Case 3:07-cv-01606-ADC-BJM Document 597 Filed 09/22/2009 Page 1 of 16

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

WESTERNBANK PUERTO RICO,

Plaintiff,
Civil No. 07-1606 (ADC)
v.
JACK KACHKAR, et al.,
Defendants.

OPINION AND ORDER

Plaintiff, Westernbank Puerto Rico (“plaintiff”), filed suit against, amongst others, Inyx,
Inc. (“Inyx”), Jack Kachkar (“Kachkar”) and his wife Viktoria Benkovitch (“Benkovitch”)
(collectively, “defendants”), alleging fraud and breach of contract related to various loan and
guarantee agreements. Docket No. 3. Plaintiff thereafter filed a motion for partial summery
judgment on its claims for breach of contract and collection of monies against defendants.
Docket No. 223. Now before the court are defendants’ objections (Docket No. 562)1 to the
Report and Recommendation (“R & R”) (Docket No. 437) issued by Magistrate-Judge Bruce
J. McGiverin (“Magistrate-Judge”), which recommended granting plaintiff’s motion. After
reviewing the R & R, objections, and pleadings, the court ADOPTS the R & R in full.
I. Factual and Procedural Background
Inasmuch as defendants have not made a specific objection to the Magistrate-Judge’s
recitation of the factual background, the court hereby adopts the same. Docket No. 437, at
2-10. To the extent defendants’ objections implicate factual findings of the Magistrate-Judge,
the court will deal with those objections individually.

1
Defendants originally filed their objections to the Report and Recommendation on March 20,
2009. Docket No. 447. On March 21, 2009, defendants amended and re-filed the same (Docket No. 449),
along with a motion for leave to file excess pages (Docket No. 448). On July 24, 2009, the court denied
defendants’ request, and ordered them to re-file their objections within the page limit. Docket No. 558.
Defendants complied with said request, and timely re-filed their corrected objections on July 29, 2009.
Docket No. 562. The court will only consider the corrected objections. The four additional exhibits,
designated SS-VV, that defendants added to the corrected objections will not, however, be considered
as they were not included as part of the original objections (Docket No. 447).
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II. Applicable Standards of Review

A. Standard of Review for Objections to a Report and Recommendation
A district court may refer pending motions to a magistrate-judge for a report and
recommendation. 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b); L. Cv. R. 72(a). Any party
adversely affected by the recommendation issued may file written objections within ten (10)
days of being served with the report and recommendation. 28 U.S.C. § 636(b)(1). A party that
files a timely objection is entitled to a de novo determination of “those portions of the report
or specified proposed findings or recommendations to which specific objection is made.” Sylva
v. Culebra Dive Shop, 389 F. Supp. 2d 189, 191-92 (D.P.R. 2005) (citing United States v. Raddatz,
447 U.S. 667, 673 (1980)). The objections must specifically identify those findings or
recommendations to which objections are being made. “The district court need not consider
frivolous, conclusive, or general objections.” Rivera-García v. United States, Civ. No. 06-1004
(PG), 2008 WL 3287236, *1 (D.P.R. Aug. 7, 2008) (citing Battle v. U.S. Parole Comm'n, 834 F.2d
419 (5th Cir. 1987)). Moreover, to the extent the objections amount to no more than general
or conclusory objections to the report and recommendation, without specifying to which
issues in the report she is objecting, or where the objections are repetitive of the arguments
already made to the magistrate-judge, a de novo review is unwarranted. Id. “Instead, the
report and recommendation is reviewed by the district judge for clear error.” Id. (citing
Camardo v. Gen. Motors Hourly-Rate Employees Pension Plan, 806 F. Supp. 380, 382 (W.D.N.Y.
1992) (“It is improper for an objecting party to . . . submit[ ] papers to a district court which
are nothing more than a rehashing of the same arguments and positions taken in the original
papers submitted to the Magistrate Judge. Clearly, parties are not to be afforded a ‘second
bite at the apple’ when they file objections to a R & R.”)).
In conducting its review, the court is free to “accept, reject, or modify, in whole or in
part, the findings or recommendations made by the magistrate-judge.” 28 U.S.C. § 636
(a)(b)(1); see also Templeman v. Cris Craft Corp., 770 F.2d 245, 247 (1st Cir. 1985); Alamo-
Rodríguez v. Pfizer Pharma., Inc., 286 F. Supp. 2d 144, 146 (D.P.R. 2003). Hence, the court may
accept those parts of the report and recommendation to which the plaintiff does not object.
See Hernández-Mejías v. General Elec., 428 F. Supp. 2d 4, 6 (D.P.R. 2005) (citing Lacedra v. Donald
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W. Wyatt Det. Facility, 334 F. Supp. 2d 114, 125-26 (D.R.I. 2004)).

