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Ethica Corporate Finance S.r.L v. Dana Inc.

Superior Court of Delaware

August 16, 2018

ETHICA CORPORATE FINANCE S.r.L, an Italian Limited Liability Company, as successor to ETHICA HOLDING S.P.A., f/k/a ETHICA CORPORATE FINANCE S.p.A., an Italian Corporation, Plaintiff,
v.
DANA INCORPORATED, a Delaware Corporation, Defendant.

          Submitted: May 14, 2018

         Upon Defendant DANA Incorporated's Motion to Dismiss DENIED

         Upon Plaintiff Ethica Corporate Finance S.r.L.'s Motion to Strike DENIED

          Jon E. Abramczyk, Esquire, Barnaby Grzaslewicz, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware, Robert L. Sills, Esquire, Emmanuel B. Fua, Esquire, Orrick, Herrington & Sutcliffe LLP, New York, New York, Attorneys for Plaintiff Ethica Corporate Finance S.r.L

          Daniel B. Rath, Esquire, James S. Green Jr., Esquire, Jennifer L. Cree, Esquire, Landis Rath & Cobb LLP, Wilmington, Delaware, Attorneys for Defendant Dana Incorporated

          ERIC M. DAVIS, JUDGE

         I. INTRODUCTION

         This is a breach of contract action assigned to the Complex Commercial Litigation Division of the Court. The action arises out of an agreement regarding the provision of financial advisory services (the "Agreement") by Plaintiff Ethica Corporate Finance S.r.L, ("Ethica") for Defendant Dana Incorporated ("Dana"). Dana is a Delaware corporation with its headquarters in Maumee, Ohio. Dana is a manufacturer and supplier of products in the motor vehicle industry. Ethica is an Italian limited liability company that provides financial advisory services. Ethica is located in Milan, Italy.

         Ethica alleges that this civil action is a case regarding unpaid financial advisory fees. According to Ethica, Ethica and Dana entered into the Agreement under which Ethica provided Dana with services relating to Dana's acquisition of the Brevini Group. Ethica contends that it performed substantial and valuable work under the Agreement; however, Dana terminated the Agreement and refused to compensate Ethica in accordance with the terms of the Agreement.

         On October 12, 2017, Ethica filed suit in this case (the "Complaint"). In response, Dana filed the Motion to Dismiss (the "Motion"). Through the Motion, Dana seeks to dismiss the suit for improper venue under forum non conveniens. Ethica opposes the Motion. Ethica also filed Ethica Corporate Finance S.r.L.'s Motion to Strike Portions of Dana Incorporated's Reply Brief and Related Filings (the "Motion to Strike").

         For the reasons stated below, the Court DENIES the Motion and DENIES the Motion to Strike.

         II. RELEVANT FACTS

         Ethica is a financial advisory firm that provides merger and acquisition advice in the Italian market.[1] Since 2010, Ethica has provided advice in over 50 mergers and acquisitions aggregating over 3.5 billion.[2] Dana is a Delaware corporation with its principle place of business in Ohio.[3] Dana is a publicly traded manufacturer and supplier of products for vehicle manufacturers.[4] In 2015, Dana sought Ethica's services regarding a merger and acquisition.[5]

         On or about April 10, 2015, representatives from Dana and Ethica met at Ethica's office in Italy.[6] Ethica presented some possible target corporations for Dana.[7] Dana expressed an interest in acquiring O&K Antriebstechnik GmbH, Brevini Power Transmissions S.p.A., and Brevini Fluid Power S.p.A.[8] The two Brevini companies were owned by the Brevini Group.[9]Dana wanted Ethica to facilitate a merger or acquisition with the target companies.[10] Dana and Ethica did not reach an agreement regarding Ethica's compensation. Rather, the parties decided to address compensation at a later time.[11]

         On April 23, 2015, Dana instructed Ethica to contact Mr. Brevini, Brevini Group's controlling shareholder.[12] On April 24, 2015, Ethica's representative met with Mr. Brevini and discussed Dana's interest in acquiring Brevini.[13] Ethica, on behalf of Dana, negotiated a nondisclosure agreement with Brevini.[14]

         On June 5, 2015, Ethica made a proposal to Dana regarding Ethica's fees. On July 16, 2015, the parties reached an agreement regarding fees. Dana would pay Ethica a "non-refundable retainer of 15, 000 per month, following the execution by Dana of a letter of intent and continuing until the sooner of six months after execution or closing of the transaction, and a success fee of 0.5% of the enterprise value of Brevini if the acquisition was concluded."[15]

         Ethica continued facilitating negotiations between Dana and Brevini.[16] On September 28, 2015, Dana unilaterally terminated the contract with Ethica.[17] Dana offered 25, 000 for expenses and 200, 000 upon Dana's completed transaction with Brevini.[18] Ethica rejected the offer.[19]

         On February 2, 2017, Dana publicly announced the completed purchase of 80% of Brevini's common shares.[20] Dana also announced that it had the option to purchase the remaining 20% of common shares by 2020.[21] Dana publicly valued Brevini at 325, 000, 000 with the assumption of nearly 100, 000, 000 of debt.[22]

         On October 12, 2017, Ethica filed the Complaint. In the Complaint, Ethica claims: (1) breach of contract; (2) unjust enrichment; and (3) pre-contractual liability. On February 1, 2018, Dana filed the Motion. On March 1, 2018, Ethica filed the Opposition to Dana Incorporated's Motion to Dismiss (the "Opposition"). On March 15, 2018, Dana filed the Reply Brief in Further Support of Dana Incorporated's Motion to Dismiss (the "Reply").

