Transunion Corp. v. Pepsico, Inc., 85 Civ. 10058 (EW).

• Citation: 640 F. Supp. 1211
• Decision Date: 07 August 1986
• Docket Number: No. 85 Civ. 10058 (EW).,85 Civ. 10058 (EW).
• Parties: TRANSUNION CORPORATION and Union Industries, Inc., Plaintiffs, v. PEPSICO, INC., Defendant.
• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

640 F. Supp. 1211

TRANSUNION CORPORATION and Union Industries, Inc., Plaintiffs, v. PEPSICO, INC., Defendant.

No. 85 Civ. 10058 (EW).

United States District Court, S.D. New York.

August 7, 1986.

Menaker & Herrman, New York City, for plaintiffs; Richard G. Menaker, Robert F. Herrman, Jeffrey A. Barr, of counsel.

Cravath, Swaine & Moore, New York City, for defendant; Ronald S. Rolfe, Louis M. Solomon, Jonathan D. Thier, Lawrence M. Rolnick, of counsel.

OPINION

EDWARD WEINFELD, District Judge.

Plaintiffs, Transunion Corporation ("Transunion") and its wholly-owned subsidiary, Union Industries, Inc. ("UII"), both Philippines corporations, commenced this action ("New York action") on December 27, 1985, against PepsiCo, Inc. ("PepsiCo"), ten days after PepsiCo had commenced an action against Transunion and others in the Philippines ("Philippines action"). Essentially the two actions center about the same transactions and claims.

PepsiCo, in addition to motions directed at the complaint as a pleading, moves: (1) to dismiss the action on the ground of forum non conveniens; and (2) in the alternative, to stay this action pending a final decision in the Philippines action.

The claims in both actions arise out of a series of contracts entered into by the parties or their affiliates beginning in 1979. Transunion is a manufacturer of glass bottles and functions in the Philippines. In 1979, it and Pepsi Cola Bottling Company of the Philippines, Inc. ("PCBCP"), a wholly-owned subsidiary of defendant PepsiCo, entered into non-exclusive supply contracts whereby Transunion agreed to supply glass bottles to PCBCP.

On June 4, 1981, Transunion and PCBCP entered into an exclusive supply agreement under which PCBCP agreed to purchase specified minimum quantities of bottles for each year through 1986 (the "1981 Supply Agreement"). At the same time, Transunion purchased $15,000,000 of unused glass bottles in PCBCP's inventory, referred to as the "idle glass" transaction, and PCBCP guaranteed various loans to Transunion. The complaint in this action alleges the effect of these transaction was to transfer a portion of PCBCP's debt to Transunion, enabling PCBCP "to comply with Philippines regulations governing the debt-equity ratio required of foreign corporations." The complaint further alleges that in November 1982 PepsiCo disclosed that "significant accounting irregularities" had been discovered at PCBCP, which consisted, at least in part, of false reporting regarding PCBCP's bottle inventory, "facilitated by the idle glass purchase arrangement"; that as a result of the disclosures, the SEC in the United States, the SEC in the Philippines, and a grand jury in the Southern District of New York commenced investigations; and that a shareholders' class action was instituted in the Southern District of New York.

Transunion, on February 17, 1983, commenced an action against PCBCP and PepsiCo in the Philippines Regional Trial Court alleging breach of the 1981 Supply Agreement and seeking specific performance and damages. Soon thereafter, in May 1983, Carlos P. Ty, president of Transunion and a director of UII, and Fredrick Meils, the head of PCBCP and the Philippines branch of PepsiCo,¹ met in Manila where they engaged in preliminary negotiations in an effort to settle Transunion's lawsuit against PepsiCo; they were in accord at that meeting that the litigation should be resolved. Since both had engagements in the United States, they agreed to, and did, continue their settlement negotiations there, at the offices of PepsiCo in New York.² Meils returned to the Philippines, where drafts of the settlement agreement were sent to him, which he approved after making a number of changes. On June 17, 1983, the parties executed a compromise agreement in New York (the "1983 Compromise Agreement").

In the 1983 Compromise Agreement, Transunion, UII, PCBCP and PepsiCo agreed to exchange mutual releases releasing each other of "any and all claims" except those that might arise out of the 1983 Compromise Agreement; PepsiCo agreed to pay UII $4.5 million upon exchange of the releases; PepsiCo agreed to purchase specified amounts of glass bottles from Transunion for 1983 through 1986; the glass bottles were to "comply with glass industry AQL (acceptable quality limitations)"; and PepsiCo and PCBCP agreed to assume certain Transunion loan obligations.

