IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DENNIS A. REID, : : Plaintiff, : : v. : C.A. No. 2874-VCN : VINCENZO DAVIDE SINISCALCHI, : GIORGIO CAPRA, ALENIA SPAZIO, : ALCATEL ALENIA SPACE ITALIA : SpA (f/k/a ALENIA SPAZIO) and : FINMECCANICA SpA, : : Defendants, : : and : : USRT HOLDINGS, L.L.C. and U.S. : RUSSIAN TELECOMMUNICATIONS, : L.L.C., : : Nominal Defendants. :
MEMORANDUM OPINION
Date Submitted: June 12, 2014 Date Decided: November 20, 2014 David W. deBruin, Esquire of The deBruin Firm LLC, Wilmington, Delaware; Derek Y. Brandt, Esquire of Simmons Browder Gianaris Angelides & Barnerd LLC, Alton, Illinois; and Thomas I. Sheridan, III, Esquire, Andrea Bierstein, Esquire, and Paul J. Hanly, Jr., Esquire of Hanly Conroy Bierstein Sheridan Fisher & Hayes, LLP, New York, New York, Attorneys for Plaintiff.
Allen M. Terrell, Esquire, Lisa M. Morris, Esquire, and Rachel E. Horn, Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware; and Paul J. Vincenti, Esquire, John V. Vincenti, Esquire, and Elyse C. Pillitteri, Esquire of Vincenti & Vincenti, P.C., New York, New York, Attorneys for Defendants Alenia Spazio, Alcatel Alenia Space Italia, S.p.A. and Finmeccanica, S.p.A.
NOBLE, Vice Chancellor Alenia Spazio, Alcatel Alenia Space Italia, S.p.A., and Finmeccanica, S.p.A
(collectively referred to as “the Entity Defendants” or “Finmeccanica”1) have
moved, pursuant to Court of Chancery Rule 12(b)(2) for lack of personal
jurisdiction, and 6 Del. C. § 18-1002 for lack of standing, to dismiss Plaintiff
Dennis A. Reid’s (“Reid” or the “Plaintiff”) complaint (the “Complaint”). Plaintiff
alleges that the Entity Defendants participated in a conspiracy in which a co-
conspirator committed an act in Delaware subject to the long-arm statute.
According to Plaintiff, the co-conspirator’s actions should be imputed to the Entity
Defendants under the conspiracy theory of jurisdiction, establishing a basis for
personal jurisdiction in Delaware.
I. INTRODUCTION
A. Plaintiff’s Substantive Allegations
On April 9, 2007, Reid filed the Complaint against the Entity Defendants, as
well as Vincenzo Davide Siniscalchi (“Siniscalchi”) and Giorgio Capra (“Capra”).
Reid brought direct claims and derivative ones on behalf of Nominal Defendants
U.S. Russian Telecommunications, L.L.C. (“USRT”) and USRT Holdings, L.L.C.
(“USRT Holdings”), both Delaware limited liability companies. The Complaint
includes causes of action for breach of contract, breach of fiduciary duty,
1 Alcatel Alenia Space Italia S.p.A. is an Italian business entity that is the successor to Alenia Spazio. At all times relevant to this action, Alenia Spazio was a division of Finmeccanica, S.p.A. The three are collectively referred to as “Finmeccanica” when doing so helps narrate the facts and issues. 1 conversion, civil conspiracy, tortious interference, and tortious interference with
business relations. Reid bases standing for his derivative claims on his 10%
interest in USRT Holdings, which wholly owns USRT.
In the Complaint, Reid describes a conspiracy among the Entity Defendants,
Siniscalchi, and Capra to breach a joint venture agreement between Finmeccanica
and USRT. Reid alleges that the conspirators divested USRT of its share of the
joint venture’s proceeds, misappropriated its assets, and usurped its corporate
opportunities.
B. Background2
By the 1990s, various Russian satellites were becoming obsolete, but Russia
lacked the funds to modernize them. Because of its inability to replace the
satellites with new equipment, Russia was at risk of losing commercially valuable
geosynchronous orbital slots, which are assigned by an international commission.
Dr. Valery Aksamentov (“Aksamentov”), a Russian space scientist living and
working in the United States, learned of Russia’s situation through his brother and
a friend who worked at the Russian Satellite Communications Company
2 This Court has previously described Reid’s substantive allegations and this dispute’s procedural history. See Reid v. Siniscalchi, 2011 WL 378795, at *1-3 (Del. Ch. Jan. 31, 2011); Reid v. Siniscalchi, 2008 WL 821535, at *1-4 (Del. Ch. Mar. 27, 2008), rev’d sub nom. Reid v. Spazio, 970 A.2d 176 (Del. 2009). The factual summary in this memorandum opinion is based on the current record as developed through jurisdictional discovery. Exhibits submitted by the Entity Defendants attached to the Affidavit of Paul J. Vincenti, Mar. 12, 2014, are cited as “DX_.” Exhibits submitted by Reid attached to the Affidavit of Thomas I. Sheridan, III, Apr. 24, 2014, are cited as “SX_.” 2 (“RSCC”), the company that allocated and licensed Russian satellite
communications frequencies. Sensing a business opportunity, Aksamentov
worked with RSCC employees to push for Russian legislation that would allow
commercialization of the satellite slots.
Once Russia passed the legislation, Aksamentov developed his plan to
secure state-of-the-art technology for new satellites, find Western investors to
finance the development and launching of the new satellites, allocate some of the
satellite transponders to Russia, and market the rest to commercial customers.
Aksamentov envisioned the project’s revenues being shared among Russia, the
investors, and his group. Along with some colleagues, Aksamentov formed USRT
to pursue his plan.3 Aksamentov’s personal connections allowed USRT to develop
strong relationships with RSCC and other Russian entities.
The satellite project drew early interest from the Italian government, and
representatives of USRT met with Italian delegates in October 1997. Italy
informally appointed Capra, an Italian Navy officer, advisor to the Italian Ministry
of Defense, and board member of the Italian Space Agency, to serve as a liaison
between USRT and Italy.
