The opinion of the court was delivered by: United States District Judge Elaine E. Bucklo
MEMORANDUM OPINION AND ORDER
On August 15, 2011, plaintiff Armada
(Singapore) PTE Limited ("Armada") and AMCOL International
Corporation, Volclay International Corporation and American Colloid
Company (the "AMCOL Garnishees") presented evidence*fn1
on the following two issues: the ownership of the excess
stock proceeds and the interest due (if any) on the excess stock
proceeds.*fn2 As explained below, I conclude that the
AMCOL Garnishees owe the excess stock proceeds to Ashapura, not Chetan
Shah, and therefore plaintiff is entitled to payment of the excess
stock proceeds. However, plaintiff has not
met its burden with respect to the alleged thirteen percent interest
on the funds.*fn3
Turning first to the issue of ownership of the excess stock proceeds, I rely on a series of emails*fn4 introduced by Armada at the hearing to conclude that the AMCOL Garnishees owe the excess stock proceeds to Ashapura and not Chetan Shah individually. Plaintiff's Exhibit 1 at AMC001151 is a January 13, 2010 email from Don Pearson, Vice-President and Chief Financial Officer at AMCOL International Corporation, to Ajay Phalod, Business Development Manager at Ashapura. This email from Pearson reads:
As agreed between AMCOL and Ashapura in 2009 and finalized in December, AMCOL's 950,000 shares of Ashapura were sold to Ashapura at Rs38. The price on the open market at the time of the sale was Rs 69.70. The excess price above Rs 38, after adjusting for selling costs, will be transferred to the account identified by Ashapura. AMCOL will absorb the US tax on the gain. Ashapura will forward the same amount in USD to AANV, within four weeks of AMCOL's initial transmission to the Ashapura named account, and the amount will be applied to debt that AANV has to AMCOL's subsidiary, AMCOL Minerals Europe Ltd. At today's exchange rate of 45.6, the amount approximates USD 653,000. AMCOL will transfer the amount at the Rs/USD exchange rate at the time of transfer.
This email, which post-dated the sale of stock in December 2009 by only a few weeks, provides compelling evidence that AMCOL agreed to pay the excess stock proceeds to Ashapura. Chetan Shah is never mentioned in this email as a potential recipient of the proceeds.
There is other documentary evidence that AMCOL owed the excess stock proceeds to Ashapura, and not Chetan Shah. In Plaintiff's Exhibit 2, after a series of emails in July 2010 between Pearson and Phalod concerning the precise amount of the excess stock proceeds, Pearson then emailed Sejal Ghia at AMCOL asking "Can you confirm what the excess Ashapura proceeds is at this point, $635K or $643K?" Ghia responds, "Excess due to AML for Dec 2009 share sale = Rs 30,006,782 at today's fx rate 0.02141 = 642,445." See AMC000779. In this email exchange, Ghia stated that the excess stock proceeds were due to AML (Ashapura Minechem Limited), and there is no mention of the proceeds being due to Shah. Likewise, a memorandum entitled "AMCOL and Ashapura Excess Share Purchase" at AMC000756-57, which was an internal AMCOL document created at Pearson's direction, contained multiple references to Ashapura as the entity which was owed the excess share proceeds. The memo stated,
On December 30, 2009, Ashapura purchased 950,000 shares from AMCOL at a total price of 69.70 rupees before Rs 129,725 in fees. As agreed by the parties, for any price greater than Rs 38, e.g., Rs 31.70 net of fees, AMCOL would forward this amount to Ashapura, who would then remit the amount to AANV to pay down debt by AANV to AMCOL. This amount totals Rs 30,006,782 and is referred to as the excess amount or excess proceeds. The share sale proceeds remain with Sharekhan, AMCOL's broker. Our agreement with Ashapura, requires payment upon receipt of the funds from the broker. There have been technical difficulties whereby the broker has not released the funds. Ashapura borrowed funds to purchase the shares at 13%. AMCOL has an old note from Ashapura, relating to AVL, the note had been paid down to $109,619, however, interested [sic] had not been accrued since September 2007. After adjusting for missing accrued interest at one month libor plus 100 bps, the current balance at June 30, 2010 is $130,500. Considering the delay in receiving the funding for the share proceeds from the broker, AMCOL suggested that it credit Ashapura against the $130,500 note for the interest Ashapura is incurring on its borrowing for the purchase of the excess share price.
This internal AMCOL memorandum clearly states that Ashapura is owed the excess stock proceeds and no where mentions that these funds should go to Shah personally.
Finally, in Plaintiff's Exhibit 4, a July 14, 2010 email from Sejal Ghia to Pearson and others at AMCOL, Ghia once again references the "net amount due to AML" (with AML referencing Ashapura Minechem Limited). This email also references the fact (as confirmed by the testimony of Pearson) that AMCOL's own internal accounting system listed "AML," not Shah, as the entity to whom the excess stock proceeds were owed.*fn5
Further support for plaintiff's position can be found in Pearson's emails, in which he suggested that, instead of AMCOL making any cash payments to Ashapura for interest owed on the excess amount, AMCOL could instead reduce the amount Ashapura owed AMCOL on an outstanding note for $109,000. AMCOL has not put forward any explanation as to why Shah, if he were indeed owed both the excess proceeds and the interest personally, would agree to allow AMCOL to reduce Ashapura's corporate debt. This suggestion by Pearson more logically supports the notion that AMCOL owed Ashapura, and not Shah, the excess stock proceeds.
In reaching this conclusion, I was not convinced by the testimony of Don Pearson. Pearson testified that the AMCOL Garnishees were obligated to pay the excess stock proceeds to Shah, as it was Shah who purchased the shares and borrowed the funds to effectuate the stock purchase. Over and over again, Pearson reviewed the numerous emails he authored which explicitly stated that Ashapura was owed the excess stock proceeds, and testified that those references to Ashapura were shorthand references to Shah. Put simply, in light of the number of references to Ashapura by multiple parties and the fact that AMCOL's own internal accounting system reflected the fact that the proceeds were owed to Ashapura, I did not credit Pearson's testimony.*fn6
To counter plaintiff's evidence, the AMCOL Garnishees point to:
(1) a September 29, 2009 email from Larry Washow (former CEO of AMCOL) to Don Pearson; and (2) a transcript of a January 22, 2010 quarterly analyst call. Turning first to the email, Washow stated, "Don[,] the price difference I guess is actually Chetan's money so we probably can't do much but if it could be used to offset a bit of the Antwerp loan or if there is some way we could keep the difference that would be good. Larry." Even assuming I could properly consider Washow's statement, I do not read this email as providing conclusive evidence that the excess stock proceeds were owed to Shah personally. The most obvious problem with its reliability is Washow's use of the qualifier, "I guess." Given Washow's own obvious uncertainty, this email does not conclusively support the AMCOL Garnishees' position, especially in light of all the post-sale emails discussed above.
Second, the AMCOL Garnishees point to a transcript of a January 22, 2010 quarterly analyst call as support. Putting aside any issues of admissibility of this document, even if I did consider it, it also does not provide strong support for the AMCOL Garnishees. In this transcript, after being asked about the sale of Ashapura shares, Washow responds, "Yeah. We did go through the open market. The other owner ended up buying the shares as a block." AMC001124. Once again, Washow's reference to "the ...