The Saga Continues: Part II
On June 1, 2023, the majority of an en banc panel of the Ninth Circuit found that Gap Inc.’s forum selection clause does not violate the anti-waiver provision of the Securities Exchange Act of 1934 (the “Exchange Act”) or Delaware law, entrenching its split with the Seventh Circuit’s circuit ruling on the same questions and ensuring that the enforcement of forum selection clauses across jurisdictions will remain unsettled for the foreseeable future.
You Might Think Your Arbitration Is Confidential…But, In Delaware, The Court Will Decide
Practitioners rely on ostensibly ironclad provisions of protective orders to withhold documents or portions thereof from public view. And that is particularly so in arbitrations, which are generally private proceedings. But a recent Delaware Court of Chancery opinion issued by Vice Chancellor Paul A. Fioravanti, Jr. serves as a reminder that practitioners should be mindful that rules of the court regarding confidentiality may differ from arbitration rules or even stipulated confidentiality agreements among arbitration parties.
Collision Course: The Consequences of Conflicting Forum-Selection Provisions
On January 6, 2023, Vice Chancellor Laster issued an opinion in Fairstead Capital Management LLC v. Blodgett concerning a “dispute-resolution collision” between two applicable forum-selection clauses. The collision arises from the termination of a principal of an investment fund, whose partners fired him for allegedly breaching his employment agreement and also cancelled his member interests in two LLCs that owned rights to the profits generated by the fund. Unhappy with his ouster, the former principal wanted to litigate against his former partners and the LLCs. But that raised the question at the core of this Vice Chancellor Laster’s opinion: where to litigate?
Court Takes Buzzsaw To Bid To Arbitrate Claims Against Buzzfeed
The Delaware Court of Chancery recently held that BuzzFeed was not required to arbitrate stock conversion claims brought by its former employees following Buzzfeed’s 2021 SPAC merger. Vice Chancellor Zurn granted BuzzFeed and its officers and directors an anti-arbitration injunction and rejected Plaintiffs’ argument that the Court of Chancery lacked subject matter jurisdiction over the claims. In doing so, the court offered a thoughtful application of contract law and law on arbitrability to a post-SPAC transaction dispute.
The Forum Selection Saga Continues
On October 24, 2022, the Ninth Circuit granted en banc review in Lee v. Fisher 34 F.4th 777 (9th Cir. 2022), vacating the Circuit’s prior ruling that the forum selection clause in the bylaws of Gap Inc. (“Gap”) is enforceable. This is the latest chapter in the saga of forum selection enforceability that has gripped the Courts and litigants for years. With this ruling, the Ninth Circuit is set to consider whether forum selection clauses are enforceable, even if they result in a waiver of substantive rights under federal law. A ruling enforcing Gap’s clause will leave the Ninth and Seventh Circuits in direct conflict, while a ruling against Gap could bring the two circuits back into alignment.
General Counsel’s Natural Habitat: Delaware Court of Chancery Court Holds that LLC Act’s Consent-to-Jurisdiction Statute Extends to a Delaware LLC’s General Counsel
The Delaware Court of Chancery recently interpreted the Delaware Limited Liability Company Act’s (“LLC Act”) provision for service on any “person” who “participates materially in the management” of a Delaware LLC as sufficient to support implied consent to Delaware jurisdiction by a Delaware LLC’s general counsel. In past cases, the Delaware Court of Chancery found that this material-participation standard applies to LLC officers who hold the title of president and perform functions customarily associated with that role. But in In re P3 Health Group Holdings, LLC, No. 2021-0518-JTL, Vice Chancellor Laster considered the plain meaning of “participates materially” and those words’ “natural habitat” in other statutes like the federal tax code and Delaware General Corporation Law’s (“DGCL”) consent-to-jurisdiction statute for corporate officers, and held that the LLC Act’s consent-to-jurisdiction statute extends to any person who holds a “C-suite” position in a Delaware LLC, including an LLC’s general counsel. C-suite executives of Delaware LLCs should thus anticipate that they may be subject to jurisdiction in Delaware for claims involving their actions as senior officers of a Delaware entity going forward.
