Gilstrap v. Radianz Ltd.
| Decision Date | 26 July 2006 |
| Docket Number | No. 05 Civ. 7947(PKC).,05 Civ. 7947(PKC). |
| Parties | Douglas GILSTRAP and Myron Tataryn, each on behalf of himself and all others similarly situated, Plaintiffs, v. RADIANZ LTD., Radianz Americas, Inc., Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, Reuters America LLC, and British Telecommunications plc, Defendants. |
| Court | U.S. District Court — Southern District of New York |
James T. Southwick, Stephen D. Susman, Stuart V. Kusin, Susman Godfrey LLP, Houston, TX, for Plaintiffs.
Richard A. Rothman, Weil, Gotshal & Manges LLP, New York, NY, for Defendants.
Plaintiffs bring this action on their own behalf and on behalf of current or former employees of defendants Radianz Ltd. ("Radianz") and/or Radianz Americas, Inc. (collectively, the "Radianz Cos."), asserting claims relating to a stock option plan which governed the plaintiffs' rights to acquire shares in Radianz (the "Plan"). Plaintiffs contend, among other things, that the Radianz Cos. breached their obligations under the Plan, and that, in connection with a sale of the Radianz Cos. by defendants Reuters Limited, Blaxmill (Six) Limited, Reuters C LLC, and Reuters America LLC (collectively, "Reuters") to defendant British Telecommunications ("BT"), Reuters and BT manipulated the purchase price of the Radianz Cos. so as to make worthless options that had been awarded to plaintiffs under the Plan. The plaintiffs assert claims for breach of contract, breach of the duty of good faith and fair dealing, tortious interference with contractual relations, unjust enrichment and breach of fiduciary duty.
Defendants have moved to dismiss this action on the ground of forum non conveniens. They contend that virtually all of the parties, witnesses and relevant evidence are located in England. They contend that all of the events at issue in the action occurred in England, including the adoption and amendment of the Plan, and the negotiation and documentation of the sale of the Radianz Cos. by Reuters to BT. They also note that the Plan governed options to acquire shares in an English company (Radianz), and that all option holders located in the U.S. (a group that makes up only 40 percent of the putative class) were explicitly informed that the shares were not registered on any U.S. exchange. Defendants argue that, at bottom, this action relates entirely to the internal corporate governance of, and transactions between, English companies. As such, they contend that England provides an adequate, and more appropriate, forum for litigation of plaintiffs' claims.
As discussed herein, I conclude that the courts of England represent an adequate alternative forum for the resolution of this dispute and the relevant private and public interest factors weigh heavily in favor of dismissal and, accordingly, the motion is conditionally granted. Central to this lawsuit is the claim that defendants breached a stock option plan which was adopted and subsequently amended in England, and governed the rights of employees to purchase English securities. The events giving rise to the claim that the stock option plan was breached arise out of the sale of Radianz from one English company to another, which transaction was negotiated and documented in England. Approximately 40 percent of the putative class members reside in England. While another approximately 40 percent of the putative class members reside in the U.S., only 16 percent of those are residents of the state of New York. Significantly, though Radianz apparently maintained its operational headquarters in New York, the events at issue in this action have little, if any, connection to the District. The vast majority of the key witnesses and documents are located in England. Assessment of the credibility of witnesses will be important in this case and can be best accomplished in England, where the witnesses—particularly nonparty witnesses—will be able to testify in the presence of the fact-finder. Furthermore, English law is likely to apply to the claims in this action and no federal statutory claims are asserted.
Plaintiff Gilstrap is "a principal founder, and the former President and CEO, of Radianz," who, during his tenure as a Radianz employee, worked out of the company's "global headquarters in New York." (Cmplt.¶ 30)1 Gilstrap is currently a resident of Houston, Texas. (Cmplt.¶ 12) Plaintiff Tataryn was employed by Radianz in London for approximately four years, and is currently a resident of Suffolk, England. (Cmplt.¶¶ 31, 12) Both plaintiffs were participants in the Plan and allege that they continue to hold Radianz stock options. (Cmplt.¶ 12)
Radianz, a telecommunications company which provides "extranet" services (private internet protocol services) to the financial community, was formed in May 2000 as a joint venture between Reuters and a telecommunications company called Equant, which is not a party to this case. (Cmplt.¶ 32) Fifteen percent of the company's stock was set aside to be distributed to Radianz employees through the Plan. (Cmplt.¶ 33) While plaintiffs allege that approximately 70 percent of the outstanding options were issued to employees who worked for Radianz in the United States (Cmplt.¶34), they do not contest defendants' assertion that approximately 60 percent of the individuals who participated in the Plan are located outside the United States, with 40 percent in England.
