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DiChiara v. Ample Faith Investments Limited

November 29, 2006

ANTHONY P. DICHIARA, PLAINTIFF,
v.
AMPLE FAITH INVESTMENTS LIMITED AND OFFER HIGH INVESTMENTS LIMITED, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Plaintiff Anthony DiChiara ("DiChiara"), an American lawyer and business executive, brings this action to recover his claimed 3% equity stake in an American eyewear company from defendants Ample Faith Investments Limited ("Ample Faith") and Offer High Investments Limited ("Offer High"), who are majority owners of the company. DiChiara claims he was issued the stock in recognition of his service to defendants' parent company, Hong Kong-based Moulin Global Eyecare Holdings Limited ("Moulin"). He contends that defendants, who are incorporated in the British Virgin Islands, have refused to recognize his ownership of the 3% stake and have attempted to sell it, along with their own stock, to an outside purchaser.

Invoking this Court's diversity jurisdiction, DiChiara brings common law tort claims and seeks a declaration that he is the rightful owner of the 3% equity stake; an injunction prohibiting defendants from distributing any proceeds from the sale of the stock; and damages. Defendants move to dismiss the complaint, arguing that (1) the Court lacks personal jurisdiction over defendants; (2) the "first filed" rule and the doctrines of forum non conveniens and comity require that the issues be litigated in Hong Kong; and (3) DiChiara's failure to join Moulin, an indispensable party, requires dismissal of the action. For the following reasons, defendants' motion is denied.

Background

The following facts are taken from the pleadings and the parties' submissions on the instant motion. They are undisputed except where otherwise noted.

In late 1999 or early 2000, DiChiara was engaged by Moulin, an optical products company, to serve as an outside consultant. Over the next few years, DiChiara played a substantial role in a number of Moulin's investment and acquisition efforts.

On November 12, 2004, DiChiara entered into a Term Sheet Agreement (the "Term Sheet") with Moulin's then-CEO, Cary Ma ("Ma"), under which he agreed to serve as Moulin's general counsel, chief administrative officer, and executive vice president of strategic planning. DiChiara was also to be appointed an executive director of Moulin the following year. In addition to an annual base salary of $375,000, the Term Sheet promised DiChiara a substantial bonus if Moulin's efforts to acquire the Eye Care Centers of America ("ECCA") were successful. Although the Term Sheet provided that DiChiara and Moulin would negotiate a "definitive employment agreement" by December 31, 2004, there is no indication that such an agreement was ever reached. And, according to defendants, Moulin's board never approved the compensation package outlined in the Term Sheet.

Moulin planned to acquire ECCA through use of an investment vehicle -- ECCA Holdings Corporation ("ECCA Holdings") -- which was to be owned 56.5% by Moulin,*fn1 42.5% by Golden Gate Private Equity ("Golden Gate"), and 1% by members of ECCA management. According to the Term Sheet, once the acquisition had closed, DiChiara would receive a $1.25 million payment and a stock option grant to purchase 3% of the common shares of ECCA Holdings at a 90% discount to fair market value. Under the agreement between DiChiara and Ma, then, Moulin's intended stake in ECCA Holdings would be reduced to 53.5%.

On February 2, 2005, Ample Faith, Golden Gate, and ECCA Holdings executed a Stockholders Agreement (the "Stockholders Agreement"), that, among other things, laid out the conditions for the transfer and registration of stock, and established the composition and voting procedures of the board of directors. The parties to the Stockholders Agreement also agreed to the application of New York law and the non-exclusive jurisdiction of New York courts over disputes pertaining to the agreement:

THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, AND ALL MATERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. . . .

Each of the Parties hereby irrevocably acknowledges and consents that any legal action or proceeding brought with respect to any of the obligations arising under or relating to this Agreement may be brought in the courts of the State of New York, County of New York or in the United States District Court for the Southern District of New York and each of the Parties hereby irrevocably submits to and accepts with regard to any such action or proceeding . . . the non-exclusive jurisdiction of the aforesaid courts.

