78 So.3d 959 (Ala. 2011), 1091191, Ex parte Kohlberg Kravis Roberts & Co., L.P.

Docket NºEx parte Ronald G. Bru
Citation78 So.3d 959
Opinion JudgeMURDOCK, Justice.
Party NameEx parte KOHLBERG KRAVIS ROBERTS & COMPANY, L.P., et al. v. Kohlberg Kravis Roberts & Company, L.P., et al.). (In re 27001 Partnership et al. (In re 27001 Partnership et al. v. Kohlberg Kravis Roberts & Company, L.P., et al.).
AttorneyMichael A. Florie and Jay M. Ezelle of Starnes Davis Florie LLP, Birmingham; and Paul C. Curnin, James G. Gamble, Bryce L. Friedman, and George S. Wang of Simpson Thacher & Bartlett LLP, New York, New York, for petitioners Kohlberg Kravis Roberts & Company, L.P., KKR Associates, L.P., KKR Partner...
Judge PanelMALONE, C.J., and WOODALL, STUART, BOLIN, PARKER, SHAW, MAIN, and WISE, JJ., concur.
Case DateAugust 19, 2011
CourtSupreme Court of Alabama

Page 959

78 So.3d 959 (Ala. 2011)

Ex parte KOHLBERG KRAVIS ROBERTS & COMPANY, L.P., et al.

(In re 27001 Partnership et al.

v.

Kohlberg Kravis Roberts & Company, L.P., et al.).

Ex parte Ronald G. Bruno.

(In re 27001 Partnership et al.

v.

Kohlberg Kravis Roberts & Company, L.P., et al.).

1091191, 1091206.

Supreme Court of Alabama.

August 19, 2011

Page 960

[Copyrighted Material Omitted]

Page 961

[Copyrighted Material Omitted]

Page 962

Michael A. Florie and Jay M. Ezelle of Starnes Davis Florie LLP, Birmingham; and Paul C. Curnin, James G. Gamble, Bryce L. Friedman, and George S. Wang of Simpson Thacher & Bartlett LLP, New York, New York, for petitioners Kohlberg Kravis Roberts & Company, L.P., KKR Associates, L.P., KKR Partners II, L.P., Crimson Associates, L.P., Henry R. Kravis, George R. Roberts, Paul E. Raether, James H. Greene, Jr., Nils P. Brous, and Robert Tobin.

Mac M. Moorer, James F. Hughey III, Tenley E. Armstrong, and James W. Gibson of Lightfoot, Franklin & White, L.L.C., Birmingham, for petitioner Ronald G. Bruno.

James L. North and J. Timothy Francis of James L. North & Associates, Birmingham; and Leo R. Beus, Quinton F. Seamons, and Scot C. Stirling of Beus Gilbert PLLC, Scottsdale, AZ, for respondent.

MURDOCK, Justice.

Kohlberg Kravis Roberts & Co., L.P. (" KKR" ), KKR Associates, LP (" KKR Associates" ), KKR Partners II, LP (" KKR Partners II" ), and Crimson Associates, LP (" Crimson Associates" ), and individual defendants Paul Raether, James Greene, Jr., George Roberts, Henry Kravis, Nils Brous, and Robert Tobin petition this Court in case no. 1091191 for a writ of mandamus directing the Jefferson Circuit Court to vacate its order denying the defendants' motion seeking the dismissal of the plaintiffs' complaint on the ground of lack of personal jurisdiction. Additionally, in case no. 1091206, individual defendant Ronald G. Bruno petitions this Court for a writ of mandamus directing the Jefferson Circuit Court to vacate a separate order by which it denied a motion seeking the dismissal of the plaintiffs' claims under the Alabama Securities Act, § 8-6-1 et seq., Ala.Code 1975 (" the ASA" ). We deny both petitions.

I. Facts and Procedural History

KKR is a Delaware limited partnership having its principal place of business in New York, New York. KKR's affiliates— KKR Associates, KKR Partners II, and Crimson Associates— are Delaware limited

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partnerships with their principal places of business also in New York.1 KKR Associates is the sole general partner of KKR Partners II and Crimson Associates. KKR and KKR Associates have the same 11 general partners, who include Greene, Raether, Roberts, and Kravis. Before the events that culminated in this action, KKR held significant ownership interests in a large number and wide variety of businesses throughout the nation, including supermarket-grocery chains doing business in multiple states.2

The plaintiffs in this action are 46 individuals, partnerships, corporations, foundations, trusts, and retirement and pension funds located throughout the country that invested in certain promissory notes issued as part of a leveraged recapitalization of Bruno's, Inc. (" Bruno's" ). At the time of the events at issue, Bruno's was an Alabama corporation engaged in the supermarket-grocery business with its headquarters and significant operations and assets located throughout Alabama.