In the spring of 2004, Reuters and Equant decided to sell their interests in Radianz and, in September 2004, accepted a bid from BT, an English company. (Cmplt.¶¶ 39, 41) Plaintiffs contend that while the purchase price of Radianz was announced as $175 million, that figure "did not represent the true value Reuters received from the sale of Radianz," and that the "true purchase price was at least $580 million and possibly higher than $800 million." (Cmplt.¶ 41) Prior to the consummation of the sale to BT, Reuters bought out Equant's interest in Radianz in November 2004 for approximately $150 million. (Cmplt.¶ 50)
The Plan contained provisions whereby option holders, upon being notified of a proposed sale of the entire interest in Radianz to an entity unrelated to Reuters or Equant, could exercise their options to acquire shares in anticipation of selling those shares to the proposed buyer. The Plan also contained a provision authorizing the Radianz Board to replace Radianz options with options to purchase stock in the acquiring company. (Cmplt.¶ 53) While the Radianz Board was vested with the power to amend the Plan, the Plan contained a provision stating that "no amendment shall be effective which would materially prejudice the interests of Option Holders in relation to Options already granted to them" unless such holders consented.
In March 2005, the Radianz Board voted to amend the Plan. The Amended Plan added a "cash cancellation" provision, which enabled the Radianz Board, in the event of a proposed sale of the company, and "in its absolute discretion," to cancel all options in exchange for a cash payment to the option holders. The amount of the payment was to be determined by a formula set forth in the Amended Plan, and was based on the difference between the purchase price per share to be paid by the acquiring entity and the exercise price of the option to be canceled. If the exercise price exceeded the per share price to be paid, the Amended Plan provided that a "nominal amount" would be paid for each canceled option. (Cmplt.54)
Based upon the stated purchase price of $175 million, the Radianz Board determined that the per share price to be paid by BT was lower than the exercise price on all existing options. Pursuant to the cash cancellation provision, Radianz canceled all options and, in April 2005, paid all option holders ten cents per share. (Cmplt.¶ 56)
Plaintiffs filed the initial complaint in this action on September 12, 2005.
The doctrine of forum non conveniens allows a district court to "`resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute.'" Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146, 153 (2d Cir.2005) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507, 67 S.Ct. 839, 91 L.Ed. 1055 (1947)), cert. denied, ___ U.S. ___, 126 S.Ct. 2320, 164 L.Ed.2d 860 (2006). District courts have broad discretion in deciding whether to dismiss an action on the ground of forum non conveniens, but should be guided by the "central notions of ... the convenience of the parties and their witnesses and that justice be served." Scottish Air Ina, Inc. v. British Caledonian Group, PLC, 81 F.3d 1224, 1227 (2d Cir.1996).
In the Second Circuit, district courts are instructed to assess forum non conveniens motions under a three-step process. First, the court must determine the degree of deference that is properly afforded the plaintiffs choice of forum. Then, it must determine whether the alternative forum proposed by the moving party constitutes an adequate forum for the resolution of plaintiff's claims. Finally, assuming the alternative forum is found to be adequate, the court must weigh the relevant private and public interest factors and determine whether the plaintiffs chosen forum or the proposed alternative is, in fact, more convenient and appropriate. See Norex, 416 F.3d at 153 (citing Iragorri v. United Techs. Corp., 274 F.3d 65, 73-74 (2d Cir.2001) (en banc)). First Union Nat'l Bank v. Paribas, 135 F.Supp.2d 443, 448 (S.D.N.Y.2001), aff'd, 48 Fed.Appx. 801 (2d Cir.2002).
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