The opinion of the court was delivered by: WARD
The complaint filed in this action sets forth claims for (1) breach of contract, (2) an accounting, (3) fraud, (4) tortious interference with contractual relations, and (5) a taking of property in violation of international law. Defendants are Undaras na Gaeltachta ("UG"), an instrumentality of the Republic of Ireland, and the Industrial Development Authority of Ireland ("IDA"), also an instrumentality of the Republic of Ireland. UG and IDA have moved to dismiss the complaint, arguing (1) that the Court lacks subject matter jurisdiction over this action, (2) that the Court lacks personal jurisdiction over both UG and IDA, (3) that the Court should invoke the doctrine of forum non conveniens, and (4) that plaintiffs have failed to plead fraud with the particularity required by Rule 9(b), Fed. R. Civ. P. For the reasons hereinafter stated, the Court finds that only the fourth of these arguments has merit. Accordingly, the Court denies the UG-IDA motion insofar as it seeks dismissal of the complaint in its entirety, and grants the UG-IDA motion insofar as it seeks dismissal of plaintiffs' fraud claim.
Analysis of the UG-IDA motion requires a fairly detailed recapitulation of the factual background to this action. To the extent the papers before the Court disclose a factual dispute with respect to an issue relevant to the UG-IDA motion, the Court has liberally construed plaintiffs' version of the facts and has deemed that version to be true for the purpose of deciding this motion. Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 303 n.6 (2d Cir. 1981), cert. denied, 454 U.S. 1148, 102 S. Ct. 1012, 71 L. Ed. 2d 301 (1982). Needless to say, by so doing the Court has not relieved plaintiffs of their trial burden of proving the necessary jurisdictional facts by a preponderance of the evidence. Gilson v. Republic of Ireland, 221 U.S. App. D.C. 73, 682 F.2d 1022, 1026 (D.C. Cir. 1982); Bialek v. Racal-Milgo, Inc., 545 F. Supp. 25, 36 (S.D.N.Y. 1982).
The series of events that led to the commencement of this action began in 1973. At that time, plaintiffs were both employed by the Standard T Chemical Company ("Standard"), a New York corporation that was engaged in manufacturing plastic containers used to package cosmetics for sale to the general public. Standard's most popular cosmetics containers were those made from "metallized" plastic. During his employ by Standard, plaintif Gibbons had acquired a substantial expertise in the production techniques associated with the manufacture of metallized plastic cosmetics containers. Plaintiff Beiseigel, while employed by Standard, had become an expert in marketing such containers to cosmetics manufacturers.
Although metallized plastic cosmetics containers had, by 1974, become quite popular within the United States cosmetics industry, they had not theretofore been extensively manufactured or marketed in Europe. Plaintiffs accordingly perceived a lucrative foreign market for such containers and set about finding a means of exploiting that market through the use of their expertise in the area. Sometime in late 1973, plaintiffs learned of IDA. IDA was then and is today an instrumentality of the Republic of Ireland. It is a not-for-profit entity that exists to encourage foreign industrial development, particularly the creation of new manufacturing facilities, within the Republic of Ireland. To this end, it maintains offices in various countries around the world, including one here in New York City. Projects that qualify for the IDA program are eligible for various forms of governmental assistance, including capital grants from IDA itself and tax incentives made available by Irish law.
In the spring of 1974, plaintiffs informed IDA that they were considering the possibility of starting a manufacturing operation in Ireland for the production of metallized plastic cosmetics containers, and inquired whether such a project might qualify for the IDA program. At that time, no such manufacturing facility existed in Ireland. The initial discussions between plaintiffs and IDA relative to plaintiffs' proposed project took place either over the telephone or via letter. After IDA expressed interest in the project, plaintiffs traveled to New York and met with two representatives of IDA at IDA's office in New York City. At this meeting, plaintiffs were informed of the governmental assistance to which they would be entitled if their project qualified for the IDA program. Among other things, IDA offered to lease plaintiffs a plant in Ireland and to provide a capital grant equal to forty-five percent of the cost of the machinery needed to equip the plant. Shortly after the New York City meeting, plaintiffs traveled to Ireland, at IDA's request, to inspect possible plant sites. However, since both the plant sites and IDA's proposed capital grant proved inadequate for plaintiffs' purposes, the negotiations between plaintiffs and IDA were discontinued in the summer of 1974.
