Court Opinion

ID: 9378473
Source: CourtListenerOpinion
Date Created: 2023-03-10 17:03:15.225058+00
Date Added: 2024-06-11T17:17:21.512882
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CSP N3 SPONSOR LLC AND      )
CAPSTACK REAL ESTATE FUND )
L.P.,                       )
                            )
              Plaintiffs,   )
                            )
      v.                    )              C.A. No. N22C-07-157 PAW
                            )
MATTHEW GROSSMAN AND        )
JMG CAPITAL PROPERTIES LLC, )
                            )
              Defendants.   )
                            )

                          Submitted: January 25, 2023
                            Decided: March 9, 2023

        Upon Defendants’ Motion to Dismiss, or, in the alternative, Stay:
              GRANTED IN PART AND DENIED IN PART.

                 MEMORANDUM OPINION AND ORDER

Charles J. Brown, Esq., of GELLERT SCALI BUSENKELL & BROWN, LLC,
Attorney for Plaintiffs.

Adam L. Balick, Esq., and Melony Anderson, Esq., of BALICK & BALICK, LLC,
Attorneys for Defendants.

Winston, J.
I.    INTRODUCTION

      Plaintiffs CSP N3 Sponsor LLC (“CSP”) and Capstack Real Estate Fund L.P.

(“Capstack”) filed a declaratory judgment action and misappropriation of trade

secrets claim against Defendants Matthew Grossman and JMG Capital Properties,

LLC (“JMG Capital”). Plaintiffs’ declaratory judgment action seeks a declaration

that Capstack owes no obligations to Mr. Grossman and JMG Capital. Plaintiffs’

misappropriation of trade secrets claim seeks damages arising out of Mr. Grossman’s

alleged misappropriation of CSP’s trade secrets which he obtained access to through

a consulting agreement executed with CSP (the “Fee Agreement”). Defendants have

moved to dismiss this action for lack of subject matter jurisdiction and on the

grounds of forum non conveniens (the “Motion”). For the reasons set forth below,

Defendants’ Motion is granted in part and denied in part.

II.   FACTUAL AND PROCEDURAL BACKGROUND
      On or about November 3, 2020, Mr. Grossman and CSP entered into the Fee

Agreement, whereby Mr. Grossman, through his affiliated entity JMG SFR LLC

(“JMG SFR”), would work as a consultant for CSP.1 Pursuant to the Fee Agreement,

Mr. Grossman was to provide CSP his expertise in real estate analysis, asset

management, and investment management.2 In exchange, Mr. Grossman would

1
  Compl. ¶ 6. The parties dispute whether Mr. Grossman executed the Fee Agreement in his
individual capacity or on behalf of JMG SFR.
2
  Defs.’ Opening Br. Ex. A ¶¶ 2-3 (hereinafter “Fee Agreement”).
                                           2
receive a percentage of the net fees collected by CSP on the capital contributions

made into CSP’s investment vehicle (the “Investment”) by members which were

referred by or affiliated with Mr. Grossman.3 Mr. Grossman was also to receive

100% of the net fees collected from the $125,000 capital contribution made by JMG

SFR into the Investment.4 As a CSP consultant, Mr. Grossman had access to CSP’s

confidential information and trade secrets.5 And under the Fee Agreement, Mr.

Grossman agreed to maintain the confidentiality of this information during the term

of the Fee Agreement and after its expiration.6 The Fee Agreement’s arbitration

provision states:

       Except to the extent required by the Act, any dispute, claim or
       controversy arising out of or relating to this Agreement or the breach,
       termination, enforcement, interpretation, or validity thereof, including
       the determination of the scope or applicability of this Agreement to
       arbitrate, shall be determined by arbitration in Miami, Florida before
       one arbitrator. The arbitration shall be administered by JAMS pursuant
       to its Comprehensive Arbitration Rules and Procedures and in
       accordance with the Expedited Procedures in those Rules. Judgment on
       the award may be entered in any court having jurisdiction. This clause
       shall not preclude parties from seeking provisional remedies in aid of
       arbitration from a court of appropriate jurisdiction.7

