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Berwick v. New World Network International

March 28, 2007

LEONARD J. BERWICK, JEFFREY D. SERVIN, ESQ., AND OSAGE CORP. D/B/A FIRST CITY COMMUNICATIONS INC., PLAINTIFFS,
v.
NEW WORLD NETWORK INTERNATIONAL, LTD., NEW WORLD NETWORK USA, INC., COLUMBUS COMMUNICATIONS, LTD., AND BARCLAYS BANK PLC, DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, District Judge

OPINION AND ORDER

Two business partners, Leonard Berwick and Jeffrey Servin, brought this diversity tort action against Columbus Communications, Ltd. ("Columbus"), and various other defendants, after Columbus allegedly made untruthful statements in connection with its bid to acquire a fiber optic communications company that the plaintiffs had sought to purchase.

The individual plaintiffs, through their company First City Communications, Inc. ("First City"), allegedly formed a business arrangement with owners of a Jamaican company, Jamaica Fibre Optic Cable Co. Ltd. ("JFOC"), through which the plaintiffs acquired rights to a government license allowing them to conduct certain fiber optics business in Jamaica. The plaintiffs then sought to obtain financing to acquire New World Network USA, Inc. ("NWN USA"), a company with an existing fiber optics ring connecting South Florida to various locations in the Caribbean. The plaintiffs allege that Columbus tortiously interfered with their business opportunity by claiming that it held an exclusive license to operate a fiber optics network in Jamaica, creating the impression among potential investors and the investment bank handling the sale that the plaintiffs had lied about their own rights as holders of a Jamaican license. The plaintiffs assert a series of tort claims, all stemming from this alleged misrepresentation by the competing bidder which they allege was republished among the various defendants.

The plaintiffs' claims include: (1) interference with their prospective contractual relations by the alleged competing bidder Columbus Communications, Ltd.; (2) slander of the individual plaintiffs by all defendants; (3) slander per se of the individual plaintiffs by all defendants; (4) libel of the individual plaintiffs by all defendants; (5) defamation of the individual plaintiffs by all defendants; (6) "false light" invasion of the individual plaintiffs' privacy by all defendants; (7) commercial disparagement of First City by all defendants; (8) injurious falsehood by all defendants harming all of the plaintiffs; and (9) civil conspiracy by all defendants harming all of the plaintiffs. The plaintiffs allege damages in the amount of $1.25 billion. All of the claims are state common law claims, but this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The applicable law is disputed by the parties, with the plaintiffs favoring Pennsylvania law while the defendants favor New York law, but for claims 1--5 and 8 there appears to be no appreciable conflict between the law of the two states.

The plaintiffs first filed an action based on the facts at issue in this case in the Eastern District of Pennsylvania on December 30, 2005. See Compl., Berwick et al. v. New World Network Int'l, Ltd., Civ. Action No. 05-6839 (E.D. Pa. 2005). The plaintiffs then filed an Amended Complaint on February 17, 2006, and the defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 On April 4, 2006, before its deadline to file opposition papers to the defendants' motion had passed, the plaintiffs filed the present Complaint in this district. The plaintiffs then filed their opposition to the defendants' motion to dismiss the action in the Eastern District of Pennsylvania on April 6, 2006. Six days later, on April 12, 2006, the plaintiffs voluntarily dismissed the Pennsylvania action pursuant to Federal Rule of Civil Procedure 41(a)(1)(i).

On January 26, 2006, a provisional liquidator filed a petition under Chapter 15 of Title 11 of the U.S. Bankruptcy Code on behalf of defendant New World Network International, Ltd. ("NWNI") in the bankruptcy court in this district. United States Bankruptcy Judge Allan L. Gropper entered an Order Granting Recognition and Relief in Aid of Foreign Main Proceeding Pursuant to 11 U.S.C. §§ 1517, 1520, and 1521 in the bankruptcy case on October 20, 2006. Pursuant to 11 U.S.C. §§ 1520(a)(1) and 362, the bankruptcy court's order has the effect of staying "the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under [title 11], or to recover a claim against the debtor that arose before the commencement of the case under [title 11]." § 362(a)(1). The present action is thus stayed with respect to the defendant NWNI in light of its bankruptcy proceedings. The remaining defendants for the purposes of the present motion therefore include NWN USA, Columbus, and Barclays Bank PLC ("Barclays").

The defendants have moved to dismiss the Complaint in the present action pursuant to Rules 8, 9(g), 12(b)(2), and 12(b)(6), and for lack of standing. For the reasons stated below, the Court dismisses the Complaint in its entirety against the moving defendants.

I.

The facts as alleged in the Complaint and the documents to which it refers, which are accepted as true for the purposes of this motion to dismiss, are as follow.

