Forum Financial v. Fellows of Harvard College, 00-306-P-C.
| Decision Date | 19 November 2001 |
| Docket Number | No. 00-306-P-C.,00-306-P-C. |
| Citation | 173 F.Supp.2d 72 |
| Parties | FORUM FINANCIAL GROUP, Limited Liability Company and John Y. Keffer, Plaintiffs v. PRESIDENT AND FELLOWS OF HARVARD COLLEGE, Jonathan R. Hay and Andrei N. Shleifer, Defendants |
| Court | U.S. District Court — District of Maine |
Peter J. Detroy, III, Norman, Hanson & Detroy, Portland, Stephen R Delinsky, Esq., Michael J. Flammia, Esq., Peter F. Carr, II, Esq., Eckert, Seamans, Cherin & Mellott, Boston, MA, for Forum Financial Group, Limited Liability Company, John Y Keffer, plaintiffs.
Richard L. O'Meara, Barbara T. Schneider, Esq., Murray, Plumb & Murray, Robert S. Frank, Esq., Harvey & Frank, Portland, Lawrence S. Spiegel, Esq., David M. Zornow, Esq., Kadden, Arps, Slate, Meagher & Flov, New York, NY, Joseph H. Groff, III, Jensen, Baird, Gardner & Henry, Portland, for President and Fellows of Harvard College, Jonathan R Hay, Andrei N Shleifer, defendants.
Plaintiffs Forum Financial Group, LLC and John Y. Keffer ("Plaintiffs") have filed a Complaint against the Defendants President and Fellows of Harvard College ("Harvard"), Jonathan R. Hay, ("Hay") and Andrei N. Shleifer ("Shleifer") (collectively "Defendants"), for claims arising out of a failed business transaction. Specifically, Plaintiffs assert claims for fraudulent misrepresentation, negligent misrepresentation, and tortious interference with prospective economic advantage against Hay (Counts I, III, and V); Plaintiffs assert claims for aiding and abetting fraudulent misrepresentation, aiding and abetting negligent misrepresentation, and aiding and abetting tortious interference with prospective economic advantage against Shleifer (Counts II, IV, and VI); and Plaintiffs assert claims for vicarious liability and negligence against Harvard (Counts VII, VIII, and IX). Plaintiffs request both compensatory and punitive damages (Count X). Now before the Court are Defendants' Motions to Dismiss Or, In The Alternative, Transfer the case to the District of Massachusetts. For the reasons that follow, the Court will DENY Defendants' Motions to Dismiss and the Motion for Transfer of Venue.
On October 24, 2000, Plaintiffs filed this action against Defendants. Defendants Shleifer filed a Motion to Dismiss on November 20, and Defendant Harvard filed a Motion to Dismiss, Or in the Alternative, Motion to Transfer on November 22, 2000. On December 21, 2000 Plaintiffs filed a Motion for Court-Ordered Service in regards to Defendant Hay. On December 13, 2000, Plaintiffs filed an Opposition to Defendants' Motions to Dismiss and requested discovery specifically related to jurisdiction. On January 24, 2001, Chief Judge Hornby denied without prejudice Defendants Shleifer's and Harvard's Motions to Dismiss for lack of personal jurisdiction, and granted Plaintiffs' request for discovery limited solely to personal jurisdiction issues over Defendants Harvard College and Andrei Shleifer. On February 16, 2001, Judge Hornby ordered court-directed service of process to be made on Defendant Hay. On April 6, 2001, Defendant Hay filed a Motion to Dismiss Plaintiffs' Complaint, alleging lack of personal jurisdiction, for forum non-conveniens, and pursuant to Fed. R.Civ.P. 12(b)(6) for failure to state a claim for fraudulent and negligent misrepresentation (Counts I and III) and tortious interference with prospective economic advantage (Count V). Defendant Hay additionally contends that Plaintiffs failed to effect proper service upon him.1 On July 20, 2001, Defendant Shleifer renewed his Motion to Dismiss for lack of personal jurisdiction or, in the alternative, to dismiss Count IV, aiding and abetting negligent misrepresentation (Count IV), for failure to state a claim upon which relief can be granted, and to dismiss Count VI for failure to join an indispensable party. On July 24, 2001, Defendant Harvard renewed its Motion to Dismiss on all grounds raised in the original motion except want of jurisdiction, including: the act of state doctrine, the effect of the release agreement, the application of the doctrine of immunity as a non-profit, charitable organization, for lack of vicarious liability, a claim of lack of duty, failure to plead with sufficient particularity in violation of Fed.R.Civ.P. 9(b), applicability of punitive damages, or in the alternative, for transfer to the United States District Court for the District of Massachusetts. Additionally, Harvard has moved to dismiss pursuant to Fed. R.Civ.P. 19 for failure to join indispensable parties, namely the Russian Commission on Securities and Capital Markets ("Russian SEC"), and Dimitri Vasiliev. In the event that Shleifer and/or Hay are successful in their motions to dismiss, Harvard contends, under theories of vicarious liability, that Harvard's agents, Shleifer and Hay, are also indispensable parties. Defendants also adopt each other's arguments to the extent they apply to the individual claims of Defendants.2