The plaintiffs allege that in December 1994, Ronald G. Bruno, who at the time was the chairman and chief executive officer (" CEO" ) of Bruno's, invited representatives of KKR to Birmingham to conduct meetings concerning a possible takeover of Bruno's. Raether and Greene represented KKR in those meetings. In April 1995, KKR agreed in principle that its affiliate, Crimson Associates, would acquire more than 80% of the outstanding common stock of Bruno's.

In the spring of 1995, KKR hired Deloitte & Touche LLP (" Deloitte" ), an accounting firm, to conduct a due-diligence investigation of Bruno's financial, accounting, and operational affairs, including its financial condition and financial reporting. The investigation included the physical inspection of Bruno's assets in Alabama, including warehouses and grocery stores, and the examination in Alabama of Bruno's books and records.

On May 8, 1995, Deloitte prepared a written report for KKR and other defendants entitled " Project Crimson Due Diligence" (" Project Crimson Report" ), which documented Deloitte's findings that Bruno's had serious problems in its facilities, financial condition, and financial reporting.3 The Project Crimson Report detailed, among other things, that Bruno's had overstated the worth of various assets and had understated its depreciation and self-insurance reserves and stated that a downward adjustment to Bruno's net worth of $55.6 million was necessary.

Despite the negative findings in the Project Crimson Report, KKR decided to proceed with its acquisition of Bruno's. The plaintiffs allege that KKR determined that the best way to effect the acquisition was through a leveraged recapitalization to be executed through the efforts of KKR Associates, KKR Partners II, and Crimson Associates. In conjunction with the leveraged recapitalization, the acquisition of

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more than 80% of Bruno's common stock was accomplished on August 18, 1995.

The plaintiffs allege that KKR used the knowledge it gained from the Project Crimson Report to negotiate a price reduction of over $50 million for Bruno's common stock in effecting its takeover of Bruno's. The plaintiffs allege that information contained in the report also caused KKR to realize that acquiring Bruno's presented significant financial risks and that the acquisition would require a substantial amount of debt financing, including the sale of notes to the public.

In order to accomplish the leveraged recapitalization, KKR had Bruno's and its underwriters, including BT Securities Corporation (" BT Securities" ), effect a public offering of $400 million in principal amount of notes described as " 10-1/2% Senior Subordinated Notes due 2005" (" the notes" ). In preparation for the sale, BT Securities conducted its own due diligence of Bruno's in Birmingham. It is undisputed that the sale of the notes occurred in order to make possible the acquisition of Bruno's.

The plaintiffs allege that the defendants made material, fraudulent misrepresentations to the plaintiffs' investment money manager, W.R. Huff Asset Management Co., LLC (" Huff" ), which misrepresentations induced Huff to purchase in November 1995, on the plaintiffs' behalf, over $190 million in principal amount of the notes. The misrepresentations were made in the form of a prospectus concerning Bruno's (" the prospectus" ) made available to Huff in August 1995, in public filings made in September 1995, in presentations made to Huff at a so-called " road show" in New York City attended by representatives of KKR, Bruno's, and underwriters for Bruno's, and in individual meetings at Huff's offices in Morristown, New Jersey, attended by Greene and Brous of KKR, Ronald Bruno of Bruno's, and representatives of the underwriters. The plaintiffs allege that the defendants knew that their representations in the prospectus and in its public filings in September 1995 directly contradicted the financial information contained in the Project Crimson Report. Specifically, the plaintiffs allege that Bruno's made a total of $243.6 million in write-downs in 1996 and 1997, and that, at a minimum, $185.6 million of these write-downs should have been taken and disclosed at the time Huff was presented the prospectus in August 1995 and when the public filings were made in September of the same year.

The original complaint in this action was filed by Huff in the Jefferson Circuit Court on August 6, 1999. The case was removed to the United States Bankruptcy Court for the Northern District of Alabama (" the bankruptcy court" ) because Bruno's had filed a petition in bankruptcy and the action was related to Bruno's bankruptcy proceedings. On April 24, 2000, Huff filed a first amended complaint in the bankruptcy court. Huff submitted a second amended complaint on May 25, 2000, that streamlined the allegations. On January 4, 2001, the bankruptcy court returned this case to the Jefferson Circuit Court. On November 14, 2001, the defendants removed the case to the United States District Court for the Northern District of Alabama (" the district court" ). On November 5, 2002, while the action was pending in the district court, Huff filed a third amended complaint designed to avoid the preclusion of its claims pursuant to the Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. §§ 77p and 78bb. In April 2005, before the district court had ruled upon the third amended complaint, Huff sought leave to file a fourth amended complaint.

