Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 1 of 21
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`QUINN EMANUEL URQUHART & SULLIVAN, LLP
`Alex Spiro (pro hac vice forthcoming)
`alexspiro@quinnemanuel.com
`51 Madison Ave 22nd floor
`New York, NY 10010
`Telephone:
`(212) 849-7000
`Facsimile:
`(212) 849-7100
`
`Michael T. Lifrak (Bar No. 210846)
`michaellifrak@quinnemanuel.com
`Joseph C. Sarles (Bar No. 254750)
`josephsarles@quinnemanuel.com
`Alex Bergjans (Bar No. 302830)
`alexbergjans@quinnemanuel.com
`Aubrey L. Jones (Bar No. 326793)
`aubreyjones@quinnemanuel.com
`865 S. Figueroa Street, 10th Floor
`Los Angeles, California 90017
`Telephone:
`(213) 443-3000
`Facsimile:
`(213) 443-3100
`
`Attorneys for Defendants Elon Musk, X
`Holdings I, Inc., and X Holdings II, Inc.
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`
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`
`
`WILLIAM HERESNIAK, on behalf of
`himself and all others similarly situated,
`
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`Plaintiff,
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`vs.
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`ELON R. MUSK, X HOLDINGS I, INC., X
`HOLDINGS II, INC., and TWITTER, INC.,
`
`
`Defendant.
`
` CASE NO. 3:22-CV-03074-CRB-SK
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`DEFENDANTS X HOLDINGS I, INC.
`AND X HOLDINGS II, INC.’S MOTION
`TO DISMISS THE FIRST AMENDED
`COMPLAINT AND STAY DISCOVERY
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`Judge: Hon. Charles R. Breyer
`Courtroom: 6, 17th Floor
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`Hearing Date: December 2, 2022
`Time: 10 a.m.
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`Case No. 3:22-CV-03074-CRB-SK
`X HOLDINGS I., INC. AND X HOLDINGS II, INC.’S MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 2 of 21
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`TABLE OF CONTENTS
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`Page(s)
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`ARGUMENT .....................................................................................................................................5
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`I.
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`THE ACTION WAS FILED IN THE WRONG FORUM ....................................................5
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`A.
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`Twitter’s Bylaws Mandate That This Action Be Litigated In Delaware
`Chancery Court ........................................................................................................6
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`1.
`
`2.
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`3.
`
`4.
`
`Forum-Selection Clauses In Bylaws Are Enforceable Against
`Shareholders ...................................................................................................6
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`Plaintiff’s First Claim Falls Within The Bylaws’ Forum-Selection
`Clause .............................................................................................................6
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`The Bylaws’ Forum-Selection Clause Is Valid and Enforceable ...................7
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`The Public Interest Weighs In Favor Of Enforcement ...................................8
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`B.
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`The Court Should Dismiss The Entire Action .......................................................9
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`II.
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`III.
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`IV.
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`PLAINTIFF’S CLAIMS ARE DERIVATIVE ......................................................................9
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`PLAINTIFF FAILS TO STATE A CLAIM FOR AIDING AND ABETTING ..................10
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`PLAINTIFF LACKS STANDING FOR DECLARATORY RELIEF ................................10
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`A.
`
`B.
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`Plaintiff Cannot Enforce An Agreement To Which He Is Not A Party ............10
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`Plaintiff’s Request For Declaratory Relief Is Not Justiciable ............................11
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`V.
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`ALTERNATIVELY, THE COURT SHOULD STAY DISCOVERY ................................12
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`A.
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`The Court Should Stay Discovery Pending Resolution Of Related
`Actions .....................................................................................................................12
`
`1.
`
`2.
`
`3.
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`A Discovery Stay Would Promote The Orderly Course Of Justice .............13
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`Plaintiff Will Not Be Damaged By A Stay ..................................................13
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`Defendants Will Suffer Considerable Hardship Absent A Stay ..................14
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`B.
