Amakua Development LLC v. Warner

• Decision Date: 25 January 2006
• Docket Number: No. 05 C 3082.,05 C 3082.
• Citation: 411 F.Supp.2d 941
• Court: U.S. District Court — Northern District of Illinois
• Parties: AMAKUA DEVELOPMENT LLC, a Nevada Limited Liability Company, Plaintiff, v. H. TY WARNER, an individual; TY Inc., a Delaware Corporation; TY Warner Hotels & Resorts LLC, a Delaware Limited Liability Company; and JTL Capital LLC, a Texas Limited Liability Company, Defendants.

411 F.Supp.2d 941

AMAKUA DEVELOPMENT LLC, a Nevada Limited Liability Company, Plaintiff, v. H. TY WARNER, an individual; TY Inc., a Delaware Corporation; TY Warner Hotels & Resorts LLC, a Delaware Limited Liability Company; and JTL Capital LLC, a Texas Limited Liability Company, Defendants.

No. 05 C 3082.

United States District Court, N.D. Illinois, Eastern Division.

January 25, 2006.

COPYRIGHT MATERIAL OMITTED

Daniel L. Rasmussen, Erik M. Andersen, Payne & Fears, Irvine, CA, Todd H. Flaming, Schopf & Weiss LLP, Chicago, IL, for Plaintiff.

Gregory J. Scandaglia, Eric J. Munoz, James Robert Ahler, Matthew Boyd Steffens, Therese Lynn Tully, Scandaglia & Ryan, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

FILIP, District Judge.

Plaintiff, Amakua Development LLC ("Amakua" or "Amakua LLC" or "Plaintiff"), filed suit against Defendants, H. Ty Warner ("Mr.Warner"), Ty Inc. ("Ty Inc."), Ty Warner Hotels & Resorts LLC ("Warner Hotels" or "Warner Hotels LLC," together with Mr. Warner and Ty Inc., the "Warner Defendants"), and JTL Capital LLC ("JTL" or "JTL LLC") regarding the sale of real estate located in Los Cabos, Mexico (the "Las Ventanas Property") in the District Court for the Central District of California (the "California Court"). (D.E.1.)¹ By order entered May 11, 2005, the California Court transferred the suit to this Court pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. 1406(a) on the grounds that it lacked personal jurisdiction over Mr. Warner, venue was improper in the Central District of California, an Illinois court would have personal jurisdiction over all Defendants and venue would be appropriate in this Court. (D.E. 38 (attached as Exhibit A to D.E. 53).)

Plaintiff's operative complaint ("Complaint") alleges the following state law claims against the Warner Defendants: breach of contract (Count I), breach of the implied covenant of good faith and fair dealing (Count II), fraud (Count III), and quantum meruit (Count IV). (D.E.64.) The Complaint also alleges a state law claim for intentional interference with contract against JTL (Count V). (Id.) The Warner Defendants moved to dismiss Counts II and III. (D.E.51.) For the reasons stated below, the Court grants the Warner Defendants' motion to dismiss Count II without prejudice and denies its motion to dismiss Count III.

I. Relevant Facts²

Amakua, a Nevada limited liability company with its principal place of business located in Las Vegas, Nevada, was formed for the purpose of consulting, identifying, developing, and transacting hotel properties. (D.E. 64 ¶¶ 2, 11.) Ty Inc. is a Delaware corporation with its principal place of business in Westmont, Illinois. (Id. ¶ 3.) Warner Hotels is a Delaware limited liability company with its principal place of business in Santa Barbara, California. (Id. ¶ 4.) Mr. Warner maintains residences in Santa Barbara, California and Westmont, Illinois. (Id. ¶ 5.) Plaintiff alleges, on information and belief, that Mr. Warner is the president and chairman of Ty Inc. and the sole owner and managing member of Warner Hotels. (Id.) Defendant JTL is a Texas limited liability company with its principal place of business in Dallas, Texas. (Id. ¶ 9.)

On August 5, 2003, Amakua became aware that negotiations had terminated between JTL and Omni Hotels concerning the possible acquisition by Omni Hotels of parts of the Las Ventanas Property. (Id. ¶ 16.) Through confidential discussions with JTL, Amakua learned that JTL was a party to a stock purchase agreement in which JTL would acquire ownership of the Las Ventanas Property for approximately $68.7 million. (Id.) Pursuant to this agreement, JTL was required to put down a $100,000 non-refundable deposit on or about October 2, 2003, and to complete the purchase before December 31, 2003, which would require the funding of the purchase price. (Id. ¶¶ 16, 23.) JTL was anxious to find a buyer to replace Omni Hotels before the October 2, 2003 deposit deadline. (Id. ¶ 16.) Through these discussions, Amakua also learned that it could acquire the hotel, the surrounding condominium project, and the additional development land on the Las Ventanas Property for $70.25 million, with JTL keeping two condominiums on the property. (Id. ¶ 18.) With the permission of JTL, Amakua analyzed detailed financial information regarding the Las Ventanas Property, which was prepared by the property manager, Rosewood Hotels & Resorts. (Id. ¶ 17.)

