Free Opening Brief in Support - District Court of Delaware - Delaware

Case 1:04-cv—O1268—***—MPT Document 41-3 Filed O3/O2/2005 Page1 of 4
EXHIBIT B

Case 1:04-cv—O1268—***—MPT Document 41-3 Filed O3/O2/2005 Page 2 of 4
\r‘t’%2st;irtvtt
Not Reported in F Supp 2d Page l
2003 WL 2l026787 (D Del)
(Cite as: 2003 WL 21026787 (l).Dcl.))
G stockholders, Joint Energy Developntent Investments
Il Limited Partnership ("J`E.DI ll"), and ECTME Tnrtta
Mssimls wplsmlinss and Filinsys Holdings LP ("Trutta"), both ot which are affiliates
of Enron Corporation ("Ertron'*) Collectively, lEDl
Only ms W€Sl13`v srlsijsn is ssnsmys, sVs0sb1s_ Ii and Trutta own 8192 90 shares, or atl of Venoco's
outstanding Series A preferred stock Id 1] 1] 5, 6
Venoco l1ad certain dividend obligations on the
Usirsd Sialcs Disulict Couiis preferred stock, which it tailed to rneet in full Id 1] 1]
D Dstswsss, l0—15 On June 30, 2002, Veuoco‘s Board ol`
VENOCO, lNC,a Delaware corporation, Plzrlntiit DlY9ClOl$ (HBUHYCW) Nm to ¤0¥l$l€l9l U5 Pmielllcd
v_ dividend obligations, and decided by vote to pay a
rpgmcmy M MARQUEZ’ Dsrsndsm cash dividend of $2,048,000 to the Enron @liates
Ns 02,4685 GMS Id 1] 15 Marquez voted against payment oi the
dividend and subsequently, after the dividend was
Mast 5, 2003 paid, rnade a demand regarding the dividend Pl 's
Cornpl 1] 16-t7 Marquez asserted that " ‘no Director
J1,[EA,{ORy]ND[h\J_s;tIVD ggpggq ol" Venoco in tire proper exercise of itisflier
reasonable business itrdgtirettt could have believed
SLEET’ J that the caslt dividend was in the best interest ol the
*_`— corporation" ' Id 1] E7 Additionally, Marquez
I ysqrppggrjgyrgyrr demanded that Venoco " 'take all steps necessary,
including, an action against the holders of the Series
rt] On Novcsnbcsl 19, 2002, Vcngccs rss A, to obtain the return ofthe cash dividend, including
(•·\;snsss¤), s Dsgswsss Cmpomrjsss Bled s but not limited to an action against those Directors
mmpgsim rss dssrssmms, I-slisf against qrgmmhy M who, rn breach ot their fiduciary duties to Venoco,
Marquez r*·Merqeee··i, e eaeeter eee eierretrettrer et anrrrtrsd the cash rlwrdcrid-" ‘frt it T7
Venoco, in the Court of Chancery of the State of
Dslswsms Nsw Cssss Ccunly gs Nsvsmbss 2G, OuNovernl;>er i4, 2002, the Board met and fornteda
M2lI~quCZ 3 Shpuahcldgl- dcrivaiixrg acliun Coluluiuga to consider MHI`qU€Z‘S Ckilllillld and rnalre id.
