Qlarant, Inc. v. IP Commercialization Labs, LLC

• Court: Superior Court of Delaware
• Decided: July 6, 2022
• Docket: N22C-02-044 FWW
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

QLARANT, INC., ) ) Plaintiff, ) ) C.A. No. N22C-02-044 FWW v. ) ) IP COMMERCIALIZATION LABS, LLC, ) STUDIOWORKS, INCORPORATED, ) WILLIAM MAPP and DAMON HUNT, ) ) Defendants. )

Submitted: March 16, 2022 Decided: July 6, 2022

Upon Defendant IP Commercialization Labs, LLC’s Motion to Dismiss the Verified Complaint for Declaratory Judgment, GRANTED.

MEMORANDUM OPINION AND ORDER

Daniel M. Silver, Esquire, Johanna Peuscher-Funk, Esquire McCARTER & ENGLISH, LLP, Renaissance Centre 405 N. King Street, 8th Floor, Wilmington, DE 19801, Attorneys for Plaintiff Qlarant, Inc.

John G. Harris, Esquire, BERGER HARRIS LLP, 1105 N. Market Street, Ste. 1100, Wilmington, DE, 19801; Meredith Sharoky Paley, Esquire, SPIRO HARRISON, 830 Morris Turnpike, Second Floor, Short Hills, NJ 07078; Jason Charles Spiro, SPIRO HARRISON, 2 Bridge Avenue, Suite 322, Red Bank, NJ 07701; Attorneys for Defendant IP Commercialization Labs, LLC.

WHARTON, J. I. INTRODUCTION

Plaintiff Qlarant, Inc. (“Qlarant”) initiated this declaratory judgment action

in the Court of Chancery on July 2, 2021.1 It sought a declaration that: (1)

Defendant IP Commercialization Labs, LLC (“IPCL”) was not a shareholder of

Defendant StudioCodeworks Incorporated (“SCI”); (2) transactions consummated

pursuant to an Asset Purchase Agreement (“APA”) dated December 31, 2019

between it and William Mapp, III (“Mapp”), and Damon O. Hunt (“Hunt”) were

validly consummated; and (3) IPCL be permanently enjoined from asserting it held

stock or any other interest in SCI at the time the APA was executed and the

transaction contemplated by the APA was consummated.2 IPCL moved to dismiss

under Court of Chancery Rules 12(b)(1), (2), and (3) on the grounds that the Court

of Chancery lacked personal jurisdiction over it, lacked subject matter jurisdiction

over the dispute,3 was an improper forum, and alternatively, the matter should be

dismissed on forum non conveniens grounds.4 After the Motion was fully briefed,

the Court of Chancery dismissed the case because the Vice Chancellor found that

1 Compl., D.I. 1. Unless otherwise stated, docket item references are to the Court of Chancery docket. 2 Id. 3 Def.’s Mot. to Dismiss, D.I. 9. The challenge to the Court of Chancery’s subject matter jurisdiction contended that Qlarant had an adequate remedy at law. Def.’s Op. Br., at 19-22, D.I. 13. In light of that Court’s Opinion, that argument is moot in the Superior Court. 4 Def.’s Op. Br., D.I. 13. 2 Qlarent’s proposed declaratory judgments would, if granted, give it an adequate

remedy at law, divesting that court of equity of subject matter jurisdiction. 5 The

matter then was transferred to this Court pursuant to 10 Del. C. § 1902.6 This

Court’s decision on IPCL’s Motion to Dismiss follows.

II. FACTS AND PROCEDURAL HISTORY.

The following facts are taken from the Court of Chancery’s Opinion:

On December 31, 2019, plaintiff Qlarant, Inc. (“Qlarant”) purchased assets from StudioCodeworks, Inc. (“Studio”) and several of its affiliates (the “Transaction”). The Transaction was memorialized in an asset purchase agreement (the “APA”). While the parties were negotiating the Transaction, defendant IP Commercialization Labs, LLC (“IPCL”) claimed it held an interest in Studio. The APA represented that Studio’s only shareholders were defendants William Mapp and Damon Hunt. Mapp and Hunt signed the APA, authorizing the Transaction as Studio’s only shareholders.

On February 14, 2020, IPCL and its affiliates filed an action challenging the Transaction against Studio, its affiliates Mapp, and Hunt in the Circuit Court of Maryland for Prince George’s County (the “Maryland Action”). Qlarant, IPCL, and Studio are all Maryland entities, and Mapp and Hunt live in Maryland. In the Maryland Action, IPCL alleges breach of fiduciary duty, breach of contract, tort, and Maryland statutory fraud claims. IPCL alleges it owns a twenty percent interest in Studio and asserts some claims derivatively on Studio’s

5 Qlarant, Inc. v. IP Commercialization Labs, LLC, 2022 WL 211367 (Del. Ch. Jan. 25, 2022). 6 D.I. 27. 3 behalf. IPCL’s most recent Maryland complaint, dated June 25, 2021, added Qlarant as a defendant.7

Prior to the Court of Chancery issuing its decision, counsel for IPCL and Qlarant

wrote separately to the Vice Chancellor regarding Qlarant’s motion to dismiss in

the Maryland Action. The Maryland court denied the motion, but the parties

disagreed about what implications, if any, that denial had for the litigation in

Delaware.8 This Court has been provided with no further updates on the Maryland

Action.