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`Alternatively, Discovery Should Be Stayed Pending Pleading Motion
`Practice ....................................................................................................................14
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`CONCLUSION ................................................................................................................................15
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 3 of 21
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`
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Cases
`
`Arris Enterprises LLC v. Sony Corp.,
` No. 17-CV-02669-BLF, 2017 WL 3283937 (N.D. Cal. Aug. 1, 2017) ............................. 14
`
`Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas,
` 571 U.S. 49 (2013) ................................................................................................... 5, 7, 8, 9
`
`Bell Atl. Corp. v. Twombly,
` 550 U.S. 544 (2007) ........................................................................................................... 10
`
`Benerofe v. Cha,
` 1998 WL 83081 (Del. Ch. Feb. 20, 1998) .......................................................................... 11
`
`Boilermakers Loc. 154 Ret. Fund v. Chevron Corp.,
` 73 A.3d 934 (Del. Ch. 2013) ................................................................................................ 6
`
`City of S. Lake Tahoe v. California Tahoe Reg’l Plan. Agency,
` 625 F.2d 231 (9th Cir. 1980) .............................................................................................. 10
`
`CMAX, Inc. v. Hall,
` 300 F.2d 265 (9th Cir. 1962) .............................................................................................. 13
`
`Cont’l Grain Co. v. The FBL-585,
` 364 U.S. 19 (1960) ............................................................................................................... 8
`
`Crispo v. Musk et. al.,
` C.A. No. 2022-0666-KSJM .................................................................................................. 5
`
`E.I. du Pont de Nemours & Co. v. MacDermid Printing Sols. L.L.C.,
` 248 F. Supp. 3d 570 (D. Del. 2017) ................................................................................... 10
`
`Fortis Advisors LLC v. Medicines Co., & Melinta Therapeutics, Inc.,
` 2019 WL 7290945 (Del. Ch. Dec. 18, 2019) ..................................................................... 11
`
`Fuller v. Amerigas Propane, Inc.,
` No. 09-2616 TEH, 2009 WL 2390358 (N.D. Cal. Aug. 3, 2009) ...................................... 13
`
`Gafcon, Inc. v. Ponsor & Assocs.,
` 98 Cal. App. 4th 1388 (2002) ............................................................................................. 11
`
`In re Facebook, Inc. S’holder Derivative Priv. Litig.,
` 367 F. Supp. 3d 1108 (N.D. Cal. 2019) ................................................................... 2, 6, 7, 8
`
`In re Pattern Energy Grp. Inc. Sec. Litig.,
` No. CV 20-275-MN-JLH, 2022 WL 263312 (D. Del. Jan. 27, 2022),
` report and recommendation adopted, No. CV 20-275 (MN) (JLH),
` 2022 WL 957761 (D. Del. Mar. 30, 2022) ....................................................................... 6-7
`
`In re Rh S’holder Derivative Litig.,
` No. 18-CV-02452-YGR, 2019 WL 580668 (N.D. Cal. Jan. 23, 2019) ....................... 13, 14
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 4 of 21
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`
`
`In re STEC, Inc. Derivative Litig.,
` No. CV 10-00667-JVS MLGX, 2012 WL 8978155 (C.D. Cal. Jan. 11, 2012) ................. 14
`
`In re: CytRx Corp. S’holder Derivative Litig.,
` No. CV146414GHKPJWX, 2015 WL 9871275 (C.D. Cal. Oct. 30, 2015) ..................... 6, 8
`
`Landis v. N. Am. Co.,
` 299 U.S. 248 (1936) ........................................................................................................... 12
`
`Lee v. Fisher,
` 34 F.4th 777 (9th Cir. 2022) ............................................................................................. 6, 7
`
`Little v. City of Seattle,
` 863 F.2d 681 (9th Cir. 1988) .............................................................................................. 12
`
`Lockman Found. v. Evangelical All. Mission,
` 930 F.2d 764 (9th Cir. 1991) ................................................................................................ 9
`
`M/S Bremen v. Zapata Off-Shore Co.,
