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April 01, 2022

Delaware Chancery Court Finds Forum Choice Provision in One Contract Governs Disputes Under Later Contract

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Key Takeaways

  • Plaintiff Centene alleged Defendant Accellion breached a “Business Associates Agreement” (BAA) by failing to indemnify losses from a data breach.

A claim under a business-to-business contract was dismissed this week when Delaware's Chancery Court held that, under an earlier agreement between the parties, the dispute had to be brought in a different Court. Centene Corp. v. Accellion, Inc., (Del. Ch. Mar. 28, 2022). 

Plaintiff Centene alleged Defendant Accellion breached a "Business Associates Agreement" (BAA) by failing to indemnify losses from a data breach. Accellion moved to dismiss, arguing an earlier License Agreement contained a forum selection clause requiring that "[a]ny dispute between the parties regarding this Agreement" be brought in a California Court. The Plaintiff responded that the claim arose solely under the BAA, which had no forum selection clause but did contain an integration clause stating the BAA was "the entire agreement between the parties with respect to its subject matter and merges, integrates and supersedes all prior and contemporaneous agreements ...." 

In granting dismissal, Vice Chancellor Paul A. Fioravanti examined the parties' relationship and the negotiation of the various agreements, noting the BAA, "does not entirely displace the License Agreement," and that the forum choice provision in the early concord was broad enough to govern any dispute "touching on" the parties' relationship. The Court cautioned, however, that the ruling "should not be read to hold that the mere absence of choice-of-law and forum selection provisions in the BAA, standing alone, conclusively establishes that the License Agreement controls. Instead, it is another factor that leads me to conclude looking at the real-word business context in which the BAA was negotiated and drafted … that the parties intended the License Agreement's Forum Selection Clause to govern the BAA."

The decision underscores the need to ensure that serial contracts clearly and explicitly identify those portions of prior agreements that have continued application, and those that do not.  The principle can apply to any matter in a prior agreement that is not expressly affirmed or superseded.

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