3 This plan, and later iterations in which USRT alleges it had a right to participate, are referred to as the “satellite project.” 3 On November 26, 1997, Capra informed Aksamentov and RSCC that Italy
was “committed to the joint venture with USRT.”4 On December 5, Italy
reconfirmed its “firm and full commitment . . . to provide full financing as a joint-
venture partner of USRT . . . .”5 A month later, Italy brought Finmeccanica, an
Italian state-controlled entity, into the project to obtain financing.6 Due to his role
as a government representative, Capra “had a lot of relations” with Finmeccanica’s
management.7 Capra introduced USRT to Finmeccanica on December 11, 1997,
and later that month, Finmeccanica agreed to be USRT’s joint venture partner for
the satellite project.
USRT and Finmeccanica scheduled a meeting with the Russians for
January 12, 1998. Before the meeting, USRT told Finmeccanica that the parties
must prepare “all documentation required to reconfirm our commitment to the joint
program.”8 On December 31, 1997, Capra sent Finmeccanica a draft letter with an
attached note explaining, “the words have been carefully chosen, with a view to
avoiding an effective commitment.”9 Days later, Finmeccanica sent USRT a letter
acknowledging, “consequent to our meeting on December 18, 1997, and pursuant
4 SX47. 5 DX15. 6 At all times relevant to the Complaint, Finmeccanica was 61% owned by an Italian company that was wholly owned by the Italian Treasury Ministry. 7 DX86 (Giuseppe Viriglio Dep., Sept. 11, 2002) at 192. 8 DX36. 9 SX10 (translated at Capra Dep., Dec. 12, 2013 (Capra Dep.) 54). 4 to your letter dated December 26, 1997, we hereby confirm our attendance at the
meetings in Moscow scheduled for January 12, 1998, as your joint venture
partner.”10
Despite Finmeccanica’s written confirmation of the joint venture,
Aksamentov informed Capra that USRT and Finmeccanica needed to execute a
formal joint venture agreement before meeting with the Russians.11 Capra
forwarded Aksamentov’s letter to Finmeccanica and expressed his belief that it
was necessary to satisfy USRT’s requests at that time.
Subsequently, on January 12, 1998, USRT and Finmeccanica signed their
first of several memoranda of agreement (“MOA”). The parties agreed to “jointly
elaborate a business plan of the [satellite project]” and to “negotiate in good
faith.”12 The agreement identified USRT as “a company incorporated under the
laws of Delaware.” Before the MOA was signed, Finmeccanica had questioned
Aksamentov as to why USRT was necessary to the satellite project. Finmeccanica
also expressed interest in dealing with the Russians directly. However,
Aksamentov convinced Finmeccanica that USRT’s relationship with RSCC, the
Russian entity in control of the orbital slots, was very valuable. USRT had already
10 DX23. 11 SX41. 12 DX24 ¶¶ 3, 5. 5 entered into a joint venture arrangement with RSCC and RSCC wanted to work
with USRT.13
Once the MOA was signed, Finmeccanica and USRT attended meetings in
Moscow. After these meetings, on January 19, 1998, Siniscalchi forwarded
questions from the Italian government to USRT. The questions sought information
regarding USRT’s structure, business, and relationship to the Russian government.
The final question was: “What is the commercial value of what USRT brings to the
joint venture?”14 USRT responded to these questions by sending information
about the satellite project to Capra, and that information was subsequently used to
prepare a financing submission to the Italian government.
On January 23, Finmeccanica sent USRT a letter indicating its
understanding that although it was “more than willing to become USRT [sic]
partner in [the satellite business],” a joint venture would not actually be formed
until several conditions precedent were met.15 This sentiment appeared to hedge
against Finmeccanica’s earlier acknowledgements that it and USRT were already
joint venture partners.
On January 25, Capra wrote to Finmeccanica, exclaiming, “I’m convinced
that any unilateral action by [Finmeccanica] not agreed upon with the Russians and
13 SX2 (Aksamentov Aff., Nov. 9, 2007 (Aksamentov 2007 Aff.)) ¶¶ 13-14. 14 DX52. 15 DX82. 6 the Americans might seriously harm the program and presumably cancel it!”16
Within a week of Capra’s warning, Finmeccanica’s representatives met unilaterally
with the Russians to discuss the satellite business.17 This meeting occurred while
other representatives of Finmeccanica met with USRT’s representatives in Texas
to sign a revised MOA, reconfirming their commitment to the joint venture. The
new MOA acknowledged “that USRT may be reorganized as a new Delaware
entity based on further discussions.”18
Throughout early 1998, Finmeccanica continued communicating unilaterally
with the Russian entities to which USRT had introduced it. Finmeccanica sought
to “develop a long term cooperation program” with the Russians with “the first
short term opportunity of such nature . . . represented by the . . . Gorizont Satellite
Replacement Program.”19 The Gorizont Program was the satellite project in which
USRT had an interest.20
During the spring of 1998, RSCC transferred control of the Russian satellite
slots to another Russian company, InSpace. On April 1, InSpace invited USRT,
through Aksamentov, along with its “industrial partner [Finmeccanica],” to Russia
16 SX23 (translated at Capra Dep. 80). 17 SX26. Reid and Finmeccanica offer conflicting interpretations of this meeting’s scope. The meeting’s program states the agenda in very general terms. Apparently, Finmeccanica gave a presentation regarding its business, and opinions were exchanged on the use of satellite navigation systems. 18 DX25 ¶ 6. 19 SX17. 20 See DX 27 ¶ 1. 7 in order to discuss the satellite project.21 On April 6, USRT and InSpace entered
into a nondisclosure agreement, which provided, “Each party agrees that it will not
circumvent the other party and attempt to do, or actually do, business with the
contacts and sources of the other party unless otherwise agreed in writing by the
parties.”22
On April 7, Finmeccanica suggested that it might deal directly with
InSpace.23 However, Aksamentov informed it of the non-circumvent provision in
USRT and InSpace’s agreement. The next day, Finmeccanica, USRT, and
InSpace, formed a joint venture to exploit the satellite slots. InSpace was to
receive forty percent of the project’s revenues, with Finmeccanica and USRT
splitting the rest.
