210 F.3d 1207 (10th Cir. 2000), 97-1421, United Int'l Holdings Inc v Wharf Limited

Docket Nº:97-1421, 98-1002
Citation:210 F.3d 1207
Party Name:UNITED INTERNATIONAL HOLDINGS, INC., a Delaware corporation; and UIH ASIA INVESTMENT COMPANY, a Colorado general partnership, Plaintiffs-Appellees, v. THE WHARF (HOLDINGS) LIMITED, a Hong Kong company; WHARF COMMUNICATIONS INVESTMENTS LIMITED, a Hong Kong company; WHARF CABLE LIMITED, a Hong Kong company; and STEPHEN NG, a Hong Kong citizen, Defend
Case Date:April 28, 2000
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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210 F.3d 1207 (10th Cir. 2000)

UNITED INTERNATIONAL HOLDINGS, INC., a Delaware corporation; and UIH ASIA INVESTMENT COMPANY, a Colorado general partnership, Plaintiffs-Appellees,

v.

THE WHARF (HOLDINGS) LIMITED, a Hong Kong company; WHARF COMMUNICATIONS INVESTMENTS LIMITED, a Hong Kong company; WHARF CABLE LIMITED, a Hong Kong company; and STEPHEN NG, a Hong Kong citizen, Defendants-Appellants.

PRODUCT LIABILITY ADVISORY COUNCIL, INC., Amicus Curiae.

Nos. 97-1421, 98-1002

United States Court of Appeals, Tenth Circuit

April 28, 2000

APPEAL FROM UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 94-K-2560)

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Paul Michael Dodyk, of Cravath, Swaine & Moore, New York, New York (William R. Jentes, of Kirkland & Ellis, Chicago, Illinois; and Scott R. Bauer, of Petrie, Bauer & Vriesman LLP, Denver, Colorado, with him on the brief), for the appellants.

Louis R. Cohen, of Wilmer, Cutler & Pickering, Washington, D.C. (Steven P. Finizio and Jonathan J. Frankel, of Wilmer, Cutler & Pickering, Washington, D.C.; David B. Wilson, of Holme, Roberts

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& Owen LLP, Denver, Colorado; and Jeffrey A. Chase, of Jacobs, Chase, Frick, Kleinkopf & Kelley, LLC, Denver, Colorado, with him on the brief), for the appellees.

Malcolm E. Wheeler and Lee Mickus, of Wheeler, Trigg & Kennedy, P.C., Denver, Colorado; and Hugh F. Young, Jr., Product Liability Advisory Council, Inc., Reston, Virginia, on the brief for the amicus curiae.

Before BRORBY, HOLLOWAY, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

This case arises out of the award to defendant The Wharf (Holdings) Limited (Wharf) of a franchise to operate Cable Network Communications Limited (CNCL), a cable television system in Hong Kong. United International Holdings, Inc., (UIH) initiated this action against Wharf and one of its managing directors, Stephen Ng, claiming UIH had acquired an option to acquire 10% of the stock of CNCL and had been precluded from exercising its option. UIH asserted claims under Section 10(b) of the Securities Exchange Act of 1934, the Colorado Securities Act, and Colorado common law. Following an eleven-week trial, a jury found in favor of UIH and awarded $67,000,000 in compensatory damages and $58,500,000 in punitive damages. The district court awarded $28,208,440 in prejudgment interest. During post-judgment proceedings, the district court held Wharf in contempt of court for failure to comply with the court's turnover order, sanctioned Wharf in the amount of $944,233.10, and awarded UIH post-judgment attorney fees of $144,457.91. Wharf appeals and we affirm.

I.

Background

The government of Hong Kong publicized its intent to grant an exclusive license for operation of a cable television system in Hong Kong in 1991. Wharf had little experience in the cable industry and directed Ng to locate suitable business partners with telecommunications and cable television experience. Ng initiated discussions with NYNEX Network Systems Company (NYNEX) representative Paul Duffy, who agreed that NYNEX would review the telecommunications portion of Wharf's proposal. NYNEX had technical and business expertise in the cable television industry, particularly in relation to the design, installation, and maintenance of subscription television networks. NYNEX devoted its resources to this early phase of the project with the tacit understanding that if Wharf received the award and both Wharf and NYNEX were comfortable with the relationship and the project, NYNEX would have an opportunity to invest in the communications company or possibly garner an operations and maintenance contract for its efforts.