         Dana attached the Declaration of Francesca Rolla (the "Rolla Declaration") to the Motion. The Rolla Declaration makes several statements about the Italian legal system and its impact on this civil litigation. First, the Rolla Declaration states that Italian courts do not follow stare decisis; therefore, it is possible that the parties will ask the court to rely on a decision that is inconsistent with well-settled Italian law.[23] Next, the Rolla Declaration explains the difficulty Dana could face with discovery based on European Union and Italian law.

         As part of the Opposition, Ethica attached the Declaration of Stefano Pastore in Support of Plaintiff's Opposition to Defendant's Motion to Dismiss the Complaint for Forum Non Conveniens (the "Pastore Declaration"). Mr. Pastore states that most of the negotiations were conducted in English.[24] Further, Matthias Goethe and Mark Schneider were the lead Dana representatives that communicated with Ethica regarding the Brevini Group.[25] Mr. Goethe and Mr. Schneider both hold Ohio phone numbers for business.[26] Mr. Pastore also states that Ethica is willing to sign waivers that are necessary to facilitate cross-border transfer of data and documents subject to Italian data protection laws.[27] Ethica also agrees to produce its employees for depositions and will waive the requirement that discovery be sought under the Hague Convention.[28]

         Dana attached the Declaration of Marc Schuett (the "Schuett Declaration") to the Reply. Mr. Schuett is a senior legal director at Dana.[29] Mr. Schuett states that he "participated in meetings in Italy with representatives of Brevini and Ethica" and that the "statements in Dana's opening brief and in the Francesca Rolla's declaration that most of the witnesses relating to the Matter are located in Italy are accurate."[30] Mr. Schuett provided a list of six employees involved in negotiations who are located in Italy.[31] Additionally, Mr. Schuett lists five people involved in negotiations who work for the Brevini Group or no longer work for Dana.[32]

         On April 10, 2018, Ethica filed the Motion to Strike. On May 8, 2018, Dana filed the Response of Dana Incorporated in Opposition to Ethica Corporate Finance's Motion to Strike (the "Opposition to Strike"). Ethica seeks to strike Dana's submission of a proposed draft of the contract at issue in the complaint. Ethica also seeks to strike the list of employees located in Italy, former employees, and Brevini employees provided in the Schuett Declaration. Ethica argues that Dana failed to provide this information in the Motion and raising the issues in the Reply prejudices Ethica without an opportunity to respond.

         On May 14, 2018, the Court held a hearing (the "Hearing") on the Motion, Opposition, Reply, Motion to Strike, and Opposition to Strike. The Court took the matter under advisement.

         III. PARTIES' CONTENTIONS

         A. Motion

         Through the Motion, Dana seeks to dismiss this civil action for improper venue under the theory of forum non conveniens. Dana argues that this case belongs in an Italian court because: (1) evidence is located in Italy; (2) all witnesses-party and third party-are located in Italy; (3) Italian law governs the dispute; (4) Dana's access to proof in Delaware "would be cumbersome, inefficient, and extremely difficult;" (5) Ethica is a resident of Italy; and (6) damages, if any, were incurred in Italy.

         B. Opposition

         Ethica argues that Dana fails to meet standard for forum non conveniens. Ethica notes that Dana is a Delaware Corporation with its headquarters in Ohio. Ethica contends that it worked closely with executives from Dana who live and work in Ohio. Ethica provides that the parties communicated in English. Ethica further contends that Delaware courts resolve issues for foreign law, "particularly where, as here, the applicable foreign law is settled and uncontroversial."[33]

         IV. DISCUSSION

         A. The Court will deny the Motion to Strike because the parties had a full and fair opportunity to address all factual and legal issues at the hearing held on the Motion and Opposition.

         "Moving parties must provide adequate factual and legal support for their positions in their moving papers in order to put the opposing parties and the court on notice of the issues to be decided."[34] Delaware Courts do not favor "sandbagging" in reply briefs.[35] Sandbagging is "raising new bases for dispositive relief for the first time in a reply brief."[36] Courts may disregard or deem waived any arguments made in a reply brief which was not raised in the opening brief.[37]

         Ethica seeks to strike two pieces of information from the Reply. First, Ethica seeks to strike paragraphs seven and eight of the Schuett Declaration which list potential witnesses located in Italy or outside Dana's control.[38] Second, Ethica seeks to strike Exhibit B to the Reply. Dana states that Exhibit B is Ethica's proposed draft of a contract.[39]

