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KOFF v. BRIGHTON PHARM.

October 24, 1988

BERNARD E. KOFF, et al., Plaintiffs,
v.
BRIGHTON PHARMACEUTICAL, INC. and KANSAS CITY SOUTHERN INDUSTRIES, INC., Defendants



The opinion of the court was delivered by: WOLIN

 The substance of this case is the alleged breach of a Stock Purchase Agreement between plaintiffs and defendants. The current issue before the Court, however, is whether there are sufficient "minimum contacts" between the defendants and the State of New Jersey to support the assertion of in personam jurisdiction over defendants by a New Jersey court. A secondary issue is whether the Court should transfer this action to the Western District of Missouri pursuant to 28 U.S.C. ยง 1404(a).

 The Court concludes that there are sufficient contacts; thus defendants' motion to dismiss for lack of personal jurisdiction will be denied. The Court further concludes that defendants have not met their burden in overcoming the presumption that plaintiffs' choice of forum should be honored; therefore, defendants' alternative motion to transfer will also be denied.

 INTRODUCTION

 Plaintiffs, all New Jersey residents, are individual stockholders of USI Technology, Inc. (USI), a New Jersey corporation. Defendants Brighton Pharmaceutical, Inc. (Brighton) and Kansas City Southern Industries, Inc. (KCSI) are both Delaware corporations with their principal place of business in Missouri. Subject matter jurisdiction is thus founded on diversity of citizenship. *fn1"

 On June 23, 1983, USI and a company named Martec Pharmaceuticals, Inc. (later renamed Midwest Pharmaceutical, Inc.) (MPI), entered into a joint venture for the purpose of manufacturing and distributing the generic drug propranolol hydrochloride. MPI is a wholly owned subsidiary of L.M. Johnson Co., which is a wholly owned subsidiary of defendant Brighton. Defendant KCSI, in turn, owns a majority interest in Brighton.

 As averred by plaintiffs, the joint venture maintained a base of operations in New Jersey. According to plaintiffs, KCSI, Brighton and their officers and directors played a significant role in managing the joint venture. Specifically, plaintiffs allege that William G. Skelly, KCSI's manager of corporate development (and the vice-president and later president of the joint venture), conducted various aspects of the joint venture's business by letters written on KCSI letterhead. See Affidavit of Richard C. Zeich, at 2-4. In addition, plaintiffs allege that Skelly and Landon Rowland, KCSI's president, came to New Jersey on several occasions in 1984 and 1985 to discuss various business matters pertaining to the joint venture. See id. at 4-5. Furthermore, plaintiffs allege that KCSI was named as the insured for the joint venture's automobile; provided employment benefits for Zeich, who was not an employee of KCSI but rather an employee of the joint venture; agreed to provide insurance for the propranolol venture when additional insurance became necessary; and allowed an MPI employee to use KCSI's Federal Express account. See id. at 6-7. In sum, Mr. Zeich alleges:

 
During all of the time that I had dealings with Martec Pharmaceuticals, Inc., USI's partner in the joint venture, I was under the distinct impression that, no matter with whom I spoke, whether to Gene Goode, William Skelly or Landon Rowland, that person spoke as an officer of KCSI. It appeared to me that Martec and KCSI were one and the same. It was also my understanding that Brighton and KCSI were one and the same.

 Id. at 9.

 In light of the joint venture's activities in New Jersey, Skelly and USI's accountant apparently agreed to acknowledge to New Jersey that the joint venture was doing business in that state; this is evidenced by a letter addressed to Skelly in his capacity as a KCSI employee. *fn2" Defendant Brighton actually had a certificate of authority to conduct business in New Jersey from August 1, 1984 to December 31, 1985. *fn3"

 Because of internal disagreements and personality conflicts, the two principals to the joint venture began to look for a way to dissolve their relationship in the summer and early fall of 1985. The result was the Stock Purchase Agreement, which is the subject of the instant action. Under the Agreement, Brighton agreed to acquire a 100% interest in USI by purchasing the USI shares from the USI shareholders, plaintiffs in this action. Allegedly because of plaintiffs' demands, KCSI served as the guarantor of Brighton's obligations under the Agreement.

 
The validity of this Agreement, the terms hereof, and all duties, obligations and rights arising therefrom, shall be governed by and interpreted in accordance with the laws and decisions of the State of Missouri as applicable to contracts made and to be performed in this State; provided, however, stock transfer taxes . . . shall be governed by the laws of ...

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