Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd.

• Decision Date: 09 May 2014
• Docket Number: No. 20120156.,20120156.
• Parties: ENERGY CLAIMS LIMITED, Petitioner, v. CATALYST INVESTMENT GROUP LIMITED, Timothy Roberts, Arm Asset–Backed Securities, S.A., Charles P. Baker, Thomas Depetrillo, Charles Becker, and Robert Beuret, Respondents.
• Court: Utah Supreme Court

325 P.3d 70

ENERGY CLAIMS LIMITED, Petitioner,

v.CATALYST INVESTMENT GROUP LIMITED, Timothy Roberts, Arm Asset–Backed Securities, S.A., Charles P. Baker, Thomas Depetrillo, Charles Becker, and Robert Beuret, Respondents.

No. 20120156.

Supreme Court of Utah.

May 9, 2014.

Jefferson W. Gross, Salt Lake City, for petitioner.

Charles D. Shmerler, James H. Neale, Jami Mills Vibbert, James L. Barnett, and Darren G. Reid, Salt Lake City, for respondents Catalyst Investment Group Limited, Timothy Roberts, and ARM Asset–Backed Securities, S.A.

Reid W. Lambert and Anthony M. Grover, Salt Lake City, for respondents Christopher P. Baker, Thomas DePetrillo, Charles Becker, and Robert Beuret.

Chief Justice DURRANT, opinion of the Court:

INTRODUCTION

¶ 1 Energy Claims Limited (ECL), a British Virgin Islands company, filed suit in Utah district court, asserting a now defunct Utah corporation's claims against that corporation's former directors, Catalyst Investment Group Limited (Catalyst), Mr. Timothy Roberts, and ARM Asset–Backed Securities, S.A. (ARM). All of the defendants reside, or have their principal place of business, outside of Utah. The district court dismissed ECL's claims against the former directors, Catalyst, and Mr. Roberts on the basis of forum non conveniens. It also dismissed the claims against ARM for improper venue based on a forum selection clause. The court of appeals affirmed these dismissals.

¶ 2 We granted certiorari to consider (1) whether we should adopt a threshold choice-of-law inquiry before undertaking a forum non conveniens analysis; (2) whether the court of appeals erred in affirming dismissal of ECL's claims against the directors, Catalyst, and Mr. Roberts for forum non conveniens; and (3) whether the court of appeals erred in affirming dismissal of ECL's claims against ARM for improper venue. As discussed below, we decline ECL's invitation to adopt the threshold choice-of-law test. But we nevertheless conclude that the court of appeals erred in affirming dismissal on the basis of forum non conveniens and on the basis of improper venue. Accordingly, we remand this case for further proceedings consistent with this opinion.

BACKGROUND ¹

¶ 3 ECL is a British Virgin Islands company and has its principal place of business in Tortola, British Virgin Islands. It is the assignee of certain claims of Eneco, Inc. (Eneco), a now defunct Utah Corporation. Eneco incorporated under Utah law in 1991 and eventually focused its research and development on thermal chip technology. A group of lenders, referred to by the parties as the “2005 Noteholders,” provided millions of dollars in initial loans, which were secured by patent rights that Eneco had previously obtained.

¶ 4 In 2006, however, Eneco's board of directors (Eneco's Board), which then consisted of Mr. Harold Brown, Mr. Max Lewinsohn, Mr. Patrick Murrin, and Mr. Charles Becker, determined that Eneco would need an additional $5 million to develop a commercially viable product. To this end, Eneco engaged the services of Catalyst, a United Kingdom (UK) company whose principal place of business is in London, England. The result of this engagement was an agreement (Catalyst Agreement) for Catalyst to provide general corporate financial advice and to assist Eneco in the issuance of $40 million in convertible corporate bonds. Catalyst represented that it would raise a minimum of $5 million for Eneco by September 30, 2006. The Catalyst Agreement contained a forum selection and choice-of-law provision, which provided that the “[a]greement shall be governed by, and construed in accordance with the Laws of England, and the parties hereto submit to the exclusive jurisdiction of the Courts of England and Wales.”

¶ 5 Catalyst further proposed that the bonds being sold to raise funds for Eneco would also benefit ARM, a joint-stock company incorporated under the laws of the Grand Duchy of Luxembourg and based principally in Luxembourg. Catalyst, acting as ARM's agent, recommended that Eneco issue an investment bond, the C3 Bond, that would in turn be made up of other bonds issued by Eneco and ARM. It further advised Eneco to form two subsidiaries: Eneco Assets, Ltd. (Eneco Assets) and Eneco Europe, PLC (Eneco Europe). Catalyst advised Eneco to sell the right to use Eneco's patents in the UK to Eneco Assets. Eneco Europe would purchase shares of Eneco Assets, and Catalyst would in turn sell shares of Eneco Europe to third-party investors. Catalyst represented that this approach would raise the $5 million Eneco needed to develop its product.

