Weidner Communications Inc. v. Faisal, 86 C 7578.
| Decision Date | 08 September 1987 |
| Docket Number | No. 86 C 7578.,86 C 7578. |
| Citation | 671 F. Supp. 531 |
| Parties | WEIDNER COMMUNICATIONS INC., a Utah corporation, Plaintiff, v. H.R.H. Prince Bandar Al FAISAL, H.H. Princess Basma Bint Majid Bin Abdul Aziz, H.R.H. Prince Saud Abdullah Al Faisal, Ali Fissa Belkairous, The Saudi Group, an entity formed under the laws of Saudi Arabia, and Saudi Computer Aided Translation, Ltd., an entity formed under the laws of Saudi Arabia, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Harry P. Lamberson, David B. Sarritt, Davit T.B. Audley, Chapman & Cutler, Chicago, Ill., for plaintiff.
William E. Kelly, Pope, Ballard, Shepard & Fowle, Chicago, Ill., for defendants.
WCC seeks more than fifty million dollars in actual damages and not less than one hundred million dollars in punitive damages as well as costs and attorney's fees from Prince Bandar, Princess Basma, Prince Saud, Belkairous, SG and SCAT.1 Jurisdiction is based on undisputed diversity of citizenship for claims of contract breach, common law fraud, restitution, conversion, and intentional interference with contract. Jurisdiction also is founded on a claim for relief under the federal RICO law. Against Belkairous there are two further counts, one for breach of a confidentiality and non-competition agreement and the other for intentional interference with contract.
Before the court is an extensively briefed motion to dismiss, and the facts recited are those alleged by WCC and those derived from an examination of the unchallenged exhibits filed by the parties.
WCC, a Utah corporation, has its principal office in Northbrook, Illinois. Prince Bandar and his wife, Princess Basma, are subjects of the Kingdom of Saudi Arabia and reside both there and in Aspen, Colorado. Prince Saud is also a Saudi Arabian and resides in the Kingdom. SG is a joint venture, existing under Saudi law, comprised of Prince Saud, Prince Bandar, Princess Basma and other unknown persons or enterprises. So, too, SCAT is an entity under Saudi law owned and controlled by SG and the persons who comprise SG. Belkairous is a citizen of Algeria, residing in Saudi Arabia and maintaining a residence in Chicago, Illinois.
WCC develops computer aided systems for translating languages to and from English and, on February 22, 1985, was sole owner of the Product at issue here, a system it developed for translating English into Arabic.
In July of 1984 the Saudi defendants (Prince Bandar, Princess Basma, Prince Saud and SG) engaged one Rittenberry to serve as their agent to find an English to Arabic computer aided translation system. Later that summer Rittenberry and a computer expert visited WCC's offices to meet with WCC's president Garrett and observe a demonstration of the Product. As a result of Rittenberry's report of his findings Prince Bandar became interested in the Product and asked to send three experts from Saudi Arabia to WCC's offices to look again at the Product. WCC agreed, and in mid-October of 1984, Rittenberry and three Saudi experts spent three days at WCC's Northbrook offices examining the computer source code, discussing the system with WCC's staff and putting many pages of text through the system.
A Letter of Intent dated and effective on October 30, 1984 was made between WCC and "Prince Bandar al Faisal a Saudi Arabian National, hereinafter referred to SG" (sic). It provided essentially that "WCC and the Saudi Group (SG) will form a new company in Saudi Arabia named ... (SCAT)" for the purpose of selling and leasing computer aided translation systems and software and operating translation service bureaus. SCAT was to acquire the worldwide marketing rights to the Product, and its stock was to be owned by SG (51%) and WCC (49%) with SG to provide $510,000 and WCC to provide $490,000, each from its own resources to be used as SCAT's working capital. SCAT was to borrow $2,500,000 at the current U.S. prime rate of interest from SG to be repaid from the initial profits of SCAT prior to any distribution of dividends. Payment of interest on the $2,500,000 appears to have been WCC's obligation to SG. The $2,500,000 itself was to be paid by SCAT to WCC to acquire the marketing rights to the Product. SCAT was obligated to commence marketing the Product immediately after acquisition and was obliged to pay WCC for any new software conversion or development.
