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Carlyle Investment Management LLC v. Plaza Management Overseas S.A.

United States District Court, Third Circuit

August 14, 2013



SUE L. ROBINSON, District Judge.

At Wilmington this 14th day of August, 2013, having reviewed plaintiffs' motion to remand and the papers filed therewith;

IT IS ORDERED that said motion (D. I. 9) is granted, for the reasons that follow:

1. Procedural background. Plaintiffs in this case are (1) three entities affiliated with The Carlyle Group, (2) the three founders of Carlyle, and (3) three Carlyle-affiliated former directors of Carlyle Capital Corporation limited ("CCC").[1] Plaintiffs brought this action in the Delaware Court of Chancery against Louis J.K.J. Reijtenbagh ("Reijtenbagh") and three companies he controls, Moonmouth Company, S.A. ("Moonmouth"), Plaza Management Overseas, S.A. ("Plaza"), and Parbold Overseas Ltd. ("Parbold") (collectively, the "Reijtenbagh defendants"), as well as a Dutch entity, Stichting Recovery CCC ("SRCCC"). Plaintiffs seek to enforce a forum selection clause requiring litigation only in Delaware state court, as well as several releases from liability. Defendant Plaza removed the case to this court; plaintiffs seek remand on the grounds that removal was procedurally defective and in violation of the forum selection clause.

2. Factual background. CCC was an investment fund incorporated in Guernsey in August 2006. It invested primarily in AAA-rated residential mortgaged-backed securities issued by Fannie Mae and Freddie Mac with the implied guarantee of the U.S. government. In December 2006, Reijtenbagh, acting through Plaza, caused Moonmouth to purchase three million CCC Class B shares for $60 million. On December 20, 2006, Plaza executed a Subscription Agreement on Moonmouth's behalf ("the Agreement"), which Agreement was countersigned on CCC's behalf. (D.I. 11, ex. 1) Subsequently, in 2007, Reijtenbagh caused Moon mouth to transfer one million shares to Parbold.

3. In March 2008, CCC was placed into liquidation after the "sudden and unprecedented global financial crisis" depleted its cash reserves. (D. I. 10 at 4) By letters dated June 7, 2012 written on behalf of Moonmouth[2] and SRCCC by Dutch counsel, defendants alleged that Carlyle "took irresponsible and unacceptable risks" in connection with the investments it managed, and would hold Carlyle "liable [under Dutch law]... for all damages... that the investors sustained and any and all damage that they will sustain in the future in connection with the CCC shares." (D.I. 11, exs. 2, 3) Soon thereafter, on July 13, 2012, Parbold was dissolved.

4. In response to the June 2012 correspondence, plaintiffs filed the instant complaint in the Court of Chancery to enforce the Agreement's forum selection clause as well as certain contractual releases from liability. On November 19, 2012, plaintiffs served Moonmouth, Plaza, and Parbold. Moonmouth was dissolved on November 26, 2012.[3] Having requested and received plaintiffs' consent to an extension of time to answer plaintiffs' first amended complaint, Plaza filed a notice of removal pursuant to 28 U.S.C. § 1446. Plaintiffs timely filed the instant motion to remand.

5. Paragraph 8 of the Agreement contains the following forum selection clause:

The courts of the State of Delaware shall have exclusive jurisdiction over any action, suit or proceeding with respect to this Subscription Agreement and the Investor hereby irrevocably waives, to the fullest extent permitted by law, any objection that it may have, whether now or in the future, to the laying of venue in, or to the jurisdiction of, any and each of such courts for the purposes of any such suit, action, proceeding or judgment..., and the Investor hereby submits to such jurisdiction.

(D.I. 11, ex. 1, 1J8) The Agreement also specifies that it "shall be binding upon the Investor and the heirs, personal representatives, successors, and assigns of the Investor, " and that its "terms and provisions []shall be governed, construed and enforced solely under the laws of the State of Delaware." ( Id. at ¶ 7)

6. Standard of review. The federal removal statute, 28 U.S.C. § 1441, is strictly construed, requiring remand to state court if any doubt exists over whether removal was proper. The party seeking removal bears the burden of proving that removal is proper. See Abels v. State Farm Fire & Cas. Co., 770 F.2d 26 (3d Cir. 1985); Carlyle Investment Management, LLC v. Carlyle Capital Corp. Ltd., 800 F.Supp.2d 639 (D. Del. 2011). The burden is especially heavy when a party seeks removal in order to avoid the effect of a legally enforceable forum selection clause. Cf. lngres Corp. v. CA, Inc., 8 A.3d 1143 (Del. 2010).

7. With limited exceptions, a defendant may remove a case to federal court only with the unanimous consent of all co-defendants. See Balazik v. Cnty. of Dauphin, 44 F.3d 209, 213 (3d Cir. 1995). The unanimous consent requirement is waived only for defendants who are unknown or nominal parties, fraudulently joined, or not served as of the date of removal. Id. at 213 n. 4. With respect to the first exception, a "defendant is nominal if there is no reasonable basis to impose, or legal possibility of, legal liability." 16 Moore's Federal Practice, § 107.11[1][d], at 107-43 (3d ed. 2012); see also Farias v. Bexar County Bd. of Trustees, 925 F.2d 866, 872 (5th Cir. 1991) (non-moving defendants deemed nominal parties where "plaintiff could in no way establish a cause of action" against them).

8. Analysis. The Notice of Removal at bar identifies only Plaza as the filing party. There is agreement that neither Reijtenbagh nor SRCCC had been served at the time of removal, making their consent unnecessary. Although it is not clear when Parbold was served, the record indicates that it had been dissolved months before the instant lawsuit was filed. The first dispute that needs to be addressed, then, is whether the consent of Moonmouth and Parbold is excused because they are nominal parties due to their dissolution.

9. The dissolved defendants were incorporated under the laws of the British Virgin Islands ("BVI"); under the law of the BVI, a dissolved company ceases to exist for all purposes. (D.I. 23, ex. A, ¶¶ 7, 17-21) More specifically, under the law of the BVI, a dissolved company can neither be sued, and the company can take no action whatsoever. ( Id. at ¶¶ 7, 21) Since both Moon mouth and Parbold ceased to exist under the law of the BVI at the time of their dissolution, there is no legal possibility of their legal ...

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