After this three-way agreement was signed, USRT informed Finmeccanica
that until the two executed a new bilateral MOA, “all meetings with the
appropriate Russian parties [would] be indefinitely postponed.” 24 Capra reiterated
to Finmeccanica that without a new MOA, “the Moscow meetings planned for
May 11 to 16 might be jeopardized.”25 In response, the parties signed a new MOA
on May 12, 1998, providing in part that “any action towards third parties shall be
21 SX21. 22 SX33 ¶ 2. 23 Aksamentov 2007 Aff. ¶ 25. 24 SX35. 25 DX46. 8 previously agreed upon between the parties and neither [party] shall undertake any
action which could adversely affect the implementation of their joint business.”26
This MOA remained in effect until Finmeccanica eventually canceled it on
December 20, 1999.27
Throughout the summer and fall of 1998, Finmeccanica was unable to obtain
the financing required for the satellite project, and late that year, Capra and
Siniscalchi supposedly told USRT that the Italian government would only approve
the deal if USRT were entirely Italian-owned. On August 30, 1998, Siniscalchi
informed USRT that “there is going to be no deal . . . unless control of USRT is
also fully transferred.”28
Then, on September 13, Siniscalchi wrote to Aksamentov informing him
that “[e]ffective immediately . . . Capra and . . . Siniscalchi withdraw and cancel
any proposal to purchase 100% of USRT.”29 However, days later, Capra wrote to
USRT’s lawyer regarding the “[a]cquisition of 100% of the membership interests
in USRT.”30
26 DX27 ¶ 6. This MOA superseded all previous written agreements between the parties. It “set forth the principles of agreement between [Finmeccanica and USRT] for the [initial stage of the satellite project], in particular for what concerns the structure of the joint venture for its implementation . . . .” Id. ¶ 2. The parties agreed “to pursue jointly the [satellite project],” and to negotiate the terms of a final agreement in good faith. Id. ¶¶ 5-6. 27 DX79. 28 SX49. 29 SX50. 30 SX56. 9 At Capra’s request, Siniscalchi formed USRT Holdings in Delaware on
October 6, 1998, with Capra initially the company’s sole member. USRT
Holdings purchased all membership interests in USRT (the “Acquisition”) in
exchange for $300 million in revenue participation rights that would have been
valuable if USRT had been able to consummate the joint venture project. At
USRT, Capra became the chief executive officer, Siniscalchi the chief operating
officer, Jon L. Reed (“Reed”) the president, and Reid the chief financial officer.
The day after USRT Holdings’s formation in Delaware, Capra granted Reed and
Reid each the right, valid for five years, to demand five percent membership
interests in USRT Holdings.31 After the Acquisition, Siniscalchi sent both USRT’s
and USRT Holdings’s business records to Capra in Italy.32
Within days of the Acquisition, USRT’s lawyer sent Finmeccanica a letter
voicing a concern that an upcoming meeting between Finmeccanica and the
Russians that excluded USRT violated the May 12 MOA.33 Finmeccanica
dismissed USRT’s concerns and confirmed its intention to meet unilaterally with
the Russians.34 Within weeks, the law firm that had sent the letter to Finmeccanica
no longer represented USRT.
31 Reid exercised his right on June 2, 1999. Reed exercised his right as well, and at some point transferred his interest to Reid. 32 Siniscalchi Dep., Aug. 22, 2013 (Siniscalchi 2013 Dep.) 263-65. 33 SX9. 34 SX15. 10 On November 19, 1998, Finmeccanica applied for financing from the Italian
government for its three-way joint venture with USRT and InSpace. The
application did not mention that USRT was owned by Capra. Three months later,
the Italian Ministry of Industry, Commerce and Handicraft issued a written
response, noting that the project did not qualify for funding under the law that
Finmeccanica had invoked in its application. Further, the law that could have
provided financing was not yet enacted. However, the government viewed the
satellite project as a “significant program” and did not rule out the possibility that
funds would be available in the foreseeable future.35
Despite the failure to receive the desired financing, Finmeccanica continued
communicating with the Russians regarding the satellite business. On April 29,
1999, Italy adopted legislation that allowed for the funding of aerospace projects
including the satellite project.36 Within days, Reed wrote to Finmeccanica,
expressing USRT’s desire to “constructively . . . work with [Finmeccanica] in
preparing formal Joint Venture documents as well as planning technical meetings
with Russian counterparts . . . .”37 Finmeccanica was meanwhile meeting
unilaterally with the Russians and informing them, “The Italian Government has
adopted the law giving [Finmeccanica] the opportunity to cooperate with Russian
35 DX65. 36 DX5 (Reed Aff. Oct. 18, 2002) ¶ 11. 37 DX76. 11 companies on space projects and providing financial support for
[Finmeccanica].”38
In May 1999, Finmeccanica allegedly attempted to bribe Reid and Reed to
accept payments in return for Finmeccanica’s exploitation of USRT’s interests in
the satellite project. Neither Reid nor Reed accepted Finmeccanica’s offered
compensation and both told Siniscalchi that, now that Italian funding was
available, USRT should take a firm stand regarding its rights. Both Reid and Reed
were fired from their positions in August 1999.
On October 11, 1999, Reid sent Finmeccanica’s CEO a letter in which he
held himself out as “represent[ing] the Minority Interest in USRT Holdings, L.L.C.
the sole owner of [USRT]” and alleged that Finmeccanica was attempting to
“divest USRT of its satellite interests.”39 Then, on December 20, Finmeccanica
terminated the May 12 MOA. Approximately a week later, Siniscalchi wrote to
Reid: “Consequent to a letter from . . . and upon [Finmeccanica’s] request, I hereby
order you to cease and desist from representing yourself or taking actions and
being in any way whatsoever associated with [USRT].”40
Sometime late in 1999, a Russian company launched a satellite allegedly
financed by Finmeccanica. Reid contends that the Entity Defendants are carrying
38 SX20. 39 DX71. 40 SX27. 12 out USRT’s business plan without its participation, and that more satellites have
been or are planned to be launched. Reid alleges that USRT Holdings and USRT
are suffering irreparable injury as a result of the Entity Defendants’ actions.
