Newmont bargained for. See Goodman Mfg. Co. L.P. v. Raytheon Co., No. 98 Civ. 2774 (LAP), 1999 WL 681382, at *14 (S.D.N.Y. Aug. 31, 1999).
Even putting aside the conclusion that all three Alleged MAEs fall within the "missed projection" exclusion and are precluded from serving as the basis for a Company MAE under the SPA and New York law, based on the undisputed facts in the record, Newmont still fails to assert any "change, effect, event, occurrence, circumstance or state of facts" that rises to the level of a Company MAE.
The First Alleged MAE is based on AGA's alleged discovery, during the MAE Period, that it had built the "wrong type of mill for the ore body at CC&V," which resulted in the Mill's "failure to reach design recovery rates." See Opp'n at 24. Newmont relies heavily on the Mususumeli Report, Newmont Ex. 25, and the AMTEL Report, Newmont Ex. 49, to support this Alleged MAE. See Opp'n at 24-25.
It is undisputed, moreover, that the Mususumeli Report analyzed only one type of ore at CC&V—Cresson Pipe—and that the AMTEL Report analyzed only Cresson Pipe and one other ore type, Dante ore. See Newmont 56.1 ¶¶ 573, 660; AGA-Ch. Resp. ¶¶ 573, 659-61. The record shows that neither ore type constituted a significant percentage of the ore body at CC&V. Dr. Harvey, Newmont's metallurgical expert, concluded that Cresson Pipe constituted only 3.9% of the total ore expected to be fed to the Mill at the time, see AGA Reply Ex. 155 at 29 n.6, and Winterton testified that Cresson Pipe constituted "less than 1 percent" of the overall ore body at CC&V, see AGA Reply Ex. 137 (Winterton Tr.) at 193:7-12. The prevalence of Dante ore was also relatively insignificant when compared to the ore body at CC&V, as Winterton admitted that it was "roughly the same order as Cresson [P]ipe." See AGA Reply Ex. 137 (Winterton Tr.) at 200:20-201:2.
In attempting to demonstrate the significance of Cresson Pipe and Dante ore, Newmont points to a June 2015 email sent from Jose Augusto Dumont, a metallurgist at AGA, to Helcio Guerra, in which Dumont summarized the AMTEL Report and stated that it was his understanding that the "technical solution for this ore," presumably referring to Cresson Pipe, would "be of large proportions in what will be fed to the crusher" in the Mill. See Newmont Ex. 50 at -1188. This single email, reflecting one employee's view, does not support Newmont's claim that, upon receipt of the AMTEL Report, "AGA immediately recognized that contrary to its earlier belief, `crushing will not be effective' for these types of ore, which AGA knew would `be of large proportions in what will be fed to' the Mill." See Opp'n at 25. Furthermore, even if it was true that Cresson Pipe or Dante ore were intended to "be of large proportions in what will be fed to" the Mill, as Newmont claims, a Company MAE must be analyzed in the context of the Mine as a whole, and not just the Mill. These two reports—about only two ore types, comprising a relatively small percentage of the ore to be processed at the Mine—cannot serve as the basis for any conclusion about the Mine, or even the Mill, as a whole. Given these circumstances, the conclusions in the Mususumeli Report and the AMTEL Report do not show that a Company MAE occurred.
The Second Alleged MAE is premised on the Mill's inability to achieve its throughput target. See Opp'n at 29. Newmont argues that certain "design defects that would prevent the Mill from ever reaching design throughput" constitute a Company MAE, id., and that AGA was aware that the Mill would not reach the throughput target based on, at a minimum, the July 7 Memo and the DGS Memo, see id. at 30. As AGA points out, however, "Newmont's suggestion that the Mill would never achieve its 250 stph throughput projection is refuted by the fact that it subsequently achieved throughput rates in excess of 250 stph." AGA-Ch. Resp. ¶ 712. In a March 2017 email, for instance, Winterton noted that "[t]hings are starting to come together with the mill here," in part because the Mill's "feed rate is now 255 stph with near 100% utilization up from 185 stph with 60%." AGA Reply Ex. 156 at -4010; see also AGA Reply Ex. 153 at -2381 (Henris states that the Mill "is currently running at 255 tpoh, 35 tpoh higher than BP17").
