Esi, Inc. v. Coastal Power Production Co.

• Decision Date: 02 March 1998
• Docket Number: No. 96 CIV. 7381(WCC).,96 CIV. 7381(WCC).
• Citation: 995 F.Supp. 419
• Parties: ESI, INC., Plaintiff, v. COASTAL POWER PRODUCTION COMPANY a/k/a Coastal Power Company, La Casa Castro, S.A. de C.V. and Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A., Defendants.
• Court: U.S. District Court — Southern District of New York

995 F.Supp. 419

ESI, INC., Plaintiff, v. COASTAL POWER PRODUCTION COMPANY a/k/a Coastal Power Company, La Casa Castro, S.A. de C.V. and Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A., Defendants.

No. 96 CIV. 7381(WCC).

United States District Court, S.D. New York.

March 2, 1998.

COPYRIGHT MATERIAL OMITTED

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Aydelott & Aydelott, Mount Kisco, NY (Christopher P. Keenan, of Counsel), for Plaintiff.

Colson, Hicks, Edison, Colson, Matthews, Martinez & Mendoza, P.A., Miami, FL (Roberto Martinez, of Counsel), Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, New York, NY (Jeffrey B. Sklaroff, of Counsel), for Defendant Coastal Power Company.

OPINION AND ORDER

WILLIAM C. CONNER, Senior District Judge.

This diversity action arises from a dispute as to the parties' relative ownership interests in an electrical generating power plant located in El Salvador. Presently before the Court is a motion to dismiss brought by defendant Coastal Power Production Company a/k/a Coastal Power Company ("Coastal"). Coastal seeks dismissal of the Amended Complaint (1) pursuant to Fed.R.Civ.P. 12(b)(3) on the ground of improper venue, (2) on the ground of forum non conveniens, and (3) pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. For the reasons discussed below, Coastal's motion to dismiss is granted in part and denied in part.

BACKGROUND

Unless otherwise indicated, the following factual account is based on the allegations in plaintiff's Amended Complaint, including documents appended to, and documents incorporated by reference by, the Amended Complaint. See Fed.R.Civ.P. 10(c); Hertz Corp. v. City of New York, 1 F.3d 121, 125 (2nd Cir.1993); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2nd Cir.1991). To the extent that this factual background refers to the supplementary affidavit and declarations submitted by the parties, such information will be considered only for purposes of deciding the venue and forum non conveniens issues. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) (deciding forum non conveniens motion on the basis of affidavits); Cuizon v. Kedma, Ltd., No. 96 Civ. 0229, 1997 WL 37938 (S.D.N.Y. Jan.30, 1997) (deciding Rule 12(b)(3) motion to dismiss for improper venue on the basis of affidavits). Any references in the factual background to these supplemental materials will be disregarded for purposes of deciding whether the Amended Complaint states a cognizable claim.¹ See Cortec, 949 F.2d at 47 (in deciding Rule 12(b)(6) motion to dismiss, court may not consider any documents outside the pleadings).

In 1993, the government of El Salvador, through its nationally-owned utility, Comision Ejecutiva Hidroelectrica del Rio Lempa ("CEL"), solicited bids from developers for the construction, ownership, and operation of an electrical generating power plant to be built in Nejapa, El Salvador (the "Project"). The winning bidder would receive the exclusive right, for a fixed period, to negotiate and execute with CEL a "Power Purchase Agreement," which would establish the terms and conditions under which the bidder would agree to construct and operate the power plant and CEL would agree to purchase electricity from that facility.

Several developers organized to secure the right to develop the power plant. Defendant Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A. ("DELASA"),² contacted Independent Energy Corporation ("IEC")³ to participate in submitting a bid proposal to CEL. In turn, IEC invited United Thermal Development Corporation ("UTDC")⁴ to be a joint venturer in submitting a bid proposal to CEL and developing the power plant. Defendant La Casa Castro, S.A. de C.V. ("La Casa Castro"), an El Salvador corporation, acted as the host company and in-country liaison for the developers.

In January 1994, IEC and UTDC submitted a joint bid on behalf of themselves, DELASA, and La Casa Castro. CEL accepted the bid the following month, granting IEC and UTDC the exclusive right, for a limited time, to enter a Power Purchase Agreement.⁵ Around this time, UTC (including its subsidiary, UTDC) was acquired by Trigen Energy Corporation ("Trigen").⁶ Trigen was substituted for UTDC on the bid and took its place as a Project developer.

At the end of April 1994, Trigen, DELASA and La Casa Castro entered a written agreement establishing their respective rights and obligations as joint venturers (the "Three-Party Agreement"). The Three-Party Agreement, which was negotiated and executed in New York, (Affidavit of Robert McVay, dated Mar. 19, 1997, ¶¶ 8-12), did not include IEC. The Three-Party Agreement established the proportionate ownership interests in the Project: Trigen, 75%; La Casa Castro, 15%; DELASA, 10%.