C. Current Procedural Posture
The Entity Defendants first moved to dismiss the Complaint, based on the
statute of limitations and laches, as well as lack of personal jurisdiction, on
June 29, 2007. The Court’s dismissal of the action on the basis of the applicable
statute of limitations and laches41 was subsequently reversed by the Supreme
Court.42 Because the Court had dismissed the Complaint on alternate grounds, the
Court had not addressed the issue of personal jurisdiction.43
On remand, the Court refrained from deciding the personal jurisdiction
question until Plaintiff was afforded the opportunity to undertake jurisdictional
discovery in Delaware.44 While Plaintiff had previously taken jurisdictional
discovery in Texas, the Court recognized that the focus of discovery to establish
this Court’s jurisdiction over the Entity Defendants could be different. Since
41 Reid, 2008 WL 821535, at *12. 42 Reid v. Spazio, 970 A.2d 176, 178 (Del. 2009). 43 Reid, 2008 WL 821535, at *12 n.85. 44 Transaction ID 24798161 (Letter to Counsel, dated Apr. 21, 2009). 13 discovery, the Entity Defendants moved to dismiss the Complaint for lack of
personal jurisdiction and for lack of standing.45
II. PERSONAL JURISDICTION
A. Legal Standard for Motion to Dismiss for Lack of Personal Jurisdiction
When a defendant moves to dismiss under Court of Chancery Rule 12(b)(2),
the plaintiff must establish a basis for the Court’s exercise of personal
jurisdiction.46 The Court may consider “pleadings, affidavits, and any discovery of
record,”47 and “draw[s] reasonable inferences in favor of the plaintiff.”48 After
jurisdictional discovery, “plaintiff must allege specific facts supporting its
position.”49 A plaintiff must (i) identify a statutory basis for jurisdiction under
Delaware’s long-arm statute, 10 Del. C. § 3104(c), and (ii) demonstrate that
subjecting the defendant to jurisdiction would comport with the Due Process
Clause of the Fourteenth Amendment.50
Delaware’s long-arm statute provides jurisdiction over a defendant who “in
person or through an agent . . . [t]ransacts any business or performs any character 45 The Entity Defendants added lack of standing as a basis to dismiss the Complaint after obtaining evidence through discovery subsequent to the submission of their original motion to dismiss. 46 Hart Holding Co. Inc. v. Drexel Burnham Lambert Inc., 593 A.2d 535, 538-39 (Del. Ch. 1991). 47 Sprint Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *5 (Del. Ch. July 14, 2008). 48 Vichi v. Koninklijke Philips Elecs. N.V., 2009 WL 4345724, at *4 (Del. Ch. Dec. 1, 2009) (citing Sample v. Morgan, 935 A.2d 1046, 1056 (Del. Ch. 2007)). 49 Sprint Nextel Corp., 2008 WL 2737409, at *5 (citing Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, 2004 WL 415251, at *2 (Del. Ch. Mar. 4, 2004)). 50 Id. 14 of work or service in the State . . . [or c]auses tortious injury in the State by an act
or omission in this State.”51 According to the conspiracy theory of personal
jurisdiction, a conspirator’s co-conspirators are treated as his agents. Therefore,
“any act by a conspirator in furtherance of the conspiracy which takes place in the
jurisdiction is attributable to the other conspirators.”52 If one co-conspirator’s
actions in advancing the conspiracy subject him to long-arm jurisdiction, then all
other conspirators are also subject to personal jurisdiction.53
The conspiracy theory is thus not an independent jurisdictional basis, but a
way to impute a conspirator’s conduct to a co-conspirator not otherwise subject to
the Court’s jurisdiction.54 The Court employs a “narrowly and strictly construed”
five-part test to determine whether a conspiracy supports personal jurisdiction.55 A
plaintiff must present factual proof of each of five elements:
(1) a conspiracy to defraud existed; (2) the defendant was a member of that conspiracy; (3) a substantial act or substantial effect in furtherance of the conspiracy occurred in the forum state; (4) the defendant knew or had reason to know of the act in the forum state or that acts outside the forum state would have an effect in the forum state; and (5) the act in, or effect on, the forum state was a direct and foreseeable result of the conduct in furtherance of the conspiracy.56 51 10 Del. C. § 3104(c)(1), (c)(3). 52 Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 222 (Del. 1982). 53 Id. 54 Benihana of Tokyo, Inc. v. Benihana, Inc., 2005 WL 583828, at *6 n.16 (Del. Ch. Feb. 4, 2005). 55 Computer People, Inc. v. Best Int’l Gp., Inc., 1999 WL 288119, at *6 (Del. Ch. Apr. 27, 1999). 56 Carlton Invs. v. TLC Beatrice Int’l Hldgs., 1995 WL 694397, at *12 (Del. Ch. Nov. 21, 1995) (citing Istituto Bancario’s five-part test). 15 B. Reid’s Jurisdictional Argument
The act in Delaware on which Reid bases his argument for personal
jurisdiction is the formation of USRT Holdings.57 Siniscalchi is subject to the
long-arm statute due to his formation of USRT Holdings in Delaware as Capra’s
agent. Capra is also subject to long-arm jurisdiction under the theory that
Siniscalchi acted as his agent. In order to impute the Delaware act to the Entity
Defendants, Reid must present specific factual evidence supporting all five Istituto
Bancario factors. The Court “analyze[s] the elements of the five-part conspiracy
theory test using the deferential factual standard of a motion to dismiss, as limited
by the more exacting factual requirements of the conspiracy theory.”58
1. First and Second Istituto Bancario Factors
The first two Istituto Bancario factors require Reid to offer evidence that
Finmeccanica was a member of a conspiracy to defraud. While he lacks direct
proof of a conspiracy, “[c]onspiracy is a crime long recognized as dependent on
circumstantial evidence for proof that it occurred.”59 There is some tension
57 Reid also argues that 10 Del. C. § 3104(c)(3) subjects the Entity Defendants to personal jurisdiction because the injury to USRT was a substantial effect in Delaware by virtue of USRT’s status as a Delaware limited liability company. The Court need not, and thus does not, consider the merits of this contention. 58 Vichi, 2009 WL 4345724, at *6; see also id. at *6 n.42 (“The fact that [plaintiff] has had the benefit of jurisdictional discovery also requires me to use a more exacting factual standard.”). Not only has Reid taken jurisdictional discovery in Delaware, but he took discovery in the previous Texas actions as well. 59 Lemons v. State, 32 A.3d 358, 362 (Del. 2011). 16 between requiring Reid to allege specific facts to support jurisdiction and
recognizing that a plaintiff often cannot produce direct evidence of a conspiracy.