There is also no evidence in the record that AGA concluded that the 250 stph throughput target was unachievable. Although it is true that the July 7 Memo and the DGS Memo identified specific design defects that could justify litigation against the Mill's designer, neither memo concluded that the Mill would never reach a throughput of 250 stph. See generally Newmont Ex 38; Newmont Ex. 40. Nor did the Winterton Memo reach such a conclusion. See generally Newmont Ex. 89. Rather, the Winterton Declaration states only that, in Jeff Winterton's view, the Mill would "never be capable of reaching design recovery or throughput without significant modifications." Winterton Decl. ¶ 15 (emphasis added). In fact, Dr. Reeves, one of Newmont's experts, also admitted at his deposition that the Winterton Memo did not actually contain the conclusion that the Mill could never achieve 250 stph throughput. See AGA Reply Ex. 148 (Reeves Tr.) at 112:7-114:16.
The Third Alleged MAE overlaps with the Second Alleged MAE to a significant degree, but is premised not only on the alleged conclusion that the Mill would never reach its design throughput, but also that it would never reach its design recovery rate of 76.5%. See Opp'n at 34 (arguing that, based on the findings set forth in the Winterton Memo, AGA had "determined that the Mill, in its entirety, suffered from underlying deficiencies that would prevent it from achieving design throughput or recovery"). The Winterton Memo, however, does not contain any conclusion that the Mill would never achieve a recovery of 76.5%. See generally Newmont Ex. 89. The Winterton Declaration, again, only states that the Mill would not be able to achieve 76.5% recovery "without significant modifications," not that it would never be able to do so. Winterton Decl. ¶ 15.
In sum, there is simply nothing in the record to support Newmont's claim that the Mill would never reach its throughput or recovery targets. When pressed at oral argument to point to evidence supporting these claims, Newmont cited the Winterton Memo, "combined with the knowledge that was gained both from operationally and in the DGS [Memo]." See Tr. at 54-55. As discussed above, however, none of these documents supports Newmont's claims about throughput or recovery.
Newmont's own behavior during the diligence period and after the transaction closed confirms that no Company MAE occurred during the MAE Period. As already discussed, Newmont was aware during the diligence period that the Mill was not achieving its throughput and recovery targets, and that there was a possibility that these targets would not be reached. In now arguing that Company MAEs occurred during the MAE Period, Newmont places great weight on the Winterton Memo. It is undisputed, however, that Newmont received the Winterton Memo on August 4, 2015, the day after the CC&V transaction closed, and that upon receipt of this report, Newmont did not express concern about the conclusions or discussion set forth therein. See Newmont Ex. 89 at -8064. Indeed, there is nothing in the record to show that, at the time it received the Winterton Memo, Newmont believed the report contained any information indicating that a materially adverse effect had occurred. To the contrary, Winterton testified at his deposition that neither McLaren nor Dodd expressed "any concern that they were surprised about the contents of [the Winterton Memo]" when they subsequently came to CC&V for a site visit, and that they did not convey to Winterton during that meeting or at any other time that "they had no idea that there were going to be this many issues when they took over." See AGA Reply Ex. 137 (Winterton Tr.) at 211:13-212:23. These circumstances lend support to AGA's argument that the Winterton Memo merely set forth information that Newmont already knew about prior to Closing.
Newmont's analyses in the post-transaction period also undermine its argument that a Company MAE occurred. In the context of an M&A transaction, an MAE provision is generally intended to protect the buyer "from the occurrence of unknown events that substantially threaten the overall earnings potential of the target in a durationally-significant manner." In re IBP, 789 A.2d at 68. In other words, to constitute a Company MAE, the Alleged MAE "should be material when viewed from the longer-term perspective of a reasonable acquiror." Id. Here, however, Newmont's post-transaction analyses demonstrate that no "durationally-significant" material adverse effect occurred. Just two months after the transaction closed, in an October 2015 report comparing estimates from the diligence period to Newmont's 2016 budget, Newmont noted that it expected CC&V, as a whole, to produce more gold than it had estimated during due diligence. See AGA Ex. 27 at -9692; see also AGA 56.1 ¶¶ 289-90.
