Centene Corporation v. Accellion, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
CENTENE CORPORATION and )
HEALTH NET, LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 2021-0206-PAF
)
ACCELLION, INC., )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: November 1, 2021
Date Decided: March 29, 2022
Paul J. Lockwood, Ryan M. Lindsay, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP, Wilmington, Delaware; William E. Ridgway, SKADDEN, ARPS,
SLATE, MEAGHER & FLOM LLP, Chicago, Illinois; Peter B. Morrison, Zachary
M. Faigen, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Los Angeles,
California; Attorneys for Plaintiffs Centene Corporation and Health Net, LLC.
Raymond J. DiCamillo, RICHARDS, LAYTON & FINGER, P.A., Wilmington,
Delaware; Michael Rubin, Melanie Blunschi, LATHAM & WATKINS LLP, San
Francisco, California; Serrin Turner, LATHAM & WATKINS LLP, New York,
New York; Attorneys for Defendant Accellion, Inc.
FIORAVANTI, Vice Chancellor
A healthcare company and its subsidiary seek to keep their breach of contract
action in this court. Their contract counterparty insists this suit belongs in
California. The plaintiffs, Centene Corporation (“Centene”) and Health Net, LLC
(“Health Net,” and with Centene, “Plaintiffs”), and defendant, Accellion, Inc.
(“Accellion”), are parties to a license agreement, pursuant to which Plaintiffs have
licensed Accellion’s software. The license agreement is governed by California law
and selects three counties in California as the forum for any dispute regarding the
license agreement. Years after entering into the license agreement, Plaintiffs
informed Accellion that Plaintiffs would not renew the license agreement unless
Accellion entered into an ancillary agreement designed to protect private health
information in accordance with federal law. The parties entered into the ancillary
agreement, which contains neither a choice of law nor choice of forum provision. In
2021, Accellion experienced a data breach that exposed personal health information
of plaintiffs’ clients. Plaintiffs sought to invoke their rights under the ancillary
agreement. When Accellion refused to comply, Plaintiffs filed a complaint in this
court asserting claims for breach of contract and seeking declaratory relief solely as
to the ancillary agreement. Accellion has moved to dismiss, arguing that the forum
selection clause in the license agreement mandates that this dispute be litigated in
California. Plaintiffs argue that the license agreement is inapplicable to this dispute
because the claims asserted here only relate to the ancillary agreement, which is a
fully integrated agreement that supersedes the license agreement. This opinion
grants Accellion’s motion.
I. BACKGROUND
The facts recited in this Memorandum Opinion are drawn from the Verified
Complaint, documents integral thereto, and materials submitted by the parties.
A. The Parties
Centene is a Delaware corporation with its principal place of business in St.
Louis, Missouri.1 Health Net is a health insurance company and has been a wholly
owned subsidiary of Centene since March 2016. 2
Accellion (or “Defendant”) is a Delaware corporation that provides data
storage, maintenance, and transfer solutions for its clients, with its principal place of
business in Palo Alto, California. 3
B. The Parties’ Contracts
1. The License Agreement
Accellion offers cloud-based, file-transfer services through a file transfer
system known as the File Transfer Appliance (the “FTA”).4 Accellion marketed the
1
Dkt. 1, Verified Complaint (“Compl.”) ¶ 9.
2
Id. ¶¶ 1, 10.
3
Id. ¶¶ 2, 11.
4
Id. ¶¶ 4, 14.
2
FTA as a solution for companies that needed to “transfer large and sensitive files
securely” and as a means for those companies to protect their customers’ Protected
Health Information (“PHI”) and to comply with the requirements of the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”). 5 Under HIPAA,
PHI is defined as “individually identifiable health information . . . that is: (i)
Transmitted by electronic media; (ii) Maintained in electronic media; or (iii)
Transmitted or maintained in any other form or medium.”6 Health Net first
contracted with Accellion to use the FTA in 2010. 7 Health Net subsequently used
the FTA to communicate with health care providers regarding patients and their
PHI.8
On August 2, 2012, Health Net and Accellion entered into a License
Agreement (the “License Agreement”), which provided Health Net with continued
access to Accellion’s software, including the FTA.9 The License Agreement also
addresses each party’s liability risk. The section describing Accellion’s limited
warranties reads:
5
Id. ¶ 14; see 42 U.S.C. § 1320d et seq.
6
45 C.F.R. § 160.103.
7
Compl. ¶ 17.
8
See id. ¶¶ 15–16.
9
See Dkt. 6, Accellion, Inc.’s Opening Brief in Support of its Motion to Dismiss the
Verified Complaint (“Def.’s Op. Br.”), Ex. 1 (“License Agreement”).
3
Accellion is not liable under any warranty or otherwise for defects or
liability caused by the use of the [Accellion’s software] . . . in any
manner or for any purpose other than that for which it was licensed to
Customer, or for causes not within Accellion’s reasonable control.
...
ACCELLION DOES NOT WARRANT THAT THE USE OF [its
software] WILL BE UNINTERUPPTED OR ERROR FREE.10
Under the terms of the License Agreement, Accellion also agrees to indemnify
Health Net in a third-party action “to the extent that it is based upon a claim that
[Accellion’s software] . . . infringes such third-party’s U.S. patent or foreign
equivalent thereof . . . or misappropriates any trade secret . . . .” 11 And under a
section titled, “Limitation of Liability,” the License Agreement states:
EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS HEREIN
[and other exceptions] . . . , IN NO EVENT SHALL EITHER PARTY
. . . BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF
PROFITS, REVENUE, DATA OR USE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR THE USE OR
PERFORMANCE OF THE PRODUCTS OR SERVICES SUPPLIED
HEREUNDER . . . ACCELLION’S AGGREGATE LIABILITY FOR
DAMAGES SHALL IN NO EVENT EXCEED THE TOTAL FEES
RECEIVED FROM THE LICENSES GRANTED TO THE
CUSTOMER UNDER THIS AGREEMENT IN THE PREVIOUS
TWELVE MONTHS FOR THE APPLICABLE [software]. 12
10
License Agreement §§ 8.1(b), 8.4.
11
Id. § 9.2.
12
Id. § 10.
4
The License Agreement also contains a forum selection clause (the “Forum
Selection Clause”), stating that “[a]ny dispute between the parties regarding this
Agreement will be subject to the exclusive venue of the state and federal courts in
the state of California in San Francisco, San Mateo and Santa Clara counties.”13
Additionally, the License Agreement contains an integration clause, which reads in
pertinent part: “This Agreement constitutes the complete and exclusive agreement
between the parties and supersedes any and all prior communications,
representations and understandings, whether written or oral.”14
The License Agreement contemplates that the duration of the agreement will
be set forth in an “Order” for Accellion’s services, which Order becomes part of the
License Agreement. 15 The License Agreement provides that it “shall continue for
the License Term on the applicable Order” unless otherwise terminated by the
parties.16 Neither the License Term nor the applicable Order is in the record.
