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EDELSON v. CH'IEN

January 11, 2005.

HARRY EDELSON, Plaintiff,
v.
RAYMOND K.F. CH'IEN, PETER YIP HAK YUNG, ASIA PACIFIC ONLINE LTD., and CHINADOTCOM CORPORATION, Defendants.



The opinion of the court was delivered by: AMY J. ST. EVE, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Harry Edelson ("Edelson") filed his Second Amended Complaint alleging tortious interference with prospective economic advantage against Defendants Raymond K.F. Ch'ien ("Ch'ien"), Peter Yip Hak Yung ("Yip"), Asia Pacific Online, Ltd. ("Asia Pacific"), and chinadotcom corporation ("Chinadotcom"). Ch'ien moves to dismiss the Second Amended Complaint for lack of personal jurisdiction, pursuant to Rule 12(b)(2), and for failure to state a claim, pursuant to Rule 12(b)(6), and in the alternative, to strike immaterial matter, pursuant to Rule 12(f). Chinadotcom separately moves to dismiss the Second Amended Complaint for failure to state a claim pursuant to Rule 12(b)(6). For the reasons discussed below, the Court grants in part Ch'ien's motion and denies Chinadotcom's motion.

BACKGROUND

  For purposes of this Opinion, the Court presumes the following allegations as true. I. Parties

  Edelson is a citizen of New Jersey. (R. 53-1; Sec. Am. Compl. ¶ 1.) He is the former outside, independent non-management director of Chinadotcom. (Id.) Since January 1999, Edelson has served as a non-executive director of Chinadotcom. (Id.) Edelson has also served in a variety of other capacities for Chinadotcom and its various subsidiaries. (Id.) He is also a stockholder of Chinadotcom. (Id.)

  Edelson is also a venture capitalist. (Id.) He is the founding partner of Edelson Technology Partners, a high technology venture capital partnership assisting multinational corporations. (Id.) Over his 30-year career, Edelson has served on the Board of Directors of numerous privately and publicly held companies, in addition to Chinadotcom. (Id. ¶ 8.) Edelson relies on connections made during his business career, as well as his reputation in order to raise funds. (Id.)

  Ch'ien was, at all times relevant, the Executive Chairman of the Board of Directors of Chinadotcom. (Id. ¶ 3.) He is a citizen and resident of Hong Kong. (Id.)

  Chinadotcom is a corporation formed and existing under the laws of the Cayman Islands. (Id. ¶ 5.) Its principal place of business is in Hong Kong. (Id.) Chinadotcom is an integrated enterprise solutions company offering software services and outsourcing, technology, marketing, and media services and content for companies and end users throughout the greater China and the Asia-Pacific region, the United States, and the United Kingdom. (Id.)

  II. The Press Release

  Shortly after Edelson filed his Complaint in this case, Chinadotcom filed a Statement of Claim in the High Court of the Hong Kong Special Administrative Region, Court of First Instance, Action No. 4004 of 2003 (the "Hong Kong Action"), against Edelson and Edelson Technology Partners. (R. 53-1; Sec. Am. Compl. ¶ 10.) Chinadotcom alleged breach of fiduciary duty and breach of Chinadotcom's insider trading policy. (Id.) Edelson disputes Chinadotcom's allegations in the Hong Kong Action, arguing that they are baseless and filed for no other reason than to retaliate against Edelson for filing this action. (Id.)

