Opinion ID: 2492601
Heading Depth: 3
Heading Rank: 1

Heading: The Trial Court's Order and the Positions of the Parties.

Text: In concluding that it had specific personal jurisdiction over the defendants, the circuit court first noted that the gravamen of the allegations contained in Plaintiffs' Fourth Amended Complaint was that [t]he alleged deficiencies in the financial condition of Bruno's Inc. identified in the Project Crimson Report are alleged to have been known by the non-resident individual Defendants either through their participation in the preparation of the said due diligence report known as Project Crimson; their alleged[ly] becoming aware of the contents of the report; or their alleged awareness that the Prospectus, issued in conjunction with the underwriting and marketing of the Bruno's Notes to Plaintiffs, allegedly materially misstat[ed] the true financial condition of Bruno's Inc. to Plaintiffs' financial detriment. The circuit court reasoned that based on these allegations, the [p]laintiffs' complaint provides a basis for specific in personam jurisdiction because the plaintiffs pleaded that the actions of Defendants were purposeful and were directed toward an Alabama corporation. All acts and omissions alleged against Defendants are allegedly acts and omissions undertaken in the process of taking over the management and control of an Alabama Corporation, Bruno's Inc. The defendants counter that the alleged misrepresentations stemming from the prospectus, the public filings, the road show, and the one-on-one meetings with Huff did not take place in Alabama. They argue that the Project Crimson Report and the acquisition of Bruno's are irrelevant to personal jurisdiction because, the defendants argue, they do not give rise to the plaintiffs' claims. Instead, they argue, the plaintiffs' claims arise from alleged misrepresentations made outside Alabama: the prospectus was distributed in relation to the nationwide sale of the notes and not specifically targeted to Alabama residents, the road show occurred in New York, and the one-on-one meetings with Huff occurred in New Jersey. The defendants emphasize that none of them reside in Alabama or have contacts with Alabama that relate to the allegations in the action and that none of the plaintiffs reside in Alabama. Thus, they contend that Alabama has no interest in adjudicating this action. In support of their statement that none of the defendants reside in Alabama or have contacts with Alabama that relate to the plaintiffs' allegations of misrepresentation, individual defendants Raether, Greene, Kravis, Brous, Roberts, and Tobin submitted nearly identical affidavits in the circuit court in support of the defendants' motion to dismiss for lack of personal jurisdiction. All but one of these defendants admitted being a member of Bruno's board of directors from 1995 to 1999, [5] but they denied approv[ing] and/or execut[ing] any Bruno's public filings while in Alabama. All of them denied target[ing] any activities relating to Bruno's securities filings or the sale of Bruno's notes toward Alabama. All of them also denied that Bruno's or any of the KKR affiliates was a sham corporation, i.e., that either Bruno's or the KKR affiliates were alter egos of KKR. All of them stated that they committed no wrongdoing in relation to the Bruno's transaction. Kravis stated that he was not a member of the KKR team assigned to the Bruno's transaction and that he never traveled to Alabama in connection with the acquisition of Bruno's. Kravis admitted attending one Bruno's board meeting in Alabama after the acquisition occurred. Roberts stated that he was not a member of the KKR team assigned to the Bruno's transaction. He also stated that he never traveled to Alabama in connection with the acquisition or ownership of Bruno's, nor did he travel to Alabama in connection with his service on Bruno's board of directors. Tobin stated that he did not travel to Alabama in connection with the acquisition of Bruno's and that the only contacts he had with Alabama related to the action consisted of acts taken in his fiduciary capacity as a director of Bruno's and/or as an executive at The Stop & Shop Supermarket Company, which was then a KKR affiliate. Raether, Greene, and Brous admitted that they were part of the KKR team assigned to the Bruno's transaction. Each of them also stated that the only contact he had had with Alabama that related to the action consisted of acts taken in his fiduciary capacity as a KKR executive and/or as a member of the Bruno's board of directors. The aforesaid affidavits do not mention that Kravis, Roberts, Greene, and Raether were members of KKR's board of directors as well as on the board of directors of KKR Associates. KKR Associates was the sole general partner of Crimson Associates and KKR Partners II, the entities formed for the purpose of facilitating the acquisition of a controlling majority share of common stock in Bruno's. The affidavits also contain no statements challenging the plaintiffs' allegation that each of these individuals either contributed to the production of the prospectus or approved of its distribution in their capacities as members of KKR's board of directors. Likewise, these individual defendants do not deny the plaintiffs' allegation that they were aware of the contents of the Project Crimson Report at the time the prospectus was produced and distributed to the public for the purpose of soliciting sales of the notes. [6] The plaintiffs' arguments echo the trial court's reasoning in that the plaintiffs focus on the fact that their allegations relate to the acquisition of an Alabama corporation. The plaintiffs contend that the defendants' actions have sufficient contacts with Alabama because Bruno's is an Alabama corporation that, at the time of the acquisition, was the largest supermarket operator in Alabama and owned and operated a large number of facilities throughout the State. The plaintiffs emphasize that all the allegations involve actions taken by the defendants to purchase Bruno's or in furtherance of advertising and selling the notes, which financed the purchase. Those alleged actions include: meeting with Ronald Bruno in Alabama to work out preliminary details of KKR's acquisition of Bruno's; sending agents to Alabama to investigate the financial condition of Bruno's; obtaining the Project Crimson Report that detailed the financial condition of Bruno's; causing Bruno's to offer for sale $400 million in notes to help with the leveraged recapitalization; preparing and distributing a prospectus that deliberately failed to reveal the truth about the financial condition of Bruno's in order to facilitate the sale of the notes; actively soliciting Huff to purchase notes of the Alabama corporation through a road show and one-on-one meetings; and participating in Bruno's board meetings and in the approval of Bruno's public filings following the acquisition that deliberately delayed revealing the Alabama corporation's actual financial condition until after the plaintiffs had purchased the notes.