Paribas Corp. v. Shelton Ranch Corp.
| Decision Date | 06 July 1990 |
| Docket Number | No. 89 Civ. 5596 (RWS).,89 Civ. 5596 (RWS). |
| Citation | 742 F. Supp. 86 |
| Parties | PARIBAS CORPORATION, Plaintiff, v. SHELTON RANCH CORPORATION, Robert R. Shelton, Fronie K. Shelton, Shelton Ranches, Inc., SRC Hotels, Inc., SRC Inns, Inc., Shelton Land & Cattle Company, and Shelton Holdings, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Howard, Darby & Levin, New York City, for plaintiff.
Kornstein Veisz & Wedxler by Daniel J. Kornstein, New York City (Brown Maroney & Oaks Hartline, Houston, Tex., of counsel), for defendants.
Defendants SRC Hotels, Inc. ("SRC Hotels"), SRC Inns, Inc. ("SRC Inns"), Shelton Holdings, Inc. ("Shelton Holdings") and Fronie K. Shelton ("F. Shelton") (the "12(b) defendants") have moved pursuant to Federal Rule 12(b)(2) of the Federal Rules of Civil Procedure to dismiss the complaint for lack of personal jurisdiction. Defendants Robert R. Shelton ("Shelton"), Shelton Ranches Corporation ("SRC"), Shelton Ranches, Inc. ("Shelton Ranches") and Shelton Land & Cattle Company ("Shelton Land") (the "1404 defendants") have moved pursuant to 28 U.S.C. § 1404(a), to transfer this action on the ground of forum non conveniens, to the United States District Court for the Southern District of Texas, Houston Division, or, in the alternative, to the Western District of Texas San Antonio Division. Both motions are denied for the reasons set forth below.
Paribas is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in New York, New York. Paribas renders financial advice and provides investment banking services to its clients.
SRC is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in Kerrville, Texas.
Defendants Shelton Ranches, SRC Hotels, SRC Inns, Shelton Land and Shelton Holdings are affiliates of SRC and are corporations organized and existing under the laws of the State of Texas with their principal places of business in Kerrville, Texas. Each of the corporate defendants has a common set of officers holding identical positions (Shelton), president, F. Shelton, vice president and secretary, James Bobbitt ("Bobbitt") executive vice president and assistant secretary, Mark Stark ("Stark") treasurer and assistant secretary, Ned Hartline ("Hartline"), assistant secretary.
Robert Shelton is a citizen and resident of the State of Texas, and is the president of each of SRC, SR Inns, SRC Hotels, Shelton Ranches, Shelton Land, and Shelton Holdings. Shelton is the sole director of each of the other corporate defendants.
F. Shelton, is a citizen and resident of the State of Texas and is the spouse of Shelton. F. Shelton is the vice-president and secretary of all of the corporate defendants.
Paribas instituted this suit on August 18, 1989. Both the 12(b) defendants and the 1404 defendants (collectively the "Shelton Parties") filed this motion to dismiss on October 20, 1989. After adjournment by the parties this oral argument was heard on March 16, 1990 and the motion was considered fully submitted as of that date.
In 1988, Shelton, a Texas businessperson, developed a project (the "Project") to grow and market "contra-seasonal" apples. Shelton's idea was to grow and harvest apples in Texas in the early summer months in the hope that fresh apples would bring a premium over apples stored for long periods under controlled atmospheric conditions. Shelton proposed to support the Project with existing sugarcane and vegetable operations in Florida. To attract investors to finance the Project, Shelton prepared a brochure and began to contact possible sources of financing throughout the country, including New York.
In the Spring of 1988 Shelton met several times with representatives of Paribas to discuss his proposal. These meetings took place in New York, Florida, and Texas.
On May 13, 1988, Paribas and SRC signed an engagement letter (the "Engagement Letter") whereby Paribas agreed to identify and contact potential sources of financing and provide other advisory and investment banking services in exchange for the payment of certain fees and the reimbursement of Paribas' out-of-pocket expenses. Shelton also agreed to pay Paribas' attorneys' fees in the event of litigation.
The Engagement Letter specifically provides that any dispute arising out of the agreement shall be governed by New York law, that any such dispute shall be adjudicated in the state or federal courts in the Southern District of New York, and that Shelton consents to service of process by certified mail. The Engagement Letter was signed by Shelton as president of SRC.
