U.S. District Judge Paul Engelmayer. Photo: Diego M. Radzinschi/ALM
U.S. District Judge Paul Engelmayer of the Southern District of New York on Wednesday awarded $10.8 million in damages to Partner Reinsurance Co. in a breach of contract case involving RPM Mortgage's agreement to buy a majority share in an Ohio-based insurance company of which PartnerRe was a principal owner.
In a 147-page opinion, Engelmayer found that RPM failed to close the merger because CEO Robert Hirt "had developed an acute case of buyer's remorse" regarding his company's agreement with the insurance company, Entitle Direct Group.
"RPM, the court holds, willfully breached its obligations under the merger agreement," Engelmayer wrote. "To avoid a binding agreement that its chief executive, Hirt, had come to regret but had no valid basis to avoid, RPM, in the period spanning the closing date, articulated a shifting series of baseless rationalizations for claiming breach by Entitle, which did not, in any respect, breach."
Hirt testified at trial that he was concerned Entitle would be a "captive insurer" with regulatory and business concerns, but Engelmayer found that his testimony was "contrived."
"Hirt's affect on this point was noticeably shifty and evasive," Engelmayer wrote. "And this testimony was uncorroborated, unconvincing and at best middlingly coherent."
Engelmayer found that, in general, Hirt was a "notable exception" to the mostly credible fact witnesses who testified during the bench trial.
"It would be difficult to overstate the unfavorable impression Hirt left with this factfinder," Engelmayer wrote, describing his testimony as "all too frequently glib, non-rigorous, self-serving and unreliable."
Engelmayer rejected PartnerRe's argument that the Hirts were personally liable for breach of contract under a theory of alter ego liability, finding that "RPM was not a sham entity that existed merely to shield the Hirts from creditors."
Along with the $10.8 million in damages, Engelmayer also awarded pre- and post-judgment interest to PartnerRe.
Roche Freedman partner Amos Friedland, who was lead counsel for PartnerRe in the matter, praised the ruling in a statement.
"We are pleased that the court's extremely thorough opinion has vindicated PartnerRe's entitlement to the full damages it sought for RPM's bad faith refusal to close under the parties' merger agreement," Friedland said.
Blank Rome partner Steven Caponi, who represented RPM and the Hirts, declined to comment.
Jane Wester
Jane Wester is a litigation reporter for the New York Law Journal. Email her at [email protected] or find her on Twitter @janewester.