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