Hoffman v. Goberman

• Decision Date: 06 January 1970
• Docket Number: No. 17474.,17474.
• Citation: 420 F.2d 423
• Parties: Louis HOFFMAN, Appellant, v. Allan N. GOBERMAN.
• Court: U.S. Court of Appeals — Third Circuit

420 F.2d 423 (1970)

Louis HOFFMAN, Appellant, v. Allan N. GOBERMAN.

No. 17474.

United States Court of Appeals Third Circuit.

Argued November 6, 1969.

Decided January 6, 1970.

Gregory M. Harvey, Esquire, Morgan, Lewis & Bockius, Philadelphia, Pa., for appellant.

Kimber E. Vought, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa. (Dennis R. Suplee, Philadelphia, Pa., on the brief), for appellee.

Before MARIS, SEITZ and STAHL, Circuit Judges.

OPINION OF THE COURT

MARIS, Circuit Judge.

The question presented on this appeal is whether the district court abused its discretion in dismissing the complaint under the doctrine of forum non conveniens. For the reasons which follow, we hold that under the circumstances of this case it was an abuse of discretion to decline jurisdiction.

The plaintiff Louis Hoffman, a resident of Baltimore, Maryland, and the defendant Allan N. Goberman, a resident of Lancaster, Pennsylvania, are the sole owners of the capital stock of the St. Maarten Isle Hotel Corporation N.V., which was organized under the laws of the Netherlands Antilles. This action, founded on diversity of citizenship and jurisdictional amount, was brought in the District Court for the Eastern District of Pennsylvania, the judicial district in which the defendant resides. The complaint alleges, inter alia, the following facts:

On May 22, 1967 the plaintiff, then the registered holder of 50,000 shares, comprising the entire outstanding capital stock of the corporation, entered into a contract with the defendant whereby it was agreed that the plaintiff would transfer to the defendant 52½% of the outstanding shares of capital stock in consideration of the defendant paying $300,000 to the corporation, completing at cost the construction of an unfinished resort hotel owned by the corporation on the island of St. Maarten in the Netherlands Antilles, and obtaining the financing for its construction and a mortgage loan for the permanent financing of the hotel. It was agreed that thereafter, the plaintiff would be the registered owner of 47½% (23,750 shares) and the defendant 52½% (26,250 shares) of the capital stock. The complaint avers performance of the contract by the plaintiff by the transfer of 52½% of the stock to the defendant.

It is further alleged that the defendant breached the contract at a shareholders' meeting on July 31, 1967 when Howard Rubin, Esq., the defendant's attorney-in-fact and proxy, over the objections and negative votes of Frank Hirsch, Esq., the plaintiff's attorney-in-fact and proxy, voted the defendant's shares in favor of certain actions. These were (1) to authorize either of the two managing directors of the corporation to sign a note in the amount of $300,000 to Susquehanna Builders, Inc., a corporation controlled by the defendant, which was the same amount as defendant had agreed with the plaintiff to pay to the corporation; (2) to provide that all of the remaining authorized but unissued capital stock, comprising 200,000 shares, be issued to the defendant at the par value of $1.00 per share; and (3) to provide that the $300,000 note be accepted in payment for those 200,000 shares by cancelling to the extent of $200,000 the corporation's obligation to pay $300,000 on the note given to Susquehanna Builders, Inc. An entry was thereafter made on the shareholders' register purporting to register 200,000 shares of the capital stock in the defendant's name.

The effect of the defendant's action, the complaint charges, was to alter the 47½-52½% ratio of stock ownership to a 9½-90½% ratio in violation of the plaintiff's rights as a shareholder and contrary to the terms of their contract, and it alleges that the defendant refused the plaintiff's demands to restore the ratio. It is further alleged that an extraordinary meeting of shareholders was called for the purpose of deleting from the articles of incorporation a provision which required that a shareholder desiring to transfer his shares must offer them first to the other shareholders; that the defendant's purpose in seeking to delete this provision is to permit him to transfer a portion of his shares to third parties for value and without notice to the alleged defective ownership thereof, all to the plaintiff's irreparable injury.

The complaint prays for temporary relief by enjoining the defendant and others from changing the capital structure, from transferring the defendant's shares to others and from amending the articles. As permanent relief the complaint seeks an order requiring the defendant to surrender for cancellation the 200,000 shares issued to him as a result of the actions complained of and to restore the ratio of share-ownership in accordance with the contract. The district court entered, ex parte, a temporary restraining order in the terms prayed for in the complaint. Thereupon the defendant moved for dissolution of the restraining order and for dismissal of the complaint, contending that the doctrine of forum non conveniens was applicable.

After hearing the motions, the district court found that diversity of citizenship and jurisdictional amount had been established, that venue was properly laid, and that the forum was geographically convenient, but it declined jurisdiction and entered an order granting the defendant's motions but directed that the restraining order remain in effect until the plaintiff instituted an appropriate action in the Netherlands Antilles and dismissed the complaint without prejudice to application by the plaintiff for reinstatement of the complaint in the event the courts of the Netherlands Antilles declined to "assert jurisdiction". After the court announced its decision, the plaintiff filed a motion for reargument which the district court denied. This appeal by the plaintiff followed.

The district court's action was based upon its conclusion that this was a suit which called upon the court to interfere in the internal affairs of a foreign corporation and that it was more properly triable in the foreign court. The circumstances which appear to have led it to this conclusion were that the parties had chosen to enter into a business venture conducted in a foreign jurisdiction; that the corporate books and records were kept in the foreign jurisdiction; that the case raised questions of stock ownership of a Netherlands Antilles corporation requiring the application and construction of Netherlands Antilles corporate and contract law, that travel to the Netherlands Antilles by the parties and others on their behalf had not in the past appeared to be a "substantial impediment", and that it was doubtful that the Netherlands Antilles government would decline jurisdiction when the underlying subject of the lawsuit, the construction of a resort hotel and casino, was so intimately connected with its own internal welfare. The plaintiff, on the other hand, contends that the relief which he is seeking is neither against nor on behalf of the corporation and that his action does not involve the policy or management of the corporation but that the primary basis of the relief sought is the defendant's action in changing the ratio of share ownership from that agreed upon by the parties, both of whom are properly before the district court, and that the secondary basis is the defendant's action as majority shareholder in causing the 200,000 authorized but unissued shares to be issued to himself, not to serve any bona fide corporate purpose but solely to dilute and injure the plaintiff's interest in the corporation. The plaintiff asserts that remitting him to a Netherlands Antilles court would work a grave injustice since the courts of the Netherlands Antilles lack jurisdiction to entertain suits on contract disputes between nonresident parties or in any case to grant equitable relief, and they could only acquire jurisdiction through an attachment proceeding directed to the St. Maarten Isle Hotel Corporation N.V. in which proceeding specific performance could not be obtained but merely a judgment for money damages.¹ The plaintiff further urges that if the case were to be tried in the Netherlands Antilles court he would be required at great inconvenience and expense to transport eight witnesses, residents of Maryland, Pennsylvania and New York, to St. Maarten and that difficult problems would arise in conducting his suit in the language of that court. In...