New York Court of Appeals Upholds Purchase Agreement's Broad Release in Affirming Dismissal of $900 Million Fraud Claim

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On June 7, 2011, the New York Court of Appeals affirmed the dismissal of a $900 million lawsuit brought by former shareholders against America Movil SAB (“Movil”), Latin America’s largest mobile phone carrier, on the grounds that a general release entered into by the parties in 2003 barred Plaintiffs’ claims. Centro Empresarial Cempresa SA et al. v. America Movil SAB de CV et al., -- N.E. 2d --, 2011 WL 2183293, slip op. at 1, 14 (June 7, 2011). The unanimous decision by New York’s highest court underscores the extent to which sophisticated parties to arms-length transactions can contract away future claims, even “fraud claims . . . unknown at the time of contract.” Id at 9.

Factual Background

The facts underlying the litigation date back to 1999 when Plaintiffs Centro Empresarial Cempresa SA (“Centro”) and Conecel Holding Ltd. -- two British Virgin Island entities holding a combined majority interest in the Ecuadorian telecom company Consorcio Ecuatoriano de Telecomunicaciones S.A. Conecel (the “Company”) -- sought financing from Mexican billionaire Carlos Slim Helu (“Slim”).

Slim’s company, Telmex Mexico (“Telmex”) injected $150 million into the Company in 2000, taking a majority interest. Following the transaction, Plaintiffs and Telmex held their interests in the Company through a new entity, Telmex Wireless Ecuador LLC (“TWE”). The parties agreed that in the event Slim consolidated his Latin American telecommunications interests into one entity, Plaintiffs would have the right to exchange their units in TWE for equity shares of the new entity.....

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Published In: Business Organization Updates, Business Torts Updates, Civil Remedies Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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