Focus Fin. Partners, LLC v. Holsopple

• Decision Date: 02 November 2020
• Docket Number: C.A. No. 2020-0188-JTL
• Citation: 250 A.3d 939
• Parties: FOCUS FINANCIAL PARTNERS, LLC, Plaintiff, v. Scott HOLSOPPLE, and Hightower Holdings, LLC, Defendants.
• Court: Court of Chancery of Delaware

250 A.3d 939

FOCUS FINANCIAL PARTNERS, LLC, Plaintiff,

v.Scott HOLSOPPLE, and Hightower Holdings, LLC, Defendants.

C.A. No. 2020-0188-JTL

Court of Chancery of Delaware.

Date Submitted: October 7, 2020

Date Decided: November 2, 2020

Travis S. Hunter, Dorronda R. Bordley, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Michael V. Rella, MURPHY & McGONIGLE, New York, New York; Attorneys for Plaintiff.

Daniel M. Silver, Travis J. Ferguson, Alexandra M. Joyce, McCARTER & ENGLISH, LLP, Wilmington, Delaware; Attorneys for Defendants.

LASTER, V.C.

Focus Financial Partners, LLC ("Focus Parent") is the publicly traded parent company of Focus Operating, LLC ("Focus Sub"). Scott Holsopple left his employment with Focus Sub and took a job with Hightower Holdings, LLC ("Hightower").

Focus Parent filed this lawsuit against Holsopple and Hightower. In a previous decision, this court dismissed Holsopple from the case for lack of personal jurisdiction. Focus Fin. P'rs, LLC, v. Holsopple (Jurisdiction Decision ), 241 A.3d 784 (Del. Ch. 2020). Hightower has moved separately to dismiss this action under Rule 12(b)(3) based on the doctrine of forum non conveniens . This decision grants that motion.¹

I. FACTUAL BACKGROUND

The facts for purposes of Hightower's motion to dismiss under Rule 12(b)(3) are drawn from the currently operative complaint, the documents it incorporates by reference, and other filings on the docket. At this stage of the case, the court views the record in the light most favorable to the plaintiff.

A. Focus Parent and Focus Sub

Focus Parent is a holding company that owns all of the member interests in Focus Sub. Both are organized as Delaware limited liability companies. Both have their principal places of business in New York, New York.

Focus Sub conducts business in the wealth management industry. As part of its business model, Focus Sub invests in and provides services to investment advisors in the United States, Canada, the United Kingdom, and Australia. Focus Sub has offices in New York and San Francisco.

B. Holsopple Joins Focus Sub.

Holsopple joined Focus Sub by accepting an offer letter dated December 12, 2014. According to the offer letter, New York law governed the terms of his employment.

The offer letter stated that Holsopple would be "based in [Focus Sub's] San Francisco, CA office." Dkt. 22 Ex. 1. It promised him an annual salary of $220,000 plus a performance bonus payable in cash or units of Focus Parent. As a signing bonus, the offer letter promised Holsopple $75,000 in cash plus 40,000 units in Focus Parent.

Holsopple's receipt of the 40,000 units was "subject to, and conditioned upon" his entry into a "standard Incentive Unit Agreement" with Focus Parent. Id. Holsopple executed the agreement on January 15, 2015. Dkt 49 Ex. 1 (the "2015 Unit Agreement").

The 2015 Unit Agreement defined Holsopple as the "Unit Holder." Id. § 1. Section 5 of the 2015 Unit Agreement was titled "Restrictive Covenants of Unit Holder." Id. § 5. It imposed a series of restrictions on the Unit Holder that typically would appear in an employment agreement.

Section 5(a) imposed the following non-competition obligation on the Unit Holder:

During the Unit Holder's employment or service period with the Company or its subsidiaries and for one-hundred-eighty (180) days thereafter following any termination of employment or service, the Unit Holder shall not, directly or indirectly, alone or as a partner, officer, director, manager, employee or consultant or equity-holder of any entity: (i) provide any wealth management services, including personal financial planning or personal advisory services of the type provided or contemplated to be provided by the Company or its subsidiaries at the time of such termination to any individual or entity anywhere in the continental United States (a "Competitive Business"); (ii) provide finder, broker or financial advisory services to any Competitive Business; (iii) interfere with any potential acquisition by the Company or its subsidiaries of any other business or discourage any party to any such potential acquisition from engaging in any such transaction; or (iv) provide any services currently provided by the Company to or on behalf of its subsidiaries or affiliates to any business or enterprise that is similar to, or otherwise competitive with, the Company.

Id. § 5(a) (the "Non-Competition Provision").

