As I discussed in a 2015 blog post, the language in a forum selection clause is critical if you want to ensure that potential litigation takes place on your “home court.” Indeed, as the defendants in Genis v. Campbell recently learned, having a less than all-encompassing and precise forum selection clause can lead to unintended results.
Alfred Genis is a Massachusetts resident and a diamond laboratory scientist. In 2013, Genis met Martin Campbell, who, along with his brother, David, owned Pure Crystal, a company involved in growing laboratory diamonds. In October of that year, the three individuals executed what would later be referred to as the “October 2013 Agreement.” That Agreement indicated that Genis would be granted 25% equity in Pure Crystal and also would receive equity in two new companies to be formed. In that same month, the Campbell brothers formed the first of those companies, Kimberlite Applied Science, LLC, and Genis executed an “Employment Agreement” and a “License Agreement” with Kimberlite.
By 2017, the relationship between Genis and the Campbells had broken down, and Genis filed suit in Massachusetts Superior Court, alleging that his intellectual property had been misappropriated and that he had not been granted the 25% equity in Pure Crystal that he was promised under the October 2013 Agreement. The Campbells and Pure Crystal moved to dismiss Genis’ complaint, arguing that forum selection clauses in both the Employment Agreement and the License Agreement required any disputes between the parties to be litigated in their home state of Ohio.
The License Agreement included a forum selection clause, stating that “[a]ll actions or proceedings related to this Agreement shall be litigated in state courts of competent jurisdiction located within the State of Ohio.” The Employment Agreement had an even broader forum selection clause, mandating that:
EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF OHIO FOR PURPOSESOF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY WITH RESPECT TO EMPLOYEES’ EMPLOYEMENT HEREUNDER. . . .
Unfortunately for the Campbells, however, and as the Superior Court Judge pointed out:
The present lawsuit does not relate to or arise from either of the[se] two Agreements. Rather, this lawsuit seeks redress for the alleged misappropriation of intellectual property Genis claims to have provided to Pure Crystal …, and the alleged breach of a promise under the October 2013 Agreement to provide Genis with a 25 percent equity interest in Pure Crystal – a contract that has no forum selection clause.
While the defendants tried arguing that the Employment Agreement superseded the October 2013 Agreement based on a merger clause, the Judge noted that the merger clause expressly said that it only applied “to the specific subject matter to which the Employment Agreement pertains, which is Genis’ employment as CTO of Kimberlite.” Thus, the Employment Agreement did not supersede the October 2013 Agreement with respect to the claims being asserted by Genis.
Had any of the three agreements simply included words to the effect that “any disputes between the parties or their affiliates must be brought solely and exclusively in the State Courts in Ohio and may not be pursued in any other jurisdiction,” the Campbells likely would have prevailed. So the next time you are able to include a forum selection clause, be sure that the language is broad enough and clear enough to ensure that you have no difficulty obtaining home-field advantage in the event of litigation.