Reid must offer specific facts from which one can reasonably infer that a
conspiracy existed.
To prove the existence of a civil conspiracy, Reid must establish the
following elements: “(1) two or more persons; (2) an object to be accomplished;
(3) a meeting of the minds between or among such persons relating to the object or
a course of action; (4) one or more unlawful acts; and (5) damages as a proximate
result thereof.”60
(a) Two or More Persons
Reid’s allegation that Finmeccanica, Capra, and Siniscalchi participated in a
conspiracy satisfies the first element of a civil conspiracy. Whether or not Reid
has produced evidence of a meeting of the minds among these individuals is a
close question, discussed infra.
(b) Object to be Accomplished
Reid alleges that the conspiracy’s goal was for Finmeccanica to breach its
joint venture agreement with USRT and misappropriate value from the satellite
project. Presumably, Finmeccanica partnered with USRT in part to exploit its
60 Donald J. Wolfe, Jr. & Michael A. Pittenger (“Wolfe & Pittenger”), Corporate and Commercial Practice in the Delaware Court of Chancery, § 3.04[b], at 3-85 (2014) (citing Zirn v. VLI Corp., 1989 WL 79963, at *9 (Del. Ch. July 17, 1989)). 17 Russian contacts. Once introduced to the Russians, Finmeccanica was allegedly
incentivized to avoid its commitments to USRT.
(i) Finmeccanica’s Incentive to Breach its Agreements with USRT
The May 12, 1998, MOA between Finmeccanica and USRT was effective
until December 20, 1999. Finmeccanica argues that the MOA was not a final
agreement between the parties and did not impose heavy obligations. Since several
conditions precedent were never met, Finmeccanica claims that the MOA was
never binding, and therefore, there was no reason to conspire to breach the
agreement. However, the MOA provided that its terms were to be regulated by
final agreements that would be negotiated in good faith.61 The parties agreed “to
pursue jointly the [satellite project]” and agreed that “action towards third parties
shall be previously agreed upon between the parties and neither of them shall
undertake any action which could adversely affect the implementation of their joint
business.”62
The MOA supports a finding that USRT and Finmeccanica were joint
venturers with the concomitant duties of “utmost good faith, fairness and honesty
with respect to their relationship to each other and to the [satellite project].”63
61 DX27 ¶ 5. 62 Id. ¶ 6. 63 In re Arthur Treacher’s Fish & Chips of Ft. Lauderdale, Inc., 386 A.2d 1162, 1166 (Del. Ch. 1978). 18 Reid’s allegation that Finmeccanica breached those duties provides the legal
foundation for most of his claims. Until its termination, the MOA governed
various rights and obligations between the parties.
Presumably, Finmeccanica saw value in maintaining its relationship with
USRT; otherwise, it could have canceled the MOA well before it did. However,
Finmeccanica also had an incentive to proceed with the satellite project without
USRT. According to the three-way MOA with InSpace, Finmeccanica and USRT
were to split 60% of the joint venture’s profits. The satellite project was forecast
to earn hundreds of millions of dollars and Finmeccanica could have doubled its
profits by excluding USRT.
(ii) Finmeccanica’s Supposed Reluctance to Commit to USRT
In addition to establishing motive, Reid cites evidence of a pattern of
behavior suggesting that Finmeccanica was reluctant to partner formally with
USRT and frequently attempted to avoid its commitments. This behavior allegedly
supports the theory that Finmeccanica acted in pursuit of an illegitimate goal. At
times, Finmeccanica questioned why USRT was necessary to the satellite project
and expressed its desire to deal with the Russians directly. Further,
Finmeccanica’s signing of the MOAs often coincided with upcoming meetings
among it, USRT, and the Russians. Reid argues that Finmeccanica tried to back
off of its commitments after being introduced to the Russians and obtaining
19 USRT’s valuable information.64 One can infer that Finmeccanica signed the
MOAs to appease USRT and to access its Russian connections. Finmeccanica
dealt unilaterally with the Russians after the initial meetings with USRT. Capra
allegedly coached Finmeccanica on how to string USRT along while trying to
avoid effective commitments.65
Finmeccanica objects to the notion that it sought to avoid its obligations to
USRT and argues that Reid assigns nefarious meaning to innocent business
communications. Most sophisticated business entities would ask questions before
pursuing a deal the magnitude of the satellite project. Finmeccanica claims to have
actively pursued the joint venture project with USRT, both before and after the
Acquisition. Finmeccanica allegedly made its best efforts to obtain funding from
the Italian government. Its November 19, 1998, financing application, submitted
after the Acquisition, referenced USRT as its joint venture partner.66 USRT helped
prepare that application and Finmeccanica contends that this evidence shows its
continued commitment to the joint venture, contrary to Reid’s assertion that
Finmeccanica openly breached their agreement after the Acquisition. 64 See supra text accompanying n.15. Reid argues that Finmeccanica’s January 23, 1998, letter to USRT improperly suggested that although a joint venture was a goal, one had not yet been formed. Allegedly, the letter also added conditions to Finmeccanica’s commitments. 65 See, e.g., SX10. This letter from Capra to Finmeccanica, discussed supra text accompanying n.9, included Capra’s draft of a letter that Finmeccanica could use to prepare a letter to USRT whereby Finmeccanica confirmed its participation in the joint venture while “avoiding an effective commitment.” 66 DX63. 20 While Finmeccanica’s arguments are logical, they do not preclude accepting
Reid’s theory that Finmeccanica desired excluding USRT from the satellite project.
Finmeccanica could have believed it prudent to string USRT along, even after the
Acquisition. For example, including USRT on its financing application may have
improved its chances of securing funding, and once funding was obtained, USRT
could be excluded from the project. The Court cannot weigh the evidence at this
stage and must take permissible inferences in Reid’s favor.
