Guinness PLC v. Ward

• Citation: 955 F.2d 875
• Decision Date: 10 March 1992
• Docket Number: Nos. 90-1869,90-1870,s. 90-1869
• Parties: GUINNESS PLC; Guinness America, Incorporated, Plaintiffs-Appellees, v. Thomas Joseph WARD, Defendant-Appellant. (Two Cases)
• Court: U.S. Court of Appeals — Fourth Circuit

Page 875

955 F.2d 875

GUINNESS PLC; Guinness America, Incorporated, Plaintiffs-Appellees, v. Thomas Joseph WARD, Defendant-Appellant. (Two Cases)

Nos. 90-1869, 90-1870.

United States Court of Appeals Fourth Circuit.

Argued May 9, 1991.

Decided Jan. 28, 1992.

As Amended March 10, 1992.

Thomas Joseph Ward, Sr., Ward, Lazarus & Grow, Washington, D.C., argued (Harold R. Bruno, III, on brief), for defendant-appellant.

Rebecca Ellen Swenson, Arnold & Porter, Washington, D.C., argued (Richard J. Wertheimer, on brief), for plaintiffs-appellees.

Before HALL, Circuit Judge, HALLANAN, District Judge for the Southern District of West Virginia, sitting by designation, and KELLAM, Senior District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

HALLANAN, District Judge:

Defendant-Appellant Thomas Joseph Ward [hereinafter referred to as "Ward"] appeals from the district court's grant of summary judgment for the Plaintiffs-Appellees Guinness PLC and Guinness America, Incorporated, [hereinafter collectively referred to as "Guinness"] on Guinness' complaint and Ward's counterclaim.

I.

Guinness initiated this action on February 9, 1988, in the United States District Court for the District of Maryland seeking recognition and enforcement of a foreign money judgment entered by the High Court of Justice in London, England, [hereinafter referred to as "High Court"] in favor of Guinness and against Ward in the amount of 5.2 million pounds sterling plus interest. The English judgment resulted from litigation against Ward for his alleged part in a financial scandal arising out of perhaps the largest takeover battle in English history.

In April of 1986, Guinness, a major European beer and alcohol producer and worldwide distributor, succeeded in a takeover of a Scottish competitor, Distillers PLC. Within a year's time, however, what initially appeared as a great triumph for Guinness turned to tragedy as investigations by various British regulatory and law enforcement agencies uncovered a financial scandal involving the top echelons of Guinness' management. By January, 1987, Ernest Saunders, Guinness' Chairman and Chief Executive Officer, and Oliver Roux, its Chief Financial Officer, as well as others, had been forced to leave Guinness and were replaced by new management.

Ward, the senior partner of the Washington, D.C., law firm of Ward, Lazarus & Grow and a practicing attorney for over 20 years, served as a director for Guinness as well as a legal advisor at the time of Guinness' takeover of Distillers PLC. On March 18, 1987, Guinness issued a writ against Ward and Ernest Saunders in the High Court and applied for what is known in England as a Mareva injunction. More specifically, Guinness contested a 5.2 million pounds sterling payment which Ward and Saunders allegedly had arranged for Guinness to make to a company incorporated in the Isle of Jersey and known as Marketing and Acquisition Consultants LTD. [hereinafter referred to as "MAC"] after discovering that MAC was controlled by Ward and that the payment had been made for Ward's benefit.

Guinness contends that a Mareva injunction is similar to a temporary restraining order and that it sought such an injunction due to its fear that Ward and Saunders would remove or otherwise dissipate the payment or alienate the proceeds thereof. A Mareva injunction was granted ex parte by Mr. Justice Warner of the High Court on the same day that such injunction was requested.

The injunction prohibited Ward and Saunders from removing or dissipating the payment or alienating any proceeds obtained therefrom. The injunction also prohibited Ward and Saunders from removing or dissipating their assets except insofar as they exceeded the value of 5.2 million pounds sterling and directed them to transfer the payment or any property acquired thereby which was in the control of the Court to Guinness' solicitors. ¹ Guinness agreed to abide by any subsequent order regarding damages Ward might be held to have sustained as a result of the injunction.

The restrictions were to remain effective until March 25, 1987, or until further order of the court. Ward and Saunders were also directed to swear an affidavit by March 25, 1987, revealing the whereabouts of the payment or any property acquired thereby, the nature and date of every transaction involving the payment, and the value, nature and location of any assets within the court's jurisdiction. Furthermore, Ward and Saunders were to take all reasonable steps to discover the whereabouts of the payment or property acquired thereby and to bring such payment or property within the court's jurisdiction.

