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State ex rel. Gorlin v. Webster

Supreme Court of Appeals of West Virginia

November 8, 2019

State of West Virginia ex rel. Steve Gorlin and the Gorlin Companies, LLC, Defendant Below, Petitioners,
v.
The Honorable Carrie L. Webster, Judge of the Circuit Court of Kanawha County, Robert Scott Long, Stephen B. Farmer, Ralph Lewis Ballard, III, JL Dickinson Trust AAP FBO JKTP, Payne-Gallatin Company, Boone Coal and Timber Co., Spruce Boone Land Co., Andrew A. Payne, III, RL Rooke for William W. Rooke, Bruce Cameron Conway, Bryan Mcshane, and George B. Lucas, Jr., Plaintiffs Below, Respondents.

          (Kanawha County No. 18-C-1204)

          MEMORANDUM DECISION

         Petitioners Steve Gorlin (sometimes referred to as "petitioner Gorlin") and The Gorlin Companies, LLC (referred to collectively as "petitioners"), by counsel Richard D. Jones and Shereen Compton McDaniel, petition this Court to invoke its original jurisdiction pursuant to Rule 16 of the West Virginia Rules of Appellate Procedure. Petitioners seek a writ of prohibition, against respondents, the Honorable Carrie L. Webster, Judge of the Circuit Court of Kanawha County, Robert Scott Long, Stephen B. Farmer, Ralph Lewis Ballard, III, JL Dickinson Trust AAP FBO JKTP, Payne-Gallatin Company, Boone Coal and Timber Co., Spruce Boone Land Co., Andrew A. Payne, III, RL Rooke for William W. Rooke, Bruce Cameron Conway, Bryan McShane, and George B. Lucas, Jr., [1] by counsel Shawn P. George and Jennie Ovrom Ferretti, requesting the Court vacate the circuit court's order denying petitioners' motion to dismiss the complaint and directing the case be remanded for entry of an order dismissing it because under the applicable forum-selection clause, proper venue is in the State of Florida.

         Upon thorough consideration of the petition for writ of prohibition, respondents' brief, the parties' oral arguments, and the appendix record, this Court concludes that petitioners are entitled to the relief requested and grant a writ of prohibition. Because we discern no new or substantial question of law in connection with the petition, a memorandum decision granting the requested writ is the appropriate disposition pursuant to Rule 21 of the West Virginia Rules of Appellate Procedure.

         I. Facts

         The action before the Court arises from respondents' investments in Nano Technology Corporation ("NTC" or "Nano"), which is a private Samoan (or Cayman Island) corporation and is in the business of nanotechnology.[2] NTC has plants and equipment in China that were managed and operated by two Chinese nationals, who founded the company. As respondents allege in their complaint, each of them "purchased the common stock of Nano as a direct result and in justifiable reliance on the representations and solicitations by Defendants. Each of the Plaintiffs held and maintained their investment due to the continued representations of Defendants after Plaintiffs' investment." (Emphasis added). Respondents aver that they collectively invested over $1.9 million in NTC by the purchase of common stock.

         According to respondents, petitioner Gorlin was the managing member of The Gorlin Companies and Chairman of the Board of NTC at the time respondents decided to invest in NTC in 2007. Petitioners "actively engaged in the solicitation" of respondents and others to invest in Nano by purchasing stock in the company. Respondents alleged that the basis for their investments was petitioners' representations that they would not sell any share of Nano common stock, or any right related to it, "unless Plaintiffs had the same right at the same time on the same terms to sell their shares[;]" and that petitioner Gorlin "made oral statements to the effect that Gorlin was prevented, individually, or in any representative capacity, from selling shares, options or any interest in any such right, without Plaintiffs then having the same corresponding right to sell their interests." Further, petitioner Gorlin allegedly assured respondents that he would "remain active" in NTC and continue to oversee and supervise its operations "for as long as it took for the investment to reap a return either by purchase by another entity, or by Nano becoming a publicly traded entity yielding several times any money invested." Respondents claim these representations by petitioners played an integral role in respondents' decision to invest in NTC because they were concerned about the lack of oversight or control of NTC should they invest in the company. Respondents, however, apparently did not reduce all these oral "representations" made by petitioners to writing.

         Contrary to respondents' allegations of oral representations made by petitioners upon which they relied in making their decisions to invest in NTC, each respondent was given an Amended and Restated Private Placement Memorandum ("PPM"), which provided information about NTC and their potential investments. The PPM contained the following representation:

Offers and sales of Shares will be made on our behalf by our directors and executive officers . . . . The Gorlin Companies, LLC, a Florida limited liability company controlled by Steve Gorlin, a principal shareholder and a director of . . . [NTC] . . . has an agreement with . . . [NTC] pursuant to which it will receive (i) 5% of the proceeds of any investment made by an investor it introduces to . . . [NTC] in this offering, and (ii) a warrant to purchase, at the same price as the offering price, 5% of the number of Shares sold to an investor it introduces to . . . [NTC] in this offering. In addition, our directors and executive officers will be reimbursed for their reasonable expenses incurred in this offering.

         The PPM also contained the following representation:

No person has been authorized to give any information or to make any representations other than those contained in this Memorandum, and if given or made, such information or representations must not be relied upon as having been authorized by our agents or us. We will give you the opportunity to ask questions of, and receive answers from, our representatives concerning the terms and conditions of this offering and to obtain additional information, to the extent such information is possessed or can be obtained without unreasonable effort or expense.

(Emphasis added).

         In addition to the foregoing language, the Subscription Agreement that was signed by each respondent[3] provides:

The undersigned acknowledges that the undersigned has been offered the opportunity to obtain information, to verify the accuracy of the information received by him, her or it and to evaluate the merits and risks of this investment and to ask questions of and receive satisfactory answers concerning the terms and conditions of this investment. The undersigned has received and reviewed a copy of the Memorandum, including all Exhibits thereto, and represents that he, she or it understands the information set forth therein. The undersigned has received copies of such documents and information as he, she or it has deemed necessary in order to make an informed investment decision with respect to the investment being made hereby and the Company has made its officers available to the undersigned to answer questions concerning the Company and the investment being made hereby. In making the decision to purchase the Common Stock, the undersigned has relied and will rely solely upon independent investigations made by him, her or it. . . .
. . . .
The undersigned has such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of an investment in the Common Stock.

(Emphasis added).

         Significant to determining the issue presented in the instant case, the Subscription Agreement also contains the following forum-selection clause:

(A) THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO ITS CONFLICTS OF LAWS PRINCIPLES, (B) THE UNDERSIGNED HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FLORIDA STATE COURT OR UNITED STATES FEDERAL COURT SITTING IN THE STATE OF FLORIDA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR ANY AGREEMENT CONTEMPLATED HEREBY, AND (C) THE UNDERSIGNED HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH FLORIDA STATE OR FEDERAL COURT. THE UNDERSIGNED FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH COURT AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH COURT ON THE BASIS OF A NON-CONVENIENT FORUM. THE UNDERSIGNED FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE COMPANY SHALL BE ...

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