III. THE PARTIES’ CONTENTIONS.

IPCL contests Delaware personal jurisdiction on two grounds. First, Qlarant

has not demonstrated any basis under Delaware’s Long Arm statute, 10 Del. C. §

3104(c), for personal jurisdiction over IPCL.9 It does not allege any “Delaware

business, conduct or acts of any kind by ICPL,” instead predicating Delaware

jurisdiction on the APA’s Delaware forum selection provision.10 IPCL argues that

the forum selection provision cannot confer personal jurisdiction in Delaware over

IPCL because it was not a party to the APA.11 Second, IPCL has no minimum

contacts with Delaware to satisfy due process requirements.12

7 Qlarant, at *1. 8 D.I. 23 (IPCL), D.I. 24 (Qlarant). 9 Def.’s Op. Br., at 12, D. I. 13. 10 Id. 11 Id., at 12-16. 12 Id., at 16-18. 4 Under IPCL’s interpretation of the APA’s forum selection provision, Qlarant

cannot lawfully bring this action in any Delaware court.13 In IPCL’s view, the

forum selection provision applies only to the interpretation and enforcement of the

APA, and the relief Qlarant is seeking is beyond that limited scope.14 Qlarant is

asking a Delaware court to determine that Mapp and Hunt were the only

shareholders of SCI, but that is a determination that cannot be made without going

beyond the four corners of the APA.15 In fact, IPCL’s complaint in Maryland is

that SCI and Qlarant fraudulently cut IPCL from their deal, intentionally failing to

acknowledge IPCL’s equity ownership interests.16 The express language of the

APA is inadequate to resolve that contention.17

IPCL’s alternative argument is that this action should be dismissed on forum

non conveniens grounds. All of the parties to the first complaint filed are in

Maryland; all of the events occurred in Maryland; all of the critical witnesses are in

Maryland; the controversy between Qlarant and IPCL is not dependent on Delaware

law because IPCL never signed the APA; and IPCL would face continued

13 Id., at 22-25. 14 Id. 15 Id. 16 Id. 17 Id. 5 inconvenience litigating in Delaware.18 Thus, all of the relevant factors favor

dismissing the litigation here in favor of the ongoing Maryland Action.19

Qlarant asserts that this Court has personal jurisdiction over IPCL. Where a

forum selection clause governs a dispute, the Court need not engage in traditional

personal jurisdictional analysis, nor is a minimum contacts analysis necessary. 20

Because IPCL has chosen to “stand in the shoes” of SCI by asserting derivative

claims in the Maryland Action, and because SCI agreed to the forum selection

clause in the APA, IPLC has waived any objection to the forum selection clause.21

Even if IPCL has not waived its opposition to personal jurisdiction, it nonetheless

is bound by the APA, despite being a non-signatory because it is equitably estopped

from contesting that clause.22 Since IPLC is seeking to claim the benefits of the

APA in the Maryland Action, it is estopped from denying the application of the

forum selection provision.23

With regard to IPCL’s contention that no Delaware court would be a proper

forum in which to litigate because the nature of the dispute between the parties is

too broad to trigger the APA’s limited forum selection provision, Qlarant responds

18 Id. 19 Id. 20 Pl.’s Ans. Br, at 6-8, D.I. 14. 21 Id., at 8-10. 22 Id., 10-15. 23 Id. 6 that IPCL reads the APA too narrowly.24 The APA encompasses not just

interpretation and enforcement of the APA, but also disputes “in respect of the

transactions contemplated.”25 Read in this fashion, the APA is broad enough to

require that Delaware be the forum for this litigation.

Finally, Qlarant rejects IPLC’s forum non conveniens ground for dismissal.

Not only was the Maryland Action not first filed as to Qlarant, but dismissal in favor

of the Maryland Action would contravene the APA.26 Moreover, IPLC cannot

demonstrate that being required to litigate in Delaware would subject it to such

overwhelming hardship that this is one of those rare cases where the drastic relief

of dismissal is warranted.

