Joint Venture Assignment | Memorandum Facts

Added on - Oct 2019

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MEMORANDUMA.FACTSUSCO and ARGO entered into a joint venture via a new Argentinian Corporation,JVCO. The parties created the joint venture for the purpose of setting up a telecomcompany in Argentina. A transfer of technology would occur from USCO to JVCOpursuant to a separate license agreement. The license agreement contained a choice oflaw clause but did not contain a dispute resolution clause.Additionally, Richard, an executive (“Exec”) was hired to be the president ofJVCO. He served a three-year term with JVCO. His employment agreement did notcontain a governing law clause. He also entered into a supplemental agreement withUSCO that did contain a governing law clause. Claims of sexual harassment andmisappropriation of trade secrets is filed by a former employee Ms. Femp and ARGO,respectively.B.Legal Issues1.Under Section 6 and 188 of the Restatement (Second) of Conflict of Laws,Argentina law should apply to the issue of whether USCO has breached theJVA.In the instant case, the parties have instituted a lawsuit in federal court in Miamiand their JVA contains a clause where parties have consented to jurisdiction of federalcourt in Miami for purpose of dispute resolution. A Miami court will have to conduct isown choice of law analysis to determine whether Florida law, California law, or
Argentinian law should apply. Upon an application of Section 6 and 188 of theRestatement, the court will look at the following factors:Section 188 states that the rights and duties of the parties with respect to an issuein contract are determined by the local law of the state which, with respect to that issue,has the most significant relationship to the transaction and the parties under the principlesstated in Section 6. Section 6 provides the following factors:(1)The needs of the interstate and international systems,(2)The relevant policies of the forum,(3)The relevant policies of other interested parties and the relative interests of thosestates in the determination of the particular issue,(4)The protection of justified expectations,(5)The basic policies underlying the particular field of law,(6)Certainty, predictability and uniformity of result, and(7)Ease in determination and application of the law to be applied.ARGO’s argument regarding Exec never being employed by JVCO will have nobearing on the choice of law analysis. Irrespective of who employs Exec, the allegedmisappropriation occurred in Argentina and included JVCO’s trade secrets while Execworking or performing the contract for JVCO. These facts suggest that the forum mostinvolved is Argentina as it has an interest in protecting the rights of its citizens from tradesecret misappropriation within Argentina. Factors (2) to (6) support ARGO’s secondargument in that Argentinian companies will be discouraged from entering into JVs withforeign companies such as USCO if their trade secrets aren’t protected.
USCO might argue that the factors listed above are less important when torts areinvolved. Trade secret misappropriation is an issue of tort law and thus any factors listedabove should not apply to the choice of law analysis unless the only damages beingsought is for breach of contract. In the case of the latter, the factors listed above remainsignificant.Furthermore, the court might apply important contacts in determining state ofmost significant relationship. As argued by USCO, USCO is a California corporationand the contract was negotiated in the US and Argentina, though, ARGO might argue thatthe last act necessary to give the contract a binding effect, that is, the actual signing of thecontract took place in Argentina. However, the place of performance of the JVA is inArgentina and both parties were expected to perform in Argentina through their localcompany JVCO. Thus, the local law of the place of performance, that is, Argentina lawshould apply to govern all questions relating to performance including breach of the tradesecrets. As for place of incorporation, courts place little value on the actual place ofincorporation of the contracting party unless that place becomes important in relation toother contracts. USCO can argue that all of its other contracts under the JVA wereentered into by USCO, a California corporation and that each of the contracts wereperformed by USCO in California. Additionally, the supplemental agreement mentionsCalifornia and the supplemental agreement was incorporated by reference to the exec’semployment agreement. Do either contract list which contract takes precedence whenthere are inconsistent terms? Having said that, the facts suggest that performanceoccurred in Argentina and therefore, this argument is weak.
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