Ney v. 3i Group ( 2023 )

Case: 21-50431 Document: 00516900388 Page: 1 Date Filed: 09/19/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
September 19, 2023
No. 21-50431
Lyle W. Cayce
____________ Clerk
S. Christopher Ney,
Plaintiff—Appellant,
versus
3i Group, P.L.C.; 3i Corporation,
Defendants—Appellees.
______________________________
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:20-CV-1142
______________________________
Before Barksdale, Stewart, and Dennis, Circuit Judges.
Per Curiam:*
In March 2019, New Amsterdam Software Holdings acquired
Magnitude Software Inc. (“Magnitude”) for $340 million following an
extensive bidding process. Christopher Ney, the CEO of Magnitude, was an
integral part of these negotiations. Ney alleges that during these negotiations
the president of New Amsterdam Software Holdings, Andrew Olinick,
promised Ney a $20 million “kicker” in exchange for Ney’s support of the
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*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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No. 21-50431
2019 sale of Magnitude. Ney filed suit to enforce this alleged oral contract,
and the district court dismissed his claim for forum non conveniens pursuant
to a valid forum-selection clause. Ney appeals this dismissal. For the reasons
given below, we AFFIRM.
I.
Plaintiff-Appellant Christopher Ney, a Texas citizen, co-founded
Magnitude, an Austin-based software firm. Ney also served as the CEO of
Magnitude. In 2018, Magnitude entered negotiations with several private eq-
uity funds and investment companies concerning a potential sale of the com-
pany. One of those potential buyers was Defendant-Appellee 3i Group, an
international private equity group organized in England and Wales with its
principal place of business in London. During these negotiations Ney com-
municated primarily with Andrew Olinick, who held himself out as a 3i Group
partner, co-head of North American Private Equity, and Global Head of Busi-
ness and Technology, but who now claims to have been acting on behalf of a
related corporation, 3i Corporation. Because of this, Ney brings his claims
against both 3i Group and 3i Corporation (referred to collectively as the “3i
Defendants”).1
Ney alleges he negotiated with the 3i Defendants regarding a potential
sale throughout 2018 and 2019. During these negotiations, Olinick repeatedly
pressed Ney to put the 3i Defendants at the “front of the line.” Olinick told
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1
We note that the district court found that “the exact relationship between 3i
Corporation, 3i Group, and New Amsterdam is opaque.” The 3i Defendants’ brief clarifies
this relationship. The 3i Defendants did not directly purchase Magnitude. Rather, New
Amsterdam Software Holdings purchased Magnitude, and New Amsterdam Software
Holdings’ general partner is New Amsterdam Software GP LLC. 3i Group is a British-
private equity firm that was one of New Amsterdam Software Holdings’ indirect investors.
3i Corporation is an investment advisory company for 3i Group incorporated in
Massachusetts with its principal place of business in New York.
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Ney that although the 3i Defendants “had previously committed to a firm
purchase price of $360 million, 3i Group’s investment committee now could
only get to a $340 million purchase price.” Ney responded that $340 million
was unacceptable.
In light of Ney’s rejection of a $340 million purchase price, Ney claims
that Olinick proposed an oral contract. Olinick suggested that a $20 million
“kicker” be paid to Ney. Specifically, Olinick promised that 3i Group would
pay Ney $20 million if Ney (i) worked to keep 3i Group at the “front of the
line” in the acquisition negotiations, (ii) got the deal done, and (iii) stayed on
as CEO of Magnitude during the post-acquisition period. Ney claims that he
accepted the 3i Defendants’ offer and pushed the negotiations to a successful
close, stayed on as Magnitude’s CEO, rolled $6 million back into Magnitude,
and successfully transitioned the company post-closing.
In March 2019, New Amsterdam Software Holdings purchased Mag-
nitude for $340 million. This sale, as well as Ney’s compensation with re-
spect to it, is governed by various interlocking written contracts, namely: the
Stock Purchase Agreement (“the Purchase Agreement”), the Restrictive
Covenant Agreement, two Incentive Unit Grant Agreements, a Rollover
Contribution and Subscription Agreement (“the Rollover Agreement”),
which is Exhibit B to the Purchase Agreement, and two organizational agree-
ments. All of the agreements are either dated March 18, 2019, or May 2, 2019.
