Harland Clarke Holdings Corp. v. Milken
Decision Date | 04 February 2014 |
Docket Number | Civil Action No. SA–13–CA–724–XR. |
Citation | 997 F.Supp.2d 561 |
Parties | HARLAND CLARKE HOLDINGS CORP. and Scantron Corp., Plaintiffs, v. Michael MILKEN and Kalyanaraman Srinivasan, Defendants. |
Court | U.S. District Court — Western District of Texas |
OPINION TEXT STARTS HERE
Amy Elizabeth Tankersley, Jennifer Barrett Poppe, Vinson & Elkins, LLP, Austin, TX, Ricardo G. Cedillo, Leslie J. Strieber, III, Ryan J. Tucker, Davis, Cedillo & Mendoza, Inc., San Antonio, TX, Harry M. Reasoner, Karl S. Stern, Vinson & Elkins L.L.P., Houston, TX, for Plaintiffs.
Jeffrey A. Webb, Michael William O'Donnell, Fulbright & Jaworski, LLP, Ricardo Roberto Reyna, Jeffrey J. Aultman, Brock Person Guerra Reyna, P.C., San Antonio, TX, B. Dylan Proctor, John B. Quinn, Michael T. Zeller, Susan R. Estrich, Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, CA, for Defendants.
Defendants move to transfer this case to the district court for the District of Delaware pursuant to 28 U.S.C. § 1404(a) (docket no. 18) or, alternatively, to dismiss this case for improper venue (docket no. 38). After careful consideration, the Court will grant the motion to transfer.
Plaintiff Scantron is a Delaware corporation, and Plaintiff Harland Clarke Holdings (“Harland Clarke”) is Scantron's parent company based in San Antonio, Texas. Scantron alleges that it is also headquartered in San Antonio, but Defendants dispute this fact and assert that Scantron is headquartered in Minnesota. See docket no. 18 at 1–2.1 Harland Clarke is a holding company that owns and operates multiple business, including Harland Clarke Corporation and Scantron. First Am. Compl ¶ 12.
In 2010, Scantron purchased a business based in Bellevue, Washington known as GlobalScholar from non-party KUE Digital International, L.L.C. (“Digital”). 2 Digital is a holding company that does not conduct business. Plaintiffs allege that “[o]fficers, agents and other representatives of Harland Clarke, with assistance from [its parent company M & F Worldwide Corp.], conceived of the acquisition of the GlobalScholar business for its Scantron subsidiary and led the acquisition negotiations and due diligence efforts.” First Am. Compl. ¶ 12. In order to “evaluat[e] a possible transaction with Digital,” Harland Clarke entered into a Nondisclosure Agreement with Digital to obtain confidential information in September 2010. Maron Decl. Ex. A. This Nondisclosure Agreement does not contain a forum-selection clause.
On November 10, 2010, Harland Clarke sent a letter to Digital via Defendant Kalyanaraman Srinivasan (known as “Kal Raman”). The letter states, “Pursuant to recent discussions, we are pleased to submit our non-binding indication of interest for the acquisition (the ‘Transaction’) of KUE Digital International LLC dba GlobalScholar including all subsidiaries (the ‘Company’) by Harland Clarke Holdings Corp. or Scantron Corporation, our wholly owned subsidiary (collectively, ‘we’ or ‘us').” Maron Decl. Ex. B. The letter continued, “We would expect to negotiate and execute a purchase agreement for the Transaction containing customary terms,” including “a customary set of seller representations and warranties covering GlobalScholar,” “indemnification of certain purchaser indemnified parties by seller indemnifying parties for customary matters such as the following matters and others that may arise in due diligence: breaches of representations, warranties and covenants in the purchase agreement or related instruments; pre-closing tax liabilities (subject to reserves); unpaid Transaction expenses; and pre-closing indebtedness of the Company not extinguished at closing.” Id. The “rationale” section of the offer letter states, “We have been very impressed with the management of GlobalScholar and we would welcome GlobalScholar's management and employees as an integral component of the Scantron and Harland Clarke Holdings culture.” Id. The letter was “agreed and accepted” by Kal Raman as CEO of Digital. Id.
Scantron and Digital entered into a “Securities Purchase Agreement between Scantron Corporation and KUE Digital International, LLC” (the “Purchase Agreement”) dated December 15, 2010.3 The Purchase Agreement contains the following choice-of-law and forum-selection clause:
§ 11.10 Governing Law; Consent to Jurisdiction. All matters relating to this Agreement or the breach, interpretation, construction, validity, termination and enforcement of this Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than the State of Delaware. Subject to Sections 1.04, 1.05, 6.02 and 11.11 herein, and the alternative dispute resolution provisions contained therein, each of the Parties hereby irrevocably and unconditionally submits, for itself and its assets and properties, to the exclusive jurisdiction of any Delaware State court in New Castle County, or Federal court of the United States of America, sitting within New Castle County in the State of Delaware, and any respective appellate court, in any action or proceeding arising out of or relating to this Agreement, the agreements delivered in connection with this Agreement, or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts; (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court or, to the extent permitted by applicable Law, in such Federal court; (iii) waives to the fullest extent it may legally and effectively do so, any objectionwhich it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State or Federal court; and (iv) waives, to the fullest extent permitted by applicable Law, the defense of lack of personal jurisdiction or an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State or Federal court....
Maron Decl. Ex. C § 11.10 (emphasis added).
Various parties entered into additional agreements related to the transaction. These additional agreements are referenced in the Purchase Agreement, which defines the “Transaction Documents” as “this Agreement, the Escrow Agreement, the Transaction Incentive Plan, the Guarantees and the Restrictive Covenant Agreement.” Section 11.08 of the Purchase Agreement, entitled “Complete Agreement,” states, “This Agreement (including the exhibits hereto and the Disclosure Schedules) and the documents referred to herein (including the Escrow Agreement) contain the complete agreement between the Parties hereto and supersede any prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way.” Maron Decl. Ex. C § 11.08. All of the Transaction Documents include a forum-selection clause like the one in the Purchase Agreement designating Delaware as the exclusive forum for disputes arising out of or related to the agreement and the transactions contemplated thereby.
As part of the sale, Scantron required Raman and Digital's primary equity holders to guarantee Digital's performance of certain obligations in the Purchase Agreement in proportion to their economic interests in Digital, through limited guarantees. Maron Decl. ¶ 8. The Purchase Agreement preamble states, “Whereas, concurrently with the execution and delivery of this Agreement, each of (i) Knowledge Universe Education L.P. [“KUE LP”], (ii) Ignition Venture Partners III, L.P., (iii) Ignition Managing Directors Fund III, LLC and (iv) the Key Employee [Kal Raman] has delivered to Buyer a limited guarantee, dated as of the date of this Agreement and effective as of the Closing (each, ‘ Guarantee’ and collectively, the ‘ Guarantees' ).”
Under the Limited Guarantee signed by Scantron and Raman, subject to certain limitations, Raman guaranteed to Scantron “the due and punctual observance, performance and discharge of all of the payment and indemnification obligations of Seller under the Purchase Agreement (including such obligations that arise as a result of the non-performance by Seller of its obligations under the Purchase Agreement.”) Maron Decl. Ex. E. Scantron agreed
The Limited Guarantee signed by Scantron and KUE LP is substantially similar, except that Scantron agreed that it would not institute, and would cause each of its Affiliates not to institute, directly or indirectly, “any Action arising under, or in connection with, this Guarantee, the...
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