The Delaware Court of Chancery has denied a motion from H.I.G. Capital, LLC, seeking to prevent defendants Kristen Allred and Victoria Klein from pursuing a lawsuit in California. This ruling has implications for the enforcement of forum selection clauses in business agreements, particularly in cases involving multi-state transactions.
The court's decision, dated August 10, 2026, comes after H.I.G. Capital and its affiliates filed a complaint against the defendants, claiming they breached forum selection provisions in three agreements related to the sale of behavioral health facilities. The ruling highlights the complexities of jurisdiction and enforcement in business contracts.
The case, H.I.G. Capital, LLC, et al. v. Kristen Allred, et al., C.A. No. 2026-0343-BWD, centers around a dispute initiated by the defendants in California state court. H.I.G. Capital argued that the California lawsuit violated agreed-upon provisions that specified Delaware as the exclusive forum for disputes. However, the court found that the claims made in California did not fall under the provisions of the agreements.
Background
H.I.G. Capital, a private equity firm based in Delaware, along with its affiliates, entered into agreements with Allred and Klein for the sale of their interests in behavioral health facilities in California. The sale, which closed in August 2022, was governed by three agreements that included specific clauses about where disputes should be resolved.
After the sale, a payment dispute arose regarding a deferred payment of $17.5 million that was due a year later. To settle this dispute, the parties entered into a Settlement Agreement in July 2024, which also included a forum selection clause requiring any disputes to be adjudicated in Delaware.
However, in July 2025, Allred and Klein filed a lawsuit against H.I.G. Capital in California, claiming breach of fiduciary duty and securities fraud. This prompted H.I.G. Capital to file a motion in Delaware seeking an anti-suit injunction, arguing that the California lawsuit violated the forum selection provisions in their agreements.
The Ruling
The court ruled against H.I.G. Capital's motion for a preliminary anti-suit injunction, stating that the California Blue Sky Claim did not fall within the scope of the forum selection provisions in the Settlement Agreement. Vice Chancellor Bonnie W. David noted, "The California Blue Sky Claim does not arise out of, nor is it in connection with or in any way related to, the narrow payment dispute resolved through the Settlement Agreement."
Furthermore, the court found that the forum selection provisions in the Equity Purchase Agreement (EPA) and the Rollover Agreement were unenforceable in this case. The ruling clarified that neither the U.S. District Court for the District of Delaware nor the Delaware Court of Chancery had jurisdiction over the California Blue Sky Claim, which is a legal claim based on California state law.
Impact
This ruling has significant implications for businesses involved in multi-state transactions. It emphasizes the importance of clearly defining the scope of forum selection clauses in contracts. The court's decision indicates that simply having a forum selection clause does not guarantee that a court will enforce it, especially if the claims do not directly relate to the agreements in question.
The outcome of this case may influence how companies draft their agreements and manage disputes across state lines. Companies may need to be more vigilant in ensuring that their contracts specify the types of claims that fall under their forum selection clauses to avoid similar disputes in the future.
What's Next
While H.I.G. Capital's motion for an anti-suit injunction has been denied, the case is not over. The defendants' California lawsuit is still pending, and H.I.G. Capital may pursue other legal avenues in response to the claims made against them. Details regarding any potential appeals or related cases were not available in the court filing.