On February 7, 2005, the district court struck the third amended complaint and

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denied Huff's request for leave to file the fourth amended complaint. On December 11, 2006, the United States Court of Appeals for the Eleventh Circuit vacated the district court's denial of Huff's motion for leave to file the fourth amended complaint, and it remanded the action. On June 22, 2007, the district court granted leave for the filing of the fourth amended complaint. The defendants appealed the ruling to the Eleventh Circuit Court of Appeals, which dismissed the appeal for lack of jurisdiction. Following that ruling, the case was remanded to the Jefferson Circuit Court. On August 29, 2009, the circuit court consolidated Huff's action with an action the remaining plaintiffs had filed in 2004 against three firms that served as the underwriters for the sale of the notes that facilitated the acquisition of Bruno's— BT Securities, Chemical Securities, Inc., and Salomon Brothers, Inc.— as well as against accounting firms...

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39 practice notes
  • 148 So.3d 1060 (Ala. 2014), 1120904, Sterne, Agee & Leach, Inc. v. U.S. Bank Nat'l Ass'n
    • United States
    • Alabama Supreme Court of Alabama
    • February 7, 2014
    ...or a motion for a summary judgment is not reviewable by petition for writ of mandamus.'" Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat'l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002)). The " certain narrow exception......
  • Ex parte City of Muscle Shoals, 022318 ALSC, 1160396
    • United States
    • Alabama Supreme Court of Alabama
    • February 23, 2018
    ...for a summary judgment is not reviewable by petition for writ of mandamus."' Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat'l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002)). One of the few 'narrow exce......
  • 257 So.3d 850 (Ala. 2018), 1160396, Ex parte City of Muscle Shoals
    • United States
    • Alabama Supreme Court of Alabama
    • February 23, 2018
    ...a summary judgment is not reviewable by petition for writ of mandamus." ’ Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat’l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002) ). One of the few ‘narrow except......
  • 151 So.3d 1075 (Ala. 2014), 1120965, Ex parte Merches
    • United States
    • Alabama Supreme Court of Alabama
    • March 14, 2014
    ...personally to the jurisdiction of our courts as to the claims at issue here. See, e.g, Ex parte Kohlberg Kravis Roberts & Co., L.P., 78 So.3d 959, 974 (Ala. 2011), distinguishing between contract-based actions and certain tort actions and quoting with approval from Thames v. Gunter--Dun......
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38 cases
  • 148 So.3d 1060 (Ala. 2014), 1120904, Sterne, Agee & Leach, Inc. v. U.S. Bank Nat'l Ass'n
    • United States
    • Alabama Supreme Court of Alabama
    • February 7, 2014
    ...or a motion for a summary judgment is not reviewable by petition for writ of mandamus.'" Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat'l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002)). The " certain narrow exception......
  • Ex parte City of Muscle Shoals, 022318 ALSC, 1160396
    • United States
    • Alabama Supreme Court of Alabama
    • February 23, 2018
    ...for a summary judgment is not reviewable by petition for writ of mandamus."' Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat'l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002)). One of the few 'narrow exce......
  • 257 So.3d 850 (Ala. 2018), 1160396, Ex parte City of Muscle Shoals
    • United States
    • Alabama Supreme Court of Alabama
    • February 23, 2018
    ...a summary judgment is not reviewable by petition for writ of mandamus." ’ Ex parte Kohlberg Kravis Roberts & Co., 78 So.3d 959, 966 (Ala. 2011) (quoting Ex parte Liberty Nat’l Life Ins. Co., 825 So.2d 758, 761-62 (Ala. 2002) ). One of the few ‘narrow except......
  • 151 So.3d 1075 (Ala. 2014), 1120965, Ex parte Merches
    • United States
    • Alabama Supreme Court of Alabama
    • March 14, 2014
    ...personally to the jurisdiction of our courts as to the claims at issue here. See, e.g, Ex parte Kohlberg Kravis Roberts & Co., L.P., 78 So.3d 959, 974 (Ala. 2011), distinguishing between contract-based actions and certain tort actions and quoting with approval from Thames v. Gunter--Dun......
  • Free signup to view additional results
1 books & journal articles
  • Shifting Sands of Mandamus Review, 0915 ALBJ, 76 The Alabama Lawyer 304 (2015)
    • United States
    • Alabama Bar Lawyer Nbr. 76-5, September 2015
    • September 1, 2015
    ...of the action; in such cases, “standing” is a superfluous requirement. See Ex parte Kohlberg Kravis Roberts & Co., L.P., 78 So.3d 959, 978-79 (Ala. 2011) (Murdock, J., quoting Justice Lyons’s concurring opinion in Hamm v. Norfolk So. Ry. Co., 52 So.3d 484, 499 (......