Koal Industries Corp. v. ASLAND, SA
| Decision Date | 29 December 1992 |
| Docket Number | No. 89 Civ. 6033 (RJW).,89 Civ. 6033 (RJW). |
| Citation | 808 F. Supp. 1143 |
| Parties | KOAL INDUSTRIES CORPORATION, et al. v. ASLAND, S.A., Joaquin Bertran, Miguel del Campo, Alberto Vinolas and Joaquin Targhetta. |
| Court | U.S. District Court — Southern District of New York |
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Philip R. Hoffman, James A. Janowitz, Deirdre O. Byrne, Myriamne Coffeen, Leonard A. Wohl, Paige Moore, Pryor, Cashman, Sherman & Flynn, New York City, for plaintiffs.
Lawrence W. Newman, Grant Hanessian, Manuel A.J. Teehankee, Karen F. Kyle, Baker & McKenzie, New York City, for defendants.
Defendants Asland, S.A. ("Asland"), Joaquin Bertran, Miguel del Campo, Alberto Vinolas and Joaquin Targhetta have moved to dismiss plaintiffs' Amended Complaint, pursuant to Rule 12(b), Fed.R.Civ.P., and/or, in the alternative, for summary judgment pursuant to Rule 56, Fed.R.Civ.P. For the reasons that follow, defendants' motion is granted in part and denied in part.
At the heart of this litigation is the Sugarloaf Mine, which is located in Arkansas and operated by the Sugarloaf Mining Corporation ("SMC"). In 1982, plaintiff Southern States Corporation ("SSC") acquired SMC, financing the acquisition, in part, through loans from Banco Portugues Do Atlantico ("BPA").
By late spring of 1985, SSC and SMC were in financial trouble and defaulted on their loans from BPA, resulting in judgments in excess of $5 million in favor of BPA against SSC and SMC. Plaintiffs allege that it was around this time that defendant Bertran, who was chairman of Asland during the entire period relevant to this case, was experiencing serious personal financial difficulties and initiated a fraudulent scheme, designed to funnel funds to himself so that he could pay off his personal debts. Amended Complaint ¶ 27. Asland already had a relationship with SMC as it had been buying coal from SMC and Koal Industrial Corporation ("KIC"), SMC's mining contractor, since October 1984.
Plaintiffs allege that Bertran met with representatives of SSC, SMC and BPA in Dallas, Texas on June 6, 1985 and falsely represented Asland's interest in the Sugarloaf Mine, its enormous need for coal, and its long-term plans in the United States in order to induce SSC, SMC and BPA to enter into transactions with Asland which would personally benefit Bertran. Amended Complaint ¶¶ 28, 29. To this end, Asland's earlier contract with SMC was replaced in August 1985 by a new five-year agreement between Asland and KIC, wherein Asland agreed to purchase 300,000 metric tons of coal annually from KIC. Amended Complaint ¶ 30.
Plaintiffs allege that Bertran, whose personal financial situation had reached a "desperate" stage by December 1985, caused Asland to replace the August 1985 contract with a new and more substantial contract. This contract ("the December 1985 Coal Contract") committed Asland to purchase 300,000 metric tons of coal annually for seven years or the life of the mine, whichever was longer. The contract also provided that its object was to establish a long-term relationship between Asland and KIC whereby Asland would purchase the total production of the Sugarloaf Mine. The purpose of the new contract, it is alleged, was to underscore Asland's commitment to the Sugarloaf Mine and thereby convince BPA, SSC, SMC, KIC, Earl H. Powers (the sole shareholder and president of KIC) and others to enter into transactions from which Bertran would personally benefit. Amended Complaint ¶¶ 31, 32 and 34.
