Cognizant Technology Solutions Corporation v. Bohrer, PLLC

Background

Cognizant Technology Solutions Corporation sued Bohrer PLLC and Jeremy I. Bohrer over alleged fraudulent billing for legal work performed while representing Steven Schwartz, Cognizant’s former Executive Vice President and Chief Legal Officer. Cognizant asserted claims for fraud, civil conspiracy, and unjust enrichment, seeking to recover fees and expenses it had already paid to the Bohrer Firm.

Cognizant’s bylaws and a June 4, 2013 indemnification agreement required it to advance Schwartz’s reasonable legal fees and expenses for proceedings connected to his employment. The indemnification agreement also included a mandatory forum-selection clause providing that any action or proceeding arising out of or connected with the agreement “shall be brought only in the Delaware Court” of Chancery.

After Cognizant stopped paying the Bohrer Firm’s invoices because it considered them unreasonable, Schwartz brought an advancement proceeding in the Delaware Court of Chancery. During that proceeding, Cognizant learned of allegations that the Bohrer Firm had submitted fraudulent bills, including charges for work not performed, personal expenses, and marked-up vendor services. Cognizant later resumed advancing the fees and paid more than $23 million to date, according to the complaint.

Defendants’ Motion

The defendants moved to dismiss based on forum non conveniens, the indemnification agreement’s prohibition on interim determinations, claim-preclusion and issue-preclusion principles, and the doctrine governing parallel proceedings. They alternatively sought a stay until the Delaware indemnification proceeding concluded. The court addressed forum non conveniens first and did not reach the other proposed grounds.

A forum-selection clause is a contract provision choosing the court where covered disputes must be litigated. The court explained that such a clause is presumptively enforceable when it was communicated to the resisting party, is mandatory, and covers the parties and claims involved, unless enforcement would be unreasonable or unjust.

Parties Covered by the Clause

Cognizant did not dispute that the clause was communicated to it or that its language was mandatory. It argued instead that the defendants could not enforce the clause because they did not sign the indemnification agreement.

The court rejected that argument. It held that a non-signatory may enforce a forum-selection clause when it is closely related to a signatory and enforcement was foreseeable. The Bohrer Firm’s interest in receiving payment was directly related to Schwartz’s interest in receiving advancement of those same fees. The court also relied on Cognizant’s allegations that the defendants and Schwartz acted together during the advancement proceeding. Because the defendants’ interests were closely connected and aligned with Schwartz’s, the court concluded that Cognizant could have foreseen their enforcement of the clause.

Claims Covered by the Clause

Cognizant argued that its fraud, civil-conspiracy, and unjust-enrichment claims were tort claims separate from the indemnification agreement. The court held that the clause’s broad language—covering disputes arising out of or in connection with the agreement—was not limited to breach-of-contract claims.

The court found a strong connection between the claims and the agreement. The agreement created Cognizant’s obligation to advance Schwartz’s legal fees, and without that obligation there would have been no relationship between Cognizant and the defendants. The complaint repeatedly referred to the agreement and described the alleged fraud as an abuse of Cognizant’s contractual advancement obligation. The court also noted that determining whether the bills were fraudulent would be relevant to assessing whether the fees were reasonable under the agreement and involved the same operative facts as Cognizant’s defenses in the Delaware advancement proceeding.

Ruling and Disposition

The court concluded that the forum-selection clause was enforceable, that the defendants and Cognizant’s claims were covered by it, and that the Delaware Court of Chancery was the proper forum. It granted the defendants’ motion to dismiss, directed the clerk to terminate the motion at docket entry 21, and closed the case. The court did not decide whether Cognizant’s complaint adequately stated claims and did not rule on the defendants’ other proposed grounds for dismissal or alternative request for a stay.