Case of the Day: Germaninvestments AG v. Allomet Corp.

The case of the day is Germaninvestments AG v. Allomet Corp. (Del. Ch. 2019). Allomet is a Delaware corporation in the business of manufacturing metal powders for coating industrial products. Fobio Enterprises, Ltd., a Hong Kong company, owned the majority of Allomet’s shares. In 2016, it became the sole owner by purchasing shares from the Estate of Richard Toth. Fobio’s beneficial owner was Hannjörg Hereth, a Swiss national.

Allomet was facing financial difficulties. In 2017, it had a debt of more than $40 million to Fobio and more than $20 million in net operating loss carryforwards. Hereth met with Richard Herrling, a German national residing in Switzerland, about the possibility of forming a joint venture to raise capital for Allomet. (Germaninvestments, one of the plaintiffs, was a Swiss company that managed the assets of Herrling and his family). The plan was to create an Austrian holding company that would own Allomet’s IP and also own the outstanding stock of Allomet and Yanchep LLC, a Delaware company owned by a relative of Hereth whose sole asset was the real property Allomet leased for its headquarters. There was discussion about whether Fobio would assign its claims against Allomet to the joint venture. During the negotiations, Herrling loaned Allomet $850,000 to keep it afloat. The parties entered into an agreement that provided for funding for Allomet while the parties worked out the joint venture. It provided that it was governed by Austrian law and that the “place of jurisdiction” was Vienna. The agreement provided that Herrling would own a 50% stake in the holding company that would own the shares of Allomet. Later, the parties organized the Austrian holding company, AHMR. They continued to negotiate the terms of the joint venture. But the negotiations broke down, and Herrling walked away from the deal. The question was whether Herrling had made loans to Allomet (Hereth’s preferred outcome), or whether he had made an equity investment (Herrling’s preferred view).

Herrling brought an action to compel Allomet to reissue its stock certificates in AHMR’s name under § 168 of the Delaware General Corporations Law. Hereth moved to dismiss, on the grounds that the case should be heard in Vienna per the parties’ agreement. Herrling denied that the agreement was a forum selection agreement and asserted that in an case it was unenforceable with respect to his Delaware law claims. (more…)

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Case to Watch: Animal Science Products v. Hebei Welcome Pharmaceutical Co.

Readers, keep your eyes on Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co., a case that the Supreme Court has just agreed to hear. Here is SCOTUSBlog’s description of the case:

The case arose when U.S. companies that purchase Vitamin C from … Chinese companies filed lawsuits against a group of Chinese companies, alleging that the Chinese companies had violated U.S. antitrust laws by conspiring, through a group known as the China Chamber of Commerce, to fix the prices and quantities of Vitamin C. The Chinese companies asked the U.S. court to throw the cases out. They acknowledged that they had fixed prices and quantities of Vitamin C, but argued that they were required to do so under Chinese law—an assertion confirmed in a “friend of the court” brief filed by the Chinese government.
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Case of the Day: Fu v. Fu

A hat tip to Sophia Tang for her pointer to today’s very interesting case of the day, Fu v. Fu (Ill. App. Ct. 2017). The United States grants so-called EB-5 visas to “qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise … in which such alien has invested … capital” of at least $500,000. 8 U.S.C. § 1153(b)(5). In 2012, Pengbo Fu, a Chinese national who lived in China, entered into a “gift agreement,” drafted in Chinese and governed by Chinese law, in which he agreed to “make a free and unconditional gift” of nearly $600,000 to his son, Yongxiao Fu, so that the younger Fu could invest the money so as to qualify for a visa. The son first invested $500,000 in a hotel and conference center project in Chicago. In 2013, the SEC determined that the project had been a fraud, and Fu recovered his money. Fu then invested the $500,000 in Lake 1 LLC, which was to build a garment manufacturing and retain facility in Melrose Park, Illinois. But in 2016, the US government denied EB-5 approval for the project, but the funds remained in an escrow account for the project. Later in 2016, Fu agreed to invest $500,000 in a New York apartment complex. But by then his father had demanded his “gift” back, and so the escrow agent refused to release the funds.

