Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd., 20100128–CA.

• Decision Date: 02 February 2012
• Docket Number: No. 20100128–CA.,20100128–CA.
• Citation: 701 Utah Adv. Rep. 10,275 P.3d 257,2012 UT App 32
• Parties: ENERGY CLAIMS LIMITED, a British Virgin Islands company, Plaintiff and Appellant, v. CATALYST INVESTMENT GROUP LIMITED; Timothy Roberts; ARM Asset–Backed Securities, S.A.; Christopher P. Baker; Thomas DePetrillo; Charles Becker; and Robert Beuret, Defendants and Appellees.
• Court: Utah Court of Appeals

2012 UT App 32

275 P.3d 257

701 Utah Adv. Rep. 10

ENERGY CLAIMS LIMITED, a British Virgin Islands company, Plaintiff and Appellant,

v.CATALYST INVESTMENT GROUP LIMITED; Timothy Roberts; ARM Asset–Backed Securities, S.A.; Christopher P. Baker; Thomas DePetrillo; Charles Becker; and Robert Beuret, Defendants and Appellees.

No. 20100128–CA.

Court of Appeals of Utah.

Feb. 2, 2012.

Jefferson W. Gross and Robert J. Shelby, Salt Lake City, for Appellant.

Reid W. Lambert, Anthony M. Grover, James L. Barnett, and Mona L. Burton, Salt Lake City; and Charles D. Schmerler, James H. Neale, and Jami Mills Vibbert, New York City, New York, for Appellees.

Before Judges McHUGH, VOROS, and ROTH.

AMENDED OPINION ¹

McHUGH, Associate Presiding Judge:

¶ 1 Energy Claims Limited (ECL) appeals the trial court's dismissal of its claims against Catalyst Investment Group Limited (Catalyst), Timothy Roberts, Christopher P. Baker, Thomas DePetrillo, Charles Becker, and Robert Beuret for forum non conveniens, and the dismissal of its claims against ARM Asset–Backed Securities, S.A. (ARM), for improper venue. We affirm.

BACKGROUND ²

¶ 2 Eneco, Inc., was incorporated in Utah in 1991 for the purpose of developing technologies related to cold fusion. Eneco subsequently redirected its research and development activities to focus on thermal chip technologies. Between 1999 and 2006, Eneco raised and spent significant funds by selling equity in Eneco and borrowing funds from lenders. One group of lenders, the 2005 Noteholders, advanced several million dollars to Eneco, securing the loans with Eneco's rights to its patents. In 2006, Eneco's board of directors (board)—consisting of Harold L. Brown, Max Lewinsohn, Patrick Murrin, and Charles Becker—projected that a minimum of $5 million in additional funds was needed to develop a commercially-viable product.

¶ 3 On May 15, 2006, Eneco entered into a contract with Catalyst (Catalyst Agreement), a United Kingdom investment group with its principal place of business in London, England. Pursuant to the Catalyst Agreement, Catalyst agreed to provide general corporate financial advice and to assist Eneco in the issuance of a $40 million convertible corporate bond. The Catalyst Agreement contained a forum selection clause that stated, “This Agreement 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.” Timothy Roberts, the executive director of Catalyst, represented that Catalyst would raise $5 million for Eneco by September 30, 2006. Roberts is a resident of England and a director and agent of ARM, a société anonyme ³ incorporated under the laws of the Grand Duchy of Luxembourg. ARM's principal place of business is in Luxembourg, and its operations are focused on transactions involving asset-backed securities. Acting as ARM's agent, Catalyst advised Eneco to involve ARM in its fundraising efforts. Specifically, Catalyst proposed that Eneco “sell an investment bond, the ‘C3 Bond,’ issued by Eneco Financing, S.A., which in turn would be made up of bonds issued by Eneco and bonds issued by ARM.” Catalyst also encouraged Eneco to form two subsidiaries, Eneco Europe, PLC (Eneco Europe), and Eneco Assets, Ltd. (Eneco Assets). Catalyst's strategy called for Eneco to license its intellectual property rights in the United Kingdom to Eneco Assets, then sell shares of Eneco Assets to Eneco Europe, so that Catalyst could offer shares of Eneco Europe to third-party investors to fund Eneco Europe's purchase of shares of Eneco Assets. Catalyst represented that this mechanism would raise at least $5 million for Eneco.

¶ 4 To facilitate the sale of Eneco Europe's shares and the issuance of the $40 million convertible bond, Catalyst asked Eneco to convert the 2005 Noteholders' debt to equity. Catalyst, ARM, and Roberts were aware that the 2005 Noteholders were unlikely to agree to such a conversion in the absence of assurances that Catalyst was successful in its fundraising efforts on behalf of Eneco. Based on written assurances from Roberts, Eneco informed the 2005 Noteholders that Catalyst had raised $5 million as promised. In reliance on this information, “the 2005 Noteholders agreed to convert their loans to equity upon the express condition that Catalyst had raised $5 million for Eneco,” and “Eneco treated the debt owed to [the] 2005 Noteholders as having been converted to equity.”

