by Ross Todd
Mayer Brown cured a nearly $1 billion headache for Latin America's largest mobile phone carrier on Tuesday, persuading New York's highest court to throw out $900 million in claims against América Móvil brought by shareholders of the company's Ecuadorian unit.
The plaintiffs—-a pair of British Virgin Islands entities called Centro Empresarial Cempresa SA and Conecel Holding Ltd.—-held a combined majority interest in Conecel, Ecuador's mobile telephone company, in the late 1990s. The plaintiffs approached Mexican billionaire Carlos Slim, now América Móvil's chair, seeking outside capital for the company. Slim's companies acquired a majority interest in the Ecuadorian company in 2000.
In 2008 the plaintiffs sued América Móvil, its subsidiaries, Slim, and another director in New York state court, claiming that the defendants supplied them with false financial information regarding the value of their shares as they bought them out early in the last decade. Based on that false information, the plaintiffs claimed, they sold their shares to América Móvil and released the defendants from any liabilities in connection with the share sales. The allegations included breach of contract, fraud, fraudulent inducement, unjust enrichment, and a claim for accounting.
The New York Court of Appeals unanimously rejected each of those claims Tuesday, affirming a ruling by the state's first appellate division that the defendants were shielded by a 2003 release agreement with the plaintiffs. Here's the court's 14-page opinion, authored by Judge Carmen Beauchamp Ciparick.
"As sophisticated entities, [the plaintiffs] negotiated and executed an extraordinarily broad release with their eyes wide open," wrote Judge Ciparick. "They cannot now invalidate that release by claiming ignorance of the depth of their fiduciary's misconduct."
Kathleen Kundar of Fox Horan & Camerini, who handled oral arguments for the plaintiffs in April, said the plaintiffs have 30 days to seek a rehearing. Kundar declined to say whether the plaintiffs plan to do so. In a statement to Bloomberg, América Móvil said decision brings the litigation to a close.
Mayer Brown's Donald Falk, who argued for the defendants, told the Litigation Daily "the chances of rehearing are nonexistent" given the appellate court's unanimous ruling. He led the Mayer Brown team on the case along with former partner Steven Selsberg. Selsberg had represented Slim and his companies for more than a decade.
"It's very easy to plead fraud. In almost every bitter contract dispute someone throws out a fraud claim," Falk said. "What this decision says is that, at least for sophisticated parties, you can end a relationship so no one can come back years later and get years of stock appreciation."