The plaintiff Leonard J. Berwick is a citizen of Pennsylvania and an owner and officer of First City, which is organized under the laws of Nevada but maintains a principal place of business in Philadelphia. (Compl. ¶¶ 5, 9.) The plaintiff Jeffery D. Servin, Esq., is a citizen of Pennsylvania doing business at the same address as Berwick in Philadelphia. (Id. ¶ 7.) First City is in the business of "implementing, installing, distributing and/or marketing fiber-optic cable communications worldwide in nations including, but not limited to, Jamaica and Nigeria." (Id. ¶ 10.)

At the time the Complaint was filed, the defendant NWN USA was a corporation organized under the laws of Florida with corporate offices in Florida. (Id. ¶ 15.) NWN USA was at that time a subsidiary of NWNI,*fn2 and it had an existing fiber optics ring from Miami connecting to twenty-one entry points in fifteen countries around the Caribbean. (Id. ¶¶ 15, 35.) The Complaint does not allege that NWN USA's ring connected Miami to Jamaica.

The defendant Columbus is a wholly-owned subsidiary of the non-party Columbus Communications, Inc. Columbus is organized under the laws of Barbados and does business in North Miami Beach, Florida. (Id. ¶ 17.)

The defendant Barclays is a corporation organized under the laws of the United Kingdom with offices in the City of New York. (Id. ¶ 19.) At all times relevant to the allegations in the Complaint, Barclays owned a controlling interest in NWN USA, and Barclays attempted to sell the company to a third party. (Id.

¶¶ 20--21.) Mark Manski was at the relevant times the Head of the Credit Restructuring & Advisory Group at Barclays and also served as the Director and Chairman of the parent company NWNI. (See id. ¶¶ 22, 58, 60, 89.)

The non-party Morgan Stanley is a corporation organized and registered in Delaware. Morgan Stanley acted on behalf of Barclays as its agent for the purposes of selling its interest in NWN USA. (Id. ¶¶ 23--24.) In particular, James Allen, the Managing Director of the Investment Banking Division at Morgan Stanley, and Richard Swift, also from that division, assisted with the sale of NWN USA. (See id. ¶¶ 25, 39--40.)

In late 2003, plaintiffs Berwick and Servin, individually and on behalf of First City, began negotiations with William G. Johnson, Foy Johnson, and Mark T. Hynes on behalf of JFOC "to purchase a two-part license granted from the Government of Jamaica to implement, install, distribute and/or market fiber optic communications in Jamaica and an interest in [JFOC]." (Id. ¶ 30.) On February 6, 2004, First City acquired fifty percent of JFOC, and along with the acquisition of this interest in JFOC First City acquired the Jamaican license to conduct fiber optics business in Jamaica. (Id. ¶¶ 31--32.) The plaintiffs allege that "[t]he resulting venture was to be called First City Fiber Optics." (Id. ¶ 33.)

JFOC's license grants to the licensee rights to own and operate:

Cable Landing Stations, Satellite Earth Station including VSATS, International Gateway Switches, Transmission Towers etc. such facilities comprising a public network for the provision of specified services to the public to or from:

(a) anywhere in Jamaica; and/or

(b) anywhere outside Jamaica, provided that such foreign locations have not been proscribed by the government.

(Ex. D to Aff. of Douglas I. Koff, May 5, 2006.)

The day after the plaintiffs formed their business arrangement with JFOC, they learned that NWN USA was for sale by its investor Barclays at an asking price of $150,000,000. (Compl. ¶ 34.) The plaintiffs informed JFOC of the opportunity to buy NWN USA on February 10, 2004. (Id. ¶ 36.) The plaintiffs allege that NWN USA was attractive to them because the cost of laying cable to connect Jamaica to a hub in the United States would have been approximately $150,000,000. (Id. ¶ 37.)

On March 3, 2004, Berwick and Servin contacted Richard Swift at Morgan Stanley and expressed their interest in acquiring NWN USA. (Id. ¶ 39.) Berwick and Servin thereafter had several communications with James Allen about a potential NWN USA deal. (See id. ¶¶ 40--44, 49--52, 58.) In April 2004 Allen sent a letter to the plaintiffs outlining the appropriate procedure for submitting a written application to acquire NWN USA, including a confidentiality agreement for the plaintiffs' execution. (Id. ¶¶ 42.) Allen also sent the plaintiffs an Information Memorandum outlining NWN USA's history, sales prospects, and limited financial information. (Id. ¶ 43.) The plaintiffs sent Allen a letter on April 27, 2004 expressing continued interest in the deal and requesting additional financial information. (Id. ¶ 44.)

