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Berkshire Capital Group, LLC v. Palmet Ventures

September 21, 2007

BERKSHIRE CAPITAL GROUP, LLC, AND, RICHFIELD HOSPITALITY, INC. PLAINTIFFS,
v.
PALMET VENTURES, LLC, MICHAEL MOYER, AND CHICAGO TITLE & LAND TRUST COMPANY, DEFENDANT.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge

OPINION & ORDER

Plaintiffs Berkshire Capital Group LLC ("Berskhire") and Richfield Hospitality Inc. ("Richfield") allege that Defendants Palmet Ventures, LLC, ("Palmet"), Michael Moyer ("Moyer") and Chicago Title & Land Trust Company ("Chicago Trust") breached the exclusive negotiation provision of a Letter of Intent ("LOI") relating to the sale of the Hotel Allegro, located in Chicago, Illinois ("the Hotel"); and breached the implied duty of good faith and fair dealing created by that provision. Defendants move to dismiss the claims for lack of personal jurisdiction, improper venue, and failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(2), (3), and (6) and 28 U.S.C. § 1391(a). In the alternative, Defendants move to transfer the action to the Northern District of Illinois pursuant to 28 U.S.C. §1404(a). The Court grants Defendants' motion pursuant to Fed. R. Civ. P. 12(b)(2) and dismisses this action for lack of personal jurisdiction.

BACKGROUND*fn1

Berkshire is a Delaware limited liability company with its principal place of business in New York City. Richfield is a corporation organized and with its principal place of business in Colorado. Palmet is a limited liability company, organized and with its principal place of business in Chicago, Illinois. Moyer is a managing member of Palmet, and Chicago Trust is a trust organized under Illinois law. Palmet and Chicago Trust own the Hotel, with Chicago Trust holding the deed. The hotel is managed, by contract, by non-party Kimpton Hotels and Restaurants ("Kimpton").

In February 2006, Plaintiffs' representatives approached Moyer about acquiring the Hotel, and were informed that Kimpton had a right of first offer. Negotiations between Kimpton and Palmet failed, however, and on April 5, 2006, Kimpton's right of first offer expired. On or about April 6, 2006, Palmet informed Plaintiffs of its termination of negotiations with Kimpton. Plaintiffs then drafted the LOI at issue in this case. The LOI was signed by Plaintiff Berkshire's Managing Principal, Joseph Esmail ("Esmail") on behalf of his company and sent to Defendant Palmet on April 6, 2006. Moyer signed the LOI on behalf of Palmet in Chicago on April 18, 2006 and returned it by fax to New York.

I. Relevant Terms of the LOI

This action is based on the purported breach of the exclusive negotiation provision of the LOI which states:

Seller agrees that it shall negotiate exclusively with Buyer during the 45 day period following receipt by both parties of the executed copy of this letter (the "Exclusive Negotiation Period"), but Seller is not precluded from receiving unsolicited offers during the Exclusive Negotiation Period; provided, however, during the Exclusive Negotiation Period, Seller shall not negotiate and/or accept any such received offers.

Affidavit of Michael A. Moyer ("Moyer Aff."), Ex. 1 ("LOI"), 1. The LOI defined the "Buyer" as Berkshire and the "Seller" as Palmet. Id. While the terms of the LOI were generally non-binding expressions of the parties' intentions, and the acquisition depended on the parties' execution of a "Definitive Agreement," the exclusive negotiation and expenses provisions of the LOI were "agreed to be fully binding and enforceable against Buyer and Seller.and shall survive the termination of this letter." Id. at 3. Pertinent to this motion is the LOI's choice of law provision which provides in full:

Choice of Law. This letter shall be deemed to have been made in, and shall be subject to and construed in accordance with, the internal laws of the state of New York. The Definitive Agreement shall be subject to and construed in accordance with the laws of the state of Illinois.

II. Post-LOI Communications

Following the execution of the LOI, Plaintiffs commenced their due diligence efforts and the parties continued to negotiate towards the final terms of the acquisition. This process continued through May into June at which point, according to Plaintiffs, "the Exclusive Negotiation Period under the LOI was understood to be extended and was extended by [Palmet and Berkshire] into August 2006." Compl. ¶ 20. On August 10, 2006, Moyer informed Plaintiffs that the exclusive negotiation period was over and on September 18, 2006, Moyer informed Plaintiffs via email that Palmet had reached an agreement to sell the Hotel to ING. Plaintiffs allege that the contract with ING could not have been negotiated within the time frame, unless Defendants had violated the 45 day exclusive period for negotiation.

III. Additional Facts Concerning Personal Jurisdiction*fn2

Defendants provide further details of Moyer's communication with Berkshire on August 10, 2006 through Moyer's own affidavit and the attached letter referred to in the Complaint. The letter, sent to Esmail by email, see Affidavit of Michael A. Moyer ("Moyer Aff."), ΒΆ 27, notes that "the Exclusive Negotiation Period outlined in the Letter of Intent has expired." Id. at Ex. B. The letter further notes that Moyer had "been approached by other parties regarding a sale" and that he would be exploring those possibilities. Id. Esmail also submits a declaration, in which he declares that during the negotiations with Defendants following the execution of the LOI, "there were, as would be ...


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