` 407 U.S. 1 (1972) ............................................................................................................. 7, 8
`
`Malpiede v. Townson,
` 780 A.2d 1075 (Del. 2001) ............................................................................................. 7, 10
`
`McKesson HBOC, Inc. v. New York State Common Ret. Fund, Inc.,
` 339 F.3d 1087 (9th Cir. 2003) ............................................................................................ 11
`
`Minghong Inv., Inc. v. Felix Chac Chuo,
` No. 2:21-CV-05979-SB-PD, 2022 WL 2189365 (C.D. Cal. Mar. 9, 2022) ........................ 9
`
`Moretti v. Hertz Corp.,
` No. C 13-02972 JSW, 2014 WL 1410432 (N.D. Cal. Apr. 11, 2014) ................................. 8
`
`Pub. Serv. Comm’n of Utah v. Wycoff Co.,
` 344 U.S. 237 (1952) ........................................................................................................... 12
`
`Rasella v. Musk,
` S.D.N.Y. Case No. 1:22-cv-03026 ....................................................................................... 5
`
`Tooley v. Donaldson, Lufkin & Jenrette, Inc.,
` 845 A.2d 1031 (Del. 2004) ................................................................................................... 9
`
`Twitter, Inc. v. Musk, et al.,
` C.A. No. 2022-0613 KSJM .............................................................................................. 1, 5
`
`Vance v. Google LLC,
` No. 5:20-CV-04696-BLF, 2021 WL 534363 (N.D. Cal. Feb. 12, 2021) ............... 12, 13, 14
`
`Yei A. Sun v. Advanced China Healthcare, Inc.,
` 901 F.3d 1081 (9th Cir. 2018) ...................................................................................... 5, 7, 8
`
`Yiren Huang v. Futurewei Techs., Inc.,
` No. 18-CV-00534-BLF, 2018 WL 1993503 (N.D. Cal. Apr. 27, 2018) ............................ 15
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 5 of 21
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`Rules and Regulations
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`Fed. R. Civ. P. 12(b)(1) ..................................................................................................................... 1
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`Fed. R. Civ. P. 12(b)(3) ..................................................................................................................... 1
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`Fed. R. Civ. P. 12(b)(6) ..................................................................................................................... 1
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`Fed. R. Civ. P. 23.1 ........................................................................................................................... 1
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 6 of 21
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`PLEASE TAKE NOTICE THAT, on December 2, 2022,1 or as soon thereafter as the
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`matter may be heard, defendants X Holdings I, Inc. and X Holdings II, Inc. (“Holding
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`Companies”) will hereby move the above entitled Court to dismiss Plaintiff’s First Amended
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`Complaint (“FAC”) (Dkt. 7) and for a discovery stay pending the resolution of related actions
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`pending in other courts, including Twitter, Inc. v. Musk, et al., C.A. No. 2022-0613 KSJM, or the
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`resolution of pleadings motions, pursuant to the doctrine of forum non conveniens, Federal Rules
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`of Civil Procedure 12(b)(1), 12(b)(3), 12(b)(6), 23.1, and the Court’s inherent authority.
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`The motion asks the Court to (1) dismiss the FAC in its entirety under the doctrine of
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`forum non conveniens, (2) dismiss the FAC in its entirety pursuant to Rules 12(b)(6) and 23.1
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`because its claims are derivative and fail to comply with Rule 23.1, (3) dismiss the first cause of
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`action for failure to state a claim, (3) dismiss the second cause of action pursuant to Rule 12(b)(1)
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`for lack of subject matter jurisdiction and for failure to state a claim, and (4) stay discovery.
