A recent Delaware Court of Chancery decision recited the standards applied in Delaware to determine when to stay a case or allow it to proceed when similar litigation between the same parties is proceeding in another state. In AG Resources Holdings, LLC v. Terral, C.A. No. 2020-0850-JRS (Del. Ch. Feb. 10, 2021), the court addressed the titular topic in a 24-page decision that provided a careful chronology of the litigation between the parties in Louisiana as well as detailed background facts.
But for purposes of this short blog post, I will provide highlights of what I regard, quite subjectively, as the most noteworthy takeaways from this ruling that would have the broadest application to corporate and commercial litigators in Delaware:
This decision provides guidance for what standards will be applied when a motion to stay or dismiss under Rule 12(b)(3) is filed–depending on which of the following circumstances are in play:
- If the Delaware case was clearly the first-filed case, compared to the related case pending in another forum. See Slip op. at 8 and n. 19. (apply Cryo-Maid factors giving due deference to the plaintiff’s choice of forum.)
- If, however, the Delaware action follows the filing of a similar action elsewhere, “the court applies the discretionary McWane standard that allows the court to defer more readily to the court in which related litigation was first filed”. Id. and n. 20.
- If the pending cases both outside and in Delaware are filed at about the same time, the court applies the “forum non conveniens analysis by applying the factors set forth in Cryo-Maid.” Slip op. at 9 and n. 21 That is, less emphasis in such a situation is placed on the priority of filing.
Two nuanced variations on the above three situations require more careful analysis. For example:
- When litigation is contemplated and one party files a DJ action in an attempt to preempt the filing by the opposing party in a different forum, the court’s analysis “requires a closer look”. Slip op. at 10 and n. 25.
- Also, when the issue involves the internal affairs of a Delaware entity or issues arising under a Delaware entity’s constitutive documents, Delaware courts may have a greater interest in retaining the matter. Slip op. at 20 and n. 45.
All of the foregoing assumes that there is not a controlling, mandatory forum selection clause (as compared, for example, to a merely permissive forum selection clause). In such a situation, reference should be made to the many cases highlighted on these pages analyzing the enforceability of mandatory forum selection clauses. (Just make sure there is no delay in the enforcement of such a clause.)