Seokoh, Inc. (Seokoh) and Lard-PT, LLC (Lard) entered into a joint venture agreement to operate Process Technologies and Packaging, LLC (PTP or the Company). The PTP operating agreement (the Agreement) included a provision for resolving a deadlock between Seokoh and Lard. Specifically, in the case of a deadlock, the two chief executive officers of PTP’s parent companies would meet in an attempt to resolve. If the deadlock remained unresolved, the Agreement provided a mechanism whereby either Seokoh or Lard had the ability to buy or to be bought out by the other member of the joint venture.
The Agreement also contained an exclusive forum selection clause that stated that any “suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement …whether in contract, tort, or otherwise, shall be brought exclusively in the state or federal courts located in New York, New York.”
After the parties found themselves in a deadlock, the procedures in the Agreement failed to remedy the impasse, and the parties remained at loggerheads for approximately two years. During this time, PTP was losing money as well as key personnel. Seokoh filed suit in a New York court, claiming that Lard was in breach of the deadlock procedure. Lard counterclaimed, alleging that Seokoh was the breaching party and sought specific performance under the Agreement. The New York court determined on summary judgment that Lard’s theory was flawed, and that it could not obtain specific performance. The remaining issues in New York were stayed.
On July 23, 2020, Seokoh filed a petition of dissolution in the Delaware Court of Chancery alleging it was no longer reasonably practicable for PTP to carry on its business affairs in conformity with the Agreement. Lard sought a TRO in New York to stop the Delaware action, which was granted and later vacated once the New York court rejected Lard’s claims of breach.
Lard moved to dismiss the Delaware action, arguing that dissolution was unwarranted because the Agreement provides a sufficient means by which Seokoh can buy Lard out of the joint venture – the same theory that was considered and rejected in New York – and any such action regarding the deadlock procedure must be brought in New York under the Agreement’s forum selection clause. Lard also claimed that Seokoh failed to state a claim for dissolution.