Mark Schneider, vice president of UIH, met with Ng in early 1991. UIH is based in Denver, Colorado, and owns, operates, and invests in worldwide cable television systems. UIH representatives made it clear they were not interested in serving as a consultant on the project for a fee, but would commit their resources in exchange for a right to invest in CNCL if Wharf was awarded the license. Ng wrote to William Hudon of UIH on July 20, 1991, stating: "If as a result of our discussions you continue to be interested in co-investing in Wharf Cable's project in Hong Kong . . . I would appreciate hearing from you very soon." Appellants' Addendum at 31. In response to UIH overtures that it was interested in obtaining a greater ownership interest, Ng added: "Under the present rules in Hong Kong governing television franchises, a foreign company is not permitted to own more than 10% in the cable operator." Id. In October 1991, Schneider signed a confidentiality agreement on behalf of UIH, prohibiting UIH from divulging confidential and proprietary information provided by Wharf.

Ng and Schneider met in Singapore in June 1992 and Ng informed Schneider that Wharf had selected UIH as its cable

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partner. Ng also mentioned that Wharf was engaged in serious negotiations with NYNEX regarding a telephone partnership. According to Schneider, Ng did not expressly state that NYNEX's involvement was a prerequisite to any deal between UIH and Wharf. Schneider recalled that Ng offered UIH a 10% ownership interest in CNCL. Schneider returned to Denver and sent a memo to the chair of the UIH board, stating: "It looks like we are in for 10% of the Hong Kong project." Id. at 34.

Beginning in August 1992, several UIH employees, at UIH's expense, went to Hong Kong to assist Wharf in crafting the cable proposal, negotiating key contracts, designing the cable system, recruiting potential employees, and arranging financing. Hudon, UIH's financial specialist, contacted banks and other funding sources regarding UIH's 10% contribution obligation which would be triggered if UIH exercised its option.

UIH and Wharf drafted several letters of intent and shareholders' agreements. The initial letter of intent drafted by Wharf and submitted to UIH in early August recognized the "intention of the parties to cooperate together and invest in" the cable company for the purpose of preparing and submitting the license application and, hopefully, constructing, operating, and managing the cable television network. Id. at 43. Under the heading "Corporate Structure and Shareholdings," the draft provided that UIH would hold 10% of the company's share capital. Id. However, the draft letter provided: "This letter does not create legally binding and enforceable obligations and is intended to identify in general terms a number of the principal matters forming the basis of the cooperation between the parties." Id. The letter concluded: "Each of the parties will negotiate in good faith, and use all reasonable endeavors to conclude the terms of a formal, legally binding shareholders' agreement between them by not later than Friday 25th September, 1992." Id. at 46-47. Sonjia Norman, UIH's Hong Kong counsel, responded to this draft letter by advising UIH:

"Our signing of the full Shareholder's Agreement after this letter of intent should be conditional upon: (a) our approval of the financial, operating and programming plans; (b) board consent on both sides; (c) award of the local franchise; (d) the subscription of NYNEX of 20% of Wharf Cable. (Mike [Fries, senior vice president of UIH], is this still our concern?)"

Id. at 48. The parties never signed a letter of intent.

Schneider went to Hong Kong in September 1992 during Wharf's final bid preparations. Ng expressed concern that NYNEX might withdraw and deal Wharf's chances a critical blow, and that UIH's unimpressive balance sheet would make Wharf's bid less attractive. Schneider offered to discuss UIH's financial status with Wharf's board and specifically inquired as to Ng's authority to "make this deal" on behalf of Wharf. At trial, Schneider testified that Ng expressed full authority to offer UIH a 10% right of investment, but no more. The parties were unable to consummate a shareholders' agreement before the deadline for the license application.

As the bid date came nearer, Wharf was increasingly uncomfortable with the lack of a signed letter of intent or a signed shareholders' agreement and the perceived weaknesses of its proposal. To demonstrate it had secured sufficient technical expertise to construct and operate the system, Wharf entered into separate Technical Cooperation Agreements with NYNEX and UIH on September 25, 1992. The UIH agreement obligated UIH to do nothing until Wharf was awarded the license. The agreement acknowledged that Wharf "wishes to obtain the benefit of UIH's experience, and to engage UIH for the purpose of receiving assistance with respect to the administrative and technical operations of the subscription television system." Id. at 149. The agreement listed UIH's qualifications and duties with

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respect to construction and operation of the system, described UIH as "an independent contractor," and specified "UIH shall have no right or interest in the Company or in the CATV System, nor any claim or lien with respect thereto, arising out of this Agreement or the performance of its services hereunder." Id. at 156. The agreement specifically provided: "Notice of termination, changes and additions to this Agreement as well as any additional or supplemental agreements to this Agreement must be made in writing. Additional oral agreements are invalid. The requirement to use the written form may be waived only in writing." Id. at 160. Michael Fries, senior vice president of UIH, signed the Technical Cooperation Agreement on behalf of UIH. This is the only agreement that was signed by the...

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