United States District Court, District of Columbia
THOMAS BILLARD, derivatively and on behalf of LIQUIDITY SERVICES, INC., Plaintiff,
WILLIAM P. ANGRICK, III et al., Defendants.
A. HOWELL Chief Judge.
plaintiff Thomas Billard, a shareholder of Liquidity
Services, Inc. (“LSI”), has filed this derivative
action, on behalf of LSI, against ten current and former LSI
board members and officers, asserting claims of breach of
fiduciary duty, waste of corporate assets, and unjust
enrichment. The defendants moved to dismiss this
action on forum non conveniens grounds, citing
LSI's forum-selection bylaw, see generally
Defs.' Mot. Dismiss for Forum Non Conveniens
Based on Liquidity Services Inc.'s Forum Selection Bylaw
(“Defs.' Mot. Dismiss”), ECF No. 14, which
specifies that “the sole and exclusive forum” for
any claim by a stockholder that is “based upon a
violation of a duty by a current or former director [or]
officer” “shall be the Court of Chancery of the
State of Delaware.” Defs.' Mot. Dismiss,
Declaration of LSI Counsel Miranda S. Schiller
(“Schiller Decl.”), Ex. 3.2 to Ex. G (“LSI
Bylaws”) ¶ 7.1, ECF No. 14-8. For the reasons
explained below, the defendants' motion to dismiss on
forum non conveniens grounds is granted.
plaintiff, a shareholder of LSI, brings this derivative
action on behalf of LSI, pursuant to Federal Rule of Civil
Procedure 23.1,  against ten current and former LSI
directors and officers asserting claims for breach of
fiduciary duty, waste of corporate assets, and unjust
enrichment. Compl. ¶¶ 1, 23, ECF No. 1.
Shortly after the filing of the complaint, the parties filed
a stipulation, indicating the defendants' belief that the
plaintiff was “required” to file this action in
the Delaware Court of Chancery and that the parties agreed
that “the interest of efficiency and judicial economy
would be served by allowing the parties to brief the issue of
forum non conveniens before any pleading-based
grounds for dismissal.” Stipulation and Proposed Order
at 1-2, ECF No. 5. The Court agreed, see generally
Order (dated Aug. 24, 2016), ECF No. 6, and the parties have
briefed the forum non conveniens issue. Although
resolution of the pending motion turns on the effect of
LSI's forum-selection bylaw, the factual allegations
underlying the plaintiff's claims are briefly set out to
provide context before explaining the timeline of events
resulting in LSI's adoption of a forum-selection bylaw,
since this timeline features prominently in the parties'
The Factual Allegations Underlying Plaintiff's
in 1999, LSI “provides online auction marketplaces for
surplus and salvage assets, and derives its revenue from
retaining a percentage of the proceeds from the sales.”
Compl. ¶ 67. In 2005, LSI obtained “the exclusive
right to manage and sell all United States Department of
Defense (‘[DOD]') scrap property.”
Id. ¶ 3. “[T]he majority of [LSI's]
revenue came from its [DOD] contracts.” Id.
Although the DOD contracts were lucrative, the contracts did
not provide a guaranteed income stream because of “the
competitive nature of the mandatory bidding process required
under U.S. law.” Id. ¶ 4. LSI recognized
the need to diversify its business to decrease its dependence
on the DOD revenue and adopted a two-part strategy for
diversification. Id. ¶¶ 4-5, 8. First, LSI
endeavored to expand into the retail and capital supply
markets and, second, LSI began acquiring competitors.
Id. The company referred to these strategies as the
“organic” and “inorganic” growth
strategies respectively. Id. ¶ 68. The company
repeatedly touted its success on these fronts notwithstanding
evidence to the contrary. Id. ¶¶ 5-7.
these strategies failed, LSI “began to manipulate sales
numbers while revenues and margins declined through 2013 and
2014.” Id. ¶ 9. “[T]he Company
[also] began issuing . . . statements [that] conceal[ed] the
operational problems.” Id. While the defendants
allegedly concealed LSI's troubles and thereby
“artificially inflated” the company's stock
price, Mssrs. Angrick, Rallo, Tique, Gross, Ellis, and Kramer
collectively sold “more than $106 million worth of
[LSI] stock, ” often in the days following a press
release reporting the company's growth, which caused a
spike in stock prices. Id. ¶¶ 105-06. For
example, during the relevant period, Mr. Angrick “sold
1, 642, 979 shares, approximately 25% of his holdings-and
reaped . . . proceeds of $68.2 million.” Id.
8, 2014, LSI issued a press release finally revealing to the
public what the defendants had allegedly known but failed to
disclose for some time: “that [LSI] had suffered
‘unforeseen' losses and [would be] forced to
drastically reduce its guidance for the remainder of the
fiscal year 2014.” Id. ¶¶ 12, 14.