In the late summer or early fall of 1974, plaintiffs once again contacted IDA with regard to their proposed project. IDA informed plaintiffs that they might be able to obtain a larger capital grant and a satisfactory plant site from an entity known as Gaeltarra Eireann ("GE"). GE, the statutory predecessor to defendant UG, was a not-for-profit instrumentality of the Republic of Ireland, and was charged by law with encouraging and assisting the economic development of certain designated Gaelic-speaking areas of Ireland. In similar fashion to the IDA program, a project that qualified for the GE program was eligible for various forms of governmental assistance.
GE, since it was not primarily concerned with encouraging foreign investment in the areas for which it was responsible, did not maintain an office in the United States or employ any personnel in the United States. Instead, GE had developed a relationship with IDA (which was a completely separate legal entity under Irish law) pursuant to which United States investors having development projects that seemed likely candidates for the GE program were directed by IDA to contact GE. Under this arrangement, IDA also made its personnel and its New York City office available to GE in order to facilitate GE's negotiations with those investors who were referred to GE by IDA.
Upon being referred to GE by IDA pursuant to the GE-IDA arrangement just described, plaintiff Gibbons telephoned GE at its office in Ireland and outlined plaintiffs' proposed project. He followed this conversation up with a letter wherein he set forth additional details of the plan. GE responded by scheduling a meeting at IDA's New York City office. The meeting occurred in October 1974, and was attended by plaintiffs, two representatives of IDA, and two representatives of GE. At the meeting, both the general nature and the specific details of plaintiffs' proposal were discussed. The GE representatives informed plaintiffs of the governmental assistance to which they would be entitled in the event their project qualified for the GE program. GE informed plaintiffs that their project could be structured as an "export company," and thereby qualify for certain tax incentives made available by Irish law. Among other things, GE offered to lease plaintiffs a plant in Ireland and to provide a capital grant in the amount of sixty percent of the cost of the machinery necessary to equip the plant. Plaintiffs and GE agreed that the plant would be located in County Galway, Ireland. Plaintiffs and GE also developed a tentative financial structure for the project. IDA, nothing that negotiations would henceforth be undertaken primarily between plaintiffs and GE, agreed nonetheless to continue to make itself, its personnel, and its New York City office available to plaintiffs and GE in order to faciliate their continued negotiations and the completion of the arrangements for the project.
After the meeting, plaintiffs set about the task of preparing a formal application seeking to qualify their project for the GE program. After communicating with GE on numerous occasions during the fall of 1974 and the winter of 1974-1975, plaintiffs submitted such an application on March 27, 1975. The spring of 1975 was chiefly occupied with communications between GE and plaintiffs wherein the parties sought to clarify the details of plaintiffs' application. Many of the communications just described were initiated by plaintiffs from IDA's New York City office either via telephone or telex. In June 1975, plaintiffs traveled to Ireland and provided further clarification of the details of their application.
On August 21, 1975, GE sent plaintiffs a formal proposal setting forth the terms under which it would accept plaintiffs' application. Plaintiffs executed this proposal, while in Ireland, on October 17, 1975. Nonetheless, significant financial details of the parties' agreement remained to be worked out. Further negotiations took place during the fall of 1975 and the winter of 1975-1976. During this time, plaintiffs had a second meeting with representatives of GE at IDA's New York City office; however, no substantial negotiations occurred at this meeting. Finally, on May 21, 1976, GE sent plaintiffs an amended proposal wherein GE significantly increased the size of the capital grant that it proposed to make, and also agreed to enlarge its equity participation in the enterprise. Plaintiffs executed this proposal, while in the United States, on June 12, 1976. (The Court hereinafter refers to the agreement executed on October 17, 1975, as amended by the agreement executed on June 12, 1976, as the "Joint Venture Agreement.")
