Title: Warburg, Pincus Ventures, L.P. v. Schrapper

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE
WARBURG, PINCUS VENTURES, L.P.,
§
§
No. 198, 2000
Defendant Below,
§
Appellant,
§
Court Below:  Superior Court
§
of the State of Delaware in and
v.
§
New Castle County
§
DIETRICH K.H. SCHRAPPER, M.D.,
§
C.A. No. 99C-06-028
§
Plaintiff Below,
§
Appellee.
§
Submitted:
April 17, 2001
Decided:
May  31, 2001
Before VEASEY, Chief Justice, WALSH, HOLLAND, BERGER and
STEELE, constituting the Court en Banc.
Upon appeal from Superior Court.  AFFIRMED.
Martin P. Tully, Esquire, and Bradley James Enna, Esquire, of Morris,
Nichols, Arsht & Tunnell, Wilmington, Delaware; Of Counsel: Roger Netzer,
Esquire (argued), of Willkie Farr & Gallagher, New York, New York, for
Appellant.
Edward M. McNally, Esquire, of Morris, James, Hitchens & Williams,
LLP, Wilmington, Delaware, for Appellee.
VEASEY, Chief Justice:
We accepted this appeal to review an interlocutory order of the Superior
Court denying a motion to dismiss on the ground of forum non conveniens.
Because the Superior Court applied the correct legal standard and did not abuse
its discretion in determining that the appellant has not satisfied the overwhelming
hardship standard, we affirm.
Facts
Dr. Dietrich K.H. Schrapper, a German citizen, filed a complaint in
Superior Court against Warburg, Pincus Ventures L.P. (“Warburg”) on June 25,
1999.  Warburg is a Delaware limited partnership.  The complaint concerns
negotiations, and an alleged contract, between Warburg’s wholly owned U.K.
subsidiary, E.M. Warburg, Pincus & Co. International Limited, and Schrapper
relating to a joint venture they were to form to invest in the German healthcare
industry.
According to the complaint, the parties executed a term sheet dated
December 2, 1996 that committed Warburg to supply financing for the
acquisition of German healthcare facilities, subject to the fulfillment of certain
conditions contained in the term sheet.  Schrapper alleges that these conditions
were fulfilled, as were several additional conditions Warburg placed on the deal
in the following months, such as requiring Schrapper to terminate employment
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relationships with various healthcare facilities.  According to Schrapper,
Warburg continued to delay closing the deal for pretextual reasons while
Schrapper pressed to close.  On April 3, 1997, Warburg informed Schrapper’s
attorneys that it did not intend to form the partnership contemplated in the term
sheet.
Schrapper’s complaint seeks recovery under theories of breach of contract,
“tortious breach of contract,” “breach of the covenant of good faith and fair
dealing,” “quantum meruit,” “tortious interference with existing business
relationships,” “tortious interference with prospective economic advantage,”
“promissory estoppel,” and “fraudulent inducement and misrepresentation.”
Schrapper alleges, in essence, that Warburg intentionally led Schrapper along,
using confidential and proprietary information Schrapper supplied to form
another venture without him.  His complaint seeks damages “of at least DM
261,816,500” based on lost compensation, termination of business relationships
in reliance on Warburg’s alleged promises, and various other costs and damages.
All of the activities that are the basis of Schrapper’s complaint occurred
outside of the United States.  The negotiations between the parties and their
attorneys took place in Germany and England, which is also where all of the
witnesses reside and where all of the evidence is located.  Similarly, Schrapper’s
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alleged damages involve interference with his relationships with various German
entities.  On September 9, 1999, Warburg filed a motion to dismiss on the
ground of forum non conveniens.  In support of dismissal, Warburg argues in its
motion that the only connection this case has to Delaware is Warburg’s status as
a Delaware limited partnership, that the witnesses and evidence are all in
Germany and England, and that either German law or possibly English law
would apply to this action.  The Superior Court denied Warburg’s motion on the
ground that Warburg had not established with particularity that it would face
overwhelming hardship if required to litigate in Delaware.1  We affirm the order
of the Superior Court denying the motion to dismiss.
Warburg Must Demonstrate Overwhelming Hardship
Our jurisprudence is clear that a complaint will not be dismissed on the
ground of forum non conveniens without a showing of overwhelming hardship.2
While this standard is not “preclusive,” it requires a defendant to show that the
case is “one of the rare cases where the drastic relief of dismissal is warranted
based on a strong showing that the burden of litigating in this forum is so severe
                                   
