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FAIRMONT FOODS CO. v. MANGANELLO

June 27, 1969

FAIRMONT FOODS COMPANY, Plaintiff,
v.
Filomena MANGANELLO as Executrix of the Last Will and Testament of Ralph Manganello and as Guardian of the property of Betty Ann Manganello, Rita Yodice and Anna Guiliano as Executrices of the Last Will and Testament of Nicola Gentile, Marie Prezzano as Executrix of the Last Will and Testament of Joseph Prezzano, Walter W. Pegalis, Origena Pizza Crust Co., Inc., and Anthony Filiti, Defendants


Pollack, District Judge.


The opinion of the court was delivered by: POLLACK

MEMORANDUM

POLLACK, District Judge.

 Motions are before the Court to dismiss or alternatively, to stay this action; or as a further alternative to direct a more definite statement of plaintiff's claims.

 This is a diversity case and involves no federal question. It is unclear from the record where the case arose and consequently it is unclear what law should govern. The first Count calls upon the Court to exercise its equity powers by decreeing specific performance of an alleged agreement to cause a Canadian corporation to sell its assets to the plaintiff. The second Count seeks, as an alternative, the award of damages for breach of such agreement. The third Count seeks damages from those charged with interfering with and inducing breach of such agreement.

 The facts given herein are those claimed by the parties respectively and while they are assumed, no finding thereof is made for the purposes of these motions.

 According to the plaintiff, a Delaware corporation, the defendant-majority stockholders of a Canadian corporation, Origena Pizza Crust Co. of Canada, Ltd. ("Origena Canada" hereafter) who also constituted three of the five members of the board of directors and one of whom was the president, agreed in November, 1968 to cause that corporation to sell all of its assets to plaintiff, to promptly call a meeting of stockholders and at such meeting "to propose the ratification of the sale of Origena Canada's assets to plaintiff and vote their stock in favor of such sale." The stockholder defendants breached their agreement by failing and refusing to hold such a meeting.

 Plaintiff further represents that the board of directors of Origena Canada voted approval of the sale; that a notice of meeting of stockholders was sent to the minority stockholders but the meeting was never held and consequently, of course, the ratification of the sale of the corporate assets to plaintiff was not proposed nor the stock of the defendant stockholders voted in favor of the sale.

 The defendants contend hereon that while there may have been complex and complicated negotiations, the parties never reached an agreement for the sale to the plaintiff of all the corporate assets. Instead, about December 19, 1968, the stockholder defendants together with one of the minority stockholders optioned all of their shares in Origena Canada to the corporate defendant, a New York corporation, known as Origena Pizza Crust Co., Inc. ("Origena New York" hereafter). The principal stockholder and officer of that corporation is the defendant Anthony J. Filiti. The optionors agreed that they would not sell their stock to others; that they would not vote as directors of Origena Canada for the sale of its assets nor would they participate in any plan to sell those assets during the one year term of the option agreement. The business of the Canadian corporation was to be operated during the term of the option by Origena New York.

 Some time in February, 1969, the defendant stockholders sold their shares of Origena Canada to defendant Origena New York and resigned their posts as directors and officers of the Canadian corporation.

 The instant action was commenced on December 31, 1968. Origena Canada is not named as a party nor has it appeared herein. Three weeks later, on January 22, 1969 plaintiff commenced a suit against Origena Canada in the Supreme Court of Ontario, Canada, seeking specific performance of an agreement with the Canadian corporation itself for the sale of its assets to plaintiff or in the alternative, seeking damages for breach of that agreement. According to the plaintiff's papers herein, the Canadian suit may turn on whether Canadian law requires stockholder consent to such a sale. In its Canadian pleading, the plaintiff expressly "denies that it was aware or that it was contemplated when the agreement was concluded, that the agreement was to be subject to shareholder approval and that the Plaintiff pleads that the agreement is binding on the Defendant [Origena Canada] regardless of whether or not it has received shareholder approval".

 I.

 The relief which the plaintiff demands under the first Count of the complaint is to declare null and void the sale by the defendant stockholders of their stock of Origena Canada to Origena New York and Anthony Filiti and to direct the latter two to reassign and transfer to the defendant stockholders all of the stock of Origena Canada purchased by them subsequent to the agreement with the plaintiff; to direct the defendant stockholders to call a meeting of the shareholders of the Canadian corporation in accordance with its by-laws; to direct such defendants at such meeting to propose ratification of the agreement to sell the Canadian corporation's assets to the plaintiff; and to direct such defendants to vote their stock at such meeting to ratify such agreement.

 In the alternative, under the second Count, plaintiff demands judgment against the shareholder defendants for their alleged breach of contract in a sum of money claimed as the value of the breach.

 As a general rule a Court other than the domiciliary Court will decline to interfere with corporate administration of a non-joined foreign corporation and will decline to direct or control the internal conduct of corporate meetings and the votes of directors or stockholders thereat.

 
"But it is well settled that jurisdiction in any case will be declined either in the absence of jurisdiction in the strict sense or where a determination of the rights of litigants involves regulation and management of the internal affairs of the corporation dependent upon the laws of the foreign State or where the court in which jurisdiction is sought is unable to enforce a decree if made or where the relief sought may be more appropriately adjudicated in the courts of the State or country to which the corporation owes its existence."
 
(Langfelder v. Universal Laboratories, 293 N.Y. 200, 204, 56 N.E.2d 550, 552, 155 A.L.R. 1226)*

 Plainly, in this suit at the instance of a foreign corporation plaintiff and in the absence of Origena Canada, a party whose presence is indispensable in respect of a direction to hold and conduct a corporate meeting, it would be inappropriate for this Court to retain jurisdiction of the first Count of the complaint.

 The law of Ontario, Canada, would have to be resorted to for guidance on matters of the corporate administration of such a meeting and the forum court would have to yield thereto leaving no ...


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