The most important terms of the Joint Venture Agreement were as follows. Plaintiffs were to form an Irish company to engage in the manufacture and export of metallized plastic cosmetics containers. GE agreed (1) to lease the company a factory and three four-bedroom houses located in County Galway, Ireland; (2) to give the company a capital grant in the lesser amount of $420,000
or sixty percent of the cost of anv machinery necessary to equip the factory for the manufacturing process contemplated by the parties; (3) to give the company a second capital grant of up to $72,000, to be used towards the cost of training employees to work in the factory; and (4) to purchase twenty-six percent of the outstanding stock of the company up to a total equity investment of $71,000. Plaintiffs agreed (1) to purchase the necessary machinery in the United States and arrange for its delivery to Ireland; (2) to hold at least seventy-four percent of the company's outstanding stock; (3) to move to Ireland to act as the principal directors and officers of the company; and (4) to hire primarily Gaelic-speaking individuals as employees of the company. The Joint Venture Agreement contemplated a two-stage process for development of the Company's manufacturing capacity. During "Stage 1," the parties anticipated that the company would import plastic cosmetics containers and metallize them at the County Galway plant. GE was to make up to $264,000 of the promised machinery capital grant, $40,000 of the promised training capital grant, and $52,000 of the promised equity investment in the course of Stage 1. After Stage 1 had been successfully accomplished, the parties contemplated beginning "Stage 2," at which time the company would start making its own plastic cosmetics containers at the County Galway plant. The Joint Venture Agreement stated that Stage 1 would be begun in 1976, but set no timetable for the completion of Stage 1 or the commencement of Stage 2.
After the parties finalized the Joint Venture Agreement, plaintiffs commenced purchasing the machinery necessary to equip the County Galway plant for the manufacture of metallized plastic cosmetics containers. Plaintiffs purchased this equipment from various suppliers in the United States, at a total cost of $360,000. The equipment was then shipped to Ireland, and arrived at the County Galway plant in November 1976. Plaintiff Gibbons and his family moved to Ireland in late 1976, and plaintiff Beiseigel and his family moved to Ireland in April 1977.
Prior to moving to Ireland, plaintiffs arranged for the creation of an Irish company, named International Processing & Chemical Teoranta ("IPC"), to conduct the business contemplated by the Joint Venture Agreement. Plaintiff Gibbons and plaintiff Beiseigel each purchased thirty-seven percent of IPC's stock, and GE purchased the remaining twenty-six percent. On October 27, 1976, GE and IPC entered into two agreements. By the first agreement, ("the Lease Agreement"), GE leased the County Galway plant to IPC. The second agreement ("the Machinery Capital Grant Agreement") set forth the terms and conditions of the machinery capital grant that GE was to give IPC during Stage 1 of the project. In the Machinery Capital Grant Agreement, GE promised to grant IPC the lesser amount of $264,000 or sixty percent of the cost of the equipment necessary for Stage 1, on condition that any equipment purchased was new at the time of purchase and installed in a workmanlike manner by July 1, 1978.
Disputes began to arise between plaintiffs and GE almost immediately after IPC began operations in late 1976. According to plaintiffs' complaint, the factory rented to IPC by GE did not meet the specifications set forth in the Lease Agreement and was not ready for occupancy by IPC at the time promised. The three houses promised by GE in the Joint Venture Agreement were not ready for occupancy at the time promised either. GE never provided the $40,000 training capital grant that it had promised, in the Joint Venture Agreement, to make during Stage 1. Most importantly, GE repeatedly withheld scheduled payments under the Machinery Capital Grant Agreement. GE attempted to justify its failure to comply with the Machinery Capital Grant Agreement by claiming that plaintiffs themselves had violated that agreement, first by purchasing second-hand machinery for the County Galway plant, and then by billing IPC for this equipment at a price far exceeding its true value. According to plaintiffs, these claims were entirely false and were known by GE to be false at the time they were made.
Notwithstanding the difficulties just mentioned, IPC went into production in the spring of 1978. IPC was ultimately able to secure some of the financing that it had expected to receive from GE by obtaining loans from the Bank of Ireland and from plaintiffs. By mid-summer of 1978, IPC was producing and selling its products, but failing to show a profit. IPC's nonprofitability resulted in large part from the fact that, due to GE's failure to provide the entire machinery capital grant that it had promised in the Joint Venture Agreement and later in the Machinery Capital Grant Agreement, IPC had been unable to purchase sufficient equipment to operate at a full production level.
