The opinion of the court was delivered by: MUKASEY
MICHAEL B. MUKASEY, U.S.D.J.
In this diversity action, Sheldon Solow sues Richard Stone, Michael Jordan, Christopher Barlow, and Michael Herz alleging breach of fiduciary duties, aiding and abetting such breaches by another, and tortious interference with contract. Defendants move to dismiss the breach of fiduciary duties claim under Fed. R. Civ. P. 12(b)(1) for lack of standing, and the remaining two claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. In the alternative, defendants Stone, Jordan, and Barlow move to dismiss the complaint under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. For the reasons stated below, the complaint is dismissed as to all defendants.
The following facts are accepted as true for purposes of this motion: Plaintiff, doing business as Solow Building Co., owns commercial office space on West 57th Street in Manhattan. (Compl. P 4)
In August 1989, plaintiff leased the office space for ten years to PPI Enterprises, Inc. ("PPIE"), a Delaware corporation. (Id.) PPIE's obligations under the lease were guaranteed by Polly Peck Plc ("Polly Peck"), an English holding company that held 100% of PPIE's stock through PPI Holdings, B.V. ("PPI Holdings"), a wholly owned subsidiary. (Id. P 14)
In October 1990, Polly Peck entered into insolvency proceedings in Britain, and the British court appointed Stone, Jordan, and Barlow, British citizens, to serve as the company's "administrators."
(Id. PP 9, 14) Shortly after their appointment, the administrators took control of PPIE and decided end its operations and liquidate its assets. (Id. P 19) To that end, in January 1991, they travelled to PPIE's offices in New York, where they fired most of PPIE's employees and ordered Herz, a remaining officer at PPIE, to terminate PPIE's lease with plaintiff and abandon the West 57th street office. (Id. PP 20, 22) While in New York, the administrators also rejected a leveraged buy-out proposal from PPIE's management. (Id. P 21)
In October 1991, plaintiff sued PPIE in this district for breach of the lease. (Id. P 48) In November 1992, the district court granted summary judgment in favor of plaintiff on the issue of liability. See Solow v. PPI Enterprises (U.S.), Inc., 150 B.R. 9, 11 (S.D.N.Y. 1992). The administrators and plaintiff then entered lengthy settlement negotiations on the issue of damages. (Compl. P 49) These negotiations lasted up to April 1996, at which time PPIE filed for relief under Chapter 11 of the Bankruptcy Code (the "Code"). (Id.)
Also in furtherance of their plan to use PPIE for Polly Peck's benefit, in July 1992, the administrators arranged for Polly Peck to sell to PPIE its ownership of two percent of the stock of Del Monte Foods Co. ("Del Monte"). ( Id. P 28) The administrators priced the stock at $ 12.6 million -- the amount Polly Peck had paid for the shares two years earlier -- without performing a revaluation study. (Id.) Because PPIE did not have funds sufficient to pay this amount, the administrators recorded another intercompany indebtedness, this time between PPIE and Polly Peck. (Id.) After the transfer, Herz reduced the balance sheet value of the stock to $ 3.5 million to reflect its true market value at the time. (Id.) However, the $ 12.6 million intercompany debt remained unchanged. (Id.)
In November 1996, after having filed for bankruptcy, PPIE sought the Bankruptcy Court's approval to auction off the Del Monte stock. ( Id. P 32) PPIE informed the Court that it hoped to receive $ 1.6 million for the stock, an amount that plaintiff alleges did not reflect the stock's true value but did reflect defendants' unwillingness or inability to maximize the value of PPIE's assets. ( Id. PP 32, 38) Plaintiff objected to the auction on the ground that the asking price was too low, the notice and bidding procedures were not designed to insure a competitive bid, and PPIE unduly favored selling the stock back to Del Monte. ( Id. P 33) The Bankruptcy Court agreed with plaintiff and ordered PPIE to devise a new plan for conducting the sale. ( Id. P 36) A court-approved auction eventually was held in January 1997. (Id.) Plaintiff, still dissatisfied with the notice and bidding requirements and convinced of PPIE's "adamant" desire to sell the stock to Del Monte for less than its market value, decided to take part in the auction. ( Id. P 37) Although Del Monte submitted a bid for $ 10.15 million, well above its original offer ( Id. 38), plaintiff ultimately prevailed, purchasing the stock for approximately $ 11 million.
( Id. P 39)
As a result of the Standard Fruit transaction and the Del Monte stock transfer, PPIE has incurred an intercompany debt to PPI Holding and Polly Peck totalling $ 54.7 million. ( Id. P 46) At all times relevant to this action, defendants knew or should have known that PPIE was insolvent and would be unable to pay this debt. ( Id.) Moreover, as indicated by the stock auction, defendants have been willing to liquidate PPIE's assets without maximizing their market value. ( Id. P 45) As a result of defendants' overall negligence and mismanagement, plaintiff's ability to collect on its judgment against PPIE for breach of the office lease has been substantially diminished. ( Id. P 46)
The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 (1994), as the parties are of diverse citizenship
and the amount in controversy exceeds the jurisdictional minimum. To determine the substantive law that controls in a diversity action, the court generally applies the choice of law rules of the forum state. See American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997). "However, where the parties have agreed to the application of the forum law, their consent concludes the choice of law inquiry." Id. In this case, the parties agree that, because PPIE was incorporated in Delaware, Delaware law should govern plaintiff's claim that defendants have their breached fiduciary duties of loyalty and care. (Def. Mem. at 12; Pl. Mem. at 14) I agree with the parties. See Galef v. Alexander, 615 F.2d 51, 58 (2d Cir. 1980) (under New York choice-of-law rules, law of state of incorporation controls in adjudicating ...