B. Summary Judgment Standard
“Summary judgment is appropriate when there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law based on the pleadings,
depositions, answers to interrogatories, admissions on file, and any affidavits.” Thompson v.
Coca-Cola Co., 522 F.3d 168, 175 (1st Cir. 2008) (citing Fed. R. Civ P. 56(c)). When ruling on a
motion for summary judgment, the court “must scrutinize the evidence in the light most
agreeable to the nonmoving party, giving that party the benefit of any and all reasonable
inferences.” Cox v. Hainey, 391 F.3d 25, 27 (1st Cir. 2004). The court may safely ignore
“conclusory allegations, improbable inferences, and unsupported speculation.” Suárez v.
Pueblo Int’l, Inc., 229 F.3d 49, 53 (1st Cir. 2000) (quoting Medina-Muñoz v. R.J. Reynolds Tobacco
Co., 896 F.2d 5, 8 (1st Cir. 1990)). In addition, the “absence of evidence on a critical issue
weighs against the party—be it either the movant or nonmovant—who would bear the
burden of proof on that issue at trial.” Alamo-Rodríquez v. Pfizer Pharma., 286 F. Supp. 2d 144,
151 (D.P.R. 2003) (citing Pérez v. Volvo Car Corp., 247 F.3d 303, 310 (1st Cir. 2001)).
“A dispute is genuine if the evidence about the fact is such that a reasonable jury could
resolve the point in the favor of the non-moving party.” Thompson, 522 F.3d at 175 (quoting
Sánchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)) (internal quotation marks omitted). “A
fact is material if it has the potential of determining the outcome of the litigation.” Maymí v.
P.R. Ports Auth., 515 F.3d 20, 25 (1st Cir. 2008). To defeat a properly supported motion for
summary judgment, evidence offered by the non-movant “must be significantly probative of
specific facts.” Pérez, 247 F.3d at 317 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986)). As a rule, “[e]vidence that is inadmissible at trial, such as inadmissible hearsay, may
not be considered on summary judgment.” Vázquez v. López-Rosario, 134 F.3d 28, 33 (1st Cir.
1998). Finally, it is well settled that “[t]he mere existence of a scintilla of evidence” is
insufficient to defeat a properly supported motion for summary judgment. Anderson, 477 U.S.
at 252.
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III. Discussion
A. Magistrate-Judge’s Recommendations and Defendants Objections to the
Same
In the R & R, the Magistrate-Judge recommended that plaintiff’s motion for partial
summary judgment should be granted. As such, he recommended that: (1) defendants’
request for the court to refrain from ruling on the partial summary judgment, pursuant to
Federal Rule of Civil Procedure 56(f), be denied because they failed to comply with the rule;
(2) plaintiff’s motion for partial summery judgment regarding its breach of contact claim
should be granted because defendants failed to comply with the terms of the Loan
Agreements2, and breached the Personal Guarantees3. Further, the Magistrate-Judge found
defendants’ defenses to be without merit.
For their part, defendants contend that the Magistrate-Judge erred in all of his
recommendations. Specifically, they aver that the Magistrate-Judge: (1) failed to properly
interpret and apply the summary judgment standard; (2) failed to properly interpret and
apply Rule 56(f); (3) erred in a number of ways by concluding that there are no issues of
material facts as to the breaches of the Loan Agreements; (4) erred in concluding that there
are no issues of material facts as to whether defendants breached the Personal Guarantees;
(5) erred in rejecting defendants’ “waiver” defense; (6) erred in rejecting defendants’
“forbearance” defense; (7) erred in rejecting defendants’ “defenses” regarding the Personal

2
Inyx and its subsidiary, Inyx USA, entered into a Loan and Security Agreement with plaintiff
in March 2005 and Inyx subsidiaries Inyx Europe and Ashton Pharmaceuticals entered into a separate
Loan and Security Agreement with plaintiff in August 2005. Docket No. 223-2, at ¶¶ 1, 6, 17. These
loans will be collectively referred to as the “Loan Agreements.”