The Plaintiffs' Complaint makes the following relevant factual assertions. Plaintiff Forum Financial Group, LLC ("Forum") is a Delaware limited liability company with a principal place of business at Two Portland Square, Portland, Maine. John Y. Keffer ("Keffer") is an individual residing in Cumberland, Maine, who is the owner of Forum. Forum is in the business of the administration and operation of mutual funds in the United States, Poland, Bermuda and Malta. Complaint ¶ 39. Forum's expertise includes the technical aspect of operations management, with a particular expertise in the operation and administration of mutual funds in foreign countries. Complaint ¶ 39. Forum was the first company to provide independent third-party fund administration services in Poland. Complaint ¶ 39. Defendant Harvard is a corporation incorporated under the laws of the Commonwealth of Massachusetts with a principal place of business in Massachusetts. Harvard received money from the United States Agency for International Development ("USAID") to provide strategic guidance to the capital market development effort in Russia and "to provide unbiased input into, and overall day-to-day management, review, and evaluation of, the privatization and market reforms."3 Complaint ¶ 14. With USAID funds, Harvard conducted business in Russia as the Harvard Institute for International Development ("HIID" or "the Russia Program").
Defendant Andrei Shleifer is a United States citizen residing in Newton, Massachusetts. Shleifer is a tenured Professor in Harvard's Department of Economics. Complaint ¶ 8. In 1993, Harvard appointed Defendant Shleifer as Home Office Coordinator/Principle Investigator of its Russia Program. Harvard authorized Shleifer to act on Harvard's behalf concerning the Russia Program. Complaint ¶ 20. Shleifer had the authority and primary responsibility for creating, overseeing, and managing Harvard's Russia Program and insuring adherence to all of Harvard's obligations under the USAID agreements. Complaint ¶ 20. Defendant Jonathan R. Hay is a United States citizen currently residing in Moscow, Russia.4 In 1993, Harvard hired Defendant Hay, Shleifer's former student, to work with Shleifer as Harvard's Field Associate in Russia. At Shleifer's recommendation, Harvard promoted Hay to General Director/Field Coordinator of the HIID Russia Program in Moscow. Complaint ¶ 21. Plaintiffs allege that to accomplish the program objectives. Complaint ¶ 21. Harvard held out Shleifer and Hay as competent and qualified to direct the Russia Program. Complaint ¶ 22. Plaintiffs allege that Shleifer and Hay, as employees, were agents of Harvard, with apparent authority to act within the scope of their employment on the Russia Program by, inter alia, subcontracting with businesses such as Forum, and exercising their authority over the USAID initiative in Russia. Complaint ¶¶ 136, 23. Shleifer and Hay used USAID funds to establish the Institute for Law-Based Economy ("ILBE"), a Russian nonprofit corporation.5 Complaint ¶ 26.
Nancy Zimmerman ("Zimmerman") is Shleifer's wife. Elizabeth Hebert ("Hebert") was Hay's girlfriend during 1995 and 1996, and she is now Hay's wife. Complaint ¶ 3. Julia Zagachin ("Zagachin") was employed by HIID as a Russia Program associate. Complaint ¶¶ 3, 51. Beginning in late 1995 or early 1996, Hay, Hebert, Shleifer, Zimmerman, and Zagachin put together a plan to launch the first Russian mutual fund and the first Russian specialized depository for their own personal profit. Complaint ¶ 35. Michael Butler, Esq. ("Butler") was hired by Harvard, pursuant to Hay's request, to work directly with Shleifer and Hay on Harvard's Russia Program.6 Complaint ¶ 72.
Dimitri Vasiliev ("Vasiliev") was Chairman of an entity identified as the Russian SEC. Complaint ¶ 31. Albert Sokin ("Sokin") was Vasiliev's political advisor. Id. The Russian SEC executed a contract (the "Contract") on July 25, 1996, with Forum Financial Group Consulting LLC ("Forum Consulting"), an entity created by Plaintiffs for the purpose of creating a mutual fund industry in Russia. Complaint ¶¶ 62, 67. Under that Contract, Forum Consulting was to assist the Russian SEC with developing and implementing a Russian mutual fund market. Forum Consulting established a new entity, Forum Financial Group Russia LLC ("Forum Russia"), in order to execute the First Russian Specialized Depository ("FRSD"), a management and custodian service company necessary to administer mutual funds. Complaint ¶ 62. Forum Russia was set up...
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