Matters went from bad to worse during 1979. IPC's continued nonprofitability caused it to fall into default on the loan received from the Bank of Ireland. GE frustrated several IPC attempts to obtain additional financing from various private sources. Finally, in September 1979, the Bank of Ireland called its loan to IPC, throwing the financial operations of the company into total disarry and effectively dooming any remaining possibility that IPC could become a viable business operation. IPC ceased production in February 1980, at which time the County Galway plant was closed. IPC was placed in receivership soon thereafter. Plainiff Beiseigel returned to the United States to seek other employment, while plaintiff Gibbons remained in Ireland. Together, plaintiffs suffered out-of-pocket losses amounting to $510,000 as a result of their joint venture with GE.
Plaintiffs commenced this action on April 20, 1981, by filing a complaint in the United States District Court for the District of Columbia. The complaint named the Republic of Ireland, IDA, and UG (the statutory successor to GE) as defendants. Five causes of action are set forth in the complaint. In their first cause of action, plaintiffs seek to recover for GE's alleged breach of the Joint Venture Agreement. Plaintiffs' second cause of action alleges that GE misappropriated certain technology and know-how that plaintiffs supplied to IPC pursuant to the Joint Venture Agreement. The third cause of action alleges that GE and IDA made fraudulent misrepresentations, both in United States and abroad, that induced plaintiffs to enter into the Joint Venture Agreement and accordingly caused plaintiffs to suffer the damages that ensued from their participation in the Joint Venture Agreement. Plaintiffs' fourth cause of action alleges that GE tortiously interfered with the contractual relationship between plaintiffs and IPC. In their fifth cause of action, plaintiffs allege that the GE's misappropriation of their technology and know-how constituted a taking of plaintiffs' property in violation of international law.
The complaint seeks (1) compensatory damages in the amount of $510,000; (2) an award of lost profits in the amount of $4,800,000; and (3) an accounting by UG for the profits earned by it and its statutory predecessor GE through the technology and know-how that GE allegedly misappropriated from plaintiffs.
Soon after the complaint was filed, all three defendants moved to dismiss. The Republic of Ireland, which was named as a defendant on the theory that it was the "employer" of GE and IDA, moved for summary judgment on the ground that it could not, under the facts of this case, be held responsible for the acts of GE and IDA. Defendants UG and IDA moved to dismiss pursuant to (1) Rule 12(b)(1), Fed. R. Civ. P., alleging lack of subject matter jurisdiction; (2) Rule 12(b)(2), Fed. R. Civ. P., alleging lack of personal jurisdiction; (3) Rule 9(b), Fed. R. Civ. P., alleging a failure to plead fraud with particularity, and (4) the doctrine of forum non conveniens. On February 10, 1982, Judge Gesell issued a memorandum decision wherein he held that the Republic of Ireland could not, on the facts of this case, be held liable for the conduct of its instrumentalities GE and IDA. Gibbons v. Republic of Ireland, 532 F. Supp. 668, 672 (D.D.C. 1982). Judge Gesell accordingly granted the Republic of Ireland's motion for summary judgment and ordered that the complaint be dismissed as to that defendant. The elimination of the Republic of Ireland as a named defendant rendered venue improper in the United States District Court for the District of Columbia, see 28 U.S.C. § 1391(f)(4). Thus, Judge Gesell ordered that the action be transferred to this Court, on the ground that "[t]he great bulk of the activities giving rise to this action which occurred in the United States took place in New York City." Gibbons v. Republic of Ireland, supra, 532 F. Supp. at 673; see 28 U.S.C. § 1406(a). As a result of this order, Judge Gesell never ruled on the UG-IDA motion to dismiss. Upon being transferred to this Court, the action was assigned to me. Shortly thereafter, UG and IDA renewed their motion to dismiss. The Court heard oral argument on the motion on June 25, 1982, and reserved decision in order to permit the parties to make certain additional submissions to the Court. These submissions were completed by July 30, 1982, setting the stage for the decision that the Court renders by today's opinion.
The Court has determined to consider the merits of the UG-IDA motion to dismiss in the following order. First, the Court discusses the UG-IDA contention that the Court lacks subject matter jurisdiction over this action. Second, the Court analyzes the issue of whether it has personal jurisdiction over UG and IDA. Third, the Court turns to the question whether the doctrine of forum non conveniens should be invoked here. Fourth, the Court considers the UG-IDA ...