Section 5(b) imposed the following non-solicitation obligation on the Unit Holder:

In addition, during the Unit Holder's employment or service period with the Company or its subsidiaries and for twelve (12) months thereafter, the Unit Holder shall not, directly or indirectly, alone or as a partner, officer, director, manager, employee or consultant or equity-holder of any entity ... solicit or do business with any customer or client of the Company or any of its subsidiaries, or any potential acquisition target of the Company, any potential customer or client of the Company or any of its subsidiaries, or any potential acquisition target of the Company (A) in any manner which interferes with such person's relationship or potential relationship with the Company or its subsidiaries, or any such potential acquisition target of the Company, as the case may be, or (B) in an effort to obtain such person as a customer, client, supplier, consultant, salesman, agent or representative to any Competitive Business; or ... work together in any business or enterprise involving wealth management services (other than the Company and its affiliates) with any other current or former senior executives of the Company.

Id. § 5(b) (the "Non-Solicitation Provision"; together with the Non-Competition Provision, the "Restrictive Covenants").

Section 5(c) imposed the following restrictions on the Unit Holder's ability to share "Confidential Information":

The Unit Holder shall not at any time, whether during or after the termination of the Unit Holder's employment or service with [Focus Parent] or its subsidiaries, reveal to any person any Confidential Information (as defined below) except to employees or agents of [Focus Parent] or its subsidiaries who need to know such Confidential Information for the purposes of their employment or activities on behalf of [Focus Parent] or its subsidiaries, or as otherwise authorized by [Focus Parent] in writing. ... The Unit Holder shall keep confidential all matters entrusted to the Unit Holder and shall not use or attempt to use any Confidential Information except as may be required in the ordinary course of performing the Unit Holder's duties as an employee, officer, director, agent or other representative of [Focus Parent] or its subsidiaries, nor shall the Unit Holder use any Confidential Information in any manner which injures or causes losses to [Focus Parent].

Id. § 5(c) (the "Confidentiality Provision"). The 2015 Unit Agreement defined "Confidential Information" broadly to include

any non-public information concerning the organization, business or finances of [Focus Parent] or its subsidiaries, or of any third party for whom [Focus Parent] is under an obligation to keep information confidential that is maintained by [Focus Parent] as confidential. Such Confidential Information shall include trade secrets or confidential information in respect of acquisition models, services, inventions, products, designs, methods, know-how, techniques, systems, processes, engineering data, software programs and software code, works of authorship, customer and supplier lists, customer and supplier information, financial information, pricing information, business plans, projects, plans, notes, memoranda, reports, data, sketches, specifications and proposals.

Id.

The 2015 Unit Agreement contained a choice-of-law provision selecting Delaware law. Id. § 6(e) (the "Delaware-Law Provision"). The 2015 Unit Agreement did not contain a provision making courts located in Delaware the exclusive forum for disputes arising out of or related to the agreement.

C. Holsopple Works For Focus Sub.

When Holsopple joined Focus Sub, he lived in Kansas City, Missouri, and he signed the offer letter and 2015 Unit Agreement while there. For the first three months of his employment, Holsopple worked remotely from Kansas City. For the next two months, he commuted back and forth from Kansas City to San Francisco. In June 2015, Holsopple relocated to California. For the remainder of his tenure, he worked out of Focus Sub's San Francisco office.

Although Holsopple primarily worked for Focus Sub in San Francisco, his work was not limited to California. He traveled across the United States to meet with investment firms. But Holsopple has never worked for Focus Sub in Delaware, and none of the events giving rise to this matter took place in Delaware.

During his employment, Holsopple helped develop Focus Sub's pipeline of investment firm prospects. He also helped develop Focus Sub's proprietary methods, processes, and strategies for pursuing prospective investment firms. As part of his job, Holsopple participated in discussions with prospective investment firms, and he used Focus Sub's methods, processes, and strategies when negotiating with potential clients.

D. The Other Unit Agreements And The Operating Agreements

During his employment, Holsopple signed four more Unit Agreements:

• An Incentive Unit Agreement dated January 12, 2017. Dkt 49 Ex. 2 (the "2017 Unit Agreement’).

• A Long Term Incentive Program Award Agreement dated November 22, 2017. Dkt 49 Ex. 3 (the "Long-Term Agreement").

• An Incentive Unit Award Agreement dated June 18, 2018. Dkt 49 Ex. 4 (the "2018 Unit Agreement").

• An Omnibus Incentive Unit Award Agreement December 18, 2018. Dkt 49 Ex. 5 (the "Omnibus Agreement").

Holsopple signed these agreements while living in California.

Under the 2017 Unit Agreement, Holsopple received 25,000 incentive units. The 2017 Unit Agreement was substantively identical to the 2015 Unit Agreement.

Under the Long-Term Agreement, Holsopple received...