¶ 5 By early 2007, Eneco's board was concerned that none of the money allegedly raised by Catalyst had been received. Therefore, the board “hired counsel in the United Kingdom in order to investigate and pursue possible claims against Catalyst and possibly others for breach of contract and fraud.” Catalyst was made aware of Eneco's concerns through a letter from Eneco's U.K. lawyer demanding that it perform its obligations under the Catalyst Agreement. ⁴

¶ 6 In June 2007, Roberts approached Becker, a member of Eneco's board, to enlist his help in reconstituting Eneco's board for the benefit of Catalyst and ARM. Becker is a resident of Texas. In exchange for Becker's efforts to appoint three new directors acceptable to Catalyst, Catalyst agreed to pay Becker, or a company controlled by Becker, $300,000 to develop a demonstration unit of Eneco's technology. Without disclosing the agreement with Catalyst to the rest of Eneco's board, Becker recruited three new directors, Baker, Beuret, and DePetrillo, who were investment bankers “familiar to Catalyst.” Baker and Beuret are residents of Massachusetts, and DePetrillo is a resident of Rhode Island. Becker, Baker, DePetrillo, and Beuret (collectively, Defendant Directors) secretly acquired proxies from Eneco's shareholders and voted those shares so that Baker, DePetrillo, and Beuret were appointed to the Eneco board. Once ensconced on the Eneco board, the Defendant Directors conspired with Catalyst, ARM, and Roberts “to pursue their own self interests at the expense of Eneco.” Specifically, ECL alleges that the conspirators publically listed Eneco's stock, enriched themselves with fees, and refused to hold a special shareholder's meeting authorized by resolution of the board.

¶ 7 By October 2007, Eneco was in default to the 2005 Noteholders and had no means to satisfy the deficiencies; the board acknowledged that the debt had been improperly converted to equity. Eneco's chief executive officer, Lewinsohn, acting through Maximillian & Co., an English sole proprietorship, notified Eneco that Maximillian & Co. had been appointed as collateral agent for the 2005 Noteholders. Despite numerous proposals from Maximillian & Co. to resolve the matter favorably to Eneco and to reconstitute the Eneco board in a manner acceptable to the 2005 Noteholders, the Defendant Directors refused to accept any offer from Maximillian & Co. and also rejected the written financing proposals from two other suitors presented to Eneco's board by Lewinsohn in November 2007. In response, Lewinsohn resigned as a director of Eneco and Murrin resigned shortly thereafter. In December 2007, Lewinsohn, acting through Maximillian & Co., initiated procedures to foreclose on Eneco's right to its patents on behalf of the 2005 Noteholders.

¶ 8 In December 2007, the Eneco Europe board, which included Roberts's wife, Barbara Piper, “put Eneco Europe into administration under the laws of the United Kingdom due to it insolvency.” Because the administration of Eneco Europe was detrimental to Catalyst's business reputation, Catalyst sought a method to make Eneco Europe solvent. Roberts and Catalyst accomplished this purpose by inducing the Defendant Directors to forgive Eneco Europe's $3.5 million debt to Eneco for no consideration.

¶ 9 In early 2008, the Defendant Directors entered into an agreement with Catalyst, ARM, and Roberts (the Subscription Agreement), in which ARM agreed to finance Eneco's anticipated bankruptcy proceedings for $225,000 by purchasing shares of Eneco in that amount “provided that [ARM] obtain a release of any prior commitment to provide funds to Eneco.” The Subscription Agreement contained provisions selecting the laws of England and Wales and designating the courts of England and Wales as the choice of forum. ECL alleges that, in furtherance of the conspiracy, the Defendant Directors entered into the Subscription Agreement, thereby releasing Roberts, Catalyst, and ARM from liability for breach of the Catalyst Agreement, and that they did so without adequate consideration.

¶ 10 On January 18, 2008, Eneco filed for reorganization under Chapter 11 of the United States Bankruptcy Code. See generally 11 U.S.C. §§ 1101–74 (2006). Thereafter, in June 2008, the bankruptcy trustee converted the case to a liquidation proceeding pursuant to Chapter 7 of the Bankruptcy Code. See generally id. §§ 701–84. All of Eneco's assets were sold by the bankruptcy trustee to pay Eneco's creditors. Maximillian & Co., the 2005 Noteholders' collateral agent, purchased Eneco's causes of action against all of the defendants from the bankruptcy estate for $750,000. Maximillian & Co. then assigned those causes of action to ECL. ECL is a British Virgin Islands company with its principal place of business in Tortola, British Virgin Islands.

¶ 11 On January 9, 2009, ECL filed a complaint in the Third Judicial District Court of Utah against Catalyst, ARM, and the Defendant Directors, asserting three causes of action and praying for over $150 million in relief. First, ECL alleges that the Defendant Directors breached their fiduciary duties to Eneco in their dealings with Catalyst, ARM, and Roberts. Second, ECL contends that the Defendant Directors, Catalyst, Roberts, and ARM entered into a civil conspiracy in furtherance of which the Defendant Directors “(1) refused to pursue claims against Catalyst, ARM, and Roberts, (2) released claims against Catalyst, ARM and Roberts, and (3) released claims against Eneco...