Latham Secures Important Victory in New York Appellate Division, First Department
A Latham team secured an important appellate victory for Parque Solar Don Jose S.A. de C.V., Villanueva Solar, S.A. de C.V., and Parque Solar Villanueva Tres, S.A. de C.V. (Project Companies), in a contract dispute worth more than US$100 million.
Project Companies are owners of renewable energy facilities in Mexico that were formerly owned by Defendant Enel S.p.A. (Enel). At Enel’s behest, Project Companies entered into a contract with an Enel subcontractor for constructing and operating the facilities. Because the Enel subcontractor had little to no assets of its own, Project Companies also entered into a guarantee agreement under which Enel guaranteed damages “due and payable” under Project Companies’ contract with the Enel subcontractor.
In 2020, Project Companies confirmed that the Enel subcontractor had fallen far short of its performance commitments and demanded payment from the Enel subcontractor. At the same time, Project Companies notified Enel that they would be entitled to collect from Enel under its guarantee if the Enel subcontractor failed to pay. After the Enel subcontractor refused to pay, Project Companies took the dispute to arbitration, securing a US$77 million plus interest award. Enel, however, refused to pay the award even after the Enel subcontractor defaulted on the payment. Project Companies sued Enel in New York Supreme Court for breach of the guarantee and the implied covenant of good faith and fair dealing. Adopting Enel’s view of the parties’ agreement, Supreme Court (Crane, J.) dismissed the case, concluding that Project Companies failed to make a timely demand.
On appeal to the Appellate Division, First Department, Project Companies argued that the parties’ contracts mandated the completion of arbitration proceedings before they could seek collection from Enel, rendering their demand timely. At oral argument, the panel expressed skepticism of Enel’s reading of the contract, tracking arguments Latham made in its briefs. On December 9, the panel unanimously reversed the dismissal of Project Companies’ contract claim, holding that the claim “should not have been dismissed” due to ambiguity in the contracts. The court also rejected all of Enel’s alternative defenses, further clearing the way for Project Companies on remand to pursue a judgment holding Enel accountable for the now-US$100+ million award.
Latham Washington, D.C. partner Michael Bern argued the appeal. The Latham team also included New York associate Nikita Kansra, who worked on the appeal; New York partner Rob Malionek and associate Tyler Halloran also provided invaluable support to the appeal; and Antonio Del Pino, Santiago Bejarano, and retired partner Fernando Mantilla-Serrano, who handled the contract negotiation and arbitration process.