Kirch v. Liberty Media Corp.

• Decision Date: 05 June 2006
• Docket Number: Docket No. 04-5852-cv.
• Citation: 449 F.3d 388
• Parties: Dr. Leo KIRCH, individually and as assignee, KGL Pool GMBH, and International Television Trading Corp., Plaintiffs-Appellants, v. LIBERTY MEDIA CORP., John Malone, Deutsche Bank AG, and Dr. Rolf-Ernst Breuer, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

449 F.3d 388

Dr. Leo KIRCH, individually and as assignee, KGL Pool GMBH, and International Television Trading Corp., Plaintiffs-Appellants, v. LIBERTY MEDIA CORP., John Malone, Deutsche Bank AG, and Dr. Rolf-Ernst Breuer, Defendants-Appellees.

Docket No. 04-5852-cv.

United States Court of Appeals, Second Circuit.

Argued: October 21, 2005.

Final Submission: November 17, 2005.

Decided: June 5, 2006.

COPYRIGHT MATERIAL OMITTED

Rodney A. Smolla, University of Richmond School of Law, (David Boies, Alan B.

Vickery, Philippe Z. Selendy, of counsel, Boies, Schiller & Flexner, LLP, New York, NY), Richmond, VA, for Plaintiff-Appellant Dr. Leo Kirch.

Michael E. Petrella, Law Offices of Sean F. O'Shea, New York, NY, for Plaintiff-Appellant International Television Trading Corp.

R. Stan Mortenson, Baker Botts, LLP (Jeffrey A. Lamken, Michael L. Calhoon, of counsel), New York, NY, for Defendants-Appellees Liberty Media, Corp. and John Malone.

Jeffrey Baris, Millbank, Tweed, Hadley & McCloy LLP, New York, NY, for Defendants-Appellees Deutsche Bank AG and Dr. Rolf-Ernst Breuer.

Before: OAKES, JACOBS, and SACK, Circuit Judges.

SACK, Circuit Judge.

Plaintiff-appellant Dr. Leo Kirch is the founder of KirchGroup, once a prominent German group of mass-media entities. He alleges that defendants-appellees Liberty Media Corp. ("Liberty") and Deutsche Bank AG ("Deutsche Bank") had strong economic interests in seeing Kirch's empire broken apart and that, in order to bring about such a breakup, they conspired to ensure KirchGroup's financial collapse. Dr. Kirch further alleges that in February 2002, defendant-appellee Dr. Rolf-Ernst Breuer, who was the chief executive officer of Deutsche Bank, stated during a German-language interview by a journalist in New York City that Breuer doubted whether the financial community was willing to lend KirchGroup the money it needed to survive the liquidity crisis it faced. Kirch asserts that this statement was false and that Breuer knew it was false when he made it. Less than three months later, KirchGroup, unable to secure necessary financing, sought bankruptcy protection under German law.

In February 2003, Dr. Kirch filed a complaint against Deutsche Bank and Breuer (the "Deutsche Bank defendants") in New York State Supreme Court, New York County, alleging causes of action for defamation, tortious interference with contract, tortious interference with prospective economic advantage, and civil conspiracy. In January 2004, the complaint was amended to add as a plaintiff International Television Trading Corp. ("ITTC"), a corporation with its headquarters in South Egremont, Massachusetts. ITTC served as KirchGroup's exclusive agent in North America and, according to the plaintiffs, was known in the industry as the "face" of the KirchGroup in North America. KGL Pool GmbH ("KGL") was also added as a plaintiff, and Liberty, a major American media company, and its chief executive officer, John Malone, were added as defendants (the "Liberty defendants"). The Deutsche Bank defendants, with the consent of the Liberty defendants, removed the case to the United States District Court for the Southern District of New York. In September 2004, the district court (Naomi Reice Buchwald, Judge) dismissed the complaint in its entirety for failure to state a claim upon which relief can be granted. See Kirch v. Liberty Media, 2004 WL 2181383, 2004 U.S. Dist. LEXIS 19228 (S.D.N.Y. Sept.27, 2004).

We affirm the district court's dismissal of all of ITTC's claims. We also affirm its judgment with respect to the tortious interference with contract claim. We conclude, however, that the court did not sufficiently consider the forum non conveniens issue briefed by both parties in the district court. Therefore, without deciding the defamation, tortious interference with prospective economic advantage, or civil conspiracy claims alleged by the plaintiffs other than ITTC, we remand for the court to decide whether what remains of this matter should be dismissed under the doctrine of forum non conveniens.

BACKGROUND

We are required, on this appeal from the district court's judgment dismissing the plaintiffs' complaint under Rule 12(b)(6), to "accept[ ] as true the factual allegations in the complaint and draw[ ] all inferences in the plaintiff[s'] favor." Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006). We therefore set forth those allegations in some detail, well aware that the defendants filed answers in the district court denying the substance of those assertions, and that should this litigation go forward on the merits, any number of them may prove to be untrue.