in the United States District Court for the Central l9€9l““"*99dilli0¤ l0 *}*9 lilllllc Bfiilill- fd li lg _Oll
District ol` California seeking, on behalf of Venoco, N9V9mb9T lg?. 2091 m‘~’95llt%%1ll¤tl 309 lllcillltltii
to recover damages caused by the payment of a cash the Comlmllw ll9€¤u9l¤¤$il’ d9l9Y`mlll9d mid
dr._,idsud_ On Dsssmbss 18, ZQQZI Mafqucz umsyy recommended that the full Board reject Marquefs
teereveerrre declaratory reiiereeueete this eee;-rl dsimmd The full V¤¤i¤¤¤ Braid met wid
subsequently reiected Marquez's demand Id 1] l8~
Presently before the court is it/larquez's motion to 29 Oil N°V‘·?mb9l lg, 2992, VWOFO Hisd 05
dismiss, or alternatively, to transfer this case to the COl“P}ilml lll thc CUUH Gt C·`hi¤lC9YY Qi lim Smit? Ul
Central District of Calilbrnia, or to stay this case D9iil“’*H9» N9“’ @1509 Cwlllli Sllfiillllts §1°€]tlYlll¤l)'
pending the outcome ol"' the derivative shareholder .lUdSlll€‘·¤l$ Ulm We B9iU€l°$ d€‘$l$*¤¤ Yclcclmtl Um
litigation (D l 4) For the reasons that follow, the dsriirrrid is Villld and PF0i°Cl9d W the 9**5*9955
cuurl gn}ntMarq;lcZ*S nsoiicnlc dismiss judgrnertt rule and that any Venoco shareholder be
precluded from pursuing a derivative claitn relating
H BA(j;(GROUND to the dividend Id 1] l On November 20, 2002,
Marquez tiled a sitarelioider derivative action on
Founded in IQQZ, Vcslgco is an 0;; and gas ssmpmsy, beliall`ot"'\/enoco in the Central District of California
incorporated in Delaware, with its principal place of OH Dcccllllwl lg, 2992, Mlllfllwz Y`€m0V€d the *190%
busincss in Califcitnia ’S Culnpl Mmqlsgzs :,1 CHpi.iDHCd CHSB [YOU] UK} CEHIHCCYY CUUH. 1.0 CDUH
ceteeree resident, is rr eteeitrreieer eee otreerer- or Ott January 72 2003, Mitrrrrrsz tiled ile rvressrit
vsssss sm; wss ms (gms; Executive Omsss (CEO) nrotion to dismiss, or alternatively, to stay or transl"er
of the company front 1992 until he was terminated in t1¤<==¤¤¤¤tii¤ the Csritrril Disuict ¤F June of 2002 Id. 1] 3 Venoco lias two preferred
© 2005 Tliornsort/West No Claim to Orig US Govt Works

Case 1:04-cv-01268-***-IVIPT Document 41 -3 Filed O3/O2/2005 Page 3 of 4
Not Reported in F Suppr2d Page 2
2003 Vv‘t, 21026787 (D Del.)
(Cite as: 2003 WL 21026787 (D.DeL))
ill STANDARD OF REVEEW services or things in Delaware; (3) causing tortious
injury in Delaware through an act committed in
*2 Marquez moves to dismiss pursuant to Federal Delaware; (4) causing tortious injury in Delaware
Rule of Civil Procedure l2§b) for lack of jurisdiction through an act cornrnitted outside Delaware if the
over the defendant. in determining the presence or person solicits business in Delaware, engages in
absence of personal jurisdiction, courts engage in a regniar conduct in Delaware or derives substantial
two step anaiysis First, the court rnust decide revenue from Delaware contacts; (5) having an
whether the 1ong—arnr statute ot` the state in which the interest in, rising, or possessing real property in
court sits authorizes jurisdiction Dunsportes Acres Delaware; or (6) contracting to act as a surety for a
de Angola v Renoir, Inc, 544 FSr1pp 864-65 contract or other such obligation located, executed, or
(D Del.i982) lf jurisdiction is proper per the long- to be performed within Delaware at the time the
arm statute, the court rnust then determine whether contract is made Id. § 3104tc)gl)—(6)
exercising _jurisdiction cornports with the
requirenrents of the Due Process Clause ot" the *3 The plaintiff urges that§ 3l04§c)t1) applies to
Fourteenth Amendment Ic' (noting, however, "intent the defendant. Venoco contends that Marquez has
of the legislature to exercise jurisdiction over non— transacted business in this state by his position as a
residents whenever ieasible"); Compaq Computer director and stocirltoider of Venoco, a Delaware
Corp. v. Packard Bell lilac., Inc., 948 F, Supp 338. corporation, and through his previous litigation in a
342 gQ.Del.1996)_ (citation omitted) To satisfy the Detaware state court |l~N1| Even when construed in
second prong of this analysis, the court inustlind the the light most favorable to Venoco, irowever, the
existence of Hfliiilitlitlltl contacts" between tire court cannot conclude that these acts constitute
defendant and the forum state, "such that the "transacting business" within the state
maintenance of the suit does not offend traditional
notions of fair play and substantial justice *' ' Sec Pl 's Ans Br at 10 (citing jfg;g_gg_g,
atanincrt<2aat..§tre·;...Qur .... ir..tl£ai;Zrttrstear...§.2Q.-LL.Sr...§.iQ, the ....
