Aveta, Inc. v. Colon

942 A.2d 603, 2008 WL 151859, 2008 Del. Ch. LEXIS 8
CourtCourt of Chancery of Delaware
DecidedJanuary 15, 2008
DocketCivil Action 2936-MG
StatusPublished
Cited by23 cases

This text of 942 A.2d 603 (Aveta, Inc. v. Colon) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aveta, Inc. v. Colon, 942 A.2d 603, 2008 WL 151859, 2008 Del. Ch. LEXIS 8 (Del. Ct. App. 2008).

Opinion

OPINION

CHANDLER, Chancellor.

Delaware’s courts frequently repeat the adage that only in rare cases can a defendant successfully defeat a plaintiff’s choice of forum. 1 It is even rarer that a defendant can defeat a plaintiff’s choice of forum that is mandated by a contractual forum selection clause. Because defendant here has made a sufficiently particularized showing of overwhelming hardship, I conclude that this is one of those especially rare cases and affirm the Master’s decision to stay this matter.

I. BACKGROUND

In August 2006, Aveta, Inc., a Delaware corporation and provider of Medicare services, purchased Preferred Medicare Choice, Inc. (“PMC”), a Medicare provider based in Puerto Rico and effected this purchase through a merger with its subsidiary, MMM Holdings, Inc. (“MMM,” or, collectively with Aveta and PMC, “plaintiffs” or simply “Aveta”). Pursuant to the purchase agreement governing the transaction, MMM acquired all the stock of PMC’s Class B shareholders, a group comprised of physicians alone.

Dr. Victor Delgado Colón (“Delgado” or “defendant”), a physician practicing in Manatí, Puerto Rico, owned 30,000 Class B shares at the time of the purchase. Plaintiffs allege that Delgado received about $540,000 for his shares. Concerned because primary care physicians greatly influence where their patients enroll for Medicare coverage, Aveta sought to prevent the Class B shareholders from walking away with their patients after the consummation of the transaction. Thus, physicians who sold their Class B shares had to enter non-competition agreements with plaintiffs in which they promised not to invest in competing health care plans and not to encourage or induce their patients to terminate their enrollment in PMC’s plan for a period of two years.

*606 Notwithstanding this agreement, Delgado affiliated himself with a competitor of PMC early in 2007. Moreover, Aveta alleges that he lured hundreds of patients away from PMC in the process. As a result of this purported breach, Aveta initiated this suit on May 3, 2007, seeking compensatory damages and a permanent injunction specifically enforcing the non-competition agreement. Delgado obtained an extension to retain counsel and filed a motion to dismiss the complaint on July 27, 2007. Plaintiffs answered Delgado’s motion on August 31, 2007. On September 6, however, Delgado filed a declaratory judgment action against plaintiffs in the Commonwealth Court of Puerto Rico seeking a declaration that the non-competition agreement is unenforceable under Puerto Rican law (the law that the parties agree governs the substance of the contract).

The matter is complicated because, in addition to the non-competition agreement, the contract also contained a forum selection clause that provided:

Any Action or Proceeding based upon, arising out of or relating to this letter agreement may be brought in the federal and state courts located in the State of Delaware, and each of the parties irrevocably submits to the exclusive jurisdiction of such courts in any such Action or Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the Action or Proceeding shall be heard and determined only in any such court and agrees not to bring any action or proceeding arising out of or relating to this letter agreement or any transaction contemplated hereby in any other court. The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive any objections to venue or to convenience of forum. Process in any Action or Proceeding referred to in the first sentence of this paragraph may be served on any party anywhere in the world.

Aveta contends that this forum selection clause is determinative and effectively bars Delgado from proceeding with the suit in Puerto Rico. Delgado disagrees. He contends that he should not be bound by this forum selection clause because the negotiation process was flawed. Delgado, who is not fluent in English, never read the agreement, was never provided with a copy in either English or Spanish, and was never told that by signing he agreed to the exclusive jurisdiction in Delaware. The son of one of the Class A controlling shareholders simply called Delgado and told him he had to sign an agreement to receive his funds for the sale of his shares. Delgado concedes that he signed the agreement, but maintains that enforcement of the forum selection clause would impose an overwhelming hardship on him.

On September 26, 2007, Master Sam Glasscock III heard oral argument on Delgado’s motion and issued a final bench report. In this report, the Master declined to dismiss for want of jurisdiction or for lack of process because he found Delgado’s argument that he never read the agreement unpersuasive. 2 Nevertheless, the Master decided to stay the first-filed Delaware action to allow the Puerto Rican case to move forward. He emphasized *607 that the enforceability of the non-competition agreement was an issue of first impression under Puerto Rican law that implicated public policy concerns about the doctor/patient relationship.

Plaintiffs filed exceptions to the Master’s report on October 5, 2007. Specifically, plaintiffs took exception to the Master’s decision to stay the case pending the Puer-to Rican court’s determination of the enforceability of the non-competition agreement. Plaintiffs’ argument is twofold: first, the stay is inconsistent with the Master’s ruling that the forum selection clause is enforceable; second, Delgado has not shown sufficient hardship to defeat the plaintiffs’ choice of forum under a forum non conveniens analysis. Briefing on plaintiffs’ exceptions was complete on November 29, 2007, and I now conclude that the Master’s decision to stay is correct.

II. ANALYSIS

A. Standard of Review

The Court of Chancery has “both inherent and statutory authority to refer any matter within the court’s jurisdiction to a master,” but the master’s rulings “are not final until reviewed and adopted by a judge.” 3 When considering objections to a master’s report, this Court reviews de novo the master’s legal and factual conclusions. 4 Where, as here, neither party takes exception to any of the master’s factual findings, the Court “may review the record de novo accepting the master’s facts in the same way that the judge would resolve a dispute presented on a stipulated set of facts.” 5

B. Legal Standards of Forum Non Con-veniens

Delaware courts afford a great deal of respect to a plaintiff’s choice of forum, 6

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Cite This Page — Counsel Stack

Bluebook (online)
942 A.2d 603, 2008 WL 151859, 2008 Del. Ch. LEXIS 8, Counsel Stack Legal Research, https://law.counselstack.com/opinion/aveta-inc-v-colon-delch-2008.