Delaware Business Litigation Report

Chancery Resolves Dispute About Competing Forum Selection and Arbitration Provisions

Fairstead Cap. Mgmt. LLC v. Blodgett, C.A. No. 2022-0673-JTL (Del. Ch. Jan. 6, 2023)
This case highlights the difficulties that can arise when relationships are governed by contracts with competing forum selection and arbitration provisions. Two LLCs brought claims against a former principal for breach of the respective LLC agreements, both of which contained Delaware forum selection clauses. In response, the principal sought an injunction barring the LLCs from proceeding outside of arbitration because the principal’s employment agreement contained a broad arbitration provision that encompassed all of the parties’ disputes.

Deciding cross-motions for summary judgment, the Court reasoned that conflicting provisions did not reflect a clear intent to arbitrate or to delegate the issue of arbitrability to an arbitrator, so the issue was for the Court to decide. In that regard, the Court concluded it was a “mixed bag,” sending claims for breaches of the employment agreement to arbitration but keeping claims for breaches of the LLC agreements in Court. Although the Court characterized this outcome as “wasteful and inefficient,” it was “the suboptimal outcome that their dispute-resolution collision created.”

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