IAC/InterActiveCorp v. Roston

44 F.4th 635

IAC/INTERACTIVECORP, et al., Plaintiffs-Appellants,

v.Adam ROSTON, Defendant-Appellee.

No. 21-2501

United States Court of Appeals, Seventh Circuit.

Argued January 11, 2022

Decided August 11, 2022

Leonid Feller, Attorney, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, Michael Barry Carlinsky, Attorney, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Plaintiffs-Appellants.

Steven L. Friedlander, Attorney, SV Employment Law Firm PC, San Mateo, CA, Charles G. Giger, Attorney, Partridge Partners, P.C., Chicago, IL, for Defendant-Appellee.

Before Easterbrook, Scudder, and Kirsch, Circuit Judges.

Kirsch, Circuit Judge.

After IAC Publishing signed an Employment Agreement with Adam Roston making him its CEO, the relationship soured. Roston sparred with his employer about the value of his stock appreciation rights. He soon moved to become CEO of Bluecrew, another affiliate of IAC Publishing's parent company, IAC/InterActiveCorp, but the employment relationship continued to deteriorate until Roston was terminated. His former employers later discovered that Roston had retained a company laptop, documents, and confidential data. IAC/InterActiveCorp, IAC Publishing, and Bluecrew (collectively "the Companies") brought a complaint in federal court in Illinois, seeking declaratory, monetary, and injunctive relief. First, IAC/InterActiveCorp and IAC Publishing sought relief declaring Roston was not entitled to more payments based on the stock appreciation rights Roston received from the plaintiffs. Second, IAC/InterActiveCorp and Bluecrew sought relief declaring that Roston was not wrongfully terminated. And third, all three plaintiffs brought claims under state and federal law that Roston had violated his contractual obligations by failing to return a laptop, company documents, and confidential data after his termination.

But in the very same contract under which the Companies sought relief lurks a mandatory forum selection clause, designating certain California courts as the exclusive venues for litigation. The district court was right to apply the forum non conveniens doctrine as it did and did not abuse its discretion in dismissing the complaint on that ground. We affirm.

I

A

The fraught employment relationship at the heart of this case began in 2011, when Roston joined IAC/InterActiveCorp ("IAC"), a Delaware corporation headquartered in New York. Five years later Roston became the CEO of IAC Publishing, a subsidiary of IAC in Oakland, California. Pursuant to that new position and IAC's 2016 Incentive Plan, Roston was awarded three and a half million stock appreciation rights ("SARs"), a form of equity-based compensation. Roston had a right to exercise his vested SARs at their specified price and benefit from any positive difference between the fair market value ("FMV") of the common stock—determined by IAC Publishing's Board of Managers—and the specified exercise price. He received four FMV determinations during his tenure at IAC Publishing and challenged all four. In that same period, Roston also became a board member of IAC's subsidiary Bluecrew, an online staffing company incorporated in Delaware and headquartered in Chicago, Illinois.

One year after he became CEO of IAC Publishing, Roston signed an Employment Agreement ("Agreement"), effective July 1, 2016. Roston agreed to various obligations in handling confidential information, including trade secrets, data, information, and computer records. The Agreement also has multiple paragraphs dealing with termination, such as what qualifies as "for cause" and what SARs Roston would have a right to exercise after he left the company. And although the Agreement was originally between Roston and IAC Publishing, the latter could "allow any of its obligations to be fulfilled by, or take actions through, any affiliate of the Company ... and in the event of any such assignment ... all references to the ‘Company’ shall refer to Company's assignee or successor hereunder." Each of those provisions matters, but at this case's core is the precise interpretation and application of various phrases within this paragraph:

This Agreement and the legal relations thus created between the parties hereto (including, without limitation, any dispute arising out of or related to this Agreement) shall be governed by and construed under and in accordance with the internal laws of the State of California without reference to its principles of conflicts of laws. Any such dispute will be heard and determined before an appropriate federal court located in the State of California in Alameda County, or, if not maintainable therein, then in an appropriate California state court located in Alameda County, and each party hereto submits itself and its property to the non-exclusive jurisdiction of the foregoing courts with respect to such disputes.