Ward and Saunders were permitted to apply immediately after receiving notification of the injunction's entry to the High Court for relief or modification of its terms. Saunders appeared before the High Court on March 19, 1987, while Ward appeared through English counsel ² the next day. Through such appearances Ward and Saunders were successful in obtaining several modifications of the injunction as well as additional time in which to serve defenses and respond to the reporting obligations.

On April 1, 1987, Ward submitted an affidavit with exhibits to the High Court. In addition to challenging the propriety of the Mareva injunction and conceding his control over MAC and receipt of the payment, Ward contended that such payment had been proper and made pursuant to a contingent fee agreement under which he was to receive for his legal services a fee of 1/5 of 1% of the value of the takeover bid in the event that Guinness' takeover of Distillers PLC was successful.

An additional hearing was held before the High Court between April 8 and April 14, 1987, on the question of whether the orders granting the Mareva injunction and subsequent modifications should be extended through the trial or until further order. Ward appeared at such hearing through his English counsel and was so represented throughout the remainder of the High Court litigation. On May 13, 1987, Ward filed a counterclaim with the High Court in which he asserted a claim for the reasonable value of the legal services he allegedly performed on behalf of Guinness.

Guinness responded by filing a motion for summary judgment against Ward on May 15, 1987, and a motion for judgment on admissions against Ward on July 1, 1987. On July 17, 1987, the Vice Chancellor of the High Court granted Guinness' motion for judgment concluding that Ward's receipt of the payment via MAC was unlawful under the English Companies Act of 1985 and constituted a breach of the fiduciary duties which Ward owed Guinness as a Guinness director. Ward timely appealed the High Court judgment to the British Court of Appeal.

Guinness then initiated a suit in the District of Columbia involving in part an attorney's lien which Ward's law firm had asserted against Guinness due to alleged non-payment of legal fees. Ward contends that "[d]uring the pendency of that suit and [his] British appeal, Guinness and [he] engaged in negotiations aimed at achieving a 'global settlement' of all of the disputes." Ward further contends that such negotiations resulted in an agreement which settled all of the parties' disputes in London, the Isle of Jersey ³ and Washington, D.C.

Guinness allegedly, however, disavowed and repudiated this agreement only to shortly thereafter begin negotiations with Ward anew. As stated by the district court below concerning the new negotiations

[t]here is no dispute that the parties indeed entered into settlement negotiations. The settlement discussed by the parties provided that Ward would be entitled to retain sufficient assets necessary to meet his large debts, certain specified major assets, and $100,000.00 of liquid assets, and Guinness would receive the remainder of Ward's assets. Guinness, however, refused to assent to any settlement until it had some idea of the nature of Ward's assets that it would be receiving under the agreement. Thus, Guinness insisted that Ward provide full documentation of his assets and liabilities.

Ward, however, was unwilling to simply disclose to Guinness extensive financial information concerning the nature and location of his assets, with Guinness being permitted thereafter to refuse to consummate the settlement. Ward feared that Guinness would acquire financial information, refuse to settle, and then begin collection on the assets identified by Ward.

The parties negotiated for an extensive period of time, eventually entering into a letter agreement on October 12, 1987. According to Ward, the "letter agreement ... outlined the terms of the settlement and the procedures that would be followed in consummating the agreement." In accordance with the agreement, Ward made a series of financial disclosures concerning his assets. The date on which Guinness could back out of the Settlement Agreement based on Ward's financial disclosures passed without Guinness withdrawing. Although agreeing to the settlement generally as outlined, Guinness modified the agreement, reserving certain exceptions or limited reasons based on which Guinness could subsequently properly refuse to consummate the settlement. Specifically, because Ward had agreed to transfer shares of a corporation, the value of which was not obvious from the mere description of that asset, Guinness wanted to obtain additional information about the corporation. At that point, Guinness could still refuse to consummate the settlement, but only if Ward's financial disclosures proved untrue, or if, following the subsequent disclosure of the identity [sic] corporation, Guinness was unsatisfied with the asset.

Towards the end of November, 1987, Guinness needed shares of stock in Richter Brothers that were subject to the valid lawyer's lien of Ward Lazarus. Guinness represented that if Ward Lazarus immediately transferred the Richter Brothers' stock for an advance payment of $100,000.00 on outstanding...