Yasser Draini v. Naseeb Networks, Inc. ( 2017 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
TAMIKA R. MONTGOMERY-REEVES New Castle County Courthouse
VICE CHANCELLOR 500 N. King Street, Suite 11400
Wilmington, Delaware 19801-3734
Date Submitted: May 24, 2017
Date Decided: June 13, 2017
Theodore A. Kittila, Esquire Richard H. Cross, Esquire
Greenhill Law Group LLC David G. Holmes, Esquire
1000 North West Street, Suite 1200 Cross & Simon LLC
Wilmington, DE 19801 1105 North Market Street, Suite 901
Wilmington, DE 19899
RE: Yasser Draini v. Naseeb Networks, Inc., et al.,
C.A. No. 12774-VCMR
Dear Counsel:
This letter opinion resolves Defendants’ motion to dismiss this case in favor
of arbitration and for lack of personal jurisdiction over Defendants Namma
International Marine Services Co. Ltd., a Saudi Arabia company (“Namma”), Nesma
Advanced Technology, a Saudi Arabia company (“Nesma”), and Nesma Holding
Co., a Saudi Arabia company that wholly owns Namma and Nesma (“Nesma
Holding”).
I. BACKGROUND
Plaintiff Yasser Draini seeks stock certificates for—or the fair value of—(1)
certain shares of stock in Naseeb Networks, Inc., a Delaware corporation,
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June 13, 2017
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(“Naseeb”) and (2) stock options to purchase Naseeb stock to which he allegedly is
entitled. Draini became the CEO of Gulf Tradanet W.L.L., a Bahrain company,
(“Gulf”) in late 2012. At that time, Gulf had three stockholders: Namma, Al Safat
Energy Holding Company KSC, a Kuwait company (“Al Safat”), and Advanced
Solutions, a Saudi Arabia company.
A. The Al Safat Block of Naseeb Shares
In April 2012, Defendant Naseeb presented the Gulf stockholders with a letter
of intent, which contemplated Naseeb’s purchase of all Gulf shares in exchange for
Naseeb stock. Namma and Advanced Solutions signed the letter of intent, but Al
Safat was reluctant to sell its shares of Gulf in exchange for Naseeb stock. Rather,
Al Safat wanted to be “bought out,” presumably for cash. After several months,
Namma, Advanced Solutions, and Naseeb executed a stock purchase agreement,
dated November 11, 2012. Al Safat continued to refuse to sell its Gulf shares. Draini
and Ahmed Reda, the head of Advanced Solutions, allegedly agreed to purchase the
Naseeb stock that Al Safat would have received in the stock purchase from Al Safat.
To accomplish that goal, Draini, Reda, Al Safat, and Namma agreed to a multi-party
transaction under which Namma absorbed a loss that otherwise would have fallen to
Al Safat, and Draini and Reda paid cash to Namma. As a result of the proposed
transaction, Al Safat would cease to be a Gulf or Naseeb stockholder, and Draini and
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Reda would receive Al Safat’s shares of Naseeb. Reda agreed to purchase two-thirds
of Al Safat’s shares of Naseeb, and Draini agreed to purchase one-third of the
shares—or 824,517 shares (190,267 of which were to be placed in escrow until
certain benchmarks were met). Once the parties reached this agreement, Al Safat
executed the November 11, 2012 stock purchase agreement on March 13, 2013. In
April 2013, Draini paid 155,355 Saudi Riyal (approximately $41,428) to Namma for
the Al Safat block of shares in Naseeb. But Draini never received certificates for the
Naseeb shares.
B. The Options to Purchase Naseeb Shares
In December 2012, even though Al Safat had not yet executed the stock
purchase agreement, Naseeb began to exercise control over Gulf. Naseeb sought to
retain Draini as CEO, and Draini allegedly entered a stock option agreement with
Naseeb on December 25, 2012. Draini also entered a revised employment agreement
with Gulf, dated January 1, 2013 (the “Employment Agreement”). The Employment
Agreement provided in part that “[Draini] will be entitled to stock options entitling
him to purchase stock of the Company’s parent entity, Naseeb Networks Inc. in
accordance with the terms and conditions of a stock option agreement to be entered
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into between [Draini] and Naseeb Networks, Inc.”1 Draini never received the stock
options to which he was allegedly entitled under the Employment Agreement.
C. The Exit Agreement
In late 2013, Draini resigned from his employment due to disagreements with
Naseeb’s CEO Monis Rahman. On December 26, 2013, Gulf and Draini entered a
Resignation and Release of Claims Agreement (the “Exit Agreement”). Under the
Exit Agreement, Draini resigned effective December 31, 2013, and he was entitled
to receive $58,090 in severance pay. The Exit Agreement also states that Naseeb
agrees to transfer to Draini the 634,250 non-escrowed Naseeb shares that Draini
purchased from Al Safat “after completion of the share transfer formalities by the
Company.”2 And the Exit Agreement states that Draini “shall be granted 158,561
stock options as per terms of the stock option agreement (‘SOA’) dated 25 December
2012.”3
The Exit Agreement contains certain employment-related clauses. In Section
5, Draini promises to return all company property to Gulf and warrants that he has
1
Compl. ¶ 23.
