Energy Claims Ltd. v. Catalyst Investment Group Ltd.

2012 UT App 32, 275 P.3d 257, 701 Utah Adv. Rep. 10, 2012 WL 301161, 2012 Utah App. LEXIS 34
CourtCourt of Appeals of Utah
DecidedFebruary 2, 2012
Docket20100128-CA
StatusPublished
Cited by2 cases

This text of 2012 UT App 32 (Energy Claims Ltd. v. Catalyst Investment Group Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Energy Claims Ltd. v. Catalyst Investment Group Ltd., 2012 UT App 32, 275 P.3d 257, 701 Utah Adv. Rep. 10, 2012 WL 301161, 2012 Utah App. LEXIS 34 (Utah Ct. App. 2012).

Opinion

AMENDED OPINION 1

MeHUGH, Associate Presiding Judge:

1 Energy Claims Limited (ECL) appeals the trial court's dismissal of its claims against Catalyst Investment Group Limited (Catalyst), Timothy Roberts, Christopher P. Baker, Thomas DePetrillo, Charles Becker, and Robert Beuret for forum non conveniens, and the dismissal of its claims against ARM Asset-Backed Securities, S.A. (ARM), for improper venue. We affirm.

BACKGROUND 2

2 Eneco, Inc., was incorporated in Utah in 1991 for the purpose of developing tech *260 nologies related to cold fusion. Eneco subsequently redirected its research and development activities to focus on thermal chip technologies. Between 1999 and 2006, Ene-co raised and spent significant funds by selling equity in Eneco and borrowing funds from lenders. One group of lenders, the 2005 Noteholders, advanced several million dollars to Eneco, securing the loans with Eneco's rights to its patents. In 2006, Ene-eo's board of directors (board)-consisting of Harold L. Brown, Max Lewinsohn, Patrick Murrin, and Charles Becker-projected that a minimum of $5 million in additional funds was needed to develop a commerecially-viable product.

1 3 On May 15, 2006, Eneco entered into a contract with Catalyst (Catalyst Agreement), a United Kingdom investment group with its principal place of business in London, England. Pursuant to the Catalyst Agreement, Catalyst agreed to provide general corporate financial advice and to assist Eneco in the issuance of a $40 million convertible corporate bond. The Catalyst Agreement contained a forum selection clause that stated, "This Agreement shall be governed by, and construed in accordance with the Laws of England, and the parties hereto submit to the exclusive jurisdiction of the Courts of England and Wales." Timothy Roberts, the executive director of Catalyst, represented that Catalyst would raise $5 million for Ene-co by September 830, 2006. Roberts is a resident of England and a director and agent of ARM, a société anonyme 3 incorporated under the laws of the Grand Duchy of Luxembourg. ARM's principal place of business is in Luxembourg, and its operations are focused on transactions involving asset-backed securities. Acting as ARM's agent, Catalyst advised Eneco to involve ARM in its fundraising efforts. Specifically, Catalyst proposed that Eneco "sell an investment bond, the 'C8 Bond,' issued by Eneco Finane-ing, S.A., which in turn would be made up of bonds issued by Eneco and bonds issued by ARM." Catalyst also encouraged Eneco to form two subsidiaries, Eneco Europe, PLC (Eneco Europe), and Eneco Assets, Ltd. (Eneco Assets). Catalyst's strategy called for Eneco to license its intellectual property rights in the United Kingdom to Eneco Assets, then sell shares of Eneco Assets to Eneco Europe, so that Catalyst could offer shares of Eneco Europe to third-party investors to fund Eneco Europe's purchase of shares of Eneco Assets. Catalyst represented that this mechanism would raise at least $5 million for Eneco.

