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CVR Energy, Inc. v. Wachtell, Lipton, Rosen & Katz

United States District Court, D. Kansas

August 14, 2014

CVR ENERGY, INC., Plaintiff,
WACHTELL, LIPTON, ROSEN & KATZ, et al., Defendants.


JULIE A. ROBINSON, District Judge.

Before the Court is specially appearing Defendants Wachtell, Lipton, Rosen & Katz ("Wachtell Lipton"), Benjamin M. Roth, and Andrew R. Brownstein's Motion to Dismiss under Rule 12(b)(2) and 12(b)(3) for Lack of Personal Jurisdiction and Improper Venue (Doc. 9). Plaintiff CVR Energy, Inc. ("CVR") opposes the motion, and moves in the alternative for transfer of this action (Doc. 31). The Court granted CVR's request to conduct limited jurisdictional discovery (Doc. 24). The Court has considered the briefs, as well as the evidence submitted with the briefs and is prepared to rule. As described more fully below, the Court finds Defendants are not subject to personal jurisdiction, but rather than grant the motion to dismiss, the Court grants CVR's request to transfer this case to the United States District Court for the Southern District of New York.

I. Factual Background

Drawing all reasonable inferences in favor of Plaintiff CVR, the following facts are taken from the Complaint and attached exhibits, and the declarations and exhibits attached to the parties' briefs. The Court does not consider any general or conclusory allegations unsupported by affidavit or other evidence.

CVR is a holding company incorporated in Delaware, whose stock is listed on the New York Stock Exchange. CVR is headquartered in Sugarland, Texas, and has corporate offices in Kansas and Oklahoma, where it operates refineries. The Kansas office is where the Chief Financial Officer, General Counsel and legal department are located.

In January 2012, Carl Icahn, a New York hedge fund operator and corporate raider, announced that he had purchased a sizeable stake in CVR and threatened the company with a hostile takeover. Edmund Gross, CVR's general counsel, placed unsolicited phone calls to Andrew Brownstein and Benjamin Roth, partners of Wachtell Lipton, at the firm's office in New York. Wachtell Lipton is a law firm organized as a general partnership under New York law. It has one office, in New York City. CVR had never before retained Wachtell Lipton, and the firm had never solicited CVR's business, in Kansas or anywhere else.

Gross informed Brownstein and Roth that CVR was aware that the firm had represented another corporation in its recent successful effort to resist a hostile takeover by Icahn. Gross conveyed an invitation from the CVR board of directors for Wachtell Lipton to speak to the board at a telephonic board meeting on Sunday, January 15, 2012. Brownstein and Roth participated in the meeting, and afterwards, Gross informed them by telephone that the CVR board of directors wished to engage Wachtell Lipton. Brownstein and Roth accepted the engagement on behalf of the firm.

Roth emailed a letter to CVR confirming the engagement, explaining that New York law governing the conduct of New York attorneys required the firm to send an engagement letter upon undertaking representation, and that the letter was being sent in compliance with that law. At Gross's instruction, Roth addressed the letter to the Kansas City, Kansas office, where Gross was located. None of Wachtell Lipton's attorneys are licensed to practice law in Kansas, the firm does not maintain an office or employees there, nor does the firm pay taxes, own property, or hold bank accounts in Kansas.

In addition to retaining Wachtell Lipton, CVR also engaged two New York-based financial advisors, Goldman Sachs & Co. and Deutsche Bank Securities, Inc. (the "New York Banks.").

Wachtell Lipton attorneys performed all their work for CVR from the firm's office in New York. In the course of the engagement, Wachtell Lipton's attorneys communicated by telephone and email with CVR executives, with an occasional face-to-face meeting in New York. Wachtell Lipton's attorneys also communicated with CVR executives and directors at the company's board meetings, which occurred either in New York or telephonically; counsel never traveled to Kansas. Wachtell Lipton's attorneys dealt primarily with Edmund Gross while he was in his Kansas City office. These contacts and discussions included the negotiation of engagement letters with the New York Banks, SEC filings, alternative strategies regarding Icahn's tender offer, and a Transaction Agreement entered into in April 2012. In connection with these discussions, which Gross avers occurred on a nearly daily basis, Defendants sent Gross for review and discussion a number of documents, including drafts of engagement letters, SEC filings, the Transaction Agreement, and Minutes of the Board of Directors. In addition, Gross avers that Brownstein and Roth often commented on other documents sent to them for review, including press releases and correspondence.

On February 16, 2012, the Icahn Group announced that it would launch a proxy contest and a tender offer for all of CVR's outstanding shares. Wachtell Lipton assisted CVR in preparing fifteen filings with the SEC. On the cover page of each filing, "Edmund S. Gross, " along with the address and phone number of CVR's headquarters in Sugarland, Texas, is listed as the contact information for the person authorized to receive notices and communications on behalf of CVR. The filings were copied to Brownstein and Roth in New York City.

After the Icahn Group announced its intent to launch a tender offer, the New York Banks proposed to Frank Pici, CVR's Chief Financial Officer, that CVR execute a second round of engagement letters with the Banks providing for "success' fees if CVR was sold." The Banks sent a summary of the proposed fees to Pici, and Pici and the Banks then negotiated the fee terms.

On February 27 and 28, 2012, the CVR board held two days of meetings at Wachtell Lipton's New York office. The minutes of the CVR board meeting that date reflect that Roth explained to the board that the New York Banks would receive a fee based on a percentage of CVR's enterprise value if the company were sold, and a different fee if CVR remained independent after the tender offer.

By May 2012, the Icahn Group owned approximately 69% of CVR's outstanding shares and thus controlled CVR. The new Icahn-controlled CVR board ordered the company not to pay fees to the New York Banks, and the Banks brought actions for breach of contract against CVR in the New York Supreme Court. CVR is defending the actions in part on the basis that its board did not authorize the fee terms of the second engagement letters, that Wachtell Lipton never ...

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