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PI, INC. v. QUALITY PRODS.

December 22, 1995

PI, INC., Plaintiff, against QUALITY PRODUCTS, INC., JAMES S. RENALDO and LEE OGLE, Defendants.


The opinion of the court was delivered by: KOELTL

 JOHN G. KOELTL, District Judge:

 The plaintiff, PI, Inc. ("PI") has sued the defendants Quality Products, Inc. ("Quality"), James S. Renaldo, and Lee Ogle on various claims arising from a merger agreement. In its Amended Complaint, the plaintiff alleges (1) a breach of contract claim against Quality; (2) a tortious interference claim against defendants Ogle and Renaldo; and (3) fraud against all three defendants. Subject matter jurisdiction over this matter is based on diversity of citizenship, pursuant to 28 U.S.C. § 1332(a) (1).

 Several motions are pending. Quality has moved to dismiss the plaintiff's first cause of action, the breach of contract claim, for lack of venue pursuant to Fed. R. Civ. P. 12(b) (3). Renaldo and Ogle have moved to dismiss the tortious interference and fraud claims pursuant to Fed. R. Civ. P. 12(b) (2) for lack of personal jurisdiction and pursuant to Fed. R. Civ. P. 12(b) (3) for improper venue. All three defendants seek dismissal of the fraud claim pursuant to Fed. R. Civ. P. 9(b) for failure to plead fraud with sufficient particularity and pursuant to Fed. R. Civ. P. 12(b) (6) for failure to state a claim upon which relief can be granted. In the alternative, the defendants seek an order transferring the entire action to the United States District Court for the Middle District of Florida, Tampa Division, pursuant to 28 U.S.C. § 1404(a).

 After hearing oral argument on the motions, the Court (1) grants Quality's motion to dismiss the breach of contract claim for lack of venue pursuant to 12(b) (3); (2) grants the motions by defendants Ogle and Renaldo to dismiss the tortious interference claim for lack of venue pursuant to Fed. R. Civ. P. 12(b) (3) and for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b) (2); (3) denies Ogle's motions to dismiss the fraud claim for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b) (2), for improper venue pursuant to Fed. R. Civ. P. 12(b) (3), and for failure to state a claim pursuant to Fed. R. Civ. P. 12(b) (6); (4) grants Ogle's motion to dismiss the fraud claim for failure to plead fraud with sufficient particularity; (5) grants Renaldo's motions to dismiss the fraud claim for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b) (2); (6) grants Quality's motion to dismiss the fraud claim for failure to state a claim pursuant to Fed. R. Civ. P. 12(b) (6); (7) denies the plaintiff's motion to amend the complaint for the second time; and (8) denies as moot the defendants' motions to transfer this action to the Middle District of Florida.

 I.

 When considering motions to dismiss, the Court "'must accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor.'" Gant v. Wallingford Bd. of Education, 69 F.3d 669, 1995 U.S. App. LEXIS 30842, *10-*11, 1995 WL 628555, at *4 (2d Cir. 1995) (considering a motion to dismiss pursuant to Fed. R. Civ. P. 12(b) (6)) (quoting Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.), cert. denied, 130 L. Ed. 2d 63, 115 S. Ct. 117 (1994)); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985) (when deciding a motion to dismiss for lack of jurisdiction pursuant to 12(b) (2) without an evidentiary hearing, all doubts must be resolved in favor of party asserting personal jurisdiction).

 In January 1993, Scott Smith, an officer and director of PI and a representative of Sentinel, a subsidiary of PI, went to Arkansas to meet with defendants Renaldo and Ogle in order to market Sentinel products to Quality. (Am. Compl. P 7, 9.) At this meeting, Smith informed the defendants that PI had recently placed PICPC on the market. (Am. Compl. P 9.) The defendants indicated that Quality would purchase PICPC; however, no further negotiations occurred at that time because Smith lacked proper authority. (Am. Compl. P 9.) Instead, the parties agreed to conduct negotiations for PICPC in February at the Toy Fair held in New York City. (Am. Compl. P 9.)

 In February, John Bambara, the chairman and chief executive officer of PI, and J. Anthony Glydon, the president of PI, attended the Toy Fair. Also present were Renaldo, Ogle, and Smith. (Am. Compl. PP 10, 11.) In a New York hotel room the evening before the Toy Fair, Smith allegedly told Ogle and Renaldo that Bambara said any merger agreement must include payment of $ 700,000 to cover PI's current debt. (Am. Compl. P 10.) Ogle agreed to this term. (Am. Compl. P 10.) In addition, Ogle and Renaldo stated that Quality could issue stock to PI in return for the sale, and that such stock "could and would be registered within 180 days of the closing." (Am. Compl. P 10.) Smith suggested that Ogle and Renaldo meet with Bambara at the Toy Fair. (Am. Compl. P 10.)

 At the Toy Fair, Ogle met with Bambara alone, at which time Ogle allegedly told Bambara that although he, Ogle, had no official position in PI, he in fact dominated and controlled Quality through the shares he owned registered in the names of nominees. (Am. Compl. P 12.) Ogle also stated that he dominated Renaldo. (Am. Compl. P 12.) In response to Ogle's offer to arrange for Quality to acquire PICPC for consideration that included 800,000 shares of Quality common stock which were restricted securities, Bambara explained that unregistered shares of Quality stock would not be acceptable consideration for the merger because PI needed immediately available funds. (Am. Compl. P 13.) Ogle allegedly agreed to cause Quality to register the 800,000 shares of Quality stock and said that he would personally make sure those shares were registered with the SEC within 180 days of the effective date of the sale of PICPC. (Am. Compl. P 13.) Relying on this representation, Bambara allegedly agreed to the sale of PICPC to Quality. (Am. Compl. P 13.)

 Subsequently, Ogle and Bambara met with Renaldo, Glydon, and Smith to tell them about this agreement. (Am. Compl. P 14.) At this meeting, Renaldo did not disagree with any statements Ogle made or indicate that Ogle lacked the power to enter into such an agreement. (Am. Compl. P 14.) Relying on the representations of Ogle and Renaldo, the plaintiff allegedly agreed to sell PICPC to Quality. (Am. Compl. P 14.) The parties eventually executed a Plan of Merger on about February 16, 1993, and the Articles of Merger were executed by PICPC on about March 9, 1993 and by QPI on March 12, 1993. (Am. Compl. P 15.) Under § 8(d) of the Plan of Merger, Quality stated that it

 
represents, agrees and warrants that it will file all initial and continuing documentation necessary to provide for the registration of the 800,000 restricted securities within 180 days after the effective date of merger.

 (Am. Compl. P 16.) Although not cited in the Amended Complaint, the Plan of Merger contained an integration clause that provided that

 
this agreement constitutes the entire agreement between the parties; there are no agreements, warranties, or representations, express or implied, except those expressly set forth herein. All agreements, representations, and warranties contained in this agreement shall apply as of the closing date and shall survive the closing of this agreement.

 (Quality's Notice of Mot., Ex. 2 at 7, § 20 (merger agreement).)

 II.

 The Court first turns to Quality's motion to dismiss the breach of contract claim for lack of venue pursuant to Fed. R. Civ. P. 12(b) (3). *fn1"

 The amended complaint alleges diversity jurisdiction under 28 U.S.C. § 1332. (Am. Compl. P 5.) Accordingly, the venue statute applicable to this action is 28 U.S.C. § 1391(a), which provides:

 
A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which the defendants are subject to ...

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