3
  Id.
4
  Id. ¶ 3(a)(i).
5
  Compl. ¶ 7.
6
  Id.
7
  Fee Agreement ¶ 4.
                                          3
       Following the formation of Capstack8 in March 2021, Mr. Grossman began

negotiating the terms of his involvement in Capstack with David Blatt.9 However,

Mr. Blatt and Mr. Grossman could not agree on the role Mr. Grossman would have

at Capstack.10 Subsequently, Mr. Grossman decided to end his relationship with

Capstack.11 Capstack then returned to Mr. Grossman the funds he had advanced to

CSP in anticipation of his involvement with Capstack.12 At some point after

Capstack and Mr. Grossman ended their relationship, CSP learned Mr. Grossman

violated the Fee Agreement by, inter alia, using CSP’s confidential customer and

investor lists to solicit investments for JMG Capital.13

       On or about June 14, 2022, Mr. Grossman, through legal counsel, sent a

settlement demand letter (the “Demand Letter”) to Capstack asserting he was owed

an additional sum of $275,000. Mr. Grossman based his demand on the parties’

express oral agreement, clear course of performance, and prior course of dealing.14

Specifically, $275,000 represented the profit Capstack received from certain

8
  Capstack is an affiliate of CSP. Compl. ¶¶ 1-2.
9
  Compl. ¶ 8. Mr. Blatt formed Capstack and is the manager of CSP.
10
   Id. ¶¶ 9-10.
11
   Id.
12
   Id. ¶ 11.
13
   Id. ¶ 14.
14
   Id. ¶ 12.
                                             4
Grossman-generated investments.15 The Demand Letter stated “[t]his settlement

demand will remain open for thirty days.”16

       Following the expiration of the thirty-day window, Plaintiffs filed the instant

action. Count I seeks a declaratory judgment that Capstack owes no obligations to

Defendants.17 Count II alleges Mr. Grossman misappropriated CSP’s trade secrets

and confidential information in violation of state and federal law.18 Five days after

Plaintiffs filed the instant action, Defendants filed a notice with summons in the

Supreme Court of the State of New York against Plaintiffs and additional defendants

Mr. Blatt and Capstack Partners LLC (the “New York Litigation”).19 Defendants

then filed the instant Motion pursuant to Superior Court Civil Rules 12(b)(1) and

12(b)(3).20 The Court heard argument on the Motion, and, at the end of the hearing,

the Court took the Motion under advisement.

III.   PARTIES’ CONTENTIONS
       Defendants make two arguments in support of their Motion. First, they claim

that both Counts are subject to the arbitration provision contained in the Fee

Agreement.21 Second, in the event the Court concludes one or both Counts are not

15
   Id.
16
   Defs’ Opening Br. Ex. B at 6 (hereinafter “Demand Letter”).
17
   Id. ¶¶ 16-20.
18
   Id. ¶¶ 22-26.
19
   Defs.’ Opening Br. at 7.
20
   Defs.’ Motion to Dismiss, or, in the Alternative, Stay at 1.
21
   Defs.’ Opening Br. at 14-16.
                                               5
subject to arbitration, Defendants argue that this Court should dismiss or stay the

action on the grounds of forum non conveniens in favor of the New York Litigation.22

Defendants further contend that the typical forum non conveniens hardship analysis

does not apply because Plaintiffs filed their declaratory judgment action in

anticipation of imminent litigation.23 Instead, Defendants assert this Court should

look to the factors discussed in Burris v. Cross to determine whether Plaintiffs’

declaratory judgment action should be dismissed or stayed pending the outcome of

the New York Litigation.24

       Plaintiffs respond by asserting that neither Defendant is a party to the Fee

Agreement and thus their claims against Defendants are not subject to the arbitration

provision, and that, in any event, their claims do not rely upon the Fee Agreement.25

In the alternative, Plaintiffs contend that Defendants waived their right to arbitration

by initiating the New York Litigation.26 Plaintiffs also assert the factors in Burris v.

