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TELESERVICES JAMAICA, LTD. v. WEST TELEMARKETING CORP.

United States District Court, S.D. New York


October 5, 2005.

TELESERVICES JAMAICA, LTD., Plaintiff,
v.
WEST TELEMARKETING CORPORATION OUTBOUND, et ano., Defendant.

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

MEMORANDUM OPINION

This is a diversity action brought on behalf of Teleservices Jamaica, Ltd. ("TJL") against West Telemarketing Corporation Outbound ("West") and West Corporation for allegedly orchestrating a scheme to defraud TJL of its assets. With a few exceptions, the assets of TJL have been in receivership since June 2003 pursuant to the terms of a debenture held by National Investment Bank of Jamaica ("NIBJ"). Defendants move to dismiss on the ground that, under Jamaican law, the persons who brought this action lacked standing to do so because the receiver did not consent to or authorize it.*fn1

  Background

  A. The Parties

  TJL is a Jamaican company founded in December 2000 for the purpose of providing outsourced telecommunications services from Jamaican facilities to large corporate clients.*fn2 These services include operating call centers to make telephone solicitations on behalf of clients.*fn3 West, which is a wholly owned subsidiary of West Corporation, provides similar services.*fn4 Both defendants are Delaware corporations with their principal places of business in Nebraska.*fn5 B. West's Alleged Scheme To Obtain Control Over TJL

  In May 2002, TJL and West entered into an agreement pursuant to which TJL would provide telemarketing services to West's clients through TJL's call centers in Jamaica.*fn6 The agreement, which embodied an initial five-year term, required West to provide TJL, on a monthly basis, with an estimate of the projected call volume to be handled by TJL in the upcoming month.*fn7

  According to the complaint, West's agreement was part of an elaborate scheme to obtain control of TJL.*fn8 In order to carry out its scheme, West allegedly made TJL "beholden" to it by, among other things, requiring TJL to sever its relationships with existing clients, make costly changes to infrastructure, and incur unnecessary expenses in hiring and training additional staff.*fn9 It purportedly induced TJL to do so by promising to send it large call volumes that it ultimately failed to deliver.*fn10 Its failure "to live up to its promises vis a vis the workload grossly and negatively impacted TJL's cash flow problems."*fn11

  As a final blow, West allegedly sabotaged negotiations between Infotel, a subsidiary of Verizon, and TJL for the purchase of TJL.*fn12 The complaint asserts that, around May 2003, West disclosed the negotiations to AT&T, which was a major client of TJL and a competitor of Verizon.*fn13 In response, AT&T allegedly cancelled TJL's services.*fn14 This, the complaint asserts, "effectively ended TJL's ability to continue operations."*fn15

  C. The Appointment of a Receiver

  TJL had financed the construction of its call centers with approximately $7.2 million from shareholders and $6.4 million in loans from NIBJ, which received a debenture as security.*fn16 In June 2003, after the Infotel deal fell part, NIBJ appointed a receiver for the assets of TJL that were charged in the debenture.*fn17

  On September 9, 2003, TJL, acting through the receiver and NIBJ, sold all of its assets, with a few exceptions, to West.*fn18 D. This Action

  The complaint asserts breach of contract, breach of fiduciary duty, fraud, and other state law claims against West and West Corporation for West's alleged failure to send projected call volumes, its disclosure of the Infotel negotiations, and other conduct.

  Discussion

  A. Standard

  On a motion to dismiss for lack of standing, "the district court is authorized to consider matters outside the pleadings and to make findings of fact when necessary."*fn19 The plaintiff has the burden of establishing standing by a preponderance of evidence.*fn20

  B. Whether the Action May Proceed Absent Consent of the Receiver

  Defendants argue that Jamaican law bars the plaintiff from bringing this action because it lacks the consent or authorization of the receiver.*fn21

  The Court begins by looking at the powers conferred on the receiver and the assets within its charge. Under the terms of the Debenture, TJL charged "all of the undertaking [sic] and assets of [TJL] whatsoever and wheresoever both present and future."*fn22 Moreover, it granted broad powers to the receiver,*fn23 including the power to bring actions in the company's name in order to collect property, manage the business, sell property, and enter agreements on behalf of the company.*fn24 Pursuant to the terms of the debenture, NIBJ appointed an employee of PricewaterhouseCoopers "to be Receiver and Manager of the business, assets and properties of the company charged by the said Debenture upon the terms and subject to powers and provisions . . . contained in the said Debenture."*fn25

  The parties dispute whether Jamaican law bars this action absent consent or approval of the receiver. They agree that the relevant rules of law were set forth in Newhart Development Ltd. v. Co-operative Commercial Bank Ltd.*fn26 There, the plaintiffs were companies in receivership pursuant to a debenture that granted the receiver broad powers to, among other things, initiate proceedings in the name of the company in order to collect assets, carry on or concur in the carrying on of the company's business, and make any arrangements or compromises in the interest of the debenture holder.*fn27 They issued a writ against the debenture holder, seeking damages for breach of contract. The defendants moved to dismiss on the ground that the receiver had not consented to the suit. The Court of Appeal set aside a lower court order that in substance had dismissed the action. It stated the general rule that a receiver's power to bring a suit in the name of the company "does not divest the directors of the company of their power, as the governing body of the company, of instituting proceedings in a situation where so doing does not in any way impinge prejudicially upon the position of the debenture holders by threatening or imperilling the assets which are subject to the charge."*fn28 Otherwise, the interests of the shareholders and other creditors might be unprotected, since the duties of a receiver extend only to the debenture holder.*fn29 In the case at bar, it concluded that the action did not threaten to diminish the property charged to the debenture holder because the company was indemnified against any liability for the costs of the litigation.*fn30 But the court suggested that the outcome would have been different absent the indemnity for costs. "[I]f the result of pursuing [the action] might be that the company would be faced with a liability for costs, or would have to finance the action to the detriment of the debenture holders, the receiver could properly take steps to prevent such an outcome arising."*fn31

  Here, the receiver did not consent to or authorize this action.*fn32 In the absence of his consent, plaintiff had the burden of showing that the costs of the litigation would not fall upon the company, thereby threatening to diminish the assets charged in the debenture. It has not done so. Accordingly, plaintiff has failed to prove that it has standing to prosecute this action under Jamaican law.

  Conclusion

  For the foregoing reasons, the motion to dismiss the action for lack of standing [docket item 11] is granted.

  SO ORDERED.

20051005

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