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Li v. Loandepot.Com, LLC

Court of Chancery of Delaware

April 24, 2019

TIMOTHY LI, Plaintiff,
v.
LOANDEPOT.COM, LLC, Defendant.

          Date Submitted: April 17, 2019

          Brett M. McCartney, Elizabeth A. Powers, BAYARD, P.A., Wilmington, Delaware; Shawn M. Kennedy, MODERA LEGAL, Irvine, California; Counsel for the Plaintiff.

          Eric Lopez Schnabel, Alessandra Glorioso, DORSEY & WHITNEY LLP, Wilmington, Delaware; John Baker; Bryan M. McGarry; DORSEY & WHITNEY LLP, Costa Mesa, California; Counsel for Defendant.

          MEMORANDUM OPINION

          LASTER, V.C.

         Timothy Li was an employee of loanDepot.com, LLC (the "Company"). The Company's limited liability company agreement (the "LLC Agreement") granted employees and agents a right to mandatory indemnification to the fullest extent of the law. Compl. Ex. A § 6.4(a). The indemnification right included a right to mandatory advancement for any proceeding for which the indemnitee might ultimately be entitled to indemnification.

         The Company sued Li, then commenced an arbitration against him. Both proceedings implicated Li's advancement rights. The Company subsequently dismissed the arbitration against Li without prejudice, triggering the portion of Li's fullest-extent-of-the-law indemnification right that applies when an indemnitee has been successful on the merits or otherwise. See Meyers v. Quiz-DIA LLC, 2017 WL 2438328, at *7-8 (Del. Ch. June 6, 2017); Stockman v. Heartland Indus. P'rs, 2009 WL 2096213, at *10-11, 17-18 (Del. Ch. Jul. 14, 2009) (Strine, V.C.).

         Li sued in this court to enforce his advancement right. The Company moved to dismiss the case, citing a mandatory forum selection clause in the LLC Agreement which called for any disputes relating to the LLC Agreement to be heard "in the state or federal courts located in Los Angeles, California . . . ." Compl. Ex. A § 14.8.

         Under Delaware law, "[a] valid forum selection clause must be enforced." Nat'l Indus. Gp. (Hldg.) v. Carlyle Inv. Mgmt. L.L.C., 67 A.3d 373, 381 (Del. 2013). Forum selection clauses are generally valid "unless the resisting party can 'clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reason as fraud or overreaching.'" Id. (quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)).

         Li does not challenge the forum selection clause on the traditional grounds. Li relies instead on Section 18-109(d) of the Delaware Limited Liability Company Act (the "LLC Act"). With formatting and enumeration added to promote clarity, that section states:

[1] In a written limited liability company agreement or other writing, a manager or member may consent [a]to be subject to
[i] the nonexclusive jurisdiction of the courts of, or arbitration in, a specified jurisdiction, or
[ii] the exclusive jurisdiction of the courts of the State of Delaware, or
[iii] the exclusivity of arbitration in a specified jurisdiction or the State of Delaware, and
[b]to be served with legal process in the manner prescribed in such limited liability company ...

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