(c) Meeting of the Minds
One can infer the existence of a close and ongoing relationship between
Capra and Finmeccanica. Capra was appointed by the Italian government to
represent its interests in the satellite project and Italy was financially invested in
Finmeccanica.67 He was familiar with Finmeccanica’s management before the
satellite project was ever considered. There is evidence that Capra frequently
communicated with Finmeccanica and advised it on how best to interact with
67 Finmeccanica argues that the fact that Capra held a position with Finmeccanica’s “parent,” does not serve as evidence of a conspiracy with a subsidiary or affiliate of the parent. See Hospitalists of Del., LLC v. Lutz, 2012 WL 3679219, at *11 (Del. Ch. Aug. 28, 2012). While a parent entity will not be found to “have conspired with and aided and abetted its subsidiary [by virtue of] merely presid[ing] atop the corporate structure while wrongdoing ensued,” a parent may be found to be a conspirator when a plaintiff “identif[ies] specific behavior from which a court can infer knowing participation or conspiratorial agreement.” Id. Reid does not allege that Italy, as Finmeccanica’s “parent,” was involved in the conspiracy. Further, he does not rely only on Capra’s position with the Italian government to prove that he conspired with Finmeccanica. Rather, Reid infers Capra’s participation in the conspiracy from his communications and actions. 21 USRT to achieve its goals.68 He was allegedly privy to Finmeccanica’s plans, as
evidenced by his warning against unilateral action shortly before Finmeccanica
met with the Russians without USRT. Capra also frequently forwarded
correspondence from USRT to Finmeccanica. One can infer that Capra ordered
Siniscalchi to form USRT Holdings and completed the Acquisition for the benefit
of Finmeccanica.
Finmeccanica argues that Reid’s characterization of Capra’s relationship
with Finmeccanica is misleading. Capra also often communicated with and
advised USRT. As Italy’s representative, not initially on either USRT’s or
Finmeccanica’s side, he served as an intermediary to facilitate a deal.
One might also conclude that Capra’s interests evolved to become closely
aligned with USRT’s as a result of the Acquisition. He could have earned millions
of dollars if USRT participated in the satellite project.
Finmeccanica’s arguments are legitimate; however, the Court cannot yet
weigh the evidence or decide between conflicting theories of Capra’s motivations.
There is evidence from which one can infer the existence of a close relationship
between Capra and Finmeccanica extending beyond Capra’s role as a liaison. One
can also conclude that Capra was sympathetic to Finmeccanica’s interests.
68 See, e.g., SX23 (Capra’s warning against “unilateral action”); SX10 (Capra’s draft of a letter to be sent to USRT “with a view to avoiding an effective commitment”); DX46 (Capra’s advice to Finmeccanica that a new MOA should be signed to avoid cancellation of upcoming meetings in Russia). 22 There is other evidence that potentially implicates Siniscalchi in the alleged
conspiracy. Siniscalchi frequently communicated with Capra, and due to his line
of work, Siniscalchi often curried favor with Italian officials. Siniscalchi and
Capra allegedly manipulated USRT’s members to transfer control of the
company.69 They also appear to have jointly prepared the proposal for the
Acquisition.70 Siniscalchi represented USRT Holdings in its purchase of USRT
and failed to protect USRT’s rights after the Acquisition. Siniscalchi formed
USRT Holdings on Capra’s behalf and sent USRT Holdings’s business records to
Capra in Italy.
Finmeccanica protests that Capra and Siniscalchi were never employees,
agents, consultants, or representatives of Finmeccanica. There is no evidence that
either was compensated by Finmeccanica; rather, their financial incentives were
apparently aligned with USRT’s. While Reid fails to establish that Capra or
Siniscalchi were compensated for their roles in the alleged conspiracy, he does
raise the possibility that Capra’s and Siniscalchi’s interests were aligned with
69 See, e.g., DX12 (letter from Siniscalchi to USRT mentioning that although USRT’s project was still alive, it was no longer a priority for Siniscalchi); DX17 (letter from Capra to USRT indicating that there had been some progress in the Italian Senate regarding financing). Reid cites these communications, among others, as evidence that Siniscalchi and Capra purposefully framed the satellite project’s status in ways that they hoped would lead USRT’s members to believe that selling their interests might be the final necessary step to obtain financing. 70 See SX50 (Siniscalchi’s letter to Aksamentov, discussed supra text accompanying n.29, withdrawing his and Capra’s proposal to purchase USRT’s equity). 23 Finmeccanica’s.71 Capra allegedly enjoyed a long-standing relationship with
Finmeccanica, and as a career-military man and Italian public servant, supposedly
possessed natural sympathies toward Italian industry. Siniscalchi, who was well-
connected with Italian officials, allegedly maintained a close and mutually
beneficial relationship with Capra. Therefore, both were potentially motivated o
act for Finmeccanica’s benefit.
Further, Finmeccanica’s alleged change in behavior following the
Acquisition supports a finding of a meeting of the minds among Capra, Siniscalchi,
and Finmeccanica. The idea for the Acquisition supposedly came from Capra’s
“side.”72 One might conclude that Capra’s “side” included Finmeccanica.
Allegedly, after the Acquisition, Finmeccanica stopped dragging its feet, obtained
funding, and pursued a satellite project with the Russians. Finmeccanica applied
for financing from the Italian government on November 19, 1998, despite having
been able to do so since May, when Finmeccanica, USRT, and InSpace signed
their three-way MOA. However, Finmeccanica did not apply until Capra
controlled USRT.
71 Finmeccanica notes that over the period of several years, Siniscalchi assisted USRT in its efforts to consummate the satellite project, at times providing advice contrary to Finmeccanica’s interests. He appears to have lobbied for USRT’s interests both before and after USRT Holdings’s formation. The Court agrees that the evidence for Siniscalchi’s involvement in a potential conspiracy is weak. However, as discussed, one can infer that Siniscalchi and Capra together orchestrated the Acquisition, which was vital to the conspiracy. 72 Siniscalchi 2013 Dep. 108. 24 After the Acquisition, Finmeccanica eventually pursued the satellite business
unilaterally with the Russians. Reid complained about USRT’s exclusion from the
satellite project, but apparently could not protect its rights since Capra controlled
USRT Holdings. Further, Finmeccanica allegedly became bolder by openly
meeting with the Russians unilaterally and allegedly causing the termination of
USRT’s lawyers for attempting to assert USRT’s rights. If one accepts Reid’s
contention that Finmeccanica’s behavior changed following the Acquisition, one
can infer that Finmeccanica recognized that event as important in allowing it to
disregard USRT’s rights. Capra’s control of USRT was apparently beneficial to
Finmeccanica’s interests and one can conclude that Capra completed the
Acquisition on its behalf.
