Tag: Forum Selection Clause

WHAT’S SELECTED TO HAPPEN IN VEGAS, STAYS IN VEGAS: CHANCERY COURT ENFORCES FORUM SELECTION CLAUSE IN RE-DOMESTICATED NEVADA CORPORATION BYLAWS, DESPITE ALLEGED VIOLATIONS OCCURRING WHILE ENTITY WAS A DELAWARE CORPORATION

By David L. Forney and Lauren McFadden

In Sylebra Capital Partners Master Fund, Ltd., and P Sylebra Ltd. v. Ronald O. Perelman et al., C.A. No. 2019-0843-JRS (Del. Ch. October 9, 2020), Sylebra Capital Partners Master Fund, Limited and P Sylebra Ltd. (together, “Plaintiff”), had sued Scientific Games, a Nevada corporation (“Company”), and its controlling stockholder and members of its Board (“Defendants”) for breaches of fiduciary duty and violations of the Delaware General Corporation Law (“DGCL”). The Company’s Nevada bylaws, however, contained a provision requiring stockholders to bring claims for breach of fiduciary duty in the courts of Clark County, Nevada. The Delaware Court of Chancery (the “Court”) granted Defendants’ motion to dismiss and held that Plaintiff’s claims were subject to the forum selection provision in the bylaws of the Company and must be brought in Nevada courts.

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CHANCERY COURT APPLIES INTERNAL AFFAIRS DOCTRINE TO DECLARATORY ACTION FOR INSPECTION RIGHTS SOUGHT UNDER CALIFORNIA LAW

By: Annette E. Becker and Claire Suni

In Juul Labs, Inc. v. Daniel Grove, C.A. No. 2020-0005-JTL (Del. Ch. August 13, 2020), defendant and e-cigarette maker Juul Labs, Inc. (“Juul”) is a privately held Delaware corporation with its principal place of business in California. The Delaware Court of Chancery (the “Court”) granted in part Juul’s motion for declaratory judgment, which sought confirmation that a stockholder seeking inspection rights was limited to rights and remedies under the Delaware General Corporation Law (“DGCL”), and could not apply California law, among other things. The Court held that inspection rights are a matter of internal affairs under the internal affairs doctrine articulated by the Supreme Court, and thus Delaware law applies.

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Court of Chancery Hesitates to Dismiss Lawsuit, Stays Litigation Pending Texas Lawsuit

By: Scott E. Waxman and Marissa Leon

In EnVen Energy Corporation v. David M. Dunwoody, Jr., et al. (C.A. No. 2019-0579-KSJM), the Delaware Court of Chancery (the “Court”) stayed litigation pending the outcome of a separate lawsuit filed in Texas to give deference to a plaintiff’s chosen forum, to avoid wasting judicial resources and to foreclose potential conflicting rulings.

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CHANCERY COURT DECLINES TO MOVE BOOKS AND RECORDS DISPUTE TO NEW YORK DESPITE NEW YORK VENUE CLAUSE IN LLC AGREEMENT

By: Scott Waxman and Claire Suni

In Joseph Stanco v. Rallye Motors Holding LLC, C.A.  No. 2019-0751-SG (Del. Ch. Dec. 23, 2019), a former managing member of a Delaware limited liability company (“LLC”) brought an action to compel inspection of the company’s books and records in the Delaware Court of Chancery (the “Court”).  The company moved to dismiss the action on the basis that (i) its LLC Agreement designated New York as the venue for dispute resolution and (ii) a different plaintiff was simultaneously pursuing a similar action with respect to the same documents in New York.  The Court was not persuaded by either of the company’s arguments and denied its motion to dismiss.

