United States District Court, D. Delaware
LCY CHEMICAL CORP. and LCY SYNTHETIC RUBBER CORP., Plaintiffs,
KRATON PERFORMANCE POLYMERS, INC., KRATON PERFORMANCE POLYMERS LIMITED, and NY MERGERCO, LLC, Defendants.
GREGORY M. SLEET, District Judge.
Plaintiffs LCY Chemical Corp. and LCY Synthetic Rubber Corp. (collectively, "LCY") filed this action on October 6, 2014 asserting breach of contract against Kraton Performance Polymers, Inc., Kraton Performance Polymers Limited, and NY MergerCo, LLC (collectively, "Kraton"). (D.I. 1, ¶¶ 131-45.) Presently before the court is Kraton's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) or, in the alternative, for forum non conveniens. (D.I. 11.) The court heard limited oral argument on the motion during a telephone conference on March 19, 2015. (D.I. 21.) For the reasons that follow, the court will grant Kraton's motion to dismiss. (D.I. 11.)
Defendant Kraton Performance Polymers, Inc. is a Delaware corporation with headquarters in Houston, Texas. (D.I. 1, ¶ 33.) Defendant Kraton Performance Polymers Limited is a wholly-owned subsidiary of Kraton Performance Polymers, Inc., and Defendant NY MergerCo, LLC is a wholly-owned Delaware subsidiary of Kraton Performance Polymers Limited. ( Id., ¶¶ 34-35.) LCY is a Taiwanese corporation with headquarters in Taipei, Taiwan, and LCY Synthetic Rubber Corp. is a wholly-owned subsidiary of LCY. ( Id., ¶¶ 29, 32.)
On January 28, 2014, Kraton and LCY entered into a "Combination Agreement, " whereby Kraton, a producer of styrenic block copolymers ("SBCs"), would combine with LCY's SBC business. ( Id., ¶¶ 33, 79.) The Combination Agreement "[constitute[s] an agreement and plan of merger for all purposes of the [Delaware General Corporation Law] and the [Delaware Limited Liability Company Act]." (D.I. 1, Ex. A at§ 1.1 (b)). The Combination Agreement called for LCY to contribute its SBC Business in exchange for newly issued share in the combined company. (D.I. 1, ¶ 2.) Kraton's stockholders and LCY would each own 50% of the outstanding shares of the combined company. ( Id. ) The combined company would be redomesticated to the United Kingdom. ( Id. ) The transaction was subject to approval by both Kraton's and LCY's respective stockholders, and was anticipated to close in the 4th Quarter of 2014. ( Id. )
On Monday, June 30, 2014, the Kraton Board sent LCY a notice indicating that it intended to withdraw its recommendation that Kraton's stockholders support the combination, claiming that its action was permitted under the Combination Agreement. ( Id., ¶ 16.) On August 4, 2014, LCY notified Kraton that LCY would "not negotiate regarding, or agree to, any revisions to the terms and conditions of the Combination Agreement." ( Id., ¶ 20.) LCY alleges that the Kraton Board's "Adverse Recommendation Change" was a breach of the Combination Agreement because it did not comply with the contract's requirement that the Kraton Board determine in good faith that a failure to take such action would reasonably likely be inconsistent with its fiduciary duties. ( Id., ¶ 21.)
LCY alleges that as a result of Kraton's actions it was left with little choice but to exercise its right under the Combination Agreement to terminate the contract and receive a negotiated termination fee of $25 million dollars. ( Id., ¶ 23.) On August 8, 2014, LCY terminated the Combination Agreement and requested that the termination fee be paid to its account. ( Id. ) Kraton refused to pay the termination fee. ( Id., ¶ 24.)
LCY's Complaint alleges that Kraton breached the agreement twice. First, Kraton board's exercise of its "fiduciary out" to withdraw its recommendation in favor of the transaction violated Section 5.1(c). ( Id., ¶ 134.) Second, Kraton's invocation of an assertion of a material adverse effect ("MAE") and refusal to pay a $25 million termination fee violated Section 9.2(b). ( Id., ¶ 143.)
The Combination Agreement contains a forum selection clause that governs LCY's claims. It states:
Each Party agrees that all claims arising out of or in connection with this Agreement (including the exhibits hereto, the disclosure letters delivered in connection herewith, and the Ancillary Agreements), aside from disputes arising out of Section 2.8 hereof (which disputes shall be subject to the dispute resolution provisions stated in Section 2.9), shall be brought in the Court of Chancery of the State of Delaware... or, if the Court of Chancery does not have subject matter jurisdiction, the federal court sitting in the State of Delaware.
(D.I. 1, Ex. A at § 9.1(a).)
III. STANDARD OF REVIEW
Courts may treat a motion to dismiss based upon enforcement of a forum selection clause as a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). See Salovaara v. Jackson Nat'l Life Ins. Co., 246 F.3d 289, 298-99 (3d Cir. 2001) ("Our holding in Crescent [Int'l Inc. v. Avatar Communities, Inc., 857 F.2d 943, 944-45 (3d Cir. 1988)] leaves no doubt that a 12(b)(6) dismissal is a permissible means of enforcing a forum selection clause that allows suit to be filed in another federal forum."). Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief may be granted. FED. R. CIV. P. 12(b)(6). Under Rule 12(b)(6), the court looks at the facts most favorable to the non-moving party. See, e.g. Calloway v. Green Tree Servicing, LLC, 607 F.Supp.2d 669, 673 (D. Del. 2009). "When there are well-pleaded factual allegations, a ...