3
On June 7, 2007, Kachkar and Benkovitch executed an Amended and Restated Limited
Guarantee (the “First Personal Guarantee”) personally guaranteeing all the Inyx Borrowers’ obligations
to plaintiff up to a limit of $30.1 million. Id. at ¶ 25. On June 20, 2007, Kachkar and Benkovitch executed
an additional guarantee (the “Second Personal Guarantee”) personally guaranteeing all obligations of
the Inyx Borrowers to plaintiff up to a limit of $70 million plus the amount that the repayment
obligations under the Loan Agreements exceeded $142.4 million. Id. at ¶ 29. These guarantees will be
collectively referred to as the “Personal Guarantees.”
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Guarantees; and (8) erred in the damage finding. Each of defendants’ objections will be dealt
with in turn.
B. Analysis
1. Interpretation and Application of Fed. R. Civ. P. 56
After conducting a thorough review of the R & R, it is clear that the Magistrate-Judge
did not err in either his interpretation or application of Rule 56. The Magistrate-Judge held
plaintiff to its proper heightened standard, and, to the extent it was properly disputed,
viewed the evidence in a light most favorable to defendants.
2. Interpretation and Application of Fed. R. Civ. P. 56(f)
Defendants’ contend that the Magistrate-Judge failed to recognize the safe harbor
provided by Rule 56(f), and failed to properly apply applicable First Circuit precedent in
denying their request for additional discovery. The court does not agree.
Rule 56(f) offers a “safeguard against judges swinging the summary judgment axe
too hastily.” Resolution Trust Corp. v. N. Bridge Assocs., Inc., 22 F.3d 1198, 1203 (1st Cir. 1994);
see also Guzmán-Ruíz v. Hernández-Colón, 406 F.3d 31, 35 (1st Cir. 2005). Accordingly, summary
judgment may be denied if “a party opposing the motion shows by affidavit that, for specified
reasons, it cannot present facts essential to justify its opposition.” Fed. R. Civ. P. 56(f).
Because district courts “construe motions that invoke the rule generously, holding parties to
the rule’s spirit rather than its letter,” the First Circuit requires substantial, but not perfect,
compliance with its requirements. Resolution Trust Corp., 22 F.3d at 1203; see also Adorno v.
Crowley Towing And Transp. Co., 443 F.3d 122, 127 (1st Cir. 2006). Nonetheless, a party seeking
the protection of Rule 56(f) must still show “(i) good cause for his inability to have discovered
or marshaled the necessary facts earlier in the proceedings; (ii) a plausible basis for believing
that additional facts probably exist and can be retrieved within a reasonable time; and (iii) an
explanation of how those facts, if collected, will suffice to defeat the pending summary
judgment motion.” Rivera-Torres v. Rey-Hernández, 502 F.3d 7, 10 (1st Cir. 2007).
In the instant action, defendants, on page thirty-four (34) of their thirty-nine (39) page
opposition to plaintiff’s request for partial summary judgment, requested, for the first time,
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that the motion be denied because discovery was in its early stages. In support of this
argument, defendants aver that they are entitled to discovery with respect to contested facts
that are central to their defenses. They proceed to list a number of documents that they
believe plaintiff has withheld from them, and that they cannot access. Finally, they set forth
“facts” which they allege to be representative of the types of evidence they would have
uncovered had discovery been allowed.
Taking all of defendants’ averments into account, the Magistrate-Judge did not err in
his recommendation. First, as the R & R explains, the Rule 56(f) argument is nothing more
than a fall back argument by defendants. Instead of immediately moving the court for an
order for additional time to conduct discovery after plaintiff filed its motion, defendants
waited more than a month, and only after contesting every argument put forth by plaintiff,
did they request additional discovery. See Vargas-Ruíz v. Golden Arch Dev., Inc., 368 F.3d 1, 4
(1st Cir. 2004) (Rule 56(f) motion should be filed “promptly upon service of defendant’s
dispositive motion.”). By choosing this path, defendants manifested a belief that they
possessed enough evidence to defeat plaintiff’s motion. See C.B. Trucking, Inc. v. Waste Mgmt.,
Inc., 137 F.3d 41, 44 (1 st Cir. 1998) (“[A] party ordinarily may not attempt to meet a summary
judgment challenge head-on but fall back on Rule 56(f) if its first effort is unsuccessful.”);
Ayala-Gerena v. Bristol Myers-Squibb Co., 95 F.3d 86 (1st Cir. 1996) (upholding denial of Rule
56(f) motion because, inter alia, “[a]ppellants filed their original opposition to summary
judgment without previously informing the court of their inability to properly oppose