Newmont's two PIRs also demonstrate that, in the post-Closing period, the value of CC&V increased from Newmont's valuation at the time of the transaction. In the first PIR, submitted in September 2016, Newmont valued CC&V at $831 million on an NPV basis. See Newmont Ex. 83 at -5955. The review of the first PIR that Newmont's VAT submitted in November 2016 noted that the "value of the CC&V asset" had increased by approximately $68 million "when compared against the $820 million purchase price." See AGA Ex. 21 at -6365. In the second PIR, submitted in April 2018, Newmont valued CC&V at $842 million on an NPV basis. See Newmont Ex. 84 at -8818. The VAT's review of the second PIR, also submitted in April 2018, stated that CC&V was "on track to deliver approximately $11 million in incremental NPV." See AGA Ex. 23 at -2001. It bears repeating that, in determining whether a Company MAE occurred during the MAE Period, the Mine must be analyzed as a whole. Thus, even if it is true that the Mill was struggling to reach its design throughput or recovery, Newmont's PIRs show that CC&V as a whole did not suffer a materially adverse effect.
Because Newmont's three Alleged MAEs do not fall within the Company MAE definition, and because the record shows, in any event, that they do not rise to the level of a Company MAE within the meaning of the SPA, AGA is entitled to summary judgment on Newmont's breach of contract claims.
Newmont asserts fraud claims based on (1) AGA's representation in the SPA, and restated at Closing, that no Company MAE had occurred during the MAE Period, and (2) AGA's representation in the SPA, and confirmed through the Compliance Certificate provided at Closing, that it had complied with its obligations and covenants under Sections 6.01(b), 6.02, and 9.10 of the SPA between Signing and Closing. See Opp'n at 39; Tr. at 4-5.
Newmont's first set of fraud claims—those premised on Section 4.14 and the representation that no Company MAE had occurred—fail for the same reasons discussed above. Based on the evidence in the record, Newmont has failed to establish that a Company MAE did in fact occur within the MAE Period, let alone that AGA knew, believed, or recklessly disregarded that fact and intentionally or recklessly represented otherwise.
Newmont's second set of fraud claims—those regarding certain obligations and covenants, as confirmed through the Compliance Certificate provided at Closing—is premised on three specific provisions of the SPA. Pursuant to Section 7.02 of the SPA, Newmont received a Compliance Certificate at Closing, signed by Guenther, representing that certain "representations and warranties" made in the SPA, including those made in Section 4.14(a), were "true and correct as of the Closing Date as though made on the Closing Date," and that AGA had "performed or complied in all material respects with all obligations and covenants required by the Agreement to be performed or complied with by the AGA Parties by the time of the Closing." See Newmont Ex. 103 at -4264; see also SPA § 7.02(b)-(c); Newmont 56.1 ¶ 747. As an initial matter, the representations made in the Compliance Certificate are statements of present fact, which—if established to be materially false or misleading and made with the requisite scienter—may serve as the basis for a fraud claim. See VTech Holdings Ltd. v. Lucent Techs. Inc., 172 F.Supp.2d 435, 440 (S.D.N.Y. 2001). Newmont has not, however, demonstrated that any of the statements contained in Sections 6.01(b), 6.02, and 9.10—or, in turn, in the Compliance Certificate—were fraudulent, or that AGA acted with the requisite scienter in certifying its compliance with those provisions at Closing.