2
Exit Agreement § 2.1.
3
Id.
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not retained any company property. In Section 6.1, the Exit Agreement incorporates
by reference the non-competition, non-solicitation, and confidentiality clauses from
the Employment Agreement, and Draini acknowledges that those clauses remain in
effect. And in Section 6.2, the Exit Agreement contains a non-disparagement clause.
The Exit Agreement provides that “[t]his Agreement and Release contains the
entire agreement between the parties and supersedes and terminates any and all
previous agreements between them.”4 It also contains an arbitration clause as
follows:
You acknowledge and affirm that, in view of the nature of
the business in which the Company is engaged, the
restrictions and agreements contained in your
Employment Agreement and carried over to this
Agreement and Release are reasonable and necessary in
order to protect the Company’s legitimate interests, and
any breach or threatened breach thereof will lead to the
Company being entitled to obtain from any court of
competent jurisdiction temporary, preliminary and
permanent injunctive relief or any other equitable remedy,
as well as damages, which rights shall be cumulative and
in addition to any other rights or remedies to which it may
be entitled.
Any claim or controversy arising out of or relating to this
Agreement and Release shall be settled via arbitration by
a sole arbitrator in accordance with the UNCITRAL
Arbitration Rules as at present in force. The place of
4
Id. § 11.
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arbitration shall be Manama, Bahrain and the language of
the arbitration proceedings shall be English.5
After entering the Exit Agreement, an unrelated dispute arose between Draini
and Rahman. Thereafter, Gulf refused to honor the severance payments, and Draini
filed litigation in Bahrain seeking to enforce the Exit Agreement.
In early 2014, Draini enlisted the assistance of Ousama Najjar, Namma and
Nesma’s principal representative, to attempt to obtain the stock certificates Draini
allegedly had purchased from Al Safat or their fair value. But instead of receiving
the stock certificates or their fair value, in September 2014, Draini allegedly was
wired 155,535 Saudi Riyal, the price he paid for the Naseeb stock 17 months earlier.
In the same month, Naseeb closed a $6 million financing round that the complaint
alleges was based on a valuation for Naseeb of at least $25 million. Draini now
seeks certificates for 824,517 Naseeb shares and 158,561 options for Naseeb
shares—or the fair value of such shares.
II. ANALYSIS
Defendants move to dismiss under Court of Chancery Rule 12(b)(1) for lack
of subject matter jurisdiction because of the arbitration clause in Draini’s Exit
Agreement. “Delaware courts lack subject matter jurisdiction to resolve disputes
5
Id. §§ 9.1, 9.2.
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that litigants have contractually agreed to arbitrate.”6 Delaware public policy favors
arbitration, and “in recognition that ‘contractual arbitration clauses are generally
interpreted broadly in furtherance of that policy[,]’ a Rule 12(b)(1) motion will be
granted if the parties contracted to arbitrate the claims asserted . . . .”7
In this case, the Court must first decide whether the Court or the arbitrator is
empowered to decide whether this claim should be arbitrated. Plaintiffs argue that
because the Exit Agreement is “governed by and interpreted in accordance with the
laws of the Kingdom of Saudi Arabia without regard to conflicts of law principles,”
Saudi Arabian law should govern the question of who decides substantive
arbitrability. But Plaintiff cites no Saudi Arabian law and does not argue that Saudi
Arabian law conflicts with Delaware law on this point. Absent any argument that a
conflict of laws exists, I apply Delaware law.
“Under Delaware law, the interpretation of a contract is ordinarily a matter of
law, which turns on the meaning that emerges from the contract’s words. Contracts
are to be interpreted as written, and effect must be given to their clear and
6
NAMA Hldgs., LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 429 (Del. Ch.
2007).
7
Li v. Standard Fiber, LLC, 2013 WL 1286202, at *4 (Del. Ch. Mar. 28, 2013)
(quoting Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 581-82 (Del.
Ch. 2006)).
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unambiguous terms.”8 Generally, if a contract is ambiguous, “the court should look
to parol evidence and, in the end, give the contract the most reasonable interpretation
that best reflects the parties’ apparent intent.”9 But “[i]n the case of contracts
containing arbitration clauses . . . the policy in favor of arbitration requires that
doubts regarding whether a claim should be arbitrated, rather than litigated, be
resolved in favor of arbitration.”10
Under the U.S. Supreme Court’s opinion in First Options of Chicago, Inc. v.