IV. STANDARD AND SCOPE OF REVIEW

On a motion to dismiss pursuant to Superior Court Rule 12(b)(2)27 for lack

of personal jurisdiction over a defendant, “A plaintiff bears the burden of showing

a basis for a trial court’s exercise of jurisdiction over a nonresident defendant.”28

“In ruling on a Rule 12(b)(2) motion, the Court may consider the pleadings,

24 Id., at 19-20. 25 Id. 26 Id., at 20-23. 27 Since the matter now is in the Superior Court, the Court applies the Superior Court Civil Rule corresponding to the Court of Chancery Rules referenced in the Motion. 28 AeroGlobal Capital Management, LLC v. Cirrus Industries, Inc., 871 A.2d 428, 437 (Del. 2005). 7 affidavits, and discovery of record.”29 Normally, the Court applies a two-pronged

analysis, first considering whether Delaware’s Long Arm statute is applicable, and

then determining whether subjecting the nonresident defendant to jurisdiction in

Delaware violates the Due Process clause of the Fourteenth Amendment.30 Here,

however, Qlarant asserts personal jurisdiction based on a forum selection provision

of the APA. IPCL claims that is it not bound by that provision because it was not

a party to it. Thus, the scope to the Court’s review is to determine whether IPCL,

as a non-signatory to the APA, is bound by that provision.

Forum non conveniens is a common law judicially created doctrine that

allows the Court to exercise some control over a foreign plaintiff’s access to a forum

in Delaware.31 The decision whether to grant dismissal lies in the sound discretion

of the trial court.32 A forum non conveniens analysis requires the Court to analyze

and weigh, in light of the relevant circumstances, the following six factors: (1) the

relative ease of access to proof; (2) the availability of compulsory process for

witnesses; (3) the possibility of the view of the premises; (4) whether the

controversy is dependent upon the application Delaware law which the courts of

29 Economical Steel Building Technologies, LLC v. E. West Construction, Inc., 2020 WL 1866869, at *1 (Del. Super. Ct. Apr. 14, 2020) (quoting Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007). 30 Biomeme, Inc. v. McAnallen, 2021 WL 5411094, at *2 (Del. Super. Nov. 10, 2021). 31 Ison v. E.I. DuPont de Nemours & Co., Inc. 729 A.2d 832, 849 (Del. 1999). 32 Williams Gas Supply Co. v. Apache Corp., 594 A.2d 34, 38 (Del. 1991). 8 this state more properly should decide than those of another jurisdiction; (5) the

pendency or nonpendency of a similar action or actions in another jurisdiction; and

(6) all other practical problems that would make the trial of the case easy,

expeditious, and inexpensive.33 These factors are well known in shorthand fashion

as the Cryo-Maid factors.34

How those factors are applied depends on the posture of the case - “what

changes is the strength of the presumptions applied.”35 When a case is first filed in

Delaware, the plaintiff’s choice of forum should not be defeated except where the

defendant establishes, based on the Cryo-Maid factors, overwhelming hardship and

inconvenience.36 If the action was filed first in a foreign jurisdiction and remains

pending, the strong preference for litigating in the forum where the action was first

filed applies.37 If the Court determines that the competing actions were

contemporaneously filed, the moving party must show that the Cryo-Maid factors

33 Martinez v E.I. DuPont de Nemours & Co., 86 A.3d 1102, 1104 (Del. 2014) (citing Gen. Foods Corp. v. Cryo-Maid, Inc. 198 A. 2d 681, 684 (Del. 1964)). 34 Id. 35 GXP Capital, LLC v. Argonaut Manufacturing Services, Inc., 253 A.3d 93, 101 (Del. 2021) (quoting Aranda v. Phillip Morris USA, Inc., 183 A.3d 1245, 1250 (Del. 2018). 36 Gramercy Emerging Markets Fund v. Allied Irish Banks, P.L.C., 173 A.3d 1033, 1042 (Del. 2017). 37 Id. (citing McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co., 263 A.2d 281, 283 (Del. 1970). 9 favor litigating the dispute in the foreign forum.38 In that circumstance, the Court

weighs those factors neutrally, comparing the hardships imposed on each party by

the adverse party’s chosen forum.39

V. DISCUSSION

This case does not belong here. It belongs in Maryland. Delaware does not

have personal jurisdiction over IPCL; and the well-developed Maryland Action,

which is nearing a Fall trial, is the far better positioned to resolve all of the disputes

between the parties.

A. The Forum Selection Provision of the APA Does Not Confer Personal Jurisdiction on IPCL. In asserting Delaware personal jurisdiction over IPCL, Qlarant does not rely

on Delaware’s long arm statute to claim that IPCL transacts any business in

Delaware, caused any tortious injury by act or omission in Delaware, or any other

basis under 10 Del. C. § 3104(c). Instead, it relies on the forum selection provision

of the APA. But, that reliance is not based on IPCL having bargained for the forum

selection provision as a party to the APA. It did not and was not. Instead, Qlarant

argues that IPCL has waived any challenge to the forum selection provision because

it elected to “stand in the shoes” of SCI when it asserted derivative claims in the

38 National Union Fire Insurance Company of Pittsburgh, PA v. Turner Construction Company, 2014 WL 703808, at *2 (Del. Super. Feb. 17, 2014). 39 In re Citigroup, Inc. Shareholder Derivative Litigation, 964 A.2d 106, 116 Del. Ch. 2009. 10 Maryland Action. Alternatively, it argues that IPCL is bound by the forum selection

provision pursuant to Capital Group Companies v. Armour.40 Both asserted bases

for personal jurisdiction are unpersuasive.

