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RONAR, INC. v. WALLACE

October 24, 1986

RONAR, INC., Plaintiff,
v.
MICHAEL WALLACE, HENRY WALLACE, FRANZ FISCHER & CO. KNOPFFABRIK and JOSEF FISCHER, Defendants



The opinion of the court was delivered by: CARTER

CARTER, District Judge

This diversity case, removed to this court from the New York State Supreme Court, involves various contract and business-related tort claims. Plaintiff Ronar, Inc. ("Ronar") is a New York corporation. Defendants are the West German company Franz Fischer & Co. Knopffabrik ("F&C"), its managing director Josef Fischer, and two British citizens, Henry and Michael Wallace, who are father and son.

After Ronar brought its original action in New York Supreme Court, F&C commenced a declaratory judgment proceeding in a West German court pertaining to the contractual obligations of Ronar and itself.

 F&C and Josef Fischer now move to dismiss the action here for improper venue. Henry Wallace moves to dismiss for lack of personal jurisdiction. And his son Michael moves to stay litigation against him in this court pending the outcome of the West German proceedings. *fn1"

 BACKGROUND

 The parties in this case deal in buttons. In mid-1980, Ronar and F&C entered into a written agreement under which F&C would manufacture buttons in West Germany and Ronar would distribute them in the United States and Canada. The contract was effective through December 31, 1981, and renewable automatically from year to year but terminable upon three months notice.

 The contract remained in effect when in mid-1982, Michael Wallace emigrated from the United Kingdom to New York to work as manager and assistant to the president at Ronar. In this position of responsibility, Michael Wallace became familiar with Ronar's marketing practices.

 During the fall of 1985, however, events turned sour. F&C notified Ronar in September that their contract would not be renewed effective January 1, 1986. Ronar terminated its employment of Michael Wallace in October, 1985. In December, 1985 Michael Wallace and F&C formed a new company, Fischer Wallace Corporation ("FW Corp."), for the manufacture and distribution of buttons in North America.

 The circumstances surrounding these events are largely in dispute. Plaintiff contends that behind its back defendants were scheming to cut off their dealings with Ronar and do business together. For over a year, according to plaintiff, defendants planned their entry into the North American button market, taking advantage of Michael Wallace's insider knowledge of Ronar's sales network.

 In its amended complaint, Ronar now charges F&C and Josef Fischer with inducing Michael Wallace to breach his employment contract. It charges Michael Wallace with both breach of the employment contract and three torts leading to the Ronar-Fischer break up: defamation, breach of fiduciary duties, and interference with prospective contractual relations.

 Plaintiff also charges Henry Wallace with inducing his son's breach of contract and interfering with prospective (Ronar-Fischer) contractual relations. In connection with its charges against Henry Wallace, Ronar alleges that the elder Wallace helped finance and negotiate the formation of FW Corp., and expects to receive (or is receiving) income from it. Finally, Ronar charges all defendants with unfair competition.

 Defendants paint a different picture. F&C chose not to renew its contract with Ronar, say defendants, because it was displeased with Ronar's performance and wanted to form its own business for manufacturing and distributing buttons in the United States. Michael Wallace became dissatisfied when he did not get the responsibility at Ronar that he was promised and he became anxious that Ronar's financial condition was poor. And F&C and Michael Wallace formed FW Corp. because of their disappointment with Ronar, their interest in manufacturing buttons here, and Ronar's expressed lack of interest in joining their venture.

 In the meantime, according to defendants, Henry Wallace did not join his son and F&C in negotiations but merely relayed messages between them. He has not participated in the management or financing of FW Corp., and he derives no revenue from it, although he gave Michael $35,000 as a gift that his son could invest in the new business. Rather, the elder Wallace sold his own business in 1982 and, except for consulting work through 1985, he is retired. He resides in Florida and owns no property in New York.

 DISCUSSION

 A. Forum-Selection ...


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