Dewhurst v. Telenor Invest As

Citation83 F.Supp.2d 577
Decision Date24 January 2000
Docket NumberNo. Civ. CCB-99-417.,Civ. CCB-99-417.
PartiesWarren T. DEWHURST, et al. v. TELENOR INVEST AS, et al.
CourtU.S. District Court — District of Maryland

Stephen C. Glassman, Glassman and Bullock Laytonsville, MD, for plaintiffs.

James P. Ulwick, Kramon and Graham, Baltimore, MD, Wendy L. Addiss, Coudert Brothers, Washington, DC, for defendants.

MEMORANDUM

BLAKE, District Judge.

Now pending before this Court is Defendants' motion to dismiss the complaint or, in the alternative, to stay the proceedings. On February 16, 1999, Plaintiffs Warren Dewhurst, Harry Burks, Jr., Robert Dewhurst, Serguej Domaratskij, Latitudes Trading Company, Inc. ("LTC"), DCI Engineering and Consulting Ltd. ("DCI"), and Neva-Nor Telekom AS ("NNT") filed a complaint with this Court against Defendant Telenor AS, a wholly-owned subsidiary of the government of Norway; Defendants Telenor Invest AS, Telenor International AS, Comet Telecom AS, Comet Holding AS, and Comet Advisors KFT (collectively the "Subsidiary Defendants"); and Defendants Jan Gustav Stenhagen, Arne-Kjetil Lian, and Goran Olson (collectively the "Individual Defendants"). The action stems from a business venture between Warren Dewhurst, Robert Dewhurst,1 Burks, Domaratskij, LTC, and Telenor Invest AS. These four individuals and two corporations were shareholders in both NNT and a companion corporation, Full-Cry Neva ("FCN").

In June 1993, Warren Dewhurst, Robert Dewhurst, Burks, Domaratskij, and LTC (collectively the "Founders") formed FCN to operate a paging system in St. Petersburg, Russia. In an attempt to obtain additional funding for the corporation, these Plaintiffs reached an agreement with Telenor Invest AS whereby Telenor Invest AS agreed to invest $700,000 into the venture in exchange for a 50 percent ownership in the company. The parties also agreed to establish a new corporation, ultimately NNT, to provide financial and management services to FCN (collectively the "NNT/FCN venture"). The agreement stated that Telenor Invest AS would likewise receive a 50 percent ownership in NNT. NNT was eventually incorporated in Norway, although much of its business was conducted from Germantown, Maryland.

Plaintiffs' complaint alleges that Telecom AS and the Subsidiary Defendants (collectively the "Corporate Defendants") breached funding, service, and settlement agreements with the Plaintiffs; that the Corporate Defendants breached employment contracts with Burks and Warren Dewhurst; that the Defendants breached fiduciary duties owed to the Plaintiffs; that conduct by Olson and the Corporate Defendants resulted in a tortious interference with contractual relations between the Plaintiffs and outside investors; and that the actions of the Defendants were conducted in bad faith and in breach of the covenants of good faith and fair dealing. On July 13, 1999, the Defendants filed a motion to dismiss the complaint or, in the alternative, to stay the proceedings pending arbitration proceedings that have commenced in Paris, France. The Defendants move to dismiss asserting several challenges to this Court's jurisdiction, as well as other procedural and substantive challenges. For the reasons that follow, this Court holds that it lacks subject matter jurisdiction over any of the claims, and therefore grants the Defendants' motion to dismiss.

STANDARD OF REVIEW

The Fourth Circuit recently summarized the basic principles governing the resolution of a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction:

The plaintiff has the burden of proving that subject matter jurisdiction exists. When a defendant challenges subject matter jurisdiction pursuant to Rule 12(b)(1), the district court is to regard the pleadings as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment. The district court should grant the Rule 12(b)(1) motion to dismiss only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.

Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir.1999) (internal citations omitted). While the Fourth Circuit has not addressed the standard of review when the motion to dismiss is based on a claim of foreign sovereign immunity, a district court may need to make a more searching inquiry into the alleged facts before asserting jurisdiction over the foreign state. See Jungquist v. Sheikh Sultan Bin Khalifa al Nahyan, 115 F.3d 1020, 1027-28 (D.C.Cir. 1997) ("Where the motion to dismiss is based on a claim of foreign sovereign immunity, which provides protection from suit and not merely a defense to liability, however, the court must engage in sufficient pretrial factual and legal determinations to satisfy itself of its authority to hear the case before trial.") (internal quotations omitted).

