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State Court of Chancery Addresses Choice of Forum in Corporate Litigation Across International Borders

By Ssolbergj [GFDL (http://www.gnu.org/copyleft/fdl.html), GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia CommonsThe choice of a forum is a critical component of preparing for litigation. A litigant must choose a court that has subject matter jurisdiction over the dispute and that can exercise personal jurisdiction over the defendant or defendants. Even after a litigant has made these choices, prepared and filed a complaint, and served all parties, a defendant can still obtain dismissal of the case on the grounds that the plaintiff’s choice of forum is not the most convenient. The doctrine of forum non conveniens gives a court discretion to dismiss a case if it finds that another court, typically in a different state or country, would offer a more convenient location. The Delaware Court of Chancery, whose rulings often affect corporations nationwide, recently ruled on whether it provides a convenient forum for a dispute that originated in India. Pipal Tech Ventures Private Ltd. v. MoEnage, Inc., C.A. No. 10381-VCG, mem. op. (Del. Ch., Dec. 17, 2015).

Each state has its own rules regarding forum non conveniens. Appellate courts must generally give wide discretion to trial courts’ forum non conveniens rulings, reversing only upon a finding of abuse of discretion. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257 (1981). California law states that a court can stay or dismiss all or part of a case, on its own motion or the motion of a party, if it “finds that in the interest of substantial justice an action should be heard in a forum outside this state.” Cal. Code Civ. P. § 410.30(a).

A court must determine whether a proposed alternate forum is a “suitable place for trial,” and then it must balance the private interests of the litigants and various public interests. Stangvik v. Shiley, Inc., 54 Cal.3d 744, 751 (1991). Private interests include the cost of litigating in the alternate forum and the ability of litigants to obtain evidence and compel attendance by witnesses in court. Public interests include the burden on the local court system, and whether litigation would burden courts and juries with “cases in which the local community has little concern.” Id.

The plaintiff in Pipal Tech is a corporation formed under Indian law and headquartered in India. It alleged that two employees stole the source code of a computer application owned by the plaintiff and then created a Delaware corporation to market the application in the U.S. and other countries. The plaintiff filed suit against the Delaware corporation in Delaware, seeking a declaratory judgment stating that the application is the plaintiff’s intellectual property and asserting a claim under state trade secrets law. It has voluntarily dismissed a third claim for conversion against the two employees, since it was based on alleged acts that occurred solely in India.

The defendant corporation moved to dismiss the lawsuit on forum non conveniens grounds, claiming that India would be more convenient. The court denied the motion, finding that dismissal based on forum non conveniens might seem appropriate “at first blush” but concluding that Delaware is an appropriate forum “upon close[r] examination.” Pipal Tech, mem. op. at 2-3.

If you or your business has a dispute involving a contract or other business matter, you should consult with a knowledgeable and skilled business litigation attorney. James G. Schwartz has advocated on behalf of businesses and business owners in the Bay Area since 1976. Contact us online or at (925) 463-1073 today to schedule a free and confidential consultation to see how we can assist you.

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Photo credit: Ssolbergj [GFDL, GFDL or CC BY-SA 3.0], via Wikimedia Commons.