Court Opinion

ID: 9840659
Source: CourtListenerOpinion
Date Created: 2023-09-19 18:00:37.410286+00
Date Added: 2024-06-11T10:59:48.700743
License: Public Domain

Case: 21-50431         Document: 00516900388             Page: 1      Date Filed: 09/19/2023

              United States Court of Appeals
                   for the Fifth Circuit                                   United States Court of Appeals
                                                                                    Fifth Circuit

                                      ____________                                FILED
                                                                          September 19, 2023
                                        No. 21-50431
                                                                             Lyle W. Cayce
                                      ____________                                Clerk

   S. Christopher Ney,

                                                                     Plaintiff—Appellant,

                                             versus

   3i Group, P.L.C.; 3i Corporation,

                                               Defendants—Appellees.
                      ______________________________

                      Appeal from the United States District Court
                           for the Western District of Texas
                               USDC No. 1:20-CV-1142
                      ______________________________

   Before Barksdale, Stewart, and Dennis, Circuit Judges.
   Per Curiam:*
          In March 2019, New Amsterdam Software Holdings acquired
   Magnitude Software Inc. (“Magnitude”) for $340 million following an
   extensive bidding process. Christopher Ney, the CEO of Magnitude, was an
   integral part of these negotiations. Ney alleges that during these negotiations
   the president of New Amsterdam Software Holdings, Andrew Olinick,
   promised Ney a $20 million “kicker” in exchange for Ney’s support of the

          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 21-50431       Document: 00516900388             Page: 2      Date Filed: 09/19/2023

                                        No. 21-50431

   2019 sale of Magnitude. Ney filed suit to enforce this alleged oral contract,
   and the district court dismissed his claim for forum non conveniens pursuant
   to a valid forum-selection clause. Ney appeals this dismissal. For the reasons
   given below, we AFFIRM.
                                              I.
          Plaintiff-Appellant Christopher Ney, a Texas citizen, co-founded
   Magnitude, an Austin-based software firm. Ney also served as the CEO of
   Magnitude. In 2018, Magnitude entered negotiations with several private eq-
   uity funds and investment companies concerning a potential sale of the com-
   pany. One of those potential buyers was Defendant-Appellee 3i Group, an
   international private equity group organized in England and Wales with its
   principal place of business in London. During these negotiations Ney com-
   municated primarily with Andrew Olinick, who held himself out as a 3i Group
   partner, co-head of North American Private Equity, and Global Head of Busi-
   ness and Technology, but who now claims to have been acting on behalf of a
   related corporation, 3i Corporation. Because of this, Ney brings his claims
   against both 3i Group and 3i Corporation (referred to collectively as the “3i
   Defendants”).1
          Ney alleges he negotiated with the 3i Defendants regarding a potential
   sale throughout 2018 and 2019. During these negotiations, Olinick repeatedly
   pressed Ney to put the 3i Defendants at the “front of the line.” Olinick told

          _____________________
          1
              We note that the district court found that “the exact relationship between 3i
   Corporation, 3i Group, and New Amsterdam is opaque.” The 3i Defendants’ brief clarifies
   this relationship. The 3i Defendants did not directly purchase Magnitude. Rather, New
   Amsterdam Software Holdings purchased Magnitude, and New Amsterdam Software
   Holdings’ general partner is New Amsterdam Software GP LLC. 3i Group is a British-
   private equity firm that was one of New Amsterdam Software Holdings’ indirect investors.
   3i Corporation is an investment advisory company for 3i Group incorporated in
   Massachusetts with its principal place of business in New York.

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   Ney that although the 3i Defendants “had previously committed to a firm
   purchase price of $360 million, 3i Group’s investment committee now could
   only get to a $340 million purchase price.” Ney responded that $340 million
   was unacceptable.
          In light of Ney’s rejection of a $340 million purchase price, Ney claims
   that Olinick proposed an oral contract. Olinick suggested that a $20 million
   “kicker” be paid to Ney. Specifically, Olinick promised that 3i Group would
   pay Ney $20 million if Ney (i) worked to keep 3i Group at the “front of the
   line” in the acquisition negotiations, (ii) got the deal done, and (iii) stayed on
   as CEO of Magnitude during the post-acquisition period. Ney claims that he
   accepted the 3i Defendants’ offer and pushed the negotiations to a successful
   close, stayed on as Magnitude’s CEO, rolled $6 million back into Magnitude,
   and successfully transitioned the company post-closing.
          In March 2019, New Amsterdam Software Holdings purchased Mag-
   nitude for $340 million. This sale, as well as Ney’s compensation with re-
   spect to it, is governed by various interlocking written contracts, namely: the
   Stock Purchase Agreement (“the Purchase Agreement”), the Restrictive
   Covenant Agreement, two Incentive Unit Grant Agreements, a Rollover
   Contribution and Subscription Agreement (“the Rollover Agreement”),
   which is Exhibit B to the Purchase Agreement, and two organizational agree-
   ments. All of the agreements are either dated March 18, 2019, or May 2, 2019.
          The primary agreement depicting the terms of the Magnitude sale is
   the Purchase Agreement. Signed by Olinick and Timothy Mack as President
   of Magnitude, this agreement, like the other six ancillary agreements, notes
   that all seven agreements constitute “the complete agreement by, between
   and among the parties.” Additionally, the Purchase Agreement contains a
   forum-selection clause:
          [E]ach of the parties to this Agreement hereby irrevocably . . .