2. The BAA
HIPAA regulations require companies like Health Net to obtain contractual
assurances from companies they engage to safeguard PHI.17 In January 2015, Health
13
Id. § 12.7.
14
Id. § 12.10.
15
Id. §§ 1.2, 11.1.
16
License Agreement § 11.1.
17
See 45 C.F.R. §§ 164.502(e)(2), 164.504(e).
5
Net informed Accellion that Health Net’s renewal of the License Agreement would
be contingent on the parties entering into a business associate agreement (the
“BAA”).18 The BAA was meant to ensure Health Net’s compliance with the
pertinent HIPAA regulations. 19 After nearly two months of negotiations, Health Net
and Accellion executed the BAA on March 19, 2015.20
The BAA obligates Accellion to “use appropriate administrative, physical,
and technical safeguards to prevent improper use or disclosure of PHI,” 21 so as to
comply with HIPAA and other security and privacy requirements. Those
requirements are detailed in a schedule attached to the BAA.22 The BAA also states
that Accellion “shall be responsible for all costs incurred in connection with the loss
[of PHI], Security Incident or Breach, including but not limited to, any notifications
and mitigation activities taken.” 23
18
Compl. ¶¶ 18–19. See generally Gerald E. DeLoss, HIPAA Requirements for Lawyers-
Business Associate Contracts, 79 N.D. L. REV. 41, 46–48 (2003) (describing HIPAA’s
requirements for business associate contracts).
19
Compl. ¶ 18.
20
Id. ¶¶ 19–20.
21
Compl., Ex. A (“BAA”) § II(d). The BAA incorporates HIPAA’s definition for PHI.
Id., Recital C.
22
See id., Schedule B.
23
Id. § II(g). The BAA adopts HIPAA’s definitions for both a “Breach” and a “Security
Incident.” Id. §§ I(a), (s). A “Breach” is defined as “the acquisition, access, use, or
disclosure of protected health information in a manner not permitted under” ancillary
HIPAA regulations. 45 C.F.R. § 164.402. A “Security Incident” is defined as the
6
Like the License Agreement, the BAA contains an indemnification provision,
albeit one where Accellion accepts more liability. Under the BAA, Accellion:
shall defend, indemnify and hold harmless Health Net . . . from and
against any claim, cause of action, liability, damage, cost or expense
(including reasonably attorneys’ fees) arising out of or relating to any
loss, Security Incident, Breach or other non-permitted use or disclosure
of PHI, failure to safeguard ePHI, or other breach of this Agreement by
[Accellion] . . . . The exclusions and limits of liability, if any, provided
in the Health Net - Vendor Contract(s) shall not apply in the event of a
breach of [the BAA] or with respect to [Accellion’s] indemnification
obligations.24
The BAA defines “Health Net - Vendor Contract(s)” to encompass two categories
of contracts: (1) a “contract or contracts for the provision of services, software or
some other business arrangement” that Health Net and Accellion executed “[o]n or
around the date” the BAA was signed “or shortly thereafter” and (2) “additional
agreements in the future pursuant to which [Accellion] may provide services to
Health Net, license software to Health Net or enter into some other business
arrangement.”25
The BAA also provides Health Net with information rights. Under the BAA,
Health Net “may inspect the facilities, systems, records, policies and procedures
attempted or successful unauthorized access, use, disclosure, modification, or destruction
of information or interference with system operations in an information system.” 45 C.F.R.
§ 164.304.
24
BAA § II(q).
25
Id., Recitals A–C.
7
relating to the access, use and/or disclosure of PHI or ePHI pursuant to [the BAA]
for the purpose of determining whether [Accellion] has complied with [the BAA],”
subject to Health Net giving Accellion written notice ten business days in advance
(the “Audit Provision”). 26
Like the License Agreement, the BAA contains its own integration clause (the
“Integration Clause”):
This Agreement—consisting of the signature page, these terms and
conditions and the attached Schedules and Addenda—constitute the
entire agreement between the Parties with respect to its subject matter
and merges, integrates and supersedes all prior and contemporaneous
agreements, addenda and understandings between the Parties, whether
written (including within any Health Net-Vendor Contract(s)) or oral,
concerning its subject matter. Schedules A and B to this Agreement,
attached hereto, are incorporated herein as though fully set forth in the
body of the Agreement.27
Unlike the License Agreement, the BAA contains neither a forum selection
provision nor a choice of law provision. According to Accellion, the BAA is “a form
agreement that Centene appears to have had its vendors sign in 2015,” but it
acknowledges that the parties negotiated over its terms for approximately two
months.28
26
Id. § IV.
27
Id. § X.
28
Dkt. 14 (“Hrg.”) at 5:11–17; see Compl. ¶ 19.
8
Centene acquired Health Net on March 24, 2016. 29 Following the acquisition,
Centene began administering the contracting relationship between Health Net and
Accellion, to which Accellion agreed.30
C. The FTA Is Hacked and PHI Is Exposed
On December 16, 2020, Accellion discovered vulnerabilities in the FTA,
which allowed for hackers remotely to access customer data.31 Accellion notified
Centene about these vulnerabilities on December 21, but omitted any mention of
customer data being stolen. 32 On January 12, 2021, Accellion issued a press release
acknowledging that “it was made aware” of a “vulnerability” in the FTA in mid-
December, but also stated that it had resolved the vulnerability. 33 The press release
did not disclose that customer data had been stolen. 34
On January 20, 2021, hackers exploited vulnerabilities in the FTA again.35
This time the hackers remotely accessed customer data, including data that belonged
to Plaintiffs’ customers (the “Data Breach”).36 On January 22, 2021, Accellion’s
29
Compl. ¶ 26.
30
Id. ¶ 27.
31
Id. ¶ 30.
32
Id. ¶ 31.
33
Id. ¶ 33.
34
Id.
35
Id. ¶ 35.
36
Id.
