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PenneCOM B.V. v. MERRILL LYNCH & CO.

August 24, 2005.

PENNECOM B.V., Plaintiff,
v.
MERRILL LYNCH & CO., INC., MERRILL LYNCH INTERNATIONAL, INC., and PAUL A. PITTMAN, Defendants.



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

MEMORANDUM DECISION

In this case, plaintiff PenneCom B.V. ("PenneCom") sues defendants Merrill Lynch & Co., Inc. ("MLC"), Merrill Lynch International, Inc. ("MLI"), and Paul A. Pittman for tortious conduct in connection with PenneCom's unsuccessful efforts to sell a subsidiary. Defendants acted as investment bankers for the intended buyer. They move to dismiss the second amended complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted and Fed.R.Civ.P. 9(b) for failure to plead fraud with sufficient particularity. For the reasons set forth below, the motion is granted in part and denied in part.

  BACKGROUND

  I. Prior Proceedings

  I assume familiarity with the background of this case and restate it here only briefly. See PenneCom B.V. v. Merrill Lynch & Co., 372 F.3d 488 (2d Cir. 2004), vacating No. 02 Civ. 5355 (DC), 2003 U.S. Dist. LEXIS 11229 (S.D.N.Y. July 1, 2003). In short, PenneCom entered into a share purchase agreement (the "SPA") in April 1999 to sell its wholly-owned subsidiary, Pilicka Telefonia S.A. ("Pilicka"), to Elektrim S.A. ("Elektrim"). The transaction did not close, and PenneCom commenced arbitration proceedings against Elektrim for breach of contract, seeking $100 million in damages. PenneCom prevailed, as the arbitration panel found that Elektrim had breached the SPA, but PenneCom was awarded only $38 million in damages. In July 2002 PenneCom commenced this action against defendants, Elektrim's investment bankers, asserting a claim of tortious interference with contract under Polish law. PenneCom sought $100 million in damages.

  Defendants moved to dismiss the amended complaint on November 14, 2002. The case was reassigned to me in January 2003, and on June 30, 2003, I granted the motion to dismiss (the "June 2003 Memorandum Decision"), finding that New York law applied to the case and that PenneCom's claims were barred by the doctrine of collateral estoppel. I found that the arbitration panel had rejected the claim that PenneCom had been injured to any extent beyond the $38 million that PenneCom was awarded and that PenneCom could not be permitted to relitigate the extent of its damages by pursuing claims against defendants. In an order dated July 23, 2003, I denied PenneCom's Fed.R.Civ.P. 59(e) motion to alter or amend the judgment. PenneCom appealed and on June 28, 2004, the Second Circuit vacated the judgment and remanded the case. PenneCom B.V., 372 F.3d at 488. The Second Circuit held that this Court erred in concluding that Norris v. Grosvenor Marketing Ltd., 803 F.2d 1281 (2d Cir. 1986), compelled dismissal on grounds of collateral estoppel. The Second Circuit held that "before the court invokes collateral estoppel to bar PenneCom from relitigating the extent of its loss resulting from Elektrim's breach, PenneCom must be allowed discovery to collect evidence which might support a finding either that PenneCom was not afforded a full and fair opportunity to prove its loss in the arbitration, or that Merrill Lynch should be precluded by its own (alleged) misconduct from asserting the equitable doctrine of collateral estoppel." 372 F.3d at 493.

  In addition, the Second Circuit noted that a post-discovery determination that collateral estoppel bars PenneCom from relitigating the amount of its loss against defendants would not necessarily preclude punitive damages against them. 372 F.3d at 494-95. Although PenneCom's amended complaint had not demanded punitive damages, the Second Circuit concluded that PenneCom was not seeking to evade or relitigate any matter previously decided by the arbitrators because defendants were not parties to the arbitration and the arbitration did not consider whether defendants were liable for punitive damages. Id. II. The Second Amended Complaint

  After remand, PenneCom filed a Second Amended Complaint on November 5, 2004. In the Second Amended Complaint, PenneCom asserts three tort claims under Polish law and, in the alternative, two claims under Dutch law and, also in the alternative, claims of tortious interference with contractual relations and fraud under New York law. The facts alleged in the Second Amended Complaint, which are assumed to be true, are in some instances stated differently than they were in the amended complaint and I note those differences in this decision where relevant.

  Defendants MLC and MLI moved to dismiss the Second Amended Complaint on December 13, 2004, arguing first that New York law governs the action and second, that PenneCom failed to state claims for tortious interference and fraud under New York law. Defendant Pittman also moved to dismiss the Second Amended Complaint, relying on the facts, legal authority, and argument set forth by MLC and MLI.

  DISCUSSION

  A. Choice of Law

  In the June 2003 Memorandum Decision, I found that New York choice of law principles governed this case and I applied an "interest analysis" approach, which New York courts utilize "to determine which of two competing jurisdictions has the greater interest in having its law applied in the litigation." Padula v. Lilarn Props. Corp., 620 N.Y.S.2d 310, 311 (1994). I concluded that New York has more of an interest in having its law apply to the case than does Poland. See PenneCom B.V., 2003 U.S. Dist. LEXIS 11229, at *9-12. In the instant motion papers, the parties do not dispute that New York choice of law principles govern the case or that, in the event of a conflict of law, New York law requires the Court to apply an interest analysis approach. The parties disagree, however, as to whether there is a conflict of law among New York, Polish, and Dutch law and, if there is a conflict, which country has a greater interest in the litigation.

  After consideration of the Second Amended Complaint and the parties' motion papers, I conclude that there is a conflict among Polish, Dutch, and New York law and that New York has more of an interest in ...


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