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August 1, 1990


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

This is an action brought pursuant to the Court's diversity jurisdiction by an Italian corporation, Ente Nazionale Indrocarburi ("ENI"), which is the energy and petrochemicals agency of the Italian Government, against Prudential Securities Group, Inc. ("Prudential"), a Delaware corporation with its principal place of business in New York whose principal business is investment banking and securities trading. There are two motions currently pending before the Court, which were submitted on an expedited basis in view of an anticipated motion for a preliminary injunction. The first is ENI's motion for expedited discovery. The second is Prudential's motion to dismiss based on the dual grounds of failure to join an indispensable party whose joinder would destroy the diversity jurisdiction on which this action is predicated, and forum non conveniens.


In this action, ENI claims that Prudential has tortiously interfered with ENI's contract with another Italian corporation, Montedison, SpA ("Montedison"), a large industrial group with business in chemicals, energy and pharmaceuticals. The contract between Montedison and ENI provided for the creation of a joint venture between the two companies, a "marriage" between the public sector and the private sector, in order to achieve the scale necessary to compete effectively internationally. Complaint ¶ 7.*fn1

On December 15, 1988, ENI and Montedison entered into an agreement (the "Agreement" or the "Joint Venture Agreement") creating a joint venture company called Enimont and setting forth the terms of the formation, structure, operating rules, and goals of Enimont. Id. ¶ 6. Enimont is one of the world's ten largest integrated producers of petrochemicals, bulk and specialty chemicals, and a broad range of chemical intermediates and end products. Id. ¶ 7. Enimont's deed of incorporation, established under the laws of the nation of Italy, is dated May 9, 1989. Id.

The "marriage" was designed to create equal control of Enimont by the two partners. Id. ¶¶ 8, 12. Under the agreement, which we observe is governed by Italian law, ENI and Montedison each hold 40% of the shares of Enimont. The remaining 20% was to be, and has been, sold to the public. Id. ¶ 8. Each are to have the same number of directors on the board (five), id. ¶ 11, and the board was to appoint a Chairman and a Managing Director, one from ENI and one from Montedison, who are to have equal powers. Exhibit A of the Affidavit of Berardino Libonati, sworn to July 23, 1990 ("Libonati 7/23 Aff.") at Article 12.*fn2 ENI refers to these provisions as establishing the "party of control" and states that this parity or equality is "the bedrock" supporting the Agreement. Complaint ¶ 12. The portion of the Agreement which is most relevant to the instant action is found in Article 10.3, which provides: "[T]he parties [ENI and Montedison] undertake not to acquire from third parties, in any form whatsoever, either directly or indirectly or through trustees, any shares of Enimont, nor to receive same on a pledge or contago [swap] basis." Libonati Aff., Ex. A at Article 10.3.*fn3 The Agreement further provides that the parties "shall in any event retain an equal and balanced number of shares as between them." Id. at Article 9.1, see also Article 9.2. The parity was to last for at least three years. Id. at Article 10.3.

The marriage between the parties soured quite quickly. ENI contends that soon after the formation of Enimont, the president of Montedison, Raul Gardini, "embarked upon a course designed to gain control of Enimont." Complaint ¶ 13. Gardini purportedly enlisted the aid of Prudential and two other individuals, Italian Financer Gianni Varasi and French Entrepreneur Jean Marc Vernes. These three "allies" purchased 10.1% of Enimont's stock, with Prudential buying 5.8% and the two others, the remaining 4.3%.

ENI has commenced this action against Prudential only for tortious interference with the Joint Venture Agreement. Specifically, ENI alleges that Prudential's actions, in concert with Montedison, Varasi and Vernes, have caused Montedison to breach Article 10.3 of the Agreement by giving Montedison "indirect" ownership of more than 40% of Enimont's shares.