IAC Publishing was later restructured, and Roston became CEO of Bluecrew in February 2019. Bluecrew equipped Roston with a MacBook Pro, on which Roston kept Bluecrew documents. Roston also had documents and data from his time at IAC and IAC Publishing, accumulated since 2011. These were stored in a personal Dropbox folder. The new position lasted barely over a year before Roston was informed of his termination and presented with a draft separation letter from IAC's general counsel. After his termination, Roston retained the MacBook and Dropbox documents and provided them to his attorneys. The plaintiffs learned of this in 2021 and made repeated demands that Roston return the items.

B

After Roston's termination but before discovery of his retention of the laptop and documents, IAC and IAC Publishing filed a one-count complaint in federal court in the Northern District of Illinois on June 12, 2020. The two plaintiff companies sought declaratory relief relating to any dispute over the valuation of Roston's SARs. Meanwhile, Roston sued in Alameda County Superior Court in California concerning the same and adding claims of wrongful termination.

Learning of the laptop, documents, and data and made aware of a possible wrongful termination claim, the plaintiffs amended their complaint in the district court in Illinois. The operative complaint added eight new counts—for a total of nine—and added Bluecrew as a third plaintiff. Roston moved to dismiss the complaint based on the forum non conveniens doctrine, alleging the proper venue to be in California. The district court agreed, finding that the Agreement's forum selection clause was mandatory and applied to Bluecrew and the complaint's claims. The district court thus considered only the public interest factors in its forum non conveniens analysis. Having concluded that the balance of factors favored California and that Illinois was not the proper forum, the district court dismissed the Companies' complaint.

II

The Companies appeal the dismissal by challenging the district court's premises about the application of the forum selection clause. The clause, the Companies first argue, does not apply at all because the Agreement itself is no longer in force, and, even if it were, the complaint's claims are outside the forum selection clause's scope. And the clause is a permissive, not mandatory, forum selection clause. Following from that, the Companies conclude that the district court misapplied the forum non conveniens analysis by ignoring their preferred forum and the private interest factors and by misbalancing the public interest factors.

A

Before we review the district court's forum non conveniens analysis, we address the threshold arguments about whether the forum selection clause applies to the claims in the complaint and whether the clause is mandatory or permissive. We review questions of contract interpretation de novo, Soarus L.L.C. v. Bolson Materials Int'l Corp. , 905 F.3d 1009, 1011 (7th Cir. 2018), including the enforceability of forum selection clauses, Jackson v. Payday Fin., LLC , 764 F.3d 765, 773 (7th Cir. 2014). We apply federal law—not California law—as the substantive law governing the validity of this forum selection clause because both parties briefed this case on the assumption we would. See Adams v. Raintree Vacation Exch., LLC , 702 F.3d 436, 438 (7th Cir. 2012) ("[N]either side has asked either the district judge or us to apply Mexican law to the clause; their debate over its enforceability is framed entirely as a dispute about American law, and so the issue of the applicable law has been waived.").

The Companies first argue that the forum selection clause simply does not apply to Roston's employment at Bluecrew. In other words, the Agreement—and its forum selection clause—expired. But this runs into a basic problem: Their complaint invokes the Agreement and seeks relief under it.

We hold that when plaintiffs pursue claims and relief that arise out of or relate to a contract, they will be bound by that contract's forum selection clause governing disputes that arise out of or relate to the contract. Because all the Companies' claims are within the scope of the forum selection clause, we do not need to wade into the war of inferences waged by the parties about whether the Agreement was still in force. The three plaintiffs will be bound by the clause because they have sued under the clause's contract.

This approach follows other legal approaches and reason. The Supreme Court "presume[s] as a matter of contract interpretation that ... parties d[o] not intend a pivotal dispute resolution provision [such as an arbitration clause] to terminate for all purposes upon the expiration of [an] agreement." Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. NLRB , 501 U.S. 190, 208, 111 S.Ct. 2215, 115 L.Ed.2d 177 (1991). Considering that arbitration clauses "are a species of forum selection clause," Auto. Mechanics Loc. 701 Welfare & Pension Funds v. Vanguard Car Rental USA, Inc. , 502 F.3d 740, 746 (7th Cir. 2007), we have no problem applying Litton 's arbitration principles to forum...