A recent Court of Chancery decision is noteworthy for its analysis of the interfacing between a forum selection clause requiring Delaware jurisdiction and the law of a foreign country ostensibly granting exclusive jurisdiction to the courts of that foreign country. In AlixPartners, LLP v. Mori, No. 2019-0392-KSJM (Del. Ch. Nov. 26, 2019), the court explained, relying on Delaware Supreme Court decisions, that in only very limited circumstances will the law of a foreign country that provides for exclusive jurisdiction in that foreign country, divest Delaware courts of subject matter jurisdiction–especially when a forum selection clause between the parties before it provided for exclusive Delaware jurisdiction. (A graphic of the Roman forum seemed appropriate for this case.)
The facts of this case involve an intricate web of connected and overlapping agreements and related Delaware and foreign entities. For purposes of this short overview, the key facts are that an employee of an Italian subsidiary of a Delaware entity, who had an employment contract governed by Italian law, also signed a partnership agreement with the Delaware entity that had a non-solicitation clause and a Delaware forum selection clause. The employee was accused of downloading confidential information and related activity in violation of the Delaware agreement. However, Italian law required the claims under the employment agreement governed by Italian law to be pursued exclusively in the courts of the country of Italy, even without a forum clause in that agreement.
This case features an unusual twist on the many cases highlighted on these pages over the last 15 years involving the enforceability of forum selection clauses.
- The court rejected defenses based on the applicable law of Italy and the law of the European Union–which required that certain claims be pursued in Italy–and explained that such foreign laws did not divest the Delaware court of subject matter jurisdiction, especially in light of an applicable forum selection clause providing for Delaware courts to address the majority of the disputes at issue.
- The court relied on two Delaware Supreme Court cases that addressed the very limited circumstances where a foreign country’s exclusive jurisdictions statute will divest the Delaware courts of jurisdiction. See Slip op. at 14 and footnotes 44 and 45.
- The court also explained, relying on prior Delaware court decisions, that even a non-signatory can be bound to a forum selection clause–which is also considered to constitute consent to personal jurisdiction that satisfies a due process analysis. See pages 25 to 29.
- The court explained that a forum selection clause supersedes any defense based on forum non conveniens as well as an argument based on international comity.
- Nonetheless, the court found that the employment agreement involved in this case, that had an Italian choice of law clause (but no forum selection clause), supported the entry of a stay of the claims related to that employment agreement based on forum non conveniens, and that result is also supported by the fact that Italy had the most substantial relationship to all the facts, the issues and the witnesses, who likely would not be subject to compulsory process in Delaware.
- But see footnote 138, in which the court requires the parties to meet and confer to determine if there is a way to stay the proceedings “in Delaware or Italy to avoid having both courts determine overlapping issues.” The court reserved its right to reconsider its ruling on the stay depending on the outcome of the parties’ efforts to determine whether duplication of efforts can be avoided by the courts of Delaware and Italy.