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Radmore v. AEGIS Communications Group

December 4, 2008


The opinion of the court was delivered by: Savage, J.


In this action brought by a former shareholder of a Delaware corporation alleging that the price paid for the stock by the corporation that acquired the company was far below the actual market value, we must decide whether the Delaware short-form merger statute, Del. Code Ann. tit. 8 § 253(a), limits the minority shareholder's remedy to an appraisal action, which would preclude any other form of challenge to the fairness of the merger. Before we reach that issue, we must determine whether there is personal jurisdiction over the two foreign corporate defendants.

The plaintiff, James R. Radmore ("Radmore"), a former minority shareholder of Aegis Communications Group, Inc. ("Aegis"), seeks compensatory damages for the difference between the price he was paid and the alleged actual value of his shares, as well as punitive damages. Among those named as defendants are Aegis and Aegis's parent corporations, Essar Services (Mauritius) (f.k.a. World Focus) ("World Focus") and Essar Investments Ltd. ("Essar").*fn1 He alleges that the defendants breached their fiduciary duties in the execution of Aegis's merger with World Focus.

After removing the state court action, the defendants moved to dismiss it. Both World Focus and Essar have raised lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2). Additionally, the three corporate defendants have moved to dismiss for failure to state a claim upon which relief can be granted because, under Delaware law, Radmore's sole remedy is an appraisal action in the Delaware Court of Chancery. The defendants also contend that the Pennsylvania internal affairs doctrine precludes the court from exercising jurisdiction in order to avoid interfering in the internal affairs of a foreign corporation.

Because there is no personal jurisdiction over World Focus and Essar, the motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(2) will be granted as to those two defendants. The action against the remaining defendant, Aegis, will be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) because Radmore's sole remedy is appraisal in Delaware state court.*fn2 Finally, Radmore's motion to amend his complaint will be denied because, based upon his representations that the amendment would not change any factual allegations in the complaint but only the name of one defendant, his proposed amendment would be futile.

Background and Procedural History

On November 3, 2006, World Focus, which then held over 94% of Aegis's voting stock, converted Aegis, a Delaware corporation, into a privately held corporation pursuant to a short-form merger under Delaware law.*fn3 Compl. ¶¶ 2, 17, 19-20, 28. Aegis's minority shareholders were paid five cents per share. Id. ¶ 33.

Radmore, a Pennsylvania resident, filed suit in Pennsylvania state court, alleging that the price paid to minority shareholders after the short-form merger "was blatantly unfair and fraudulent and was grossly inadequate compensation for the shares at issue." Id. ¶ 34. He claims that at the time of the merger, the real market value was at least $1.05 per share. Id. ¶ 46. He seeks compensatory damages for the difference in the alleged real value of his 1,065,500 shares and what World Focus paid for them.

Personal Jurisdiction

World Focus and Essar, both foreign corporations, contest personal jurisdiction. They aver that they have no contacts, let alone minimal ones, with Pennsylvania.

The defendants having challenged personal jurisdiction, Radmore bears the burden of demonstrating facts establishing a basis for the exercise of jurisdiction. O'Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 316 (3d Cir. 2007); Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290, 300-01 (3d Cir. 2008). Bald assertions and legal conclusions are insufficient and Radmore must show the existence of sufficient contacts between each defendant and the forum. Kanter v. Barella, 489 F.3d 170 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)); see, e.g., Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66 (3d Cir. 1984) (rejecting plaintiff's "bald, self-serving statement" concerning the defendants' contacts with the forum). Thus, to meet his burden, Radmore must present "competent evidence" showing that each defendant has the requisite minimal contacts with the forum to warrant the exercise of personal jurisdiction over each defendant. Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 101 n.6 (3d Cir. 2004) (citing Patterson v. FBI, 893 F.2d 595, 603-04 (3d Cir. 1990)); BP Chems. Ltd. v. Formosa Chem. & Fibre Corp., 229 F.3d 254, 259 (3d Cir. 2000).

Radmore argues that Essar and World Focus are subject to general jurisdiction in this forum. Radmore has not asserted nor is there any basis for specific jurisdiction, which arises when the cause of action is related to or arises out of the non-resident defendant's contacts with the forum and the injury is related to those contacts. General Electric Co. v. Deutz A.G., 270 F.3d 144, 150 (3d Cir. 2001); Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002).

The focus of general jurisdiction is on the relationship between the defendant and the forum state, not on the relationship of the claims to the forum. See Mesalic v. Fiberfloat Corp., 897 F.2d 696, 699 (3d Cir. 1990). General jurisdiction exists where the nonresident has substantial, continuing and systematic contacts with the forum. Provident Nat'l Bank v. California Fed. Savs. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir. 1987). Once these contacts are established, the defendant can be answerable for any claim even if the cause of action has no relationship to the forum. Penzoil Prods. Co. v. Colelli Assocs., Inc., 149 F.3d 197, 200 (3d Cir. 2004). Thus, general jurisdiction is not premised on conduct related to the litigation, but on the defendant's unrelated contacts in the forum.

Radmore has presented no evidence that either World Focus or Essar does business in or has any contacts with Pennsylvania.*fn4 Rather, he relies on the parent-subsidiary relationship, arguing that "[a]s Aegis is a wholly owned subsidiary, the parent corporation, Essar, has clearly indicated it does business in Pennsylvania" and "World Focus, by its actions in taking majority ownership of Essar, also subjected to the jurisdiction of the Commonwealth of Pennsylvania." Pl.'s Opp'n at 6. Even after jurisdictional discovery, Radmore posits nothing more than "World Focus is the parent of Essar, the multi-nation conglomerate which has substantial business interests in the United States including the Commonwealth of Pennsylvania." Pl.'s Supp. Mem. at 5. He has proffered no specific evidence of these alleged Pennsylvania interests. He cites contacts by Aegis, which does not contest that it is registered to do business in Pennsylvania, and, without any evidentiary basis, argues that these contacts should be imputed to Essar and World Focus, the parent corporations. The fact that Aegis does business within Pennsylvania "does not confer jurisdiction over its nonresident parent, even if the parent is the ...

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