The Delaware Court of Chancery rejected a foreign citizen’s efforts to dismiss a lawsuit affecting a Delaware limited liability partnership in favor of his preferred forum in Italy. While AlixPartners confirmed that an American court’s legal authority is not absolute, a defendant bears the difficult burden of establishing the “limited circumstances” under which a Delaware court will not exercise jurisdiction over a dispute requiring the interpretation of foreign law. Where the dispute touches on the internal affairs of a Delaware entity, the burden is beyond daunting and approaching the realm of impossible.
The plaintiff limited liability partnerships filed suit against the former managing director of their Italian subsidiary, arising out of the defendant’s purported efforts to download files from his work-issued computer prior to his termination. The lawsuit included claims for breach of contract related to the defendant’s employment agreement, declaratory relief as to the plaintiffs’ decisions to exercise their contractual rights to repurchase and terminate the defendant’s equity, misappropriation of trade secrets, and common-law conversion. The defendant moved to dismiss the lawsuit based on a lack of subject matter jurisdiction, with the Italian citizen arguing that a European Union regulation and provision of the Italian civil and labor procedure code divested the Court of Chancery of jurisdiction. The vice chancellor denied the motion but stayed the claim arising out of the defendant’s employment agreement and the cause of action for conversion.
As a general matter, a foreign law will not unilaterally divest an American court of the power to decide a dispute. An American court is fully capable of resolving foreign disputes, and “[t]here are only ‘limited circumstances’ in which Delaware courts ‘will not exercise subject matter jurisdiction over a dispute that is predicated on foreign law where the foreign state has vested jurisdiction exclusively in its own courts.’” This case was not one of them. Relying on precedent, the Court of Chancery found that the plaintiff’s claims were transitory in nature, so “the right and the remedy [were] not so inseparably united as to make the right dependent upon its being enforced in a particular tribunal.” Neither the European Union regulation nor the Italian labor law created the right or remedy sought to be enforced, and thus the plaintiff’s causes of action were not “inseparably united” with any foreign law requiring enforcement in a foreign tribunal.
AlixPartners confirms what most onlookers already suspect—the Court of Chancery will not refrain from deciding a matter within its jurisdiction, particularly a controversy implicating the internal affairs of a Delaware limited liability company. While the court exercised restraint in staying certain claims based on forum non conveniens, it did not hesitate in exercising jurisdiction over disputes involving the operation of a Delaware corporate entity. The plaintiff’s claims for relief did not stem from or arise out of foreign law. Although certain acts giving rise to the claims occurred on foreign soil, the rights and remedies underlying the lawsuit were not inseparable from European law such that the case must have been decided in Italy. To the contrary, the rights and remedies concerned matters of Delaware corporate governance that necessitated the Court of Chancery’s jurisdiction.
AlixPartners, LLP, et al. v. Giacomo Mori, C.A. No. 2019-0392-KSJM (Del. Ch. Nov. 26, 2019)