summary judgment due to incomplete discovery”). Second, defendants did not comply with
the spirit, much less the letter, of Rule 56(f). While defendants are correct in their statement
that the First Circuit does not require strict compliance with Rule 56(f), it certainly does not
allow a litigant to disregard completely its requirements. After reviewing the opposition, and
taking defendants’ opposition as the authoritative document, because they did not submit an
affidavit, it is evident that the Magistrate-Judge was correct in his finding that defendants: (1)
did not set forth a “‘plausible basis for believing that additional facts probably exist’” (Docket
No. 437, at 13 (internal citation omitted)); (2) did not set forth any additional facts that would
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be uncovered through additional discovery (nor the time in which they would be discovered);
and (3) did not offer any explanation of how any missing facts would suffice to defeat the
pending summary judgment motion (see Rivera-Torres, 502 F.3d at 12). Third, the evidence
collected by defendants after the filing of the opposition does not aide in their argument.
Importantly, it fails to defeat the contractual provisions present in the Loan Agreements and
Personal Guarantees which prove fatal to many of defendants “defenses.”
3. Misunderstanding of Defendants’ Position (Section II(B))
Defendants’ next objection is that the Magistrate-Judge “misunderstood” their
primary argument. Namely, it avers that the Magistrate-Judge failed to grasp its argument
that there was a novation of the Loan Agreements which created a new and separate
agreement. The court strongly disagrees. Contrary to defendants’ current position, they
failed to raise this argument before the Magistrate-Judge, choosing instead to rely on their
arguments that: (1) the Loan Agreements was modified via an oral waiver; (2) the parties
entered into a separate Forbearance and Workout Agreement; (3) the Kachkars’ were
fraudulently induced to enter into the Personal Guarantees; (4) the Personal Guarantees
lacked consideration; and (5) the statute of frauds was inapplicable. As such, this “new”
argument is untimely and is waived. See Paterson-Leitch Co., Inc. v. Massachusetts Mun.
Wholesale Elec. Co., 840 F.2d 985, 991 (1st Cir. 1988) (“Systemic efficiencies would be frustrated
and the magistrate’s role reduced to that of a mere dress rehearser if a party were allowed to
feint and weave at the initial hearing, and save its knockout punch for the second round.”).
4. Genuine Issues of Material Fact Concerning Default Events (Section
II(B)(1)) – Diversion of Lock Box Funds
Defendants contend that the Magistrate-Judge erred in identifying the diversion of
funds from the lock box accounts as a “default event” under the Loan Agreements.
According to defendants, the Magistrate-Judge needed to look at facts beyond the language
of the Loan Agreements to determine whether defendants were compliant with the lock box
requirements. Defendants’ argument, however, suffers from one major defect: defendants
failed to properly oppose plaintiff’s properly supported statements of uncontested fact
wherein it stated that defendants improperly diverted lock box funds away from plaintiff’s
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lock box accounts and into accounts under the control of defendants. Docket No. 437, at 6-7,
n.3 & 4; Docket No. 223-3, at ¶ 57; Docket No. 310-2, ¶¶ 3, 4, 9. As such, pursuant to L. Cv.
R. 56(e), these facts are deemed admitted, and defendants cannot come back now and contest
the same.4 Additionally, the record is replete with evidence that defendants improperly
diverted funds from the lock box accounts. See Docket No. 563, at Exs. A-D; Docket No. 310-
2, at ¶ 9.
5. Genuine Issues of Material Fact Concerning Default Events (Section
II(B)(1)) – “Prefix 7” Receivables
Defendants argue that the Magistrate-Judge erred in finding that there was
undisputed evidence that fraudulent invoices and accounts receivable were reported to
plaintiff. According to defendants, they proffered enough evidence “showing that the nature
and basis for these invoices were well known to [plaintiff] throughout virtually the entire
relationship of the parties.” Docket No. 562, at 14. Again, defendants’ failed to properly
oppose plaintiff’s properly supported statements of fact concerning the Prefix 7 receivables
by either failing to cite to a record citation for the referenced supporting exhibit, or failing to
oppose altogether, and therefore they are admitted pursuant to L. Cv. R. 56(e). Docket No.
437, at 15; Docket No. 223-3, at ¶ 58; Docket No. 310-2, ¶¶ 2, 7, 8. Further, this argument is
little more than a recitation of the argument made previously, and rejected by, the Magistrate-
Judge.

