Ex parte Bentley

• Decision Date: 21 May 2010
• Docket Number: 1081083.
• Citation: 50 So.3d 1063
• Parties: Ex parte Gregory S. BENTLEY et al. (In re Intergraph Corporation and Cobalt BSI Holding, L.L.C. v. Gregory S. Bentley et al.).
• Court: Alabama Supreme Court

50 So.3d 1063

Ex parte Gregory S. BENTLEY et al.

(In re Intergraph Corporation and Cobalt BSI Holding, L.L.C.

v.Gregory S. Bentley et al.).

1081083.

Supreme Court of Alabama.

May 21, 2010.

M. Christian King, William H. Brooks, and James F. Hughey III of Lightfoot, Franklin & White, L.L.C., Birmingham, for petitioners.

G. Bartley Loftin III and Walter A. Dodgen of Maynard, Cooper & Gale, P.C., Huntsville; Drayton Nabers, Jr., of Maynard, Cooper & Gale, P.C., Birmingham; Douglas B. Hargett of Hall & Tanner, P.C., Tuscumbia; and David Vance Lucas and Anthony P. Zana, Intergraph Corporation, Huntsville, for respondents.

COBB, Chief Justice.

Bentley Systems Incorporated ("BSI"), a Delaware corporation based in Pennsylvania, and Gregory S. Bentley, Keith A. Bentley, Barry J. Bentley, Raymond B. Bentley, and Richard P. "Scott" Bentley ("the Bentley brothers"), residents of Pennsylvania and the defendants in the underlying action, petition this Court for a writ of mandamus instructing the Madison Circuit Court to vacate its order denying their motion to dismiss the action or, in the alternative, to stay the proceedings in the underlying action or to enter an order dismissing the action without prejudice. The plaintiffs in the underlying action, Cobalt BSI Holding, L.L.C. ("Cobalt"), a Delaware limited-liability company based in Nevada, and Intergraph Corporation ("Intergraph"), a Delaware corporation based in Alabama, sued the defendants in the Madison Circuit Court on November 26, 2008, both directly and derivatively as shareholders of BSI. The action challenged an incentive-compensation plan between the plaintiffs and the defendants and alleged, among other things, that the Bentley brothers were operating BSI as their corporate "alter ego." The relief sought includes the permanent removal of the Bentley brothers from any managerial or directorial position at BSI. On the same day the underlying action was filed in Alabama, Cobalt filed a complaint against BSI and the Bentley brothers in the Delaware Chancery Court asserting similar claims and allegations and seeking similar relief; the Delaware action also sought an inspection of BSI's corporate books and records under Delaware business law.

On January 16, 2009, the plaintiffs filed a motion in the Alabama action seeking a preliminary injunction enjoining any further distribution of profits of BSI to the Bentley brothers. Also on January 16, BSI and the Bentley brothers filed an action in Delaware seeking a judgment declaring the law as to the same issues raised in the Alabama action. In light of their Delaware action, BSI and the Bentley brothers subsequently filed a motion to dismiss the Alabama action pursuant to Ala.Code 1975, § 6-5-430, on the ground that Delaware was a more appropriate forum. Section 6-5-430 states:

"Whenever, either by common law or the statutes of another state or of the United States, a claim, either upon contract or in tort has arisen outside this state against any person or corporation, such claim may be enforceable in the courts of this state in any county in which jurisdiction of the defendant can be legally obtained in the same manner in which jurisdiction could have been obtained if the claim had arisen in this state; provided, however, the courts of this state shall apply the doctrine of forum non conveniens in determining whether to accept or decline to take jurisdiction of an action based upon such claim originating outside this state; and provided further that, if upon motion of any defendant it is shown that thereexists a more appropriate forum outside this state, taking into account the location where the acts giving rise to the action occurred, the convenience of the parties and witnesses, and the interests of justice, the court must dismiss the action without prejudice. Such dismissal may be conditioned upon the defendant or defendants filing with the court a consent (i) to submit to jurisdiction in the identified forum, or (ii) to waive any defense based upon a statute of limitations if an action on the same cause of action is commenced in the identified forum within 60 days of the dismissal."

The Bentley brothers also asserted that they should be dismissed as defendants in the Alabama action because, they say, the Alabama court lacked personal jurisdiction over them.

