Carnival Cruise Lines, Inc. v. Oy Wartsila AB

• Decision Date: 19 October 1993
• Docket Number: No. 90-1755-CIV.,90-1755-CIV.
• Parties: CARNIVAL CRUISE LINES, INC.; and Carnival Maritime, Inc., Plaintiffs, v. OY WARTSILA AB; and Valmet Oy, Defendants.
• Court: U.S. District Court — Southern District of Florida

159 B.R. 984 (1993)

CARNIVAL CRUISE LINES, INC.; and Carnival Maritime, Inc., Plaintiffs, v. OY WARTSILA AB; and Valmet Oy, Defendants.

No. 90-1755-CIV.

United States District Court, S.D. Florida.

October 19, 1993.

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William F. Hamilton, Holland & Knight, Miami, FL, Lewis Clayton, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for plaintiffs.

Barry Davidson, Miami, FL, Michael Jaffe, Gerald Zingone, Arent, Fox, Kintner, Plotkin & Kahn, Washington, DC, David L. Ross, Greenberg Traurig Hoffman Lipoff Rosen & Quentel, Miami, FL, for defendants.

ORDER OF DISMISSAL

MARCUS, District Judge.

THIS CAUSE comes before the Court upon the motions filed on February 7, 1992 by Defendants Oy Wartsila Ab ("Wartsila") and Valmet Oy ("Valmet") to dismiss the amended complaint filed by Plaintiffs Carnival Cruise Lines, Inc. and Carnival Maritime, Inc. (collectively, "Carnival"). See Docket Entry Nos. 210, 215. For the following reasons, we GRANT the motions to dismiss pursuant to the doctrine of forum non conveniens.

I.

Carnival Cruise Lines, Inc. is a Panamanian corporation headquartered in Miami, Florida, and is alleged to be successor-in-interest to Carnival Maritime, Inc., a now-dissolved Panamanian corporation. Wartsila is a Finnish corporation headquartered in Finland.¹ Valmet is a Finnish corporation also headquartered in Finland, and is 80%-owned by the government of Finland.

Carnival filed this action in state court on June 22, 1990 (service was perfected on June 28, 1990) and Defendants removed it to federal court on July 24, 1990. On December 27, 1990, Carnival filed its four-count amended complaint sounding in fraudulent misrepresentation (Count I), negligent misrepresentation (Count II), Florida civil theft (Count III), and civil conspiracy (Count IV), seeking to pierce the corporate veil of the subsidiary corporation with which Carnival contracted, Wartsila Marine Industries, Inc. ("Marine"), by alleging that the subsidiary was, in practice, the "alter ego" of the Defendants, and demanding $400 million in compensatory damages, $300 million in punitive damages, trebling as appropriate, costs and fees. The gravamen of the complaint is the allegation that Defendants fraudulently induced Carnival to enter into a contract with an undercapitalized subsidiary, which agreement was subsequently breached, for the construction of three luxury cruise ships by misrepresenting the financial strength of the subsidiary.

The controversy as alleged by the amended complaint can be briefly summarized as follows. In late 1986, Carnival, which is in the business of operating luxury cruises, and Defendants, which were in the business of building ships, began negotiations for the construction of a new luxury oceanliner, the Fantasy. During negotiations, Defendants told Carnival that as of January 1987, their shipbuilding operations would be merged into a new subsidiary corporation, Marine, which would be owned 30% by Valmet and 70% by Wartsila. Carnival then sought a parent guarantee from Defendants that the contract would be completed. Defendants allegedly rejected this idea, emphasizing the robust capitalization of Marine. To reassure Carnival, Wartsila faxed a "comfort letter" — allegedly signed by Tor Stolpe, the president of Wartsila on behalf of both Wartsila and Marine as well as by a Valmet representative, see Am. Compl. Ex. A, and accompanied by a "transmittal" cover sheet signed by Tim Lehto, counsel for Wartsila — to Carnival detailing the capitalization of Marine. Relying on these representations and others, in January 1987 Carnival closed the Fantasy contract, and shortly thereafter accepted an option agreement for the construction of another ship. Later that year, Carnival exercised that option and also agreed to purchase a third ship. Those two ships were later named Ecstasy and Sensation.

All three contracts were subsequently breached when Marine declared bankruptcy in October 1989 without having delivered any of the ships. The Fantasy and the Ecstasy were partially completed, and the Sensation, not at all. Carnival then paid another Finnish shipbuilding concern to complete the ships at additional cost, and now sues to recover the cost of cover and consequential lost bookings resulting from the late delivery.