9
Chief Information Security Officer alerted Plaintiffs that Accellion had discovered
the second security vulnerability in the FTA and that it was an “extension” of the
previously disclosed vulnerability. 37
On February 11, 2021, Plaintiffs’ counsel notified Accellion that Plaintiffs
intended to audit Accellion’s compliance with the BAA pursuant to the terms of the
Audit Provision.38 Plaintiffs also demanded that Accellion indemnify Plaintiffs and
“bear responsibility for” all past and future costs resulting from the Data Breach.39
Accellion refused to indemnify or bear responsibility for Plaintiffs costs or provide
them access for an audit. 40
D. Procedural History
Plaintiffs filed their three-count Verified Complaint (the “Complaint”) on
March 10, 2021. 41 Count I seeks an order directing Defendant’s specific
performance and compliance with the BAA’s Audit Provision. 42 Count II seeks a
declaratory judgment that Accellion must indemnify Plaintiffs under the BAA for
37
Id. ¶ 36.
38
Id. ¶ 38.
39
Id.
40
Id. ¶ 39.
41
See Dkt. 1.
42
Compl. ¶ 47.
10
damages they suffered relating to their losses from the Data Breach. 43 Count III
alleges that Accellion breached the BAA by (1) “failing to maintain reasonable
security and safeguards to prevent unauthorized access to PHI” in accordance with
the BAA, (2) refusing to “bear responsibility” for Plaintiffs’ costs resulting from the
Data Breach, and (3) refusing to indemnify Plaintiffs from the fallout over the Data
Breach. 44
Accellion has moved to dismiss the Complaint under Court of Chancery Rule
12(b)(3), arguing that the License Agreement’s Forum Selection Clause precluded
Plaintiffs from bringing their claims in this court.45
II. ANALYSIS
“The proper procedural rubric for addressing a motion to dismiss based on a
forum selection clause is found under Rule 12(b)(3), improper venue.” In re Bay
Hills Emerging P’rs I, L.P., 2018 WL 3217650, at *4 (Del. Ch. July 2, 2018)
43
Id. ¶¶ 48–55.
44
Id. ¶ 59.
45
See Dkt. 3. Defendant initially moved to dismiss under Court of Chancery Rule 12(b)(6)
as well, but failed to make any arguments for dismissal under that rule in its briefing.
“Under the briefing rules, a party is obliged in its motion and opening brief to set forth all
of the grounds, authorities and arguments supporting its motion.” Franklin Balance Sheet
Inv. Fund v. Crowley, 2006 WL 3095952, at *4 (Del. Ch. Oct. 19, 2006) (citing Ct. Ch. R.
7(b) and 171). “The failure to raise a legal issue in an opening brief generally constitutes
a waiver of the ability to raise that issue in connection with a matter under submission to
the court.” Thor Merritt Square, LLC v. Bayview Malls LLC, 2010 WL 972776, at *5 (Del.
Ch. Mar. 5, 2010). Therefore, I consider that part of its motion waived.
11
(internal quotations omitted). “Delaware honors contractual choice of forum
provisions.” PPF Safeguard, LLC v. BCR Safeguard Hldg., LLC, 2010 WL
2977392, at *5 (Del. Ch. July 29, 2010). “Forum selection clauses are presumptively
valid and should be specifically enforced unless the resisting party clearly shows that
enforcement would be unreasonable and unjust, or that the clause is invalid for such
reasons as fraud and overreaching.” Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1146
(Del. 2010) (internal quotations and bracketing omitted). Consequently, under Court
of Chancery rule 12(b)(3), the court will grant a motion to dismiss for improper
venue if there is an applicable forum selection clause where the parties use “express
language clearly indicating” that they may not bring an action in this court. Ashall
Homes Ltd. v. ROK Ent. Grp. Inc., 992 A.2d 1239, 1245 (Del. Ch. 2010) (internal
quotations omitted). Unlike a motion to dismiss for failure to state a claim, “the
court is not shackled to the plaintiff’s complaint and is permitted to consider
extrinsic evidence from the outset.” Mack v. Rev Worldwide, Inc., 2020 WL
7774604, at *6 (Del. Ch. Dec. 30, 2020).
Accellion contends that this dispute implicates the License Agreement’s
Forum Selection Clause, and therefore, Plaintiffs’ claims may only be brought in
one of the three California counties specified in the License Agreement. Plaintiffs
do not challenge the validity of the Forum Selection Clause. Instead, they argue that
this dispute does not implicate the Forum Selection Clause in the License
12
Agreement. Plaintiffs assert that their claims fall solely under the BAA, which was
a subsequent, fully integrated agreement that created distinct rights, obligations, and
remedies. Because the BAA contains no forum selection clause of its own, Plaintiffs
maintain that the License Agreement is inapplicable.
The parties do not dispute that if the Forum Selection Clause applies to the
Plaintiffs’ Complaint, Defendant’s motion must be granted. Thus, the issue here
concerns the extent of the Forum Selection Clause in the License Agreement as to
the current dispute. Accellion essentially makes two arguments in support of its
position: (1) the scope of the Forum Selection Clause encompasses Plaintiffs’ causes
of action and Accellion’s defense to the claims; and (2) Plaintiffs’ own allegations
in the Complaint state that the BAA is part of the License Agreement, and the Forum
Selection Clause thus applies to any claims rooted in the BAA. Plaintiffs rely on the
Integration Clause in the later-executed BAA, which contains no choice-of-forum
provision, as foreclosing Accellion’s arguments.
A. The Scope of the Two Agreements
Determining the scope of both the License Agreement and BAA requires the
court to engage in contract interpretation. The License Agreement is governed by
California law. The BAA is silent as to which law applies.
In Delaware, the construction of contract language presents a question of law.
Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195
13
(Del. 1992). The court’s “task is to fulfill the parties’ shared expectations at the time
they contracted.” Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688,
696 (Del. 2019) (internal quotations omitted). The court starts with the text of the
contract. Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836,
846 (Del. 2019). When a contract’s language is clear and unambiguous, the court
will give effect to the plain meaning of the contract’s terms and provisions. Osborn
v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010). The contract is to be read as a whole,
giving effect to each term and provision, “so as not to render any part of the contract
mere surplusage.” Id. at 1159.
California rules governing contract interpretation are similar. See Grunstein
v. Silva, 2011 WL 378782, at *13 (Del. Ch. Jan. 31, 2011); see also KT4 Partners
LLC v. Palantir Techs. Inc., 2021 WL 2823567, at *18 (Del. Super. Ct. June 24,
2021) (“Both Delaware and California courts take a plain meaning approach
to contract interpretation.”). Under California law, “[t]he language of a contract is
to govern its interpretation, if the language is clear and explicit, and does not involve
an absurdity.” Cal. Civ. Code § 1638; Powerine Oil Co. v. Superior Ct., 118 P.3d
589, 598 (Cal. 2005) (“If contractual language is clear and explicit, it governs.”)
(internal quotations omitted). The court looks to the “objective intent,” i.e., “the
words of the contract,” to interpret a contract, not “the subjective intent of one of the
14
parties.” Founding Members of the Newport Beach Country Club v. Newport Beach
Country Club, Inc., 135 Cal. Rptr. 2d 505, 514 (Cal. Ct. App. 2003).