¶ 6 To facilitate this approach, Catalyst advised Eneco to convert the debt it owed to the 2005 Noteholders into equity. Eneco informed Catalyst, ARM, and Mr. Timothy Roberts—a UK resident and an executive director for Catalyst as well as a director and agent for ARM—that the 2005 Noteholders would be unlikely to go along with the conversion absent assurances of Catalyst's success in raising funds for Eneco. Mr. Roberts accordingly provided written assurances that Catalyst had raised the $5 million necessary for Eneco. ECL alleges that these assurances were false and that, in reliance on these false assurances, Eneco treated the 2005 Noteholders' loans as having been converted to equity.

¶ 7 In early 2007, Eneco's Board became concerned when Catalyst failed to deliver the funds as promised. Eneco hired legal counsel in the UK to investigate Catalyst and others for fraud and breach of the Catalyst Agreement. In response, Catalyst, ARM, and Mr. Roberts approached Mr. Becker, a resident of Texas, to seek his cooperation in reconstituting Eneco's Board in an effort to relieve Catalyst and ARM of Eneco's claims. Catalyst offered to pay Mr. Becker or his company $300,000 toward development of Eneco's technology to secure his cooperation. ECL alleges that Catalyst, ARM, Mr. Roberts, and Mr. Becker then recruited Mr. Christopher Baker, Mr. Robert Beuret, and Mr. Thomas DePetrillo, who were each investment bankers familiar to Catalyst, as acceptable additions to Eneco's Board. Mr. Baker and Mr. Beuret are both residents of Massachusetts, and Mr. DePetrillo is a resident of Rhode Island. Mr. Becker did not disclose to Eneco's Board his agreement with Catalyst, ARM, and Mr. Roberts.

¶ 8 Mr. Becker, Mr. Baker, Mr. DePetrillo, and Mr. Beuret (collectively, the Director Defendants) then secretly acquired proxies from Eneco's shareholders to successfully reconstitute Eneco's Board and gain a controlling vote. ² ECL alleges that, “once in control,” the Director Defendants sought “to accommodate their own interests and the interests of Catalyst, ARM and [Mr.] Roberts at the expense of Eneco.” Specifically, ECL alleges that the Director Defendants listed Eneco's shares publicly, enriched themselves with fees, and declined to conduct a special shareholders meeting as required by law—all pursuant to a conspiracy financed by Catalyst, ARM, and Mr. Roberts.

¶ 9 By late 2007, Eneco was in default to the 2005 Noteholders. Eneco had no means to cure the default, and its Board acknowledged that the previous conversion of the debt to equity was improper. Mr. Lewinsohn, acting through Maximillian & Co. (Maximillian), an English sole proprietorship, notified Eneco that the 2005 Noteholders had appointed Maximillian as their collateral agent. Maximillian then made a number of proposals to resolve the default favorably to Eneco and to reconstitute Eneco's Board, all of which were rejected by the Defendant Directors. As a result, Mr. Lewinsohn and Mr. Murrin resigned as directors of Eneco. Further, Mr. Lewinsohn and Maximillian, on behalf of the 2005 Noteholders, began procedures to foreclose on Eneco's patent rights.

¶ 10 Also at this time, Eneco Europe went “into administration under the laws of the United Kingdom due to its insolvency.” This was apparently detrimental to Catalyst's business reputation, so Catalyst sought to make Eneco Europe solvent again. ECL alleges that Mr. Roberts and Catalyst accomplished this effort by inducing the Director Defendants, without consideration, to forgive Eneco Europe's debt to Eneco.

¶ 11 In early January 2008, the Director Defendants entered into an agreement with Catalyst, ARM, and Mr. Roberts (Subscription Agreement) in which ARM agreed to finance Eneco's expected bankruptcy by purchasing $225,000 worth of shares in Eneco in return for a release of any prior commitment for ARM to provide funding to Eneco. The Subscription Agreement “supercede[d] and revoke [d]” any prior commitments from Catalyst, ARM, and Mr. Roberts. The Subscription Agreement contained a forum selection clause providing that “[a]ny dispute, controversy or claim arising out of or related to the agreement shall be brought exclusively before the courts of England [and] Wales.” It also contained a choice-of-law provision, which stated that the “agreement shall be governed by, and construed and enforced in accordance with the laws of England [and] Wales.” ECL alleges that the Director Defendants “essentially caused Eneco to release million dollar claims against the Defendants for fraud and breach of contract in exchange for $225,000.”

¶ 12 Eneco subsequently filed for Chapter 11 bankruptcy in the United States Bankruptcy Court of the District of Utah. In June 2008, Eneco's court-appointed trustee converted the case to a Chapter 7 bankruptcy and liquidated Eneco's assets. And in November 2008, the trustee assigned Eneco's causes of action to ECL in exchange for $750,000.

¶ 13 ECL then filed three claims in the Third Judicial District Court of Utah on January 9, 2009, including (1) a claim for breach of fiduciary duty against the Director Defendants; (2) a claim for civil conspiracy against the Director Defendants, Catalyst, ARM, and Mr. Roberts; and (3) a claim for aiding and abetting breaches of fiduciary duty against Catalyst, ARM, and Mr. Roberts. All of the parties named in the complaint reside, or have their principal place of...