Cross should not apply because their declaratory judgment action was not filed in

anticipation of imminent litigation, and that this Court is the proper forum to resolve

all disputes between the parties.27

22
   Id. at 17.
23
   Id. at 17-18.
24
   Id.
25
   Pls.’ Answering Br. at 5-8.
26
   Id. at 9-10.
27
   Id. at 10-16.
                                           6
IV.     STANDARD OF REVIEW

        A.      MOTION TO DISMISS BASED                   ON    LACK      OF   SUBJECT MATTER
                JURISDICTION

        Pursuant to Superior Court Civil Rule 12(b)(1), a party may move to dismiss

a claim for “[l]ack of jurisdiction over the subject matter.”28 “The burden of

establishing the Court’s subject matter jurisdiction rests with the party seeking the

Court’s intervention.”29 When reviewing a motion to dismiss based on lack of

subject matter jurisdiction, the court may consider documents outside the pleadings

and “need not accept Plaintiff’s factual allegations as true.”30 “The law is clear that

courts lack subject matter jurisdiction over a claim that is ‘properly committed to

arbitration.’”31

28
   Super. Ct. Civ. R. 12(b)(1).
29
   Donofrio v. Peninsula Healthcare Servs., LLC, 2022 WL 1054969, at *2 (Del. Super. Ct. Apr.
8, 2022) (citation omitted).
30
   Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007) (quoting
Philips v. County of Bucks, 1999 WL 600541, at *1 (E.D. Pa. Aug. 9, 1999) (“Unlike the standards
employed in Rule 12(b)(6) analysis, the guidelines for the Court's review of a Rule 12(b)(1) motion
are far more demanding of the non-movant. The burden is on the Plaintiffs to prove jurisdiction
exists. Further, the Court need not accept Plaintiffs factual allegations as true and is free to consider
facts not alleged in the complaint.”)).
31
   West IP Commc’n., Inc. v. Xactly Corp., 2014 WL 3032270, at *5 (Del. Super. Ct. June 25,
2014) (quoting Aquila of Del., Inc. v. Wilm. Trust Co., 2011 WL 4908406, at *1 (Del. Super. Ct.
Oct. 10, 2011)).
                                                   7
       B.     MOTION TO DISMISS BASED             ON THE    GROUNDS      OF   FORUM NON
              CONVENIENS
       Even when a court has subject matter jurisdiction over a claim, it can still be

dismissed on the grounds of forum non conveniens.32 “A motion raising forum non

conveniens is a request that a court possessing both personal and subject matter

jurisdiction over an action nevertheless decline to hear it.”33 A plaintiff’s choice of

forum is typically respected and overwhelming hardship, not mere inconvenience

must be shown to warrant relief.34

V.     DISCUSSION

       A.     THE ARBITRABILITY DETERMINATION
       Arbitrability questions arise when parties disagree about whether an

arbitration agreement extends to a particular issue. Disputes concerning whether an

arbitration agreement encompasses certain claims is a question of substantive

arbitrability. It is undisputed that the issue here is one of substantive arbitrability.

       Arbitration is a matter of contract, and as such, parties cannot be required to

submit to arbitration any dispute which they have not agreed to submit.35 As a result,

32
   Civil Rule 12(b)(3).
33
   GXP Cap., LLC v. Argonaut Mfg. Servs., Inc., 234 A.3d 1186, 1193 (Del. Super. Ct. 2020)
(citing Chrysler First Bus. Credit Corp. v. 1500 Locust Ltd. P'ship., 669 A.2d 104, 106 (Del.
1995)).
34
   Taylor v. LSI Logic Corp., 689 A.2d 1196, 1198-1199 (Del. 1997).
35
   James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 78 (Del. 2006) (citing Housam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct, 154, L.Ed.2d 191 (2002)(“a party cannot be
required to submit to arbitration any dispute which he has not agreed so to submit”)).
                                             8
before addressing questions of substantive arbitrability, the Court must determine

whether a valid arbitration agreement exists.36 Therefore, to determine whether a

claim is properly subject to arbitration, the Court engages in a two-part analysis.37

The Court must determine:

               1)      Whether a valid arbitration agreement exists;38 and

               2)      Whether the court or arbitrator decides issues of substantive
                       arbitrability.39

First, “where the putative contract is in the form of a signed writing, that document

generally offers the most powerful and persuasive evidence of the parties’ intent to

be bound.”40        The principles of contract interpretation are well-established in