Extremely relevant to this lawsuit are two actions currently pending in Italy relating to the issue of control of Enimont, one in Italian state court in Milan and the other before an arbitration panel, also in Milan. In the state court action, as the complaint concedes in paragraph 19, ENI has sued Enimont. In the affidavit submitted here by ENI's Italian counsel in opposition to the motion to dismiss, it is stated that there were three actions brought in the Italian state court: two emergency actions, which actions have been concluded, and one lawsuit that is still pending. Affidavit of Berardino Libonati, dated July 27, 1990 ("Libonati 7/27 Aff."), at ¶¶ 6-10.

On February 23, 1990, ENI brought on its first emergency proceeding, pursuant to Article 700 of the Italian Civil Code of Procedure. ENI, apparently ex. parte, asked the court to block a shareholders' meeting called for February 27, 1990, the purpose of which was to expand the Board of Directors to give the non-joint venture partners (i.e., the public shareholders) the two seats referred to in the Joint Venture Agreement. ENI also requested a declaration from the court that such an increase in the Board had to be made at an extraordinary, rather than an ordinary, shareholders' meeting. Affidavit of Thomas F. Curnin, sworn to July 23, 1990 ("Curnin Aff."), Exhibit B. The following day, the Italian court denied ENI's application in its entirety. Curnin Aff., Exhibit C. It reasoned that the regular shareholders' meeting should be held and that any damage that might be caused to ENI would ensue not from the holding of the meeting itself, but rather from the decisions approved at the meeting. Because ENI had a remedy under Article 2378 of the Civil Code, in that it "stipulates the possibility of obtaining the suspension of resolutions made in violation of the law and the deed of incorporation through an order by the President of the Court," the court rejected ENI's application under Article 700, concluding that it was "inadmissible and completely unjustified." Curnin Aff., Exhibit C.

The vote at the February shareholders' meeting on the issue of increasing the number of members of the Board was postponed for reasons not made known to us. Libonati 7/27 Aff., Exhibit A at 1. On March 28, 1990, the shareholders, at an ordinary shareholders' meeting, passed a resolution increasing the number of members of the Board of Directors from ten to twelve. Curnin Affidavit, Exhibit D at 2.*fn4 At that meeting, two new directors, Messrs. Varasi and Vernes, were also elected over ENI's objection. On April 5, 1990,*fn5 ENI followed the court's advice and petitioned under Article 2378 of the Civil Code for suspension of the resolution passed at the meeting and asked that it be annulled or declared invalid. Curnin Aff., Exhibit D at 2. On May 4, 1990, the Court rejected ENI's petition for a "Decree of Urgency." Curnin Aff., Exhibit E. On such a petition, the court stated that it must consider and rule on

  the soundness of the plaintiff's request before evaluating the
  severity of the consequences that may derive, both to the
  contesting partner and the company itself, from the initial
  execution and the successive annulment of the resolution, since
  the protection of the law can be accorded only to those who
  hold a substantial right deserving of protection, and no
  serious prejudice can be held to exist if said prejudice does
  not correspond to an injury in the legal sense. The
  pronouncement of any precautionary ruling is, in fact,
  conditional on the existence of the so-called "fumus beni

Curnin Aff., Exhibit E at 1. The court held that it did not need to determine, for the purposes of the "precautionary" decision, whether or not the public shareholders (the 20%) had a right to have the Board of Directors expanded or whether the contested resolution was legitimate, but that it only had to determine the probable soundness of the claim. Id. at 2.*fn6 After examining ENI's claims and the facts and law surrounding them, the court concluded that "[a]ll these circumstances tend to render improbable the soundness of [ENI's] interpretation" and therefore, that "all of the legal requisites for granting the request for suspension under Art. 2378 Civil Code have not been met." Id. at 8.