Kaplan,11 which this Court followed in Willie Gary LLC v. James & Jackson LLC,12
“[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless
there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.”13 The arbitration
clause in the Exit Agreement is similar to the arbitration clause in Willie Gary in that
8
Willie Gary LLC v. James & Jackson LLC, 2006 WL 75309, at *5 (Del. Ch. Jan. 10,
2006).
9
Id.10
Id.11
514 U.S. 938 (1995).
12
2006 WL 75309, at *6 (Del. Ch. Jan. 10, 2006).
13
First Options of Chicago, 514 U.S. at 944.
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it carves out equitable remedies, which may be obtained in a court.14 Section 9.1 of
the Exit Agreement states in part that:
[A]ny breach or threatened breach thereof will lead to the
Company being entitled to obtain from any court of
competent jurisdiction temporary, preliminary and
permanent injunctive relief or any other equitable remedy,
as well as damages, which rights shall be cumulative and
in addition to any other rights or remedies to which it may
be entitled.15
The Willie Gary court held that such an arbitration clause does not constitute clear
and unmistakable evidence of the parties’ intent to submit the question of substantive
arbitrability to the arbitrator because the arbitration clause does not generally refer
all disputes to arbitration.16 Instead, certain disputes may be brought in a court.
Here, the result is the same. The Court must determine substantive arbitrability
because the contract does not submit all claims to arbitration but rather has an
exception for certain remedies.
Section 9.2 of the Exit Agreement contains a broad arbitration clause
submitting “[a]ny claim or controversy arising out of or relating to this Agreement
and Release” to arbitration. Defendants argued at oral argument that the right to
14
Willie Gary, 2006 WL 75309, at *6.
15
Exit Agreement § 9.1.
16
Willie Gary, 2006 WL 75309, at *7.
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seek an injunction in a court in Section 9.1 of the Exit Agreement refers only to the
employment obligations from the Employment Agreement that are incorporated by
reference into the Exit Agreement. The unambiguous plain meaning of Section 9.1
supports that argument. It states as follows:
[T]he restrictions and agreements contained in your
Employment Agreement and carried over to this
Agreement and Release are reasonable and necessary in
order to protect the Company’s legitimate interests, and
any breach or threatened breach thereof will lead to the
Company being entitled to obtain from any court of
competent jurisdiction temporary, preliminary and
permanent injunctive relief or any other equitable remedy,
as well as damages . . . .17
Thus, only claims for breaches of Draini’s non-competition, non-solicitation, or
confidentiality obligations are not submitted to arbitration. In this case, Draini seeks
an injunction requiring Naseeb to issue stock certificates or the fair value of the
Naseeb shares he allegedly owns. The Section 9.1 exclusion from the arbitration
clause does not include that claim. As such, Section 9.2 of the Exit Agreement
submits Draini’s claims in this case to arbitration.
Draini argues that his claims do not “arise out of” and are not “related to” the
Exit Agreement but, instead, stem from the separate stock purchase agreement with
17
Exit Agreement § 9.1 (emphasis added).
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Al Safat and the stock option agreement with Naseeb. I disagree. The Exit
Agreement expressly includes the 634,250 non-escrowed Naseeb shares and the
158,561 Naseeb stock options as “payments and benefits” to which Draini is
entitled.18 And the Exit Agreement includes a broad release of any claims against
Gulf in exchange for those “payments and benefits.”19 Further, the Exit Agreement
explicitly “supersedes and terminates any and all previous agreements” between
Draini, Gulf, and Naseeb.20 I find that even if Draini’s claim does not “arise out of”
the Exit Agreement, it is at least “related to” the Exit Agreement for purposes of the
arbitration clause because the Exit Agreement terminates the other agreements
between Draini and his former employer. Draini’s claims, therefore, are submitted
to arbitration, and Defendants’ Rule 12(b)(1) motion to dismiss is granted.21
18
Id. § 2.1.
19
Id. § 3.
20
Id. § 11. Defendants argued at oral argument that Naseeb should be deemed a party
to the Exit Agreement because it acquired Gulf. Oral Arg. Tr. 52.
21
Plaintiff also raises concerns that Defendants would not agree to submit to
arbitration in Bahrain. Naseeb concedes that it is bound by the Exit Agreement and
must participate in arbitration. Oral Arg. Tr. 52. At oral argument, counsel for
Rahman represented that he too agrees to submit to arbitration. Oral Arg. Tr. 53.
The remaining defendants are likely barred by estoppel from raising that argument
because they have joined this motion seeking dismissal in favor of arbitration.
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III. CONCLUSION
For these reasons, Defendants’ Rule 12(b)(1) motion to dismiss is granted,
and their Rule 12(b)(2) motion to dismiss is denied as moot.
IT IS SO ORDERED.
Sincerely,
/s/ Tamika R. Montgomery-Reeves
Tamika R. Montgomery-Reeves
Vice Chancellor
TMR/jp