A recent Chancery decision provided three reasons why the first-filed rule, sometimes known as the McWane Doctrine, would not be followed, based on the procedural history and facts in the case styled: In re Lordstown Motors Corp. Stockholders Litigation, C.A. No. 2021-1066-LWW (Del. Ch. Mar. 7, 2022). The Court first explained that the McWane Doctrine applies with less force in the context of representative litigation. The second reason the court provided for why the doctrine will not be followed in this case is that: even though a related federal action was first-filed, and concerns the same business combination–the parties, the claims, and remedy sought in that first-filed case are different.
The third and more important reason that the first-filed rule was not followed in this matter is because, as the court observed: “This case raises emerging issues of Delaware law” regarding Special Purpose Acquisition Companies (SPACs.)
The Court added that although established doctrines of fiduciary duty law are far from novel, the Delaware Court of Chancery has had occasion to apply those principles in the context of a Special Purpose Acquisition Company [SPAC] and stockholder redemption rights just once (in a decision authored by the same vice chancellor who decided the instant case).
The court concluded that the essential role of the Delaware Court of Chancery in providing guidance in developing areas of Delaware law would be impaired if it were “to denude its jurisdiction because a federal securities action resting on similar facts was filed first.” Slip op. at 2.