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Alliance Industries Limited v. A-1 Specialized Services & Supplies, Inc.

United States District Court, E.D. Pennsylvania

March 12, 2014

ALLIANCE INDUSTRIES LIMITED and ALLIANCE INDUSTRIES FZC,
v.
A-1 SPECIALIZED SERVICES & SUPPLIES, INC

MEMORANDUM RE: DEFENDANT'S MOTION TO DISMISS OR STAY PURSUANT TO PRINCIPLES OF INTERNATIONAL COMITY AND THE DOCTRINE OF FORUM NON CONVENIENS

MICHAEL M. BAYLSON, District Judge.

This case presents a $70 million international dispute among three companies owned by four family members, arising out of eleven leases for precious metals. Plaintiffs and Defendant are parties to a Settlement Agreement regarding the transfer of shares in the companies. The Settlement Agreement contains a release of claims provision that is currently the subject of a pending action in England. Defendant moves to stay or dismiss Plaintiffs' Second Amended Compliant for reasons of international comity or forum nonconveniens. Defendant argues that this action should be dismissed in favor of the English action, or stayed pending its outcome, because all of the parties to this case are parties to the English action. Plaintiff contends that the Settlement Agreement has no bearing on the leases, so the outcome of the English action construing the Settlement Agreement would not resolve this dispute.

This preface may seem similar to the plot of a Wagner opera, of a Dickens novel, or merely a law school exam question. In the absence of any recent Third Circuit guidance on the forum nonconveniens issue in an international context, the Court will weigh concepts as ethereal as fairness and as concrete as discovery.

I. FACTUAL BACKGROUND

Plaintiff Alliance Industries Limited (Limited) is a company that buys, sells, markets and trades precious metals, and lends or leases its inventory of metals. Second Amended Complaint (SAC) at ¶ 7. Limited is incorporated under the laws of Gibraltar with its principal place of business in the United Arab Emirates and is owned entirely by Ashok Kumar Khosla (Kumar). SAC at ¶ 2. Co-plaintiff Alliance Industries FZC (FZC) is also involved in trading and marketing precious metals, and is owned 50% by Kumar and 50% by his brother Suresh Khosla (Suresh). SAC at ¶ 3. FZC is incorporated under the laws of the Sharjah Airport International Free Zone of the United Arab Emirates, which is also its principal place of business. SAC at ¶ 3.

The Second Amended Complaint alleges that Kumar is the General Manager and Director of FZC, which Defendant does not dispute.[1] SAC at ¶ 9. Kumar and Suresh both reside in Mooresville, New Jersey, and assert that is where they store FZC and Limited corporate records, which are relevant to this case. (ECF No. 34).

Defendant A-1 Specialized Services & Supplies (A-1) also markets and sells commodity-grade precious metals, and processes salvage automotive catalytic converters. (ECF No. 34-1). A-1 is owned by three brothers, Kumar Khosla, Suresh Khosla, and Om Khosla, and Suresh's wife Leena Khosla.[2] Stipulation at ¶ 4. A-1 is incorporated in Pennsylvania, which is also its principal place of business. Stipulation at ¶ 4.

A. Issues in this Case

This dispute relates to eleven lease agreements for the lease of platinum and palladium, a precious metal used in catalytic converters. Stipulation at ¶ 1. Plaintiffs seek damages for breach of eleven lease agreements for precious metals, alleging A-1 failed to return the leased metals to Plaintiffs and failed to pay interest owed under the lease agreements. SAC at ¶ 1. The first six lease agreements, dated between April 24, 2011 and January 18, 2012, were between FZC and A-1, "with the metal provided by Limited." SAC at ¶¶ 12-13. The other five lease agreements were between Limited and A-1 directly, and were signed between February 6, 2012 and September 26, 2012. SAC at ¶ 14. The last two lease agreements were signed on September 26, 2012, after the Settlement Agreement was executed.

