McKellar v. Mithril Capital Management LLC

The case concerns the violation of terms of a separation agreement conducted between Crystal Scripps McKellar (McKellar) and the Mithril Capital Management LLC collective (Mithril). Specifically, McKellar is involved in three lawsuits in three different states with Mithril Capital Management LLC, Ajay Royan (its owner and general partner), and entity of Mithril GP Employee Feeder LLC (ABA Journal, 2019). McKellar previously worked as Mithril Capital’s general counsel and a managing director (GovInfo, 2020). On February 12, 2019, she signed the separation and consulting agreements, which both implied her departure from Mithril and her future work as an independent consultant (GovInfo, 2020). However, in July 2019, Mithril accused McKellar of violating the separation and consulting agreements, filing cases in Texas (Texas Action) and Delaware (Delaware Action). The former concerned the claim about agreements’ violation, whereas the latter sought declaration that stripping McKellar of her carried interest was appropriate (GovInfo, 2020). In response, McKellar filed an instant action to hinder the prosecution of mentioned cases under the California Labor Code, paragraph 925. In turn, Mithril moved to compel arbitration of these cases and to decide on her response claim.

Before the claims’ prosecution, three issues had to be addressed first – the issue of voidable contractual provisions as a reason to hinder prosecution, the issue of a place of arbitration, and the jurisdiction over a response claim. The legal conflict, in this case, is centered around the place of claims’ arbitration. According to the agreements conducted on February 12, 2019, if any arbitration should arise – it should be prosecuted in Texas (GovInfo, 2020). However, paragraph 925 of the California Labor Code implies that contractual provisions are voidable in the case of using the agreement of adjudication outside California as a condition of employment (California Legislative Information, 2017). In addition, such provisions are voidable if they deprive the employee of California law protection regarding the controversy that arose in California (California Legislative Information, 2017). The consequent legislation used to identify whether McKellar was an employee referred to paragraph 2750.3(a)(3) of the California Labor Code.

Paragraph 2750.3(a)(3) provides options for the employer to prove that an individual was not officially employed. However, it states that the matter should not be tested if an individual possesses an active California State license and practices a recognizable profession, including attorneys (California Legislative Information, 2017). Mithril attempted to contend the 925 paragraph’s application due to an exception about an individual being represented by a legal counselor (California Legislative Information, 2017). In this context, Mithril did not imply McKellar was actually legally represented. Instead, Mithril notes the confirmation of representation enclosed in the agreement and applies to California Evidence Code, paragraph 622, that McKellar cannot state otherwise (FindLaw, 2019). Nevertheless, McKellar proved the legal counselor’s absence at the time of signing the agreement by referring to procedural unconscionability that arose during the agreement’s negotiation. Consequently, McKellar was proved to be an employee even after signing the contracts, which made the court conclude paragraph 925 satisfied, and the claims to be arbitrated in California.

Ultimately, the court approved the arbitration of Texas and Delaware Actions in California and declined jurisdiction over McKellar’s response claims, dismissing them. In the context of legal conflict resolution, I agree with the decision of the court. I believe the separation and consulting agreements imposed on McKellar were intentionally tailored to prevent the latter’s ability to retaliate adequately. Thus, I am satisfied with the outcome and eager to learn how the claims’ final prosecution would finish.

References

ABA Journal. (2019). Venture capital firm sues its former general counsel, once a child actress on ‘The Wonder Years.

California Legislative Information. (2017). Law Selection. Web.

FindLaw. (2019). California Code, Evidence Code – EVID § 622.

GovInfo. (2020). 19-7314 – McKellar v. Mithril Capital Management LLC et al.