Country Home Products, Inc. v. Schiller-Pfeiffer, No. 2:04-CV-111.

• Citation: 350 F.Supp.2d 561
• Decision Date: 19 November 2004
• Docket Number: No. 2:04-CV-111.
• Parties: COUNTRY HOME PRODUCTS, INC., Plaintiff, v. SCHILLER-PFEIFFER, INC., JEP Management, Inc., Stuart M. Bryan, individually and in his capacity as an officer of Schiller-Pfeiffer, Inc., Jeffrey E. Perelman, individually and in his capacity as an officer of Schiller-Pfeiffer, Inc. Defendants.
• Court: United States District Courts. 2nd Circuit. District of Vermont

350 F.Supp.2d 561

COUNTRY HOME PRODUCTS, INC., Plaintiff, v. SCHILLER-PFEIFFER, INC., JEP Management, Inc., Stuart M. Bryan, individually and in his capacity as an officer of Schiller-Pfeiffer, Inc., Jeffrey E. Perelman, individually and in his capacity as an officer of Schiller-Pfeiffer, Inc. Defendants.

No. 2:04-CV-111.

United States District Court, D. Vermont.

November 19, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Marc B. Heath, Devin McLaughlin, Lawrence C. Agee, Pro se, for Plaintiff.

Richard W. Kozlowski, Craig Weatherly, Janet C. Murnane, Robert F. O'Neill, for Defendant.

MEMORANDUM AND ORDER

SESSIONS, Chief Judge.

Plaintiff Country Home Products ("CHP") seeks declaratory relief and damages for fraudulent misrepresentation and fraudulent concealment against Defendants Schiller-Pfeiffer ("Schiller"), JEP Management ("JEP"), Stuart M. Bryan and Jeffrey E. Perelman. Defendants move to dismiss Plaintiff's Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of jurisdiction over the person, Fed.R.Civ.P. 12(b)(3) for improper venue and Fed. R. Civ. P 12(b)(6) for failure to state a claim upon which relief can be granted and in the alternative, move to Transfer the Action to the Eastern District of Pennsylvania (Doc. 12 & 13). CHP opposes the motion to dismiss and the motion to transfer venue. For the reasons that follow, the Court DENIES Defendants' Motion to Dismiss Plaintiff's Amended Complaint and DENIES to Transfer the Action to the Eastern District of Pennsylvania.

BACKGROUND

For the purposes of the motion to dismiss, all facts taken from CHP's amended complaint are assumed to be true and all inferences are drawn in CHP's favor. CHP is a Vermont business producing outdoor products with its principal place of business in Vergennes, Vermont. Schiller and JEP are Pennsylvania corporations with principal places of business in Pennsylvania. Defendant Stuart M. Bryan is a resident of Pennsylvania and President of Schiller. Defendant Jeffrey E. Perelman is also a resident of Pennsylvania and is the Chief Executive Officer of Schiller and President of JEP.

In June 2003, Mr. Perelman and JEP's Chief Financial Officer visited CHP offices in Vermont to discuss Schiller's possible acquisition of CHP. Am. Compl. ¶ 7. Defendants Perelman and Bryan were involved in these negotiations, representing Schiller and JEP respectively. On December 30, 2003, the parties entered into a "non-binding" Letter of Intent ("LOI") and a Confidentiality Agreement to allow the parties to explore the possible acquisition of CHP by Schiller and affiliates. Under the LOI, CHP could not solicit other offers and the LOI "is to be governed and construed in accordance with the laws of Pennsylvania." Am. Compl. ¶ 15. The LOI did not contain provisions relative to jurisdiction and venue. The Confidentiality Agreement contained a forum selection clause that stated the agreement "may be enforced only in federal court having jurisdiction in the state of Vermont and the parties hereby agree that such courts shall have venue and exclusive subject matter jurisdiction." Am. Compl. ¶ 18, Ex. A.

The parties subsequently engaged in due diligence and CHP requested financial documents from Schiller and JEP. Defendants Bryan and Perelman allegedly delayed providing financial information and subsequently gave misleading sales and profit forecasts for 2004 to CHP. In March 2004, the acquisition began to unravel due to discoveries made during the course of due diligence. CHP became concerned about the financial state of Schiller and JEP and that CHP would be a poor fit with Schiller and JEP. Specifically, CHP's corporate culture fosters a "permissive, libertarian workplace environment," while Schiller maintains a rigid, hierarchal style. Am. Compl. ¶ 31. CHP was also worried that key members of its management team would choose not to accept offers from or remain employed by the acquiring company. Also of concern to CHP was Schiller's plan to close certain Vermont operations that would result in the loss of over 70 jobs in Vermont.