Delaware. When interpreting a contract, “courts read the agreement as a whole and

enforce the plain meaning of clear and unambiguous language.”41 Contracts are

interpreted to ‘give each provision and term effect’ and not render any terms

36
   Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524, 530 (2019); Fairstead Cap.
Mgmt. LLC v. Blodgett, 2023 WL 11540, at *18 (Del. Ch. Jan. 6, 2023) (“a court must address
issues of contract formation before deferring to an arbitrator to resolve the who-decides question
under a delegation provision”)(citations omitted).
37
   Fairstead Cap. Mgmt. LLC v. Blodgett, 2023 WL 115540, at *14-15 (Del. Ch. Jan. 6, 2023).
38
   Id. at *18 (quoting Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524, 530 (2019)
(“To be sure, before referring a dispute to an arbitrator, the court determines whether a valid
arbitration agreement exists.”).
39
   Id. at *17.
40
   Eagle Force Holdings., LLC v. Campbell, 187 A.3d 1209, 1230 (Del. 2018) (citing Seiler v.
Levitz Furniture Co. E. Region, 367 A.2d 999, 1005 (Del. 1976)).
41
    Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1208 (Del. 2021)
(citations omitted).
                                                 9
‘meaningless or illusory.”42 When contract language is clear and unambiguous, the

court will give effect to the plain meaning of its terms and provisions.43

       If, a court determines that the parties have contracted to arbitrate, the next

issue the Court decides is whether the Court or arbitrator will decide issues of

substantive arbitrability. It is presumed that substantive arbitrability is an issue for

judicial determination, unless there is clear and unmistakable evidence to the

contrary.44 A clear and unmistakable intent among the parties to submit substantive

arbitrability issues to the arbitrator is found when the arbitration clause contains an

express provision that substantive arbitrability issues will be determined by an

arbitrator.45

       B.       PLAINTIFFS’ MISAPPROPRIATION           OF   TRADE SECRETS CLAIM           IS
                SUBJECT TO ARBITRATION

       Count II, Plaintiffs’ misappropriation of trade secrets claim, alleges CSP

discovered that Mr. Grossman violated the Fee Agreement and misappropriated

CSP’s trade secrets by, inter alia, utilizing CSP’s customer and investor lists to

solicit CSP’s customers and investors to invest in Mr. Grossman’s affiliated

42
    Id. (quoting Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (citation
omitted)).
43
   Id.
44
   James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 79 (Del. 2006).
45
   Donofrio v. Peninsula Healthcare Servs., LLC, 2022 WL 1054969, at *3 (Del. Super. Ct. Apr.
8, 2022) (citing GTSI Corp. v. Eyak Tech., LLC, 10 A.3d 1116, 1119 (Del. Ch. 2010)).
                                             10
company, JMG Capital.46 Defendants contend this claim is subject to arbitration,

since the only basis for Mr. Grossman’s access to CSP’s trade secrets was by virtue

of the Fee Agreement.47 Yet, Plaintiffs argue that their misappropriation claim is

not subject to arbitration because (1) Mr. Grossman is not a party to the Fee

Agreement, and (2) regardless of whether Mr. Grossman is party to the Fee

Agreement, their misappropriation claim does not rely upon the Fee Agreement.48

The Court disagrees.

               1.      A valid arbitration agreement exists between Mr. Grossman
                       and CSP
       Plaintiffs’ first argument, that Mr. Grossman is not a signatory to the Fee

Agreement, is easily disposed by reviewing the Fee Agreement. A plain reading of

the Fee Agreement evidences that CSP entered into the Fee Agreement with Mr.

Grossman in his individual capacity. First, the Fee Agreement states: “This FEE

AGREEMENT (“Agreement”) is entered into by and between CSP N3 Sponsor LLC

(“Company”) and Matthew Grossman identified below (“Consultant”) (collectively,

the “Parties”).”49 Second, Plaintiffs’ argument that the signature block signifies Mr.

