BW Piezo Holdings LLC v. Phillips
N16C-08-214 RRC
| Del. Super. Ct. | Apr 18, 2017Background
- BW Piezo, Piezo Investment Holdings, and Channel sued former CEO Ralph Phillips in Delaware for breach of a promissory note, pledge agreement, and a severance agreement/release, and sought declaratory relief about LLC/mirror‑unit agreements.
- Phillips had an Employment Agreement with Channel containing an exclusive California forum selection clause; the Promissory Note and Pledge Agreement each contained non‑exclusive Delaware forum selection clauses.
- Phillips sued the plaintiffs in California alleging misrepresentations and seeking rescission of the Promissory Note, Pledge Agreement, Employment Agreement, and equity grants.
- Plaintiffs amended the Delaware complaint to add parties and claims (including breach of the severance release and declaratory claims) after the California suit was filed; timing and relation‑back were disputed.
- Phillips moved to dismiss for improper venue (relying on the Employment Agreement’s exclusive California clause) or, alternatively, to stay the Delaware action as the California proceedings would decide core issues.
- The Delaware Superior Court granted Phillips’s alternative motion to stay the Delaware litigation pending resolution of the California action, without deciding the dismissal motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Employment Agreement’s exclusive California forum clause require dismissal of related Delaware claims? | The Employment clause does not govern claims arising under the Promissory Note, Pledge, or Severance Agreement; those later agreements specify Delaware venue. | All claims relate to the Employment Agreement and thus fall under its exclusive California forum clause. | Not decided on the merits; court stayed Delaware action instead of resolving dismissal. |
| Should the Delaware action be stayed pending the California litigation? | Plaintiffs argued amendment related back to original Delaware filing, so stay was unnecessary. | California action addresses validity of the Employment Agreement and is the appropriate forum; stay warranted. | Stay granted: Delaware court exercised discretion to stay pending California resolution because key issues (validity of Employment Agreement) will be resolved there. |
| Do related agreements require a single forum to avoid inefficiency and inconsistent rulings? | Plaintiffs favored Delaware for certain contract claims. | Phillips argued California should adjudicate employment‑related issues that could moot Delaware claims. | Court emphasized efficiency and avoidance of claim‑splitting; stayed Delaware case to let California resolve overlapping dispositive issues. |
| Is McWane first‑filed doctrine applicable to require dismissal or stay? | Plaintiffs relied on relation‑back to original filing date to preserve priority. | Phillips invoked first‑filed principles to support stay. | Court found McWane inapplicable here (McWane concerns when Delaware is not the first filed), and stayed on other grounds. |
Key Cases Cited
- Ingres Corp. v. CA, Inc., 8 A.3d 1143 (Del. 2010) (forum‑selection clauses are presumptively valid and enforceable absent strong reasons not to enforce)
- Ashall Homes Ltd. v. ROK Entertainment Group, 992 A.2d 1239 (Del. Ch. 2010) (courts should avoid bifurcating related contract disputes between forums to prevent inefficiency and inconsistent results)
- McWane Cast Iron Pipe Corp. v. McDowell‑Wellman Eng’g Co., 263 A.2d 281 (Del. 1970) (doctrine addressing treatment of first‑filed actions and claim‑splitting; applicable when Delaware action is not first filed)