Summary
The Appellate Division, First Department reviewed a trial court’s grant of summary judgment in favor of Telefónica S.A. for breach of a share purchase agreement concerning the sale of a Costa Rican telecommunications business. The court determined that the contractual condition precedent requiring a specific Costa Rican regulatory “Authorization” was unenforceable because such approval was neither legally required nor permitted under local law. However, the appellate court modified the lower court’s award of prejudgment interest on the full contract price, remanding the matter to calculate proper expectation damages and corresponding interest under CPLR 5001.
Topics
Practice areas
Questions Presented
- Whether the "Authorization" provision in the SPA was an enforceable condition precedent to closing
- Whether prejudgment interest should be awarded on the full contract price from the closing date to the replacement transaction
- Whether summary judgment was proper on Telefónica's breach‑of‑contract claim
Holdings
- The "Authorization" term was not an enforceable condition precedent because the required regulatory approval was not legally required or permitted under Costa Rican law; therefore Millicom breached the contract.
- Prejudgment interest may not be awarded on the full contract price for the period after the breach; the matter is remanded for the Supreme Court to determine the proper amount of damages and prejudgment interest under CPLR 5001.
- Summary judgment was proper because Millicom's failure to obtain the required regulatory approval constituted a breach of the unambiguous terms of the SPA.
Key quotations
“We reject Millicom's alternative argument that the word "Authorization" was "broad enough to encompass" ratifications such as endorsements (refrendos) by the Comptroller in Costa Rica.” (at 1)
“Expectation damages provide "the general measure of damages in a breach of contract case under New York law" (Emposimato v CIFC Acquisition Corp., 89 AD3d 418, 421 [1st Dept 2011]).” (at 1)
Factual background
Millicom agreed to purchase Telefónica's Costa Rican mobile‑communications business under a share‑purchase agreement that required closing by May 1, 2020, contingent on obtaining a regulatory "Authorization" from the Costa Rican Comptroller. The Comptroller could not issue such an authorization and instead required a "refrendo" endorsement. The parties failed to obtain the refrendo by the deadline, and Millicom terminated the transaction. Telefónica sued for breach of contract.
Procedural history
The Supreme Court, New York County entered an order granting summary judgment to Telefónica on its breach‑of‑contract claim and awarding prejudgment interest. Millicom appealed. The Appellate Division reviewed the order, affirmed the summary‑judgment finding, vacated the prejudgment‑interest portion, and remanded for further proceedings.
Remand instructions
Remand to the Supreme Court, New York County for further proceedings to determine the amount of damages and the appropriate prejudgment interest under CPLR 5001, including the period from the breach until the replacement transaction.