Under Delaware law, in construing a contract, “the trial court must consider
‘[t]he basic business relationship between [the] parties’ so that it can ‘give sensible
life’ to the agreement.” Bardy Diagnostics, Inc. v. Hill-Rom, Inc., 2021 WL
2886188, at *18 (Del. Ch. July 9, 2021) (quoting Chi. Bridge & Iron Co. v.
Westinghouse Elec. Co. LLC, 166 A.3d 912, 926–27 (Del. 2017)) (bracketing in
original). Nevertheless, “the background facts cannot be used to alter the language
chosen by the parties within the four corners of their agreement.” Town of Cheswold
v. Cent. Del. Bus. Park, 188 A.3d 810, 820 (Del. 2018). “Under California law,
however, extrinsic evidence may be used to explain the meaning of a contract even
if the contract appears unambiguous on its face.” CA, Inc. v. Ingres Corp., 2009 WL
4575009, at *29 (Del. Ch. Dec. 7, 2009) (citing Pac. Gas & Elec. Co. v. G. W.
Thomas Drayage & Rigging Co., 442 P.2d 641, 644 (Cal. 1968)), aff’d, 8 A.3d 1143(Del. 2010); see also Cal. Civ. Code § 1647 (“A contract may be explained by
reference to the circumstances under which it was made, and the matter to which it
relates.”).
1. The License Agreement
“When a contract contains a forum selection clause, this court will interpret
the forum selection clause in accordance with the law chosen to govern the contract.”
15
Germaninvestments AG v. Allomet Corp., 225 A.3d 316, 331 (Del. 2020) (quoting
Ashall Homes, 992 A.2d at 1245) (internal quotations omitted). Because the License
Agreement is governed by California law,46 the court will interpret the scope of the
Forum Selection Clause under California law. See id.The Forum Selection Clause in the License Agreement reads, in pertinent part:
Any dispute between the parties regarding this Agreement will be
subject to the exclusive venue of the state and federal courts in the state
of California in San Francisco, San Mateo and Santa Clara counties.
The parties hereby consent to the exclusive jurisdiction and venue of
such courts. 47
Accellion argues that the application of the Forum Selection Clause to any “dispute”
“regarding” the License Agreement must be construed broadly.
Accellion generally points to California decisions applying contractual forum
selection clauses to statutory or tort claims between the contracting parties. 48 In Cal-
State Bus. Prod. & Servs., Inc. v. Ricoh, 16 Cal. Rptr. 2d 417 (Cal. Ct. App. 1993),
the California Court of Appeal interpreted a forum selection provision written
46
License Agreement § 12.7.
47
Id.
48
Accellion’s briefing relies on a couple of unpublished California Court of Appeals
decisions in interpreting the License Agreement. Under the California Rules of Court,
however, those unpublished decisions cannot be cited. Cal. R. Ct. 8.1115(a) (requiring
that, except under circumstances not present here, “an opinion of a California Court of
Appeal or superior court appellate division that is not certified for publication or ordered
published must not be cited or relied on by a court or a party in any other action”).
Accordingly, this decision does not cite or rely on those opinions.
16
identically across a group of contracts. Each provision stated that any state or federal
district court in the Borough of Manhattan in New York City would have “exclusive
jurisdiction over any case or controversy arising under or in connection with” its
respective agreement. Id. at 420 n.6. The court held that those provisions should be
interpreted broadly to “encompass[] all causes of action arising from or relating to
[their respective] agreement[s].”49 Id. at 423 (citations and emphasis omitted); see
also Olinick v. BMG Entm’t, 42 Cal. Rptr. 3d 268, 279 (Cal. Ct. App. 2006) (holding
state statutory and common law age discrimination claims fell within an employment
agreement’s forum selection clause using “arising under” language).
The scope of the Forum Selection Clause turns on the precise language of the
agreement. The Forum Selection Clause applies to “any dispute between the parties
regarding this Agreement.” The ordinary meaning of “regarding” is “[i]n reference
or relation to,” “about,” or “concerning.” Oxford English Dictionary (3d ed. 2009);
see Merriam-Webster’s Collegiate Dictionary (11th ed. 2014) (defining “regarding”
as “with respect to; concerning”); see also In re McGraw-Hill Glob. Educ. Hldgs.
49
Ricoh relied on Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148 (Cal. 1992), which
held that a choice of law provision stating that it “governs” the agreement “encompasses
all causes of action arising from or related to that agreement, regardless of how they are
characterized, including tortious breaches of duties emanating from the agreement or the
legal relationships it creates.” Id. at 1155. The Ricoh court, observed that choice-of-law
and forum selection provisions are “closely related” under California law and extended
Nedlloyd’s reasoning to forum selection clauses.
17
LLC, 909 F.3d 48, 68 (3d Cir. 2018) (relying on same dictionary definitions).50
Other California decisions support a broad reading of these terms. See Shepard v.
Edward Mackay Enters., Inc., 56 Cal. Rptr. 3d 326, 328 (Cal. Ct. App. 2007)
(characterizing an arbitration clause as “broadly worded” where it mandated
arbitration for any disputes “regarding” or “arising out of” the greater agreement);
Sagonowsky v. More, 75 Cal. Rptr. 2d 118, 126, 133–34 (Cal. Ct. App. 1998)
(finding that arbitration agreement requiring arbitration of “any dispute” “regarding”
the parties’ agreements was broad and not limited to “colorable” or “bona fide”
claims).
Accellion also points to In re McGraw-Hill Global Education Holdings LLC,
909 F.3d 48 (3d Cir. 2018), in further support of the proposition that the wording of
the Forum Selection Clause favors its broad application. There, in considering a
forum selection provision, the court reasoned that “regarding” may be equated with
“‘relates to’” or “as having some ‘logical or causal connection.’” Id. at 68 (quoting
John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997)
(Alito, J.)); see also Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1047
50
Like Delaware, California courts frequently refer to a dictionary definition to construe
contractual terms. See, e.g., Scheenstra v. Cal. Dairies, Inc., 153 Cal. Rptr. 3d 21, 42, 46–
47 (Cal. Ct. App. 2013) (utilizing dictionaries to aid in the interpretation of cooperative’s
bylaws); Scott v. Cont’l Ins. Co., 51 Cal. Rptr. 2d 566, 569 (Cal. Ct. App. 1996) (“In
seeking to ascertain the ordinary sense of words, courts in insurance cases regularly turn to
general dictionaries.”).