(d) Unlawful Act
The formation of USRT Holdings was allegedly an integral step in the
conspiracy. USRT Holdings was needed to complete the Acquisition, which
supposedly rendered USRT incapable of enforcing its rights while keeping the
May 12 MOA in effect. As already discussed, Finmeccanica may have had
reasons to keep the MOA alive; however, Capra’s control of USRT apparently
assured Finmeccanica that it would not need to share the satellite project’s
revenues with USRT.
25 (e) Damages
USRT purportedly suffered damages due to its exclusion from the satellite
project. On October 9, 1999, Finmeccanica entered into a memorandum of
understanding with Gascom, a Russian company, through which Finmeccanica
agreed to finance the construction and launch of four replacement satellites.73
Such action may have breached Finmeccanica and USRT’s May 12 MOA, which
prohibited unilateral action towards third parties, but neither Capra nor Siniscalchi
protected USRT’s rights.
Reid alleges that the Italian government allocated over $700 million for the
satellite project in early 1999 and Finmeccanica ultimately received $2 billion by
2000.74 Finmeccanica counters that the Italian government never provided
sufficient financing for the satellite project.75 Finmeccanica also argues that USRT
never secured rights to the satellite slots identified in the MOA, which was a
condition precedent to that project. The Russian government transferred the
satellites slots to Gascom and, according to Finmeccanica, USRT could not have
secured the rights to those slots.
73 SX40. 74 SX4 ¶¶ 12-13. 75 See DX65 (February 17, 1999, letter from the Italian Government regarding Finmeccanica’s request for financing). 26 Finmeccanica also asserts that the scope of its participation in the project
with Gascom was very limited.76 Supposedly, Finmeccanica merely manufactured
and sold satellite parts to Gascom as a subcontractor, and the satellite project, as
contemplated by the MOA with USRT, never went forward.
The parties thus dispute the nature of Finmeccanica’s eventual projects with
the Russians. Now is not the time to decide that issue. However, Finmeccanica
and USRT were bound by a MOA obligating them to negotiate in good faith in
their joint pursuit of the satellite project. While the parties never reached a final
agreement, Finmeccanica was not at liberty to circumvent its commitments.
Although Reid has far from proved that Finmeccanica breached its agreements
with USRT and misappropriated revenues, he has presented facts from which one
could infer that Finmeccanica acted in its interests to exclude USRT from the
benefits of their joint venture.
2. The Final Three Istituto Bancario Factors
The third Istituto Bancario factor, requiring a substantial act or effect in
Delaware in furtherance of the conspiracy, is easily satisfied. The filing of a
corporate instrument in Delaware is an act occurring in the State.77 When done as
76 DX14 at 5 (“[T]he only obligation that [Finmeccanica] has to [Gascom] under their contract is to provide the parts of satellites . . . .”). 77 See Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027-28 (Del. 2012). 27 an integral part of a wrongful scheme, the formation of a Delaware entity confers
personal jurisdiction under the long-arm statute.78
There is evidence that the formation of USRT Holdings in Delaware was a
vital step in the alleged conspiracy. USRT Holdings was allegedly formed for the
sole purpose of acquiring all of the membership interests in USRT. Once USRT
was under Capra’s control, the conspirators prevented it from enforcing its rights,
allowing Finmeccanica to misappropriate the opportunity contemplated by the joint
venture.79
The fourth Istituto Bancario factor is satisfied because one can infer that
Finmeccanica knew or had reason to know of USRT Holdings’s formation in
Delaware. Reid need not offer direct evidence of Finmeccanica’s knowledge that
USRT Holdings was formed as a Delaware entity. Instead, Reid may offer facts
supporting that inference.80
As discussed supra, one can infer a close relationship between Capra and
Finmeccanica that involved keeping each other informed of their plans. Capra
supposedly ordered USRT Holdings’s formation on Finmeccanica’s behalf. The
78 Conn. Gen. Life. Ins. Co. v. Pinkas, 2011 WL 5222796, at *2 (Del. Ch. Oct. 28, 2011). 79 Siniscalchi, not Capra, was directly responsible for filing USRT Holdings’s Certificate of Formation in Delaware. As previously discussed, the record supports an inference that Siniscalchi was a conspirator. However, even if Siniscalchi were not a conspirator, his act would be imputed to Capra based on his formation of USRT Holdings as Capra’s agent. 80 Fläkt Woods, 56 A.3d at 1028. 28 idea for forming the new Delaware entity came from Capra’s “side,” which
allegedly included Finmeccanica. If a conspiracy unfolded in the manner in which
Reid alleges, Finmeccanica was likely aware of the basic structure of the entity
formed specifically to accomplish its conspiratorial goal. Finmeccanica had
formed Delaware subsidiaries in the past, and if Capra acted at its direction, it is
reasonable to believe that Finmeccanica would have instructed him to form USRT
Holdings in the State.
Further, the various MOAs between USRT and Finmeccanica referred to
USRT as a Delaware entity and even acknowledged that USRT might be
reorganized as a new Delaware entity, which eventually occurred with the
formation of USRT Holdings. Finmeccanica’s applications for financing also
described USRT as a Delaware entity. The facts support the inference that
Finmeccanica knew that USRT Holdings was formed in Delaware. At the very
least, Finmeccanica “should have known” of USRT Holdings’s Delaware nexus.81
81 Id. at 1029. Since USRT Holdings’s formation was allegedly essential to the conspiracy, Finmeccanica should have assured itself of the proper formation of USRT Holdings as a matter of “[s]imple prudence.” Finmeccanica argues that USRT’s members kept USRT Holdings a secret because the transfer of USRT’s equity violated the Foreign Corrupt Practices Act, 15 USC § 78dd-1 et seq. and would have been viewed by the Italian Government as a conflict of interest and self-dealing. According to Finmeccanica, USRT’s members believed that to obtain financing, it would be beneficial if USRT were owned by an Italian citizen. USRT’s members supposedly thought that Capra’s involvement with USRT would influence the Italian government’s decision to provide funding. Allegedly, USRT’s members kept USRT Holdings’s formation secret from Finmeccanica because of the illegal nature of their plan. This is a possible 29 Also, by October 1999, Finmeccanica was aware of the formation of USRT
Holdings and the transfer of interests in USRT. On October 11, Reid sent
Finmeccanica’s CEO a letter in which he described himself as “represent[ing] the
Minority Interest in USRT Holdings, L.L.C. the sole owner of [USRT]” and
alleged that Finmeccanica was attempting to “divest USRT of its satellite
interests.”82 Reid’s letter included a chart describing the ownership structures of
USRT and USRT Holdings. At this time, the alleged conspiracy was ongoing.