4
Defendants, in an attempt to side-step the Magistrate-Judge’s decision to admit these
statements, explain that the Goldshmidt declaration—the one the Magistrate-Judge was unable to
locate—had become part of the record “earlier in the case when it was submitted pursuant to a motion
by Defendants to file certain materials conventionally and under seal.” Docket No. 562, at 3, n.4.
Instead of accepting responsibility for failing to bring it to the Magistrate-Judge’s attention, defendants
place blame on the Magistrate-Judge for not requesting the missing document. As far as this court can
tell, defendants are suggesting that the Magistrate-Judge should have had intimate knowledge of every
document filed in this case (a case 400+ docket entries long at the time of the R & R), and that they were
under no obligation to direct the court’s attention to the exhibit’s location. This argument is misguided.
See L. Cv. R. 56(e) (“The court may disregard any statement of fact not supported by a specific citation
to record material properly considered on summary judgment. The court shall have no independent
duty to search or consider any part of the record not specifically referenced in the parties’ separate
statement of facts.”).
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6. Genuine Issues of Material Fact Concerning Default Events (Section

II(B)(1)) – Collateral Deficiency
Defendants’ next argument is not so much an objection as it is an attack on the
Magistrate-Judge. At no point do defendants explain how the Magistrate-Judge erred.
Instead, they enlighten the court with their belief that “the Report’s conclusion that there was
a ‘substantial collateral deficiency’ under the Loan Agreements adds nothing to its analysis.”
Docket No. 562, at 15. Inasmuch as no proper objection has been made, the court will not
spend time discussing this further.5
7. Alleged Defaults were not Material (Section II(B)(1))
Defendants argue further that the Magistrate-Judge erred in finding that the events
of default discussed in the R & R were “material” breaches as a matter of law. Defendants
hold the belief that the Magistrate-Judge should have refrained from deciding this question,
and should have left it for the trier of fact. To support this claim, they direct the court’s
attention to the three limited waivers entered into between the parties as evidence that the
default events were not material. Notwithstanding the above, due to defendants’ own
admissions regarding the materiality of the breaches of the Loan Agreements, and the
plethora of other evidence before the Magistrate-Judge, the Magistrate-Judge did not err in
determining the materiality of the breaches as a matter of law.6 See Gibson v. City of Cranston,

5
Moreover, defendants’ statement that plaintiff waived the collateral requirements under the
Loan Agreements, and that the parties worked a novation, is undercut by the Second Personal
Guarantee which states that “the Borrower is ‘out of formula’ under the Loan Agreements and there is
a substantial collateral deficiency thereunder” giving plaintiff the right “to make demand for immediate
payment” of the loan obligations. Docket No. 223-13, at 1.

6
For example, the following selective evidence supports the Magistrate-Judge’s findings: (1) Inyx
disclosed in its December 4, 2006 Form 10-Q public filings with the Securities and Exchange Commission
that it “was in violation” of certain loan covenants (Docket No. 310-2, at ¶ 12); (2) Kachkar stated under
oath that he does “not deny that there were issues with the Inyx loans”, but that there were “resolved”
among the parties (Docket No. 164, at ¶ 3); (3) the Audit Committee email demonstrates that Inyx Audit
Committee members were aware that “[plaintiff] has been misled” by Inyx executives and in particular,
that Inyx executive Rima Goldshmidt had falsely reported to plaintiff that Inyx’s accounts receivable
aging as $107 million when it should have been closer to $10 million and that she was responsible for
diverting funds from the lockbox account (Docket No. 310-2, at ¶ 9); (4) Inyx’ Chief Financial Officer
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37 F.3d 731, 736 (1st Cir. 1994) (“As is true of virtually any factual question, if the materiality
question in a given case admits of only one reasonable answer (because the evidence on the
point is either undisputed or sufficiently lopsided), then the court must intervene and address
what is ordinarily a factual question as a question of law.”).
8. Genuine Issues of Material Fact Concerning Breach of the Personal
Guarantees (Section II(B)(2))
Next, defendants aver that the Magistrate-Judge erred in concluding that there were
no genuine issues of material fact regarding breaches of the Personal Guarantees. Specifically,
they allege that the Personal Guarantees were not breached because of the oral three-part
Forbearance and Workout Agreement. This argument is a recitation of the arguments raised
before, and rejected by, the Magistrate-Judge. Rivera-García v. United States, Civ. No. 06-1004
(PG), 2008 WL 3287236, *1 (D.P.R. Aug. 7, 2008) (explaining that to the extent the objections
are repetitive of the arguments already made to the magistrate-judge, a de novo review is
unwarranted). Nonetheless, after conducting further review of the evidence submitted by
the parties, and the analysis performed by the Magistrate-Judge regarding the same, the court
finds that the Magistrate-Judge did not err inasmuch as the oral forbearance agreement fails
as both a matter of law and fact. Hence, as the Magistrate-Judge found, because the Personal
Guarantees “become immediately due and payable upon the Obligations becoming due under
the Loan Agreements, whether at maturity, by acceleration or otherwise” (Docket No. 223-2,
at ¶¶ 26, 33), and because the Loan Agreements were indeed “due and payable”, the payment
obligations under the Personal Guarantees became due.