18
(Del. Ch. 2006) (holding that the phrase “relating to” caused a choice-of-law
provision to govern not only “contract claims that might arise among the parties,”
but also “claims in tort seeking rescission” of the agreement). A provision that
extends to matters “relating to” an agreement encompasses “any issues that ‘touch
on contract rights or contract performance.’” ASDC Hldgs., LLC v. Richard J.
Malouf 2008 All Smiles Grantor Retained Annuity Tr., 2011 WL 4552508, at *5
(Del. Ch. Sept. 14, 2011) (quoting Parfi Hldg. AB v. Mirror Image Internet, Inc.,
817 A.2d 149, 155 (Del. 2002)).
The aforementioned authorities support a broad reading of the Forum
Selection Clause. Plaintiffs do not challenge Accellion’s general assertion that the
Forum Selection Clause should be interpreted broadly. Nor do they take issue with
Accellion’s interpretive authority or cite anything to the contrary. Instead, Plaintiffs
simply point to the language of the Forum Selection Clause and argue that it does
not apply to their claims under the BAA. In the absence of contrary authority I am
persuaded that, consistent with the aforementioned authority, the Forum Selection
Clause extends to any disputes that are related to or have any logical or causal
connection to the License Agreement.
19
2. The BAA’s Integration Clause
To avoid the Forum Selection Clause in the License Agreement, Plaintiffs rely
on the Integration Clause in the BAA.51 The integration clause in the BAA states:
This Agreement—consisting of the signature page, these terms and
conditions and the attached Schedules and Addenda—constitute the
entire agreement between the Parties with respect to its subject matter
and merges, integrates and supersedes all prior and contemporaneous
agreements, addenda and understandings between the Parties, whether
written (including within any Health Net-Vendor Contract(s)) or oral,
concerning its subject matter. Schedules A and B to this Agreement,
attached hereto, are incorporated herein as though fully set forth in the
body of the Agreement.52
The BAA contains neither a forum selection clause nor a choice of law
provision. Plaintiffs argue the logical inference from this omission is that the parties
considered the issue, chose not to include any such provisions, and therefore
intended that claims concerning the BAA could be brought in any court that could
obtain personal and subject matter jurisdiction.53
51
See Hrg. 25:12–23, 27:22–28:1 (“you have an agreement, and then you have a
subsequent agreement on a specific subject matter . . . that supersedes the overlapping
areas”).
52
BAA § X.
53
Hrg. 26:10–12 (“I think that, under those circumstances, there was a choice not to include
the choice of law provision.”), 28:5–15 (“It allows us to sue in other places where we want
to. . . . And that’s fully consistent . . . with the agreement signed by the parties. . . . [T]hese
were sophisticated parties . . . . They have the ability to adjust and amend those
contracts.”).
20
Plaintiffs principally draw support for their position from two cases. In
Newport Disc, Inc. v. Newport Electronics, Inc., 2013 WL 987936 (Del. Super. Ct.
Mar. 11, 2013), the two defendant corporations were sold pursuant to a purchase
agreement that contained a New York forum selection clause. Less than two months
later, the defendants entered into agreements with one of the plaintiff corporations
that terminated commission agreements which pre-dated the purchase agreement.
The termination agreements did not contain forum selection clauses, but did include
integration clauses and New York choice-of-law provisions. 54 The plaintiffs later
filed an action in Delaware, alleging that the defendants breached the termination
agreements. The defendants moved to dismiss, invoking the provision of the
purchase agreement that selected New York courts as the exclusive forum “for the
purpose of any Action arising out of or relating to [the] Agreement.” 55 Defendants
argued the provision was enforceable, and the suit was improperly brought in
Delaware, because the termination agreements were “part and parcel” with and
incorporated by reference the purchase agreement. Id. at *2.
54
The identical integration clauses read: “This Termination Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, among the parties identified above with
respect thereto.” Newport Disc, 2013 WL 987936, at *1.
55
Id. at *1. “Action” was defined as “any suit, litigation, hearing, examination, inquiry,
investigation, audit, arbitration, cause of action, claim, complaint, criminal prosecution,
governmental or other administrative proceeding, whether at law or at equity, before or by
any Court or Governmental Authority, arbitrator or other tribunal.” Id. at *1 n.1.
21
The Newport Disc court, denied the motion to dismiss. The court relied
primarily upon the integration clauses in the termination agreements and the
plaintiffs’ prima facie showing that the action could be resolved solely by reference
to the termination agreements. Id. at *5. 56 The court stated: “Absent a clear
intention to the contrary, an integration clause should be interpreted to limit the
forum selection clause to the agreement containing the forum selection clause.” Id.
at *4. The court was also influenced by the fact that the termination agreements
“specifically provide[d] choice of law provisions,” which “suggest[ed] the parties’
choice not to incorporate other provisions, such as forum selection, from the
Purchase Agreement.” Id. at *2. Therefore, the court determined that the forum
selection clause in the purchase agreement was inapplicable to the parties’ dispute.
Plaintiffs also rely upon Green Isle Partners, Ltd. v. Ritz-Carlton Hotel Co.
L.L.C., 2000 WL 1788655 (Del. Ch. Nov. 29, 2000). In that case, plaintiff, Green
Isle, owned a hotel and leased the surrounding property outside of San Juan, Puerto
Rico. Id. at *1. The defendant, Ritz-Carlton, operated the hotel pursuant to an
operating agreement between it and Green Isle. Id. The operating agreement was
fully integrated and governed by Georgia law; it did not contain a forum selection
56
Both the purchase agreement and termination agreements in Newport Disc were
governed by New York law. The parties in that case agreed there was “no material
difference between New York and Delaware law” for the purposes of the motion before
the court. Id. at *2 n.8.
22
provision. Id. at *1, *4. Four days after entering into the operating agreement, Ritz-
Carlton, Green Isle, and the guarantor of the hotel project entered into an attornment
agreement, establishing the rights and obligations of Ritz-Carlton and the guarantor
in the event of Green Isle’s default under its loan obligations or the operating
agreement. The attornment agreement was governed by Puerto Rican law, and it
selected Puerto Rico as the exclusive forum for “all actions or proceedings . . . arising
out of or from or related to th[e] agreement. Id. at *2. 57
When Green Isle was unable to pay its debt service on the bonds and the loan
guaranty was called, the guarantor served Green Isle with a notice of default of its
debt obligation. Green Isle then filed an action in Delaware to inspect books and
records of Ritz-Carlton under the operating agreement. Ritz-Carlton moved to
dismiss, citing the clause in the attornment agreement that selected Puerto Rico as
the exclusive forum for any action or proceeding arising out of or relating to that
agreement. Id. at *2.