First, Section 6.01(b)(v) provides, in relevant part, that AGA "shall promptly advise [Newmont] in writing of . . . the occurrence of any matter or event that is material to the business, condition (financial or otherwise), working capital, or results of operations of . . . the Mine." SPA § 6.01(b)(v); see also Opp'n at 10. Newmont argues that AGA induced it to close by falsely representing that AGA had "disclosed in writing any matters or events material to CC&V" because "AGA failed to disclose numerous matters and events between Signing and Closing that were indisputably material to CC&V's business." Opp'n at 50. Newmont points to the same reports and information that underlie its contract claim: the AMTEL Report, which it asserts "revealed that AGA had built the wrong type of mill for the ore body at CC&V," the fact that the Mill's "Process Circuit was defectively designed and constructed," and the Winterton Memo, which it argues determined that "the Mill, as a total unit, suffered from deficiencies that would prevent it from ever reaching design recovery or throughput." See id. As the Court has discussed at length, however, there is nothing in the AMTEL Report, the Winterton Memo, or any other document in the record that shows that AGA concluded that it had built the wrong type of mill or that the Mill would never reach its target throughput or recovery rates. It is for these reasons, and those articulated above, that the Court has determined that, under Sections 4.14 and 10.05, no Company MAE occurred during the MAE Period. Contrary to Newmont's suggestion, the obligation in Section 6.01(b)(v) is narrower than that of the MAE provision and Company MAE definition. While the Company MAE definition provides that "any change, effect, event, occurrence, circumstance or state of facts" that either "is" or "would reasonably be expected to be materially adverse" to the Mine could constitute a Company MAE, see SPA § 10.05(b), the language in Section 6.01(b)(v) provides disclosure obligations only as to "the occurrence of any matter or event" that "is material" to the Mine, see SPA § 6.01(b)(v) (emphasis added).
Next, Section 6.02 provides, in relevant part, that Newmont shall have "reasonable access, upon reasonable notice during normal business hours during the period prior to the Closing, . . . to the personnel[,] properties, books, contracts, commitments, Tax Returns and records of or pertaining to [the Mine]," and that during this period, AGA "shall furnish promptly to [Newmont] any information concerning [the Mine] as [Newmont] may reasonably request; provided, however, that such access does not unreasonably disrupt the normal operations of [the Mine]." SPA § 6.02; see also Opp'n at 10. Newmont argues that AGA falsely represented that it had provided "reasonable access to CC&V information, personnel, and property," particularly since it failed to provide it with "the AMTEL Report, the design defects discussed in the DGS Memo, and the Winterton Memo," and that, between Signing and Closing, Newmont had "no choice but to trust that AGA was providing it with information concerning CC&V." See Opp'n at 50-51.
Newmont points specifically to a June 15, 2015 email from Chancellor to various AGA and CC&V personnel, see Newmont Ex. 27, as well as a June 17, 2015 email from Chancellor to Briggs, see Newmont Ex. 28, to support its contention that AGA knew it was not providing "reasonable access" in the period between Signing and Closing. Neither email supports Newmont's claim. First, in his June 15th email, Chancellor explained that he was "beginning to receive requests from Newmont to access people, site, and information" at CC&V, and stated his view that, while "some access under controlled circumstances . . . is fine (and perhaps appropriate)," allowing Newmont "to review and copy files so they can run title prior to closing, on the other hand, seems . . . to go too far, and may be a `recipe' for disaster." Newmont Ex. 27 at -3809. Chancellor then proposed recommendations for how to proceed, noting that he wanted to discuss the matter further with the team. Id. at -3809-3810. This email does not demonstrate that AGA was intentionally hiding information or knew or believed that the access it was providing to Newmont was unreasonable.
The June 17th "Rules of Engagement" email that Chancellor sent to Briggs confirms that AGA was primarily concerned with balancing the parties' "wish to maximize the likelihood that the transaction will close and that there is as smooth a transition post-closing as possible" with "what is necessary—as opposed to what would be `nice to have'—over the next few weeks, as well as with what is best for the efficient, continued operation of the [M]ine." See Newmont Ex. 28 at -8342. This email does not establish that AGA knew or believed its proposed terms regarding Newmont's access to people, property, or information during this period were unreasonable. Indeed, the Rules of Engagement email was framed by the mutual understanding that both AGA and Newmont "want the site to continue to function as efficiently and productively as possible, and thus . . . must do everything possible to minimize disruptions and any corresponding impact on productivity." Id. at -8340. It was for this reason that Chancellor suggested that "[a]ccess to people, property, or information by Newmont . . . should be the exception rather than the rule, and should focus on those things that must be accomplished prior to closing." Id. Chancellor nonetheless proceeded to outline his proposed "rules of engagement," providing terms by which Newmont had access to CC&V, while remaining mindful of the overall goal that the Mine operate with as few disruptions as possible. See id. at -8340-8342.