admitted to Inyx’s Board of Directors and Audit Committee that Inyx was “in material breach” of its
“obligation to reimburse all funds received or deposited from customers into designated lockbox or
blocked accounts under the control of [plaintiff]” (Docket No. 223, at ¶ 57); (5) Kachkar and Benkovitch
admitted that “a substantial ‘Collateral Deficiency’ exists under the Loan Agreements” (Id. at ¶ 63); and
(6) the waivers referenced by defendants in their objection may have waived “certain specific
violations”, but they also expressly reserved plaintiff’s right to declare any future defaults under the
Loan Agreements (Id. at ¶¶ 41-45). Finally, by granting defendants limited waivers of certain breaches,
yet retaining the right to declare the same defaults in the future, plaintiff’s gave defendants notice that
these breaches were material.
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9. Waiver Argument (Section II(B)(3))

Defendants’ next objection is that the Magistrate-Judge erred in failing to credit
defendants’ waiver argument. However, this objection presents no developed argumentation
(United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“[I]ssues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation, are deemed waived.”),
and is little more than a brief recitation of the arguments already presented to the Magistrate-
Judge. See Rivera-García, Civ. No. 06-1004 (PG), 2008 WL 3287236, at *1. Accordingly, it is
enough that the court has reviewed, and is in agreement with the Magistrate-Judge’s
recommendation that the events of default were not waived. See Docket No. 437, at 16-17.
10. Oral Forbearance Agreement (Section 11(B)(4))
Defendants’ contend again, albeit in separate section, that the Magistrate-Judge erred
in rejecting their claim of an oral forbearance agreement between the parties. They claim, in
blanket and unsupported statements, that the Magistrate-Judge’s findings are undercut by
three things: (1) the record evidence of the promises to forbear calling the loan are
“abundant”, and that the court should not be weighing the evidence; (2) the record evidence
of the promises is not limited to testimonial evidence of Kachkar and his attorney, but also
includes collaborating testimony and documentary evidence; and (3) the “no-oral-
modification” clause in the Loan Agreements could be waived. None of these arguments
revive defendants’ claim.
First, the record evidence of “the promise” is far from abundant, but consists solely
of vague and non-specific testimonial evidence of Kachkar and his attorney, testimony of
other witnesses that fails to state that an oral forbearance agreement was entered7, and
documentary evidence which does not memorialize the existence of a forbearance agreement.

