464 B.R. 635
D. Del.2011Background
- Plaintiff Kurz served on EMAK's Board from 1990–2005 and rejoined in 2009 with an indemnification/advancement agreement.
- The Agreement allows advancement of fees and expenses in any proceeding related to Kurz's role as director, including enforcement costs.
- Section 22 grants Delaware Chancery exclusive jurisdiction for actions arising from the Agreement; a forum selection clause is present.
- Kurz filed an Advancement Action in Delaware Chancery on July 20, 2010 seeking enforcement of the Agreement across Delaware, California, and Advancement Actions.
- Defendant EMAK filed for Chapter 11 bankruptcy in the Central District of California in August 2010, triggering automatic stay of the Advancement Action and leading to removal to the district court in Delaware.
- Plaintiff later filed a proof of claim in the bankruptcy case, asserting indemnification for the Delaware, California, and Advancement Actions; the Special Litigation Committee objected to the California action as outside the Agreement’s scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the forum selection clause is enforceable | Defense consent to Delaware forum waives removability | Forum clause unenforceable due to public policy | Forum clause unenforceable in core bankruptcy context, supporting denial of remand |
| Whether the Advancement Action is a core bankruptcy proceeding | Advancement Action is a core claim due to its relation to the estate | Core status depends on the filing of a related proof of claim and its relation to the state action | Advancement Action is core; removal proper; forum clause not controlling |
| Whether equitable remand or transfer is appropriate | Remand to state court on equitable grounds; suit belongs in Delaware | Remand inappropriate; transfer to California bankruptcy court favored for efficiency | Equitable remand denied; transfer to Central District of California granted |
Key Cases Cited
- Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum selection clause presumptively valid unless public policy or other Bremem factors prohibit)
- In re Exide Techs., 544 F.3d 196 (3d Cir. 2008) (core vs non-core and effect on forum selection clauses in bankruptcy)
- In re Meyertech Corp., 831 F.2d 410 (3d Cir. 1987) (proof of claim affects core status when rooted in same facts as state action)
- Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995) (12-factor transfer analysis for venue)