Massachusetts Mutual Life Insurance Company v. Certain Underwriters at Lloyd’s of London, C.A. No. 4791-VCL (Del. Ch. Sept. 24, 2010), read opinion here. A prior decision by the Court of Chancery in this case, which denied a motion to dismiss on non-jurisdictional grounds, was highlighted here.
The Court of Chancery sua sponte transferred this case to the Delaware Superior Court after determining that the plaintiffs have an adequate remedy at law. The Court did so despite a “consensus among the litigants that equitable jurisdiction exists" and notwithstanding a prior ruling in this case by the Court on non-jurisdictional issues. Especially noteworthy is the Court’s suggestion that this case may be appropriate for the new Complex Commercial Litigation Division of the Delaware Superior Court.
The Complex Commercial Litigation Division of the Delaware Superior Court was highlighted on this blog here, and more information is available about this new litigation option (designed to handle cases involving over $1 million that are outside the scope of the limited equitable jurisdiction of the Court of Chancery), on the Court’s website here. Coincidentally, at a seminar about this new division held on the same day this decision was issued, one of the judges in this new division said that he would consider scheduling trials in as quickly as a week if the parties requested it in an appropriate case. The idea is to accommodate the handling of major cases as quickly and expertly as Chancery handles equitable matters, but for cases where only money damages are sought.
Short Discussion of Court’s Analysis
Despite submissions by the parties exhorting the Court of Chancery to retain jurisdiction, the Court concluded that this case did not fall within the three major categories of subject matter jurisdiction to which Delaware’s court of equity is limited, and which the parties cannot confer upon it regardless of their consent. The first category includes those cases where the plaintiff states an equitable claim. The second category allows cases where the plaintiff requests equitable relief for which there is no adequate remedy at law. The third type of case is allowed when subject matter jurisdiction is specifically conferred by statute.
The Court determined that the heart of this case involved a coverage dispute by D & O insurers and bond underwriters, based on allegations that they did not fulfill their obligations under their respective policies in connection with the Bernie Madoff debacle. The Court determined on its own, despite the contrary arguments of the parties, that at bottom the case involved a breach of contract for money damages, which is the traditional province of the Superior Court. Pursuant to Section 1902 of Title 10 of the Delaware Code, the Court of Chancery transferred this matter to the Delaware Superior Court based on the determination that the parties had an adequate remedy at law. See also 10 Del. C. Section 342.
The Court rejected the argument that a claim for “equitable apportionment of defense costs between two insurance carriers” allowed it to retain jurisdiction. In addition to recent cases, the Court relied on cases from the 1800s involving contribution, for its recognition that contribution can give rise to equitable jurisdiction, and recent decisions have exercised that jurisdiction. However, jurisdiction over contribution claims does not lie exclusively in a court of equity. It is often concurrent jurisdiction. See Godsell Mgmt., Inc. v. Turner Promotions, Inc., 2009 WL 1299344 (Del. Ch. May 4, 2009). See generally J. Travis Laster & Michelle D. Morris, Breach of Fiduciary Duty and the Delaware Uniform Contribution Act., 11 Del. L. Rev. 71, 72-79 (2010). The Court cited to the treatise called Pomeroy’s Equity Jurisprudence, at Section 178, for the principle that when equitable jurisdiction is concurrent such as in a matter of contribution, the Court can decline jurisdiction when sufficient remedies are available at law.
The Court also discussed at length the new Complex Commercial Litigation Division ("CCLD") of the Superior Court which is especially suited for hearing cases involving the allocation and apportionment of liability among multiple insurers. See links above for details about the new CCLD.
The Delaware Constitution at Article IV, Section 13(2) allows the Chief Justice upon written request by the Chancellor, to “designate one or more of the State Judges” to sit in the Court of Chancery. Many cases where a Delaware Superior Court Judge has been designated to sit as a Vice Chancellor to hear matters involving equitable jurisdiction as an alternative to transferring the case back to the Court of Chancery were cited in the opinion. Likewise, Section 1902 of Title 10 of the Delaware Code allows the case to be transferred back to the Court of Chancery from the Superior Court if that is later determined to be warranted.
Finally, the Court rejected the argument that it should retain jurisdiction because D & O coverage cases resemble indemnification and advancement cases which the Court of Chancery has jurisdiction over pursuant to Section 145 of the Delaware General Corporation Law.