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V Cars, LLC v. Israel Corp.

United States District Court, S.D. New York

September 30, 2012

V CARS, LLC, Plaintiff,
v.
ISRAEL CORPORATION, Defendant.

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[Copyrighted Material Omitted]

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Fred A. Schwartz, Fred A. Schwartz, Esq., Boca Raton, FL, Andrew Jack Kochanowski, Krista Marie Taylor, Lisa Rycus Mikalonis, Michael Alan Chichester, Jr., Sommers Schwartz, P.C., Southfield, MI, Daniel G. Swanson, Los Angeles, CA, Gregory Paul Vidler, Guzov Ofsink, New York, NY, for Plaintiff.

Douglass Bayley Maynard, Akin Gump Strauss Hauer & Feld LLP, Jay Philip Lefkowitz, David Scott Flugman, Kirkland & Ellis LLP, New York, NY, Donald B. Craven, Jacob K. Weixler, James P. Tuite, Kevin R. Amer, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

In this action, Plaintiff V Cars, LLC (" V Cars" ) asserts numerous claims against Defendant Israel Corporation related to an inchoate joint venture among V Cars, Israel Corp., and third-party Chery Automobile Co. (" Chery" ), as well as claims related to Defendant's misappropriation of confidential business information obtained from V Cars during negotiations regarding the proposed joint venture.

The Amended Complaint alleges that in late 2004 V Cars and Chery agreed to create a joint venture in which Chery would manufacture automobiles at its facilities in China and V Cars would import and distribute those vehicles in North America. V Cars claims that it invited Israel Corp. to invest in the joint venture, and that Israel Corp. and Chery then proceeded to form a new joint venture without V Cars' involvement, using proprietary information obtained from Plaintiff. ( See Am. Cmplt.)

Full discovery having been completed, Israel Corp. now moves for summary judgment, arguing, inter alia, that this Court lacks personal jurisdiction over it; that V Cars and Israel Corp. never entered into an agreement to form a joint venture; that Israel Corp. never made any promises or misrepresentations on which V Cars relied; and that Israel Corp. is not using any information provided by V Cars in its current joint venture with Chery. ( See Not. of Mot.; Def. Br.)

Because this Court concludes that it lacks personal jurisdiction over Israel Corp., its motion for summary judgment will be granted.

BACKGROUND

V Cars is a Delaware limited liability company, with its principal place of business in New York, New York. (Am. Cmplt. ¶ 1) Israel Corp. is a foreign corporation organized under the laws of Israel. (Am. Cmplt. ¶ 2) Chery is a Chinese car manufacturer with its principal place of business in Wuhu, China. (Am. Cmplt. ¶ 19; Def. R. 56.1 Stmt. ¶ 2) [1]

In December 2004, V Cars, Chery, and a Chery subsidiary, entered into two agreements

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— a Letter of Intent (" LOI" ) and an Importation and Distribution Agreement (" IDA" )— to form a joint venture company to manufacture cars in China, with plans to export those cars to North America.[2] (Pltf. R. 56.1 Stmt. ¶ 91) In the LOI, the parties expressed their intention, subject to several conditions, to form a joint venture owned 60/40 by Chery and V Cars, respectively, to manufacture cars in China. (Def. R. 56.1 Stmt. ¶ 3) Under the IDA, V Cars has exclusive importation and distribution rights for cars manufactured by the joint venture and exported to North America, and Chery has such rights elsewhere. (Def. R. 56.1 Stmt. ¶ 4) Chery agreed to contribute $300 million in assets to the joint venture entity (the " JV Company" ) that was to manufacture the cars for export. (Pltf. R. 56.1 Stmt. ¶ 105) V Cars agreed to contribute $200 million to the JV Company after it was formed and approved by the Chinese government. ( Id. )

In December 2005, V Cars and Chery entered into a Second Addendum to the LOI, which extended the deadline for V Cars' capital contribution, and set a schedule for V Cars to put $200 million in escrow.[3] (Def. R. 56.1 Stmt. ¶ 7) Section 2.2 of the Second Addendum states: " [i]f [V Cars] does not make the first deposit [of $50 million] on time (by January 28, 2006), any and all cooperation between the Parties shall be canceled or terminated ... and Chery shall be fully free to cooperate with any third party to develop the North American market...." (Def. R. 56.1 Stmt. ¶ 8, Ex. 11 at V Cars, LLC 000866)

In January 2006, Alan Himelfarb, V Cars' chief-of-staff, sent materials concerning V Cars' " proposed enterprise" to Pareto Securities, a Norwegian investment firm, for circulation to prospective investors. (Def. R. 56.1 Stmt. ¶ 14) In March 2006, Pareto sent an email to Idan Ofer, Israel Corp.'s chairman, inviting Israel Corp. to invest in V Cars, and attaching V Cars' 2005 Business Plan. (Def. R. 56.1 Stmt. ¶ 15, Ex. 22; Pltf. Ex. 11) Ofer was not asked to sign a non-disclosure agreement, confidentiality agreement, or any other agreement as a condition of receiving such information, and he never signed any such agreement. (Def. R. 56.1 Stmt. ¶ 16)