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`SUMMARY OF ARGUMENT
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`Plaintiff has filed this action in the wrong Court, in violation of a mandatory forum-
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`selection clause, seeking a declaration and injunction regarding a contract he has no standing to
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`enforce, and asserting a claim against the Holding Companies based on a single conclusory
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`allegation that they took unidentified “actions” constituting aiding and abetting breach of fiduciary
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`duty. Plaintiff’s defective First Amended Complaint should be dismissed in its entirety and
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`discovery should be stayed.
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`As a threshold matter, the Court need not reach the FAC’s many substantive deficiencies.
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`Instead, it can and should simply dismiss the action pursuant to forum non conveniens. Plaintiff, a
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`Twitter shareholder residing in Virginia, filed this putative class action alleging the Holding
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`Companies and Elon Musk aided and abetted two Twitter directors’ breach of fiduciary duties to
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`the company. But Twitter’s Bylaws contain a mandatory forum-selection clause, binding on
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`1 Before they were assigned to this Court, the parties entered and Judge Kim granted a
`scheduling stipulation which provided that “any hearing on any motion to dismiss will be noticed for
`November 21, 2022 or as soon thereafter as the parties and the Court are available.” (Dkt. 20 at 2.)
`Because the Court hears civil motions on Fridays and the first Friday following November 21 is the
`day after Thanksgiving, December 2 appears to be the earliest date on which all parties are available.
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`X HOLDINGS I INC. AND X HOLDINGS II, INC’S MOTION TO DISMISS
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 7 of 21
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`Plaintiff, requiring that the Court of Chancery for the State of Delaware (“Chancery Court”) “be
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`the sole and exclusive forum” for “any action asserting a claim of breach of a fiduciary duty owed
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`by, or otherwise wrongdoing by, any director.” This clause applies to Plaintiff’s aiding and
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`abetting claim since an underlying breach of fiduciary duty by a director is a necessary element.
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`Indeed, courts here and in Delaware have found that forum-selection clauses containing identical
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`language cover aiding and abetting claims by shareholders. See e.g., In re Facebook, Inc. S'holder
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`Derivative Priv. Litig., 367 F. Supp. 3d 1108, 1121 (N.D. Cal. 2019). Plaintiff—a Virginia
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`resident asserting Delaware law claims and seeking to enforce a contract governed by Delaware
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`law—lacks any credible argument under the Ninth Circuit’s forum non conveniens factors to
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`prevent enforcement of the clause. It should be enforced and wasteful parallel litigation avoided.
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`The FAC’s deficiencies extend beyond the incorrect forum. As explained in Mr. Musk’s
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`Motion to Dismiss, which the Holding Companies join, the FAC should be dismissed because
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`Plaintiff’s action is derivative in nature but was improperly brought as a direct action. Plaintiff
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`seeks to enforce the Merger Agreement on Twitter’s behalf and seeks redress for injury—a
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`reduction in stock price—suffered by Twitter as a whole and not the shareholders individually.
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`Plaintiff’s individual causes of action also fail. Plaintiff asserts that the Holding
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`Companies aided and abetted a breach of fiduciary duty, which requires him to plead that they
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`conspired with Twitter’s Board and directed (or participated) in its decisions with knowledge of
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`their wrongdoing. Yet the only allegation against them is that they “took” some unidentified
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`“actions at Musk’s direction to carry out his unlawful conduct.” (FAC ¶ 160.) Plaintiff’s second
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`cause of action fares no better. He seeks declaratory and injunctive relief related to the Merger
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`Agreement, but has no standing to enforce it because he is neither a party or third-party
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`beneficiary to it. And in any event, the declaration he seeks is too vague and indefinite to sustain a
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`cause of action for declaratory relief. The FAC should be dismissed.