         The Court finds that Dana should have been more forthcoming in the Motion and its attachments. Dana could have, from the outset, provided the list of witnesses in its opening brief. Forum non conveniens requires a defendant to show particular hardships for particular witnesses. The Court, and the parties, know that this type of information is important in determining whether to dismiss for forum non conveniens reasons. Rather than providing the specific witnesses that might not cooperate, Dana merely stated in the Motion that "[a]ll third-party witnesses and documents are located [in Italy]."[40] Further, Dana states that "[n]aturally, many of the relevant communications are in Italian, and most, if not all, of the witnesses and documents . . . are located in Italy."[41]

         However, while Dana could have identified these witnesses with more particularity in its opening brief, the list of witnesses in the Reply was not a surprise based on the statements made in the Motion. It was logical for Dana to expand and refine the list of witnesses based on the Opposition. Moreover, the parties had the opportunity to address all witness issues (availability, etc.) at the Hearing. As such, the Court will not strike paragraphs seven and eight of the Schuett Declaration for purposes of the Motion.

         Ethica also seeks to strike Exhibit B to the Reply. Exhibit B is a proposed draft of the contract that contains a forum selection clause to the Court of Milano.[42] A forum selection clause is not dispositive on a Court's analysis although a forum selection clause is a factor to consider in a forum non conveniens analysis.[43] In this situation, Exhibit B is even less relevant to the analysis as the draft contract is a contract between Dana and Ethica regarding the acquisition of another company and is unsigned. Exhibit B does not heavily weigh in the Court's analysis at this stage of the litigation and the Motion does not indicate any reliance upon a forum selection clause or a written contract. As such, the Court gives the draft contract as much importance as did Dana when it submitted the Motion. For these reasons, the Motion to Strike is denied.

         B. Motion to Dismiss Is Denied

         1. Forum Non Conveniens Legal Framework

         Forum non conveniens is a judicially created doctrine that allows the Court to exert some control over a foreign plaintiff's access to our forum.[44] Forum non conveniens falls under Superior Court Civil Rule 12(b)(3) for improper venue and "empowers a court to decline to hear a case, despite having jurisdiction, where the plaintiff's choice of forum would vex, oppress, or harass the defendant through undue inconvenience, expense, or other hardship."[45]

         Dismissal under foreign non conveniens is drastic relief and only warranted in "rare cases."[46] To avoid the plaintiff's choice of forum, a defendant must show "with particularity that it will be subjected to overwhelming hardship and inconvenience if required to litigate in Delaware."[47] To prevail on foreign non conveniens, a defendant must show that the inconvenience and hardship are "so profound" that they "overwhelm" the plaintiff's choice of forum.[48] However, this standard is "not intended to be preclusive. Rather, it is intended as a stringent standard that holds defendants who seek to deprive a plaintiff of her chosen forum to an appropriately high burden."[49]

         When determining whether a suit should be stayed or dismissed for forum non conveniens, Delaware courts apply different standards depending on the circumstances.[50] Where two cases are filed contemporaneously, or the Delaware case is filed first, or there is no other pending action, the Court examines the motion under the traditional forum non conveniens framework, applying the factors set forth in Cryo-Maid under an "overwhelming hardship" standard.[51] But, "[i]f the foreign action is the first-filed action, principles of fairness, comity, judicial economy and the possibility of inconsistent results generally favor the granting of a stay."[52] Where the Delaware action is the second-filed to the foreign action, the Court will conduct an analysis under McWane.[53]

         2. Cryo-Maid Analysis

         There is no pendency of the same action in another jurisdiction. Therefore, the Court is guided by the six Cryo-Maid factors to determine if there is an overwhelming hardship.[54] The six factors include:

(1) the relative ease of access to proof; (2) the availability of compulsory process for witnesses; (3) the possibility of the view of the premises; (4) whether the controversy is dependent upon the application of Delaware law which the courts of this State more properly should decide than those of another jurisdiction; (5) the pendency or nonpendency of a similar action or actions in another jurisdiction; and (6) all other practical problems that would make the trial of the case easy, expeditious and inexpensive.[55]

         a. Ease of Access to Proof

         The Complaint seeks damages from Dana's purported breach of contract. Alternatively, Ethica argues unjust enrichment or pre-contractual liability. The case is, therefore, about an alleged breach of contract-whether oral or written. Modern methods of communication should facilitate transcontinental document exchange, making documentation in this case easier to produce.[56] "Similarly, modern methods of transportation lessen the Court's concern about the travel of witnesses who do not live in Delaware."[57] The Court notes that most of the operative documents are written in English including the email correspondence between Ethica and Dana.

         However, Dana argues that it will face discovery issues based on Article 23 of the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (the "Hague Convention") and Italian law.[58] The Rolla Declaration states that the "Italian Government declares, in accordance with Article 23, that it will not execute Letters of Request issued for the purpose of obtaining pre-trial discovery of documents as known in common law countries."[59] Further, the Rolla Declaration states that "Italy also has adopted laws that restrict international discovery."[60] The Italian Data Protection Code, which is based upon the 1995 EC Directive of the European Parliament, provides that the "cross-border transfer to non-European Union countries is allowed in certain cases set out by the Data Protection Code including those cases where the transfer is necessary for carrying out investigation by defense counsel or else to establish or defend a legal claim."[61] However, the European Union ...


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