Opinion ID: 2155881
Heading Depth: 1
Heading Rank: 6

Heading: Choice of Law and Forum Selection

Text: In analyzing whether a valid match is made in the purported exercise of a right of first refusal, one must not confuse two separate concepts. First is the correct view that it is necessary for the exercise of the right to be coextensive with the scope of the subject matter of the original contract. Second is the incorrect notion that the holder of the right may insist that the holder need only mimic the exact terms of the original agreement and need not match other  even new  provisions in the proffer that relate to the subject matter. The Court of Chancery correctly held that the limit of the first refusal right's scope is not the four corners of the 1998 Agreement itself. Rather, the limit is the subject matter of the Agreement (the four Series). [22] Although the trial court did not correctly apply that concept to the territorial expansion in the Viacom proffer because that expansion took the proffer outside the subject matter of the Agreement, the choice of law/forum selection issue is quite different. That provision in the proposed Viacom transaction did not take the proffer outside the subject matter ( i.e. the Series). We now turn to that issue. The Agreement provides that New York law governs interpretation and enforcement, but it does not require exclusive (only nonexclusive) venue in a New York forum. In the third party proposal, WWFE and Viacom provided that New York law would govern. That proposal added a provision requiring exclusive venue in New York courts. The choice of law/forum selection provision was deleted in USA's purported exercise of its right of first refusal. In specific language, Viacom's offer provides that [t]he strategic alliance (and all of the components thereof) shall be governed by New York Law, and each party agrees to submit to the exclusive jurisdiction of the courts located in New York. (Emphasis supplied.) By contrast, the Agreement currently in effect provides, in part, that it shall be construed, interpreted and enforced in accordance with and shall be governed by the laws of the State of New York.... [WWFE] hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of any legal proceedings arising out of or relating in any way to this Agreement or the transaction contemplated hereby. (Emphasis supplied.) USA makes three arguments to excuse its failure to match these terms: (1) this same basic concept is captured in USA undertaking that there would ultimately be a long-form agreement between WWFE and USA containing the customary covenants, representations, warranties and indemnities once the right of first refusal was consummated; (2) the choice of law provision was sought by Viacom (not WWFE) in its negotiations with WWFE; and (3) the Court of Chancery could condition relief upon USA's agreeing to those terms. Contrary to USA's assertion, there are no provisions in its purported exercise to interchange with the exclusive venue [23] term and the promise of a long-form agreement incorporating boilerplate provisions is not the equivalent of the acceptance of these specific terms. [24] Nor is USA's failure to match excused on the ground that the term was material only to Viacom. The proffered transaction was on behalf of both entities. Finally, it is not a valid argument that USA matched this term because a court of equity can condition relief on USA's acceptance of a term it rejected in purporting to exercise the right. This argument incorrectly confuses equity practice in other contexts with principles of contract law. The Court of Chancery held that choice of law and forum exclusivity are material terms relating to the original subject matter, and that USA did not match those terms. [25] We agree with the trial court that choice of law and forum selection clauses are material under New York law. [26] USA's arguments that attempt to justify its removal of this term are without substantial merit. The Court of Chancery was clearly correct in its holding that USA failed to match this material term.