7
Defendants acknowledge as much by stating that these other witnesses, Barry Woods and
Miguel Vázquez, “provided testimony that corroborates key aspects of Defendants’ deception of salient
events” (Docket No. 562, at 19), not that a forbearance agreement was entered. Said “corroborating”
evidence consists mainly of testimony from both Woods and Vázquez reflecting that Woods had told
Kachkar that an oral agreement was enforceable in Puerto Rico. Both Woods and Vázquez, however,
testified that this statement was made with respect to an agreement about the mining collateral being
put up by Kachkar, not with regards to a forbearance agreement. See Docket No. 562-5; Docket No. 562-
6.
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Second, the Magistrate-Judge did not err in finding that defendants’ vague and nonspecific
evidence failed to defeat plaintiff’s properly supported partial summary judgment motion as
far as it pertained to the alleged oral forbearance agreement. See Pérez, 247 F.3d at 317
(explaining that to defeat a properly supported motion for summary judgment, evidence
offered by the non-movant “must be significantly probative of specific facts.”); see also P.R.
Laws Ann. tit. 31, § 3471 (evidence as to the parties’ intention only proper when the terms of
the contract are not clear). Third, the cases cited by the Magistrate-Judge, Nike v. Athletic Sales,
Inc., 689 F. Supp. 1235 (D.P.R. 1988) and Freightliner, LLC v. Puerto Rico Truck Sales, 399 F.
Supp. 2d 57 (D.P.R.), do support the general proposition that Puerto Rico law dictates that the
“no-oral-modification” clauses in contracts cannot be waived orally. Fourth, and finally,
defendants fail to address the fact that even had the parties agreed to modify the Loan
Agreements orally, the Puerto Rico Statute of Frauds would have rendered it unenforceable.
P.R. Laws Ann. tit. 10, § 1302 (precluding a party from proving the existence of commercial
contracts over $300 based solely on testimonial evidence).
11. Defenses Regarding Personal Guarantees (Section II(B)(5))
Defendants object to the Magistrate-Judge’s finding that they were not fraudulently
induced to enter into the Personal Guarantees, and put forth a potpourri of arguments to
support the same. Each argument is dealt with in turn.
Pursuant to Puerto Rico law, any contract where consent is obtained through deceit
is void. P.R. Laws Ann. tit. 31, § 3404. “Under Puerto Rico law, the party alleging fraud has
the burden of demonstrating: (1) a false representation by the defendant; (2) the plaintiff's
reasonable and foreseeable reliance thereon; (3) injury to the plaintiff as a result of the
reliance; and (4) an intent to defraud.” P.R. Elec. Power Auth. v. Action Refund, 515 F.3d 57, 66
(1st Cir. 2008) (citing Microsoft Corp. v. Computer Warehouse, 83 F. Supp. 2d 256, 262 (D.P.R.
2000)). “The applicable Puerto Rico contract law regarding fraud has a strong underlying
presumption in favor of good faith and honesty; the party alleging fraud has the burden of
presenting evidence which is ‘strong, clear, unchallengeable, convincing, and conclusive, since
a mere preponderance of the evidence is not sufficient to establish the existence of fraud in
[Puerto Rico].’” Id. at 66-67 (internal citation and quotation omitted).
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Defendants’ first argument is that they have put forth an “abundance” of evidence to
support their claim that they were fraudulent induced into signing the Personal Guarantees,
and therefore meet the requirements set forth in P. R. Elec. Power Auth. The court, as did the
Magistrate-Judge before it, does not agree. First, as previously discussed, supra III(B)(10),
defendants’ evidence in support of their fraudulent inducement claim is lacking, and in
someways damaging to their claim. See, e.g., supra note 7; Docket No. 223-12 (First Personal
Guarantee wherein it states that plaintiff “has not made any representations to any of
Guarantors with respect to Borrower, any other Obligor or otherwise in connection with the
execution and delivery by Guarantors of this Guarantee and Guarantors are not in any respect
relying upon Lender or any statements by Lender in connection with this Guarantee.”);
Docket No. 223-13 (same). Accordingly, defendants have failed to present “strong, clear,
unchallengeable, convincing, and conclusive” evidence supporting their fraudulent
inducement claim.
Second, defendants fail to address the fact that in determining whether reliance is
reasonable, “Puerto Rico law places little weight on a sophisticated and experienced business
party’s assertion of unknowing reliance.” P.R. Elec. Power Auth., 515 F.3d at 67. Here, as the
Magistrate-Judge explained, and defendants have made no effort to rebut, Kachkar is a
sophisticated and experienced businessman who had his counsel present during the
negotiation of the Personal Guarantees and chose not to include contractual terms in the
Personal Guarantees concerning the alleged oral forbearance agreement. Their sophistication
as experienced businessmen further reinforces the Magistrate-Judge’s finding.8
Next, defendants argue that the Magistrate-Judge erred in finding that the “no-
reliance” clauses contained in the Personal Guarantees foreclosed defendants’ fraudulent

8
It bears noting that the court agrees with the Magistrate-Judge’s opinion that defendants’
alleged reliance on statements by plaintiff’s counsel that an oral agreement is as good as a written
agreement in Puerto Rico is troubling. As the Magistrate-Judge aptly explained, “it defies credulity to
allow defendants to claim to have reasonably relied on the legal advice of opposing counsel in a
sophisticated (not to mention adversarial) business transaction when their own counsel, Barichello, was
present at the time.” Docket No. 275-2, at ¶ 36.
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inducement claim.9 Their main argument is that the Personal Guarantees—notwithstanding

their continued reference to the forbearance agreement as an oral modification to the
contracts—reflect the whole of the promise to forbear calling the loan that was made prior to
their execution. See Docket No. 562 (“The reasoning [in the case cited in the R & R regarding
the enforceability of no-reliance clauses] has no application here because Defendants maintain
that the ‘contract itself’ does indeed reflect the promise that was made orally before its
execution.”). This contention lacks merit. Defendants are clearly relying on alleged oral
agreements between the parties to not call the loans for an indefinite amount of time (but no
less than a 150 days) in exchange for the Personal Guarantees. Id. They are not seriously
pointing the court’s attention to the Personal Guarantees (or any other valid contract) and
claiming that all terms of their now claimed forbearance are contained within. See, e.g.,
Docket No. 562, at 17 (“Dr. Kachkar and Ms. Benkovitch [entered into the two Personal
Guarantees] in reliance on oral assurances from [plaintiff] that it would forbear from making
demand on the Loan Agreement (triggering the Limited Guarantees).”). Instead, they claim
that terms not memorialized in any agreement should be read into the current
contracts/agreements and should be controlling.10
Finally, defendants contend that the Magistrate-Judge erred in concluding that the
alleged oral forbearance agreement is inconsistent with the express language of the Second
Personal Guarantee. Moreover, they contend that if the Magistrate-Judge’s reading is
correct—that plaintiff could have called the loan at any time after the Second Personal
Guarantee was executed—then the agreement lacked consideration, and is void. Again, the

