The Delaware Supreme Court, in North River Ins. Co. v. Mine Safety Appliance Co., — A.3d –, 2014 WL 5784588 (Del. Nov. 6, 2014), addressed a failed attempt to control multi-forum litigation.  Delaware’s high court affirmed the Court of Chancery’s denial of a permanent injunction barring Mine Safety from prospectively assigning its rights under North River’s insurance policies to tort plaintiffs.

Background

Mine Safety first filed suit against North River in Pennsylvania.  While that case was progressing, Mine Safety also filed suit against North River in Delaware.  Then, apparently dissatisfied with the progression of the Delaware suit,[1] Mine Safety “engineered” additional actions in West Virginia by entering into settlements with tort plaintiffs and assigning its rights under the North River insurance policies to those plaintiffs, who then brought declaratory judgment proceedings against North River pursuant to West Virginia statute.

North River sought to stay the West Virginia actions, but that motion was denied.  Seeking relief from the multiplicity of actions, North River sought a permanent injunction from the Delaware Court of Chancery preventing Mine Safety from prosecuting its later-filed West Virginia claims and from further assignments of Mine Safety’s rights under the North River insurance policies to prospective tort plaintiffs.

Chancery’s Holding

The Chancery Court denied the injunction, finding that, even assuming North River satisfied the first two prongs of the test for a permanent injunction, 1) actual, rather than probable, success on the merits and 2) irreparable harm, it had failed to satisfy the final prong, 3) showing the equities weighed in its favor.  Reasoning that North Star was seeking a remedy that would ultimately be ineffective at protecting it from the risk of inconsistent judgments, the Chancery Court denied the injunction because “equity will not do a useless thing.”  Further, the court found it would be inequitable to grant an injunction that would prevent Mine Safety from participating in North River’s continued litigation that would define Mine Safety’s rights as an insured.

North River appealed.  During the pendency of the appeal, the West Virginia Supreme Court of Appeals affirmed the denial of North River’s motion to stay the later-filed West Virginia actions on forum non-conveniens grounds.  Accordingly, North River withdrew its first argument, but continued to press its argument before the Delaware Supreme Court concerning the assignment of rights to prospective tort plaintiffs.

Supreme Court’s Holding

The Delaware Supreme Court affirmed the denial of a permanent injunction barring Mine Safety from assigning its rights under North River’s insurance policies to prospective tort plaintiffs.  Reviewing the factual findings of the Chancery Court based on an abuse of discretion standard of review, the Court addressed three issues: 1) whether the Chancery Court erred in concluding that claimants would assert claims against North River even without an assignment of rights to them by Mine Safety; 2) whether the Chancery Court erred in denying permanent injunctive relief because it would be futile or useless; and 3) whether the Chancery Court abused its discretion in determining that an injunction would impede Mine Safety’s ability to settle cases with tort claimants.

As to the first argument, the Court found little evidence in the record to support North River’s assertion that, without Mine Safety’s “engineering” of suits by assigning its rights to tort plaintiffs, claimants would not directly bring suit against North River.  Even though such an injunction might reduce the number of claims, it would not provide complete relief.  Because the standard for a permanent injunction requires “actual, rather than probable success on the merits,” and the tort plaintiffs could bring suit independent of any assignment of rights, Chancery could not completely remedy the harm.  Although there is no requirement that an injunction completely remedy the harm, because of the deferential standard of review, the Supreme Court did not find that the Chancery Court had abused its discretion in refusing to issue a permanent injunction.

Second, the Chancery Court correctly determined that generally, equity will not do a useless thing.  Because under West Virginia law, tort plaintiffs have a statutory right, even absent an assignment of rights under an insurance contract, to bring a declaratory judgment action against an insurer, issuing a permanent injunction barring Mine Safety from assigning its rights would not provide complete relief.  Although the Court recognized that  there was some merit to the contention that Mine Safety had acted inequitably, there was not a full enough record to merit a finding that the Vice Chancellor had abused his discretion in denying injunctive relief.

Third, the Court found that the Vice Chancellor had not abused his discretion in determining that permanent injunctive relief would impede Mine Safety’s ability to settle cases with tort claimants.  Again, because of a scant record below, the Court was not able to determine that an abuse of discretion had occurred.