All sales of the Product were to be made through SCAT. WCC was to work closely with SCAT and SG to establish and manage SCAT; to provide necessary software and updates; system and user support; to train SCAT personnel, all in Riyadh, Saudi Arabia. SG was to provide (1) administrative personnel until SCAT personnel could perform these duties, (2) sales leads, contacts and introductions, and (3) other marketing assistance agreed to by SG and WCC. All direct personnel costs of assisting SCAT were to be repaid by SCAT and nothing was to be spent on SCAT's behalf without its prior approval. The Letter of Intent included a schedule which required, upon signing of the Letter, that SG pay WCC $100,000 and secure Saudi registration of SCAT and that WCC hire and train technical and administrative personnel, purchase DEC hardware and software and step up development of English-Arabic dictionaries. Upon Saudi registration of SCAT, SG was to pay $2,400,000 to WCC which would then pay $490,000 into SCAT as working capital and receive 49% of SCAT in exchange for the $490,000.
From October 30, 1984 WCC endeavored to fulfill its obligation under the Letter of Intent. In January of 1985 Rittenberry and three attorneys, Mitchell, Murphy and O'Reilly, all of whom represented the Saudi defendants, met with Garrett at the WCC office in Northbrook in an attempt to document formally the relationship set forth in the Letter of Intent. In early February 1985, Mitchell, Murphy and O'Reilly returned to WCC offices with a DEC systems expert who verified that the Product software was well done.
Personal negotiations between Garrett and all the Saudi defendants, save Prince Saud who was represented by the other Saudi defendants, occurred over four days in mid-February, 1985 at Aspen, Colorado. Other meetings were held later in Paris, France, and Riyadh, Saudi Arabia, and Prince Saud was present at some or all of them.
At these meetings, Prince Bandar, Prince Saud and SG told Garrett of the great need for the Product and that through their family, personal and political connections SCAT would have translation service revenues of at least $22,000,000 per year. They told Garrett that the entities which would provide the business to WCC were spending $90,000,000 a year in manual translation. The defendants' assurances of future income were made to induce WCC to enter into a business relationship and thus make certain defendants' access to and exclusive use of the WCC Product.
On or about February 22, 1985 WCC and SG signed a Joint Venture Agreement and an Agreement for the Sale of the Computer Program. Garrett signed for WCC, and Princess Basma signed for SG. At the negotiations over the agreements each of the Saudi defendants told WCC that SG and its principals would perform each of its obligations in the agreements.
The Joint Venture Agreement is a formal agreement embodying, largely, the same terms as the Letter of Intent. There are some differences. The ownership of SCAT was to be vested at 51% in SG, 43% in WCC, 5% in Rittenberry, and 1% in one Abadullah. WCC would pay $430,000 for its share. The prior payment of $100,000 to WCC was noted.
The Joint Venture Agreement provided the usual assurances that WCC had full rights to the Product which it would deliver to SCAT (including source code, software, technology and any trade secrets). Belkairous was identified as the WCC leader on the team developing the Product. WCC was required promptly to get a firm delivery commitment for the necessary computer hardware and to arrange for its installation within thirty days of delivery and, finally, to establish the Product running in good operating condition at the time of equipment installation.
SG's obligations were also set forth, part of which was that:
U.S. $2,400,000.00 shall be paid to WCC upon the date WCC delivers the Product to the company offices in Saudi Arabia, and after receipt of confirmation and subject to acceptance in writing by the Company that the English to Arabic system has been delivered, installed and is running pursuant to Section 5.2 (d) and Section 2.4.
The separate sale agreement did not materially add to these terms.
Prior to September 1985, WCC incurred expenses and devoted significant effort in developing and installing the Product, establishing SCAT offices in Riyadh, and training personnel. WCC purchased a license for a Fortran compiler from DEC in order to improve the Product (for which it would receive additional compensation from SCAT). SG expressed an interest in acquiring the Fortran license but was told by WCC that its agreement with DEC precluded this. By September 5, 1985, WCC had complied with the terms of the Joint Venture and the Sale agreements.
About a week thereafter the complaint alleges:
Defendant Prince Bandar invited Garrett to his palatial home for a meeting, ostensibly to show his gratitude to Garrett and WCC for the successful development, delivery and installation of the Product. Previous to this meeting, Prince Bandar had requested his employees to take Garrett to the town square in Riyadh, Saudi Arabia, where punishment was publicly inflicted upon criminals. At the meeting, Prince Bandar, acting on his own behalf and on behalf of the Saudi Defendants, initially discussed with Garrett the recent beheading of three persons * * *, and then threatened and intimidated Garrett, at which point Prince Bandar initiated a negotiation with Garrett in which he insisted that WCC agree to accept a drastic reduction in the monies and compensation to which it was entitled...
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