BHEP GP I, LLC v. Kentucky Retirement Systems ( 2018 )

IN THE SUPREME COURT OF THE STATE OF DELAWARE
BHEP GP I, LLC; BHEP GP II, LLC; §
BHEP GP II-B, LLC; BHEP GP III, LLC; §
BAY HILLS CAPITAL § No. 352, 2018
MANAGEMENT, LLC; BAY HILLS §
EMERGING PARTNERS I, L.P.; BAY §
HILLS EMERGING PARTNERS II, §
L.P.; BAY HILLS EMERGING §
PARTNERS, II-B, L.P.; and BAY HILLS §
EMERGING PARTNERS III, L.P., §
§
Plaintiffs Below- § Court Below: Court of Chancery
Appellants, § of the State of Delaware
§
v. § C.A. No. 2018-0234
§
KENTUCKY RETIREMENT §
SYSTEMS; KENTUCKY §
RETIREMENT SYSTEMS §
INSURANCE FUND; and KENTUCKY §
RETIREMENT SYSTEMS PENSION §
FUND, §
§
Defendants Below- §
Appellees. §
Submitted: July 23, 2018
Decided: August 1, 2018
Before STRINE, Chief Justice; VALIHURA and TRAYNOR, Justices.
ORDER
Upon consideration of the notice of interlocutory appeal and the supplemental
notice of interlocutory appeal, it appears to the Court that:
(1) The plaintiffs below (“the Plaintiffs”) are four Delaware limited
partnerships and their respective general partners. They filed the action below
against the limited partner and two related entities (“the Defendants”) to obtain
declarations that the general partners were improperly removed and that they
continue as the rightful managers of the limited partnerships. The Defendants
moved to dismiss the complaint on the ground that a forum selection clause in the
relevant entity agreements requires the Plaintiffs to litigate the dispute in Kentucky.
The Court of Chancery issued a memorandum opinion on July 2, 2018 (“the
Memorandum Opinion”), denying the Defendants’ motion to dismiss on the ground
that the purported forum selection clause was a permissive consent to jurisdiction
clause. But, the Memorandum Opinion stayed the Delaware action in favor of a
contemporaneous action1 filed by the Defendants in Kentucky.
(2) The Plaintiffs filed an application for certification to take an
interlocutory appeal of the Memorandum Opinion in the Court of Chancery on July
6, 2018. The Appellees filed their response in opposition on July 16, 2018.
(3) The Court of Chancery denied the certification application on July 23,
2018. In denying certification, the Court of Chancery noted that the Memorandum
1
See Memorandum Opinion at 16-17. The Court of Chancery noted that the Delaware action was
filed eight days before the Kentucky action. But, exercising its discretion under settled Delaware
law, the Court of Chancery chose not to afford first-filed deference to the Delaware action and
instead deemed the lawsuits simultaneously-filed.
2
Opinion did not, as the Plaintiffs argued, involve a novel question of law or create a
conflict in the law. The Court also rejected the Plaintiffs’ argument that
interlocutory review would serve considerations of justice. As the Court noted, the
Kentucky and Delaware actions overlap substantially, the parties are functionally
identical, and both actions require resolution of contract claims involving a complex
long-term relationship between parties who agreed that their disputes would be
decided under Kentucky law. Under the circumstances, the Court of Chancery held
that the Memorandum Opinion involved an exercise of the Court’s discretion, did
not decide “a substantial issue of material importance,”2 and did not warrant
interlocutory review before the entry of a final judgment.
(4) The grant or denial of an application for interlocutory review is within
the Court’s discretion. This case involves a dispute over the governance of a
Delaware limited partnership with an unusual governing agreement that contains not
just a choice of forum clause pointing to Kentucky, but also a choice of law provision
pointing to Kentucky. Contemporaneous litigation in Kentucky is ongoing, and the
Court of Chancery exercised its discretion to stay the case in light of that litigation,
and to avoid the potential for conflicting rulings and inefficiency. Recognizing that
the rare admixture created by the partnership agreement could give rise to potentially
important public policy issues depending on the ultimate direction the disputes
2
Del. Supr. Ct. R. 42(b).
3
among the parties take, and without signaling any agreement or disagreement with
any part of the Court of Chancery’s decision to stay that might be viewed as relevant
to those potential issues, we decline to accept an interlocutory appeal to consider
whether to second-guess its view that it was prudent and efficient to stay this
action. Precisely because this is such an unusual situation, the Court of Chancery
did not reach any of the embedded issues, and the parties did not brief them,
accepting this appeal seems to us to hazard more than it promises in terms of
justice. At bottom, the Vice Chancellor simply stayed his case in favor of a
contemporaneous action pending in another forum, and one which both parties, even
the plaintiffs who filed in Delaware, admit has a legitimate interest in the matter
given the unusual provisions in the partnership agreement, provisions the plaintiffs
have never objected to or challenged as invalid, even as of the time they filed their
Delaware action.
NOW, THEREFORE, IT IS HEREBY ORDERED that the within
interlocutory appeal is REFUSED. The Plaintiffs’ motion to expedite is moot.
BY THE COURT:
/s/ Leo E. Strine, Jr.
Chief Justice
4