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`Finally, the Court should stay discovery in this case pending the resolution of the Delaware
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`Action, which is set for trial on October 17, and a first-filed securities action in the Southern
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`District of New York asserting claims based on the same conduct giving rise to Plaintiff’s unjust
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`enrichment claim. Plaintiff seeks to enforce the Merger Agreement, the same relief Twitter is
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 8 of 21
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`pursuing in Delaware, and his action will likely be moot if Twitter prevails. Proceeding with
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`discovery would therefore be a waste of party and court resources and unnecessarily burden the
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`Defendants, who are currently litigating these same issues in the Delaware Action. A brief
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`discovery stay would not harm the Plaintiff and promote the orderly course of justice, as would a
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`stay pending the action in New York. In the alternative, the Court should stay discovery pending
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`resolution of the pleadings motions since they are likely to dispose of this entire action and do not
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`require any discovery to be adjudicated.
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`STATEMENT OF ISSUES TO BE DECIDED
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`1. Should the Court dismiss the FAC where Plaintiff filed this action in violation of the
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`forum-selection clause in Twitter’s Bylaws?
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`2. Should the Court dismiss the FAC for failure to state a claim and failure to comply with
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`Rule 23.1 where Plaintiff, a Twitter shareholder, seeks to recover for harm suffered by Twitter, the
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`corporation, instead of the stockholders individually and thus are derivative in nature?
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`3. Should the Court dismiss Plaintiff’s aiding and abetting breach of fiduciary duty claim
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`where Plaintiff failed to allege the elements of that claim?
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`4. Should the Court dismiss Plaintiff’s declaratory and injunctive relief claim where (1)
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`Plaintiff is not a party or third-party beneficiary to the Merger Agreement, and (2) Plaintiff’s
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`requested relief is vague and indefinite?
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`5. Should the Court stay discovery pending the resolution of ongoing actions in other
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`courts involving Defendants, arising from the same issues, and seeking the substantially similar
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`relief as the FAC or, alternatively, stay discovery pending the resolution of all pleadings motions
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`where the FAC is likely to be dismissed and no discovery is required to adjudicate the motions?
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`RELEVANT ALLEGATIONS AND BACKGROUND
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`The FAC’s allegations against the Holding Companies. Plaintiff, a Virginia resident and
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`purported Twitter shareholder (FAC ⁋ 26), filed this putative class action against Elon Musk,
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`Twitter, and the Holding Companies seeking damages and declaratory and injunctive relief
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`relating to Mr. Musk’s offer to acquire Twitter. (See generally, FAC) The gist of Plaintiff’s FAC
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`is that Mr. Musk aided and abetted Twitter directors Jack Dorsey and Egon Durban’s breaches of
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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 9 of 21
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`their fiduciary duties to Twitter in connection with the negotiation of the Merger Agreement
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`governing the acquisition, wrongfully halted the completion of the transaction before closing,
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`made disparaging statements about Twitter following the execution of the Merger Agreement, and
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`damaged Plaintiff by causing Twitter’s stock price to decline. (FAC ⁋⁋ 155-69.) Plaintiff seeks
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`damages, disgorgement, a declaration concerning “the parties’ respective rights and obligations”
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`under the Merger Agreement, and unspecified injunctive relief. (Id. ⁋⁋ 162,165, 169.)
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`As alleged in the FAC, the Holding Companies are Delaware corporations formed to
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`effectuate the purchase of Twitter. (FAC ⁋ 29). X Holdings II is the “Acquisition Sub” and X
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`Holdings I is its parent. (Id.) As of the date of this Motion, the proposed merger has not closed
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`and the Holding Companies have not acquired Twitter.
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`The FAC asserts two causes of action against the Holding Companies: (1) aiding and
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`abetting breach of fiduciary duty and (2) declaratory and injunctive relief relating to the Merger
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`Agreement. (FAC ⁋⁋ 155-165.) As to the first, the only allegation against the Holding Companies
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`is that they are “controlled by Musk and took actions at Musk’s direction to carry out his unlawful
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`conduct.” (Id. ⁋ 160.) The FAC does not plead any facts establishing Mr. Musk’s control over the
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`Holding Companies or identify any purported “actions” they allegedly took at Mr. Musk’s
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`direction. As to the second cause of action, the only allegations against the Holding Companies is
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`that they signed the Merger Agreement. (Id. ⁋ 164.)