Also during December 1985, meetings took place in the United States between Bertran, del Campo and Vinolas, officers of Asland, and Joaquin de Navasques, a principal shareholder of SSC. Bertran, del Campo and Vinolas proposed to de Navasques that Asland, SMC and KIC become partners in three new corporations: Koal Industries International, Inc. ("KII"), European Energy Corporation ("EEC") and Daylight Holdings, Inc. ("DLH") (collectively "the Coal Group"), to be formed for the purpose of mining and marketing Sugarloaf Mine coal and owning the reserves of the mine. Bertran also recommended that control of the Sugarloaf Mine be vested in the Coal Group as SSC and SMC were financially unsuitable to serve as operating companies. Plaintiffs allege that Asland falsely represented that formation of the Coal Group would help SMC and SSC in repaying their loans from BPA and also would generate funds for the Coal Group to acquire equipment and to increase production. Plaintiffs allege that the underlying, principal object of these transactions was to obtain money for Bertran's personal use and to protect Asland with respect to the December 1985 Coal Contract by providing Asland with control over the operations of the mine through Asland's ownership and control of the Coal Group. Further, plaintiffs allege that Asland, through its position of control, could sabotage the production of coal when the price of coal under the December 1985 Coal Contract was unfavorable and benefit when the price of coal from the mine was favorable. Amended Complaint ¶¶ 34-37.
Plaintiffs allege that Bertran directed de Navasques to organize two new companies, Obanos Minerals, N.V. ("Obanos") and Logostable, N.V. ("Logostable"), to join Asland and KIC as owners of the Coal Group, and that de Navasques would own Obanos, and Bertran, through a fiduciary, would own Logostable. Bertran, plaintiffs claim, planned to induce plaintiff Powers or Walter Hediger, president of plaintiff Tele Concert Promotions, Inc. ("TCP"), to invest in Obanos and Logostable and to misappropriate those proceeds for his personal use. Amended Complaint ¶ 38.
Throughout December 1985 and January 1986 numerous negotiations and meetings took place in New York relating to Bertran's proposals. At those meetings, plaintiffs allege that Bertran, Vinolas and del Campo (for Asland) falsely represented to de Navasques (for SSC and SMC) and Powers (for KIC) that:
On December 30, 1985, Bertran met with BPA in New York and, according to plaintiffs, represented to BPA that the Coal Group, through purchases of new coal leases, would increase the value of the reserves that SMC had pledged to BPA. He also allegedly falsely represented that Asland viewed this project as the beginning of an investment program in the United States. Asland's senior management also had discussions with BPA in early January 1986, wherein Asland (1) reiterated its commitment to purchase all of the Sugarloaf Mine's coal; (2) stated that this commitment would be a sufficient guarantee of the timely payment of all the BPA loans; and (3) indicated that the Coal Group would be profitable. At the same time, Asland, through telephone conversations and exchange of telexes, sought and obtained BPA's agreement that Asland employees would at all times hold 50% of the seats on the board of directors of each company in the Coal Group. The Coal Group was formed in February 1986. Each company in the group was capitalized at $1,000 and was owned 40% by Asland, 25% by KIC, 25% by Obanos and 10% by Logostable. In addition, Asland had the option to purchase Logostable's 10% interest for $1 million and thus increase its holding to 50%. Amended Complaint ¶ 47.
It was on the strength of Asland's commitment to the Sugarloaf Mine, reflected by the December 1985 Coal Contract with KIC and its newly acquired interest in the Coal Group, that BPA decided to lend millions of dollars to the Coal Group. Amended Complaint ¶¶ 40-45.
Plaintiffs further allege that at the same time Asland spoke of its long-term commitment to the Sugarloaf Mine, it was purchasing coal and other fuel for its cement business at cheaper prices from other sources and thus had no intention of complying with the proposed coal supply agreement with EEC. Amended Complaint ¶ 46.
KIC was induced by defendants, plaintiffs allege, to surrender its rights under the December 1985 Coal Contract and to operate the Sugarloaf Mine in return for a 25% ownership interest in the Coal Group and Asland's assurances that Powers (of KIC) would manage the mine and direct its sales and marketing operations under the proposed coal supply agreement between Asland and EEC. Amended Complaint ¶ 48.
On February 12 and March 14, 1986, SSC, SMC, the Coal Group, Obanos, Logostable, Powers, de Navasques, BPA and Asland entered into a series of interconnected transactions (collectively "the March 1986 Agreements") through which the existing BPA loans were restructured and new BPA loans were made. These transactions, all negotiated in New York, included:
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