3_i_§____(_lQgt§) (citation omitted) Specifically, the Ql;,2_Q_Q,2))
plaintiff must show that the defendant "purposefully
avail [ed] itseif of the priviiege of conducting First, the ntere ownership of stoclr in a Deiaware
activities within the forunr State " Qtg;;ggg;_§t;;g_,Qg;3g, corporation does not constitute ’*transacting business"
.... ..... .... -025.51 (quoting in the State as vontsrnpiated by the was ann Statute
ttrrasrar...tzr-.t.2;arst:tn...t:51..ur§r...23.§r ....2 ..... t .1.52.83.)}; M Tire plaintiff has presented no Seneca f¤r this
afro titsatrri.t`n€<:tnt..Itzrtra:tz;r,.Qa..t:r..·$ttr2.eria:..Qe.ttt:t..s§.tt cvatentivnr and the court has Fanart nvne In any vase,
U.S. 102, 108419 (l987). Unless the contacts are it is well-established that ownership of stock is not
continuous and systematic, they rnust he reiatcd to suflicient to establish personal jurisdiction consistent
the plaintiffs cause of action. I:IcIrcogteros with due process Sec In rc Dr1tttrt'et‘C}zt‘j¢sIe:·‘AG
Nocionnles de Coltnnbtn, SA. v. Hoi}, 466 l.i.S. 408. Securities Litigation, 197 F.Supp.2d 86. 98
414-I5 (1984) ln detennining the jur·isdictionai §D.Del.2002)("[S]tocit ownership has notbeen found
question, the court must accept as true the allegations to be sufficient to support the exercise of personal
in the complaint. .4t'tech Industries, Inc. v. AI Tech jurisdiction") (citing Shoticrv. Heitner, 433 U.S. 186
Sgecinlrv Steel Corp., 542 F.Sugp. 53. 55 gt977)); see also HonoRr1nch,Inc. v. Lent, 424 A.2d
(D.Dei.1982) 28. 3i (Del. Ch.l980) ('ia valid cause of action
against a non~resident defendant for acts within the
IV DISCUSSION scope of a directorsltip was a sine qua non to a
successful assertion of a claim against such a non-
Because Marquez has challenged the propriety of resident in his capacity as stocirholder")
personal jurisdiction, it is Venoco's initiai burden to
deruonstrate that Marquez's activities {ati within the Neither is the mere holding of a directorsltip
arnbit ofthe long-arm statute Jcglrenr v. Exten, 784 sufficient to estabiish jurisdiction over Marquez via
F.Sup_rg. 146. 151 (Q.E)ei.l992) According to the the long—arrn statute See, eg, Pe.stot'tt‘c, Inc. v.