9
The Magistrate-Judge found that defendants could not prove that they relied on, and were
induced by, alleged representations by plaintiff in the face of the no-reliance claim contained in the
Personal Guarantees. Docket No. 437, at 20.

10
Defendants also argue that the integration clause in the Personal Guarantees has no bearing
on their fraudulent inducement claim. Specifically, they claim that Puerto Rico law does not bar a claim
for fraud based on statements not contained in the contract. See Rodríguez v. PEP Boys Corp., Civ. No.
02-1536, 2004 U.S. Dist. LEXIS 2772 (D.P.R. Feb. 2, 2004). Even if defendants are correct, and the
integration clause in the Personal Guarantees does not bar parol evidence of the alleged oral forbearance
agreement, defendants’ claim that they were fraudulently induced to enter into the Personal Guarantees
still fails for the above mentioned reasons.
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court does not agree.

First, the forbearance entered into between the parties in the Second Personal
Guarantee left its length solely up to plaintiff’s discretion. It provides that Kachkar and
Benkovitch “requested that [plaintiff], in its sole discretion, not at this time make immediate
demand for payments . . . [and plaintiff] has agreed not to make such demand at this time in
exchange for [Kachkar and Benkovitch] entering into this Guarantee” (Docket No. 223-13, at
1), but in the next sentence it provided that the Guarantors “agree and acknowledge that
[plaintiff] may, at any time, hereafter, in its sole discretion, make such demand and nothing
contained herein shall be or shall be deemed to be a waiver of [plaintiff’s] right to make such
demand at any time in the future.” Id. at ¶ 32 (emphasis added). Thus, while the Second
Personal Guarantee provided that plaintiff would not immediately call for full payment of the
loans, it expressly allowed it to make such demand “at any time, hereafter” and “at any time
in the future.” Notwithstanding the clear and unambiguous language, defendants believe
that the court should have interpreted the phrase “at any time, hereafter,” to mean “‘at any
time after’ the parties have executed and put in place all the agreements that constituted the
Forbearance and Workout plan and established a more specific time frame for forbearance.”
Docket No. 562, at 24. The court cannot find any sound basis in the record to support such
a reading.
Second, the above interpretation does not reduce the notion of the forbearance “to a
meaningless drivel” nor does it render the consideration illusory. As the R & R makes clear,
“courts will not inquire into the adequacy of consideration in an agreed-upon exchange,
unless that consideration is so grossly inadequate as to shock the conscience of the court.” P.
R. Elec. Power Auth., 515 F.3d at 64. Given the facts, the nature, and the parties involved in this
case, a fast-paced, sophisticated business transactions, it is, as the R & R points out, easy to
conceive a situation where Kachkar and Benkovitch were willing to provide additional
guaranteed collateral to plaintiff in exchange for the Inyx Borrowers having another nine days
to try to find outside financing before defaulting on the loans. See, e.g., Docket No. 275-2, at
33, ¶ 79 (stating that June 28, 2007, commencement of administration proceedings against Inyx
UK subsidiaries “effectively prevent[ed] refinancing of the Inyx Loans”)). In any event, under
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Puerto Rico law, no consideration need be given for a guarantee to be enforceable. P.R. Laws
Ann. tit. 31, § 4872.
12. Amount of Damages
Finally, defendants argue that the Magistrate-Judge erred in recommending the award
of damages. Based on the foregoing, the court does not agree, and the Magistrate-Judge
damage recommendations are adopted in full.
IV. Conclusion
In light of the foregoing, the R & R (Docket No. 437) is ADOPTED in full.
Consequently, plaintiff’s motion for partial summary judgment (Docket No. 223) is
GRANTED.
SO ORDERED.
At San Juan, Puerto Rico, on this 17th day of September, 2009.

S/AIDA M. DELGADO-COLÓN
United States District Judge