DiChiara claims he later became a party to the Stockholders Agreement by executing a joinder.

The ECCA acquisition closed on March 1, and DiChiara became president of ECCA Holdings and was named to its board of directors. Some time thereafter, DiChiara and Ma executed a Stock Purchase Agreement (the "SPA"), which purported to grant DiChiara 3% of the stock in ECCA Holdings, or 49,387 Series B Participating Preferred shares.*fn2 In contrast to the Term Sheet, the SPA did not require DiChiara to purchase the shares. Instead, they were granted to him outright; the only consideration for the stock was DiChiara's "past service to the Company." At the time of the SPA, according to defendants, a 3% stake in ECCA Holdings was worth slightly more than $5 million.

On April 1, Moulin's auditors, Deloitte Touche Tomatsu ("Deloitte"), suspended its audit of the company's books from the previous year. Deloitte submitted a letter to Moulin's board of directors complaining that it had not been given sufficient access to records, and raising "questions as to the validity of transactions" recorded by Moulin and whether Moulin had "proper internal controls." On the same day, Moulin wired DiChiara just over $1 million, which purportedly represented a portion of his cash bonus, as well as outstanding fees and expenses.*fn3 On April 18, Deloitte formally resigned, and Moulin suspended trading of its shares on the Hong Kong Stock Exchange.

Moulin's bank creditors hired an auditor to review the company's books. By June, the audit had revealed widespread financial and accounting irregularities in Moulin's financial statements stretching as far back as 2000. As a result of these misstatements, Moulin's true debt load had been hidden from the financial markets. A group of banks initiated a "winding up" proceeding -- the equivalent of a bankruptcy action -- in Hong Kong's High Court. They also petitioned the court for a provisional liquidation order against Moulin. The order was issued, and Roderick Sutton ("Sutton") and Desmond Chiong ("Chiong") of Ferrier Hodgson Limited ("Ferrier Hodgson") were appointed provisional liquidators. They took control of Moulin and its subsidiaries -- including the defendants in this action--and Sutton replaced Ma on the board of directors of ECCA Holdings.*fn4 Ma and at least four other Moulin employees were later arrested in Hong Kong amid allegations of fraud.

On May 19, DiChiara attended the first meeting of ECCA Holding's board of directors, which was held in Napa, California. According to DiChiara, several dozen stock certificates were issued at the meeting, including Certificates Nos. 1 and 2 in the name of Ample Faith, and Certificate No. 3 -- representing a 3% share in ECCA Holdings -- in the name of DiChiara. DiChiara contends that White & Case LLP ("White & Case"), a law firm that represented Moulin, then collected the executed certificates and transported them elsewhere for safekeeping. Defendants, however, argue that no stock certificates were delivered to shareholders at the meeting. Instead, according to defendants, DiChiara was informed at the meeting that his certificate could not be issued until Ample Faith endorsed its certificate to reflect the transfer of part of its ownership to him.

In early September 2005, Sutton contacted DiChiara to inform him that he did not intend to recognize DiChiara's purported 3% ownership of ECCA Holdings. Sutton told DiChiara that Moulin had not possessed the authority to transfer him any shares in ECCA Holdings, since Ample Faith, not Moulin, was the true owner of the 56.5% stake.*fn5

On September 15, DiChiara was removed from the ECCA Holdings board of directors, and, at Sutton's direction, Certificate No. 3 was marked "cancelled." DiChiara's seat on the board was filled by Chiong. Although DiChiara made multiple requests for the return of his original stock certificate, he claims he was rebuffed by Sutton and Chiong's lawyers. On November 17, Sutton wrote to DiChiara to inform him that his certificate had been cancelled, and that the entire 56.5% equity stake in the company had been transferred to Ample Faith's wholly owned subsidiary Offer High.

Beginning in January 2006, Moulin undertook efforts to sell its purported 56.5% interest in ECCA Holdings to a third party. On May 1, Moulin announced that ECCA would be sold to Highmark, Inc. for $602 million. The transaction, which was scheduled to close in the third ...


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