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SCOTTISH AIR v. BRITISH CALEDONIAN GROUP

November 30, 1990

SCOTTISH AIR INTERNATIONAL, INC. AND MURRAY VIDOCKLER, PLAINTIFFS,
v.
BRITISH CALEDONIAN GROUP, PLC, ADAM THOMSON, DENNIS H. WALTER AND R. MARSHALL GIBSON, DEFENDANTS.



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

OPINION & ORDER

I. BACKGROUND

Plaintiffs have brought this diversity action claiming that defendants have breached an agreement to seat a nominee of plaintiff Scottish Air International, Inc. ("SAI") on the board of directors of defendant British Caledonian Group, plc ("BCG"). There are two sets of events relevant to this dispute. The first involves a shareholders' derivative action filed by Murray Vidockler and SAI, also the plaintiffs in the instant action, against Caledonian Airways (Prestwick), Ltd. ("CAP") in the Southern District of New York in 1965. The second involves plaintiff Murray Vidockler's removal from the board of directors of BCG in 1985.

BCG was incorporated in Scotland in 1960 and has maintained its only business office in Great Britain. BCG is a holding company which exercises general supervision over the diverse businesses of a number of separate and independently managed operating subsidiary corporations. The three individual defendants, Adam Thomson, Dennis H. Walter, and Marshall Gibson, are all domiciliaries, residents, and citizens of Great Britain. They are three of eleven directors of defendant BCG and collectively only own 2.2% of the outstanding shares of BCG.

CAP, is a Scottish corporation and was formed at the same time as BCG.*fn1 BCG was CAP's majority shareholder and all of BCG's directors were also directors of CAP. CAP was one of BCG's operating subsidiary corporations.

In 1961, BCG, through CAP, sought to initiate airline operations in Britain with service to the United States. BCG obtained a large portion of its capital for this venture from SAI, a New York corporation, and its majority stockholder Murray Vidockler, a New York citizen. SAI was the only United States shareholder of CAP.

In July 1965, SAI initiated a shareholder derivative suit against CAP and several members of CAP's board of directors alleging improper use of corporate funds and improper issuance of shares. That case, Scottish International, Inc. v. Thomson, 65 Civ. 1782 (S.D.N.Y. filed July 7, 1965), was before Judge Dudley Bonsal. In January 1966, the parties entered into a settlement agreement (the "settlement agreement") that was approved and so ordered by Judge Bonsal. The settlement agreement was signed by SAI, CAP, and the individual defendants in the instant action who are directors of both CAP and BCG. A key element of the settlement agreement provided that CAP appoint an individual nominated by SAI to CAP's board of directors. In the instant action, plaintiffs also claim that SAI was given a similar right on BCG's board of directors. Vidockler was the representative designated by SAI for this purpose, and was consistently elected to the boards of directors of both CAP and BCG between 1966 and 1985.

In November of 1985, defendants notified Vidockler that he would be removed from BCG's board and that no other representatives of SAI would be nominated. Vidockler was voted off the board at the 1985 meeting of BCG shareholders. SAI and Vidockler then brought the instant diversity action seeking: (1) an injunction directing defendants to comply with the 1966 settlement agreement and certain other agreements between the parties; (2) a declaration that the defendants were in contempt of the 1966 settlement agreement so ordered by Judge Bonsal; and (3) money damages for breach of contract. Defendants moved to dismiss the complaint on the grounds that: (1) this court lacks personal jurisdiction over the defendants; (2) the plaintiffs failed to join all shareholders of the defendant corporation who were necessary to effect the election of Vidockler to the board of directors; (3) ordering the election of Vidockler to the board of directors would constitute interference with the internal operations of a foreign corporation; and (4) the court should decline jurisdiction under the doctrine of forum non conveniens.

In December of 1987, British Airways ("BA") made a successful tender offer for the shares of BCG. In January of 1988, both plaintiffs tendered their BCG shares to BA. BCG continues to be a holding company which possesses assets and has a substantial net worth. BCG's principal asset is Caledonian Airways, formerly British Airtours ("CA"), a wholly owned subsidiary which now conducts a worldwide charter service. On April 15, 1988, the instant action was dismissed by this Court on the grounds of forum non conveniens. On October 31, 1988, the Second Circuit Court of Appeals reversed and remanded this Court's April 15, 1988 order for failure to consider the plaintiffs' claims for contempt and damages. 860 F.2d 57. Plaintiffs then moved pursuant to Federal Rule of Civil Procedure 19(a)(1) to add BA as an indispensable party and pursuant to Federal Rule of Civil Procedure 15(a) and (d) to amend and supplement their complaint in order to add claims that they were not allowed to trade their shares of BCG for shares of BA during BA's tender offer for BCG, but were instead forced to take cash.

II. DISCUSSION

A. Plaintiffs' Motion

1. Federal Rule of Civil Procedure 19(a)

Federal Rule of Civil Procedure 19(a) provides that a person who is subject to service of process and whose joinder will not deprive the court of subject matter jurisdiction shall be joined as a party to the action if "in the person's absence complete relief cannot be accorded among those already parties." Fed.R.Civ.P. 19(a)(1). The term "complete relief" refers only to complete relief between the parties "and not as between a party and the absent party whose joinder is sought." Arkwright-Boston Mfrs. Mutual Ins. Co. ...


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