In April 2006, Ofer asked Volker Steinwascher, a former Volkswagen executive living in Germany, to evaluate V Cars' " proposed business concept" and help Israel Corp. decide whether it should invest in the project.[4] (Def. R. 56.1 Stmt. ¶ 18, see

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Ex. 2 (Ofer Decl.) ¶ 10; Ex. 23; Ex. 24 (Steinwascher Dep.) at 35, 41-45; Ex. 25 (Ofer Dep.) at 15-16))

On April 27, 2006, V Cars and Soros Strategic Partners, LLP (" Soros" ) entered into an Escrow Agreement, pursuant to which Soros would place $200 million in escrow to fund V Cars' contribution to the V Cars-Chery joint venture. (Pltf. R. 56.1 Stmt. ¶ 115, Ex. 4) The Escrow Agreement contained an expiration date of October 27, 2006, by which time the funds would be returned to Soros. (Pltf. R. 56.1 Stmt. ¶ 122, Ex. 4 at V Cars, LLC 022835) In July 2006, Soros advised V Cars that it had decided to rescind the funding. (Def. R. 56.1 Stmt. ¶ 10)

In late July 2006, Pareto Securities, the Norwegian investment firm, arranged for Steinwascher to meet Himelfarb and Per Arneberg, the Vice Chairman of V Cars' Board of Directors, in Nice, France. (Def. R. 56.1 Stmt. ¶ 21) On August 9, 2006, Steinwascher emailed Ofer and

suggest[ed] the following steps to be taken: Step 1: Verification of major business assumptions and logics. Step 2: Due diligence for all business related aspects including profitability of JV, importer dealer and investor. Step 3: Due diligence for all contract and assets related issues. Step 4: Negotiation of the deal (including a higher share of profit)....

(Pltf. R. 56.1 Stmt. ¶ 159, Ex. 15) Steinwascher was authorized to negotiate on behalf of Israel Corp., but was not authorized to sign or commit the company to anything. (Pltf. R. 56.1 Stmt. ¶ 160; Pltf. R. 56.1 Stmt. Appx. Ex. C (Gilad Dep.) at 81)

Between August 15 and 18, 2006, Steinwascher visited V Cars' office in New York, and met with several V Cars executives, including Malcolm Bricklin, V Cars' CEO (Am. Cmplt. ¶¶ 4, 8), and Himelfarb, as well as an outside automotive consultant and Tim Ciasulli, a car dealer who had agreed to distribute the cars built by the potential joint venture. (Pltf. R. 56.1 Stmt. ¶ 167) V Cars' management understood that Steinwascher's role was to collect due diligence information and advise Israel Corp. whether or not he supported the joint venture opportunity. (Pltf. R. 56.1 Stmt. ¶ 168)

V Cars contends that during this visit, Steinwascher signed V Cars' standard non-disclosure agreement. Steinwascher does not recall ever signing any such agreement, however, nor has Plaintiff produced a copy of any such signed agreement. ( See Def. Resp. to Pltf. R 56.1 Stmt. ¶ 169) The parties agree that Steinwascher was given a copy of V Cars' " North American Product Plan" (" NAPP" ) during his visit, but they otherwise dispute what information he received.[5] (Pltf. R. 56.1 Stmt. ¶ 172) V Cars maintains, however, that the NAPP contained non-public detailed information concerning the cars to be produced by Chery, including " dimensions, weight, engine capabilities, whether the vehicle platforms were FWD, RWD, or AWD, vehicle platform capabilities, and the manufacturing costs for each platform." V Cars further asserts that " it took [V Cars] months to obtain information that supported

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the NAPP." (Pltf. R. 56.1 Stmt. ¶ 173)

The parties also dispute what statements and/or representations Steinwascher made during the New York meetings. ( See Def. Resp. to Pltf. R. 56.1 Stmt. ¶¶ 175-177) Himelfarb testified that Steinwascher gave " the impression that he was going to highly recommend [that Israel Corp.] pursu[e] [the deal]," but that " he certainly felt that it was a challenging undertaking, that there was much to do." (Def. R. 56.1 Appx. Ex. 10 at 64) V Cars CEO Bricklin testified that Steinwascher did not make any promises in New York, but said that he thought that " this is something that Israel Corporation would be interested in." (Def. R. 56.1 Stmt. Appx. Ex. 5 (Bricklin Dep.) at 86)

