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Bushansky v. Soon-Shiong: Forum Selection Clauses And Silence – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Bushansky v. Soon-Shiong: Forum Selection Clauses And Silence

In Bushansky v. Soon-Shiong, 2018 S.O.S. 2627, the plaintiff, Stephen Bushansky, filed a shareholder derivative action on behalf of a nominal defendant, NantKwest, Inc. The trial court dismissed the suit based on a forum selection provision in NantKwest’s certificate of incorporation that named Delaware as the forum for shareholder derivative actions. The forum selection clause required that the parties file any disputes in Delaware, “subject to the court’s having personal jurisdiction over all indispensable parties named as defendants.

The court ruled that because the contract term in question was silent about the fulfillment of a condition, the prevailing presumption is that the parties intended that the condition must be met within a reasonable time. And here, it was.

Bushansky appealed the dismissal of the case, arguing that the forum selection provision was subject to a condition precedent which never occurred. The condition precedent required that Delaware have personal jurisdiction over all indispensable parties that are named defendants.

At the time Bushansky filed the lawsuit in California, Delaware courts lacked personal jurisdiction over one of the defendants. Of course, Bushansky initiated the suit in California courts based on the fact that the condition was not met and, therefore, the forum selection provision designating Delaware was never triggered.

The court pointed out that the forum selection provision did not specifically mandate that personal jurisdiction must be determined by the time that an action is filed. It could be before the filing, but not after, Bushansky contended. Actually, the forum selection provision was completely silent and failed to provide any guidance as to the point in time when Delaware must have personal jurisdiction over all indispensable parties named as defendants.

The court reiterated a long-standing principle of contract law that, when a contract term is silent about the fulfillment of a condition, presumes that the parties intended that the condition is met within a reasonable time. Thus, the court framed the issue as “when does personal jurisdiction over all indispensable parties have to exist?”

Based on its conclusion that the contract was silent regarding the point in time when the condition must be fulfilled, the court ruled “[we] apply the rule that where no time is fixed for the performance of a condition precedent, it will be presumed that it is to be performed within a reasonable time.”

Bushansky attempted to argue that the provision was permissive rather than mandatory, but the court ruled against him as the contract stated “to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if such court lacks jurisdiction, any other state or federal court located within the State of Delaware) shall be the sole and exclusive forum . . . for any derivative action.”

The court concluded with “the enforcement of forum selection clauses stems from courts’ discretion to decline to exercise jurisdiction in recognition of the parties free and voluntary choice of a different forum . . . we say merely that a court properly declines to exercise jurisdiction based on a contractual forum selection clause like this one when consent to jurisdiction in the alternate forum is provided within a reasonable period of time.”

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