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COURT OF CHANCERY DENIES ITALIAN CITIZEN’S MOTION TO DISMISS

By:  Scott E. Waxman and Rachel Cheasty Sanders

In AlixPartners, LLP et al. v. Giacomo Mori, Case No. 2019-0392-KSJM (Del. Ch. Nov. 26, 2019), the Delaware Court of Chancery addressed Defendant Giacomo Mori’s motion to dismiss for (1) lack of subject matter jurisdiction and standing, (2) lack of personal jurisdiction, (3) improper venue, and (4) failure to state a claim. Defendant primarily contended that two foreign laws divested the Court of subject matter jurisdiction and that the forum selection clauses contained in particular agreements to which he was a party were unenforceable.  The Court rejected Defendant’s contentions finding that the claims against Defendant were transitory in nature and did not divest the Court of subject matter jurisdiction, the forum selection clauses were sufficient to establish personal jurisdiction over Defendant, and that Plaintiffs’ compliant adequately stated numerous claims. In denying Defendant’s motion to dismiss, however, the Court stayed certain counts against Defendant which arose solely from his employment agreement with one of the Plaintiffs on the basis of the doctrine of forum non conveniens.

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COURT OF CHANCERY RULES ON THE APPLICABILITY OF FORUM SELECTION CLAUSES TO NON-SIGNATORIES TO A CONTRACT AND A PLAINTIFF’S BURDEN IN ALLEGING BREACH OF THE “COMMERCIALLY REASONABLE EFFORTS” STANDARD

By: Scott E. Waxman and Teresa Teng

In Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Sep. 18, 2019), the Delaware Court of Chancery granted a motion to dismiss by a defendant parent company, whose subsidiary entered into a purchase agreement containing a Delaware forum selection clause. The court applied the “closely related” test in finding that the plaintiff failed to allege sufficient facts to show that the non-signatory parent entity was “closely related” to the underlying purchase agreement and as a result, plaintiff could not bind the parent entity to the agreement’s forum selection clause.

In the subsequent Neurvana Medical, LLC v. Balt USA, LLC et al., C.A. No. 2019-0034-KSJM (Del. Ch. Feb. 27, 2020), the court split its decision in granting the motions to dismiss for lack of personal jurisdiction over one of the defendant officers of the purchaser in the transaction, and for failure to state a claim with respect to all but one count of the plaintiff’s complaint. The court denied the motion to dismiss for lack of personal jurisdiction with respect to another officer of the purchaser who had also served as chairman of the board of the seller. The court also denied such defendant’s motion to dismiss on the cause of action of breach of fiduciary duty.

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YES, WE HAVE NO ESTOPPEL: CHANCERY COURT RULES DERIVATIVE, DISMISSES DILUTED STOCKHOLDERS’ EX-TEXAS MERGER-RELATED CLAIMS

 By Remsen Kinne and Adrienne Wimberly

In Sheldon v. Pinto Technology Ventures, C.A. No. 2017-0838-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery in a Memorandum Opinion granted a motion to dismiss breach of fiduciary duty claims and other allegations brought by the founder and an early stockholder (“Plaintiffs”) of non-party IDEV Technologies, Inc., a Delaware corporation (“IDEV”). The Court found that Plaintiffs’ primary claims were derivative, rejecting Plaintiffs’ assertion that Defendants were judicially estopped by a Texas state court ruling from arguing for that characterization of the claims, and dismissed the complaint for failure to comply with Chancery Court Rule 23.1’s derivative claims demand or demand futility pleading requirements.

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CHANCERY COURT GRANTS MOTION FOR PRELIMINARY INJUNCTION REGARDING ENFORCEMENT OF FORUM SELECTION CLAUSE

By: Scott Waxman and Greyson Blue

In Village Green Holding, LLC, et al. v. Jonathan Holtzman, et al., Vice Chancellor Tamika Montgomery-Reeves granted plaintiff Village Green Holding, LLC’s (“Village Green”) motion for preliminary injunction regarding the enforcement of a forum selection clause and defendant Jonathan Holtzman’s (“Holtzman”) attempt to litigate a dispute in a separate forum. In rendering its decision, the Court illustrated the circumstances under which it will enjoin litigation that is pending in an alternate forum pursuant to a contract’s forum selection clause.

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