1 See Schrapper v. Warburg Pincus Ventures, L.P, Del. Super., C.A. No. 99C-06-268 (March 30, 2000) (Letter
Op.).
2 See Ison v. DuPont de Nemours, Del. Supr., 729 A.2d 832, 838 (1999).
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as to result in manifest hardship to the defendant.”3  It is well established that
Delaware courts assess hardship to the defendant using the following six “Cryo-
Maid” factors:
(1) the relative ease of access to proof;
(2) the availability of compulsory process for witnesses;
(3) the possibility of the view of the premises;
(4) whether the controversy is dependent upon application of
Delaware law which the courts of this State more properly
should decide than those of another jurisdiction;
(5) the pendency or nonpendency of a similar action or actions in
another jurisdiction; and
(6) all other practical problems that would make trial of the case
easy, expeditious, and inexpensive.4
In this case, the Superior Court properly focused on whether Warburg has
made a showing of overwhelming hardship under the Cryo-Maid factors.
Warburg argues that the Superior Court applied an incorrect legal standard.  It
argues that in a case in which the plaintiff is not a Delaware citizen and the
defendant’s “only connection” to Delaware is its status as a Delaware business
entity (in this case, a limited partnership), the overwhelming hardship standard
                                   
3 Id. at 842.  See also Taylor v. LSI Logic Corp., Del. Supr., 689 A.2d 1196, 1197 (1997) (holding that dismissal is
not warranted where defendant “has not established with particularity on this record that it would be subjected to
overwhelming hardship and inconvenience if required to litigate in Delaware”).
4 Ison, 729 A.2d at 837-38 (citing General Foods Corp. v. Cryo-Maid, Inc., Del. Supr., 198 A.2d 681, 684
(1964)).
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does not apply.5  We conclude that Delaware forum non conveniens law does not
support this argument.
Warburg’s argument relies principally on language in Ison.  In Ison, the
DuPont Company, a Delaware corporation with its principal place of business in
Delaware, was sued in Delaware by plaintiffs from New Zealand, England,
Wales, and Scotland.6  We reversed the decision of the trial court granting the
defendant’s motion to dismiss on the ground of forum non conveniens.  Although
we held that Delaware was a proper forum, we stated that the presumption of
deference generally accorded a plaintiff’s choice of forum “is not as strong” in
the case of a foreign plaintiff.7  In addition, because the dispute in Ison involved
witnesses and evidence in part located in Delaware, we observed that it was “not
a case of weighing the foreign plaintiffs’ choice of forum (whether it be ‘forum
shopping’ or not) against a defendant whose only connection is that it is
incorporated in Delaware.”8
                                   