BACKGROUND

Telenor AS is a Norwegian company, all of whose shares are owned by the Government of Norway. (Decl. of Jan Gustav Stenhagen, Defs. Mot., Ex. A ["Stenhagen Decl."], ¶ 9) Until December 1998, Telenor AS owned all of the shares of Telenor International AS, another Norwegian company. (Id. at ¶ 9) Telenor International AS, in turn, owned all of the shares of Telenor Invest AS, a company organized under Norwegian law. (Id. at ¶ 11) In December 1998, Telenor International AS merged into Telenor Invest AS and, within a few days, the name was changed to Telenor International AS. (Id. at ¶ 12 & Ex. 4) Prior to that time, Telenor Invest AS owned all of the shares of two Norwegian corporations, Comet Holding AS and Comet Telecom Advisers Kft ("Comet Advisers Kft"). (Defs.Mot., pp. 3-4) Telenor International AS currently owns all of the shares of both Comet Holding AS and Comet Advisers Kft. (Stenhagen Decl. at ¶¶ 13-14)

In June 1993, the Founders formed FCN to provide paging services in St. Petersburg, Russia. (Pls. Opp'n, p. 4; Aff. of H. Edward Burks, Pls. Opp'n, Ex. 24 ["Burks Aff."], ¶ 3) In early 1994, in an attempt to gain additional funding for their enterprise, the Founders met with representatives for Telenor Invest AS. (Aff. of Warren Dewhurst, Pls. Opp'n, Ex. 23 ["Dewhurst Aff."], ¶ 27) After some preliminary negotiating difficulties, in May 1995, the parties eventually reached an agreement. (Id. at ¶¶ 27-35) The parties agreed that Telenor Invest AS would contribute $700,000 to the venture and, in return, would receive a 50 percent ownership in both FCN and a new company to be formed. (Pls. Opp'n, Ex. 9; Stenhagen Decl., ¶ 23)

This new company, eventually named NNT, was to provide financial and management services to FCN. (Def. Mot., p. 5; Stenhagen Decl., ¶ 22) The parties eventually decided on Norway as the place of incorporation for the new company. (Id. at ¶ 21; Pls. Opp'n, Exs. 9 & 13) According to the Plaintiffs, "NNT was registered in Norway at the insistence of Telenor Invest AS to facilitate the timeliness of their investment, with the clear understanding that all work performed by employees would be in Germantown, Maryland." (Dewhurst Aff., ¶ 10)

The parties then entered into two shareholders' agreements, one governing FCN ("FCN Shareholders Agreement") and one governing NNT ("NNT Shareholders Agreement") (collectively the "Shareholders Agreements"). (Pls. Opp'n, Exs. 10 & 12) The ownership percentage for each of these companies was the same: Telenor Invest AS, 50 percent; Warren Dewhurst, 22 percent; Domaratskij, 13 percent; Robert Dewhurst, 5 percent; Burks, 5 percent; and LTC, 5 percent. (Id.) LTC is a Colorado corporation wholly owned by Robert Busch, a Norwegian citizen. (Id. at p. 3; Stenhagen Decl., ¶ 6) The Shareholders Agreements provided that the parties should "use their best endeavors to settle amicably any dispute, controversy or claim which may arise out of or in connection with [the agreements], but failing results from such efforts, the dispute, controversy or claim shall be settled by arbitration in accordance with the ICC Arbitration Institute Rules." (Pls. Opp'n, Exs. 10 & 12) Stockholm, Sweden, was listed as the site for any such arbitration proceedings. (Id.)

On August 30, 1995, Telenor Invest AS and NNT entered into a Consulting Agreement. (Id. at Ex. 15) This agreement stated that Telenor Invest AS, designated in the agreement as an "independent contractor," would provide to NNT certain consulting, marketing, and administrative services. (Id.) In return, NNT would pay Telenor Invest AS $100,000 per year for marketing and $20,000 per year for accounting and administrative services. (Id.) The agreement also provided that it "shall be governed by and construed under the laws of [sic] Norway applicable to contracts made, accepted, and performed wholly within Norway, without application of principles of conflicts of laws." (Id.)

To fulfill their marketing obligations under the agreement, Telenor Invest AS appointed a marketing and sales director, Erling Nygaard. (Dewhurst Aff., ¶ 37) Nygaard was subsequently replaced by Busch who developed a Marketing Plan for FCN. (Pls. Opp'n, Exs. 20 & 22) Plaintiffs assert that Olson, a citizen of Sweden, also performed some marketing functions. (Id. at p. 7) Olson served as a Board member of both FCN and NNT, and was also an employee of Telenor Invest AS during that period, but claims that he was never an employee of either FCN or NNT. (Decl. of Goran Olson, Defs. Mot., Ex. C ["Olson Decl."], ¶¶ 1 & 7) Plaintiffs contend that, beyond these limited marketing efforts, "Telenor Invest AS's commitment to sales and marketing for NNT effectively ended, despite the requirements of the Consulting Agreement." (Pls.Opp'n, p. 8)

NNT entered into employment agreements with both Dewhurst and Burks. (Id. at Exs. 16 & 17) Both agreements were entered into on August 30, 1995, with an effective date of June 1, 1995. (Id.) NNT employed Dewhurst as General Director, President, and Chief Executive Officer of the company. (Id. at Ex. 16)...

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