Grossman was signing on behalf of his entity JMG SFR is belied by the express

terms of the agreement.          The sentence before the signature block states, “IN

46
   Compl. ¶ 14.
47
   Defs.’ Opening Br. at 14.
48
   Pls.’ Answering Br. at 5-8.
49
   Fee Agreement at 1.
                                            11
WITNESS WHEREOF, intending to be legally bound hereby, the undersigned has

executed this Agreement as of the date set forth below as a Member of the Company

or individually.”50 As noted above, the Fee Agreement defines CSP as “Company”.

Thus, it is clear to the Court that CSP contracted with Mr. Grossman in his individual

capacity.51 Therefore, the Court concludes Mr. Grossman is a party to the Fee

Agreement.

               2.      The Arbitration Provision delegates issues of substantive
                       arbitrability to the arbitrator
       Having determined Mr. Grossman is a party to the Fee Agreement, the next

issue is whether CSP and Mr. Grossman agreed to submit substantive arbitrability

issues to the arbitrator. This issue can similarly be disposed of with a plain reading

of the Fee Agreement’s arbitration provision. The arbitration clause provides that

“any dispute, claim or controversy arising out of or relating to this Agreement or the

breach, termination, enforcement, interpretation, or validity thereof, including the

determination of the scope or applicability of this Agreement to arbitrate[,]” shall

be determined by the arbitrator.52 An arbitration provision requiring the parties to

50
   Id. at 2 (emphasis added).
51
   Not only is Plaintiffs’ argument contrary to the plain reading of the Fee Agreement, but it is also
directly contrary to their allegations in this action and the New York Litigation. In their Complaint,
Plaintiffs allege: “Defendant Grossman, through his affiliated entity … entered into a Fee
Agreement … whereby Grossman … would work as a consultant on behalf of CSP.” Compl. ¶6.
In the New York Litigation, Mr. Blatt, via affidavit, alleges Mr. Grossman violated the Fee
Agreement. See Defs’ Reply Br., Exhibit A at 3.
52
   Id. ¶ 4 (emphasis added).
                                                 12
arbitrate “the validity, scope and enforceability of these arbitration provisions”

clearly and unmistakably assigns to the arbitrator the task of determining substantive

arbitrability.53 Thus, the parties clearly and unmistakably intended to submit the

issues of substantive arbitrability to the arbitrator. Therefore, the arbitrator must

decide whether Count II, the trade secrets claim, is subject to arbitration.54

Defendants’ motion to stay the misappropriation of trade secrets claim pending a

determination of arbitrability by the arbitrator is granted.

       C.      PLAINTIFFS’ DECLARATORY JUDGMENT ACTION IS NOT SUBJECT TO
               ARBITRATION
       Count I seeks a declaratory judgment that Capstack owes no obligations to

Mr. Grossman or JMG Capital. Neither party contends that Capstack is a signatory

to the Fee Agreement. Defendants, however, contend that the fact that Capstack is

not a party to the Fee Agreement “need not prevent this Court from finding that there

is a colorable argument that Count I is a dispute ‘arising out of or relating to’ the Fee

53
   GTSI Corp. v. Eyak Tech., LLC, 10 A.3d 1116, 1119 (Del. Ch. 2010) (“[b]y stating that the
members ‘shall’ arbitrate ‘any dispute ... including the validity, scope and enforceability of these
arbitration provisions,’ the Arbitration Provision clearly and unmistakably assigns to the arbitrator
the task of determining substantive arbitrability.”).
54
   Defendants cite to various cases that interpret McLaughlin v. McCann to add a third prong to
the Willie Gary test: that the Court will not refer a frivolous issue of arbitrability to an arbitrator.
See West IP Commc’ns, Inc. v. Xactly Corp., 2014 WL 3032270, at *9 (Del Super. Ct. June 25,
2014) and Legend Nat’l Gas II Holdings, LP v. Hargis, 2012 WL 4481303, at *6 (Del. Ch. Sept.
28, 2012). However, given the United States Supreme Court’s holding in Henry Schein, Inc. v.
Archer & White Sales, Inc. and the Delaware Supreme Court’s adherence to the majority federal
rule in Willie Gary, the third prong is inconsistent with precedent. See also, Fairstead Cap. Mgmt.
LLC v. Blodgett, 2023 WL 115540, at *22 (“Even if the court were to view arguments for
arbitrability as wholly frivolous, they would still be for the arbitrator to decide.”).
                                                  13
Agreement.”55 In support of their contention, Defendants argue that the relationship

between CSP and Mr. Grossman led to the relationship between Mr. Grossman and

Capstack, and that Capstack and CSP are inextricably intertwined.56                       Thus,