5 Alternatively, Warburg maintains that it has shown overwhelming hardship under the Cryo-Maid factors.  We
address this argument below.
6 Ison, 729 A.2d at 835.
7 See id. (“The fact that the plaintiffs are foreign nationals does not deprive them of the presumption that their choice
of forum should be respected.  Although that presumption is not as strong… we need not rest our decision on that
issue because of the defendant’s weak showing of hardship.”); see also id. at 839 (citing Piper Aircraft v. Reyno,
454 U.S. 235 (1981)).
8 Id. at 842-43.
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Based on this language, Warburg argues that while it has to show hardship
it does not have to meet the overwhelming hardship standard, which is generally
met only in the rare case.  The cases relied on by Warburg do not support a
modification of the traditional showing a defendant must make in order to prevail
on a motion to dismiss on the ground of forum non conveniens.  On the contrary,
in both Ison and Taylor, each of which involved foreign plaintiffs, this Court
found that the motion to dismiss on the ground of forum non conveniens should
not have been granted by the trial court because the defendant had not shown
overwhelming hardship.9
The application of the overwhelming hardship standard in Taylor is
especially pertinent because in that case, as here, the plaintiffs were foreign and
the only connection to the Delaware forum was the domiciliary status of the
business entity.10  The forum non-conveniens analysis is fact-sensitive, given “the
discretionary nature of the doctrine, combined with the multifariousness of the
                                   
9 See id. at 835 (reversing the trial court and noting that it did not apply “the central criterion of Delaware Supreme
Court jurisprudence:  that the defendant must show overwhelming hardship if the case is to be dismissed.”); Taylor,
689 A.2d at 1199 (holding that defendants “must establish with particularity that they will be subjected to
overwhelming hardship and inconvenience if required to litigate in Delaware”).
10 See Taylor, 689 A.2d at 1198 (summarizing facts showing that the case had no connection to Delaware other
than defendant’s incorporation in Delaware).
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factors relevant to its application.”11  Under our case law, however, “[t]he issue
is whether any or all of the Cryo-Maid factors establish that defendant will suffer
overwhelming hardship and inconvenience if forced to litigate in Delaware.”12
We reject Warburg’s argument that some lesser hardship standard applies to this
case.
Application of Overwhelming Hardship Standard to this Case
Having concluded that the Superior Court properly required Warburg to
show overwhelming hardship through the factors set forth in Cryo-Maid, we now
review its finding that Warburg has failed to sustain its burden.  A motion to stay
or dismiss on the ground of forum non conveniens is addressed to the sound
discretion of the trial court.13  “[T]his Court must determine whether the findings
and conclusions of the Superior Court are supported by the record and are the
product of an orderly and logical deductive process.”14
                                   
11 See American Dredging Co. v. Miller, 510 U.S. 443, 455 (1994). Thus, the fact that a plaintiff is not a Delaware
resident may be relevant in a number of ways.  For example, a foreign plaintiff may suffer less cost and prejudice
from dismissal of the Delaware action than would a Delaware plaintiff who would have to refile in a jurisdiction
foreign to him.  See Ison, 729 A.2d at 845.
12 Chrysler First Business Credit Corp. v. 1500 Locust Limited Partnership, Del. Supr., 669 A.2d 104, 108
(1995).
13 See Williams Gas Supply Co. v. Apache Corp., Del. Supr., 594 A.2d 34, 37 (1991).
14 Id. (citing Levitt v. Bouvier, Del. Supr., 287 A.2d 672, 673 (1972)).
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Warburg’s central claim of hardship involves ease of access to proof and
availability of compulsory process for procuring the testimony of witnesses.
Regarding compulsory process for witnesses, it is not disputed that the German
witnesses are beyond the compulsory process of the Delaware courts.  Warburg
argues that the inability to compel live testimony from third-party German
witnesses prevents effective testing of Schrapper’s claims based on breach of
contract and interference with third-party business relationships.
The trial court held, correctly in our view, that this argument does not
support a claim of hardship.  Warburg’s motion to dismiss does not specify any
of the witnesses that are alleged to be beyond its reach and whose absence would
adversely affect Warburg’s defense.  In oral argument before the trial court and
in its submission to this Court, Warburg has referred to two unnamed non-party
witnesses, a “broker” and a “healthcare consultant,” that may not be available to
testify in Delaware.  Warburg explains the relevance of their testimony with the
vague averments that the broker “introduced [Dr. Schrapper] to Warburg” and
the consultant “assisted in the negotiations.”15
                                   
