Debevoise & Plimpton LLP successfully defeated a motion to dismiss involving a novel question of Delaware Court of Chancery subject-matter jurisdiction. The ruling permits client Sun Life Assurance Company of Canada to proceed on its breach of contract claim against Group One Thousand One (“G1001”).
The underlying contract dispute arose following G1001’s purchase of several of Sun Life’s subsidiaries. Sun Life brought a breach-of-contract action in Delaware Superior Court against G1001 for declining to pay over a tax refund pursuant to the parties’ stock purchase agreement. In response, G1001 moved to dismiss or transfer the action to the Delaware Court of Chancery, citing the agreement’s forum selection clause designating the Court of Chancery as the parties’ first choice for actions arising under the agreement.
G1001—an LLC—put forward a novel jurisdictional argument involving the Delaware LLC statute. Section 18-111 of the Delaware Limited Liability Act (“LLC Act”), 6 Del. C. Section 18-111, lists five categories of LLC disputes where the Court of Chancery has jurisdiction. The first four categories cover specific kinds of disputes, and the fifth is a catchall that extends to all contracts or certificates “contemplated by” any other provision of the LLC Act. G1001 acknowledged that none of the specific categories applied to the agreement but argued the fifth category should be read to grant “broad” jurisdiction to the Court of Chancery, and, since G1001 was an LLC, it applied. No court had definitively addressed this argument.
In response, Sun Life’s brief, submitted by Debevoise attorneys Daniel M. Abuhoff and Matthew D. Forbes, argued the catchall clause extends only to agreements involving the internal workings of an LLC or those explicitly contemplated by a provision of the LLC statute; the clause was not meant to broadly extend the Court of Chancery’s jurisdiction to all LLC contract disputes. Since G1001’s inner workings were not at issue, and a stock purchase agreement is not explicitly contemplated by a provision in the LLC statute, the catchall clause was not implicated.
The Superior Court ruled in Sun Life’s favor, denying G1001’s motion and holding, as the Debevoise brief argued, that to fall under the catchall clause, a case must involve an agreement that is “expressly referenced or contemplated” by the LLC act; mere involvement of an LLC is not sufficient. Because stock purchase agreements are not expressly referenced in the LLC act, the Court of Chancery lacked jurisdiction.
The Superior Court’s decision is available here and was recently reviewed in an article in the Delaware Business Court Insider.
Mr. Abuhoff is a partner and member of the firm’s Litigation Department.
Mr. Forbes is an associate in the Litigation Department.
Debevoise & Plimpton is a premier law firm with market-leading practices, a global perspective and strong New York roots. We deliver effective solutions to our clients’ most important legal challenges, applying clear commercial judgment and a distinctively collaborative approach.