In December 2021, Buzzfeed, Inc. (Old Buzzfeed), operating as a private company, engaged in a SPAC transaction and IPO to form Buzzfeed, Inc. (New Buzzfeed), a publicly traded digital media, news, and entertainment company. Employees of Old Buzzfeed had been given stock options in Old Buzzfeed as part of their compensation package. After the SPAC transaction, the employees’ Old Buzzfeed stock was automatically converted into the equivalent class of stock in New Buzzfeed. The employees alleged, however, that they were unable to convert their New Buzzfeed stock into tradeable shares in time to participate in New Buzzfeed’s IPO because a different class of stock was offered in the IPO than the class of stock they received in New Buzzfeed.
Based on an arbitration provision in their employment agreements with Old Buzzfeed, the employees filed mass arbitration claims against New Buzzfeed, four of its officers and directors, and the IPO transfer agent. New Buzzfeed, along with its officers and directors named in the arbitration, in turn filed a complaint in the Chancery Court to (1) enjoin the arbitrations, (2) declare they are not bound by the Old Buzzfeed employment agreements’ arbitration provisions, and (3) declare the employees, as New Buzzfeed stockholders, were instead bound by the forum selection clause in New Buzzfeed’s charter requiring actions be brought in Delaware Chancery Court. New Buzzfeed moved for summary judgment, and the employees moved to dismiss the complaint for lack of subject matter jurisdiction and lack of personal jurisdiction.
First, the court determined that it had subject matter jurisdiction over the claims. Because an arbitration clause is essentially a specialized forum-selection clause, the court would not have jurisdiction over a dispute that, on its face, falls within an arbitration clause. To analyze this issue, the court looked to (1) whether there was a conflict between several potentially relevant dispute resolution provisions; and (2) whether there was clear and unmistakable evidence that the parties intended to delegate issues of substantive arbitrability to an arbitrator. The court found no conflict and no evidence of intent to arbitrate because Old Buzzfeed’s employment agreements were not binding, and thus presented no conflict or evidence of intent to arbitrate.
Second, the court found that it had personal jurisdiction over the nonresident employees, who argued that New Buzzfeed’s charter’s forum selection was unenforceable as applied to them. The court found the employees had not demonstrated that enforcing the forum selection clause would place them at an unfair disadvantage or otherwise deny them their day in court. Nor did they show why Delaware’s public policy favoring arbitration should control over Delaware’s public policy requiring courts to give effect to forum-selection clauses unless they are fundamentally inequitable or contrary to positive law.
With no binding arbitration provision and no agreement by the plaintiffs to arbitrate, the court granted plaintiffs’ motion for summary judgment and entered a declaratory judgment that plaintiffs did not enter into arbitration agreements with the employees and did not agree to arbitrate the employees claims, and the court issued a permanent injunction against the arbitrations. However, the court denied plaintiffs request for a declaratory judgment that the employees were bound by the forum selection clause in New Buzzfeed’s charter. The court found that, because it was uncertain whether the employees would try to renew their claims in this or any other forum, this relief would be impermissibly advisory.
Authored by Allison Wuertz and Elizabeth Cochrane.