In denying the motion to dismiss, the court reasoned that the subject matter of
the parties’ dispute was confined to the operating agreement. Thus, the agreement’s
integration clause made the provisions in the operating agreement addressing a
57
The forum selection provision read, in part: “all actions or proceedings in any way,
manner or respect, arising out of or from or related to this Agreement shall be litigated in
courts having situs within the Commonwealth of Puerto Rico.” Green Isle, 2000 WL
1788655, at *2.
23
books and records inspection the “entire agreement between the parties” regarding
that subject matter. Id. at *4. Underlying the court’s reasoning was the nature of
the parties’ various agreements, and particularly the limited scope of the attornment
agreement as applied to Green Isle. “Critical” to the court’s analysis was the fact
that Green Isle had signed the attornment agreement for “the sole purpose of
consenting to the covenants made therein between [the guarantor] and Ritz-Carlton.”
Id. at *3. “Green Isle never became substantively bound to any obligations or duties
created by [the attornment agreement], including its forum selection clause.” Id. at
*4. The court also concluded that the suit did not arise out of or relate in any way to
the attornment agreement, rejecting the defendant’s entirely speculative argument as
to what Green Isle might do as a result of its inspection. Id. at *5.
The BAA’s integration clause is not dispositive of the present motion. There
is no per se rule that a forum selection clause in a prior agreement is superseded by
a subsequent, integrated agreement that is silent as to a choice of forum. This court
has also confronted the issue directly and held that the existence of an integration
clause in a later-executed ancillary contract did not avoid application of the forum
selection provision in the prior contract. Both of the following cases are instructive.
In CA, Inc. v. Ingres Corp., 2009 WL 4575009, CA spun off Ingres as an
independent software company. To accommodate the remaining CA customers who
would continue using software now controlled by Ingres, the parties entered into a
24
“Legacy Support Agreement,” which provided for Ingres to maintain and support
the software for CA’s customers. Id. *6–9. The Legacy Support Agreement was
governed by New York law and selected the courts of New York and Delaware as
the exclusive forum for “any action or proceeding in respect of any claim directly
arising out of or related to” that agreement. Id. at *46. Two years later, the parties
entered into a “Reseller Agreement,” which permitted CA to purchase discounted
licenses for the latest versions of its legacy software for its customers, after Ingres
refused to provide those customers with the software for free as part of the Legacy
Support Agreement. Id. at *10–15. The Reseller Agreement contained an
integration clause, was governed by California law, and did not have a forum
selection clause. Id. at *31, *46. One issue in Ingres was whether Ingres should be
enjoined from prosecuting claims in California, which according to CA, implicated
the forum selection clause in the Legacy Support Agreement. Id. at *20, *46.
Chief Justice, then-Vice Chancellor, Strine held in a post-trial opinion that
claims under the Reseller Agreement in California were subject to the forum
selection clause in the Legacy Support Agreement. The court found that the Reseller
Agreement’s “plain terms d[id] not reveal where it beg[an] and the Legacy Support
Agreement end[ed].” Id. at *47. The court further found that the Reseller
Agreement acted as a “gap-filler” for the Legacy Support Agreement, modifying the
parties’ preexisting obligations. Id. The court was also influenced by the “complex
25
relationship” between the parties and the necessity of considering the parties’
“broader network of contracts.” Id. As the Delaware Supreme Court observed in its
affirmance, “the court must consider the entire collection of related contracts,
including those that contained forum selection clauses . . . . After considering and
interpreting all of the related agreements, the Court of Chancery concluded that the
agreement that did not contain a forum selection clause did not supersede those that
did.” 8 A.3d at 1146.
More recently, in Florida Chemical Co., LLC v. Flotek Industries, Inc., 262
A.3d 1066 (Del. Ch. 2021), the court held that a party could not avoid a forum
selection provision in one contract merely because the other agreement, which did
not possess a forum selection clause, contained an integration clause. Although a
literal reading of the integration clause would eliminate the Delaware forum
selection clause in the first agreement, “[s]uch a literal reading [was] not tenable.”
Id. at 1081. The court viewed the contracts “realistically as part of the real-world
business context” and concluded they were executed contemporaneously to
effectuate the entire transaction. Id. at 1081–82. The court cited the trial court
opinion in Ingres for the proposition that “a forum selection provision in the more
‘fundamental’ agreement applied to an ancillary agreement that did not contain a
forum selection provision, despite an integration clause in the ancillary agreement.”
Id. at 1082.
26
Plaintiffs attempt to distinguish Ingres, arguing that the agreements at issue in
that case were found to be “so deeply intertwined that ‘the 2007 Reseller
Agreement’s plain terms do not reveal where it begins and the Legacy Support
Agreement ends.’” 58 Plaintiffs argue that the BAA and License Agreement are not
so intertwined and cover completely different subject matters. 59 Plaintiffs further
argue that Ingres is irrelevant because the BAA contains the Integration Clause
stating that it supersedes all prior agreements. 60
Plaintiffs ignore, however, that the Reseller Agreement in Ingres also
contained an integration clause stating that it superseded all prior agreements
pertaining to the subject matter. See Ingres, 2009 WL 4575009, at *17. Indeed, the
court concluded that it did supersede the Legacy Support Agreement as to its subject
matter. Id. at *33 (“I conclude that the 2007 Reseller Agreement supersedes the
Legacy Support Agreement in regard to Legacy Customers’ ability to obtain licenses
to OpenROAD 2006.”). But the court ultimately concluded that the forum selection
clause in the earlier executed Legacy Support Agreement applied to claims under
the Reseller Agreement. Id. at *47 (“Therefore, I conclude that the 2007 Reseller
58
Dkt. 7 (“Pls.’ Ans. Br.”) at 17 (quoting Ingres, 2009 WL 4575009, at *47).
59
Id.60
Id.27
Agreement does not supersede the Legacy Support Agreement's forum selection
clause.”).
Both Ingres and Flotek acknowledge that the existence of an integration
clause in a later-executed contract does not per se displace a forum selection clause
in an earlier executed contract between the parties. I find this case to be sufficiently
distinguishable from both Green Isle and Newport Disc. In Green Isle, unlike here,
the plaintiff was not substantively bound to the contract containing the forum
selection clause. Green Isle, 2000 WL 1788655, at *4. Here, there is no dispute that
Heath Net signed the License Agreement and is bound to all of its terms. Second,
as discussed below, the relationship between the claims in this case and the License
Agreement is not based upon hypothetical suggestions.