The Three-Party Agreement also stipulated that Trigen alone would enter into the Power Purchase Agreement with CEL. Because the bid had been awarded jointly to IEC and UTC (Trigen's predecessor), Trigen requested, and obtained, an assignment of IEC's interest in the Project.

Prior to this assignment, Robert McVay was a Vice President of IEC and served as Director of the Project. In January 1994, McVay left IEC and formed ESI, Inc. ("ESI"), the plaintiff in this action.⁷ As head of ESI, McVay continued to serve as Project Director; as compensation for his services, in May 1994 DELASA assigned one-quarter of its 10% interest in the Project to ESI (the "DELASA-ESI Assignment"). The DELASA-ESI Assignment specifically referred to the Three-Party Agreement as the source of DELASA's interest in the Project. As required by Section 14 of the Three-Party Agreement, the DELASA-ESI Assignment received the written consent of both Trigen and La Casa Castro. Trigen signed the DELASA-ESI Assignment in its New York office. (McVay Aff. ¶ 14.)

Before Trigen executed the Power Purchase Agreement, Trigen and Tenneco Gas International, Inc. ("Tenneco") agreed that Trigen would assign its entire interest in the Project to Tenneco after the Power Purchase Agreement had been executed. However, Tenneco would not accept the assignment from Trigen, and Trigen would not execute the Power Purchase Agreement, unless DELASA and La Casa Castro first released Trigen from any and all obligations under the Three-Party Agreement. On May 17, 1994, after several extensions of the deadline for the execution of the Power Purchase Agreement had passed, and as the deadline for forfeiting the $2 million bond approached, DELASA and La Casa Castro executed a Release Agreement. The Release Agreement made no mention of ESI or of the DELASA-ESI Assignment.

After obtaining the release, Trigen executed the Power Purchase Agreement with CEL and simultaneously assigned its interest in the Project to Tenneco (the "Trigen-Tenneco Assignment"). The Trigen-Tenneco Assignment was executed in Trigen's New York office. (McVay Aff. ¶ 36.) Thereafter, Tenneco sold its interest in the Project to defendant Coastal, which guided the Project to completion.⁸

ESI commenced this action on September 27, 1996, seeking a declaration as to the validity and enforceability of its 2.5% ownership interest in the power plant. The original complaint asserted only one cause of action (for a declaratory judgment) and named only Coastal as a defendant. On July 22, 1997, ESI filed an Amended Complaint adding DELASA and La Casa Castro as defendants and setting forth several new claims.⁹ Unless otherwise stated, all claims in the Amended Complaint are against all three defendants.

The First Claim in the Amended Complaint seeks a declaratory judgment that, pursuant to the Three-Party Agreement and the DELASA-ESI Assignment, ESI has a valid and enforceable ownership interest in 2.5% of the Project and the power plant's income. The Second Claim, against Coastal and La Casa Castro, alleges damages related to ESI's status as an intended third-party beneficiary of the Power Purchase Agreement. The Third Claim seeks damages for breach of the Three-Party Agreement. The Fourth Claim, against Coastal only, alleges tortious interference with the Three-Party Agreement. The Fifth and Seventh Claims, respectively, allege conversion of ESI's interest in the Project and conspiracy to commit conversion. The Sixth and Eighth Claims, respectively, allege breach of fiduciary duty and conspiracy to commit such breach. The Ninth Claim, against DELASA only, seeks damages for breach of the DELASA-ESI Assignment. The Tenth and Eleventh Claims, against Coastal and La Casa Castro, allege, respectively, tortious interference and conspiracy to interfere with the DELASA-ESI Assignment. The Twelfth Claim seeks an accounting and the imposition of a constructive trust. The Thirteenth Claim alleges unjust enrichment. Finally, the Fourteenth Claim seeks damages for prima facie tort.

Coastal now moves to dismiss the Amended Complaint on three grounds. First, it contends that under 28 U.S.C. § 1391(a)(2), the Southern District of New York is an improper venue for this action. Second, even if venue is statutorily proper, Coastal asserts that the case should be dismissed based on the doctrine of forum non conveniens. Lastly, pursuant to Fed.R.Civ.P. 12(b)(6), Coastal seeks dismissal of each claim against it, with the exception of the Third Claim, for failure to state a claim upon which relief may be granted.

DISCUSSION

I. Venue

When venue is challenged, the plaintiff bears the burden of proving that venue is proper in the chosen forum. Central Sports Army Club v. Arena Assocs., Inc., 952 F.Supp. 181, 188 (S.D.N.Y.1997). Here, ESI asserts (1) that this venue is proper based on the forum-selection clause in the Three-Party Agreement, to which it contends Coastal is a successor, and (2) that, in any event, venue is proper under 28 U.S.C. § 1391(a). The Court need not decide at this point whether Coastal is a successor to the...