15  Compare Martin v. Vogler, N.D. Ill., 1993 WL 462853, at *3, Aspen, J. (Nov. 9, 1993) (dismissing action arising
from car accident in favor of German forum, citing the risk of losing “key liability witnesses” including “Oliver
Wieselhuber (the driver of the car…), Dr. Lorenz (the emergency room doctor…), Mr. Thielcke (a police vehicle
expert…), and Officer Willer (the Ansbach police officer who prepared the accident report)”) (emphasis added).
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We agree with the trial court that the record fails to support the contention
that the potential absence of these witnesses is sufficient to establish hardship.16
As the trial court recognized, Warburg can obtain live testimony from witnesses
under its control who were actual parties to the negotiations.17  The difference to
Warburg in travel time and expense involved in flying witnesses from England to
Germany or Delaware, or from Germany to Delaware, cannot be deemed an
overwhelming hardship to Warburg.18
Warburg is especially concerned that it will be deprived of live testimony
that it needs to “rebut plaintiff’s theory of damages” based on Warburg’s alleged
interference with Schrapper’s existing and prospective business relationships.
Warburg’s concern is simply that the jury will hear self-serving testimony from
Schrapper (and possibly others friendly to Schrapper) but will not have the
opportunity to hear from witnesses who would tend to refute Schrapper’s claims.
Initially, Schrapper may have the advantage of calling witnesses favorable
to his position and taking the stand himself.  Without compulsory process,
                                   
16 See State Marine Lines v. Domingo, Del. Supr., 269 A.2d 223, 226 (1970) (“The defendant may not prevail on this
ground because it failed to particularize sufficiently the hardship it claims in this connection.  It did not name the
witnesses it deemed necessary to call; or demonstrate their number; or show their relationship to this case; or explain
why their testimony could not be presented in Delaware by deposition.”).
17 See Ison, 729 A.2d at 843 (“DuPont, as a party to the action, must make its current employees available for
testimony….”).  Warburg has not claimed any difficulties in this regard.
18 Compare Martin, 1993 WL 462853, at *3 (citing cost as a factor in case in which parties were United States
servicemen involved in car accident in Germany).
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Warburg may have some difficulty presenting rebuttal testimony.  Ultimately,
however, it is Schrapper who must prove damages, not Warburg.  We are not
persuaded that Warburg, in concert with its U.K. subsidiary, will be unable to
counter Schrapper’s anticipated litigation strategy, perhaps with German
witnesses of its own.  Certainly, Warburg has not demonstrated overwhelming
hardship in this connection.
Turning to the related factor of relative ease of access to proof, the parties
differ on the scope and efficacy of Hague Convention procedures for accessing
evidence in Germany.19  Warburg agrees, however, that the Hague Convention
ostensibly permits a limited form of deposition.  Warburg has also argued that it
would be “difficult if not impossible” to obtain discovery of documents that are
located in Germany, although its arguments at various phases of this litigation
have placed more emphasis on the difficulty than the impossibility.  Based on the
authorities cited by the parties, it appears that Warburg could, as it argues,
“conceivably have no pretrial discovery” if the case is litigated in Delaware, but
will be able to obtain at least some evidence from Schrapper for the purposes of
                                   
19 See Hague Convention on Taking of Evidence Abroad in Civil and Commercial Matters, March 18, 1970, 23
U.S.T. 2555, 28 U.S.C. § 1781.  This Court has recognized that Hague Convention procedures for accessing
evidence place added burdens on parties.  See Ison, 729 A.2d at 843 (“[T]hese circuitous routes to accessing
evidence are somewhat cumbersome….”).
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trial.20  To the extent that the issues in this case involve business dealings
between the parties, nothing in the record suggests that Warburg lacks much of
the documentary evidence.  We agree with the trial court’s conclusion that
Warburg has not demonstrated with particularity that true hardship would result
if it is forced to resort to Hague Convention procedures to obtain discovery. 21
The next Cryo-Maid factor relevant to this case22 is “whether the
controversy is dependent upon application of Delaware law which the courts of
this State more properly should decide than those of another jurisdiction.”23  It
appears that foreign law governs this dispute, although the choice of law
determination has not been made by the trial court at this stage of the
proceedings.24  The choice of law factor, while relevant to establishing hardship
and inconvenience, primarily focuses on “Delaware’s interest in the litigation,” a
                                   