The primary agreement depicting the terms of the Magnitude sale is
the Purchase Agreement. Signed by Olinick and Timothy Mack as President
of Magnitude, this agreement, like the other six ancillary agreements, notes
that all seven agreements constitute “the complete agreement by, between
and among the parties.” Additionally, the Purchase Agreement contains a
forum-selection clause:
[E]ach of the parties to this Agreement hereby irrevocably . . .
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submits to the exclusive jurisdiction of the Court of Chancery
of the State of Delaware (or if such court lacks jurisdiction, any
other state or federal court sitting in the State of Delaware) in
respect of any litigation, action or proceeding . . . arising out of
or relating to this Agreement, the negotiation, execution or
performance of this agreement or the transactions
contemplated hereby.
The Purchase Agreement attached the Rollover Agreement as Exhibit
B. In the Rollover Agreement, Ney agreed to rollover into the new
organization his “Company Shares with a dollar value equal to $6,000,000”
in exchange for partnership interests in New Amsterdam Software Holdings.
Within the Rollover Agreement, the parties agreed to “submit to the
exclusive jurisdiction” of courts in Delaware “in respect of the interpretation
and enforcement of the provisions of this agreement and any related
agreement, certificate or other document delivered in connection herewith.”
They also agreed that “[t]his Agreement and the agreements and documents
referred to herein contain the complete agreement among the parties hereto
and supersede any prior understandings, agreements or representations by or
among the parties hereto, written or oral, that may have related to the subject
matter hereof in any way.” This agreement was signed by Olinick and Ney.
On July 7, 2020, eighteen months after the sale was completed, Ney
was terminated as CEO. Ney claims that the 3i Defendants have breached the
oral agreement by failing to pay him the agreed upon $20 million. In
response, the 3i Defendants contend that the alleged oral contract was never
made.
II.
To recover damages under the alleged oral contract, Ney filed suit in
a Texas state court against New Amsterdam Software Holdings and New
Amsterdam Software GP LLC (collectively the “New Amsterdam
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entities”), and 3i Group. The New Amsterdam entities moved to dismiss
based on forum-selection clauses in the written contracts that unambiguously
provided Delaware as the exclusive forum for resolving disputes relating to
the Magnitude negotiation and purchase. Although the New Amsterdam en-
tities noted in their motion to dismiss that the written contracts would like-
wise prohibit claims against 3i Group, 3i Group was not subject to the motion
to dismiss for failure to comply with the forum-selection clause because 3i
Group had filed a contemporaneous Special Appearance challenging the
Texas court’s jurisdiction. The Texas state court granted the New Amster-
dam entities’ motion to dismiss on the basis of the forum-selection clauses.
The only defendant that remained was 3i Group.
Following the state court’s dismissal of the New Amsterdam entities,
Ney amended his state court petition to add 3i Corporation as an additional
defendant, bringing the total number of defendants to two: 3i Group and 3i
Corporation. Ney contended that he was owed $20 million under the oral
contract and asserted breach of contract, promissory estoppel, and unjust en-
richment/quantum meruit claims against the 3i Defendants. After removal
to federal court based on diversity, the 3i Defendants filed their motion to
dismiss arguing that Ney’s claims should be dismissed because (i) his plead-
ings failed to state a claim under Rule 12(b)(6), (ii) venue was improper given
the various written agreements’ forum-selection clauses under Rule 12(b)(3),
and (iii) the court lacked personal jurisdiction over 3i Group.
The magistrate court granted the 3i Defendants leave to file a
supplemental motion to raise the forum-selection clause argument in a forum
non conveniens posture rather than under Rule 12(b)(3). After holding oral
argument, the magistrate court issued a Report & Recommendation
(“R&R”) that recommended granting the 3i Defendants’ supplemental
motion to dismiss based on forum-selection clauses in two written
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agreements: the Purchase Agreement and the Rollover Agreement. Ney filed
objections to the R&R with the district court. The district court accepted and
adopted the R&R, dismissing the case without prejudice pursuant to the
forum-selection clauses in both the Purchase Agreement and the Rollover
Agreement. Ney appeals to this Court.
III.
We review the district court’s interpretation of a forum-selection
clause and its assessment of that clause’s enforceability de novo and the
district court’s balancing of the public and private interest factors for abuse
of discretion. Weber v. PACT XPP Techs., AG, 811 F.3d 758, 768 (5th Cir.