T4 To facilitate the sale of Eneco Europe's shares and the issuance of the $40 million convertible bond, Catalyst asked Emeco to convert the 2005 Noteholders' debt to equity. Catalyst, ARM, and Roberts were aware that the 2005 Noteholders were unlikely to agree to such a conversion in the absence of assurances that Catalyst was successful in its fundraising efforts on behalf of Eneco. Based on written assurances from Roberts, Eneco informed the 2005 Noteholders that Catalyst had raised $5 million as promised. In reliance on this information, "the 2005 Noteholders agreed to convert their loans to equity upon the express condition that Catalyst had raised $5 million for Emeco," and "Eneco treated the debt owed to [the] 2005 Noteholders as having been converted to equity."

{5 By early 2007, Eneco's board was concerned that none of the money allegedly raised by Catalyst had been received. Therefore, the board "hired counsel in the United Kingdom in order to investigate and pursue possible claims against Catalyst and possibly others for breach of contract and fraud." Catalyst was made aware of Eneco's concerns through a letter from Eneco's U.K. lawyer demanding that it perform its obligations under the Catalyst Agreement. 4

T6 In June 2007, Roberts approached Becker, a member of Eneco's board, to enlist his help in reconstituting Eneco's board for *261 the benefit of Catalyst and ARM. Becker is a resident of Texas. In exchange for Becker's efforts to appoint three new directors acceptable to Catalyst, Catalyst agreed to pay Becker, or a company controlled by Becker, $300,000 to develop a demonstration unit of Eneco's technology. Without disclosing the agreement with Catalyst to the rest of Ene-co's board, Becker recruited three new directors, Baker, Beuret, and DePetrillo, who were investment bankers "familiar to Catalyst." Baker and Beuret are residents of Massachusetts, and DePetrillo is a resident of Rhode Island. Becker, Baker, DePetrillo, and Beuret (collectively, Defendant Directors) secretly acquired proxies from Ene-eo's shareholders and voted those shares so that Baker, DePetrillo, and Beuret were appointed to the Eneco board. Once ensconced on the Eneco board, the Defendant Directors conspired with Catalyst, ARM, and Roberts "to pursue their own self interests at the expense of Emeco." Specifically, ECL alleges that the conspirators publically listed Ene-eo's stock, enriched themselves with fees, and refused to hold a special shareholder's meeting authorized by resolution of the board.

17 By October 2007, Eneco was in default to the 2005 Noteholders and had no means to satisfy the deficiencies; the board acknowledged that the debt had been improperly converted to equity. Eneco's chief executive officer, Lewinsohn, acting through Maximillian & Co., an English sole proprietorship, notified Eneco that Maximillian & Co. had been appointed as collateral agent for the 2005 Noteholders. Despite numerous proposals from Maximillian & Co. to resolve the matter favorably to Emeco and to reconstitute the Eneco board in a manner acceptable to the 2005 Noteholders, the Defendant Directors refused to accept any offer from Maximillian & Co. and also rejected the written financing proposals from two other suitors presented to Eneco's board by Lew-insohn in November 2007. In response, Lewinsohn resigned as a director of Eneco and Murrin resigned shortly thereafter. In December 2007, Lewinsohn, acting through Maximillian & Co., initiated procedures to foreclose on Emeco's right to its patents on behalf of the 2005 Noteholders.

8 In December 2007, the Eneco Europe board, which included Roberts's wife, Barbara Piper, "put Eneco Europe into administration under the laws of the United Kingdom due to it insolvency." Because the administration of Emeco Europe was detrimental to Catalyst's business reputation, Catalyst sought a method to make Eneco Europe solvent. Roberts and Catalyst accomplished this purpose by inducing the Defendant Directors to forgive Eneco Europe's $3.5 million debt to Eneco for no consideration.

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Bluebook (online)
2012 UT App 32, 275 P.3d 257, 701 Utah Adv. Rep. 10, 2012 WL 301161, 2012 Utah App. LEXIS 34, Counsel Stack Legal Research, https://law.counselstack.com/opinion/energy-claims-ltd-v-catalyst-investment-group-ltd-utahctapp-2012.