The Newport Disc court found that the parties’ inclusion of a choice-of-law
provision and omission of a choice-of-forum provision suggested that the parties
thought about both issues and chose not to include a forum selection clause. The
facts of this case, however, lead me to a different conclusion. The BAA contains
neither a choice of forum nor a choice of law provision. “When two sophisticated,
commercial entities agree to a choice-of-law clause like the one in [the License
Agreement], the most reasonable interpretation of their actions is that they intended
for the clause to apply to all causes of action arising from or related to their contract.”
Nedlloyd Lines B.V. v. Superior Ct., 834 P.2d 1148, 1153 (Cal. 1992). I am thus of
28
the same view as the Olinick court, and “seriously doubt” that two, sophisticated
parties “would intend ‘that the laws of multiple jurisdictions would apply to a single
controversy having its origin in a single, contract-based relationship’” in the BAA
and that the parties could file suit wherever they might be able to obtain personal
jurisdiction over the other party. Olinick, 42 Cal. Rptr. 3d at 279 (quoting Nedlloyd
Lines, 834 P.2d at 1154). The Plaintiffs’ own words confirm that conclusion.
The Plaintiffs’ verified allegations acknowledge that the BAA is part of the
License Agreement, which gives Plaintiffs the right to access the FTA. 61 As the
Plaintiffs allege: “This case arises out of the January 2021 breach of Accellion’s . .
. [FTA].”62 The Complaint alleges that “Accellion marketed the FTA system as a
solution for companies who need to ‘transfer large and sensitive files securely.’
Indeed, Accellion routinely touted its system as a way for companies to securely
protect PHI and to comply with . . . [HIPAA].”63 Thus, protection of PHI and
compliance with HIPAA were contemplated at the time the parties entered into the
License Agreement in 2012. That agreement is the contract that gives Plaintiffs
rights to use the FTA.64
61
License Agreement § 4.1.
62
Compl. ¶ 4.
63
Id. ¶ 14.
64
License Agreement § 4.1.
29
Three years later, Health Net insisted on entry into the BAA as a condition to
renewal of the License Agreement.65 During the parties’ negotiations, “Health Net
made clear—and Accellion agreed—that the BAA would be ‘part of the contract’
governing Health Net’s access to, and use of, Accellion’s FTA system.” 66 Following
almost two months of negotiations between these two sophisticated parties, “Health
Net And Accellion Enter[ed] Into The BAA And Incorporate[d] The BAA Into
Their Contracting Agreement.” 67 Accellion points out, and Plaintiffs do not deny,
that the only contract that governed the parties relationship as of the date of the BAA
was the License Agreement. 68
The BAA expressly contemplated that at or shortly after the parties entered
into the BAA, the parties would also be entering into a Health Net - Vendor Contract
“for the provision of services, software or some other business arrangement.” 69 The
65
Compl. ¶ 19 (“Accellion initially resisted signing the BAA. Accellion relented, however,
after Health Net told Accellion that Health Net would not renew its FTA licensing
agreement if Accellion did not enter into the BAA. Health Net and Accellion then
negotiated the terms of the BAA over the course of nearly two months . . . .”).
66
Id. (emphasis added).
67
Id. at 5 (emphasis in original).
68
Dkt. 8 (“Def.’s Reply Br.”) at 6–7. The parties continue to operate under the License
Agreement. At oral argument, counsel for Accellion represented that “Accellion has
licensed FTA to Centene since 2012, pursuant to a comprehensive license agreement.”
Hrg. 4:9–11. Counsel for Plaintiffs did not deny this representation.
69
BAA, Recital A.
30
Plaintiffs contend that the License Agreement is a Health Net - Vendor Contract.70
Accellion disputes that contention. 71 This, in my view, represents a “dispute
between the parties regarding [the License] Agreement.” 72
The BAA does not entirely replace the License Agreement. Instead, it is part
of the broader contractual relationship between the parties.73 As in Ingres, the
Plaintiffs’ claims at least “relate” to the License Agreement. One issue will be
whether the License Agreement is a Health Net - Vendor Contract under the BAA
such that the “exclusions and limits of liability, if any, provided in the [License
Agreement] shall not apply . . . .” 74 Plaintiffs contend the License Agreement is a
Health Net - Vendor Contract;75 Accellion maintains that it is not. 76 There is a
70
See Hrg. 22, 27.
71
Id. at 39.
72
License Agreement § 12.7.
73
In its Reply Brief, Accellion argues that the BAA was “merged into” the License
Agreement. Def.’s Reply Br. 6, 8, 9. Accellion cites no legal authority to support the
concept that the BAA and License Agreement are one agreement for all purposes. The
argument that the BAA was “merged into” the License Agreement was not raised in
Accellion’s opening brief and is therefore waived. See Emerald P’rs v. Berlin, 726 A.2d
1215, 1224 (Del. 1999) (“Emerald Partners has waived any argument it had against Hall
Financial by not raising the issues in their opening brief”).
74
BAA § II(q).
75
Hrg. 22:5–7 (“And [the Integration Clause] calls out the Health Net vendor contracts,
which would be the license agreement.”), 27:6–9 (“THE COURT: Is the license agreement
a form of vendor contract that’s referred to in the BAA? [Counsel for Plaintiffs]: Yeah, I
believe it is, Your Honor.”).
76
Id. at 39:4–6 (“We would dispute that the license agreement is a vendor contract within
the meaning of the BAA.”).
31
genuine dispute as to whether the indemnity provision in the BAA supersedes the
indemnity provision in the License Agreement. I need not and do not decide that
issue here.
My decision should not be read to hold that the mere absence of choice-of-
law and forum selection provisions in the BAA, standing alone, conclusively
establishes that the License Agreement controls. Instead, it is another factor that
leads me to conclude, looking at the real-world business context in which the BAA
was negotiated and drafted, as alleged in the Complaint, that the parties intended the
License Agreement’s Forum Selection Clause to govern the BAA. The only
reasonable inference to be drawn from the Complaint and the parties’ submissions
is that the BAA was negotiated and executed in conjunction with the renewal of the
License Agreement.