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`Plaintiff is not a party to the Merger Agreement. The FAC alleges that on April 25, 2022,
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`the Holding Companies, Twitter, and Mr. Musk executed the Merger Agreement. (FAC ⁋⁋ 86,
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`164.) Plaintiff does not allege that he is a party to or a third-party beneficiary of the Merger
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`Agreement—to the contrary, it alleges the Merger Agreement is between Defendants, not
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`Plaintiff. (Id., ⁋⁋ 164-65.)
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`The Twitter Bylaws contain a mandatory forum-selection clause. Twitter’s Bylaws
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`include a forum-selection clause stating, in relevant part, “the Court of Chancery of the State of
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`Delaware…shall, to the fullest extent permitted by law, be the sole and exclusive forum for…any
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`action asserting a claim of breach of a fiduciary duty owed by, or otherwise wrongdoing by, any
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`director…of the corporation to the corporation…“ (Sarles Ex. 4, Bylaws, Art. VIII.)
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`4
`Case No. 3:22-CV-03074-CRB-SK
`X HOLDINGS I INC. AND X HOLDINGS II, INC’S MOTION TO DISMISS
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`

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`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 10 of 21
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`There are multiple related actions currently pending in Chancery Court and one in
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`Southern District of New York. On July 12, 2022, Twitter sued Mr. Musk for specific
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`performance in Chancery Court; Mr. Musk asserted counterclaims on August 4, 2022 and moved
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`for leave to file amended counterclaims on August 29, 2022. (Sarles Ex. 4, Twitter, Inc. v. Musk,
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`et al., C.A. No. 2022-0613 KSJM (“Delaware Action”).) Additionally, a shareholder class action
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`was filed in the Chancery Court on July 29, 2022 seeking specific performance of the Merger
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`Agreement. (Id., Ex. 5, Crispo v. Musk et. al., C.A. No. 2022-0666-KSJM.).
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`On April 12, 2022, a shareholder class action was filed in the Southern District of New
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`York against Mr. Musk asserting that he violated Section 10(b) of the Securities and Exchange
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`Act by allegedly failing to timely file a Form 13 when he acquired a certain amount of Twitter
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`stock—the same allegations giving rise to Plaintiff’s later-filed unjust enrichment claim.
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`(Compare FAC ⁋⁋ 46, 166 with Sarles Ex. 6, Rasella v. Musk, S.D.N.Y. Case No. 1:22-cv-03026
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`(“S.D.N.Y. Action”).)
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`I.
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`THE ACTION WAS FILED IN THE WRONG FORUM
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`ARGUMENT
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`Under forum non conveniens, “a valid forum-selection clause should be given controlling
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`weight in all but the most exceptional cases,” Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist.
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`of Texas, 571 U.S. 49, 63 (2013), and “must [be] enforc[ed]…unless the contractually selected
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`forum affords the plaintiffs no remedies whatsoever.” Yei A. Sun v. Advanced China Healthcare,
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`Inc., 901 F.3d 1081, 1092 (9th Cir. 2018). To determine whether to dismiss an action, courts
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`consider (1) whether the lawsuit falls within the scope of the forum-selection clause, (2) whether
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`the clause is valid and enforceable, and (3) whether public interest factors weigh against
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`enforcement (they rarely do). See id. at 1086-88. Plaintiff “must bear the burden of showing
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`why” the clause should not be enforced. Atl. Marine, 571 U.S. at 63.
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`The forum-selection clause in Twitter’s Bylaws is valid, enforceable, and requires that
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`Plaintiff’s first cause of action for aiding and abetting breach of fiduciary duty be pursued in
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`Chancery Court. (Bylaws at Art. VIII.) The Court should enforce the forum-selection clause and
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`dismiss this action.
