Gordian Grp., LLC v. Syringa Exploration, Inc.

• Decision Date: 10 March 2016
• Docket Number: No. 15-CV-1312 (RA),15-CV-1312 (RA)
• Citation: 168 F.Supp.3d 575
• Parties: Gordian Group, LLC, Plaintiff, v. Syringa Exploration, Inc., Defendant.
• Court: U.S. District Court — Southern District of New York

168 F.Supp.3d 575

Gordian Group, LLC, Plaintiff,

v.Syringa Exploration, Inc., Defendant.

No. 15-CV-1312 (RA)

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

Signed March 10, 2016

Philip A. Wellner, The Law Offices of Philip A. Wellner, PLLC, Hudson, NY, for Plaintiff.

Maurice W. Heller, Malcolm Seymour, Garvey Schubert Barer, New York, NY, for Defendant.

OPINION & ORDER

Ronnie Abrams, United States District Judge

Plaintiff Gordian Group, LLC brings this diversity action against Defendant Syringa Exploration, Inc. alleging breach of an investment banking services contract. Syringa moved to dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction and pursuant to Rule 12(b)(7) for failure to join an indispensable party. For the reasons that follow, the Court concludes it lacks personal jurisdiction over Defendant. Defendant's motion to dismiss is therefore granted without prejudice to Plaintiff to refile this lawsuit in another forum, and the Court thus need not determine whether Plaintiff failed to join an indispensable party.

BACKGROUND

I. Factual Background¹

A. The Parties

Plaintiff, a Delaware limited liability company with its principal place of business in New York, is an investment bank “specializing in financial and advisory services in complex and distressed situations.” Compl. ¶¶ 16, 18. Defendant is an Idaho corporation with its principal place of business in Idaho. Id. ¶ 17. Its “only business consists of the ownership and management of an 80 percent membership interest” in nonparty Crescent Mine, LLC (“Crescent Mine”). Gross Aff. ¶ 3. Crescent Mine, a Delaware limited liability company with its principal place of business in Idaho, is “engaged in the business of owning, acquiring, selling, exploring and operating mineral and metal mines.” Id. ¶¶ 6-7.

B. The Letter Agreement

On October 7, 2013, Plaintiff entered into a letter agreement (the “Agreement”) with nonparty United Silver Corp. (“USC”) to “be [USC's] exclusive investment banker as [USC] sought to emerge from its financial distress and either restructure or repay its secured debt.” Compl. ¶ 19 & Ex. 1 (“Agreement”). At that time, USC owed approximately $9 million to an affiliate of Hale Capital Partners, LLC (“Hale”), and the debt was secured by “substantially all of [USC's] assets.” Compl. ¶ 5. USC's “primary asset of value” was Crescent Mine by virtue of USC's complete ownership of a subsidiary called United Mine Services, Inc. (“UMS”), which in turn wholly owned Defendant and its 80 percent interest in Crescent Mine. Id. ¶ 27; Gross Aff. ¶ 3. Two Hale subsidiaries held the remaining 20 percent interest in Crescent Mine. Klein Aff. ¶ 3.

In the Agreement, Gordian agreed to assist “the Company”—a term defined to mean USC “together with its subsidiaries”—reduce its debt burden by providing advice and services. Agreement at 1. USC's interim chief executive officer, Greg Stewart, executed the Agreement on behalf of USC. Id. at 8. No other individual signed the Agreement on behalf of USC or any of its subsidiaries, though Plaintiff alleges that at that time Mr. Stewart was also Defendant's president and therefore “had actual authority to bind Syringa to the terms of the [A]greement.” Compl. ¶ 28. Plaintiff's president, Peter S. Kaufman, executed the Agreement on behalf of Gordian. Agreement at 8.

As is relevant here, the Agreement provides that Plaintiff would be paid a “Transaction Fee” in the amount of five percent of “the principal amounts of any existing debt ... directly or indirectly amended, assumed, repaid, satisfied, compromised, exchanged, refinanced, restructured, credit bid or retired” by “the Company” as a result of a “Financial Transaction.” Id. at 2-3. The term “Financial Transaction” is defined to include, among other events, “a restructuring, amendment, exchange, repayment, satisfaction, assumption, refinancing, extension, compromise or other modification of some or all of the Company's debt.” Id. at 1. Plaintiff alleges that the Agreement entitles Gordian to a Transaction Fee “solely on the occurrence of a Financial Transaction” because the Agreement “does not include any 'causation' or 'origination' requirement, or state that Gordian was obligated to have any minimum specified level of involvement in the Financial Transaction giving rise to the obligation to pay a Transaction Fee.” Compl. ¶ 23.

The Agreement also provides that:

The Company's obligations hereunder shall be joint and several obligations of [USC] and any subsidiaries, it being understood and agreed that the Company will cause the subsidiaries of the Company, if any, to perform the Company's obligations hereunder; provided, however, that no such subsidiary shall be required to pay any amount that would cause it to become insolvent and any such amount not so paid shall be reallocated among the remaining such subsidiaries.