2016). Federal law applies to determine the enforceability of forum-selection
clauses in diversity cases. All. Health Grp., LLC v. Bridging Health Options,
LLC, 553 F.3d 397, 399 (5th Cir. 2008).
IV.
As an initial matter, Ney argues that the district court should not have
considered the Purchase Agreement or the Rollover Agreement—both of
which were attached to the 3i Defendants’ motion—because Ney did not
reference those agreements in his state court petition, nor are the agreements
central to Ney’s claims.2 Ney acknowledges, however, that “[o]n a
traditional forum non conveniens motion, it is within a district court’s
discretion to consider matters outside the pleadings,” and that “weighing
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2
There is a potential preservation issue with this argument. In his objections to the
magistrate court’s R&R, Ney included a footnote alleging it was improper for the court to
consider the Purchase Agreement and the Rollover Agreement in deciding the motion to
dismiss. The Fifth Circuit has stated that “[a]rguments subordinated in a footnote are
‘insufficiently addressed in the body of the brief,’ and thus are waived.” Arbuckle Mountain
Ranch of Tex., Inc. v. Chesapeake Energy Corp., 810 F.3d 335, 339 n.4 (5th Cir. 2016). Because
Ney’s argument was buried in a footnote, this likely precludes our review. Nevertheless, as
explained in the body of this opinion, Ney’s objection fails on the merits.
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private and public interest factors will invariably require the district court to
wade beyond the pleadings to consider, for example, administrative
difficulties flowing from court congestion or the ease of access to sources of
proof.”
We find that when evaluating a motion to dismiss based on a forum-
selection clause, a court may consider matters outside the pleadings. As the
R&R explains, and as Ney himself concedes, other courts resolving forum non
conveniens motions based on forum-selection clauses have held that one may
consider facts outside of the pleadings. Color Switch LLC v. Fortafy Games
DMCC, 377 F. Supp. 3d 1075, 1082–83 (E.D. Cal. 2019), aff’d, 818 F. App’x
694 (9th Cir. 2020); Jiangsu Hongyuan Pharm. Co. v. DI Glob. Logistics Inc.,
159 F. Supp. 3d 1316, 1322 (S.D. Fla. 2016); Turner v. Costa Crociere S.P.A.,
488 F. Supp. 3d 1240, 1245–46 (S.D. Fla. 2020) (“When ruling on a motion
to dismiss for forum non conveniens, a court may consider matters outside
the pleadings if presented in proper form by the parties.”). In this case, the
Rollover Agreement and the Purchase Agreement are central to Ney’s
petition, as the amended petition repeatedly references and relies on the
purchase, the closing, and the completion of the Magnitude sale. It was
within the district court’s discretion to consider matters outside the
pleadings in deciding the 3i Defendants’ motion to dismiss, and it did not err
in considering either the Purchase Agreement or the Rollover Agreement.
Ney next argues that the district court erred in concluding that the
Rollover Agreement’s forum-selection clause binds Ney, because (1) Ney’s
claims do not seek the interpretation and enforcement of any of the Rollover
Agreement’s provisions, (2) Ney’s claims do not seek the interpretation or
enforcement of a related agreement or other document delivered in
connection with the Rollover Agreement, and (3) the Rollover Agreement’s
forum-selection clause does not cover Ney’s equitable claims.
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The Supreme Court has held that a valid forum-selection clause is
entitled to “controlling weight in all but the most exceptional cases.” Atlantic
Marine Construction Company v. United States District Court for the Western
District of Texas, 571 U.S. 49, 63 (2013). Under Atlantic Marine, a court must
determine whether (i) “the forum-selection clause is mandatory or
permissive,” (ii) “the forum-selection clause is enforceable,” and (iii)
“‘Atlantic Marine’s balancing test’ of public interest factors” supports
dismissal. PCL Civ. Constructors, Inc. v. Arch Ins. Co., 979 F.3d 1070, 1073–
74 (5th Cir. 2020) (quoting Weber, 811 F.3d at 766).
Ney does not dispute that the Rollover Agreement’s forum-selection
clause is mandatory. The forum-selection clause clearly provides for
Delaware as the “exclusive forum” for any litigation arising out of the
interpretation or enforcement of the Rollover Agreement and any related
agreement’s provisions. PCL, 979 F.3d at 1073 (quoting Weber, 811 F.3d at
768) (“A forum selection clause is mandatory if it affirmatively requires that
litigation arising from the contract be carried out in a given forum.”). Atlantic
Marine’s first prong is met.