Presently, Marine is being liquidated in a Finnish bankruptcy proceeding. Carnival has filed a claim as a creditor of Marine in that proceeding for compensatory and consequential damages arising out of the breach of the three contracts. Carnival's filing was contested by the Trustees of Marine and by Wartsila. Consequently, Carnival filed what is called a "confirmatory" action against Wartsila which will determine the validity of Carnival's claim by a full adversarial trial as part of the bankruptcy proceeding. See Liljestrom Supp. Aff. at 11-12. As a further component of the Marine bankruptcy proceedings, the Trustees of the debtor — on behalf of all creditors of Marine, including Carnival — have sued both parent corporations, Valmet and Wartsila, in their capacity as shareholders of Marine, for damages in excess of FIM 2.75 billion arising out of the alleged undercapitalization of Marine. See Liljestrom Supp. Aff. at 13. The Trustees' suit alleges various claims in contract and tort, including the Finnish counterpart of fraud and misrepresentation, conspiracy, violation of fiduciary duties and the Finnish General Corporation Law, and liability of the parent corporations on an "alter ego" theory based primarily on Marine's alleged undercapitalization. See Liljestrom Supp. Aff., Extract at 18-22 (copy of complaint by Trustees of Marine against Valmet Oy).

The amended complaint charges that the January 26, 1987 comfort letter was false because it stated Marine's net worth as FIM 1.5 billion (approximately $300 million) when in fact — as a result of the transfer of unprofitable contracts and other liabilities, as well as the overvaluation of real estate, equipment, executory contracts and accounts receivable — Marine's true worth was far less. See O'Toole Aff. ¶ 5(a) ("Wartsila Marine was worth only a third of its stated equity."). Carnival also claims that Marine's initial cash capitalization was really a transfer of vastly overvalued assets; that is, Plaintiffs theorize that Defendants' infusion into Marine of FIM 1.5 billion immediately followed by Marine's purchase of shipbuilding assets from the Defendants for FIM 1.5 billion was a "sham" since the assets were secretly valued by Defendants at only FIM 500 million.

Further, relying on an investigation by independent auditors Deloitte & Touche, Carnival contends that bank transfer receipts from the initial capitalization show that, despite the contrary representation in Marine's various disclosure documents, Marine was actually capitalized not by cash, but by the transfer of assets. Carnival alleges that the cash transfers were designed to evade the provisions of the Finnish Companies Act which requires, among other things, that a reliable appraisal be performed where a corporation is capitalized by contribution of assets, and that the directors satisfy themselves in good faith that the assets correspond to the stated value. See Am. Comp. ¶ 23; see also Luostarinen Aff., ¶ 4; Nuolimaa Aff. ¶¶ 5, 19-20. Defendants vigorously protest Carnival's view of the capitalization transaction, and reject the notion that Finnish law contains an appraisal requirement.

Carnival also alleges that the mandatory disclosure statement which Marine filed with the Finnish Trade Registry on January 12, 1987 was false on its face in representing that the new corporation had FIM 1.5 billion paid-in capital, when in fact the cash had been immediately retransferred out prior to the Trade Registry filing. Defendants reply that Finnish law (as interpreted by Jukaa Luostarinen, a Finnish attorney) does not require that the cash be on hand at the time of the Registry filing. Further, one of their experts on Finnish law contends that "the Finnish Companies Act allows the company to disburse the funds immediately upon receipt for any legitimate purpose." Luostarinen Aff. at ¶ 5.

By its instant motion, Valmet moves to dismiss the amended complaint for lack of subject-matter jurisdiction based on sovereign immunity, pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1601-11; lack of personal jurisdiction based on Carnival's inability to demonstrate a prima facia case that Marine was the alter-ego of Valmet so that Marine's conduct could give rise to specific personal jurisdiction over Valmet; and forum non conveniens. Similarly, Wartsila moves to dismiss for lack of general or specific personal jurisdiction based on Wartsila's contacts with the forum; failure to make a prima facie showing that Marine was Wartsila's alter ego so that specific personal jurisdiction could be asserted on that ground; and forum non conveniens.

Even if this Court can properly exercise jurisdiction over the Defendants in this action — and as we observe below, the assertion of jurisdiction over the defendant Valmet pursuant to the FSIA is a close question — we find that entertaining this lawsuit in this forum would be improper under the doctrine of forum non conveniens.²

At the heart of this case lie the interrelated questions of whether Marine was undercapitalized, whether it was otherwise improperly formed by the merger of Defendants' shipbuilding operations, and whether its true worth was misrepresented to Carnival in order to induce Carnival to forego securing a parent guarantee of the three construction contracts. These questions will turn on the application of Finnish corporate law, Finnish corporate reporting requirements and Finnish accounting principals to the events surrounding the formation of Marine and the negotiation of the three shipbuilding agreements. Central to the resolution of these basic questions will be...