The opinion of the court was delivered by: ELLEN S. HUVELLE, District Judge
Plaintiffs Hassan Abbey and Yussur Abrar bring this action against
Defendants Modern Africa One, LLC ("Modern Africa"), Stephen Cashin, and
Niles Helmboldt to recover compensatory and punitive damages, attorneys'
fees and costs, and injunctive relief in connection with defendants'
actions as majority shareholders of Warsun International Communications,
Inc. ("Warsun") and for their alleged interference with plaintiffs'
ownership interest in Warsun's Nigerian subsidiary.*fn1 Warsun has filed
for Chapter 11 bankruptcy and is currently in Chapter 7 liquidation
proceedings before the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division ("Bankruptcy Court").
Defendants have moved pursuant to 18 U.S.C. § 1404(a) and
28 U.S.C. § 1412 to transfer venue of this matter to that court, or
alternatively, to dismiss this action on the basis that plaintiffs have
failed to state a claim as to Count VI, and as to the remaining claims,
they are barred by the doctrines of
collateral estoppel, waiver and the Bankruptcy Court's
entry of a preliminary injunction and its approval of the sale of Warsun
assets to Modern Africa. Having considered the pleadings and relevant
law, the Court will deny the motion to transfer; grant the motion to
dismiss Counts III, VI and those claims that do not properly belong to
plaintiffs as opposed to the corporate entities; deny the motion to
dismiss Counts I, II, IV, V, and VII; and stay these proceedings pending
resolution of the adversary proceeding which is currently pending in the
The parties to this action include individuals and companies associated
with Warsun, a New York corporation that provided facilities-based
telecommunications services in Africa. Warsun filed for Chapter 11
bankruptcy on August 13, 2002, and is currently in Chapter 7 liquidation
proceedings. Plaintiffs Hassan Abbey and Yussur Abrar hold a minority
interest in Warsun, and they served as officers and directors of Warsun
until the summer of 2002.
Modern Africa, an investment fund of Modern Africa Growth and
Investment Company (the "Fund"), was established to make equity
investments in Africa, particularly in manufacturing and communications
enterprises. Modern Africa invested $6,000,000 in Warsun in the form of a
secured loan in 1999 and another $4,000,000 over the next three years.
(Nyirjesy Decl. ¶ 3.) In return, Modern Africa received one share of
Warsun stock and warrants to obtain 700,000 additional shares, the
equivalent of a 70% equity stake. (Id.) Modern Africa currently
owns 985,714 shares of Warsun stock. (Defs.' Ex. 10 [Pls.' Objection to
Mot. to Sell Assets]
¶ 44.) Defendants Stephen Cashin and Niles Helmboldt
are members of Modern Africa Fund Managers, LLC, a limited liability
company that managed and administered the Fund. Cashin served as a member
of the board of Warsun and managing director of Modern Africa. Helmboldt
served as chairman of the boards of both Warsun and Modern Africa.
Warsun Network Solutions, Ltd. ("Warsun Nigeria") is a Warsun
subsidiary. It was established in August 2000 in Nigeria, the largest
telecommunications market in Africa, to obtain telecommunications
licenses and to establish a system of software and equipment that would
enable Warsun's African affiliates to deliver and receive communications
from local Internet Service Providers ("ISPs") and telecommunications
carriers. (Am. Compl. ¶¶ 75, 77.) Ownership of Warsun Nigeria is in
dispute. Plaintiffs (along with Chidi Ibisi who is not a party to this
action) claim an ownership interest in Warsun Nigeria (id. ¶
81), while defendants maintain that 100% of Warsun Nigeria's shares
belonged to Warsun. (Defs.' Mot. at 7 n.2.) This dispute is at the heart
of an adversary proceeding now pending before the Bankruptcy Court.