In November of 2004, the plaintiffs selected "several managers of the highest quality" to manage NWN USA and offered them jobs, which they accepted pending the acquisition of NWN USA. (Id. ¶ 45.) The plaintiffs then met with several investment firms to discuss their interest in investing in First City's acquisition. (See id. ¶¶ 46--49.) In December 2004, both the Telecommunications Group at Deutsche Bank Securities and a representative of Public Finance Associates expressed interest in investing, but indicated that they would need a complete set of financials on NWN USA. (Id. ¶¶ 46-48.) The plaintiffs also spoke to a representative of Huff Alternative Fund regarding the deal. (Id. ¶ 49.)

In January and February of 2005, Berwick and Servin sought further financial information about NWN USA from Allen at Morgan Stanley. (Id. ¶ 49--51.) On February 18, 2005, in a telephone conference with the plaintiffs, Allen said that it was his opinion that the plaintiffs were dishonest because they had falsely represented to him that they held a fiber optics license in Jamaica. Allen said that Columbus had issued statements indicating that it held an exclusive fiber optics license in Jamaica. (Id. ¶ 52.)

The plaintiffs allege that they were in "constant communication" with the owners of JFOC in Jamaica through their attorney, Earle Watson, Sr., regarding the "joint enterprise Jamaica Fibre Optic Cable Company Limited/First City Fiber Optics." (Id. ¶ 54.) On February 22, 2005, Watson sent the plaintiffs an email stating that their licenses for fiber optics business in Jamaica were valid, that "a few" additional licenses for similar purposes had been issued up to that date, and that Columbus did not hold "an exclusive license to implement, install, distribute and/or market fiber-optic communications in Jamaica." (Id. ¶ 55.)

On February 23, 2005, one of the managers the plaintiffs hired to run NWN USA after their acquisition resigned his position because he "had lost faith in [the] Plaintiffs' integrity as a result of Columbus Communications' alleged exclusive license." (Id. ¶ 56.)

In April and May of 2005, the plaintiffs corresponded with Mark Manski at Barclays. The plaintiffs submitted an Acquisition Proposal, and in response Manski pointed out certain deficiencies in their proposal. (Id. ¶¶ 58, 60.) In a letter dated May 11, 2005, and written in his capacity as Chairman of NWNI, Manski stated that the plaintiffs' proposal was unacceptable for at least three reasons: (1) the economics proposed were inferior to the terms of Columbus's proposal; (2) the plaintiffs' financing mechanism was subject to risk and unlikely to close; and (3) the plaintiffs' proposal included no commitment from the financing source. (Ex. A to Koff Aff.)

At a meeting with the plaintiffs on May 12, 2005, Manski indicated that he believed the plaintiffs to be dishonest, saying, "You gentlemen don't own anything in Jamaica." (Compl. ¶¶ 63--64.) Manski showed the plaintiffs a press release posted on NWN USA's website containing the statement: "Columbus-controlled FibraLink Jamaica Ltd., was recently awarded the exclusive license to build and operate a submarine fibre optic cable network connecting Jamaica to the United States." (Id. ¶¶ 57, 65.) The plaintiffs allege that NWN USA posted the statement on its website on April 4, 2005. (Id. ¶ 57.)

The FibraLink license to which the press release referred grants the licensee, among other things, the right to own, construct, and operate "[a] submarine fibre-optic cable system named Fibralink Cable System linking Jamaica with the United States." (Ex. E to Koff Aff.)

After the meeting with Manski in May, the plaintiffs again asked Watson about the status of their Jamaican fiber optics licenses, and Watson replied that the statements made by Columbus and NWN USA regarding Columbus's exclusive license were "categorically false." (Compl. ¶¶ 68, 71.)

Manski sent a confidentiality agreement to the plaintiffs, which they signed and returned, and Manski then sent NWN USA's audited financial statement to the plaintiffs. (Id. ¶¶ 69--70.) On May 19, 2005, the plaintiffs sent to Manski and to David Martin, the President of NWN USA, a letter enclosing "proof of the existence of and status of [the] Plaintiffs' licenses." (Id. ¶ 72; Ex. B to Koff Aff.) The letter included a signed sale of shares agreement between First City and Messrs. Johnson and Hynes of JFOC. (Ex. B to Koff Aff.)

A letter from Manski to the plaintiffs dated May 23, 2005 states that their letter of May 19 failed to address the deficiencies Manski had laid out in his May 11 letter. It also states that whether the plaintiffs or Columbus had a valid telecom license in Jamaica "is irrelevant to [NWN USA]" and that "it is plainly wrong to suggest that any dialogue has taken place between Columbus and [NWN ...


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