The father then brought an action to revoke the “gift agreement” in a court in Shanghai, and a second action in Chicago. He argued that Chinese law governed the gift agreement and that a gift may be revocable under Chinese law. He suggested that the son had failed in his duty under Chinese law to support his father. The court dismissed the claim with prejudice, and the father appealed.
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Read more about the article Kuwait Airways Case: German Court Allows Airline To Refuse To Sell Ticket To Israeli
Credit: John Taggart (CC BY-SA)

Kuwait Airways Case: German Court Allows Airline To Refuse To Sell Ticket To Israeli

You may recall the Kuwait Airways case, which I’ve written about several times: the airline refused to sell a ticket to an Israeli traveler flying from New York to London on the grounds that Kuwaiti law prohibited the carrier from doing business with Israelis. After some hemming and hawing, the Department of Transportation finally took the view that this was unreasonable discrimination, and thus forbidden by 49 U.S.C. § 41310(a), even though the DOT, curiously, did not assert a violation of 49 U.S.C. § 40127(a), which bars discrimination on the basis of “race, color, national origin, religion, sex, or ancestry.” The airline sought review, but the case was rendered moot when the airline shamefully decided to drop service between New York and London rather than face having to do business with Israeli travelers.

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Kuwait Airways Petitions DC Circuit For Review

In my last post on the Kuwait Airways case, I noted that I hadn’t been able to find the airline’s “countersuit” against the Department of Transportation. “Countersuit” is, of course, the wrong word, but in fact the airline has petitioned the DC Circuit to review the DOT’s administrative decision. Eldad Gatt, the Israeli national who was refused service by the airline, has moved for leave to intervene.
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Kuwait Airways Shamefully Drops New York-London Route To Avoid Serving Israelis

Back in October, I reported that Kuwait Airways, which operates flights between New York and London, was refusing to sell tickets to customers with Israeli passports, citing Kuwaiti law, which forbids doing business with Israelis. After first ignoring the complaint of an Israeli traveler, Eldad Gatt, the Department of Transportation eventually did the right thing, determining that the airline’s policy violated US law, which prohibits unreasonable discrimination. Since then, the airline petitioned for review, but the Department rejected its petition and instructed the airline to cease and desist from further violations of the law.
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A Comparative Look At The New Hague Principles on Choice of Law & the Restatement (Second) of Conflict of Laws: Last Post

This is the third and last in a series of posts comparing the new Hague Principles on Choice of Law in International Commercial Contracts and the Restatement (Second) of Conflict of Laws. Before digging in, I want to give you the analysis of the two texts by my co-author, Jonathan Levin. His lengthy and detailed table was the genesis of the whole project, so I recommend it to you.
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Case of the Day: Malleiro v. Mori

The case of the day is Malleiro v. Mori (Fla. Dist. Ct. App. 2015). Eleno Isleno was an Argentine national who died in Florida at the age of 79. She held property in both Argentina and the United States at the time of her death. About five years before her death, she made a will in New York that everyone agreed satisfied the necessary formalities for a will under Florida law. The devisees under the New York will were her nieces, other relatives, and friends. A few months later, she made a will in Argentina. As you would expect, the formalities of making a will are quite different in a common law jurisdiction than they are in a civil law jurisdiction. In New York, she signed the will in the presence of attesting witnesses. In Argentina, Iselno orally expressed her testamentary wishes to a notary, in the presence of witnesses, who wrote them in a document and read them to her. She then orally approved the document in the presence of witnesses, and the notary signed and stamped the document. Iselno, however, did not sign. The Argentine will, which was admitted to probate in Argentina, purported to revoke all prior wills. The beneficiaries were Iselno’s nephew and other relatives and friends. None of the devisees under the Argentine will were devisees under the New York will, and vice versa.

The devisees under the New York will and the devisees under the Argentine will filed competing petitions in the Florida probate court. The court admitted the Argentine will to probate, and the New York devisees appealed.
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Case of the Day: In re Kuwait Airways Co.

The case of the day is the Department of Transportation’s investigation of Kuwait Airways Company. The DOT undertook the investigation at the request of Eldad Gatt, an Israeli national who was seeking to travel from New York to London by air. Kuwait Airways (which according to Gatt was offering the lowest fare on the day he tried to travel) refused to sell him a ticket because he was traveling on an Israeli passport. Gatt asserted that the airline discriminated against him on the basis of national origin, in violation of 49 U.S.C. § 40127(a), which provides:

An air carrier or foreign air carrier may not subject a person in air transportation to discrimination on the basis of race, color, national origin, religion, sex, or ancestry.

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A Comparative Look At The New Hague Principles on Choice of Law & the Restatement (Second) of Conflict of Laws: Second Post

Today I bring you the second post in our series comparing the new Hague Principles on Choice of Law and the Restatement (Second) of Conflict of Laws. I say “I,” but I mean “we.” Jonathan Levin, who interned this summer at the Permanent Bureau of the Hague Conference, is a co-author of these posts.
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