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PARIBAS CORP. v. SHELTON RANCH CORP.

July 6, 1990

PARIBAS CORPORATION, PLAINTIFF,
v.
SHELTON RANCH CORPORATION, ROBERT R. SHELTON, FRONIE K. SHELTON, SHELTON RANCHES, INC., SRC HOTELS, INC., SRC INNS, INC., SHELTON LAND & CATTLE COMPANY, AND SHELTON HOLDINGS, INC., DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Defendants SRC Hotels, Inc. ("SRC Hotels"), SRC Inns, Inc. ("SRC Inns"), Shelton Holdings, Inc. ("Shelton Holdings") and Fronie K. Shelton ("F. Shelton") (the "12(b) defendants") have moved pursuant to Federal Rule 12(b)(2) of the Federal Rules of Civil Procedure to dismiss the complaint for lack of personal jurisdiction. Defendants Robert R. Shelton ("Shelton"), Shelton Ranches Corporation ("SRC"), Shelton Ranches, Inc. ("Shelton Ranches") and Shelton Land & Cattle Company ("Shelton Land") (the "1404 defendants") have moved pursuant to 28 U.S.C. § 1404(a), to transfer this action on the ground of forum non conveniens, to the United States District Court for the Southern District of Texas, Houston Division, or, in the alternative, to the Western District of Texas San Antonio Division. Both motions are denied for the reasons set forth below.

Parties

Paribas is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in New York, New York. Paribas renders financial advice and provides investment banking services to its clients.

SRC is a corporation organized and existing under the laws of the State of Texas, with its principal place of business in Kerrville, Texas.

Defendants Shelton Ranches, SRC Hotels, SRC Inns, Shelton Land and Shelton Holdings are affiliates of SRC and are corporations organized and existing under the laws of the State of Texas with their principal places of business in Kerrville, Texas. Each of the corporate defendants has a common set of officers holding identical positions (Shelton), president, F. Shelton, vice president and secretary, James Bobbitt ("Bobbitt") executive vice president and assistant secretary, Mark Stark ("Stark") treasurer and assistant secretary, Ned Hartline ("Hartline"), assistant secretary.

Robert Shelton is a citizen and resident of the State of Texas, and is the president of each of SRC, SR Inns, SRC Hotels, Shelton Ranches, Shelton Land, and Shelton Holdings. Shelton is the sole director of each of the other corporate defendants.

F. Shelton, is a citizen and resident of the State of Texas and is the spouse of Shelton. F. Shelton is the vice-president and secretary of all of the corporate defendants.

Prior Proceedings

Paribas instituted this suit on August 18, 1989. Both the 12(b) defendants and the 1404 defendants (collectively the "Shelton Parties") filed this motion to dismiss on October 20, 1989. After adjournment by the parties this oral argument was heard on March 16, 1990 and the motion was considered fully submitted as of that date.

Facts

In 1988, Shelton, a Texas businessperson, developed a project (the "Project") to grow and market "contra-seasonal" apples. Shelton's idea was to grow and harvest apples in Texas in the early summer months in the hope that fresh apples would bring a premium over apples stored for long periods under controlled atmospheric conditions. Shelton proposed to support the Project with existing sugarcane and vegetable operations in Florida. To attract investors to finance the Project, Shelton prepared a brochure and began to contact possible sources of financing throughout the country, including New York.

In the Spring of 1988 Shelton met several times with representatives of Paribas to discuss his proposal. These meetings took place in New York, Florida, and Texas.

The Agreements

1. The Engagement Letter

On May 13, 1988, Paribas and SRC signed an engagement letter (the "Engagement Letter") whereby Paribas agreed to identify and contact potential sources of financing and provide other advisory and investment banking services in exchange for the payment of certain fees and the reimbursement of Paribas' out-of-pocket expenses. Shelton also agreed to pay Paribas' attorneys' fees in the event of litigation.

The Engagement Letter specifically provides that any dispute arising out of the agreement shall be governed by New York law, that any such dispute shall be adjudicated in the state or federal courts in the Southern District of New York, and that Shelton consents to service of process by certified mail. The Engagement Letter was signed by Shelton as president of SRC.

The Engagement Letter was negotiated. On May 6, Paribas sent a proposed engagement letter to Shelton and On May 12, the letter, with a number of handwritten changes by Shelton, his executives or his attorney, was telecopied to Paribas for retyping and incorporated in the final Engagement Letter signed by the parties on May 13.

2. The June 17 Term Sheet

In late May and early June, Paribas' officers and representatives toured the proposed orchard sites in Florida and Texas and met with Shelton and his representatives to obtain information regarding Shelton's operations. Paribas alleges that, because of Shelton's financial condition, the financing of the Project would be more difficult than originally anticipated. In early June, Shelton and his executive vice president Bobbitt went to Paribas' office in New York for two days to continue the discussions.

Paribas' concerns led to a demand for a higher fee agreement and adequate security for its fees and expenses in order to continue to work on the proposal. The negotiations between the parties ultimately led to the signing of a term sheet (the "Term Sheet"), dated June 17, 1988, which described and memorialized the parties' understanding of the proposed venture.

Among other things, the Term Sheet described that the property to be contributed to the proposed partnership included approximately 17,000 acres in Palm Beach County, Florida for the production of sugarcane and vegetables, and approximately 21,750 acres in Texas to be devoted to apple ...


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