The Restructuring of KirchGroup

Dr. Kirch founded KirchGroup in the 1950s. By the 1990s it was one of the largest media groups in the world. Its assets included Germany's only pay television channel, many popular television programs, the distribution rights to a large library of American films and television programs, and the television exhibition rights to such major sporting events as the World Cup and Formula One auto racing.

KirchGroup had long been privately owned. Beginning in the 1990s, however, Dr. Kirch began to develop a long-term plan to transform it into a single publicly traded company. This plan, developed in consultation with the New York-based investment bank Lehman Brothers, required that the company undergo three consecutive "restructuring events," dubbed, respectively, "Project Traviata," "Project Concordia," and "Project Galaxy." Am. Compl. ¶ 13.

Project Traviata, which KirchGroup completed in 1999, reorganized the company into three entities: (1) KirchMedia, which held KirchGroup's free television programs, media rights, and sports businesses other than Formula One racing; (2) KirchPayTV, which held its pay television platform; and (3) KirchBeteiligungs, which controlled its Formula One interests and its print publishing business, PrintBeteiligungs GMBH, which itself held a forty percent stake in one of Germany's largest publishers, Axel Springer Verlag AG ("ASV"). Each of these entities was a subsidiary of a central management holding company, TaurusHolding GMBH ("Taurus"). Under Project Traviata, KirchGroup also attracted outside strategic investors who provided industry expertise and capital. These investors included News Corp., controlled by Rupert Murdoch, and Mediaset, S.p.A., controlled by former Italian Prime Minister Silvio Berlusconi.

In 2000, pursuant to this phase of the restructuring, KirchGroup merged two of its television networks, SAT.1 and Prosieben, into one publicly traded entity called ProSiebenSat.1 Media AG, which then held the largest market share in German television advertising revenue. In order to secure the consent to the merger from ASV, which owned a minority interest in SAT.1, Kirch granted ASV a "put" option in the newly merged entity, entitling ASV to sell to Kirch ASV's shares in ProSiebenSat.1 at an agreed upon price anytime on or before January 31, 2002.

Project Concordia, unveiled in September 2001, would have merged ProSiebenSat.1 into KirchMedia by June 2002, thereby creating a publicly traded company that could raise money in public securities markets. The merger would also have combined KirchGroup's television content and network assets. KirchGroup retained several investment banks, including JP Morgan, Lehman Brothers, and Credit Suisse First Boston, to advise it on the transaction. In September 2001, Dr. Kirch and ASV agreed in principle to the merger and began five months of negotiations toward its consummation. When the deal seemed to be nearing completion, KirchGroup began working on the third and final phase of the restructuring strategy, Project Galaxy.

Because the ownership structure of KirchGroup's various companies was highly complex, KirchGroup had to conduct a variety of inter-company transactions before it could unify all of its assets under the ownership of one publicly traded company. Executing such transactions, which would inject several billion dollars of new capital by multiple investors in the enterprise, was the goal of Project Galaxy. This final stage of restructuring would have allowed Dr. Kirch to consolidate all of his assets into one company that would then hold an initial public offering in 2004 or 2005. Taurus, the holding company, retained JP Morgan and Lehman Brothers to help Kirch implement this plan.

The Alleged Conspiracy

Kirch alleges that Liberty and Deutsche Bank both wanted to derail Project Galaxy. In September 2001, Liberty announced that, as part of its global expansion, it intended to buy six regional cable systems from Deutsche Telekom ("DT"), a large communications company in which the German government held a forty percent stake, for 5.5 billion euros. Because KirchGroup had preexisting long-term leases with DT that granted KirchGroup bandwidth access sufficient for more than forty of its channels, and because KirchGroup already owned the most valuable programming content, including exhibition rights to films, television programs, and sporting events, Liberty viewed KirchGroup as an important competitor in the German cable market. Thus, say the plaintiffs, Liberty would directly benefit from the breakup of KirchGroup.

According to the plaintiffs, Deutsche Bank also had powerful incentives to see KirchGroup's restructuring fail. For one thing, the ensuing breakup would generate large fees for its investment banking division. Thus, the plaintiffs allege, in the fall of 2001, Breuer frequently traveled to New York City to discuss KirchGroup's situation with the investment bankers.

Also, the plaintiffs allege, two of Deutsche Bank's biggest customers, DaimlerChrysler and FIAT, in each of which Deutsche Bank held a large equity stake, sought to secure a controlling equity interest in Formula One racing. Each of them, with the support of Deutsche Bank, had tried to block KirchGroup's acquisition of Formula One in 2001. The...