Opinion
Civil Action No. 5387-CC.
Submitted: June 29, 2010.
Decided: July 7, 2010.
Brian M. Rostocki, Reed Smith LLP, Wilmington, Delaware.
Herbert G. Feuerhake, Law Office of H. Feuerhake, Wilmington, Delaware.
Jeffrey K. Martin, Martin Associates, P.A., Wilmington, Delaware.
Dear Counsel:
I have thoroughly reviewed the briefs on plaintiffs' motion to strike and motion to compel (which includes defendant's motion for a protective order), and on defendant's motion to dismiss or stay. For the following reasons, I grant defendant's motion to dismiss. My decision renders all other motions moot.
I share in plaintiffs' frustration with a number of aspects of defendant's course of conduct. First, filing deadlines are important, and defendant did not always meet them. Second, a motion to dismiss or stay is not tantamount to a motion to stay discovery — yet defendant appears to have treated it as such, as evidenced by his failure to respond to plaintiffs' discovery requests while defendant's motion to dismiss or stay was in the briefing process, despite the requirements of Court of Chancery Rules 33 and 34. And third, and most frustratingly in my mind, the opening brief on a motion to dismiss or stay should not be the vehicle for expressing disagreement with a plaintiff's factual allegations — yet that is exactly what defendant used the bulk of his opening brief to do.
Parties seeking to dismiss or stay a case would serve themselves best — as well as serve opposing parties and this Court best — by filing a motion to stay discovery or a motion for protective order concurrently with any motion to dismiss or stay, rather than treat the latter as inherently including the former.
Despite these deficiencies, however, I believe it to be in the interest of justice and expediency that I focus on the key issue: whether this Delaware action is the first-filed action (which would require that I apply an "overwhelming hardship" standard as part of a forum non conveniens analysis) or the second-filed action (which would require that I apply the McWane doctrine).
Taylor v. LSI Logic Corp., 689 A.2d 1196, 1199 (Del. 1997) ("The issue is whether any or all of the Cryo-Maid factors establish that defendant will suffer overwhelming hardship and inconvenience if forced to litigate in Delaware.").
McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng'g Co., 263 A.2d 281, 283 (Del. 1970) ("as a general rule, litigation should be confined to the forum in which it is first commenced, and a defendant should not be permitted to defeat the plaintiff's choice of forum in a pending suit by commencing litigation involving the same cause of action in another jurisdiction of its own choosing. . . ."). See also Kurtin v. KRE, LLC, 2005 WL 1200188, at *3 (Del. Ch. May 16, 2005) ("Where a party alleges that there is an earlier foreign action, McWane provides the appropriate analysis, holding that the discretion to grant a stay [or dismissal] should be exercised freely where (1) there is a prior pending action, (2) that involves the same parties and issues, and (3) the other court is capable of doing prompt and complete justice."). In a recent case, the Delaware Supreme Court confirmed the legal relevance and import of an action's filing status. See Lisa, S.A. v. Mayorga, 993 A.2d 1042, 1047 (Del. 2010) (explaining the appropriate standard to apply on the basis of whether the Delaware action is the second-filed action, or the first-or only-filed action).
I conclude that this Delaware action is the second-filed action. Defendant filed his Texas petition on October 9, 2009, and plaintiffs filed their Delaware Complaint on April 1, 2010. Although defendant did not attempt to serve his Texas petition until March 10, 2010 — and has not yet filed a proof of service in Texas, apparently — it remains clear to me that defendant made the first move, so to speak, and that his move was in Texas. That move may have been slow, perhaps even glacial, but a first move it was. Thus, the McWane doctrine is the appropriate standard to apply.
In addition to concluding that the Texas action is the earlier-filed action, I believe that the identity of parties and issues in the earlier-filed Texas action are substantially or functionally the same as those in the later-filed Delaware action. This substantial or functional identity is sufficient, and indeed more common than exact identity, in a McWane analysis. The original Texas petition was filed by corporate entities, rather than defendant as an individual. This decision seems to have been driven by who officially was party to the contract in question, and not indicative of defendant not being the person to whom the recovery ultimately would flow or not being the person of true import. I do not believe it to be damning, or per se a sign of inappropriate tactical maneuvers, that after the filing of the Delaware complaint defendant amended his Texas petition such that the named parties in Texas were more similar (or entirely identical) to the named parties in Delaware.
See Choice Hotels Int'l v. Columbus-Hunt Park DR. BNK Investors, L.L.C., 2009 WL 3335332, at *7 (Del. Ch. Oct. 15, 2009) (In any McWane analysis . . . the parties and issues in the competing litigations rarely will be exactly identical. The court must, therefore, balance the lack of complete identity of parties and issues against the possibility of conflicting rulings which could come forth if both actions were allowed to proceed simultaneously. Rather than insisting that the parties in both actions be identical, this court only requires substantial or functional identity.") (citations omitted).
Further, I agree with defendant: although the Texas petition involves a contract claim and the Delaware complaint involves fraud and fiduciary duty claims (among others), this does not mean the two actions are not substantially or functionally identical. There may be large differences in the nature of those claims and slightly different time periods involved between some of the contracts now in question and the alleged fraud and breaches of fiduciary duties, but the reality, it seems to me, is that this battle is one that involves why and how these parties went their separate ways — and that any breach of contract was a response to any fraud or breach of fiduciary duties. Other parties or issues may be involved, but at its core, this case appears to be the tit-for-tat I have described, and I see no reason why any complexity of parties or issues around that core merits a decision to disregard the spirit of McWane or the comity Delaware courts and judges feel for the capable courts and judges of our sister states and commonwealths, even when questions of Delaware law are in play.
See Diedenhofen-Lennartz v. Diedenhofen, 931 A.2d 439, 446 (Del. Ch. 2007) ("The two key issues are whether the parties and claims in this case are substantially similar to those raised in any of the cases that were filed earlier. The captions need not be replicas, nor must the counts in each complaint be identical. What is important is that the same individuals or entities be involved in each of the disputes and that the issues raised in each case arise out of a common nucleus of operative facts.") (citations omitted).
On that point, I take issue with the statistics plaintiffs cite in the forum non conveniens section of their Answering Brief, in comparing Delaware's judicial rankings to those of Texas in the U.S. Chamber Institute for Legal Reform's State Liability Systems Survey. In part on the basis of those rankings, plaintiffs argue that I should not stay the Delaware action despite the earlier filed Texas action. Plaintiffs' argument is unpersuasive. Delaware may be heralded (at least by one particular special interest group) for its expediency, efficacy, and efficiency, but Delaware is not the lone star. In choosing to cite these statistics, plaintiffs may have strewn some litter along their path back to the courtroom in Kaufman County, Texas, ignoring the oft-quoted and now-trademarked advice of the Texas Department of Transportation: Don't Mess with Texas.
Pls.' Answering Br. 24-25.
HARRIS INTERACTIVE, INC., U.S. CHAMBER INSTITUTE FOR LEGAL REFORM, 2010 STATE LIABILITY SYSTEMS RANKING STUDY, available at http://www.instituteforlegalreform.com/images /stories/documents/pdf/lawsuitclimate2010/2010FullHarrisSurvey.pdf.
http://dontmesswithtexas.org/.
For the reasons I have explained above, I grant defendant's motion to dismiss.
IT IS SO ORDERED.