It appears that three days prior to the filing of the second application for emergency relief, a "regular" lawsuit was filed. Libonati 7/27 Aff. at ¶ 19. That lawsuit is the only action which is still pending in the Italian state courts. Id. We are told by plaintiff that that lawsuit does not raise any issues that are "relevant" to the issues raised in the instant action. Id. We are also informed by plaintiff that Montedison has in Italy "intervened in support of Enimont's position but any judgment in the [Italian] case will run against Enimont alone, and will decide only whether the March 28 shareholder resolution is valid or is a nullity. The judgment will not consider or grant relief for any behavior of Montedison in breach of the Joint Venture Agreement." Id.

Despite the fact that ENI argues that no issues of relevance to our proceeding are raised in the Italian state action, our reading of the complaint therein, attached as Exhibit A to the Libonati 7/27 Affidavit, indicates otherwise. Indeed, a subheading of the pleading is denominated "The Agreement between ENI and Montedison of December 15, 1989" (which we take to be mistaken as to the year and to mean the Joint Venture Agreement). Libonati 7/27 Aff., Ex. A at 16. This section, which extends for three full pages, starts with the proposition that although ENI believes that the lawsuit should be decided only with resort to the Articles of Incorporation and Italian statutes, nonetheless, "ENI regards [the Joint Venture Agreement] to be important in that ENI has asserted and presently asserts that on a number of occasions ENI has complied with that agreement in the face of breaches by Montedison." Id.

Then, with specific reference to certain articles of the Agreement, ENI sets forth its claim that only "third party investors" who purchased their interests prior to the listing of the stock on the Italian stock exchange, are entitled to have the Board increased. We assume that ENI was indirectly referring to Prudential, Vernes and Varasi, all of whom apparently purchased their shares in the open market. In fact, just two pages later in the pleading, Vernes and Varasi are mentioned by name as being a threat to the equilibrium contracted for between ENI and Montedison, and the reason why the court should permanently enjoin the "illegal" expansion of the Board and the election of the new members. Thus, it is clear that in the Italian state court action, ENI seeks a declaration of the meaning of the Joint Venture Agreement and an adjudication of the rights of the "allies" to elect board members and to vote in general. It is also plain that the court was presented with argument of Montedison's breach of the Joint Venture Agreement. Accordingly, we believe the statement that the "judgement will not consider or grant relief for any behavior of Montedison in breach of the Joint Venture Agreement" is, at the very least, misleading. Furthermore, we cannot fathom ENI's assertion that Montedison, or, for that matter, the "allies," will not be bound by the decision rendered by the Italian court.

From the translations of the news accounts in the Italian press attached to the Curnin Affidavit, we are able to ascertain that the first hearing on the merits of ENI's claim was scheduled for "next Monday" (either May 7 or May 14). Curnin Aff., Exhibit F, Translation of the May 5, 1990 edition of the Milanese journal Il sole 24 Ore. At the oral argument held on Friday July 27, 1990, we asked counsel for ENI the status of this action, but he, astonishing to say, did not know it, and reiterated his position that it did not matter if there had been a hearing on the merits because it involved different issues than those presented in this case. Transcript of the Oral Argument, held July 27, 1990 ("Tr."), at 58-59. ENI has stated in its papers that it does not except a decision in the proceeding "until the end of the year at the earliest." Libonati 7/27 Aff. at ¶ 19.

The second action that is currently pending in Italy is an arbitration proceeding, pursuant to the Joint Venture Agreement, commenced on March 14, 1990 by Montedison against ENI. We are told in the complaint herein only of the counterclaim asserted by ENI in the arbitration, and not the fact that the arbitration was commenced by Montedison or of the details of Montedison's claims therein.*fn7 The complaint merely states that the purpose of the arbitration is "to establish whether Montedison has breached the ENI-Montedison Agreement in certain respects" and that ENI seeks damages in that proceeding only against Montedison, and that "ENI does not and cannot seek equitable relief in that proceeding under Italian law." Complaint ¶ 19.

Prior to the submission of its motion to dismiss, counsel for Prudential was unable to procure the legal papers submitted in the arbitration due to counsel for ENI's lack of cooperation, despite our stated interest in seeing all of the papers from the Italian ...

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