Fineberg v. Credit Intern. Bancshares, Ltd.
| Decision Date | 23 June 1994 |
| Docket Number | No. 93-432-RRM.,93-432-RRM. |
| Citation | 857 F. Supp. 338 |
| Parties | Douglas FINEBERG, as assignee of Nexus Management, Limited, Nexus Trustees, PLC., Raymond Shingles, and Ian Coutts, Plaintiffs, v. CREDIT INTERNATIONAL BANCSHARES, LTD., Credit International Bank, N.A., Richard V. Allen, Owen J. Erickson, Edwin J. Feulner, Jr., John C. Hickman, John C. Hughes, Donald I. Hovde, Tom C. Korlogos, Charles Emmet Lucey, Charles Manatt, Donald M. Phares, and John Stuart, Defendants. |
| Court | U.S. District Court — District of Delaware |
Laurence V. Cronin, and Patricia A. Garthwaite, Smith, Katzenstein & Furlow, Wilmington, DE, Robert F. Sylvia, and Evan Slavitt, Hinckley, Allen & Snyder, Boston, MA, for plaintiffs.
Gregory V. Varallo, and Lisa A. Schmidt, Richards, Layton & Finger, Wilmington, DE, for defendants Credit Intern. Bancshares, Ltd., Credit Intern. Bank, N.A., Richard V. Allen, Edwin J. Feulner, Jr., John C. Hickman, Donald I. Hovde, Tom C. Korologos and Charles Manatt.
Michael D. Goldman, Peter J. Walsh, and Kevin R. Shannon, Potter Anderson & Corroon, Wilmington, DE, for defendant John Stuart.
TABLE OF CONTENTS
FACTUAL BACKGROUND
A. Fall of 1985: The Initial Stages in the Development of the New Business ................... 341
B. March of 1986: The Nexus Loan Agreement ................................................... 341
C. March of 1986: The Clarification of the Nexus Loan Agreement .............................. 343
D. 1987: Credit International Bancshares, Ltd. is Incorporated and Warrants and
Options are Granted to Board Members .................................................... 343
E. November of 1987: The Board's Decision to Reduce the Bank's Capitalization ................ 344
F. January of 1989: Allen Confirms CIB's Decision on Options and Warrants and
Makes a Settlement Offer to Coutts, Steere and Shingles ................................ 344
G. May of 1990: Nexus, Coutts and Shingles notify CIB of their Intent to
Sue ..................................................................................... 345
H. September of 1993: Fineberg Files Suit ................................................... 345
DISCUSSION
I. Jurisdiction ............................................................................. 348
II. Summary Judgment ......................................................................... 348
III. The Plaintiff's RICO Claim ............................................................... 348
IV. The Plaintiff's Breach of Contract Claims ................................................. 349
A. The breach of contract claim based on the Nexus Loan Agreement ......................... 350
1. 10 Del.C. § 8109: The statute of limitations for actions arising from a
promissory note or an acknowledgement under the hand of a party of a
subsisting demand ................................................................... 350
2. sealed instrument ................................................................... 351
B. The breach of contract claim based on the Commission Agreement ......................... 352
This is an action arising out of agreements to provide funding and services for a new business. The plaintiff, Douglas Fineberg, is the assignee of the entities and persons who agreed to obtain the funding or provide those services. The corporate defendants are those new businesses, Credit International Bancshares, Ltd. ("CIB"), a bank holding company incorporated in Delaware, and its wholly owned subsidiary, Credit International Bank, N.A. ("the Bank"), a federally chartered bank with offices in Washington, D.C. The individual defendants are members of the board of directors of the parent corporation, certain officers of the subsidiary and one of the corporations' attorneys.
In a complaint filed on September 3, 1993, and amended in January of 1994, the plaintiff alleges that in 1986 his assignors entered into agreements to obtain funding and provide services in connection with the creation and establishment of CIB. He contends that while his assignors provided those services and obtained those funds, the defendant corporations have wrongfully failed to issue stock options and warrants and to pay amounts due under the agreements. He contends the defendants have breached various duties owed to his assignors in wrongfully failing to pay the amounts due and in responding to the assignors' claims and requests under the agreements, including that they have violated certain provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(b)-(d).