20 See Anglo American Ins. Group. v. Calfed, Inc., S.D.N.Y., 940 F.Supp. 554, 565 n.15 (1996) (noting that Hague
Convention reservations with respect to pretrial discovery do “not affect depositions or interrogatories or the
examination of documents for purposes other than pretrial discovery (i.e., for production as evidence at trial)”); cf.
General Motors v. Lopez, E.D.Mich., 948 F.Supp. 656, 667-68 (1996) (noting that the difficulty with obtaining
discovery from non-party German residents “must be weighed against the fact that broad pretrial discovery from
named parties is permitted in American courts and is not permitted in German courts”).
21 See Taylor, 689 A.2d at 1199 (“An action may not be dismissed upon bare allegations of inconvenience without a
particularized showing of the hardships relied upon.”).
22 The parties agree that this case does not involve a view of any premises.
23  Ison, 729 A.2d at 838 (citation omitted).
24  The Superior Court’s opinion states that “Delaware law may not apply in this action,” a view not challenged by
either party in this appeal.  Letter Op. at 3.  Warburg maintains on appeal that German law will apply, although in its
motion to dismiss it stated that either German or British law applies.  Schrapper has not conceded that German law
applies.
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focus evident in the phrasing of the factor itself.25  Warburg’s argument focuses
on the expense and inconvenience of translating pertinent legal precedent
(assuming German law applies), retaining foreign lawyers, and producing foreign
law experts to testify at trial.  On the record before us, we do not think the trial
court erred in giving little weight to this argument in the context of the
overwhelming hardship analysis.26
In light of this analysis, the remaining factors require little discussion.
There is no pending action in Germany or elsewhere, a fact that could weigh
against dismissal.27  At best, this factor could conceivably carry little weight in
the analysis if minimal “cost and prejudice” to Schrapper would result from
dismissal.28  Therefore, since Warburg has not demonstrated overwhelming
hardship through the combination and weight of any or all of the other Cryo-
Maid factors,29 we need not consider the degree to which the non-pendency of
                                   
25 Ison, 729 A.2d at 843; see generally id. at 844.  See also Taylor, 689 A.2d at 1200 (“It is not unusual for courts to
wrestle with open questions of the law of sister states or foreign countries.  The application of foreign law is not
sufficient reason to warrant dismissal under the doctrine of forum non conveniens.”) (emphasis added). Cf. Gulf Oil
Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947) (categorizing the choice of law issue as one of the “factors of public
interest” and focusing on the difficulty the federal trial court would have “untangl[ing] problems in conflict of laws,
and in law foreign to itself.”) (emphasis added).
26 See Taylor, 689 A.2d at 1200 (“The application of foreign law is not sufficient reason to warrant dismissal
under the doctrine of forum non conveniens.”).
27 See Ison, 729 A.2d at 844-45.
28 Id. at 845.
29 See Chrysler First, 669 A.2d at 105; Williams Gas, 594 A.2d at 36.
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other actions also counsels against dismissal in this case.   Finally, Warburg has
not cited any other practical problems associated with litigating in Delaware in
addition to the issues discussed above.
Conclusion
We agree with the trial court that Warburg “has not done anything more
than claim inconvenience and has not supported this claim with anything of
substance.”30  Warburg’s motion to dismiss on the ground of forum non
conveniens is based on little more than generalized references to the garden-
variety concerns and expenses that characterize transnational litigation.
Accordingly, we affirm the interlocutory order of the Superior Court.
                                   
30 Letter Op. at 3.