1. “Standing in the shoes” of SCI in one count of the Maryland Action is not a waiver of any objection to personal jurisdiction in Delaware.

Qlarant argues that IPCL “has chosen to subject itself to the forum selection

clause in choosing to ‘stand in the shoes’ of SCI by asserting derivative claims” in

the Maryland Action.41 Qlarant reasons that IPCL’s “knowing and voluntary

assertion of claims on behalf of SCI, which are subject a forum selection provision,

is sufficient conduct to waive any objection to personal jurisdiction in this Court,

where the forum selection provision dictates such claims be brought.”42 It cites by

example Count XXIII of IPCL’s Second Amended Complaint (“SAC”) in the

Maryland Action which “asserts a breach of contract claim ‘By IPCL, derivatively,

on behalf of [SCI] against Qlarant’ (SAC ⁋ 49.)”43 That count – Count XXIII

against Qlarant – is the only count brought derivatively by IPCL on behalf of SCI.44

In it IPLC alleges that Qlarant and SCI entered into a Professional Services

40 2004 WL 2521295 (Del. Ch. Oct. 19, 2004). 41 Pl.’s Ans. Br., at 8, D.I. 14. 42 Id., at 9. 43 Id. 44 Aff. of Keith Machen, Ex. C (SAC), D.I. 13. 11 Agreement (“PSA”) which provided certain rights and protections to SCI, including

a non-solicitation clause to ensure that Qlarant did not recruit or hire SCI personnel

during the term of the agreement or for a year after it terminated.45 IPCL alleges

that Qlarant violated the PSA by hiring SCI’s CEO Mapp and others.46 Pursuant to

Sec. II. B. of the SAC, the PSA was negotiated during July 2017 and extended

through September 30, 2019.47

According to IPCL, the PSA was entered into between IPCL and Quality

Health Strategies, Inc, a predecessor to Qlarant on August 4, 2017.48 The PSA did

not include a forum selection clause but did include a Maryland governing law

provision.49 It made no references to either Delaware law or a Delaware venue.50

Qlarant acknowledges that the forum selection provision of the APA is the

sole basis for personal jurisdiction. For that reason, a derivative claim brought by

IPCL on behalf of SCI against Qlarant for allegedly violating the PSA cannot confer

personal jurisdiction over IPCL unless, at a minimum, the PSA is linked to the

language of the APA. Therefore, the Court first must examine the APA to

45 Id. 46 Id. 47 Id. 48 Def.’s Reply Br. at 5, D.I. 20. 49 Id., at 6. 50 Id. 12 determine if there is a link to the PSA. Arguably, there is. The forum selection

clause of the APA, found at § 11.7(b) states:

Each of the Parties hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Court of Chancery, or, solely in the event that such court declines to accept jurisdiction, of the other courts of the State of Delaware…solely with respect to the interpretation and enforcement of the provisions of this Agreement, and of the documents referred to in this Agreement, in respect of the transactions contemplated hereby and thereby…the parties consent to and grant any such court jurisdiction over the person of such parties and over subject matter of such dispute…51

The forum selection clause is limited to the “the interpretation and enforcement of

the provisions” of the APA and of the “documents referred to in [the APA], and in

respect of the transactions contemplated hereby and thereby.” In other words, the

forum selection clause is limited to the interpretation and enforcement of the APA

and documents referred to in the APA, plus transactions contemplated by the APA

and transactions contemplated by documents referred to by the APA. Qlarant has

submitted excerpts of the APA as an exhibit to its Notice of Lodging in this Court.52

Under Article 7, Conditions of Closing, Section 7.1(m) the following language is

found: “Seller shall have terminated that certain services agreement dated August

4, 2017 between the Parties, including waiving that certain non-solicitation

51 Pl.’s Ans. Br., at 5, D.I.14. 52 Pl.’s Notice of Lodging, Ex. A., D.I. 6 (Super. Ct.). 13 provision contained in such agreement or any other agreement between the

parties.”53 That “certain services agreement” is the PSA. Termination of that

agreement is a transaction contemplated by a document referred to in the APA.

Count XXIII of IPLC’s SAC is an allegation by IPLC that Qlarant breached

the PSA. Such an allegation arguably falls within the APA because it pertains to a

document – the PSA – referred to by the APA. But it does not follow necessarily

that by bringing that claim in Maryland IPCL has waived personal jurisdiction, or

if it did, waive it to the extent necessary to litigate Qlarant’s declaratory relief

complaint.