On July 15, 1983, PepsiCo, PCBCP, Transunion and UII executed a release in the Philippines that expressly provided:

NOW, THEREFORE, in consideration of the foregoing, PepsiCo and PCBCP hereby release and waive all their rights, claims and demands against Transunion and UII, and Transunion and UII also hereby release and waive all their rights, claims and demands against PepsiCo and PCBCP, existing as of June 17, 1983, including but not limited to rights, claims and demands under the 1981 Supply Agreement and the 1983 complaint in the Philippines file by Transunion ...

Transunion and UII and PepsiCo and PCBCP also hereby agree that as of the date hereof, the 1981 Supply Agreement and the 1983 complaint in the Philippines filed by Transunion shall be deemed terminated and that no further rights, claims or demands shall thereafter accrue in favor of the parties.

The parties then filed a joint motion to dismiss Transunion's complaint with prejudice which was granted by the Philippines court on July 19, 1983. PepsiCo made the $4.5 million payment to Transunion in the Philippines.

In March 1985, PepsiCo sold its Philippines bottling operations to Challenge Corporation of the Philippines ("Challenge"). The sale did not include a transfer of PepsiCo's rights and liabilities under the 1983 Compromise Agreement.

On December 5, 1985, Transunion gave written notice of its cancellation of the 1983 Compromise Agreement, upon PepsiCo's alleged breaches thereof. As already noted, on December 17th, PepsiCo commenced an action in the Philippines against Transunion, UII and others alleging breach of the 1983 Compromise Agreement in that bottles supplied by Transunion did not meet quality standards and that the defendants in that action had converted soda ash intended for delivery to PepsiCo to their own use.³ The Philippines court granted PepsiCo a writ of preliminary attachment on the properties of Transunion and Carlos Ty.

Ten days later, on December 27th, Transunion and UII commenced this action against PepsiCo. Count One of the complaint seeks damages upon allegations that PepsiCo breached the 1983 Compromise Agreement, essentially by failing to order the quantities of bottles set forth in that agreement. It also seeks a declaration that the 1983 release of claims is null and void upon allegations of fraudulent conduct, and damages for breach of the 1981 Supply Agreement.

Count Two alleges that PepsiCo fraudulently induced plaintiffs to enter into the 1983 Compromise Agreement by representing that PCBCP "intended to continue to do business in the Philippines for the foreseeable future and would in good faith order from Transunion and UII the quantities of bottles provided for in the Agreement" and by misrepresenting PepsiCo's true motives for entering into the agreement.

Count Three of the complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO")⁴ and seeks treble damages in the amount of $186 million. The complaint alleges that "PepsiCo is an enterprise operating in interstate and foreign commerce" that engaged in a pattern of racketeering activity consisting of: (a) fraudulent and deceptive statements concerning the financial position of PepsiCo and PCBCP which operated as a fraud upon purchasers of PepsiCo securities; (b) a cover-up of the involvement of senior PepsiCo officials in the alleged financial misconduct with respect to PepsiCo's Philippines branch by making false statements to the SEC, the Department of Justice and the public; and (c) furtherance of the cover-up by fraudulently inducing Transunion and UII to enter into the 1983 Compromise Agreement and to terminate their lawsuit, "which lawsuit might have exposed to Transunion, UII and law enforcement officials in the United States the full extent of the senior PepsiCo executives' involvement in the Philippines financial misconduct." The defendant moves pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss each of the three claims, except so much of count one as alleges breach of the 1983 Compromise Agreement, for failure to state a claim upon which relief can be granted.

DISCUSSION

Against the foregoing description of the parties' relationship, it is desirable first to consider PepsiCo's motion to dismiss the complaint on the ground of forum non conveniens. When a litigant makes such a motion the trial court must weigh the various private and public interest factors enumerated by the Supreme Court in Gulf Oil Corporation v. Gilbert⁵ and Koster v. Lumbermen's Mutual Casualty Company.⁶ As summarized by this Court:

The private interest factors include the location of evidence and witnesses, the availability of process to compel attendance of unwilling witnesses, as well as other practical problems that make trial of a case easy, expeditious, and inexpensive. The public interest factors include the difficulty which arises when a forum must apply foreign choice of law rules and foreign law, the administrative problems which follow when litigation is added to existing heavy caseloads in congested centers rather than being handled at its origin, and the imposition of jury duty upon a community which has no relation to the litigation.⁷

In addition, the court must evaluate the enforceability of a possible judgment and the "relative advantages and obstacles to fair trial."⁸

While a plaintiff's choice of forum should rarely be disturbed and the burden is on the defendant to establish that the action should be dismissed on the ground of forum non conveniens,⁹ if an alternative forum has jurisdiction to hear the case...