Howe v. Goldcorp Investments, Ltd.

• Decision Date: 04 June 1991
• Docket Number: No. 91-1132,91-1132
• Citation: 946 F.2d 944
• Parties: , Fed. Sec. L. Rep. P 96,251 Reginald H. HOWE, Plaintiff, Appellant, v. GOLDCORP INVESTMENTS, LTD., et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 944

946 F.2d 944

60 USLW 2247, Fed. Sec. L. Rep. P 96,251

Reginald H. HOWE, Plaintiff, Appellant, v. GOLDCORP INVESTMENTS, LTD., et al., Defendants, Appellees.

No. 91-1132.

United States Court of Appeals, First Circuit.

Heard June 4, 1991.

Decided Sept. 27, 1991.

As Modified Oct. 31, 1991.

Reginald H. Howe, pro se.

Joseph A. Franco, Sp. Counsel, with whom Thomas L. Riesenberg, Asst. General Counsel, Felicia H. Kung, Attorney, S.E.C., and Paul Gonson, Sol., were on brief, for S.E.C., amicus curiae.

Harvey J. Wolkoff with whom David A. Martland, Robyn D. Gold, Ropes & Gray, John A.D. Gilmore and Hill & Barlow were on brief, for Goldcorp and Dickenson, defendants, appellees.

Brackett B. Denniston, III, Barbara Gruenthal, Sam A. Wilkins, III, and Goodwin, Procter & Hoar on brief, for defendants, appellees Tory, Tory, DesLauriers & Binnington, Charles F. Scott and James E.A. Turner.

Before BREYER, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, ^* District Judge.

BREYER, Chief Judge.

The doctrine of forum non conveniens permits an American court to decline to exercise jurisdiction over a case when a foreign tribunal can more appropriately conduct the litigation. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 250, 102 S.Ct. 252, 263, 70 L.Ed.2d 419 (1981); Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507-08, 67 S.Ct. 839, 842-43, 91 L.Ed. 1055 (1947). This appeal raises the important question of whether a federal court has the legal power to invoke the forum non conveniens doctrine in a private securities law action brought against a foreign company, its officers and other foreign defendants. The action rests upon conduct that took place primarily (but not entirely) outside the United States; the plaintiff alleges that this conduct violated several laws, including American securities laws forbidding misrepresentation. See 15 U.S.C. § 78j(b) (Exchange Act anti-fraud provision); 15 U.S.C. § 77q(a) (Securities Act anti-fraud provision).

We conclude that the federal courts possess the power to invoke the forum non conveniens doctrine in a private action claiming a violation of American anti-fraud securities statutes, as they do in cases brought under most other federal statutes. We hold that the case before us is an appropriate case in which to invoke the doctrine. And we conclude that the district court's dismissal of the case (in effect requiring the plaintiff to bring his case in Canada) was lawful.

I Background

The plaintiff in this case, Reginald Howe, an American shareholder of Goldcorp, claims that defendants Goldcorp, its officers, its investment advisors, and its lawyers, all of whom are Canadians, violated securities statutes, primarily by failing to disclose adequately their intentions, plans, objectives and other circumstances related to their efforts to take over two other Canadian companies called Dickenson and Kam-Kotia. He claims that, in these same circumstances, some of these defendants violated their fiduciary duties to Goldcorp or to its shareholders, and some, or all, of the defendants violated other statutes as well. The district court dismissed all of Mr. Howe's claims on grounds of forum non conveniens.

To understand the basis for our conclusion that the dismissal of the entire case was lawful, the reader must keep in mind background circumstances that involve complex relationships among three factors: (1) Goldcorp's contacts with the United States, (2) the basic circumstances out of which Mr. Howe's claims developed, and (3) Mr. Howe's several different, specific legal claims. We shall describe these matters briefly, drawing upon our reading of the complaint and its supporting affidavits. We shall also sometimes discuss the case as if it were against Goldcorp alone, when doing so simplifies our discussion. (When we do this, we believe our reasoning applies with equal or stronger force to Mr. Howe's claims against Goldcorp's officers and advisors.)

A. Goldcorp's Contacts with the United States

The record indicates that Goldcorp's significant contacts with the United States are limited:

First, Goldcorp is a Canadian corporation. Its shares trade on Canadian stock exchanges where anyone can buy them. Goldcorp sells its shares to residents of the United States only if they (or their agents) buy those shares in Canada. Goldcorp shares do not trade on stock exchanges (nor are they sold over the counter) in the United States.

Second, Goldcorp sends annual reports, proxy statements and similar material to shareholders in whatever country they live. Thus, shareholders who live in the United States receive this material, sent as part of general, worldwide mailings.