Agreement at 7. In addition, the Agreement contains a mandatory arbitration clause, a New York choice of law clause, and two forum selection clauses. See id. at 6-7. Specifically, the Agreement provides that “the parties ... consent to the non-exclusive jurisdiction of the federal and state courts sitting in New York City for the purpose of entering judgment upon and enforcing [an arbitration award]” and that “[t]he Company ... consents to venue and jurisdiction in any court in which Gordian ... is sued or otherwise found or brought.” Id.

Plaintiff and USC negotiated the executed the Agreement by telephone and email from their respective offices in New York and Idaho. Gross Aff. ¶ 14; Kaufman Aff. ¶¶ 4-5.

C. The Parties' Performance

Plaintiff alleges that after executing the Agreement, it “commenced a series of discussions with Hale” to propose ways that USC could retire some or all of its debt obligations, including “(i) extensions of time that could allow a real third-party exploration process, (ii) conversion of Hale's defaulted debt into more permanent capital, and (iii) a spinoff of certain assets away from Hale and to ... other stockholders.” Compl. ¶ 30. These discussions occurred between October 2013 and January 2014, and Plaintiff performed substantially all of its work pursuant to the Agreement in New York. Id. ¶¶ 31-36; Kaufman Aff. ¶ 6.

Plaintiff also alleges that on November 25, 2013, Mr. Stewart, traveled to New York on behalf of USC and—accompanied by Plaintiff's chief executive officer—“personally met with representatives from Hale” at Hale's offices in New York City. Kaufman Aff. ¶ 7 & Ex. 1. According to Plaintiff, after the meeting “Mr. Stewart returned to Gordian's offices and met with” various Gordian employees. Id. Although Defendant acknowledges that “a USC representative traveled into New York at one point to negotiate with Hale,” it contends that “Gordian was not present at that meeting,” “those negotiations were not undertaken pursuant to the [Agreement],” and “nobody acting on behalf of Syringa has ever entered New York.” Gross Aff. ¶¶ 15-16.

On January 4, 2014, Hale sought an order from the Ontario Superior Court of Justice, in Canada, appointing a receiver for USC. Compl. ¶ 36. On March 4, 2014, UMS—the USC subsidiary that wholly owned Defendant—entered into a consensual foreclosure agreement with a Hale affiliate whereby the affiliate acquired all of UMS' assets, including Defendant, in exchange for relieving $7.5 million of USC's debt. Id. ¶ 37.

D. Plaintiffs Attempts to Obtain a Transaction Fee

Plaintiff contends that UMS' “foreclosure and its associated debt relief constituted a Financial Transaction under the [Agreement], pursuant to which Gordian is entitled to a Transaction Fee.” Compl. ¶ 38. In March 2014, Plaintiff sent invoices to USC's appointed receiver, UMS, Syringa, and Crescent Mine, but did not receive payment. Id. ¶¶ 39-40.

On April 3, 2014, Plaintiff initiated arbitration proceedings against UMS, Syringa, and Crescent Mine. Id. ¶ 41. Syringa and Crescent Mine commenced an Article 75 petition in the Commercial Division of New York Supreme Court to stay the arbitration, and Plaintiff moved to dismiss the petition. Id. ¶ 42. On October 16, 2014, the court denied Plaintiff's motion, reasoning that because Syringa and Crescent Mine did not sign the Agreement, they were not bound by the arbitration clause contained therein. Id. ¶¶ 43-45; Gross Aff. Ex. 13. Of particular concern to the state court was the fact that by agreeing to arbitration, “you are giving up your right to come to an open Court, you are giving up your right to appeal a decision made by a trial [j]udge, and you give up all sorts of other rights, a trial by jury, ... motions, ... discovery—all sorts of rights.” Gross Aff. Ex. 13 at 18:7-12. Plaintiff did not appeal the state court order. Compl. ¶ 46. On November 20, 2014, the court granted Syringa and Crescent Mine's petition and stayed the arbitration.

II. Procedural History

After Plaintiff initiated this action “against the one remaining joint and several obligor that it believes both has assets and over which it can establish jurisdiction,” Compl. ¶ 46, Defendant moved to dismiss, Dkt. 6. The Court heard oral argument on Defendant's motion on February 22, 2016. Dkt. 22.

LEGAL STANDARD

“The plaintiff bears the burden of establishing that the court has jurisdiction over the defendant.” Wallert v. Atlan , 141 F.Supp.3d 258, 270, 2015 WL 6459219, at *6 (S.D.N.Y. Oct. 26, 2015) (quoting DiStefano v. Carozzi N. Am., Inc. , 286 F.3d 81, 84 (2d Cir.2001) ). “Prior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith, legally sufficient allegations of jurisdiction. At that preliminary stage, the plaintiff's prima facie showing may be established solely by allegations.” Dorchester Fin. Securities, Inc. v. Banco BRJ, S.A. , 722 F.3d 81, 84–85 (2d Cir.2013) (quoting Ball v. Metallurgie Hoboken – Overpelt, S.A. , 902 F.2d 194, 197 (2d Cir.1990) ). “This showing may be made through the plaintiff's ‘own...