Qlarant relies on Hornberger Management Company v. Haws & Tingle

General Contractors, Inc.54 The court in Hornberger recognized that lack of

personal jurisdiction may be waived by conduct and found that the defendant in that

case submitted to the jurisdiction of the court “by participating in the arbitration

process, filing a motion for a trial de novo, entering into a case scheduling order,

participating in discovery, stipulating to an extension of time for filing case

dispositive motions, and failing to file the motion [to dismiss for lack of

jurisdiction] before the deadline for the filing of case dispositive motions.”55 The

actions by IPCL and by the defendant in Hornberger are not comparable, and

53 Id. 54 768 A.2d 983, 987-89 (Del. Super. Aug. 24 2000). 55 Id., at 989. 14 Qlarant fails to explain how they are. In Hornberger, the defendant actually

litigated through trial in Delaware while failing to press the challenge to jurisdiction

in a timely fashion. In contrast, IPLC added one count derivatively of behalf of SCI

(out of 23) consisting of four paragraphs (out of 338) to the SAC in the ongoing

Maryland Action. It did nothing in Delaware. It has never appeared in Delaware

except by special appearance in this action where it is pursuing a timely challenge

to jurisdiction. Further, it has never given the slightest indication that it thought it

was submitting to Delaware’s jurisdiction when it brought the derivative claim in

Maryland. Qlarant has not cited any case where a defendant was held to have

waived personal jurisdiction by its conduct based on conduct remotely similar to

IPCL’s conduct in Maryland. Instead, it argues ipse dixit that IPCL’s filing of the

derivative claim in Maryland constitutes waiver.

Count XXIII in the Maryland Action’s SAC is limited to an allegation on

behalf of SCI that Qlarant breached the PSA – referred to in the APA as “that certain

services agreement dated August 4, 2017” - by claiming that Qlarant solicited and

hired SCI’s CEO Mapp. It otherwise does not seek to interpret of enforce the APA.

In contrast, Qlarant’s declaratory judgment complaint asks the Court to declare that

IPCL was not a shareholder of SCI when the APA was executed, declare that all of

the transactions consummated pursuant to the APA were validly consummated, and

to permanently enjoin IPCL from asserting that it was a stockholder in SCI when

15 the APA was executed and the transactions contemplated by it were

consummated.56 The scope of the Delaware litigation obviously is far greater than

the limited allegation of Count XXIII with the potential to preempt the Maryland

Action in whole or substantial part.

The Court concludes that IPCL did not waive its objection to personal

jurisdiction in Delaware pursuant to the APA’s forum selection clause when it

added a derivative count against Qlarant on behalf SCI alleging a violation of the

PSA. That action was insufficient for the Court to conclude that IPCL waived its

objection to personal jurisdiction by its conduct. To hold otherwise would require

a finding that IPCL submerged itself in Delaware’s jurisdictional waters after

having merely dipped its toe into them while standing in Maryland. Finally, to the

extent Qlarant felt that Count XXIII should not be litigated in Maryland, it had the

opportunity to seek its dismissal based on the forum selection provision of the APA.

Apparently, it did not take advantage of that opportunity.57

2. Delaware does not have personal jurisdiction over IPCL pursuant to Capital Group. Qlarant’s alternative argument, in light of the Court’s holing that IPCL did

not waive its objection to personal jurisdiction by its conduct, is that IPCL is subject

to the forum selection provision of the APA as a non-signatory under Capital

56 Compl., D.I. 1. 57 Def.’s Reply Br., at 14. 16 Group.58 In order to determine whether a non-signatory is bound by a forum

selection provision of an agreement, Capital Group sets out a three part analysis,

all parts of which must be answered in the affirmative to confer jurisdiction: “First,

is the forum selection clause valid? Second, are the defendants third-party

beneficiaries, or closely related to the contract? Third, does the claim arise from

their standing relating to the merger agreement?”59 Qlarant argues that IPCL has

not answered the first question and thus waived any challenge to the validity of the

forum selection provision.60 As to the second question, Qlarant contends that IPCL

is a third party-beneficiary of the APA or closely related to it because it sued in

Maryland to recover benefits it wished to recover under the APA and the

transactions contemplated by it, including derivatively on behalf of SCI.61 Finally,

as to the third question, the entire foundation of the Maryland Action is the APA

and the transactions contemplated in it.62

The court disagrees. As to the second Capital Group question, IPCL is not a

third-party beneficiary of the APA. Just the opposite. In the Maryland Action,

IPCL is not seeking to enforce any rights or obtain any benefits under the APA.