statute, a nonresident person or corporation is Cordrrm Corp. 449 A.2d 263, 267 (Dei.Super.1982)
deemed to submit to the jurisdiction of the Delaware ("tlte mere status as director of a Delaware
courts by connrritting zury one of several acts. corporation, standing alone, is not a signiticant basis
Del.Cocle Ann. tit. 10. § 3104tb) These acts are; (t) for the individual Defendants to reasonably anticipate
transacting any business or perforiniirg any character being hated into this Court"). Again, the plaintii?l' has
of work within the state; (2) contracting t.o suppiy cited no caseiaw, and the court has found none, to
© 2005 Thornson/West No Claim to Orig US Govt Works

Case 1:04-cv—O1268—***—MPT Document 41-3 Filed O3/O2/2005 Page 4 of 4
Not Reported in F Supp 2d Page 3
2003 WL 21026787 (D Del)
(Cite as: 2003 WL 21026787 (D.Del.))
suggest that the mere holding of a directorship Chancery Court (D I 7) and to expedite the
constitutes “transacting business" or "perforrnirrg proceedings (Di 15) are deemed moot
worlr" for purposes of the statute, Furthermore, as in
Hmm Roach, Venoco has not filed an action against V, CONCLUSION
Marquez for acts within the scope of his directorship,
but has tiled an action against Marquez as a conunon For the atorernentiorted reasons,
shareholder
iT IS lȤREBY ORDERED that:
Finally, Marquez's involvement in prior litigation in l The defendants Motion to Dismiss Action for
Delaware is not sufficient to bring hint within the Lack of Personal Jurisdiction; Disntiss or Stay
arnbit ofthe long-ann statute See, eg, Hory'orrlCa..r Action in Favor of Parallel Action; or Transfer
firs Co v Perrolon Mgmt, Inc, 1995 U S Dist Venue of Action to California (Di 4) is
LEXIS 22086 (D Del l995) (defendants participation GRANTED;
as third»party defendant in a previous suit in 2. This action is DISMISSED WITHOUT
Delaware not sufficient to confer personal PREJUDICE for lack of personal jurisdiction over
jurisdiction over it via iong·ar1n statute). The the defendant;
previous litigation in Delaware was initiated by 3 The plainttiffs Motion to Renrand to the Court of
Veuoco Marquez, though stating he had a personal Chancery of the State of Delaware (Dl.7) is
interest in remaining CEO of the company, testilied DENED as moot;
as a witness only in his capacity as a director and 4 The plaintiffs Motion to Expedite Proceedings
CEO of Venoco The court declines to hold that (D I I5) is DENIED as moot;
testifying as a witness in an official capacity 5 The Cleric of the Court is directed to close the
constitutes transacting business or pertorruing work case
in the state sufficient to confer personal jurisdiction
pursuant to the long-arni statute
Motions, Plcatlings and Filings (Qual: to top)
*4 Venoco has offered no other grounds for Ending
that Marquez falls within the anibit of the long—arnr _l_;Q_2Q_§[Q_lQ§§__________,_______________,_________(Docket)
statute, and it appears that no other such basis exists (Dec IS, 2002)
lt appears the defendant has no other contact with
Delaware beyond those alleged connections already END OF DOCUMENT
discussed He has no office or property in Delaware,
conducts no business in the state, and is not
registered to do business in Delaware There is no
suggestion that the defendant has committed any
tortious act in Delaware, or otherwise caused any
injury in the state ln short, there is no asserted
connection to Delaware as required by § 3104 As
such, the long·ar·1n statute does not authorize the
exercise ofijurisdiction over Marquez.
Because the court has found that personal
jurisdiction over Marquez is not authorized hy the
Delaware long—ann statute, it need not address the
constitutional dirnension oi the _jurisdictional
question See, eg, Irrre! Corp. v. Silicon Storage
Tech., 20 F.Supp.2d 690. 699 {Q,Del.l998) (*'[T}lre
Delaware long-ann statute [does not] authorize this
court to exercise jurisdiction over {the defendant].
`f`herefore, the court need not analyze whether
exercising such jurisdiction would cornport with the
Due Process Clause ") in addition, the court need not
address Marquerds motion to disruiss on other
grounds, or his motion to transfer or stay the case
Finally, the piaintiH”s rnotions to remand to the
© 2005 `fltonrson/West No Claim to Orig U S Govt Works