Based on the reasons outline above, CHP terminated the LOI on March 15, 2004, consistent with a provision in the LOI that "either party may terminate this letter by notice delivered to the other." Am. Compl. ¶ ¶ 16, 34. On March 17, 2004, Schiller and JEP filed a Praecipe for the Writ of Summons¹ in the Court of Common Pleas, Philadelphia County, Pennsylvania against CHP and three of its principals, alleging violation of the LOI by engaging in negotiations with other potential purchasers of the business. Based on complete diversity of citizenship between parties, CHP filed a notice for removal and removed the case to the United States District Court for the Eastern District of Pennsylvania ("Pennsylvania Action"). There are several motions currently pending in the Pennsylvania Action, including CHP's motion to dismiss or in the alternative transfer venue to Vermont.

On May 11, 2004, CHP filed a complaint in the United States District Court for the District of Vermont seeking declaratory judgment. CHP also brought claims of fraudulent misrepresentation and fraudulent concealment against the Defendants.

DISCUSSION

I. Motion to Dismiss

A. Rule 12(b)(6)

In order to decide a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accepting the complaint's allegations as true." Todd v. Exxon Corp., 275 F.3d 191, 197-98 (2d Cir.2001). A district court may grant a Rule 12(b)(6) motion to dismiss if "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. at 198 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Therefore, "`[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.'" Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

CHP seeks a declaratory judgment, requesting the Court to declare that 1) CHP had not breached the Letter of Intent; 2) Defendants were not entitled to any relief, either monetary damages or specific performance under either the LOI or the Confidentiality Agreement; and 3) Defendants must comply with the Confidentiality Agreement by providing the required certification under the Confidentiality Agreement for the return of CHP documents. In response, Schiller and JEP, move to dismiss under Rule 12(b)(6), arguing that 1) CHP improperly sought declaratory judgment because the dispute involved past actions; and 2) all of CHP's confidential documents have been returned and there is no case or controversy concerning the Confidentiality Agreement.

In a letter to the Court dated November 2, 2004, CHP indicated that it intends to amend its Complaint by removing its request that the Court order Defendants to comply with the Confidentiality Agreement. Thus, that particular issue is moot and requires no further discussion.

Section 2201 of the Declaratory Judgment Act ("DJA") provides that any court may "declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C.A. § 2201(a). The existence of an actual controversy is necessary to sustain jurisdiction under the Declaratory Judgment Act. Id. The Second Circuit must "entertain a declaratory judgment action: (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue or (2) when it will terminate and afford relief from uncertainty, insecurity, and controversy, giving rise to the proceeding." Continental Cas. Co. v. Coastal Sav. Bank, 977 F.2d 734, 737 (2d Cir.1992) (quoting Broadview Chem. Corp. v. Loctite Corp., 417 F.2d 998, 1001 (2d Cir.1969)). The court must look at the litigation situation as a whole in determining whether it is appropriate to exercise its jurisdiction over the declaratory judgment action. Federal Ins. Co. v. May Dept. Stores Co., 808 F.Supp. 347, 348 (S.D.N.Y.1992).

The purpose of the DJA is "to enable parties to adjudicate disputes before either side suffers great damages." In re Combustion Equip. Assocs., 838 F.2d 35, 37 (2d Cir.1988). In Price v. J & H Marsh & McLennan, Inc., No. 2:03-cv-292 (D. Vt. June 8, 2004), this Court recognized that declaratory judgment is inappropriate when past conduct is the focus of the allegation.

The Amended Complaint seeks declaratory judgment that Plaintiff had not breached the LOI and Defendants are not entitled to any monetary relief or specific damages. While the LOI was terminated on March 15, 2004, CHP claims it is presently suffering ongoing damages from the Defendants' current allegations that "continue to cast a dark cloud over CHP's business" (Doc. 14). During the November 4, 2004 hearing before this Court, CHP made statements about the financial damage that it continues to experience from the litigation in the Pennsylvania and Vermont Actions. CHP is stalled in its plans to sell its tangible assets until this dispute is settled. As recognized in the Second Circuit, a declaratory judgment must be entertained when it will afford relief from uncertainty and insecurity. Thus, CHP meets that prong of the test because it faces present and prospective damage.

Defendants argue that CHP's claims against Officers Bryan and Perelman in their individual capacities should be dismissed pursuant to Rule 12(b)(6) because CHP's Amended Complaint failed to allege any wrongful conduct by Defendants Bryan or Perelman in their individual capacity. The Court denies the motion as premature. Defendants may raise this issue again when discovery has been completed.

B. Personal Jurisdiction

The plaintiff bears the burden of demonstrating contacts with the forum state that are sufficient to give the court jurisdiction over the person of the defendant in a 12(b)(2) motion....