The defendants have moved for a summary judgment that the plaintiff's claims are barred by limitations. They argue that the plaintiff's assignors were on notice of their contract and RICO claims by September of 1989 and that as the plaintiff did not file the complaint until September of 1993, the contract actions are barred by Delaware's three year statute of limitations for actions based on a contract, and the RICO claims are barred by a four year statute of limitations. The plaintiff has responded by arguing that the contract claims are not barred by limitations, as the agreements are under seal and claims based on agreements under seal are subject to a longer limitations period. While he agrees that the RICO claims are subject to a four year period for limitations, he contends they are not barred as he filed this action within four years from the date of the last predicate act which was part of the same pattern of racketeering activity.
For the reasons set out below, I will grant the defendants' motion as to the RICO claims and certain of the contract claims. I will deny the motion as to certain other contract claims.
For the purposes of this motion, the court accepts the following facts as true, either because they are the version offered by the plaintiff or because they appear to be uncontradicted.
In the fall of 1985, Donald Phares, an attorney in Chicago, began to work on implementing his idea to form a new bank based in Washington, D.C. that would specialize in serving international clients and facilitating international transactions. He asked his partner Charles Emmet Lucey to outline a proposal to form and capitalize the bank, and he asked Ian Coutts, a solicitor in London, to work with them on locating persons or entities who would assist in providing the start-up funding for the bank.
Coutts eventually brought Phares together with Raymond Shingles and Peter Isola of Nexus Management Limited, a Gibraltar corporation, and one of his firm's clients. In March of 1986, Nexus agreed to obtain and loan $300,000 to Phares and Lucey to cover expenses to be incurred in obtaining a federal charter for the bank. This agreement with Nexus is dated as of March 27, 1986. It provides that Phares and Lucey enter into it as the initial organizers of Credit International Bank, a proposed federally-chartered bank to be located in the District of Columbia, and a proposed bank holding company which would own one hundred percent of the stock of that bank. It provides that interest on the $300,000 loan would be at 16% per annum and that Phares and Lucey would not be personally liable for the loan or the interest. Phares, Lucey and Nexus agreed Nexus would be paid a fee of $60,000 out of the $300,000.
The typed version of the agreement provides that Nexus would also receive options to purchase 120,000 shares in the holding company, and that the holding company would be limited to granting options for 200,000 shares, at an exercise price of 1/100th of the selling price on the date of issuance. A photocopy of that document appears to show the parties changed by hand the typed number for the total number of options from 200,000 to 400,000, and also changed the number of options granted to Nexus from 120,000 to 310,000.
The agreement provides it shall be governed by the laws of Gibraltar and has the following signature page:
It appears that Phares signed the document on or about March 27, 1986. Peter Isola then signed on behalf of Nexus and Nexus' secretary placed the seal on it. The document was then delivered to Lucey who signed as of March 27th.
By a letter dated March 27, 1986, Lucey and Phares offered clarifications to the agreement, including that the option price for the 400,000 shares would be $10 a share, that Nexus would use its best efforts to raise $12,000,000 through the sale of the bank's stock, and that as additional consideration Nexus would receive without cost 30,000 warrants for an additional 30,000 shares of stock at a price of ten cents a share. Below the signature line of this letter are the words, "AGREED," "Nexus Management Limited By:"; and a signature line with the signature of a Nexus director that appears to be Isola. The letter agreement is not under seal; that is, the word seal is not placed next to any of the signatures and there is no seal affixed or stamped on the paper.
In April of 1986, Lucey and Phares retained Coutts as legal counsel for the holding company. Lucey and Phares also designated Coutts to be responsible for all of the bank's legal work outside the United States. In return for these legal services, Lucey and Phares agreed that Coutts' law firm, Coutts Solicitors, would receive a fixed sum of $70,000 including disbursements through November, 1986.
In early 1986, Nexus obtained $245,000 of the $300,000 loan from Achates Trust Limited, of the Island of Guernsey, a corporate trust company whose managing director is Leslie Steere.
Thereafter, in June of 1986, Phares agreed with William Bowman, a client of his, that in exchange for a loan of...
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