  Around the time it filed the Hong Kong Action, Chinadotcom issued a press release on its website (www.corp.china.com) entitled "chinadotcom reports fourth consecutive quarter of US GAAP profit, revenues up 10% year-on-year, and net income of US $6.1 million" (the "Press Release"). (Id. ¶ 11.) In the section titled "Other Developments," the Press Release states in part:
The company recently filed a claim in the courts of Hong Kong against former board member, Harry Edelson and his affiliated fund seeking damages related to the alleged breach of fiduciary duties owed to the company and violations of the company's insider trading policy. The company also recently became aware that Mr. Edelson has filed an action against the company and certain board members and one shareholder alleging claims that relate principally to his disagreement with the results of this year's annual shareholders meeting whereby he was not re-elected by shareholders to the chinadotcom board of directors.
(Id. ¶ 11, Ex. B.) Based on information and belief from Edelson's experience on the Chinadotcom Board, Edelson alleges that Yip and Ch'ien directed the preparation and dissemination of the above-quoted portion of the Press Release. (Id. ¶ 12.) Edelson alleges the Press Release is inaccurate and misleading in a variety of aspects. (Id. ¶ 13-16.)

  Edelson alleges the Press Release has "thrown a taint on" his character and abilities, and "clouded his reputation in a public and embarrassing way." (Id. ¶ 13.) Despite past success in raising money for various funds, after the Press Release, Edelson has been unable to raise money for his most recent fund. (Id. ¶ 17.) Edelson contends the Press Release is readily available to the entire world and that it is impossible for him to attract investment funds. (Id. ¶ 18.) Edelson alleges that Defendants made the statements in the Press Release "with malice, with vindictiveness, and purely for revenge." (Id. ¶ 19.)

  III. History of this Action

  Edelson filed his complaint on October 15, 2003 alleging violations of Section 13(d) of the Securities Exchange Act of 1934 and tortious interference with an economic advantage. Plaintiff also moved for a preliminary injunction. (R. 1-1; Compl.) Chinadotcom filed a motion to dismiss the complaint pursuant to Rule 12(b)(6) arguing that (1) Edelson failed to allege any wrongdoing on the part of Chinadotcom, and (2) Edelson, as an ex-director of Chinadotcom, lacked standing to sue under Section 13(d). (R. 16-1; Chinadotcom's Mot. to Dismiss Compl.) In response, Edelson sought leave to file an amended complaint containing further allegations with respect to Chinadotcom's conduct. (R. 18-1; Pl.'s Mot. for Leave.) Chinadotcom opposed Edelson's motion for leave on the basis that the amendments were futile and still failed to state a claim. (R. 20-1; Chinadotcom's Opp. to Pl.'s Mot. for Leave; R. 23-1; Chinadotcom's Supp. Opp. to Pl.'s Mot. for Leave.) On January 28, 2004, the Court denied Edelson's Motion for Preliminary Injunction, granted Edelson's Motion for Leave to Amend its Complaint with respect to the tortious interference claim, and dismissed Edelson's claim for Section 13(d) violations. Edelson v. Ch'ien, No. 03 C 7320, 2004 WL 422674 (N.D. Ill. Jan. 28, 2004). Edelson appealed the Court's dismissal of its Section 13(d) claims to the Seventh Circuit. That appeal is still pending.

  After Edelson filed his Amended Complaint (R. 32-1; Am. Compl.), Chinadotcom filed a motion to strike the Amended Complaint for failing to comply with the Court's prior Order. (R. 34-1; Chinadotcom's Mot. to Dismiss Pl.'s Am. Compl.) The Court granted Chinadotcom's motion, striking the Amended Complaint and granting leave for Edelson to file a second amended complaint consistent with the Court's Order of January 28, 2004. (R. 48-1; Order.) Edelson filed its Second Amended Complaint on May 17, 2004 alleging a single claim of tortious interference with an economic advantage. (R. 53-1; Sec. Am. Compl.) Ch'ien filed a motion: (1) to dismiss for lack of personal jurisdiction; (2) to dismiss for failure to state a claim; and (3) to strike immaterial matter. (R. 57-1; Ch'ien Mot. to Dismiss.) Chinadotcom separately filed a motion to dismiss the Second Amended Complaint pursuant to 12(b)(6). (R. 58-1; Chinadotcom's Mot. to Dismiss Sec. Am. Compl.)

  ANALYSIS

  I. Ch'ien's Motion to Dismiss for Lack of ...


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