58 Pl.’s Ans. Br., at 10-15, D.I. 14. 59 Capital Group, at *5. 60 Pl.’s Ans. Br., at 10-11, D.I. 14. 61 Id. 62 Id. 17 Rather a fair reading of its Prayer for Relief is that it seeks damages because it was

harmed by the APA, as well equitable relief essentially abrogating the APA.63

The Maryland SAC is not “closely related” to the APA. The closely-related

test is an expanded form of equitable estoppel where either the party receives a

direct benefit from the agreement or it was foreseeable that the party would be

bound by the agreement.64 This Court has held that IPCL seeks no direct benefit

based on the APA in the Maryland Action based on its Prayer for Relief. Thus, the

second Capitol Group question turns on foreseeability. In Neurvana Medical, LLC

v. Balt USA, LLC,65 then Viced-Chancellor McCormick analyzed the foreseeability

inquiry as a standalone basis for satisfying the closely-related test and observed that

it has been applied in only two scenarios.66 In the first, the court allowed a non-

signatory defendant to enforce a forum selection provision against a signatory

plaintiff.67 In the second, the Court held that a non-signatory was bound by a forum

selection clause in a non-competition agreement signed by its two controlling

63 See, Aff. Keith Machen, Ex. C (SAC), D.I. 13. 64 See, McWane, Inc. v. Lanier, 2015 WL 399582, at *7 (Del. Ch. Jan. 30, 2015). 65 2019 WL 4464268 (Del. Ch. Sept. 18, 2019). 66 Id., at *5. 67 Id. (citing Ashall Homes, Ltd. v. ROK Entertainment Group, Inc., 992 A.2d 1239, 1249 (Del. Ch. 2010); Lexington Services Ltd. v. U.S. Patent No. 8019807 Delegate, LLC, 2018 WL 5310261, at *5-6 (Del. Ch. Oct. 26, 2018). 18 stockholders.68 The Vice Chancellor then cautioned that “To ensure a workable

closely-related test, Delaware courts are wise to exercise caution in extending the

foreseeability inquiry beyond the facts of Ashall/Lexington and iModules.”69

Neither of these two scenarios are present here and the Court sees no reason to

expand the scope of foreseeability to fit these facts.

The answer to the third Capital Group question is complicated. Weygandt v.

Weco, LLC recognized that the meaning of this third question “is that the agreement

containing the forum selection clause must also be the agreement that gives rise to

the substantive claims brought by or against a non-signatory in order for the forum

selection clause be enforceable against the non-signatory.”70 In order to answer

affirmatively, the claims asserted in the Maryland Action must arise from the APA.

IPCL contends that the issue undergirding both the Maryland Action and the

litigation here is whether the Maryland plaintiffs, including IPCL, were

shareholders of SCI. The SAC alleges that on October 15, 2015, IPCL exercised

warrants pursuant to a Management Advisory Agreement between IPCL and SCI

(identified as “Studio” in the SAC), gaining 10% of SCI.71 It further alleges that

68 Id., (citing iModules Software, Inc. v. Essenza Software, Inc., 2017 WL 65966880 (Del. Ch. Dec. 22, 2017). 69 Id., at *6. 70 2009 WL 1351898, at *4n.15 (Del. Ch. May, 14, 2009). 71 Aff. Keith Machen, Ex. C (SAC) at ⁋⁋ 46, 47, D.I. 13. 19 SCI issued a warrant for a 20% equity stake in SCI to IPLC on July 15, 2017, and

which IPCL exercised on January 1, 2019.72 Apparently, the agreements providing

IPCL with rights to the warrants have their own forum selection provisions. So, in

that sense, the Maryland Action can be said to have arisen from those agreements

providing IPCL with rights to the warrants.

Qlarant points out that the SAC is replete with references to the APA.73 If

there had been no APA, there would have been no Maryland Action. So, in that

sense, the SAC can be said to have arisen from the APA.

It appears to the Court that the Maryland Action “arose” from more than one

source. No authority has been presented to the Court to guide it in this circumstance

by the parties and the Court has found none. In any event it is unnecessary for the

Court dwell on this question because at least one Capital Group question – the

second – has been answered negatively. Therefore, IPCL is not subject to the forum

selection clause of the APA as a non-signatory under Capital Group.

B. Dismissal is Warranted on Forum Non Conveniens Grounds.

Notwithstanding the foregoing discussion, even if IPCL is subject to personal

jurisdiction on either of the forum selection bases advanced by Qlarant, the Court

72 Id., at ⁋⁋50, 51. 73 Pl.’s Ans. Br., at 14-15, D.I. 14. 20 dismisses the Verified Complaint for Declaratory Relief on forum non conveniens

grounds. The doctrine of forum non conveniens allows a court to decline to hear a

case despite having jurisdiction over the parties and the subject matter in favor of

another jurisdiction.