Defendants contend “there is a colorable argument that Count I is a dispute ‘arising

out of or relating to’ the Fee Agreement sufficient for this Court to dismiss it.”57

       Defendants’ argument, however, presupposes that Capstack is bound by the

arbitration provision in the Fee Agreement without considering the threshold issue

of contract formation. As previously explained, the first step in an arbitrability

determination is deciding whether a valid arbitration agreement exists between the

parties.58 The issue of whether Capstack has contracted to arbitrate its claims against

Mr. Grossman and JMG Capital or is otherwise bound to the terms of the Fee

Agreement is an issue of contract formation and decided by the Court. 59

       A non-signatory to a contract can be bound by an arbitration clause within that

contract when “‘traditional principles of contract and agency law’ equitably confer

55
   Defs.’ Opening Br. at 15-16.
56
   Id. at 16.
57
   Id.
58
   See supra V.A.
59
   See Fairstead Cap. Mgmt LLC v. Blodgett, 2023 WL 115540, at *19-20 (Jan 6, 2023) (The issue
of whether a non-signatory can be bound to an arbitration agreement is an issue for the court and
is distinct from the issue of substantive arbitrability).
                                               14
upon that party signatory status with regard to the underlying agreement.”60 Courts

have “recognized five theories for binding non-signatories to arbitration agreements:

1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego;

and 5) estoppel.”61 None of these theories apply here.

       Defendants appear to advance the theory that Capstack is an alter ego of

CSP.62 Defendants rely on Legend Natural Gas II Holdings, LP v. Hargis, in which

non-signatory successor-in-interest entities were determined to be bound to an

arbitration agreement signed by their predecessor entities. 63 The Legend Natural

Gas Court noted that in Delaware, “a successor corporation which is merely the

‘alter ego’ of the predecessor is bound by the arbitration clause of an agreement

made by the predecessor.”64

       In the instant case, however, Capstack is an affiliate of CSP, not its successor-

in-interest. In general, Delaware courts typically do not disregard the separateness

of corporate entities.65 “To succeed, the challenging party must prove that the

corporate structure ‘must be a sham and exist for no other purpose than as a vehicle

60
   NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 430 (Del. Ch. 2007)
(citing E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269
F.3d 187, 194 (3d Cir.2001)).
61
   Buzzfeed, Inc. v. Anderson, 2022 WL 15627216, at *8 (Del. Ch. Oct. 28, 2022).
62
   Defs.’ Opening Br. at 16 (“CSP and Capstack are owned and managed by the same person,
David Blatt, and are inextricably intertwined”).
63
   Legend Natural Gas II Holdings, LP v. Hargis, 2012 WL 4481303, at *6 (Sept. 28, 2012).
64
   Id.
65
   Buzzfeed, Inc. v. Anderson, 2022 WL 15627216, at *12 (Del. Ch. Oct. 28, 2022).
                                             15
for fraud.’”66 Defendants do not allege the affiliate relationship between CSP and

Capstack was merely a vehicle for fraud, and the Court does not find any indication

from the pleadings that such was the case.

       The Court finds that Capstack has not agreed to submit any claims it has

against Mr. Grossman or JMG Capital to arbitration and principles of equity do not

support binding Capstack to the terms of the Fee Agreement.                        Accordingly,

Defendants’ Motion to dismiss or stay Count I, declaratory judgment action, pending

a determination of arbitrability by the arbitrator is denied.67

       D.      DEFENDANTS’ MOTION TO DISMISS THE DECLARATORY JUDGMENT
               ACTION ON THE GROUNDS OF FORUM NON CONVENIENS IS DENIED

               1.     The Burris v. Cross Factors Do Not Weigh In Favor of
                      Dismissal
       Defendants argue that if the Court finds Plaintiffs’ declaratory judgment

action is not subject to arbitration, then the Court should find the action is ‘overripe’

under Burris v. Cross and dismiss the action.68 Burris v. Cross identified seven

factors which inform the appropriateness of a declaratory judgment action seeking

declarations on the merits of claims pending in another court. These factors are:

66
   Id. (citing Wallace ex rel. Cencom Cable Income P'rs II, Inc. v. Wood, 752 A.2d 1175, 1183
(Del. Ch. 1999)).
67
   Because the NY Litigation does not relate to Count II and the Court has determined that the
declaratory judgment action is not subject to arbitration, it need not address Plaintiffs’ argument
that Defendants waived their right to arbitrate by initiating the New York Litigation.
68
   Defs.’ Opening Br. at 19.
                                               16
               (1) Whether the defendant is truly an unwilling litigant, thus
               necessitating declaratory action. (2) What form of relief is truly
               being sought by the plaintiff and whether that relief, if not solely a
               declaration of rights, would require resort to another court for
               supplemental relief. If so, whether both the rights and relief could
               be attained in a single non-declaratory action already available. (3)
               Whether another remedy exists and whether it would be more
               effective or efficient and, thus, whether declaratory judgment
               would serve a useful purpose. (4) Whether another action is
               pending, instituted either before or after the instant action, at the
               time of consideration of the Motion to Dismiss, and whether
               plaintiff would be able to raise all claims and defenses available in
               the instant action, as part of the pending action. (5) Whether the
               instant action has truly been instituted to seek a declaration of
               rights or merely for tactical or other procedural advantage. (6)
               Whether the instant action was filed in apparent anticipation of
               other pending proceedings. (7) Whether plaintiff will suffer any
               prejudice if the instant action is dismissed.69

          Several facts, however, distinguish the instant case from Burris and make

dismissal of Plaintiffs’ declaratory judgment action inappropriate under the Burris

factors. First, the Court disagrees with Defendants’ assertion that Plaintiffs knew

Defendants intended to initiate litigation in New York in the event their settlement

demand was not met.70 While it is true the Demand Letter was drafted by counsel

in New York and stated Defendants were prepared to “pursue claims, if necessary,”

the Demand Letter did not indicate the forum Defendants intended to litigate in.

Further, Defendants’ assertion that Plaintiffs should have known Defendants

69
     Id. at 1372-73.
70
     Defs.’ Opening Br. at 21.
                                              17
intended to litigate in New York is undercut by the fact that Defendants are now

claiming that the declaratory judgment action is subject to arbitration. Thus, unlike

in Burris, Defendants did not clearly express their intent to file in a particular

jurisdiction if Plaintiffs did not meet the terms of the Demand Letter.

      Second, despite Defendants’ assertions that their Demand Letter demonstrated

a clear intent to litigate, their complaint in the New York Litigation was not filed

until February 7, 2023, more than six months after initiation of the suit.71 While the

rules of civil procedure in New York may allow this length of delay between

initiation of a suit and the filing of a complaint, it hardly presents the picture of a

willing litigant who, like the defendant in Burris, was ready to file in the event

negotiations were unsuccessful and was preempted from his choice of forum at the

eleventh hour.

      Third, the relief requested by Plaintiffs here is truly a declaration of rights. In

contrast, in Burris, the plaintiff’s claims for declaratory relief were claims for

injunctive relief more properly brought in the Court of Chancery.72 Here, Plaintiffs’

request for declaratory relief asks this Court to interpret the terms of contract, if any,

71
   See Compl., Matthew Grossman and JMG Cap. Properties, LLC v. David Blatt et al, No.:
652619/2022 (N.Y. Sup. Ct. filed February 7, 2023).
72
   Burris, 583 A.2d at 1373.
                                           18
between Mr. Grossman and Capstack. This type of issue “strike[s] at the very heart

of declaratory judgment relief, contract interpretation.”73

       Fourth, finally, and fundamentally, the fact pattern in this case mirrors a

typical declaratory judgment scenario, wherein, “an unwilling litigant will have cast

a cloud upon a property right (or other legal interest) but will not have moved

forward to litigate the claim.”74 By asserting Capstack was in breach of contract,

Defendants effectively “cast a cloud” upon Capstack’s obligations to Mr. Grossman

and gave rise to reasonable grounds for insecurity. Under these circumstances, it

was appropriate for Capstack to seek declaratory relief. The Burris factors do not

weigh in favor of dismissal.