II. Bankruptcy Proceedings
Despite Modern Africa's investments, by mid-2002 Warsun, like much of
the telecommunications industry, was in financial difficulty. It was at
this time that Warsun's board terminated plaintiffs as officers, and
plaintiffs resigned as directors of the company. Thereafter, its board
determined that bankruptcy was the only viable alternative for survival
of the company, and on August 13, 2002, Warsun filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code.
Shortly thereafter, Warsun entered into an asset purchase agreement
("APA") to sell all of the company's assets to Modern Africa as part of
the bankruptcy proceeding. On December 16, 2002, plaintiffs objected to
this sale, claiming that Warsun and Modern Africa were acting in bad
faith and requesting that the Bankruptcy Court prohibit the sale and
subordinate Modern Africa's debt investment to the interests of Warsun's
other creditors. (Defs.' Ex. 10 [Pls.' Objection to Mot. to Sell
Assets].) The Bankruptcy Court conducted a hearing, and over plaintiffs'
objections, it approved the sale on December 20, 2002, and it barred,
pursuant to § 363 of the Bankruptcy Code, any claims relating to
those assets that arose prior to the closing of the sale. (Defs.' Ex. 11
["363 Order"] at 2.) Listed among the assets sold in this transaction
were 6 million shares of common stock of Warsun Nigeria, "representing
all of the shares of common stock held by [Warsun] in such entity"
(Defs.' Ex. 1 [Asset Purchase Agreement Schedule 1.4]), except apparently
it was stipulated that "the assets and shares of Warsun Nigeria would be
sold subject to the parties' dispute, and that Modern Africa could not
acquire such assets to the extent that it is later determined by a
Nigerian court that Warsun is not entitled to such assets." (Pls.' Opp.
at 18.)*fn2 Modern Africa later assigned all of the assets it purchased
to Disco very Tel in return for a substantial equity stake in that
In a related matter, an adversary proceeding against Abrar and Abbey is
currently pending in the Bankruptcy Court.*fn3 In that action, initiated
on September 11, 2002, Warsun alleges that plaintiffs (1) violated the
automatic stay by pursuing litigation in Nigeria in violation
of the automatic stay; (2) conspired to injure Warsun in its trade,
reputation, and business in violation of Virginia's business conspiracy
statute; and (3) breached the fiduciary duties they owed to Warsun as
officers and directors by surreptitiously and improperly obtaining
personal ownership interests in Warsun Nigeria. (Defs.' Ex. 3 [Adversary
Proceeding Compl.] ¶¶ 22-29.)*fn4 Because Warsun sold all of its
assets, including its interest in Warsun Nigeria, to Modern Africa after
initiating the adversary proceeding, and because Modern Africa in turn
assigned the assets to DiscoveryTel, on January 6, 2004 the Bankruptcy
Court granted a motion to substitute DiscoveryTel as plaintiff in the
adversary proceeding. In its Order issued on January 6, 2004, the
Bankruptcy Court also set a pretrial conference for February 23, 2004 in
the adversary proceeding. The crux of that matter relates to the
ownership of Warsun Nigeria, i.e., whether DiscoveryTel or
plaintiffs own the stock of Warsun Nigeria.*fn5
Shortly after the adversary proceeding was initiated, plaintiffs filed
suit in a Nigerian court to prevent Modern Africa, DiscoveryTel, Cashin,
and Helmboldt from interfering with their interests in Warsun
Nigeria.*fn6 Prompted perhaps by this action in Nigeria, on September
11, 2002, Warsun asked the Bankruptcy Court to enjoin the plaintiffs from
violating the automatic stay. (Am. Compl. ¶ 230.) Finding that the
plaintiffs had violated the automatic stay, the Bankruptcy Court issued a
preliminary injunction on September 19, 2002, enjoining plaintiffs
from undertaking any litigation in any other court to determine ownership
rights of Warsun Nigeria.*fn7 (Defs.' Ex. 6 [Prelim. Inj.].)