On or about September 18, 2003, representatives of Amakua spoke with John J. Hong ("Mr.Hong") regarding the Las Ventanas Property. (Id. ¶ 19.) Plaintiff alleges, on information and belief, that Mr. Hong was employed by Ty Inc. as its Executive Vice President, and further alleges, on information and belief, that Mr. Hong was appointed by Mr. Warner to act as the Personal Advisor/Business Affairs to the Warner Defendants in connection with the acquisition of hotel properties. (Id. ¶ 12.) During the conversation, Mr. Hong told Amakua that his principal knew the hotel well and would be very interested in it, and that he wanted information about the possible transaction right away. (Id. ¶ 19.) Hong concluded the conversation by stating that, "We can buy this deal." (Id.) Concerned that it would be excluded from the transaction after it brought together Mr. Hong's principal and JTL, Amakua sent Mr. Hong a Confidential Non-Disclosure and Non-Circumvention Agreement (the "Agreement") on September 19, 2003. (Id. ¶ 20.) The Agreement provides that, for a period of two years, the information disclosed by Amakua would be kept confidential and that Mr. Hong "agrees to refrain from circumventing Amakua in any dealings either directly or indirectly." (Id., Ex. A ¶¶ 2, 10.) The Agreement further states that it is "binding upon any and all directors, officers, employees, contractors and agents of each party as well as parent, subsidiary, related and affiliated companies." (Id., Ex. A ¶ 12.) The Agreement also has a choice of law provision (the "Choice of Law Clause") that states that, "[t]his Agreement will be governed and construed in accordance with the laws of the State of California." (Id., Ex. A ¶ 11.) Mr. Hong signed the Agreement as the "Principal Advisor/Business Affairs," but left blank the identity of his principal. (Id., Ex. A at 4.) He faxed the signed Agreement to Amakua's representatives in Newport Beach, California on September 22, 2003. (Id.)

On September 24, 2003, Amakua confirmed that Mr. Hong received the confidential information regarding the Las Ventanas Property, including a financial analysis of the transaction. (Id. ¶ 21-22.) Mr. Hong then orally told Amakua that Mr. Warner was Mr. Hong's principal (Amakua notes an apparent conflict on this point in its Complaint, because "[i]n response to written interrogatories, Hong has taken the position and verified under penalty of perjury that he executed the Agreement on behalf of Warner Hotels" (id. ¶ 22 n. A.)), that Mr. Warner was impressed with the numbers, and that "[t]his deal makes sense for us because we have a West Coast presence with hotels." (Id. ¶ 22.) During the conversations that followed, Mr. Hong told Amakua that: Mr. Warner would be interested in the hotel property, but not the condominium development part of the Las Ventanas Property; Mr. Hong agreed that $76 million was a fair price; and Mr. Warner would buy the hotel for that amount. (Id. ¶ 22.)

Amakua arranged for Messrs. Hong and Warner to meet David A. Lane ("Mr. Lane") of JTL at the Las Ventanas Property in Los Cabos, Mexico on October 1, 2003, the day before JTL was obligated to tender the $100,000 deposit. (Id. ¶ 23.) During the visit to the property, JTL and Mr. Warner apparently discussed a transaction between JTL and a Warner affiliate which would circumvent Amakua completely, and Mr. Warner left thinking he had a "deal" to purchase the Las Ventanas Property from JTL. (Id.)³

Following the October 1, 2003 meeting at the Las Ventanas Property, Mr. Hong called Mike Scofield, the managing member of Amakua (id. at 19), and stated that "the deal was not going to occur," that Mr. Lane was "hokey," and that Mr. Hong did not have any faith in the deal. (Id. ¶ 24.) (At this time, the Warner Defendants actually were bringing in lawyers and brokers to pursue and consummate the transaction (id. ¶ 42); the letter of intent thereafter executed between Warner Hotels and JTL also contains terms nearly identical to the terms negotiated by Amakua before it was allegedly circumvented, including the pricing and holdback of condominiums for JTL (id. ¶ 43).) On the telephone call, Mr. Hong further said that, even if Mr. Warner decided to buy the Las Ventanas Property, Mr. Warner would do it through his "hotel group" and that the non-circumvention Agreement "would not hold up." (Id. ¶ 24.) Mr. Scofield told Mr. Hong that the Agreement would be in force until the end of its two-year term. (Id.)

Without Amakua's knowledge, JTL and the Warner Defendants negotiated a letter of intent pursuant to which Warner Hotels would acquire the Las Ventanas Property. (Id. ¶ 26.) In connection with the deal, JTL received from Warner Hotels the promise of indemnification for any claim made by Mike Scofield. (Id.) In one written communication, JTL's agent wrote, "We also discussed [sic] you had to indemnify JTL against any brokers especially the ones John Hong tried to get into the deal." (Id.) On December 30, 2003, JTL issued a press release announcing its purchase, in partnership with Farallon Capital Management LLC, of the Las Ventanas Property. (Id. ¶ 27.) On September 24, 2004, Warner Hotels issued a press release announcing its purchase of the Las Ventanas Property from JTL. (Id. ¶ 29.) Amakua was not involved in the transaction. (Id.)

II. Propriety of Diversity Jurisdiction

On January 4, 2006, this Court ordered the parties to confer and answer various questions concerning whether the suit was properly within the diversity jurisdiction of the federal...