Tabula Rasa Healthcare Group, Inc. v. Mphasis Corporation

Tabula Rasa Healthcare Group, Inc. v. Mphasis Corporation

C.A. No. 2025-0020-LM, Court of Chancery of Delaware, Magistrate in Chancery (August 8, 2025). Before Mitchell, M. Unpublished opinion. 2025 WL 2264585.

Relevant Facts

• Tabula Rasa Healthcare Group, Inc., a Delaware corporation, entered into a Master Services Agreement (MSA) with Mphasis Corporation (Delaware) and Mphasis Limited (India) on August 30, 2021 governing Mphasis' provision of services supporting Tabula Rasa's electronic health record business.

• Tabula Rasa sent notice of termination of Statement of Work-2 (SOW-2) on October 11, 2024, citing breach of contract. Defendants disputed the termination as improper, arguing the notice failed to set forth specific grounds.

• On November 14, 2024, the defendants filed an arbitration demand with the American Arbitration Association (AAA) alleging multiple breaches of contract by Tabula Rasa.

• The MSA contained an arbitration clause requiring arbitration of 'any dispute arising out of or in connection with this Agreement,' incorporating AAA Rules. The clause also contained a provision purporting to bar judicial review of arbitration awards.

• Tabula Rasa filed a complaint on January 7, 2025, seeking a declaratory judgment to render the arbitration agreement unenforceable and moved for a preliminary injunction to enjoin the arbitration.

Legal Issues

• Whether the arbitration clause in the MSA was valid and enforceable despite containing a provision purporting to bar judicial review of arbitration awards.

• Whether the MSA's severability clause permitted enforcement of the arbitration agreement after severing the invalid 'no judicial review' provision.

• Whether the parties delegated the question of substantive arbitrability to the arbitrator through incorporation of AAA Rules.

• Whether the court had subject matter jurisdiction to determine the substantive arbitrability of the dispute.

Positions of the Parties

• Tabula Rasa argued the arbitration clause was entirely invalid and unenforceable because its prohibition on judicial review of arbitration awards violated public policy, sought to enjoin the arbitration, and contended the court should decide substantive arbitrability.

• Mphasis sought dismissal for lack of subject matter jurisdiction, arguing the arbitration clause was valid, that the severability clause saved the remainder after severing the invalid 'no judicial review' provision, and that the parties clearly and unmistakably delegated substantive arbitrability questions to the arbitrator through incorporation of AAA Rules.

Decision of the Court and Reasons

The Magistrate in Chancery granted Mphasis' motion to dismiss and denied Tabula Rasa's motion for preliminary injunction.

On severability, the court found the MSA's severability clause clearly supported severing only the invalid 'no judicial review' provision while maintaining enforceability of the remainder of the arbitration clause. The clause instructed that invalid provisions 'shall be treated as modified to the least extent necessary to rectify its invalidity,' permitting partial enforcement.

On delegation of arbitrability, the court determined that the parties clearly and unmistakably delegated the question of substantive arbitrability to the arbitrator by providing broad arbitration language covering 'any dispute arising out of or in connection with this Agreement' and incorporating the AAA Rules, which contain a delegation clause addressing arbitrability. Incorporation of AAA Rules creates a presumption that parties intended delegation.

On subject matter jurisdiction, the court held that Delaware courts lack jurisdiction to resolve disputes contractually agreed to be arbitrated. Once a valid arbitration agreement exists and delegates arbitrability to the arbitrator, the court cannot decide arbitrability questions. The matter was stayed pending the arbitrator's decision on arbitrability.