SAN FRANCISCO – The U.S District Court for the Northern District of California on March 13 decided it lacks jurisdiction and is compelling arbitration in a case where a woman is suing a venture capital company over a contractual dispute.
“Whatever McKellar did between this period of relatively friendly relations between her and Mithril, the peace was not to last,” the court brief noted.
The plaintiff, Crystal McKellar, worked for the defendant, Mithril Capital Management, a San Francisco-based global technology investment firm.
“She (McKellar) is embroiled in no fewer than three lawsuits in three separate states with Mithril Capital, its owner and Managing General Partner Ajay Royan, and a related entity, Mithril GP Employee Feeder LLC,” the document explained.
McKellar was a general counsel and managing director of Mithril Capital, a member of Mithril Feeder entitled to awards of carried interest, and a long-time friend of Royan’s, the brief said.
On Feb.12, 2019, McKellar signed a separation and consulting agreement as part of a departure from Mithril. The agreement called for her to receive $225,000 in severance pay and an added $225,000 in consulting services as an independent contractor.
McKellar reportedly signed the two contracts 16 minutes after receiving them and without representation by counsel. Both agreements contained clauses requiring arbitration in the event of a dispute.
According to the brief, the trouble started when officials at Mithril alleged that McKellar had done practically no work and provided minimal advisory services.
McKellar alleged that although she ceased to serve as Mithril’s general counsel, she continued to perform many of the same non-legal job functions she performed at Mithril prior to the February 2019 agreements. She claimed that she continued to work out of the company’s San Francisco office and with a phone and laptop provided by Mithril.
McKellar further maintained that her work was conducted under the direction and supervision of John Kingsbury, Mithril’s chief of staff and Royan’s representative.
“On July 17, 2019, McKellar received a letter from Mithril, signed by Kingsbury, claiming she was in violation of her separation and consulting agreements and that Mithril was terminating those agreements and forfeiting McKellar’s employment compensation, including her entire carried interest in Mithril’s venture capital funds,” the court brief read.
McKellar alleged this was an unlawful retaliation for her cooperation with a government investigation of Mithril.
Mithril Capital sued McKellar in a Texas state court, and Mithril Feeder sued her in a Delaware state court.
McKellar removed both actions to federal court.
The court opinion found that a signed agreement to submit a dispute to arbitration was “irrevocable.”
“The Court therefore has no jurisdiction to consider many of McKellar’s arguments against enforcement of the arbitration provisions,” the opinion brief noted.
In addition, the court found that an agreement that was a one-sided bad bargain did not establish substantial impropriety.
“Even if McKellar’s allegations are accepted as true, she has established at most a minor degree of procedural unconscionability,” the opinion explained.
The court decided arbitration should take place in California and not Texas because McKellar was working in California as an employee under the direction of Kingsbury at the time the dispute arose.
The court also determined the plaintiff’s suit in Delaware against Mithril Feeder would result in duplicative work and conflicting judgments.
The U.S. Court called for McKellar’s claims against Royan and Mithril Capital to be arbitrated in California. The plaintiff’s claims against Mithril Feeder filed in Delaware were dismissed.