It is against this backdrop that plaintiffs have brought the current
action. In their Amended Complaint, plaintiffs allege the following: (1)
breach of fiduciary duty to plaintiffs, as minority shareholders of
Warsun, by Modern Africa (Count I); (2) conversion of plaintiffs'
interest in Warsun (Count II);*fn8 (3) violations of
18 U.S.C. § 1962(c) and (d), the Racketeer Influenced and Corrupt
Organization Act ("RICO") (Count IV); (4) conversion of plaintiffs'
interest in Warsun Nigeria (Count V); (5) interference with plaintiffs'
prospective economic advantage (Count VI); and (6) conspiracy (Count
VII). On October 6, 2003, defendants moved to transfer these claims to
the Bankruptcy Court, or in the alternative, to dismiss plaintiffs'
claims. Plaintiffs oppose defendants' motion, arguing that the claims in
this case are unrelated to those raised by the bankruptcy proceeding,
including the adversary proceeding, and thus, this matter is not properly
transferrable, and it is not subject to dismissal based on Fed.R. Civ.
P. 12(b)(6) or any of the rulings or orders entered by the Bankruptcy
Defendants seek transfer of this case pursuant to
28 U.S.C. § 1404(a) and § 1412.*fn9 The threshold question in
deciding a transfer motion is determining whether this action could have
been brought in the proposed transferee court at the time the complaint
was filed. Thus, this Court must determine first whether the Bankruptcy
Court would have had jurisdiction over this action. This involves a
two-part analysis. First, the bankrupcty court must have subject matter
jurisdiction over the matter under 28 U.S.C. § 1334(b). In re
Fed. Deposit Ins. Corp. v. Majestic Energy Corp., 835 F.2d 87, 90
(5th Cir. 1988). "[T]he district courts shall have original but not
exclusive jurisdiction of all civil proceedings arising under title 11
[of the Bankruptcy Act], or arising in or related to cases under title
11." 28 U.S.C. § 1334(b). Thus, there is federal jurisdiction not
only when the claim arises under title 11 or in a title 11 case, but also
if the claim is "at least `related to' a case under Title 11." Searcy
v. Knostman, 155 B.R. 699, 703 (Bankr. S.D. Miss. 1993). The usual
articulation of the test for determining whether a claim is "related to"
a bankruptcy case is "whether the outcome of that proceeding could
conceivably have any effect on the estate being administered in
bankruptcy." Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.
1984)); see also Celotex Corp. v. Edwards, 514 U.S. 300, 308
& n. 6 (1995) (applying the Pacor test); In re
McGuirl, No. 90-00141, 90-00142, 2001 WL 1798478, at *6 (Bankr.
D.D.C. Nov. 30, 2001) (same); Atkinson v. Kestell,
954 F. Supp. 14, 16 (D.D.C. 1997) (same).
Second, if subject matter jurisdiction is found under § 1334(b),
then the extent to which a bankruptcy court, rather than a district
court, can adjudicate the matter must be determined pursuant to
28 U.S.C. § 157. Fed. Deposit Ins. Corp., 835 F.2d at 90 (the
bankruptcy court's power to adjudicate the case depends on whether the
matter is a "core" or "non-core" proceeding). A bankruptcy obtains its
jurisdiction by referral from the federal district court under
28 U.S.C. § 157(a). Exercising this referred jurisdiction, a bankruptcy court
may hear and determine "core proceedings" those that "aris[e]
under" title 11 of the Bankruptcy Code or "aris[e] in" a case brought
under that title. 28 U.S.C. § 157(b)(1) ("Bankruptcy judges may hear
and determine all cases under title 11 and all core proceedings
arising under title 11, or arising in a case under title
11 . . . and may enter appropriate orders and judgments. . . .")
(emphasis added)).*fn10 Other proceedings that are otherwise
related to title 11 cases are considered non-core
proceedings. "A bankruptcy judge may hear a proceeding
that is not a core proceeding but that is otherwise related
to a case under title 11." 28 U.S.C. § 157(c)(1) ...