Finally, Section 9.10 provides, among other things, that the "parties shall use their reasonable best efforts and act in good faith to fully cooperate and coordinate in the prosecution and defense of, and to reach effective resolutions of, all Designated Matters." See SPA § 9.10(h)(i); see also Opp'n at 51. Newmont asserts that AGA did not "us[e] its reasonable best efforts to fully cooperate," but rather, "made a calculated decision to withhold from Newmont both the fact that severe defects had occurred [in connection with the Mill] and the nature of the claims AGA was considering against FLS." Opp'n at 51. Newmont points primarily to the documents and circumstances surrounding the July 16, 2015 meeting between AGA's counsel and Newmont's counsel, such as the July 7 Memo and the DGS Memo, to support its contention that AGA falsely represented at Closing that it had "fully cooperated in good faith in prosecuting" the Designated Matters. Id. There is again, however, no evidence in the record that AGA knew or believed that its level of cooperation was unreasonable or that it was not using its best efforts to cooperate with respect to the potential contractor claims.
While it is true that AGA did not provide Newmont with the July 7 Memo or the DGS Memo—documents drafted by its outside counsel and clearly labeled "legally privileged & confidential"—Newmont has not established that AGA had any obligation, under Section 9.10 or otherwise, to do so. There is also nothing in either Memo, or in the July 16 Agenda, evincing an intent, on the part of AGA, to hide from Newmont the fact that there were design defects at the Mill or that CC&V was contemplating claims against FLS. In fact, the July 16 Agenda contained several bullet points describing CC&V's "potential claims against [FLS]," including not only "[b]reach of contract/warranty related to other equipment designed, specified, or provided by FLS," but also "[b]reach of contract related to design failures" and "[p]rofessional negligence related to design failures." See AGA Ex. 67 at -1536. Newmont makes much of the fact that the July 16 Agenda did not include the words "process circuit," but as Newmont acknowledges, "the term `process circuit' generally describes the particular combination of equipment and processing methods selected for inclusion in the Mill and the sequence in which they operate," see AGA 56.1 ¶ 21; Newmont AGA Resp. ¶ 21, and the July 16 Agenda indisputably did reference such equipment. That Charles Carter replied "Great" to Chancellor's update following the July 16, 2015 meeting, see AGA Ex. 67 at -1531, does not evince any nefarious intent on AGA's part. In Chancellor's email, he informed Carter that AGA "did disclose the new claim for equipment issues created by [FLS]," and merely noted that "[the parties] did not dwell on it" and that "[i]t was not a point of discussion with [Newmont]." Id. (emphasis added). If Newmont believed that AGA was not cooperating within the meaning of Section 9.10, or that it was not receiving sufficient information about the FLS claims in particular, it should have raised the issue prior to Closing. But the record before the Court does not show that AGA knew or believed that it was not using its reasonable best efforts or cooperating in good faith, or that it was affirmatively withholding information about the potential contractor claims from Newmont.
Even if Newmont could show that AGA falsely certified that it had complied with its obligations in Sections 6.01(b)(v), 6.02, or 9.10—which it cannot—there is also nothing in the record demonstrating that anyone at AGA did so with the requisite scienter. Accordingly, AGA is entitled to summary judgment on Newmont's fraud claims.
Newmont asserts claims of fraudulent inducement and aiding and abetting in violation of the Colorado Securities Act against Chancellor.