The day of the press release, LSI's share price declined
30%, from $17.31 per share on May 7 to $12.17 on May 8, 2014.
Id. ¶ 13.
LSI's Adoption of a Forum-Selection Bylaw
December 18, 2014, the plaintiff made a books and records
demand under 8 Del. C. § 220, which permits shareholders
of a Delaware corporation to inspect a company's records.
See Pl.'s Opp'n Defs.' Mot. Dismiss
(“Pl.'s Opp'n”) at 4, ECF No. 4. After
the parties entered into a confidentiality agreement
concerning the materials that would be disclosed pursuant to
the plaintiff's demand, LSI produced responsive records.
Id. More than a year later, on August 2, 2016, at
10:12 A.M., the plaintiff's attorney emailed LSI's
attorney a copy of a ready-to-file complaint so that the
parties could “resolve any confidentiality issues in
advance of filing as contemplated by the parties'
confidentiality agreement.” Id. at 5.
same day, LSI held its third-quarter board meeting.
See Schiller Decl. ¶ 7. Several days before the
meeting, on July 27, 2016, LSI's directors were sent, via
email, a Board Book providing an overview of what would be
discussed at the meeting. Id. The Board Book's
table of contents lists “Exclusive Forum Bylaws”
as a topic for discussion. Schiller Decl., Ex. C
(“Board Book”) at 2, ECF No. 14-4. On August
2-the same day on which the plaintiff send LSI a copy of his
complaint-LSI's Board convened from 8:30 A.M. to 4:00
P.M. and, among other things, adopted a forum-selection
bylaw, which provides that the Delaware Court of Chancery is
the “sole and exclusive forum” for litigating
certain claims against LSI's officers and directors.
Schiller Decl. ¶ 10; see also Schiller Decl.,
Ex. E (“Board Meeting Minutes”) at 1, ECF No.
14-6. On August 4, 2016, LSI filed a Form 10-Q with the
Securities and Exchange Commission, disclosing that LSI had
adopted the forum-selection bylaw. Schiller Decl. ¶ 13.
The following day, LSI's attorney notified the
plaintiff's lawyer of LSI's forum-selection bylaw and
requested that any complaint be filed in the Delaware Court
of Chancery. Schiller Decl., Ex. H (“Defs.' Counsel
Email to Pl.'s Counsel”), ECF No. 14-9.
Notwithstanding the forum-selection bylaw, the plaintiff
filed suit in this Court.
appropriate way to enforce a forum-selection clause pointing
to a state . . . forum is through the doctrine of forum
non conveniens.” Atl. Marine Constr. Co. v.
U.S. Dist. Ct. for W. Dist. of Texas, 134 S.Ct. 568, 580
(2013). The Supreme Court has articulated a
two-step analysis for addressing a defendant's forum
non conveniens motion predicated on a forum-selection
clause. See Id. at 581-82. The threshold question is
whether the forum-selection clause is valid. See Id.
at 581 & n.5. Under M/S Bremen v. Zapata Off-Shore
Co., 407 U.S. 1 (1972), forum-selection clauses are
presumptively valid and enforceable unless the party opposing
enforcement makes a “strong showing, ”
id. at 15, or meets a “heavy burden of proof,
” id. at 17, that (1) “enforcement would
be unreasonable and unjust;” (2) “the clause was
invalid for such reasons as fraud or overreaching;” (3)
“enforcement would contravene a strong public policy of
the forum in which suit is brought, whether declared by
statute or judicial decision;” or (4) “trial in
the contractual forum would be so gravely difficult and
inconvenient that [the plaintiff] will for all practical
purposes be deprived of his day in court, ”
id. at 15. See also Marra v. Papandreou,
216 F.3d 1119, 1124 (D.C. Cir. 2000) (citing Bremen
and explaining that the plaintiff had not “point[ed] to
factors typically relied on by litigants seeking to avoid
enforcement of forum-selection clauses-for instance, that the
clause is the product of fraud or that its enforcement would
contravene a strong public policy of the forum in which suit
is brought”); Cheney v. IPD Analytics, LLC,
583 F.Supp.2d 108, 118 (D.D.C. 2008) (citing the four
forum-selection clause is valid, the second step of the
analysis is to consider whether public interest factors
“overwhelmingly disfavor” dismissal. Atl.
Marine, 134 S.Ct. at 583. Such factors include
“‘the administrative difficulties flowing from
court congestion; the local interest in having localized
controversies decided at home; and the interest in having the
trial of a diversity case in a forum that is at home with the
law.'” Id. at 581 n.6 (quoting Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)
(internal alteration omitted)). Public interest factors,
however, will “rarely” defeat a forum non
conveniens motion predicated on a valid forum-selection