241 A.3d 784
Del. Ch.2020Background
- Focus Financial Partners (Delaware LLC) awarded incentive-unit compensation to employee Scott Holsopple, conditioned on execution of Focus Parent unit agreements that included restrictive covenants and choice-of-law/forum clauses.
- Holsopple worked primarily from San Francisco after relocating to California, signed multiple unit agreements there, then resigned and joined competitor Hightower.
- Focus Parent sued in Delaware alleging breaches (restrictive covenants, confidentiality, trade-secret misappropriation, tortious interference); Holsopple and Hightower sued in California seeking declarations that the covenants and forum/choice-of-law clauses are unenforceable under California law.
- Holsopple moved to dismiss the Delaware suit for lack of personal jurisdiction; Focus Parent relied solely on Delaware forum-selection provisions in two unit agreements and in two operating agreements as the jurisdictional basis.
- The court conducted a Restatement-based choice-of-law analysis, held California law (and Cal. Lab. Code §925) governs the employment-related provisions, found a true conflict with Delaware law, and concluded §925 voids the Delaware forum/choice clauses as to the employee’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Delaware forum clauses in Unit Agreements confer personal jurisdiction over Holsopple | Forum clauses are binding contractual consent to Delaware jurisdiction | Section 925 of California law voids forum/choice-of-law provisions in agreements required as a condition of employment | Court: Forum clauses in the Long‑Term and Omnibus Unit Agreements are unenforceable under California law; they cannot supply jurisdiction; Holsopple dismissed |
| Governing law for the Unit Agreements (Delaware vs. California) | Delaware-law provisions in the agreements control | Restatement §188/§196 factors make California the default for employment-related provisions; true conflict exists | Court: For employment-related provisions, California is the default; a true conflict exists and California law applies |
| Applicability of Cal. Lab. Code §925 (condition of employment; counsel exception) | Agreements were not a condition of employment and/or employee may have had counsel | Unit agreements were tied to significant compensation (conditioned receipt/vesting); Holsopple lacked individual counsel negotiating terms | Court: Signing was a condition of receiving compensation; Holsopple was not represented in negotiation; §925 applies, rendering choice-of-law/forum clauses voidable by employee |
| Whether Operating Agreement forum clauses (2017/2018) establish jurisdiction | Operating agreements’ Delaware forum clauses bind members and thus confer jurisdiction | 2017 agreement was superseded by 2018; 2018 forum clause (to the extent it would reach employment claims) is subject to §925 because Holsopple became a member via conditioned unit agreements | Court: 2017 operating agreement superseded; 2018 operating agreement forum clause cannot supply jurisdiction for enforcement of the employment-related provisions because §925 overrides it |
Key Cases Cited
- Certain Underwriters at Lloyds v. Chemtura Corp., 160 A.3d 457 (Del. 2017) (applies Restatement §187 framework for contractual choice-of-law disputes)
- Nat’l Indus. Group v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373 (Del. 2013) (forum-selection clauses amount to consent to personal jurisdiction)
- M/S Bremen v. Zapata Offshore Co., 407 U.S. 1 (U.S. 1972) (forum clauses unenforceable where enforcement would contravene strong public policy)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (forum-selection clauses and consent to jurisdiction principles)
- Int’l Shoe Co. v. Washington, 326 U.S. 310 (U.S. 1945) (minimum contacts due-process standard)
- In re Carlisle Etcetera LLC, 114 A.3d 592 (Del. Ch. 2015) (Delaware retains sovereign interest in entities it charters; limits purely contractarian view of LLC law)
- Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020) (internal affairs doctrine does not encompass employer–employee relations)