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`5
`Case No. 3:22-CV-03074-CRB-SK
`X HOLDINGS I INC. AND X HOLDINGS II, INC’S MOTION TO DISMISS
`
`

`

`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 11 of 21
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`A.
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`Twitter’s Bylaws Mandate That This Action Be Litigated In Delaware
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`Chancery Court
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`1.
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`Forum-Selection Clauses In Bylaws Are Enforceable Against Shareholders
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`The Bylaws’ forum-selection clause is enforceable against Plaintiff, a Twitter shareholder.
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`When Plaintiff purchased stock, he agreed to be bound by Twitter’s valid Bylaws—including the
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`forum-selection clause. See Facebook, 367 F. Supp. 3d 1108, 1121 (N.D. Cal. 2019) (enforcing
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`forum-selection clause in certificate of incorporation); Boilermakers Loc. 154 Ret. Fund v.
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`Chevron Corp., 73 A.3d 934, 940 (Del. Ch. 2013) (“a forum selection clause adopted by a board
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`with the authority to adopt bylaws is valid and enforceable under Delaware law to the same extent
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`as other contractual forum selection clauses.”); In re: CytRx Corp. S'holder Derivative Litig., No.
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`CV146414GHKPJWX, 2015 WL 9871275, at *4 (C.D. Cal. Oct. 30, 2015). The selection clause
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`is valid and enforceable against him here. See Lee v. Fisher, 34 F.4th 777, 779 (9th Cir. 2022)
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`(affirming dismissal of shareholder suit due to forum selection clause in corporate bylaws).
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`2.
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`Plaintiff’s First Claim Falls Within The Bylaws’ Forum-Selection Clause
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`The Bylaws’ forum-selection clause states that Delaware Chancery Court “shall…be the
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`sole and exclusive forum for…any action asserting a claim of breach of fiduciary duty owed by, or
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`otherwise wrongdoing by, any director”. (Bylaws at Art. VIII.)2 Plaintiff asserts the Holding
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`Companies and Mr. Musk aided and abetted a breach of fiduciary duty by two of Twitter’s
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`directors. (FAC ⁋⁋ 155-62.) The claim is covered by this clause. See Facebook, 367 F. Supp. 3d
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`at 1120 (dismissing aiding and abetting claim in shareholder action pursuant to forum-selection
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`clause covering “any action asserting a claim of breach of fiduciary duty owed by, or other
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`wrongdoing by, any director”); In re Pattern Energy Grp. Inc. Sec. Litig., No. CV 20-275-MN-
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`JLH, 2022 WL 263312, at *9–10 n. 8 (D. Del. Jan. 27, 2022), report and recommendation
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`adopted by, No. CV 20-275 (MN) (JLH), 2022 WL 957761 (D. Del. Mar. 30, 2022) (same).
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`2 The clause contains a narrow exception for cases in which the Chancery Court lacks
`jurisdiction. (Bylaws at Art. VIII.) The FAC includes no allegations suggesting such a bar exists.
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`6
`Case No. 3:22-CV-03074-CRB-SK
`X HOLDINGS I INC. AND X HOLDINGS II, INC’S MOTION TO DISMISS
`
`

`

`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 12 of 21
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`Plaintiff’s claim for aiding and abetting breach of fiduciary duty requires a finding that
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`Directors Dorsey and Durban breached their fiduciary duties to Twitter and engaged in
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`wrongdoing in connection with the acquisition. See Malpiede v. Townson, 780 A.2d 1075, 1096
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`(Del. 2001); (FAC ⁋⁋ 157-60.) To establish this, Plaintiff must prove that the directors owed and
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`breached a fiduciary duty to Twitter. Id. (“the complaint must allege facts that satisfy the four
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`elements of an aiding and abetting claim: ‘(1) the existence of a fiduciary relationship, (2) a breach
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`of the fiduciary’s duty…’). It is axiomatic that aiding and abetting “assert[s] a claim of breach of
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`fiduciary duty,” which is why courts in this District and in Delaware have found that language in
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`forum-selection clauses identical to the one here apply to such claims. See Facebook, 367 F.
