Duke Energy Int'l v. Napoli

• Decision Date: 21 September 2010
• Docket Number: Civil Action No. H–09–2408.
• Citation: 748 F.Supp.2d 656
• Parties: DUKE ENERGY INTERNATIONAL, L.L.C. et al., Plaintiffs,v.Michael J. NAPOLI, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

748 F.Supp.2d 656

DUKE ENERGY INTERNATIONAL, L.L.C. et al., Plaintiffs,
v.
Michael J. NAPOLI, et al., Defendants.

Civil Action No. H–09–2408.

United States District Court, S.D. Texas, Houston Division.

Sept. 21, 2010.

[748 F.Supp.2d 662]

Gerard G. Pecht, Amy Garzon, Brian Cody Boyle, Fulbright Jaworski LLP, Houston, TX, for Plaintiffs.Murray J. Fogler, Beck Redden et al., Glenn A. Ballard, Jr., Andrew William Zeve, Bracewell Giulliani LLP, Patricia Hair, Phelps Dunbar LLP, Houston, TX, William B. Fleming, Gage, Spencer & Fleming, LLP, New York, NY, Garry L. Wills, Joseph L. Fogel, Michael J. Kelly, Feeborn & Peters LLP, Chicago, IL, for Defendants.

MEMORANDUM AND ORDER ON MOTIONS TO DISMISS NANCY F. ATLAS, District Judge.

+--------+
                ¦CONTENTS¦
                +--------¦
                ¦ ¦
                +--------+
                

I. BACKGROUND 663
                II. RULE 12(b)(6) STANDARD 664
                III. ANALYSIS 666
                

 A. Choice of Law 666
                 B. Aiding and Abetting Breach of Fiduciary Duty 666
                

 The Existence of a Fiduciary Duty between Napoli/Torre and
                 1. Duke 666
                 2. The Existence of the Cause of Action Under North Carolina 668
                 Law
                

 C. Belyea Defendants' Arguments 669
                

 1. Fraud 669
                 2. Other Claims 671
                

 D. Wabash's Arguments 671
                

 Aiding and Abetting Breach of Fiduciary Duty or
                 1. Participation in Breach of Fiduciary Duty 672
                 2. Partnership or Joint Venture Liability 673
                 3. Civil Conspiracy 674
                

 E. Unjust Enrichment Claim 675
                 F. North Carolina Statutory Claim 676
                 Personal Jurisdiction over Peter Zinman, L.S. Belyea, and
                 G. Michael Edwards 677
                 H. Venue 681
                 I. Claims Against Gas Turbine 682
                

IV. CONCLUSION 682
                

[748 F.Supp.2d 663]

Pending before the Court are three Motions to Dismiss. Defendants Japan, Inc. (“Japan”), Gas Turbine Controls Corporation (“Gas Turbine”), Michael Zinman, Peter Zinman, and Michael Napoli (collectively, the “Japan Defendants”) filed a Motion to Dismiss [Doc. # 113] (“Japan Defendants' Motion”). Defendants Michael Edwards, L.S. Belyea, and Belyea Company, Inc. (“Belyea”) (collectively, the “Belyea Defendants”) also filed a Motion to Dismiss [Doc. # 112] (“Belyea Defendants' Motion”). Defendant Wabash Power (“Wabash”) filed a Motion to Dismiss as well [Doc. # 116] (“Wabash's Motion”). Plaintiffs Duke Energy International, L.L.C. (“DEI”), Duke Energy International Guatemala Holdings No. 1, Ltd. (“DEI–GT”), and Duke Energy International Group, Ltd. (“DEIG”) (collectively, “Duke”) filed a Response [Doc. # 120].¹ Each group of Defendants filed a Reply.² Having carefully considered the parties' submissions, applicable legal authorities, and all pertinent matters of record, the Court grants in part and denies in part Defendants' Motions.

I. BACKGROUND

Duke alleges that Defendants formed a partnership with two Duke insiders to take from Duke an opportunity to purchase a power plant and then sold the plant to Duke at a grossly inflated price. The relevant facts, taken from Duke's allegations in the Third Amended Complaint [Doc. # 100] (“Complaint”), are briefly set forth below.