The genesis of the underlying action was Intergraph's 1987 acquisition of a 50% interest in BSI by way of a stock-purchase agreement. Keith, Barry, Raymond, and Scott Bentley transferred one-half of BSI's then extant stock to Intergraph in exchange for Intergraph stock worth $3 million. At least a portion of that transaction took place in Alabama. Intergraph subsequently transferred its BSI stock to Intergraph Properties Company in 2002, and Cobalt, also an Intergraph affiliate, acquired that stock in 2006. Cobalt remains the largest single shareholder of BSI stock. Intergraph Properties merged with Intergraph in 2008.

In addition to the stock-purchase agreement, Intergraph and BSI entered into contracts for the sale and licensing of software products that have already resulted in two earlier opinions by this Court: Bentley Systems, Inc. v. Intergraph Corp., 922 So.2d 61 (Ala.2005) (" Bentley I "), and Intergraph Corp. v. Bentley Systems, Inc., [Ms. 1080300, March 12, 2010] --- So.3d ---- (Ala.2010) (" Bentley II "). Although all the facts of those complex cases are not relevant to the issues presented here, a brief review of those facts provides some insight into the relationships of the parties. In Bentley I, the Court noted that Intergraph had sold, by way of an asset-purchase agreement, engineering-design software products to Bentley ¹ for Bentley to develop and market to engineering, architectural, and design companies; the agreement encompassed the conveyance of various software products and the associated maintenance agreements. Disputes over the contractual responsibilities and liabilities of the parties resulted in Intergraph's filing a declaratory-judgement action against Bentley in the Madison Circuit Court, following which Bentley filed a counterclaim against Intergraph. After a review of the voluminous evidentiary submissions, the trial court eventually entered a judgment declaring that Intergraph was owed in excess of $7.5 million on the contractual agreements and denying Bentley the relief it sought in its counterclaim. Bentley appealed, and Intergraph cross-appealed. This Court reversed the trial court's judgment, holding, among other things, that the many factual disputes in the case were not subject to resolution by evidentiary submissions without live testimony and remanding the cause to the trial court for further proceedings.

In Bentley II, this Court summarized the proceedings in the trial court on remand:

"On remand, the trial court referred all disputed issues to a special master. The special master conducted proceedingsin three separate phases and heard live testimony from a number of witnesses. The special master submitted a report in which he concluded that the principal value of the promissory note ('the note') should be adjusted to $22,295,456; counting payments already made and cash adjustments awarded to Intergraph, the special master determined that Bentley owed Intergraph an additional $1,539,744, including $500,000 in retroactive interest, on the note. The special master awarded Bentley $2,226,486 on its breach-of-contract counterclaim for lost profits. He concluded that Intergraph was entitled to indemnification from Bentley for legal expenses totaling $6,636,144.20; he concluded that Bentley was entitled to indemnification from Intergraph for legal expenses totaling $5,731,077.98. The net result of all the special master's rulings was that, on balance, Bentley must pay Intergraph $279,733."

--- So.3d at ----. The trial court entered an order adopting the special master's findings; Intergraph appealed and Bentley cross-appealed. After an extensive analysis of the facts and legal issues governing the contractual agreements between Intergraph and Bentley, the Court held:

"We find that the trial court erred in accepting the special master's calculation of damages regarding Bentley's counterclaim because that calculation failed to include the cost of the increased value of the note in establishing Bentley's lost-profits damages, and we reverse the judgment in that respect. We also reverse the trial court's judgment insofar as it fails to award Bentley lost-profits damages for years two through five. In all other respects, the judgment of the trial court is due to be affirmed. We remand the case to the trial court for it, either with or without the assistance of the special master to hear argument from the parties and to enter a judgment consistent with this opinion."

--- So.3d at ----. Thus, litigation between Intergraph and BSI continues on the contracts involving the purchase of Intergraph's software products.

The claims underlying this petition are Intergraph's assertions that after the software licenses that granted Intergraph a license to distribute BSI's "Microstation" software product expired in 1995—and with them the "Royalty Payment Bonus Plan" that resulted in a 20% payment of Intergraph's royalty payments directly to the Bentley brothers as incentive compensation—the Bentley brothers wrongfully began distributing 20% of BSI's pre-tax profits among themselves. Intergraph and Cobalt assert that the effect of this action by the Bentley brothers has been to remove from BSI approximately $59.5 million in profits that were due to be divided among all BSI shareholders.² Thus, the plaintiffs assert that the Bentley brothers breached their fiduciary duties to BSI's corporate shareholders and fraudulently suppressed information about their "bonus" plan. The plaintiffs further assert that the Bentley brothers operate BSI as their "alter ego," without regard to the corporate board of directors or the rights of the other shareholders.

On ...