Esi, Inc. v. Coastal Corp., 96 Civ. 7381(WCC).
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
| Citation | 61 F.Supp.2d 35 |
| Docket Number | No. 96 Civ. 7381(WCC).,96 Civ. 7381(WCC). |
| Parties | ESI, INC., Plaintiff, v. The COASTAL CORPORATION, Coastal Power Company f/k/a Coastal Power Production Company, Coastal Salvadoran Power, Ltd., Coastal Nejapa, Ltd., Coastal Technology Salvador, S.A., La Casa Castro, S.A. de C.V., Crystal Power Company, Nejapa Power Company, L.L.C., Trigen Energy Corporation, EPEC Gas International, Inc. f/k/a Tenneco Gas International, Inc. and Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A., Defendants, and various cross-claim actions. |
| Decision Date | 31 August 1999 |
Aydelott & Aydelott, Mount Kisco, New York, Christopher P. Keenan, of counsel, for plaintiff ESI, Inc.
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami, Florida, Pedro J. Martinez-Fraga, of counsel, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, New York City, Jeffrey B. Sklaroff, Stephen L. Saxl, of counsel, for defendants The Coastal Corporation, Coastal Power Company f/k/a Coastal Power Production Company, Coastal Salvadoran Power, Ltd., Coastal Nejapa, Ltd., Coastal Technology Salvador, S.A., La Casa Castro, S.A. de C.V., Crystal Power Company and Nejapa Power Company, L.L.C.
Fried, Frank, Harris, Shriver & Jacobson, New York City, Janice Mac Avoy, Barry G. Sher, Stephanie Goldstein, Sean Shields, of counsel, for defendant EPEC Gas International, Inc. f/k/a Tenneco Gas International, Inc.
Gauthier, Downing, Labarre, Beiser & Dean, Metairie, Louisiana, Edward F. Downing, III, John W. Houghtaling, II, of counsel, Schierberl & Wright, New York City, Mary A. Wright, of counsel, for defendant Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A.
This diversity action arises from a dispute as to the parties' relative ownership interests in an electric power plant located in El Salvador (the "Plant"). The action is presently before the Court on a welter of motions related to the Second Amended Complaint filed by plaintiff ESI, Inc. ("ESI"), and the Amended Answer to Second Amended Complaint, Counterclaim and Cross-Claim (the "Cross-Claim") filed by defendant Latin American Energy Development, Inc. d/b/a Desarrollos Energeticos Latino Americanos, S.A. ("Delasa"). The motions are more specifically described hereinafter; principally they seek dismissal of the various claims on grounds of lack of personal jurisdiction, forum non conveniens and failure to state a claim upon which relief may be granted.
This Court has already set out a significant portion of the complex factual background of this case in ESI, Inc. v. Coastal Power Prod. Co., 995 F.Supp. 419 (S.D.N.Y.1998) ("ESI I"), which involved a motion to dismiss brought by defendant Coastal Power Company f/k/a Coastal Power Production Company ("Coastal Power"). For purposes of the instant motion, the Court assumes familiarity with that opinion and hereby incorporates its factual discussion with a few exceptions which will be discussed more fully below.1
In ESI I, we discussed the factual background of, and various agreements involving, the initial bidding process, development, ownership, construction and operation of the Plant (the "Project"). We concluded our discussion with the sale by EPEC Gas International, Inc. f/k/a Tenneco Gas International, Inc. ("Tenneco") of its interest in the Project to defendant Coastal Power. ESI has since had an opportunity to conduct further discovery with respect to the current ownership structure of the Plant and has uncovered a complex organization of affiliated companies through which profits from the Plant are ultimately distributed to Coastal Power and La Casa Castro, S.A. de C.V. ("LCC").2 Indeed, Tenneco assigned its interest in the Project, not to Coastal Power, but to Coastal Salvadoran Power Ltd. ("Coastal Salvador"), a wholly owned subsidiary of Coastal Power.
Robert C. Hart, as President of Coastal Power set forth the terms by which Coastal Power would acquire Tenneco's interest in the Project in a Letter Agreement dated July 27, 1994. See Pl's Ex. A.3 This Letter Agreement indicated that either Coastal Power or an "affiliate designated by Coastal Power" would purchase Tenneco's interest in the Project subject to the approval of the transaction by the Board of Directors of The Coastal Corporation ("Coastal Corp."),4 Coastal Power's parent corporation. See id.5 It was clear from the outset that Coastal Corp. would have to guarantee the loans acquired by Coastal Power or its affiliates in connection with the financing of the Project. See Pl's Ex. E ("Construction financing of approximately $80 million will require a Coastal [Corp.] guarantee").