Third, Goldcorp sends regular dividends to shareholders in whatever country they live. Shareholders who live in the United States receive dividend payments from Goldcorp, but only as part of a general distribution to all shareholders. Goldcorp, at least once, issued rights to all of its shareholders entitling them to buy additional Goldcorp shares (at a special price); but Goldcorp did not distribute those rights to shareholders in the United States. Rather, it sold in Canada the rights of its American shareholders and sent them the proceeds of the sale.

Fourth, Goldcorp employees have answered, by mail or by phone, specific questions addressed to them by Goldcorp's shareholders in the United States. Goldcorp employees have, from time to time, sent annual reports and similar written material to investment advisors or stock brokers in the United States, always at the request of those advisors or brokers, who themselves (or who have clients who) were already Goldcorp shareholders. On at least one occasion, Goldcorp explained to a broker in the United States (who had asked Goldcorp) how that broker could buy a large block of shares on a Canadian exchange.

Fifth, in 1989 Goldcorp acquired two Canadian companies (called Dickenson and Kam-Kotia) which owned some assets in the United States and had some American shareholders. In doing so, it had to comply--and did comply--with various United States Securities and Exchange Commission requirements.

Sixth, Goldcorp's American shareholders, including Mr. Howe, own about one-third of Goldcorp's shares.

B. The Basic Underlying Circumstances

Mr. Howe's allegations grow out of the following events:

1. Before 1987 Goldcorp was a company that owned gold and held other diverse, gold-related investments. Its articles of incorporation forbid it to own more than 10 percent of the assets of any other single company or to invest more than 10 percent of its own assets in the shares of any other single company. Thus, investment in Goldcorp amounted to an investment approximately as safe as gold itself; for Goldcorp could itself own only (1) gold and (2) a small or diverse portfolio of other gold-related companies.

2. In 1987 Goldcorp asked its shareholders to approve changes in its articles of incorporation that would permit it to own more than 10 percent of other individual companies and to invest more than 10 percent of its own assets in a single company's shares. The stockholders gave their approval.

3. In January 1989 a Canadian company called Corona tried to take over two other Canadian goldmining companies (Dickenson and Kam-Kotia). Goldcorp, appearing (in Mr. Howe's words) as a "white knight," thwarted Corona's bid by taking over these two companies itself. Corona brought a lawsuit in Canada claiming that the Goldcorp takeover would violate a provision in Goldcorp's articles of incorporation (prohibiting Goldcorp from investing in a firm in which its financial advisors held more than a 5 percent interest), but Corona lost this lawsuit.

4. As a result of the takeovers of Dickenson and Kam-Kotia, the value of Goldcorp's shares declined dramatically.

C. The Legal Claims

Mr. Howe's complaint claims that facts surrounding Goldcorp's amendment of its articles of incorporation in 1987 and its 1989 takeover of Dickenson and Kam-Kotia reveal several kinds of unlawful activity. First, he says that Goldcorp "defrauded" its shareholders, primarily by failing to explain adequately that the changes in its articles of incorporation meant a radical change in its investment policy. In particular, alleges Mr. Howe, Goldcorp failed to explain that the corporation would no longer invest its assets safely in gold and in a diversified portfolio, but, instead, would invest heavily in the shares of one or two companies, thereby greatly increasing the risks to investors in Goldcorp. This "misrepresentation" or "fraud," the complaint says, violates the federal securities laws, see 15 U.S.C. §§ 78j(b), 77q(a), Massachusetts consumer protection law, see Mass.Gen.L. ch. 93A, and the common law of fraud and misrepresentation.

Second, the complaint claims another instance of "misrepresentation" or "fraud." It states that Goldcorp failed to disclose to the SEC (as part of its 1989 effort to buy shares of Dickenson and Kam-Kotia from United States shareholders) the existence of legal problems surrounding the 1987 amendment of its articles of incorporation. See 15 U.S.C. § 78n.

Third, the complaint says that officers of Goldcorp and Goldcorp's investment managers, when organizing the takeover of Dickenson and Kam-Kotia, tried to help themselves rather than to benefit Goldcorp. It says, for example, that, by improperly looking to their own financial gain, they violated fiduciary duties owed to the company--duties imposed by common law, Canadian law, securities statutes and the American Investment Company Act of 1940.

Fourth, the complaint says that these same misrepresentations and violations of fiduciary duty violated various federal criminal statutes, such as the anti-racketeering laws. See 18 U.S.C. §§ 1341 et seq.; 18 U.S.C. §§ 1961 et seq.

Fifth, the complaint says that Goldcorp should have "registered" with the SEC, under the Investment Company Act. See 15 U.S.C. § 80a-7.

The complaint asks for...