Reed Smith Client Alerts

The Delaware Superior Court, in West v. Access Control Related Enterprises, LLC et al., C.A. No. N17C-11-137-MMJ-CCLD (Del. Super. Ct. Dec. 9, 2020) (transcript), recently denied a plaintiff’s motion to voluntarily dismiss its Delaware lawsuit in favor of another action pending outside of Delaware that had been stayed pursuant to a Delaware forum selection clause, finding that dismissal was not necessary to preserve the plaintiff’s right to a jury trial.

Authors: Brian M. Rostocki Benjamin P. Chapple Alexandria P. Murphy

Background

The Delaware Superior Court’s decision arises from defendant Access Control’s termination of the plaintiff, West, “for cause.” The plaintiff was an officer and co-founder of Access Control and was terminated after Access Control allegedly learned that the plaintiff was pursuing a management buyout and had breached the Severance Agreement by sharing confidential financial information with third parties without the knowledge of Access Control’s board. West brought suit in the Delaware Superior Court (i) asserting claims for tortious interference, wrongful termination, breach of contract, and breach of the implied covenant; (ii) challenging the Access Control board’s allegedly improper termination of West “with cause” under a Severance Agreement, an Equity Incentive Plan, and an Equity Award Agreement; and (iii) seeking a declaratory judgment that obligations under a Non-Compete Agreement are unenforceable under California law. The Severance Agreement, Non-Competition Agreement, and Access Control’s LLC Agreement all include forum selection clauses requiring that claims be brought in a state court or federal court in Delaware.

Before bringing suit in the Delaware Superior Court, West had filed suit in California state court asserting claims for breach of fiduciary duty, wrongful termination, conversion, and declaratory judgment that obligations under the Non-Competition Agreement with Access Control are unenforceable. Access Control moved to dismiss or stay on forum non conveniens grounds based on the Delaware forum selection clauses in the Severance Agreement, the LLC Agreement, and the Non-Competition Agreement. In opposition, West argued that his claims arose under the Equity Incentive Plan, which did not contain a Delaware forum selection clause. The California court granted the motion to stay based on the forum selection clauses asserted by Access Control.

West then filed his complaint in the Delaware Superior Court alleging claims similar to those asserted by West in the stayed California action, but this time, West added a claim for breach of the Equity Award Agreement. Access Control moved to dismiss for lack of subject matter jurisdiction or to transfer to the Court of Chancery. The Superior Court ordered West to transfer his breach of fiduciary duty claim to the Court of Chancery.