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`Supp. 3d at 1120; Pattern Energy, 2022 WL 263312, at * 10 n. 8. On top of all that, Plaintiff’s
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`action also falls within the scope of the forum-selection clause because he alleges that Dorsey, a
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`Twitter director, engaged in wrongdoing in connection with the merger (e.g., FAC ⁋ 78), which is
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`also included in the clause.3
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`3.
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`The Bylaws’ Forum-Selection Clause Is Valid and Enforceable
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`After establishing that the forum-selection clause applies to this action, the next step is to
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`determine whether it is valid and enforceable. Forum selection clauses are “prima facie valid”
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`M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972), and are enforced “unless
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`extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a
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`transfer.” Atl. Marine, 571 U.S. at 52. In the Ninth Circuit, courts analyze three principles to
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`determine if extraordinary circumstances exist: (1) the clause is invalid due to “fraud or
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`overreaching,” (2) “enforcement wou393 F.3d 1068ld contravene a strong public policy of the
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`forum in which suit is brought, whether declared by statute or by judicial decision,” or (3) “trial in
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`the contractual forum will be so gravely difficult and inconvenient that [the litigant] will for all
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`practical purposes be deprived of his day in court.” Yei A. Sun, 901 F.3d at 1088. No such
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`circumstance exists here.
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`3 As discussed in Section I(C), infra, because this claim is subject to the forum selection
`clause, the FAC’s other related claims—declaratory relief and unjust enrichment—should likewise
`be dismissed.
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`7
`Case No. 3:22-CV-03074-CRB-SK
`X HOLDINGS I INC. AND X HOLDINGS II, INC’S MOTION TO DISMISS
`
`

`

`Case 3:22-cv-03074-CRB Document 39 Filed 09/09/22 Page 13 of 21
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`First, Plaintiff has not alleged that the forum-selection clause is invalid due to fraud or
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`overreaching, nor can he contend that it cannot be enforced against him. E.g., Lee, 34 F.4th at
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`779; Boilermakers, 73 A.3d at 940. Second, there are no public policy justifications that override
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`enforcement of the clause. Plaintiff asserts no federal claims: two of his causes of action are
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`Delaware state claims and the third seeks declaratory relief regarding a contract governed by
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`Delaware law; the company defendants are all Delaware corporations; plaintiff resides in Virginia;
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`and the forum-selection bylaws promote public policy by helping to avoid “inefficient multi-
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`forum” litigation. See Facebook, 367 F. Supp. 3d at 1120 citing CytRx, 2015 WL 9871275, at *5.
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`Finally, the third principle is not implicated here. Plaintiff cannot show that he precluded from
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`pursuing any of the same claims or remedies, all brought under Delaware law, in the contractual
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`forum. See Yei A. Sun, 901 F.3d at 1092 (third Bremen principal does not bar enforcement of
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`forum-selection clause provided there is a “basically fair court system in that forum that would
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`allow the plaintiff to seek some relief”).
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`4.
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`The Public Interest Weighs In Favor Of Enforcement
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`Courts may consider “public interest” factors—court congestion and administration
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`concerns, local interest, and which forum is more “at home” with the law at issue—but they
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`“rarely” defeat a motion. Atl. Marine, 571 U.S. at 64. In fact, the factors weigh heavily in favor
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`of dismissal. First, there are two actions in Chancery Court involving issues associated with the
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`merger that overlap with Plaintiff’s claims. “Permitting [the] situation,” Plaintiff seeks, in which
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`multiple cases about the same issues “are simultaneously pending in different…[c]ourts leads to
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`the wastefulness of time, energy and money.” See Cont'l Grain Co