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Wilson v. Imagesat International N.V.

July 30, 2008

STEPHEN M. WILSON, BRW ENGINEERING LTD., WIS PARTNERS, L.P., MOSHE BAR- LEV, PATRICK ROSENBAUM, MICHAEL MORRIS, HAIM YIFRAH, TOP DOWN PARTNERS, LLC, JOEL LEVINE, MORRIS TALANSKY, ABRAHAM MOSHEL, MAGMA INTERNATIONAL SERVICES, LTD., ALBERT REICHMANN, HEXAGRAM INTERNATIONAL LIMITED, AND POLYBUTESCOMPANY, PLAINTIFFS,
v.
IMAGESAT INTERNATIONAL N.V., ISRAEL AEROSPACE INDUSTRIES LTD., ELBIT SYSTEMS LTD, MOISHE KERET, IZHAK NISSAN, JACOB WEISS, SHIMON ECKHAUS, MICHAEL FEDERMANN, ESTATE OF JACOB TOREN, JOSEPH ACKERMAN, JOSEPH GASPAR, GINO PIPERNO-BEER, JAMES DEPALMA, DAVID ARZI, YOAV CHELOUCHE, AND YEHOSHUA ELDAR, DEFENDANTS.



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

AMENDED OPINION AND ORDER*fn1

This is a commercial dispute between fifteen minority shareholders and security holders in ImageSat, a Netherlands Antilles corporation whose principal place of business is in Israel, and ImageSat, its two largest shareholders, and about one dozen of its current and former directors and officers. Plaintiff minority shareholders and security holders allege that defendants engaged in various forms of corporate misconduct, and seek compensation for the diminution in value of their holdings. All the defendants but one have moved to dismiss this action under the doctrine of forum non conveniens. Their motion is granted, and the action is dismissed.

BACKGROUND

The facts are drawn from plaintiffs' amended complaint. Plaintiffs hold either shares, warrants, or stock options to acquire stock in defendant ImageSat. Among the plaintiffs are members of the founding management of ImageSat. ImageSat's principal business is the sale of rights to customer governments to enjoy the exclusive regional use of ImageSat's two high-resolution earth observation satellites. Defendants Israel Aerospace Industries, Ltd. ("IAI") and Elbit Systems Ltd. ("Elbit")*fn2 supplied these two satellites and are ImageSat's controlling shareholders. The remaining defendants are individuals who served or currently serve as officers and directors of ImageSat.

IAI and Elbit are large Israeli defense and aerospace companies. IAI is one-hundred-percent government-owned. Nonetheless, defendants consistently represented to investors, including plaintiffs, "that ImageSat would be run as an autonomous, apolitical commercial entity and that its business would be entirely separate and distinct from the businesses of IAI and/or Elbit." Indeed, because ImageSat's customers were governments that used the company's satellites in furtherance of their own national security agendas, ImageSat's commercial and political independence have been of paramount importance to the company's success.

Plaintiffs claim that IAI and Elbit, with the complicity and sometimes assistance of the individual defendants, have squandered ImageSat's commercial promise --- and thereby diminished the value of plaintiffs' investments --- in order to further the interests of IAI and Elbit. Defendants' alleged perfidy takes various forms, including: overbilling ImageSat for satellites and services rendered in connection with satellites that the defendants knew to be deficient and therefore not capable of ultimately being constructed; usurping ImageSat's corporate opportunities and breaching contracts establishing ImageSat's exclusivity rights for the commercialization of Israeli military earth observation satellite technology; and subordinating the company's commercial and financial interests to the needs of the Israeli government.

Plaintiffs filed their complaint on July 2, 2007, bringing twenty-two causes of action for breach of fiduciary duty (claims 1 through 6), corporate waste (claims 7 and 8), failure to enforce ImageSat's contractual rights (claim 9), self-dealing (claim 10), violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and (d) (claims 11 and 12), common-law fraud (claim 13), breach of contract and other agreements (claims 14 through 16), reformation of the warrants (claims 17 and 18),*fn3 fraudulent conveyance (claim 19), disgorgement of compensation (claim 20), conversion and misappropriation of corporate assets (claim 21), and unjust enrichment and restitution (claim 22). The complaint seeks between $100 million and $300 million in relief on each claim.*fn4

On October 15, 2007, defendants filed five separate motions to dismiss the complaint, each representing a different constellation of defendants. One of the motions, which represented all the defendants except for Joseph DePalma, sought to dismiss the complaint on the basis of, inter alia, the doctrine of forum non conveniens. It is to this motion that this Opinion is directed. Briefing in connection with all the motions to dismiss was fully submitted on April 22, 2008. This action was transferred from the docket of the Honorable Laura Taylor Swain to this Court's docket on July 15, 2008.

DISCUSSION

All but one of the defendants*fn5 in this action have jointly moved to dismiss the complaint under the doctrine of forum non conveniens. If the suit is dismissed on this ground, they have agreed to, among other things, submit to jurisdiction in Israel and to waive any statute of limitations defense beyond that which they could have asserted when this action was filed. A careful evaluation of the relevant interests leads ineluctably to the conclusion that this litigation should be dismissed. Having invested in an Israeli-based corporation, and having chosen to bring suit based on claims that the corporation has mismanaged its affairs and has acted to benefit its two largest shareholders, both of which are Israeli companies, the plaintiffs have no fair ground to complain that these defendants insist on being sued in Israel.

A court has discretion to dismiss a case on forum non conveniens grounds "when an alternative forum has jurisdiction to hear the case, and trial in the chosen forum would establish oppressiveness and vexation to a defendant out of all proportion to plaintiff's convenience. . . ." Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 127 S.Ct. 1184, 1190 (2007) (citation omitted). "Dismissal for forum non conveniens reflects a court's assessment of a range of considerations, most notably the convenience to the parties and the practical difficulties that can attend the adjudication of a dispute in a certain locality." Id. (citation omitted). The defendant bears a "heavy burden" when invoking this doctrine. Id. at 1191.

In exercising its discretion, a court must apply the three-step analysis described by the Second Circuit in Iragorri v. United Technologies Corporation, 274 F.3d 65, 72-76 (2d Cir. 2001) (en banc).

At step one, a court determines the degree of deference properly accorded the plaintiff's choice of forum. At step two, it considers whether the alternative forum proposed by the defendants is adequate to adjudicate the parties' dispute. Finally, at step three, a court balances the private and public interests implicated in the choice of forum.

Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146, 153 (2d Cir. 2005).

The degree of deference to be accorded a plaintiff's choice of forum "moves on a sliding scale" and is correlated with the "degree of convenience" that the choice reflects. Id. at 154 (citation omitted). "The more it appears that a domestic or foreign plaintiff's choice of forum has been dictated by reasons that the law recognizes as valid, the greater the deference that will be given to the plaintiff's forum choice." Id. (citation omitted). Conversely, the more that a plaintiff's choice of a United States forum appears motivated by forum shopping, the less deference that ...


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