On September 6, 2012 Limited, A-1, FZC, Suresh, Kumar, and Vivek Gulatee (a cousin of the brothers), signed a Settlement Agreement regarding the sale of Gulatee's ownership interest in Limited and FZC to Kumar and Suresh. The Settlement Agreement included the following release of claims provision:

3. RELEASE
3.1 Each Party agrees (for itself and on behalf of each of its Affiliates and Agents) that this Deed shall constitute full and final settlement, and irrevocable and unconditional waiver and release, of all and any Claims of that Party and its Affiliates and Agents against each other Party and each other Party's Affiliates and Agents.

The Agreement defines claims as:

[A]ll claims or causes of action of any kind whatsoever (whether present or future, actual, prospective, or contingent, whether or not know[n] to any of the Parties at the date of this Deed, and including for any fees, costs, or expenses) in any jurisdiction[s] that relate to, arise from, or are otherwise connected to, or concern, the Prior Proposals, the Metal Transfers, or any other matter connected with, concerning or related to: (i) Alliance Limited, the SAIF-Zone Branch, Alliance FZC, or Alliance Limited's, the SAIF-Zone Branch's, or Alliance FZC's actual or proposed present, past or future, interests, investments, transactions, operations or business....

One of the Settlement Agreement Recitals states:

To enable the Buyback Documents and the Alliance FZC SPA [Share Purchase Agreement] to be executed, the Parties wish to settle, waive and release all claims that they may have as against each other that relate to, arise from, or are otherwise connected to or concern, the Prior Proposals, the Metal Transfers [between Limited and FZC], or any other matter connected with, concerning or related to (i) Alliance Limited, Alliance FZC or Alliance Limited's, or Alliance FZC's actual or proposed, present, past or future, interests, investments, transactions, operations or business, or (ii) any other transaction, arrangement, undertaking, understanding, agreement or contract (whether written or oral) between either both of the Khoslas and/or A-1 (on the one hand) and Gulatee (on the other hand), excluding the Alliance FZC SPA, or (iii) their respective shareholdings and directorships) and related director's duties) in Alliance Limited and Alliance FZC, in each case, on the terms of this Deed.

The Settlement Agreement includes a choice of law clause stipulating its terms are to be construed under English law, and the parties agreed to submit to the jurisdiction of English courts. (Exhibit 17).

B. Action in England

On April 25, 2013, A-1 and Suresh filed an action in the High Court of Justice of England against Limited, FCZ, Kumar and Vivek Gulatee to determine the scope of the Settlement Agreement release provision. (Exhibit 20). The complaint in the English action alleges that Suresh was to have acquired 60% interest in Limited, but the shares were never issued. (Exhibit 21). The complaint further alleges that in an oral agreement related to the sale of the shares, A-1 loaned Kumar $15 million to finance the acquisition of Gulatee's shares. (Exhibit 21).[3]

A-1 and Suresh seek a determination in the English action that the Settlement Agreement release provision does not bar Suresh's claims to be issued the shares in Limited, and A-1's claims against Kumar regarding the outstanding $15 million loan. (Exhibit 20). Suresh and A-1 argue in the English action that "the Settlement Agreement was intended to compromise [only] the disputes between the Brothers [Kumar and Suresh] on one hand and Vivek [Gulatee] on the other hand." (Exhibit 21).

Kumar and Limited filed a counterclaim on August 5, 2013 seeking a declaratory judgment that the Settlement Agreement barred both Suresh's claims to be issued the shares in Limited and A-1's claim for repayment of the $15 million loan. (Exhibit 22).

C. Similarities and Differences in the case before this Court and the English Case

In the English case, there are additional parties who are not parties here. All the parties in this case are parties in the English action.

The Settlement Agreement appears to be more closely related to the dispute in England than to the dispute in his case. The Settlement Agreement pertains to the transfer of shares that are the subject of the dispute in the English action. In this action, A-1 contends that the release provision of the Settlement Agreement bars Plaintiffs' claims against it in this case. It appears the release provision of the Settlement Agreement and the involvement of some of the parties are the only areas of overlap between the two cases.

This case is a claim for monetary damages for breach of lease agreements. The English case seeks a declaratory judgment that the Settlement Agreement does not bar Suresh's claims to be issued shares in Limited and A-1's claims for the outstanding $15 million loan, and ...


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