The October 11 letter does not reference USRT Holdings’s status as a
Delaware entity. However, Reid’s letter complains of the alleged divestiture of
USRT’s rights in the satellite project. Given the circumstances, “one would expect
someone at [Finmeccanica] to have inquired into the matter promptly in order to
avoid becoming embroiled in litigation.”83 Since the alleged conspiracy continued
beyond October 11, 1999, Finmeccanica’s knowledge, or the fact that it should
have had knowledge, as of that date satisfies Istituto Bancario’s fourth
requirement.84
explanation for why USRT Holdings was formed. Again, however, the Court must make reasonable inferences in Reid’s favor. 82 DX71. 83 Fläkt Woods, 56 A.3d at 1028-29. 84 See id. at 1029 (noting that a conspirator’s knowledge of a conspiratorial act in Delaware after it occurs, but while the conspiracy is ongoing, is sufficient to satisfy Istituto Bancario’s fourth factor). 30 Finally, the fifth Istituto Bancario factor is satisfied because the formation of
USRT Holdings was a direct and foreseeable result of the conduct in furtherance of
the conspiracy. The formation of USRT Holdings and transfer of USRT’s
membership interests were important steps in the alleged conspiracy to rob USRT
of its rights. Conduct constituting essential steps in achieving the conspiratorial
goal is clearly foreseeable since it was intended.
C. Due Process Analysis
Analytically, the Istituto Bancario test applies only to the Court’s due
process analysis.85 The conspiracy theory is not an independent theory of
jurisdiction and does not provide an alternative route, independent of the long-arm
statute, to secure personal jurisdiction over a defendant. Rather, the conspiracy
theory “works in concert with [the long-arm statute] to provide a statutory basis for
personal jurisdiction.”86 However, the Istituto Bancario factors ultimately test
whether jurisdiction withstands due process scrutiny.87
Because Reid provides facts to support all Istituto Bancario factors,
Finmeccanica is considered to have voluntarily participated in a conspiracy with
the knowledge that acts were taken in Delaware. Finmeccanica is deemed to “have
purposefully availed [itself] of conducting activities in [Delaware], thereby fairly
85 Wolfe & Pittenger, § 3.04[b], at 3-87 to 88. 86 Chandler v. Ciccoricco, 2003 WL 21040185, at *1 (Del. Ch. May 5, 2003). 87 Istituto Bancario, 449 A.2d at 225. 31 invoking the benefits and burdens of [Delaware’s] laws.”88 “[S]uch participation is
a substantial contact with [Delaware] of a nature and quality that it is reasonable
and fair to require [a defendant such as Finmeccanica] to come and defend an
action [here].”89 By satisfying Istituto Bancario’s five-part test, Reid has
demonstrated that subjecting the Entity Defendants to jurisdiction comports with
due process.
III. STANDING
The Entity Defendants argue that even if they are subject to personal
jurisdiction, Reid lacks standing to bring his derivative claims. In order to bring
derivative claims on behalf of a limited liability company, “the plaintiff must be a
member or an assignee of a limited liability company interest at the time of
bringing the action and: (1) At the time of the transaction of which the plaintiff
complains . . . .”90
Reid’s derivative claims are based on the alleged conspiracy that did not end
with the formation of USRT Holdings but continued until at least December 1999.
Reid became a member of USRT Holdings on June 2, 1999, by exercising his right
to demand a five percent membership interest from Capra. At this point, the
alleged conspiracy was ongoing. Reid and Reed were not fired from their
88 Id. 89 Id. 90 CML V, LLC v. Bax, 28 A.3d 1037, 1041 (Del. 2011). 32 positions at USRT Holdings, allegedly for attempting to protect USRT’s rights,
until August 1999. Also after Reid became a member, Siniscalchi and Capra
allegedly failed to protect USRT’s rights and Siniscalchi supposedly attempted to
silence Reid by ordering him to “cease and desist from . . . taking actions and being
in any way whatsoever associated with [USRT].”91
The “transaction of which the plaintiff complains” is the conspiracy to
deprive USRT of its rights. Since Reid was a member of USRT Holdings when
this “transaction” was ongoing and he remained a member as of the time he
brought his action, he has standing to sue on USRT Holdings’s behalf.
“A ‘double derivative’ action is a derivative action maintained by the
shareholders of a parent corporation or holding company on behalf of a subsidiary
company.”92 USRT Holdings has standing to sue on USRT’s behalf because it
became the sole owner of USRT in October 1998 and Finmeccanica supposedly
misappropriated USRT’s business opportunity after that date. Reid may bring a
derivative action on USRT’s behalf because USRT Holdings “has derivative rights
to the cause of action possessed by the subsidiary.”93 Allegedly, this is a situation
where a “subsidiary and its controller parent wrongfully refuse to enforce the
91 SX27. 92 Sternberg v. O’Neil, 550 A.2d 1105, 1107 n.1 (Del. 1988). 93 Sagarra Inversiones, S.L. v. Cementos Portland Valderrivas, S.A., 34 A.3d 1074, 1079 n.7 (Del. 2011). 33 subsidiary’s claim directly.”94 Reid has standing to sue derivatively on behalf of
both USRT Holdings and USRT.
IV. CONCLUSION
Reid alleges that Finmeccanica engineered a conspiracy to misappropriate a
valuable opportunity for itself. He has alleged facts from which the Court can infer
the existence of such a conspiracy. While Reid’s evidence is not especially strong,
the inferences that he makes are consistent with the record. At this stage in the
proceedings, the Court is required to draw all reasonable inferences in Reid’s
favor, even if other inferences appear more probable.
Because Reid has established a basis for personal jurisdiction over the Entity
Defendants and has standing to bring his derivative claims, Entity Defendants’
Motion to Dismiss is denied.
An implementing order will be entered.
94 Id. 34