Parfi Holding Ab v. Mirror Image Internet, Inc.

817 A.2d 149 (2002)

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Nature of the Case

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Facts

Mirror Image (D) was formed in 1997 as a subsidiary of Mirror AB, a Swedish corporation. By 1999, Mirror AB had to seek outside investors who could provide enough funds so that D could meet its short-term obligations and stave off bankruptcy. D entered into an agreement with Xcelera Inc., and Plenteous Corp. The Underwriting Agreement provided D $2 million in capital, $1.75 million of which would be contributed by Xcelera and the balance provided by Plenteous. Xcelera became the controlling stockholder with a 62% interest in D. The Agreement granted Xcelera and Plenteous the right to appoint four directors each to the D board of directors. Mirror AB retained the right to appoint one director. The parties also agreed that any dispute, controversy or claim 'arising out of or in connection with this Agreement, or the breach, termination or invalidity thereof, shall be settled by arbitration' in Sweden. Xcelera initiated a series of transactions and Mirror AB formed Parfi Holding AB (P), which proceeded, along with Plenteous, Grandsen, and Gillberg, to challenge Xcelera's actions. P raised a breach of contract claim against D. In part, P claimed that D issued discounted stock to P which increased P's ownership from 63 percent. Mirror issued discounted stock to Xcelera to increase Xcelera’s ownership share from 62.5 to 91.8 percent. Arbitration was initiated under the contract and Plenteous was the only party who recovered. The contract claims P presented at arbitration did not involve a breach of any specific provision of the Underwriting Agreement. P then sued D in Chancery for a breach of fiduciary duties. The court held that the broad arbitration agreement covered such a claim and held for D in summary judgment. P appealed.