Regardless of which party was the first to file, the Court approaches the

forum non conveniens issue by analyzing the six Cryo-Maid factors: (1) the relative

ease of access to proof; (2) the availability of compulsory process for witnesses; (3)

the possibility of the view of the premises; (4) whether the controversy is dependent

upon the application of Delaware law which the courts of this state more properly

should decide than those of another jurisdiction; (5) the pendency or non-pendency

of a similar action or actions in another jurisdiction; and (6) all other practical

problems that would make the trial of the case easy, expeditious and inexpensive.74

If Qlarant was the first to file, IPCL must show overwhelming hardship and

inconvenience to it by litigating in Delaware.75 If IPCL was the first to file,

however, the Court may exercise its discretion on a significantly lower showing

than overwhelming hardship and inconvenience.76 In that circumstance, McWane

Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co. counsels Delaware

74 Taylor v. LSI Logic Corp, 689 A.2d 1196, 1198-99 (Del. 1997). 75 Id., (citing Chrysler First Business Credit Corp. v. 1500 Locust Limited Partnership, 669 A.2d 194, 197 (Del. 1995). 76 United Phosphorus, Ltd. v. Micro-Flo, 808 A.2d 761, 764 (Del. 2002). 21 courts to exercise their discretion freely in deferring to a prior action pending

elsewhere in a court capable of doing prompt and complete justice, involving the

same parties and the same issues.77 The Court also considers whether the actions

were filed contemporaneously. If two cases are filed at approximately the same

time, the Court can avoid encouraging a “race to the courthouse” by considering

them filed contemporaneously.78 The Court considers the circumstances

surrounding the filings to determine whether actions were filed

contemporaneously.79

The threshold question the Court must consider is which action – the

Delaware Action or the Maryland Action - was the first one filed because generally

“litigation should be confined to the forum in which it is first commenced.”80 More

importantly, the determination of the filing sequence governs the presumption the

Court applies.

IPLC began the Maryland Action by filing its original complaint naming SCI,

Mapp, and Hunt as defendants on February 14, 2020 in the Circuit Court of

Maryland, Prince George’s County.81 The first amended complaint was filed on

77 263 A.2d 281, 283 (Del. 1970). 78 In re Citigroup Shareholder Derivative Litigation, at 1186. 79 AG Resource Holdings, LLC v. Terral, 2021 WL 486832, at *3 (Del. Ch. Feb. 10, 2021). 80 Id. 81 Def.’s Op. Br., at 9, D.I. 13. 22 April 21, 2021.82 IPCL states that during discovery, it realized that it had claims

against Qlarant as well, and so moved on June 25, 2021 to “add derivative claims,

add Qlarant as a defendant, and add additional causes of action…”83 That motion

was granted and the SAC became effective as of July 13, 2021.84 Qlarant filed its

Complaint in the Court of Chancery on July 2, 2021.85 Counsel for IPLC was

notified by email of the filing on July 19, 2021 and served with the complaint on

July 26th.86

Based on the above chronology, both parties claim to have filed first. IPCL

stakes its claim on the fact that it began the litigation in Maryland in 2020 and

moved to amend its complaint to add Qlarant on June 25, 2021, all before Qlarant

filed its complaint in Delaware.87 Further, IPCL contends that “It was not until after

participating in the Maryland action through depositions and document discovery

and after being on notice that the Maryland court was going to permit the

amendment against it that Qlarant filed this action in Delaware on July 2, 2021.”88

Finally, IPCL argues that the proper date to assign to the SAC is the 2020 date since

82 Id. 83 Id., at 8-9. 84 Id., at 9. 85 Compl., D.I. 1. 86 Declaration of Mailing, Ex. A, D.I. 7. 87 Def.’s Reply Br., at 21, D.I. 20. 88 Id. 23 the SAC relates back to the original filing.89 Qlarant insists that the only dates that

matter are the date it filed in Delaware – July 2nd - and the date IPCL’s motion to

amend the SAC was granted and SAC filed against it – July 13th.90

Whether the SAC relates back to the original filing in Maryland in 2022 or

not, the Court deems it to relate back at least to the date IPCL filed its motion to

amend the complaint on June 25, 2021. The timing of Qlarant’s Delaware

complaint, filed five business days after IPCL moved to add Qlarant in the

Maryland Action, leads the Court to conclude that Qlarant’s filing was a reaction to

IPCL’s motion. It appears that Qlarant had participated in the Maryland action

through depositions and document discovery and was on notice that IPCL had taken

steps to add it as a defendant to the ongoing litigation there when it brought its

declaratory judgment action here.91 Even if they do not support a conclusion that

IPCL filed first, at a minimum, these considerations warrant a conclusion that the

filings were contemporaneous. The Court next assesses the Cryo-Maid factors.92

1. The relative ease of access to proof.

89 Id., at 22. 90 Pl.’s Ans. Br., at 20-23, D.I. 14. 91 Def.’s Reply Br., at 21, D.I. 20. 92 The Court does not assess the third Cryo-Maid factor – the possibility to view the premises because viewing the premises does not appear necessary. 24 The first Cryo-Maid factor addresses the relative ease of access to proof.

Qlarant posits that most of the proof necessary for the requested determination

would be documentary and electronic evidence as accessible to this Court as to the

Maryland court.93 The Court understands Qlarant to be suggesting this factor is a

wash. IPCL, on the other hand, argues that Qlarant’s view of the scope of this

litigation is too narrow. It believes that the determination of whether IPCL was a

stockholder in SCI at the time the APA was executed involves documents that

provide IPCL with rights to certain warrants, and which have Maryland venue

provisions.94 Those documents are outside of the APA.95 It is possible, the Court

supposes, that witness testimony might be necessary to provide context to the

circumstances attending those documents. While the Court does not consider this

factor dispositive, or even particularly significant, it does slightly tilt in IPCL’s

direction.

