Kurz v. EMAK Worldwide, Inc.

464 B.R. 635, 2011 U.S. Dist. LEXIS 102906, 2011 WL 4048966
CourtDistrict Court, D. Delaware
DecidedSeptember 9, 2011
DocketCivil No. 11-375-NLH
StatusPublished
Cited by9 cases

This text of 464 B.R. 635 (Kurz v. EMAK Worldwide, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kurz v. EMAK Worldwide, Inc., 464 B.R. 635, 2011 U.S. Dist. LEXIS 102906, 2011 WL 4048966 (D. Del. 2011).

Opinion

OPINION

HILLMAN, District Judge.

Presently before the Court are Plaintiff Donald A. Kurz’s Motion to Remand to the State of Delaware’s Court of Chancery, and Defendant EMAK Worldwide Inc.’s Motion to Change Venue to the United States District Court for the Central District of California. For the reasons set forth below, Plaintiffs Motion to Remand [Doc. 3] will be denied, and Defendant’s Motion to Change Venue [Doc. 5] will be granted.

I. Background

Plaintiff served on Defendant’s Board of Directors (hereinafter “Board”) from 1990 until his resignation in 2005. At the request of its remaining members, Plaintiff rejoined the Board in 2009. As an incentive for his return, Defendant offered Plaintiff an indemnification agreement (hereinafter “Agreement”). This agreement provided Plaintiff with the right to the advancement of fees and expenses, including expenses related to enforcement of the Agreement, incurred in his capacity as director.1 Section 9 of the Agreement specifically provides:

Advancement of Expenses. Notwithstanding any provision of this Agreement to the contrary, the Company [Defendant] shall advance the expenses incurred by [Plaintiff] in connection with any Proceeding.... Advances shall be made without regard to [Plaintiffs] ability to repay the expenses and without regard to [Plaintiffs] ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.

Doc. 4, Exhibit A § 9. The Agreement additionally contains a forum selection clause. This clause provides the Chancery Court of the State of Delaware with the exclusive jurisdiction to adjudicate all actions arising out of the Agreement. Id. at § 22 (The parties consent to “submit to the exclusive jurisdiction of the Chancery Court for purposes of any action or proceeding arising out of or in connection with the Advancement Agreement”).

On July 20, 2010, Plaintiff initiated the present matter (hereinafter “Advancement Action”) in the Delaware State Chancery Court to compel enforcement of the Agreement with respect to three actions: (1) the matter currently before the Court (the Advancement Action); (2) a separate action in Delaware (hereinafter “Delaware Action”); and (3) a civil action in California (hereinafter “California Action”). In the Delaware Action, Plaintiff commenced a lawsuit in the Chancery Court in October 2009 regarding the validity of an agreement that related to the size and membership of the Board. Defendant, in May 2010, initiated the California Action because of Plaintiffs conduct relating to the Delaware Action. On July 19, 2010, the Court of Chancery determined Plaintiff [639]*639was entitled to attorneys’ fees, pursuant to the Agreement, for the Delaware Action. The following day, Plaintiff commenced the present matter, the Advancement Action, in the Chancery Court.2

Approximately one month later, on August 5, 2010, in the United States Bankruptcy Court, Central District of California, Defendant filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code. The bankruptcy filing automatically stayed Plaintiffs Advancement Action. Shortly thereafter, the bankruptcy court approved the appointment of a special litigation committee (hereinafter “Special Litigation Committee”). On December 23, 2010, Plaintiff filed a proof of claim with the bankruptcy court, asserting indemnification pursuant to the Agreement with respect to the Delaware, California and Advancement Actions. In response, the Special Litigation Committee objected to Plaintiffs proof of claim and asserted that the fees and expenses incurred in the California Action were not within the scope of the Agreement. Plaintiff, on April 20, 2011, moved for relief from the automatic stay in order to pursue the Advancement Action and prove the Agreement’s applicability to the California action.3 On April 27, 2011, Defendant, pursuant to 28 U.S.C. § 1452, removed the Advancement Action to this Court. Shortly thereafter, Plaintiff filed a Motion to Remand, and Defendant filed a Motion to Transfer Venue to the United States District Court, Central District of California for automatic referral to the bankruptcy court. Plaintiff opposes Defendant’s Motion to Transfer, and requests remand of the Advancement Action to the Chancery Court.

II. DISCUSSION

A. Motion to Remand

Plaintiff asserts that this Court cannot exercise jurisdiction because Defendant waived its right to removal when it agreed to litigate any claims related to the Agreement “in the Court of Chancery of the State of Delaware (the ‘Delaware Court’), and not in any other state or federal court ...” Doc. 4, Exhibit A § 22. According to Plaintiff, Defendant’s consent to the forum selection clause “waivefd] any objection to the laying of venue of any such action or proceeding in the Delaware Court.” Id. In response, Defendant contends this Court can adjudicate this matter because the forum selection clause is unenforceable for reasons of public policy.

Removal of this matter is governed by 28 U.S.C. § 1452, which provides, in pertinent part, that:

(a) A party may remove any claim or cause of action in a civil action ... to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title

28 U.S.C. § 1452(a). Section 1334 grants district courts with “original and exclusive jurisdiction of all cases under title 11”, and “original but not exclusive jurisdiction of [640]*640all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(a) & (b). Cases (1) under title 11, such as, the bankruptcy petition, and proceedings (2) arising under title 11 or (3) arising in cases under title 11 constitute core proceedings. In re Resorts Int'l, Inc., 372 F.3d 154, 162 (3d Cir.2004). However, cases that are merely related to a case under title 11 are non-core proceedings. Id. at 163-64. The determination of whether a claim is a core or non-core proceeding dictates a court’s enforcement of a forum selection clause. In re Exide Techn., 544 F.3d 196, 206 (3d Cir.2008).

The Third Circuit has opined that the “law of the state ... whose law governs the construction of the contract” determines the enforceability of a forum selection clause, unless a “significant conflict between some federal policy or interest and the use of state law exists.” In re Diaz Contracting Inc., 817 F.2d 1047, 1050 (3d Cir.1987), overruled on other grounds by Lauro Lines v. Chasser,

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Bluebook (online)
464 B.R. 635, 2011 U.S. Dist. LEXIS 102906, 2011 WL 4048966, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kurz-v-emak-worldwide-inc-ded-2011.