Partners & Simons, Inc. v. Sandbox Acquisitions, LLC, C.A. No. 2020-0776-MTZ

Background

Plaintiffs (Partners & Simons and HY Connect) purchased Sandbox for $60 million under an Equity Purchase Agreement (EPA) and later alleged Sellers (including Alaris and Sandbox entities) and advisors perpetrated an accounting fraud that inflated the purchase price by ~$37.2 million.
Alaris, as controlling stockholder, installed Curtis Krawetz as Sandbox’s sole manager/board member; Krawetz signed the EPA for Acquisitions. Novo Advisors served as Sandbox’s financial advisor during the sale.
The EPA contains an express Delaware forum-selection clause specifying exclusive jurisdiction in Delaware courts for disputes relating to the agreement.
Novo and Krawetz are non-Delaware, non-party (Novo) or non-signatory-in-personal-capacity (Krawetz) defendants; they moved to dismiss for lack of personal jurisdiction under Ct. Ch. R. 12(b)(2).
The Court applied the Delaware “closely related” test for binding non-signatories to forum clauses (requiring either a direct benefit or foreseeability/control relationship) and concluded the forum clause did not confer jurisdiction over Novo or Krawetz.
The Court denied Plaintiffs’ request for jurisdictional discovery and dismissed Count II as to Novo and Krawetz for lack of personal jurisdiction.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether non-signatories (Novo, Krawetz) are bound by EPA’s Delaware forum-selection clause	EPA governs the transaction and those who participated in or benefited from it should be bound; Novo and Krawetz were central to the sale and fraud	Non-signatories did not consent and lack sufficient nexus to the EPA to be bound; no Delaware contacts	Court: No personal jurisdiction; forum clause does not bind Novo or Krawetz
Direct-benefit test for Novo	Novo earned substantial advisory fees tied to the Closing and thus directly benefited from the EPA	Fees were paid for advisory services to Sandbox and were not benefits under the EPA itself	Court: Novo’s alleged fees were indirect and attenuated; no direct benefit under the EPA; fails test
Direct-benefit test for Krawetz	As Sandbox’s sole manager and Acquisitions’ manager, Krawetz directly benefitted from closing the Transaction	Krawetz’s corporate positions predated and did not flow from the EPA; no allegation of a personal pecuniary or contractual benefit under the EPA	Court: Plaintiffs did not show a direct benefit to Krawetz arising from the EPA; fails test
Foreseeability / control (closely-related) test	Novo and Krawetz were foreseeable participants and effectively controlled the information flow; binding them prevents an end-run around the forum clause	Delaware’s foreseeability test is narrow and applies only where a signatory controls the non-signatory (controlled non-signatory); neither Novo nor Krawetz was controlled by a signatory	Court: Plaintiffs’ allegations do not meet the narrow foreseeability/control standard; cannot extend test to advisors or to a non-signatory who controls a signatory
Jurisdictional discovery request	Plaintiffs sought discovery on Novo’s role, fees, communications, and Krawetz’s compensation/benefits to support jurisdiction	Defendants submitted affidavits and engagement documents showing lack of ties to the EPA; discovery would be fishing	Court: Denied jurisdictional discovery as plaintiffs failed to make a non-frivolous prima facie showing; discovery would not cure the lack of ties

Key Cases Cited

Int’l Shoe Co. v. Washington, 326 U.S. 310 (constitutional minimum contacts standard)
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (due process and forum-selection/contacts principles)
Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023 (Del. 2012) (Delaware long-arm / jurisdiction framework)
Nat’l Indus. Group (Hldg.) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373 (Del. 2013) (forum-selection clauses and consent to jurisdiction)
Carlyle Inv. Mgmt. LLC v. Moonmouth Co. SA, 779 F.3d 214 (3d Cir. 2015) (binding non-signatory director under closely-related analysis; discussed and distinguished)
Ryan v. Gifford, 935 A.2d 258 (Del. Ch. 2007) (Rule 12(b)(2) prima facie showing and evidentiary approach to jurisdictional facts)