The opinion of the court was delivered by: KAPLAN
LEWIS A. KAPLAN, District Judge.
This litigation is one of several that has arisen out of the 1991 sale by Inoco PLC ("Inoco") and Downshire N.V. ("Downshire") of a majority stake in Gulf Resources and Chemical Corporation ("Gulf") to plaintiff Nycal Corporation ("Nycal").
Defendants move to dismiss the complaint, or various counts therein, on four grounds. First, defendants contend, the action should be dismissed or stayed in favor of ongoing litigation in the United Kingdom. Next, they assert, Counts I and II should be dismissed because Nycal failed to plead fraud with specificity. Finally, they argue that Count III should be dismissed because Nycal is collaterally estopped from bringing the claim and because it fails to state a cause of action. For the foregoing reasons, the motion is granted in part and denied in part.
Briefly stated, the facts are as follows.
Inoco, a United Kingdom property investment company, and Downshire, a wholly owned subsidiary, entered into a stock purchase agreement ("SPA") with Nycal on July 15, 1991 pursuant to which defendants' controlling stake in Gulf was sold to Nycal for approximately $ 34,000,000. Soon thereafter, Nycal brought suit in the United Kingdom alleging that Inoco and Downshire had violated the terms of the SPA. (Rowland Dec. Ex. D) The litigation was terminated with a Settlement Agreement dated October 4, 1991 in which the amount Nycal paid for the Gulf shares was reduced by $ 575,000. The Settlement Agreement stated that "each party to the [SPA] hereby acknowledges that it has no further claims arising out of the SPA or the transaction contemplated thereby or any guarantee given in relation thereto . . . and hereby waives any such claim as may now exist or as may arise after the date hereof." (Id. Ex. E)
Interallianz Bank, A.G. ("IBZ"), which financed Nycal's acquisition, sued Nycal in this Court in 1993 for nonpayment of notes Nycal had executed in favor of IBZ. Nycal counterclaimed on the theory that IBZ had been a party to defendants' alleged fraud. Judge Patterson dismissed Nycal's counterclaims in Interallianz Bank Zurich AG v. Nycal, 1994 U.S. Dist. LEXIS 5954 (S.D.N.Y. 1996) and granted summary judgment to IBZ on October 15, 1996. (Carnevale Aff. Ex. E)
On June 9, 1995, Inoco and Downshire, among others, brought suit in the United Kingdom seeking a declaration that the Settlement Agreement was binding and extinguished all of the claims Nycal now is asserting in this Court. The United Kingdom action remains pending.
This suit was commenced on August 13, 1996. Counts I and II of the complaint allege that defendants fraudulently induced Nycal to enter into the Settlement Agreement and SPA, respectively. Count III contends that defendants breached warranties contained in the SPA.
Stay or Dismissal in Favor of the United Kingdom Litigation
Defendants contend first that this action should be stayed or dismissed in favor of the suit currently pending in the United Kingdom.
"When two sovereigns have concurrent in personam jurisdiction one court will ordinarily not interfere with or try to restrain proceedings before the other. 'Parallel proceedings on the same in personam claim should ordinarily be allowed to proceed simultaneously, at least until a judgment is reached in one which can be pled as res judicata in the other.'" China Trade & Development Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir. 1987) (quoting Laker Airways, Ltd. v. Sabena Belgian World Airlines, 235 U.S. App. D.C. 207, 731 F.2d 909, 926 (D.C. Cir. 1984)) (other citations omitted).
The China Trade court
indicated that five factors are significant in determining whether to depart from the ordinary rule of permitting parallel litigation: whether (1) a policy in the enjoining forum would be frustrated; (2) the maintenance of the action would be vexatious; (3) the court's jurisdiction is threatened; (4) other equitable considerations would be sacrificed; and (5) delay, inconvenience, expense, race to judgment or inconsistency would result. In particular, courts should focus on the ...