Duke alleges that two of its former senior executives, Joseph Napoli (“Napoli”) and Julio Torre, DEI's Vice President of Business Development and Vice President of Regional Operations, respectively, formed a company called Artale Holding S.A. (“Artale”) during their employment with Duke.³ Artale, the existence of which

[748 F.Supp.2d 664]

Napoli and Torre kept secret from Duke, was formed for the purpose of pursuing electric power projects and acquisitions, the same business in which Duke was and is engaged. During their employment with Duke, Napoli and Torre learned of an opportunity to purchase an 80 MW power plant in North Carolina from R.J. Reynolds Tobacco Company (“RJR”). Duke alleges that Napoli and Torre then seized this corporate opportunity and acquired the right to purchase the power plant through their company Artale. Duke alleges that Napoli and Torre did so with the intention of assigning that right to a partnership of Belyea, Japan, Gas Turbine, and Wabash, which companies would also serve as middle men in subsequently selling the power plant to Duke. These corporate Defendants also provided financing for Artale's acquisition. With the Defendants' assistance, Artale executed a purchase agreement for the plant with RJR on August 17, 2007, at a price of $2.5 million (“RJR Agreement”).⁴

One week later, on August 24, 2007, Artale assigned the RJR Agreement to Belyea, which was acting on behalf of a partnership of all the corporate Defendants. Contemporaneously with the assignment, Belyea and Artale executed a Memorandum of Understanding that was to “govern the future relationship of Artale and Belyea as it pertains to the [RJR] Agreement.” ⁵ Among other things, the Memorandum of Understanding provided that “the parties wish to jointly market and sell [the power plant] to a third party.” ⁶ The Memorandum of Understanding also set forth a profit-sharing arrangement between Belyea and Artale. Under this arrangement, Artale would receive a substantially higher payment if the facility was sold to Duke than if it was sold to any other buyer.⁷ It is alleged that Defendants thereafter marketed the power plant to Duke while concealing Artale's, and thus Napoli and Torre's, role in Belyea's acquisition of the right to purchase the plant.

With Napoli and Torre using their status as Duke insiders to both influence Duke to purchase the plant and to provide Defendants with insider information on Duke's perspective on the negotiations, Defendants succeeded in selling the power plant to Duke for $21.3 million on February 5, 2008 (pursuant to what hereafter is referred to as the “Purchase Agreement”).⁸ This sale to Duke was less than six months after Artale had acquired the right to purchase the plant for only $2.5 million.

Duke brings claims against all Defendants for inducement and participation in—or aiding and abetting—breach of fiduciary duties (“aiding and abetting breach of fiduciary duties”); unjust enrichment; common law fraud; unfair or deceptive acts under the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75–1.1; civil conspiracy; partnership, joint venture and joint enterprise liability; and participatory liability for tortious conduct. Collectively, Defendants move to dismiss all claims. ⁹

II. RULE 12(b)(6) STANDARD

Traditionally, courts hold that a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for

[748 F.Supp.2d 665]

failure to state a claim is viewed with disfavor and is rarely granted. See Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir.2009); Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570 (5th Cir.2005). The Supreme Court has explained that in considering a motion to dismiss under Rule 12(b)(6), a complaint must be liberally construed in favor of the plaintiff and all well-pleaded facts taken as true. See Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (“[A] judge must accept as true all of the factual allegations contained in the complaint.” (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted))). Nevertheless, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Legal conclusions “are not entitled to the assumption of truth.” Id. at 1950. Legal conclusions “can provide the framework of a complaint,” but they must be supported by factual allegations. Id.¹⁰

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 1950. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The determination of “whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 1950. “But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Id. (quoting Fed. R. Civ. P. 8(a)(2)).¹¹ “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations omitted). It is insufficient to plead facts that are “merely consistent with” a defendant's liability. See Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955).

In considering a motion to dismiss, a court ordinarily must limit itself to the contents of the pleadings and attachments thereto. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir.2000) (citing Fed. R. Civ. P. 12(b)(6)). “Documents that a defendant attaches to a motion to dismiss are [also] considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim.” Id. (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.1993)); see also

[748 F.Supp.2d 666]

Kane Enters. v. MacGregor (USA), Inc., 322 F.3d 371, 374 (5th Cir.2003). “In so attaching, the defendant merely assists the plaintiff in establishing the basis of the suit, and the court in making the elementary determination of whether a claim...