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           submits to the exclusive jurisdiction of the Court of Chancery
           of the State of Delaware (or if such court lacks jurisdiction, any
           other state or federal court sitting in the State of Delaware) in
           respect of any litigation, action or proceeding . . . arising out of
           or relating to this Agreement, the negotiation, execution or
           performance of this agreement or the transactions
           contemplated hereby.
           The Purchase Agreement attached the Rollover Agreement as Exhibit
   B. In the Rollover Agreement, Ney agreed to rollover into the new
   organization his “Company Shares with a dollar value equal to $6,000,000”
   in exchange for partnership interests in New Amsterdam Software Holdings.
   Within the Rollover Agreement, the parties agreed to “submit to the
   exclusive jurisdiction” of courts in Delaware “in respect of the interpretation
   and enforcement of the provisions of this agreement and any related
   agreement, certificate or other document delivered in connection herewith.”
   They also agreed that “[t]his Agreement and the agreements and documents
   referred to herein contain the complete agreement among the parties hereto
   and supersede any prior understandings, agreements or representations by or
   among the parties hereto, written or oral, that may have related to the subject
   matter hereof in any way.” This agreement was signed by Olinick and Ney.

           On July 7, 2020, eighteen months after the sale was completed, Ney
   was terminated as CEO. Ney claims that the 3i Defendants have breached the
   oral agreement by failing to pay him the agreed upon $20 million. In
   response, the 3i Defendants contend that the alleged oral contract was never
   made.
                                           II.
           To recover damages under the alleged oral contract, Ney filed suit in
   a Texas state court against New Amsterdam Software Holdings and New
   Amsterdam Software GP LLC (collectively the “New Amsterdam

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                                    No. 21-50431

   entities”), and 3i Group. The New Amsterdam entities moved to dismiss
   based on forum-selection clauses in the written contracts that unambiguously
   provided Delaware as the exclusive forum for resolving disputes relating to
   the Magnitude negotiation and purchase. Although the New Amsterdam en-
   tities noted in their motion to dismiss that the written contracts would like-
   wise prohibit claims against 3i Group, 3i Group was not subject to the motion
   to dismiss for failure to comply with the forum-selection clause because 3i
   Group had filed a contemporaneous Special Appearance challenging the
   Texas court’s jurisdiction. The Texas state court granted the New Amster-
   dam entities’ motion to dismiss on the basis of the forum-selection clauses.
   The only defendant that remained was 3i Group.
          Following the state court’s dismissal of the New Amsterdam entities,
   Ney amended his state court petition to add 3i Corporation as an additional
   defendant, bringing the total number of defendants to two: 3i Group and 3i
   Corporation. Ney contended that he was owed $20 million under the oral
   contract and asserted breach of contract, promissory estoppel, and unjust en-
   richment/quantum meruit claims against the 3i Defendants. After removal
   to federal court based on diversity, the 3i Defendants filed their motion to
   dismiss arguing that Ney’s claims should be dismissed because (i) his plead-
   ings failed to state a claim under Rule 12(b)(6), (ii) venue was improper given
   the various written agreements’ forum-selection clauses under Rule 12(b)(3),
   and (iii) the court lacked personal jurisdiction over 3i Group.

          The magistrate court granted the 3i Defendants leave to file a
   supplemental motion to raise the forum-selection clause argument in a forum
   non conveniens posture rather than under Rule 12(b)(3). After holding oral
   argument, the magistrate court issued a Report & Recommendation
   (“R&R”) that recommended granting the 3i Defendants’ supplemental
   motion to dismiss based on forum-selection clauses in two written

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                                           No. 21-50431

   agreements: the Purchase Agreement and the Rollover Agreement. Ney filed
   objections to the R&R with the district court. The district court accepted and
   adopted the R&R, dismissing the case without prejudice pursuant to the
   forum-selection clauses in both the Purchase Agreement and the Rollover
   Agreement. Ney appeals to this Court.
                                                III.
           We review the district court’s interpretation of a forum-selection
   clause and its assessment of that clause’s enforceability de novo and the
   district court’s balancing of the public and private interest factors for abuse
   of discretion. Weber v. PACT XPP Techs., AG, 811 F.3d 758, 768 (5th Cir.
   2016). Federal law applies to determine the enforceability of forum-selection
   clauses in diversity cases. All. Health Grp., LLC v. Bridging Health Options,
   LLC, 553 F.3d 397, 399 (5th Cir. 2008).
                                                IV.

