Conduent v. Skyview: Closed Courts Challenge Party’s Need for Urgent Relief
A recently filed lawsuit in Delaware Chancery Court foreshadows the potential types of claims that courts are likely to see more of in the coming months. On March 27, 2020, Conduent Business Services LLC (Conduent) filed a declaratory judgment action against Skyview Capital LLC (Skyview), alleging an urgent need for a judgment defining the rights and obligations of the parties. Such a lawsuit is not in and of itself unusual, but the circumstances that led to its filing are. Conduent filed suit in Delaware because an existing litigation between the parties, pending in the New York Supreme Court, stalled due to the COVID-19-related closure of that court. Feeling an urgent need to resolve the matter and obtain payment, Conduent took the parties’ dispute from a closed court to an open one.
In many ways, the dispute between Conduent and Skyview presents common issues that arise with the sale of businesses. In February 2019, Skyview, a private equity firm, agreed to buy three call centers from Conduent. Purportedly, the purchase agreement requires that the call centers, located in India, the Philippines, and Jamaica, be transferred by April 30, 2020. The India and Philippine centers were transferred ahead of schedule, but the Jamaican center still remains in the hands of Conduent. Additionally, Conduent alleges that the agreement requires Skyview to reimburse the costs of operating the call center for the past 14 months, an amount which Conduent says exceeds $18 million. With the agreed-upon closing date fast approaching, the parties are quarreling over their respective rights and obligations under the agreement.
Initially, Skyview sued Conduent in the New York Supreme Court, the forum chosen by the parties in their agreement to litigate all disputes. In the New York action, Skyview alleges that Conduent fraudulently misrepresented facts and breached contractual obligations. Not surprisingly, Conduent disputes the merits of Skyview’s claims. Conduent also contends that Skyview’s claims are mere pretext to avoid its clear contractual obligations to purchase the Jamaican call center and to reimburse Conduent $18 million in operating expenses. The New York action, however, is getting nowhere fast, because of the government’s closure of the courts due to the COVID-19 pandemic.
Discontent to allow the April 30, 2020 closing date for the transfer of the Jamaican call center pass without a determination of the parties’ rights and obligations, Conduent took the uncommon step of moving the dispute to Chancery Court to expedite the resolution of the parties’ claims. Conduent alleges in its Chancery Court filing that the need for declaratory judgment is urgent because of the indefinite closure of the New York courts and because the parties’ agreement will be canceled if the April 30 deadlines are missed.
Whatever the legitimacy of the parties respective claims of breach of contract, fraud, and improper attempts to delay or impede the transfer of the Jamaican call center, it is clear that their contractually chosen forum will not be able to promptly rule on their rights and obligations. Conduent hopes that the Delaware court will accept jurisdiction, expeditiously decide its entitlement to payment, and rule that the parties may proceed with the transfer of the Jamaica call center. Conduent argues that the remaining issues raised in Skyview’s New York complaint can wait until that court reopens.
If courts remain closed for prolonged periods, more and more parties may feel the need to engage in similar forum-shifting tactics to resolve urgent matters. It remains to be seen whether open courts will take on the burden of resolving disputes that parties agreed to resolve in other states, where courts are closed.
If you have questions or would like more information, please contact Tom Fiddler (firstname.lastname@example.org; 215.864.7081) or a member of our Commercial Litigation Group.
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