Coastal Corp. authorized the transaction on July 27, 19946 and Tenneco transferred its interest in the Project to Coastal Salvador,7 a wholly owned subsidiary of Coastal Power, pursuant to a Purchase Agreement dated July 29, 1994. See Pl's Ex. L. The Purchase Agreement was signed by Robert C. Hart, as President of Coastal Salvador. See id. Coastal Salvador maintains that the Purchase Agreement was primarily negotiated and executed in Texas, although it admits to occasional telephone communications with Tenneco's counsel in New York.8
Under the terms of the Purchase Agreement, Tenneco agreed to transfer and assign to Coastal Salvador (or its designee) Tenneco's interest in the Power Purchase Agreement ("PPA"), the Engineering, Procurement and Construction Contract with Wartsila Diesel ("Wartsila"), as amended on June 17, 1994 (also known as the "Amended EPC Contract" or "Turnkey Contract"), and Tenneco's other tangible and intangible rights relating to the Project. See Pl's Exs. A, B, K and L.
As contemplated by the Purchase Agreement, Tenneco assigned the PPA and the Turnkey Contract9 to Coastal Salvador10 on July 29, 1994.11 But not until Coastal Power had guaranteed all of the obligations of Coastal Salvador ("and/or an El Salvador limited partnership of which Coastal Salvador is the General Partner") under the PPA,12 and Coastal Salvador's Board had authorized the assignment of the PPA to Coastal Salvador "and/or an El Salvador limited partnership of which Coastal Salvador will be the general partner and a limited partner."13
The "El Salvador limited partnership" contemplated by the parties was to be the Project entity that ultimately owned and operated the Plant and was to be jointly owned by Coastal Power and LCC affiliates through which the profits from the Plant would flow back to Coastal Power and LCC.14 The proposed structure and financing arrangements for the Project entity went through numerous permutations. See Pl's Exs. V, W and X. The parties ultimately decided on a lease financing model which required the creation of a limited liability company to be owned by affiliates of Coastal Power and LCC, and a U.S. special purpose trust.15
The Project entity formed to own and operate the Plant is Nejapa Power Company, L.L.C. ("Nejapa Power"), a Delaware limited liability company.16 Nejapa Power is owned 99% by the special purpose trust, .5% by Coastal Salvador, and .5% by Coastal Nejapa, Ltd. ("Coastal Nejapa"),17 which in turn is owned 90% by Coastal Salvador and 10% by Crystal Power Company, Ltd. ("Crystal Power"), a wholly owned subsidiary of LCC.18 The 99% ownership of Nejapa Power held by the special purpose trust is then "leased" to Coastal Nejapa, resulting in the flow all benefits of ownership through to the wholly owned affiliates of Coastal Power and LCC.19 Coastal Power and LCC signed a Letter Agreement confirming this arrangement on December 29, 1994. See Pl's Ex. Y.20
The affiliates of Coastal Power and LCC entered into five key agreements, dated as of December 28, 1994, in order to effectuate this arrangement: (1) the Shareholders Agreement of Coastal Nejapa; (2) the Subscription Agreement; (3) the Declaration of Trust for 1994 El Salvador Power Trust; (4) the Certificate Purchase Agreement; and (5) the Lease Agreement. In addition, Nejapa Power and Coastal Technology Salvador, S.A. ("CTS") entered into an Administrative Services Agreement. Each of these agreements will be discussed in turn.
In the Shareholders Agreement of Coastal Nejapa (Pl's Ex. FF), Crystal Power and Coastal Salvador acknowledge that Coastal Nejapa was formed for the purpose of holding an ownership interest in Nejapa Power and confirm the ownership structure of Nejapa Power as outlined above. Under the Shareholders Agreement, the authorized share capital of Coastal Nejapa is divided into Class A, B and C shares. Class A shares were issued to Crystal Power, Class B shares were issued to Coastal Salvador, and Class C shares were to be purchased by Crystal Power at a later date. This left Crystal Power with 10% ownership of Coastal Nejapa which would increase to 15% by the issuance of Class C shares to Crystal in the event that it complied with the Certificate Purchase Agreement discussed below.
Section 5.1 of the Shareholders Agreement, entitled "Governing Law; Jurisdictional Matters" states in pertinent part:
This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York.... Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York ... [or in the United States District Court] for the Southern District of New York.... The parties hereby accept for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereby irrevocably waive any objection, including any objection to the laying of venue...
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