2. The availability of compulsory process for witnesses.

The Court considers this factor to carry little weight. To the extent witness

testimony is necessary, it is likely that those witnesses have an interest in the

93 Pl.’s Ans. Br., at 22, D.I. 14. 94 Def.’s Reply Br., at 23-24, D.I. 20. 95 Id. 25 litigation and would appear voluntarily. But because everyone involved in the case

is in Maryland, this factor favors IPCL also.

3. Whether the controversy is dependent upon the application of Delaware law.

The APA’s choice of law provision selects Delaware law.96 Similarly, IPCL

claims that the documents granting it rights to stock warrants in SCI are governed

by Maryland law.97 Yet, neither Qlarant nor IPCL explain how the application of

one state’s law would differ from the application of the other’s law. The Court finds

that this factor favors neither party, and thus has little bearing on the Court’s

determination of the appropriate forum.

4. The pendency of a similar action in another jurisdiction.

While all of the Cryo-Maid factors guide the exercise of the Court’s

discretion, they are not necessarily weighted equally. Delaware law gives special

weight to this factor – the pendency of a similar action in another jurisdiction.98 The

Court considers the pendency of the Maryland Action the most significant of the

Cryo-Maid factors here. It weighs heavily in favor of IPCL. All of the parties to

both actions are in Maryland. All of the relevant events occurred in Maryland. All

96 Pl.’s Ans. Br., at 22, D.I. 14. 97 Def.’s Reply Br., at 23, D.I. 20. 98 Texas Instruments, Inc. v. Cyrix Corp., 1994 WL 96983 (Del. Ch. Mar. 22, 1994). 26 of the witnesses critical to the APA and every other relevant transaction are in

Maryland. Also, Maryland has an interest in resolving the internal corporate

disputes of Maryland corporations.

The core issue of the Delaware litigation - whether IPCL was a shareholder

of SCI – will be resolved in the ongoing Maryland litigation. But the Delaware

litigation will not resolve other issues in the Maryland Action. There are three

plaintiffs in Maryland – IPCL, YE Ventures (“YE”), and Keith Machen

(“Machen”). Both YE and Machen are suing Qlarant in numerous counts of the

SAC – Counts VII, VIII, IX, XI, XII, XIII, XIV, XV, XVII, XVIII (apparently

misnumbered in the SAC as a duplicate of Count XVII), XXI, and XXII.99 YE and

Machen are not defendants in Delaware. Thus, it seems Qlarant will be litigating

in Maryland regardless of whether it is successful in this action.100

5. All other practical problems that would make the trial of the case easy, expeditious and inexpensive.

This factor too favors IPCL. In addition to all of the other considerations

previously discussed, discovery is well underway, if not substantially complete in

Maryland. Trial is scheduled for the Fall. Too the extent additional discovery will

99 Aff. Keith Machen (SAC), D.I. 13. 100 Although the parties dispute the significance of it, it is indisputable that the Maryland court denied Qlarant’s motion to dismiss. 27 be necessary in Delaware, it will generate additional costs and effort above that of

the Maryland Action. No scheduling order has been entered in Delaware, and it is

unclear what additional efforts would be necessary to resolve the case here. The

Court sees no reason why it should endeavor to resolve an issue that is well on its

way to resolution in Maryland merely because Qlarant arguably “won” a “race to

the courthouse” by filing its complaint 11 days before it was added as a defendant

in Maryland. Qlarant’s “win” itself is dubious in light of its participation in the

Maryland Action and its knowledge of IPCL’s motion to amend the SAC filed five

business days before Qlarant filed its complaint. In short, the Court concludes that

it would be easier, more expeditious, and less expensive to proceed to trial in

Maryland.

The Court now applies the two presumptions it deems appropriate. First, if

the Court considers the competing actions to have been filed contemporaneously

and neutrally considers the Cryo-Maid factors, it is apparent that they favor IPCL.

The only two factors the Court finds particularly significant – the pendency of the

Maryland Action and practical considerations of the ease, expeditiousness, and

expense of a trial all favor dismissing the Delaware litigation. Obviously, if a

neutral application of the Cryo-Maid factors favors IPCL where the actions were

filed contemporaneously, one where IPCL was deemed to have filed first in

Maryland favors it as well.

28 VI. CONCLUSION

THEREFORE, Defendant IP Commercialization Labs, LLC’s Motion to

Dismiss the Verified Complaint of Declaratory Judgment is GRANTED. The

Verified Complaint for Declaratory Relief DISMISSED WITH PREJUDICE.

IT IS SO ORDERED.

/s/ Ferris W. Wharton Ferris W. Wharton, J.