Hsin-Chi-Su AKA Nobu Su v. Vantage Drilling Company
474 S.W.3d 284
Tex. App.2015Background
- Vantage Drilling (a special-purpose acquisition company) contracted with shipping magnate Nobu Su and his affiliates to buy rigs and an option/purchase of the drillship "Platinum Explorer." Su's wholly-owned entity F3 Capital received large blocks of Vantage stock (about 72.2 million shares) and warrants in connection with the transactions.
- Su joined Vantage’s board after closing. Vantage later discovered Su had misrepresented the payment schedule under the underlying Daewoo shipbuilding contract (he had claimed a 30/70 structure but the Daewoo contract required multiple small installments and an 80% final payment).
- Su delayed providing the complete Daewoo contract, demanded early payments, conditioned cooperation on unrelated renegotiation, and pledged/attempted to pledge significant Vantage shares (held by F3) as collateral for other Su-controlled entities.
- Vantage sued Su in state court for fraud, breach of fiduciary duty, and unjust enrichment and sought a temporary injunction to prevent Su (and those acting in concert) from selling, pledging, or encumbering the shares. The trial court granted the injunction and set a bond of $125,695.81.
- Procedurally, the case had been removed to federal court and a Fifth Circuit mandate ordered remand; but the federal district court had not yet (until after the injunction) signed and mailed a remand order when the state court entered the injunction. Su appealed arguing lack of state-court jurisdiction and challenged the merits of the injunction and the bond amount.
Issues
| Issue | Plaintiff's Argument (Vantage) | Defendant's Argument (Su) | Held |
|---|---|---|---|
| Whether state court had jurisdiction to issue the temporary injunction before a federal remand order was signed/mailed | The Fifth Circuit’s decision and mandate effectively required remand; the federal court’s later ministerial remand order did not alter that intent, and Su waived any procedural defect by litigating in state court | The state court lacked subject-matter jurisdiction because no remand order had been signed/mailed as required by 28 U.S.C. §1447(c) | Court held the case was effectively remanded and Su waived the procedural remand-compliance complaint; state court had jurisdiction to enter the injunction |
| Whether injunction improperly bound non-party F3 Capital | Vantage: injunction binds Su and those in active concert; F3 is controlled entirely by Su and received actual notice, so injunction may reach shares held by F3 | Su: F3 was not a party; Rule 124 bars judgment against non-parties | Court: injunction applies to parties and those in active concert per Tex. R. Civ. P. 683; evidence shows F3 acted in concert and was controlled by Su, so injunction validly restrained the shares |
| Whether Vantage proved probable right to recover the shares (fraud/constructive trust/disgorgement) | Vantage: Su fraudulently induced the deal (misrepresenting Daewoo payment terms) and breached fiduciary duties as a director; unjust enrichment and tracing support constructive trust or disgorgement over shares (including those held by F3) | Su: many shares were obtained before he became a fiduciary; disgorgement is inappropriate; F3 is a separate transferee without fiduciary duty | Court: evidence supported fraudulent inducement and unjust enrichment for shares obtained before and after Su became fiduciary; constructive trust/disgorgement are available and F3 cannot claim ignorance because Su wholly controls it; probable right to recover shares established |
| Whether injunction applicant proved probable, imminent, irreparable harm and adequacy of bond amount | Vantage: Su had encumbered or attempted to encumber millions of shares (including in bankruptcy collateral), threatening Vantage’s equitable interest and rendering relief ineffective absent an injunction | Su: injunction would cause massive business harm; bond was insufficient (he testified $1.5 billion loss) | Court: evidence of encumbrances (including pledges) established probable, imminent, irreparable injury; Su’s $1.5B assertion was conclusory, so trial court did not abuse discretion in setting the $125,695.81 bond |
Key Cases Cited
- Butnaru v. Ford Motor Co., 84 S.W.3d 198 (Tex. 2002) (elements and extraordinary-nature standard for temporary injunction)
- Gonzalez v. Guilbot (Guilbot Serros de Gonzalez v. Gonzalez Guilbot), 315 S.W.3d 533 (Tex. 2010) (remand order delivery and intent to divest federal jurisdiction)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (elements of fraud)
- ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (disgorgement as remedy for fiduciary breach)
- Binford v. Snyder, 189 S.W.2d 471 (Tex. 1945) (constructive trust when legal title obtained by fraud or unconscionable means)
- Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) (disgorgement and fiduciary duty principles)
- TMT Procurement Corp. v. Alvarez, 764 F.3d 512 (5th Cir. 2014) (bankruptcy court’s use of pledged Vantage shares and subsequent vacatur by Fifth Circuit)