The Engagement Letter was negotiated. On May 6, Paribas sent a proposed engagement letter to Shelton and On May 12, the letter, with a number of handwritten changes by Shelton, his executives or his attorney, was telecopied to Paribas for retyping and incorporated in the final Engagement Letter signed by the parties on May 13.
In late May and early June, Paribas' officers and representatives toured the proposed orchard sites in Florida and Texas and met with Shelton and his representatives to obtain information regarding Shelton's operations. Paribas alleges that, because of Shelton's financial condition, the financing of the Project would be more difficult than originally anticipated. In early June, Shelton and his executive vice president Bobbitt went to Paribas' office in New York for two days to continue the discussions.
Paribas' concerns led to a demand for a higher fee agreement and adequate security for its fees and expenses in order to continue to work on the proposal. The negotiations between the parties ultimately led to the signing of a term sheet (the "Term Sheet"), dated June 17, 1988, which described and memorialized the parties' understanding of the proposed venture.
Among other things, the Term Sheet described that the property to be contributed to the proposed partnership included approximately 17,000 acres in Palm Beach County, Florida for the production of sugarcane and vegetables, and approximately 21,750 acres in Texas to be devoted to apple production. The Term Sheet also sets forth the obligations of the parties.
The Term Sheet was signed four times by Shelton, on behalf of himself, SRC, Shelton Land, and Shelton Ranches. The Term Sheet also purports to bind "Senior Shelton Group Members", including F. Shelton and each of the corporate defendants in that the Term Sheet defines "Senior Shelton Group Members" to include F. Shelton, and any entity which she substantially owns. The Term Sheet also discusses that the newly formed subsidiary of SRC was to be the general partner of the Texas Orchards limited partnership. Shelton was to be the Chief Executive Officer of this company and Shelton and F. Shelton were the only named employees. At that time F. Shelton was also an employee of SRC.
The Term Sheet contains choice of law and forum selection clauses identical to those contained in the May 13, Engagement Letter:
This Term Sheet shall be governed by the laws of the State of New York. Any dispute arising out of this Agreement shall be adjudicated exclusively in the courts of the State of New York, and SRC hereby agrees that service of process upon it by registered mail at the address shown herein shall be deemed adequate and lawful service.
The forum selection clause in the Term Sheet was the subject of discussion and negotiation between the parties. SRC and Shelton promised in the Term Sheet to cause Paribas to be granted a security interest in art work or other collateral with a value of at least $2 million to secure Paribas' fees and expenses.
In response to this last provision in the Term Sheet, the parties contemporaneously signed a guaranty and security agreement (the "Security Agreement") which guaranteed, among other things, payment to Paribas and gave Paribas security in certain works of art, specifically, a Remington painting, "Death of Wascind" owned by Shelton, and a painting by Charles M. Russell, "Free Trader", owned by SRC.
To fully secure Paribas' right to these paintings, the Security Agreement is signed by Shelton seven times, once on his own behalf, and once on behalf of each of the corporate defendants, and by F. Shelton. The Agreement provides that F. Shelton shall not have any personal liability for the obligation; however, each of the signatories, including F. Shelton warrant that the works of art listed are free and clear of any lien and that the Security Agreement creates a valid and perfected security interest in them, prior to any other interest. The June 17 Security Agreement also provides that Paribas' rights are not impaired by the failure of investors to invest or the failure of the deal to go forward.
Moreover, the Security Agreement provides that it is to be governed and construed under New York law. The Agreement states that all notices and communications should be sent to SRC to the attention of Shelton; notice to the other defendants is omitted.
On June 24, 1988, the parties also signed a letter amending the Engagement Letter (the "Amended Engagement Letter"), which provides for an additional fee to Paribas in the amount of $250,000. The Amended Engagement Letter provides that it will be governed by the internal law of New York and incorporates the last three paragraphs of the Term Sheet, which include the forum selection clause granting exclusive jurisdiction to the federal and state courts in New York. The Amended Engagement Letter is signed by Shelton on behalf of SRC.
On September 29, 1988 the parties signed an amendment to the Security Agreement (the "Amended Security Agreement") which, among other things, gave Paribas a security interest in...
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