The Rollover Agreement’s forum-selection clause is also enforceable,
especially in light of the “‘strong presumption’ in favor of enforcing
mandatory forum selection clauses.” Al Copeland Invs., LLC v. First Specialty
Ins. Corp., 884 F.3d 540, 543 (5th Cir. 2018). Ney argues that his claims do
not seek the interpretation and enforcement of any of the Rollover
Agreement’s provisions, and thus the forum-selection clause does not
encompass his claims. Ney’s argument, however, belies the plain text of the
clause, which says that the parties agree to litigate in Delaware “in respect of
the interpretation and enforcement of the provisions of this agreement and
any related agreement, certificate or other document delivered in connection
herewith.” The forum-selection clause applies to any litigation “in respect
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of the interpretation” of any provision of the agreement. The Supreme Court
has held that the term “respecting” means the same thing as “relating to,”
and thus covers any case in which a court will have to interpret any provision
of the Rollover Agreement as part of its merits analysis, as it would here.
Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1760 (2018) (“Use
of the word ‘respecting’ in a legal context generally has a broadening effect,
ensuring that the scope of a provision covers not only its subject but also
matters relating to that subject.”).
Additionally, the Rollover Agreement contains a merger clause which
provides that the “[Rollover] Agreement and the agreements and documents
referred to herein contain the complete agreement among the parties hereto
and supersede any prior understandings, agreements or representations by or
among the parties hereto, written or oral, that may have related to the subject
matter hereof in any way.” This merger clause is expansive and clearly
encompasses Ney’s alleged oral contract. Further, the provisions of the
Rollover Agreement are relevant to Ney’s claims because, as the district
court correctly concluded, the Rollover Agreement memorialized Ney’s
alleged oral promise to “‘roll’ $6 million of Ney’s own money back into
Magnitude.” Ultimately, we find that the subject matter of Ney’s lawsuit is
intertwined with and implicates the subject matter of the Rollover
Agreement, and thus, the forum-selection clause within the Rollover
Agreement is enforceable.
The district court also discussed how, although Ney is an “undisputed
signatory to the Rollover agreement,” the 3i Defendants are non–signatories.
The district court went on to correctly hold that “the 3i Defendants were so
closely related to New Amsterdam Software Holdings that they were
permitted to negotiate the underlying agreements,” and thus that they were
permitted to enforce the forum-selection clause against Ney. Magi XXI, Inc.
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v. Stato della Città del Vaticano, 714 F.3d 714, 723 (2d Cir. 2013) (“We hold
that a non-signatory to a contract containing a forum selection clause may
enforce the forum selection clause against a signatory when the non-signatory
is ‘closely related’ to another signatory.”). Regardless, Ney does not raise on
appeal the issue of whether the 3i Defendants, as “closely related” entities,
can enforce the Rollover Agreement as non–signatories. Ney has forfeited
this issue on appeal.
Because the Rollover Agreement’s forum-selection clause is both
mandatory and enforceable, Atlantic Marine’s private-interest factors
“strongly favor dismissal without prejudice.” Weber, 811 F.3d at 775 (“The
only remaining question is whether this is one of the rare cases in which the
public-interest FNC factors favor keeping a case despite the existence of a
valid and enforceable FSC.”). We must now “review for abuse of discretion
the district court’s use of Atlantic Marine’s balancing test” of public-interest
factors. Id. at 766. Having done so, we find no abuse of discretion. This is not
one of those extraordinary cases where the public-interest factors can
outweigh a mandatory and enforceable forum-selection clause. Atlantic
Marine, 571 U.S. at 62 (“Only under extraordinary circumstances unrelated
to the convenience of the parties should a § 1404(a) motion be denied.”);
Weber, 811 F.3d at 767 (“Cases in which the public-interest factors are
sufficiently strong to outweigh a valid FSC ‘will not be common.’”).
As the forum-selection clause in the Rollover Agreement is mandatory
and enforceable, we need not address whether Ney’s case falls within the
Purchase Agreement’s forum-selection clause. The district court’s dismissal
for forum non conveniens is AFFIRMED.
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