Chancery Court Dismisses Caesars Bid to Halt Creditor Suit in Delaware

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By Michael Greene

March 18 — The Delaware Chancery Court March 18 rejected a motion to dismiss or stay a lawsuit filed against Caesars Entertainment Corporation on the grounds that New York was the proper forum for hearing the dispute.

Vice Chancellor Sam Glasscock III found that a Delaware court could hear Wilmington Savings Fund Society's claims that defendant investors Apollo Global Management Inc. and TPG Capital LP engaged in a scheme to deprive lenders and creditors of recourse when a Caesar subsidiary inevitably defaulted on its debts.

In denying the defendants' motion, Glasscock held that the plaintiff was not prevented from bringing its action in Delaware by operation of forum selection clause and that the defendants had not shown an “overwhelming hardship” if the claims were litigated in the state.

Caesars has another chance to shut down the case next week, when its main operating unit will ask a bankruptcy judge in Chicago to put the brakes on the litigation.

Forum Selection Clause

Vice Chancellor Glasscock observed that to dismiss a cause of action due to a forum selection clause, the court must find that the plaintiff clearly and unambiguously agreed to bring its claims exclusively in a foreign jurisdiction.

Although the agreement governing the debtor/creditor relationship between the parties—a 2009 indenture—did not include a forum selection clause, the defendants claimed that the parties chose New York as the exclusive forum for litigating their disputes because an intercreditor agreement included such a clause.

Glasscock dismissed this argument, even assuming that the 2009 indenture was intended to cover all the provisions of the intercreditor agreement.

Instead, he found that the forum selection clause included in the intercreditor agreement was limited to the actions “relating to” the right and obligations among creditors. Accordingly, it could not be read broadly to include the plaintiffs' claims seeking recourse against entities and individuals connected with shifting assests out of the plaintiff's reach.

“In other words, the language of the Intercreditor Agreement, even if imported into the 2009 Indenture, doe not amount to a clear selection in the latter of an exclusive New York forum for litigation of the claims here,” he opined.

Forum Non Conveniens

The court also declined to dismiss or stay the action under the forum non conveniens doctrine.

To dismiss on those grounds, there must be a showing of “overwhelming hardship” if the case was litigated in Delaware, Glasscock noted.

Glasscock first rejected an argument that New York court should hear this action because its law will predominate the action. He found that the chancery court is often called upon to apply New York law to resolve commercial disputes, and this case did not present any novel issues that would be more properly considered by a New York court.

He also rejected the defendants' argument that transferring the case to New York would make trial easier, expeditious and inexpensive because the majority of relevant parties and witnesses are located in that jurisdiction.

“I take judicial notice, however, that the Courthouse in Wilmington is separated from Pennsylvania Station in Manhattan by a five-minute walk and 125 miles of shiny steel rails, which may be traversed in the comfort of the business section of an Acela train in an hour and half,” he wrote. “In that light, litigation in Delaware is less manifest hardship than inconvenience.”

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