           As an initial matter, Ney argues that the district court should not have
   considered the Purchase Agreement or the Rollover Agreement—both of
   which were attached to the 3i Defendants’ motion—because Ney did not
   reference those agreements in his state court petition, nor are the agreements
   central to Ney’s claims.2 Ney acknowledges, however, that “[o]n a
   traditional forum non conveniens motion, it is within a district court’s
   discretion to consider matters outside the pleadings,” and that “weighing
           _____________________
           2
             There is a potential preservation issue with this argument. In his objections to the
   magistrate court’s R&R, Ney included a footnote alleging it was improper for the court to
   consider the Purchase Agreement and the Rollover Agreement in deciding the motion to
   dismiss. The Fifth Circuit has stated that “[a]rguments subordinated in a footnote are
   ‘insufficiently addressed in the body of the brief,’ and thus are waived.” Arbuckle Mountain
   Ranch of Tex., Inc. v. Chesapeake Energy Corp., 810 F.3d 335, 339 n.4 (5th Cir. 2016). Because
   Ney’s argument was buried in a footnote, this likely precludes our review. Nevertheless, as
   explained in the body of this opinion, Ney’s objection fails on the merits.

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   private and public interest factors will invariably require the district court to
   wade beyond the pleadings to consider, for example, administrative
   difficulties flowing from court congestion or the ease of access to sources of
   proof.”

          We find that when evaluating a motion to dismiss based on a forum-
   selection clause, a court may consider matters outside the pleadings. As the
   R&R explains, and as Ney himself concedes, other courts resolving forum non
   conveniens motions based on forum-selection clauses have held that one may
   consider facts outside of the pleadings. Color Switch LLC v. Fortafy Games
   DMCC, 377 F. Supp. 3d 1075, 1082–83 (E.D. Cal. 2019), aff’d, 818 F. App’x
   694 (9th Cir. 2020); Jiangsu Hongyuan Pharm. Co. v. DI Glob. Logistics Inc.,
   159 F. Supp. 3d 1316, 1322 (S.D. Fla. 2016); Turner v. Costa Crociere S.P.A.,
   488 F. Supp. 3d 1240, 1245–46 (S.D. Fla. 2020) (“When ruling on a motion
   to dismiss for forum non conveniens, a court may consider matters outside
   the pleadings if presented in proper form by the parties.”). In this case, the
   Rollover Agreement and the Purchase Agreement are central to Ney’s
   petition, as the amended petition repeatedly references and relies on the
   purchase, the closing, and the completion of the Magnitude sale. It was
   within the district court’s discretion to consider matters outside the
   pleadings in deciding the 3i Defendants’ motion to dismiss, and it did not err
   in considering either the Purchase Agreement or the Rollover Agreement.
          Ney next argues that the district court erred in concluding that the
   Rollover Agreement’s forum-selection clause binds Ney, because (1) Ney’s
   claims do not seek the interpretation and enforcement of any of the Rollover
   Agreement’s provisions, (2) Ney’s claims do not seek the interpretation or
   enforcement of a related agreement or other document delivered in
   connection with the Rollover Agreement, and (3) the Rollover Agreement’s
   forum-selection clause does not cover Ney’s equitable claims.

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          The Supreme Court has held that a valid forum-selection clause is
   entitled to “controlling weight in all but the most exceptional cases.” Atlantic
   Marine Construction Company v. United States District Court for the Western
   District of Texas, 571 U.S. 49, 63 (2013). Under Atlantic Marine, a court must
   determine whether (i) “the forum-selection clause is mandatory or
   permissive,” (ii) “the forum-selection clause is enforceable,” and (iii)
   “‘Atlantic Marine’s balancing test’ of public interest factors” supports
   dismissal. PCL Civ. Constructors, Inc. v. Arch Ins. Co., 979 F.3d 1070, 1073–
   74 (5th Cir. 2020) (quoting Weber, 811 F.3d at 766).
          Ney does not dispute that the Rollover Agreement’s forum-selection
   clause is mandatory. The forum-selection clause clearly provides for
   Delaware as the “exclusive forum” for any litigation arising out of the
   interpretation or enforcement of the Rollover Agreement and any related
   agreement’s provisions. PCL, 979 F.3d at 1073 (quoting Weber, 811 F.3d at
   768) (“A forum selection clause is mandatory if it affirmatively requires that
   litigation arising from the contract be carried out in a given forum.”). Atlantic
   Marine’s first prong is met.