              2.     The Cyro-Maid Factors Do Not Weigh in Favor of Dismissal

       Defendants argue that in the event the Court does not dismiss the declaratory

judgment action under Burris, the Court should nonetheless dismiss the action on

the grounds of forum non conveniens.75             “Where the actions are considered

contemporaneously filed, ‘the movant must demonstrate that litigating in Delaware

73
   E.I. DuPont De Nemours & Co., Inc. v. Huttig Bldg. Prods., Inc., 2002 WL 32072447, at *3
(Del. Super. Ct. May 28, 2002).
74
   Schick Inc. v. Amalgamated Clothing & Textile Workers Union, 533 A.2d 1235, 1239 (Del. Ch.
1987).
75
   Defs.’ Opening Br. at 22.
                                             19
would cause overwhelming hardship,’ to justify a dismissal.”76 “To justify a stay

where the actions are contemporaneously filed, ‘the movant need only demonstrate

that the preponderance of applicable forum factors ‘tips in favor’ of litigating the

dispute in the non-Delaware forum.’”77

       When a motion to dismiss or stay based on forum non conveniens is filed, the

Court considers the following five factors: “(1) the relative ease of access to proof;

(2) the availability of compulsory process for witnesses; (3) the possibility of a view

of the premises; (4) whether the controversy is dependent upon the application of

Delaware law which the courts of this State more properly should decide than those

of another jurisdiction; and (5) all other practical problems that would make the trial

of the case easy, expeditious and inexpensive.”78

       The Court does not need to conduct a fulsome analysis under these factors to

conclude that Defendants do not meet their burden to dismiss or stay this action in

favor of the New York Litigation. The first two factors do not counsel for dismissal

or staying of this action.        “Delaware courts have found that to demonstrate

overwhelming hardship, a party must identify the witnesses not subject to

76
   Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Turner Construction Co., 2014 WL 703808, at *2
(Del. Super. Feb. 17, 2015) (citing BP Oil Supply Co. v. ConocoPhillips Co., 2010 WL 702382, at
*2 (Del. Super. Ct. Feb. 25, 2010)).
77
   Id. (citing BP Oil Supply Co. v. ConocoPhillips Co., 2010 WL 702382, at *2 (Del. Super. Ct.
Feb. 17, 2014).
78
   GXP Cap., LLC v. Argonaut Mfg. Servs., Inc., 234 A.3d 1186, 1193-94 (Del. Super. Ct. 2020)
(General Foods Corp. v. Cryo–Maid, Inc., 198 A.2d 681, 684 (Del. 1964)).
                                              20
compulsory process and the specific substance of their testimony.”79 Aside from

Mr. Grossman, Defendants do not identify any witnesses located in New York. The

third factor, the possibility of a view of the premises, is irrelevant on the facts of this

case. The Court does not have enough information on the purported oral agreement

to decide the fourth factor. Finally, Defendants’ argument under the fifth factor

simply points the Court back to the arguments made in support of the earlier

factors.80 For the same reasons, that those factors are unpersuasive, this factor is

similarly unpersuasive.

VI.    CONCLUSION

       Defendants’ motion to dismiss or stay the declaratory judgment claim is

DENIED. Plaintiffs’ misappropriation of trade secrets claim is STAYED pending a

determination of arbitrability by the arbitrator. Plaintiffs shall elect whether to

submit the misappropriation of trade secrets claim to an arbitrator, per the Fee

Agreement, within thirty (30) days of this ruling. If Plaintiffs initiate arbitration for

this purpose, the stay will continue pending the arbitrator’s decision. If Plaintiffs

elect not to initiate arbitration within thirty (30) days, Defendants shall so notify the

79
   Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Turner Construction Co., 2014 WL 703808, at *5
(Del. Super. Feb. 17, 2015) (citation omitted).
80
   Defs.’ Opening Br. at 24.
                                              21
Court and submit a proposed form of order dismissing this claim with prejudice for

want of subject matter jurisdiction. IT IS SO ORDERED.

                                                  /s/Patricia A. Winston
                                                  Judge Patricia A. Winston

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