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Sanum Investment Ltd. v. San Marco Capital Partners LLC

United States District Court, D. Delaware

July 12, 2017

SANUM INVESTMENT LIMITED and LAO HOLDINGS, N.V., Plaintiffs,
v.
SAN MARCO CAPITAL PARTNERS LLC and KELLY GASS, Defendants.

          Michael F. Bonkowski, Esquire of Cole Schotz, P.C., Wilmington, Delaware. Counsel for Plaintiffs. Of counsel: Deborah Deitsch-Perez, Esquire and Kenneth N. Hickox, Jr., Esquire of Lackey Hershman, LLP, Dallas, Texas.

          James D. Taylor, Esquire and Dawn Kurtz Crompton, Esquire of Saul Ewing LLP, Wilmington, Delaware. Counsel for Defendant. Of counsel: Kenneth J. Joyce, Esquire, Stacy M. Schwartz, Esquire, and Andrew B. Zelman, Esquire of Lewis Brisbois Bisgaard & Smith LLP, Fort Lauderdale, Florida.

          MEMORANDUM OPINION

          ROBINSON SENIOR DISTRICT JUDGE.

         I. INTRODUCTION

         Plaintiffs Sanum Investment Limited and Lao Holdings, N.V. (collectively, "plaintiffs") filed a complaint against San Marco Capital Partners LLC ("San Marco") and its sole member/manager Kelly Gass ("Gass, " and collectively with San Marco, the "defendants"). (D.I. 1) The complaint alleges breach of fiduciary duty, breach of contract, and conversion. (Id. at ¶¶ 69-86) Defendants have asked the court to dismiss the complaint based on an arbitration clause in either one of two agreements or under the doctrine of forum non conveniens. (D.I. 12) The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1). The court finds that, under a theory of estoppel, plaintiffs are required to arbitrate this dispute pursuant to the arbitration clause in a Deed of Settlement (the "Deed") executed by plaintiffs and the government of Laos ("Laos"). Accordingly, the court does not reach defendants' other arguments, and its motion to dismiss is granted.

         II. BACKGROUND

         Plaintiffs are 80% owners of a casino and 60% owners of two slot clubs (collectively, the "gaming assets"), all located in the Lao People's Democratic Republic. (D.I. 1 ¶ 14) Laos owns the remaining 20% of the casino and a company named ST Group Co., Ltd. owns the remaining 40% of the slot clubs. (Id.) In 2012, plaintiffs filed bilateral investment treaty arbitrations (the "BIT arbitrations") alleging that Laos had expropriated the gaming assets and otherwise violated plaintiffs' treaty rights. (Id. at ¶ 15) Plaintiffs and Laos settled the BIT arbitrations by executing the Deed dated June 15, 2014 and a side letter dated June 18, 2014. (Id. at¶ 16)

         The complaint alleges that section 13 of the Deed is "[a] key provision of the Deed" under which "the Gaming Assets would be sold to a third-party 'on a basis that will maximize Sale proceeds.'" (D.I. 1 ¶ 2 (quoting section 13)). According to the complaint, if the assets were not sold within a certain timeframe, section 12 of the Deed provided that the parties would "jointly consult to appoint a qualified neutral gaming operator to take over, manage, and sell the Gaming Assets."[1] (Id. at ¶ 18) Section 12 further provided that the operator "shall have a fiduciary duty to [plaintiffs] and Laos as interested parties in the Gaming Assets." (Id. (quoting section 12 of the Deed)) Finally, section 42 of the Deed states that it "shall be governed by and construed solely in accordance with the laws of New York." (Id. at ¶ 20) What the complaint does not mention is that section 42 also contains an arbitration clause. It states in pertinent part:

Any dispute arising out of or in connection with this Deed ... shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre .... The seat of the arbitration shall be in Singapore.

(D.I. 13 at 5 (emphasis added))

         On April 16, 2015, Laos entered into a Management and Sales and Marketing Contract (the "contract") with defendant San Marco. (D.I. 1 at ¶ 24) The contract was signed by defendant Gass as the president of San Marco. (Id.) The stated purpose of the contract was to have defendants "manage, control, market and sell the Gaming Assets as contemplated by Sections 12, 13 and 16 of the Deed." (Id. at¶ 30) Laos did not consult with plaintiffs before hiring defendants to serve as the operator specified in the Deed. (Id. at ¶ 35) Plaintiffs claim if they had been consulted beforehand, they would not have approved of Laos awarding the contract to defendants. (D.I. 22 at 4)

         According to the complaint, defendants, as operators of the gaming assets, failed to enforce or fulfill several provisions of the Deed, in breach of their fiduciary duties and the contract. (D.I. 1 at¶¶ 70-80) Specifically, defendants failed to respond to plaintiffs' requests for information regarding sections 15, 21, and 25 of the Deed, which provide respectively for the establishment of an escrow account, the exporting of slot machines in storage, and the expansion and upgrade of an airport. (Id. at ¶¶ 38-40) Defendants also did not take action to prevent or reverse Laos' breach of sections 6 and 9 of the Deed. (Id. at ¶¶ 50, 53) Section 6 provided that a project development agreement ("PDA") related to the casino was restated and effective for fifty more years, but Laos terminated the PDA while "Gass was in charge" and "she did nothing." (Id. at ¶¶ 49-50) Section 9 of the Deed provided that all taxes on the gaming assets would be subject to a flat tax, but Laos imposed a tax set at a percentage of revenue, and "Gass failed to prevent or reverse this action." (Id. at ¶¶ 51-53) Finally, the complaint alleges that defendants have repeatedly acted or failed to act in a manner that will complete a sale of the gaming assets "on a basis that will maximizes the Sale proceeds, " as required by section 13 of the Deed. (Id. at ¶ 54)

         III. STANDARD OF REVIEW

         A defendant may move to dismiss in favor of arbitration pursuant to Rule 12(b)(6) if it is apparent on the face of the complaint and the documents relied upon therein that the plaintiff's claims are subject to an enforceable arbitration clause. Guidotti v. Legal Helpers Debt Resolution, LLC,716 F.3d 764, 773-74 (3d Cir. 2013). Under Rule 12(b)(6), the court accepts all factual allegations as true and construes the complaint in the light most favorable to plaintiff. Id. at 772. In addition, the court may consider only the complaint, exhibits attached to the complaint, matters of public record, and the documents on which plaintiff's claims are based. Id. The motion to dismiss should be denied in favor of limited discovery concerning the validity of the arbitration agreement if: (1) "the complaint and its supporting documents are unclear regarding the agreement to arbitrate;" or (2) plaintiff has responded to the motion to dismiss with "additional facts sufficient to ...


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