B. Accellion’s Defenses Rely on the License Agreement
Separately, Accellion argues that the Forum Selection Clause applies to
Plaintiffs’ claims because Accellion’s defense to the claims concerning the Data
Breach will rely on provisions of the License Agreement. Specifically, Accellion
contends that it will assert the limitation of liability, indemnification, and defects in
software provisions of the License Agreement in defense of Plaintiffs’ claims.77
77
Hrg. 17; License Agreement §§ 8.4 (defects in software disclaimer), 9 (indemnification),
10 (limitation of liability). Accellion has not indicated that it intends to use these
32
Accellion points to several cases for the proposition that defenses based on a related
contract that contains a forum selection clause will subject a plaintiff’s claims to the
chosen forum. 78
Defendant relies heavily upon In re McGraw-Hill Global Education
Holdings, LLC, 909 F.3d 48 (3d Cir. 2018). In that case, two photographers entered
into agreements with an agency that permitted the agency to sub-license the
photographers’ work to third parties. The agreements were governed by New York
law and selected New York as the exclusive venue for “any action arising out of
th[e] Agreement.” Id. at 53. The agency, acting within its contractual authority,
sub-licensed the photographers’ works to a publisher. The sub-license agreements
were also governed by New York law and selected the courts of New York as the
forum for “[a]ny dispute regarding th[e] Agreement.” Id. The photographers did
not sign the sub-license agreements. The photographers filed separate actions
against the publisher in the Eastern District of Pennsylvania, alleging that the
publisher used their photos beyond the scope of the licensure agreements, in
violation of federal copyright law. The publisher filed motions to transfer the actions
to New York, citing the forum selection clause in the sub-license agreement between
provisions to defend against Plaintiffs’ claims to the extent they invoke a breach of the
Audit Provision.
78
Pl.’s Op. Br. 14–15.
33
it and the agency. The cases were assigned to separate trial court judges, who
reached opposite conclusions.79
The Third Circuit held the copyright claims fell within the scope of the forum
selection clause in the sublicense agreement, which selected New York courts as the
exclusive forum for “[a]ny dispute regarding th[e] Agreement.” McGraw-Hill, 909
F.3d at 67. The court concluded the forum selection clause was “broad enough to
encompass actions in which the agreements are raised as an affirmative defense” to
the copyright claims for two reasons. Id. at 68. First, the allegations on the face of
the complaints cited the license agreements, said the licenses were for limited use,
and that the publisher printed or distributed more copies than authorized. Id.
Second, the forum selection clause specified federal copyright law as a source of law
governing any dispute. Id.
Similarly, in John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070(3d Cir. 1997), Justice, then-Circuit Judge Alito, considered a forum selection clause
extending to “any dispute arising under or out of or in relation to” the agreement.
79
The Third Circuit concluded that the photographers were not subject to the forum
selection clause in the sublicense agreement between the agency and the publisher.
Nevertheless, the court held that the trial judge who transferred the case to New York did
so erroneously, but the error was not clear and indisputable so as to warrant mandamus.
Judge Roth, dissenting in part, opined that mandamus was warranted and that both
photographers—asserting the very same claims and represented by the same lawyer—
should have been treated equally and permitted to litigate in the forum of their choosing.
McGraw-Hill, 909 F.3d at 71–72 (Roth, J., dissenting in part and concurring in part).
34
Id. at 1072. In an opinion affirming the trial court, he wrote that this language “easily
encompasses a dispute in which the [agreement containing that clause] is raised as a
defense.” Id. at 1076; see also Zaitzeff v. Peregrine Fin. Grp., Inc., 2008 WL
11408422, at *8 (C.D. Cal. June 23, 2008) (citing John Wyeth for the proposition
that “a claim may fall within the scope of a forum selection clause even if it is related
only to a defense”). In reaching this conclusion, Justice Alito determined that the
forum selection clause applied more broadly to disputes than it would to claims.
John Wyeth, 119 F.3d at 1074; see also McGraw-Hill, 909 F.3d at 67 (“Under Wyeth,
this Court construes the word ‘dispute’ as being broader than ‘claim.’”). Accellion
also points to the court’s dismissal of tort claims in Ashall Homes, where the
defendant argued that its defense would be based on provisions of a contract
containing a forum selection clause. The court granted the motion to dismiss,
observing that “[r]esolution of these claims [would] require an analysis of the
[agreement containing the forum selection clause].” 992 A.2d at 1253.
Plaintiffs reject Accellion’s argument on the grounds that it “is not the law in
Delaware, and Accellion notably cites no Delaware cases in support.”80 But the only
authority that Plaintiffs cite is Newport Disc, where the court observed that the
defendants “were unable to point to any authority supporting the proposition that
80
Pls.’ Ans. Br. 20.
35
either defenses or counter-claims, which are based on a related contract, can divest
Plaintiffs of their chosen forum.” 2013 WL 987936, at *5. The problem for
Plaintiffs, though, is twofold. First, they have not offered any argument or cited any
authority for the proposition that Delaware law governs the BAA. More important,
however, is that unlike in Newport Disc (the only authority Plaintiffs cite for this
issue), the Defendant here has cited authority supporting its position that affirmative
defenses relying on provisions of another agreement between the parties is sufficient
to subject the claims to the forum selection provision in the related agreement.81
Plaintiffs do not address any of those cases, which I find persuasive.
Finally, Plaintiffs contend that Accellion should not be permitted to invoke
the Forum Selection Clause to a defense that is “obviously frivolous.” 82 But the
License Agreement extends to any “dispute between the parties regarding” the
License Agreement. The BAA did not entirely supersede the License Agreement.
That would be an unreasonable construction of the BAA, which says nothing about
the terms of Plaintiffs’ license of Accellion’s software (including payment terms) or
access to the FTA. The Integration Clause in the BAA is limited to the “subject
matter” of the BAA. Both contracts must thus co-exist. The parties did not limit the
81
See McGraw-Hill, 909 F.3d 48; John Wyeth, 119 F.3d 1070; see also Zaitzeff, 2008 WL
11408422.
82
Pls.’ Ans. Br. 22.
36
scope of the Forum Selection Clause to meritorious disputes. See Sagonowsky v.
More, 75 Cal. Rptr. 2d 118 (Cal. Ct. App. 1998) (“Appellants urge us to insert into
the agreement to arbitrate any dispute the added requirement that the dispute be a
‘colorable claim’ or a ‘bona fide’ claim. We decline to rewrite the agreement entered
into by the parties.”).
I conclude that Plaintiffs’ claims for breach, a declaration concerning the
scope, and for specific performance of the BAA are subject to the Forum Selection
Clause in the License Agreement. That provision must be enforced unless doing so
“would be unreasonable and unjust, or that the clause is invalid for such reasons as
fraud and overreaching.” See Ingres, 8 A.3d at 1146 (internal quotations and
bracketing omitted). Plaintiffs make no such argument here. Therefore, Plaintiffs’
claims are subject to the Forum Selection Clause of the License Agreement.
III. CONCLUSION
The Plaintiffs’ claims are subject to the Forum Selection Clause of the License
Agreement, which provides that any dispute between the parties regarding that
agreement must be heard in the state or federal courts located in the counties of San
Francisco, San Mateo, or Santa Clara California. Accordingly, this court is an
improper venue, and Accellion’s motion to dismiss is GRANTED.
37