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CASPIAN INVESTMENTS v. VICOM HOLDINGS

July 31, 1991

CASPIAN INVESTMENTS, LTD., PLAINTIFF,
v.
VICOM HOLDINGS, LTD. AND VICOM VIDEO, INC., DEFENDANTS. CASPIAN INVESTMENTS, LTD., PLAINTIFF, V. VICOM VIDEO, INC., DEFENDANT.



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

MEMORANDUM AND ORDER

Defendant Vicom Video, Inc. ("Vicom Video") has moved to dismiss or stay this breach of contract action in deference to a previously commenced action pending in Ireland. For the reasons set forth below, the motion is granted and the case is dismissed.

I. BACKGROUND

On August 1, 1989, plaintiff Caspian Investments, Ltd. ("Caspian"), a British corporation, entered into a loan agreement ("the Agreement") with defendant Vicom Video through which it consented to loan Vicom Video $1,490,000 by way of two separate transactions. Vicom Video, a Georgia corporation that sells and rents video tapes, is a wholly-owned subsidiary of Vicom Holdings, Ltd. ("Vicom Holdings"), an Irish corporation.

Vicom Video and Vicom Holdings are joint obligors under the Agreement; Vicom Holdings pledged to guarantee and become surety to Vicom Video for prompt payment of "all Vicom Video's liabilities, present and future," up to $700,000. Bicks Aff. ¶ 16. Both parties agree that Vicom Holdings, as guarantor of the loan, is responsible for any default by Vicom Video. Butler Supp. Aff. ¶ 6; Defendants' Memo of Law in Support of Motion for Sanctions at 3. Caspian provided $440,000, the first installment of the loan, to Vicom Video on August 1, 1989. The loan was to be repaid in April 1990.

Vicom Video did not repay the loan on the April due date. The restraining order was discharged on May 14th, and on May 25th Caspian filed an injunctive suit in the High Court of Ireland "to prevent the reorganization [of Vicom Holdings] until Caspian could be guaranteed that sufficient assets would remain to cover the loan agreement guarantee." Plaintiff's Memo of Law at 3.

Vicom Holdings repaid the entire loan and interest on behalf of Vicom Video between June and September of 1990. However, Caspian alleges that Vicom Video and Vicom Holdings did not fulfill various additional obligations, including a commitment to issue shares of Vicom Video stock to Caspian. Caspian claims that, as a result, Vicom Video must pay a higher "default" interest rate.

On January 23, 1991, the Irish High Court ordered Caspian to furnish adequate security for Vicom Holdings' costs in the Irish action; the Irish action has been stayed until Caspian produces the security payment.

Meanwhile, on December 7, 1990, Caspian brought suit in the Southern District of New York against Vicom Video and Vicom Holdings (docket No. 90 Civ. 7848). In its complaint, Caspian set forth claims for breach of contract and sought a declaratory judgment requiring Vicom Video and Vicom Holdings to fulfill their obligations under the Agreement, including payment of $250,000 (representing the value of a disputed "put" option), and the default interest. Caspian premised subject matter jurisdiction over this dispute on diversity pursuant to 28 U.S.C. § 1332. Complaint ¶ 4.

On January 29, 1991, Vicom Video and Vicom Holdings moved to dismiss the Southern District action on procedural grounds. First, the defendants contended that the court lacked subject matter jurisdiction over the dispute because Caspian is a British corporation, Vicom Holdings was incorporated in Ireland, and the presence of aliens on both sides of an action defeats diversity jurisdiction. Second, Vicom Video and Vicom Holdings contended that Caspian lacked authority to maintain the suit because Caspian is not authorized to do business in New York and is therefore barred from maintaining a suit under N.Y. Bus. Corp. Law § 1312.*fn1 The defendants also moved, in the alternative, to dismiss or stay the action in deference to the previously commenced action pending in Ireland.

Rather than file an opposition to Vicom Video and Vicom Holdings' motion to dismiss, Caspian filed a "Response" in which it agreed voluntarily to withdraw the complaint "in the interest of judicial economy," although Caspian protested that Vicom's objection was merely "technical," and supportable only through a "quirk of subject matter jurisdiction practice." Plaintiff's Response to Defendants' Motion to Dismiss at 1. Thereafter, Caspian filed a notice of voluntary dismissal without prejudice pursuant to Fed.R.Civ.P. 41(a)(1). This order was never signed by the Court, and the file for No. 90 Civ. 7848 has not been closed. On the same day it filed its Rule 41(a)(1) notice, Caspian filed a new action against Vicom Video alone (docket No. 91 Civ. 1004), alleging the same causes of action as it had asserted in its original Southern District complaint.*fn2 On March 7, 1991, Vicom Video submitted an additional Memo of Law in support of its motion to dismiss, in which it reiterates and incorporates by reference some of the defenses it had put forth in response to Caspian's first complaint. Vicom Video contends that Caspian's continued violation of N.Y.Bus.Corp. Law § 1312*fn3 is now particularly egregious because Caspian was on notice of this defect prior to filing the second action, and moves again that the action be conditionally dismissed or stayed. Alternatively, Vicom Video moves that the New York action be dismissed or stayed pending the resolution of the previously commenced Irish lawsuit. Caspian responds that a stay would be inappropriate because Vicom Video is not a defendant in the Irish action and because the defendants had agreed to a New York forum.

Finally, Vicom Video moves for the imposition on Caspian of sanctions pursuant to Fed.R.Civ.P. 11 based on Caspian's complaint in No. 90 Civ. 7848, which asserted a ...


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