          The Rollover Agreement’s forum-selection clause is also enforceable,
   especially in light of the “‘strong presumption’ in favor of enforcing
   mandatory forum selection clauses.” Al Copeland Invs., LLC v. First Specialty
   Ins. Corp., 884 F.3d 540, 543 (5th Cir. 2018). Ney argues that his claims do
   not seek the interpretation and enforcement of any of the Rollover
   Agreement’s provisions, and thus the forum-selection clause does not
   encompass his claims. Ney’s argument, however, belies the plain text of the
   clause, which says that the parties agree to litigate in Delaware “in respect of
   the interpretation and enforcement of the provisions of this agreement and
   any related agreement, certificate or other document delivered in connection
   herewith.” The forum-selection clause applies to any litigation “in respect

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   of the interpretation” of any provision of the agreement. The Supreme Court
   has held that the term “respecting” means the same thing as “relating to,”
   and thus covers any case in which a court will have to interpret any provision
   of the Rollover Agreement as part of its merits analysis, as it would here.
   Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1760 (2018) (“Use
   of the word ‘respecting’ in a legal context generally has a broadening effect,
   ensuring that the scope of a provision covers not only its subject but also
   matters relating to that subject.”).

          Additionally, the Rollover Agreement contains a merger clause which
   provides that the “[Rollover] Agreement and the agreements and documents
   referred to herein contain the complete agreement among the parties hereto
   and supersede any prior understandings, agreements or representations by or
   among the parties hereto, written or oral, that may have related to the subject
   matter hereof in any way.” This merger clause is expansive and clearly
   encompasses Ney’s alleged oral contract. Further, the provisions of the
   Rollover Agreement are relevant to Ney’s claims because, as the district
   court correctly concluded, the Rollover Agreement memorialized Ney’s
   alleged oral promise to “‘roll’ $6 million of Ney’s own money back into
   Magnitude.” Ultimately, we find that the subject matter of Ney’s lawsuit is
   intertwined with and implicates the subject matter of the Rollover
   Agreement, and thus, the forum-selection clause within the Rollover
   Agreement is enforceable.

          The district court also discussed how, although Ney is an “undisputed
   signatory to the Rollover agreement,” the 3i Defendants are non–signatories.
   The district court went on to correctly hold that “the 3i Defendants were so
   closely related to New Amsterdam Software Holdings that they were
   permitted to negotiate the underlying agreements,” and thus that they were
   permitted to enforce the forum-selection clause against Ney. Magi XXI, Inc.

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   v. Stato della Città del Vaticano, 714 F.3d 714, 723 (2d Cir. 2013) (“We hold
   that a non-signatory to a contract containing a forum selection clause may
   enforce the forum selection clause against a signatory when the non-signatory
   is ‘closely related’ to another signatory.”). Regardless, Ney does not raise on
   appeal the issue of whether the 3i Defendants, as “closely related” entities,
   can enforce the Rollover Agreement as non–signatories. Ney has forfeited
   this issue on appeal.

          Because the Rollover Agreement’s forum-selection clause is both
   mandatory and enforceable, Atlantic Marine’s private-interest factors
   “strongly favor dismissal without prejudice.” Weber, 811 F.3d at 775 (“The
   only remaining question is whether this is one of the rare cases in which the
   public-interest FNC factors favor keeping a case despite the existence of a
   valid and enforceable FSC.”). We must now “review for abuse of discretion
   the district court’s use of Atlantic Marine’s balancing test” of public-interest
   factors. Id. at 766. Having done so, we find no abuse of discretion. This is not
   one of those extraordinary cases where the public-interest factors can
   outweigh a mandatory and enforceable forum-selection clause. Atlantic
   Marine, 571 U.S. at 62 (“Only under extraordinary circumstances unrelated
   to the convenience of the parties should a § 1404(a) motion be denied.”);
   Weber, 811 F.3d at 767 (“Cases in which the public-interest factors are
   sufficiently strong to outweigh a valid FSC ‘will not be common.’”).

          As the forum-selection clause in the Rollover Agreement is mandatory
   and enforceable, we need not address whether Ney’s case falls within the
   Purchase Agreement’s forum-selection clause. The district court’s dismissal
   for forum non conveniens is AFFIRMED.

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