On August 25, 2006, Nir Gilad, then Israel Corp.'s Deputy CEO, emailed Himelfarb to set up a call to learn " a little [bit] more about next steps and in particular [w]hat kind of deal [Himelfarb] ha[d] in mind." (Def. R. 56.1 Stmt. ¶ 24; Def. R. 56.1 Stmt. Appx. Ex. 114) On August 27, 2006, Himelfarb sent Gilad a " proposal for valuation" of the $200 million investment. (Pltf. R. 56.1 Stmt. ¶ 183, Ex. 20) On September 1, 2006, Gilad visited V Cars' office in New York " for a couple of hours" to meet V Cars' leadership. (Def. R. 56.1 Stmt. ¶ 24) Although Plaintiff argues that Gilad signed a non-disclosure agreement at this time ( see Pltf. Resp. to Def. R. 56.1 Stmt. ¶ 28), Gilad denies that he signed any such document, and once again there is no record of an executed agreement. (Def. R. 56.1 Stmt. ¶¶ 28-29) The parties dispute what documents Gilad was given at the September 1, 2006 meeting, but Israel Corp. admits that at some point in August or September 2006, Gilad saw a V Cars " private placement document" and a business plan. (Def. Resp. to Pltf. R. 56.1 Stmt. ¶ 191)

Himelfarb testified that, while there was " an intent to proceed," Gilad made no promises to V Cars at the September 1, 2006 New York meeting. (Pltf. R. 56.1 Stmt. Appx. Ex. G (Himelfarb Tr.) at 67-68) V Cars CEO Bricklin testified that " [t]he only promise that we got from anybody was they were going [to China] as our investors, and would not go around us." (Pltf. R. 56.1 Stmt. Appx. Ex. B (Bricklin Tr.) at 110) Bricklin testified that he had " no idea" exactly what Gilad said at the September 1 meeting, however. (Pltf. R. 56.1 Stmt. Appx. Ex. B (Bricklin Tr.) at 111)

In September 2006, Steinwascher and Himelfarb discussed what amount of equity ownership Israel Corp. would receive in return for its $200 million investment. (Pltf. R. 56.1 Stmt. ¶ 195) Himelfarb took the position that V Cars should retain at least 51% of the 40% equity stake it had in the V Cars-Chery joint venture. Steinwascher told Himelfarb, however, that Ofer and Gilad believed that Israel Corp. should receive at least 60% of V Cars' equity stake in return for its $200 million investment. (Pltf. R. 56.1 Stmt. ¶ 196; Def. R. 56.1 Stmt. Appx. Ex. 41)

On September 11, 2006, Himelfarb sent an email to Bricklin stating that the parties' disagreement about equity stakes " creates an impasse, as [Ofer] expects more to have any further interest." (Pltf. R. 56.1 Stmt. Appx. Ex. 23) In the email, Himelfarb wrote that Steinwascher " says he is trying to keep the project alive, and proposes the following to re-open discussions: 15% for dealers, and one-third (28%) for [V Cars] and two-thirds (57%) for [Ofer]...." ( Id. )

On September 12, 2006, Himelfarb sent an email to Steinwascher stating, " I spoke with both [Arneberg and Bricklin] who agree in principle with your one-third/two-third proposal. We would like to take the

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next step with you, [Gilad], and [Ofer]." (Pltf. R. 56.1 Stmt. Appx. Ex. 24) Steinwascher reported to Ofer and Gilad that " we have a much better figure now for the investment" and suggested that they meet with Chery and V Cars. (Pltf. R. 56.1 Stmt. Appx. Ex. 25 at IC_VCARS_PROD-051684)

In the second half of September 2006, Steinwascher and V Cars continued their discussions about a deal, in anticipation of setting up a meeting with Chery in China.[6] On September 23, 2006, Arneberg reported to Kan.Lei, a Chery senior executive, that Ofer " had approved to go ahead with the Chery/[V Cars] Project" and requested that they schedule a time for Steinwascher and Gilad to meet with Chery in China. (Pltf. R. 56.1 Stmt. Appx. Ex. 28) Kan.Lei responded that no meeting could take place before October 10, 2006, and that " 200 million USD cash must be secured before our meeting." [7] ( Id. )

On September 19, 2006, Himelfarb asked Steinwascher to arrange for Ofer to send a letter to Chery's CEO, and provided draft language. (Def. R. 56.1 Stmt. ¶ 36, Ex. 47) In Himelfarb's draft, Ofer stated that he was " prepared to fund [V Cars'] contribution to your joint venture." ( Id. ) In the version actually sent by Ofer to Chery's CEO on September 28, 2006, however, Ofer stated that he was " considering funding [V Cars'] contribution to your joint venture." (Pltf. Resp. to Def. R. 56.1 Stmt. ¶ 37; Def. R. 56.1 Stmt. Appx. Exs. 47-48) In the letter, Ofer offered to have Israel Corp.'s bank issue a letter confirming its ability to make a $200 million investment " within days," but cautioned that " before any investment can be made we will have to jointly prepare a business plan and finalize the required agreements." (Def. R. 56.1 Stmt. Appx. Ex. 48)

In early October, the parties exchanged several emails concerning a possible meeting in China. (Def. R. 56.1 Stmt. Appx. Ex. 50) Chery resisted scheduling a meeting. (Def. R. 56.1 Stmt. Appx. Ex. 45) On October 9, 2006, Himelfarb asked Steinwascher for help in persuading Kan.Lei to agree to a meeting. (Def. R. 56.1 Stmt. ...


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