Chancellor is also entitled to summary judgment on Newmont's fraudulent inducement claim. To prevail on a claim for fraudulent inducement, a plaintiff must establish that "(1) the defendant made a fraudulent misrepresentation of fact or knowingly failed to disclose a fact that defendant had a duty to disclose; (2) the fact was material; (3) the plaintiff relied on the misrepresentation or failure to disclose; (4) the plaintiff's reliance was justified; and (5) the reliance resulted in damage to the plaintiff." Granite Southlands Town Ctr., LLC v. Provost, 445 F. App'x 72, 75 (10th Cir. 2011) (citing M.D.C./Wood, Inc. v. Mortimer, 866 P.2d 1380, 1382 (Colo. 1994) and Nielson v. Scott, 53 P.3d 777, 779 (Colo. App. 2002)). In its opposition brief and at oral argument, Newmont clarified that, as to Chancellor, its fraud claim is premised on Chancellor's alleged misstatements and omissions from two circumstances in the pre-Closing period: first, the July 16, 2015 meeting between AGA's counsel and Newmont's counsel, and second, the language added to Section 4.1.2 of the June MLE2 Report. See Opp'n to Ch. Mot. at 5-11; Tr. at 88-94. Although Newmont asserts that Chancellor both made affirmative misrepresentations and failed to disclose material information for which he had a duty to disclose, the record before the Court makes clear that, in reality, Newmont's fraud claim against Chancellor involves only alleged omissions. Indeed, when pressed at oral argument, Newmont was unable to articulate any affirmative material misstatements or misrepresentations that Chancellor made to Newmont. See, e.g., Tr. at 90, 92-93. Thus, to succeed on its fraudulent inducement claim, Newmont must establish that Chancellor "knowingly failed to disclose a fact that [he] had a duty to disclose." Granite Southlands Town Ctr., 445 F. App'x at 75; see also Mallon Oil Co. v. Bowen/Edwards Assocs., Inc., 965 P.2d 105, 111 (Colo. 1998) (en banc) ("To succeed on a claim for fraudulent concealment or non-disclosure, a plaintiff must show that the defendant had a duty to disclose material information.") (citing Smith v. Boyett, 908 P.2d 508, 512 (Colo. 1995)).
Under Colorado law, a "defendant has a duty to disclose to a plaintiff with whom he or she deals material facts that `in equity or good conscience' should be disclosed." Mallon Oil, 965 P.2d at 111 (quoting Smith, 908 P.2d at 512). To determine whether the circumstances of a particular case give rise to a duty to disclose "in equity or good conscience," Colorado courts look to the Restatement (Second) of Torts § 551(2) for "helpful guidance." Id. Section 551(2) sets forth five circumstances in which a party to a transaction has a duty to disclose certain information to the other party. See European Motorcars of Littleton, Inc. v. Mercedes-Benz USA, LLC, No. 17-cv-00051-MEH, 2017 WL 2629133, at *9 (D. Colo. June 19, 2017). "One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated," for example, "matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading," see § 551(2)(b); "subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so," see § 551(2)(c); and/or "facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts," see § 551(2)(e).
Here, however, neither the circumstances of the CC&V transaction nor the relationship between Chancellor and Newmont created a duty to disclose on the part of Chancellor. Newmont was not in a "fiduciary or trust relationship" with either Chancellor or AGA. See Poly Trucking, Inc. v. Concentra Health Servs., Inc., 93 P.3d 561, 565 (Colo. App. 2004). "[N]or was there any expectation that either party or its counsel would act to protect the other party's interests." Id. To the contrary, AGA and Newmont were "dealing at arm's length," each represented by its own counsel, and "in an adversarial relationship where each party was expected to act on behalf of itself only . . . [and] had a duty to his or her client to protect the client's interests." Id. "In such an adversarial relationship, concealment by mere silence is not enough to constitute fraud." Id. There must instead be "some trick or contrivance intended to exclude suspicion and prevent inquiry." Vickery v. Evelyn V. Trumble Living Tr., 277 P.3d 864, 871 (Colo. App. 2011) (quoting Poly Trucking, 93 P.3d at 565). Moreover, "unless the seller is in a fiduciary relationship with the buyer or a duty is imposed by statute, a seller has no duty to disclose material facts to a buyer." Carillo v. Nielsen, No. 2015 CV 30390, 2017 WL 9771805, at *3 (D. Colo. Jan. 5, 2017); see also Leprino Foods Co. v. DCI, Inc., 727 F. App'x 464, 476 (10th Cir. 2018) (noting that a seller is "not under a duty to disclose every possible [fact]" to a buyer). Because Chancellor owed no duty to Newmont as a matter of law, Newmont's fraud claim as to Chancellor fails. See European Motorcars, 2017 WL 2629133, at *11; Vickery, 277 P.3d at 871.
For the foregoing reasons, Defendants' motions for summary judgment are granted. The Clerk of Court is respectfully directed to terminate the motions pending at Dkts. 108 and 114, and close the case.
SO ORDERED.
