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FASSI v. LJN TOYS

December 19, 1990

JOHNNY FASSI, SOLY FASSI, MIMI FASSI, ZERGA, S.R.L. AND ALN, S.R.L., PLAINTIFFS
v.
LJN TOYS, LTD. AND MCA, INC., DEFENDANTS.



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

This is an action for breach of two contracts between Johnny Fassi, LJN Italy and LJN Toys, Ltd. ("LJN Toys"). Defendants have moved to dismiss the entire complaint on the ground of forum non conveniens or, in the alternative, to stay this action pending the resolution of related litigation in Italy.

I. Background

Plaintiffs Johnny Fassi, Soly Fassi, and Mimi Fassi are brothers and Italian citizens. Plaintiffs Zerga, s.r.l. ("Zerga") and ALN, s.r.l. ("ALN") are Italian corporations owned by the Fassi family. Defendant LJN Toys is a New York corporation with its principal place of business in New Jersey. LJN Toys was the 80% owner of LJN Italy during the period relevant to this action. Defendant MCA, Inc. ("MCA") was the parent corporation of LJN Toys at that time. MCA is a Delaware corporation with its principal place of business in California.

Until 1987, Johnny Fassi and other members of the Fassi family owned the Italian company AL-ES, s.r.l. ("AL-ES"), which was in the business of selling toys. In March of 1987, the Fassis agreed to sell AL-ES to LJN Italy, the Italian subsidiary of defendant LJN Toys.

The sale agreement also provided for various transactions between other Fassi family companies and subsidiaries of LJN Toys. Specifically, Zerga subscribed to 20% of the shares of LJN Italy, and ALN subscribed to 20% of the shares of Superest, a company owned by LJN Toys' Hong Kong subsidiary.

From March 1987 through most of 1988, Johnny Fassi was employed as general manager of AL-ES and of LJN Italy. Disputes arose between Fassi and LJN Toys, however, and Fassi's employment as manager ended in December of 1988.

A. The 1989 Agreements

At the beginning of 1989, Johnny Fassi and LJN Italy attempted to resolve their disputes. This attempt yielded two contracts, both dated February 1, 1989. One, the "Employment Agreement," set out the terms on which Johnny Fassi would return as manager of LJN Italy and AL-ES. Section 8 of the Employment Agreement stated that it was to be governed by Italian law and that "the Courts of Italy shall be competent" for disputes arising under it.

The other agreement, the "Umbrella Agreement," addressed various other issues between the Fassi family and its companies, and LJN Italy. The Umbrella Agreement provided, among other things, that LJN Italy would repay outstanding loans made by the Fassis and Zerga to LJN Italy and AL-ES; that LJN Toys would buy out Zerga's 20% interest in LJN Italy; and that LJN Toys, through its Hong Kong subsidiary, would close and liquidate Superest as soon as practicable and repay ALN's 20% investment in it. The Umbrella Agreement also provided that Zerga would receive 20% of any American insurance proceeds recovered by LJN Toys or MCA for a 1988 warehouse fire in Italy. Section 21 of the Umbrella Agreement, the basis for four of plaintiff's claims against LJN Toys, provides as follows:

  LJN Toys Ltd, undertakes to maintain their controlling
  interest in and not to liquidate nor to cease
  operations o[f] LJN Italy and/or AL-ES as long as
  their obligations toward Johnny, Soly and Mimi Fassi
  under this Agreement and the Employment Agreement are
  not fully performed.

The signatories to the two agreements are Johnny Fassi, LJN Italy and LJN Toys.

The parties differ as to the events surrounding the operation of AL-ES and LJN Italy during 1989, but they do not dispute that AL-ES was placed in liquidation on November 28, 1989 and that LJN Italy was placed in liquidation on December 20, 1989.

B. The Italian Litigation

In late 1989, the Fassis sued AL-ES in the Italian Court of Monza for repayment of outstanding loans, and that court preliminarily attached AL-ES's assets in the amount of the debt. The Fassi brothers also sued LJN Italy and AL-ES in the Labor Court of Monza. That action sought salary and benefits allegedly due the Fassi brothers under the Employment Agreement. LJN Toys is not a defendant in either of those Italian actions.

Subsequently, AL-ES filed for bankruptcy in the Bankruptcy Court of Milan. Because AL-ES is now in bankruptcy, all claims against it, including the Fassis' claim for repayment of loans, must be brought in the Milan Bankruptcy Court. The Fassis' action in the Labor Court for salary and benefits, including the claim against ...


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