District Court Clarifies Who Is A Manager

Wakley Limited v. Ensotran LLC, C.A. 12-728-GMS (March 18, 2014)

Under the Delaware LLC Act, a manager or a person who acts like a manager is subject to jurisdiction in Delaware in a breach of duty case arising out of her management.  Because the LLC agreement usually sets out who is a "manager," that is usually not disputed.  However, it is often less clear who had exercised management duties sufficient to be subject to jurisdiction in Delaware. This decision helps decide that question. It points out that just being named an officer is not enough to submit to jurisdiction and that the nature of the defendant's' duties compared to what it is alleged she did improperly may also be determinative.  In other words, if you "managed" X project but are sued for what you did on the Y project, there is no jurisdiction over you..

Court Of Chancery Clarifies Jurisdiction

Darby Emerging Markets Fund L.P. v. Ryan,  C.A. 8381-VCP (November 27, 2013)

This decision clarifies the Court of Chancery's jurisdiction under the clean up doctrine and when a contract subject to specific performance has not yet been breached.

Court Of Chancery Explains Conspiracy Jurisdiction

Lake Treasure Holdings Ltd. v. Foundry Hill GP LLC, C.A. 6546-VCL (November 21, 2013)

The so-called conspiracy theory of jurisdiction over a non-resident is often misunderstood. This decision is useful because: (1) it explains the relationship between jurisdictional discovery and the burden of alleging facts sufficient to establish jurisdiction and (2) it again explains what must be shown to warrant jurisdiction under the conspiracy theory.

Court Of Chancery Again Explains Conspiracy Theory Of Jurisdiction

Microsoft Corporation v. Amphus, Inc., C.A. 8092-VCP (October 31, 2013)

The alter ego and conspiracy theories of jurisdiction are among the hardest to understand.  This decision carefully and clearly applies those theories to a complicated fact pattern.

Court Of Chancery Explains Limits Of Jurisdiction Over Foreign Entities

Baier De Adler v. Upper New York Investment Companies LLC, C.A. 6896-VCN (October 31, 2013)

This is an interesting decision dealing with jurisdiction over foreign entities. The Court will not take jurisdiction when the assets involved are located outside the US and not owned by a Delaware entity

Court Of Chancery Upholds Forum Selection Bylaw

Boilermakers Local 154 Retirement Fund v. Chevron Corporation, C.A. 7220-CS (June 25, 2013)

The Court of Chancery has upheld a bylaw that selects Delaware as the only forum for internal corporate disputes. The Court  did leave open the possibility that such a bylaw might be later challenged on narrow grounds that it was improper in limited circumstances.

Supreme Court Reinvigorates Istituto Bancario

Matthew v. Flakt Woods Group SA, No. 150, 2012 ( November 20, 2012)

For some time the conspiracy theory of jurisdiction, first set out in the famous Istituto Bancario decision, has had little success in conferring jurisdiction over foreign entities.  With this new decision by the Delaware Supreme Court, that trend may be reversed.  The key holding is that the defendant should have known that it was involved with a Delaware corporation and  the dissolution of that company as part of the alleged conspiracy was enough to give jurisdiction over the non-US defendant.  While the parameters of this possible extension of jurisdiction are to be determined later, it may be very broad.

Court Of Chancery Dismisses Improperly Notarized Complaint

Bessenyei v. Vermillion, Inc., C.A. 7572-VCN (November 16, 2012)

This is a troubling decision.  One plaintiff, through the efforts of the other plaintiff who is a lawyer, used a false verification when the complaint was filed. The Court of Chancery requires all complaints be verified.  As a result, the Court dismissed the complaint under the rule of Parfi where the dismissal is on the merits.

Seems right so what is troubling?  Delaware lawyers typically believe their clients when they are sent a verification that the client did what the verification says, appeared before a notary to sign it. This is an odd case because there was some indication that was not being done. Still, how far should we  go?  The short answer is that we need to ask the client: "Did you get this signed in front of a notary like it says"?

Court of Chancery Dismisses Limited Liability Partership Act Suit

New Media Holding Company LLC v. Brown,  C.A. 7516-CS (November 14, 2012)

This decision deals with a hole in Delaware jurisprudence.  Generally, the statutes authorizing each form of Delaware entity contain a provision whereby the managers of that entity submit themselves to the jurisdiction of the Delaware courts for acts in their managerial capacity.  But, as this decision points out in dismissing the complaint for want of personal jurisdiction over the defendants, that is not the case under the Delaware limited liability partnership statute.  This seldom used act may need to be amended as a result.

Court Of Chancery Explains Conspiracy Jurisdiction

Hospitalists of Delaware, LLC. v. Lutz, C.A. 6221-VCP (August 28, 2012)

This is an important decision because it explains the theory of jurisdiction over alleged conspirators. While that basis for jurisdiction has been around since the Istituto Bancario decision, it is still hard to understand.  The guidance this decision provides to that law and the conspiracy theory in general is very helpful.

Court Of Chancery Explains Limits Of Jurisdictional Discovery

Picard v. Wood, C.A. 6526-VCG (July 12, 2012)

A plaintiff must offer some basis to believe the defendant is subject to the Court's jurisdiction before he will be permitted to take jurisdictional discovery.  Owning an interest in a Delaware LLC is not enough.

Court Of Chancery Permits Jurisdictional Depositions

Reid v. Siniscalchi, C.A. 2874-VCN (May 25, 2012)

Discovery in aid of proving jurisdiction is usually available.  But is there a limit?  This decision explores that question and permits depositions to prove jurisdiction.

Court Of Chancery Resolves Who May Bring Derivative Claims After Dissolution

Matthew v. Laudamiel, C.A. 5957-VCN (February 21, 2012)

This decision resolves who may bring a derivative claim after an LLC has been dissolved.  The argument made by 1 of the parties was that after dissolution, any member may bring a derivative claim directly.  The Court rejected that argument and concluded that the claim still must be brought in the name of the LLC and that a petition might also be filed to have the entity restored to bring such a claim or for a trustee to be apponted to do so.

This decision also dealt with an important jurisdictional issue under the so-called conspiracy theory.  It holds that the alleged conspirator must be aware that the conspiracy involves an action in Delaware in furtherance of the conspiracy, before the conspiracy is completed and the harm done.

Court Of Chancery Explains The Incorporation Basis For Personal Jurisdiction

Connecticut General Life Insurance Company v. Pinkas, C.A. 5724-VCN (October 28, 2011)

It is sometime claimed that the act of incorporating a Delaware corporation is enough to subject the incorporator to jurisdiction in Delaware.  After all, an old case does do just that.  But as this decision points out, the act of incorporating has to be an integral part of the actions that give rise to the claims asserted.  That is not so easy to show and did not work in this case.

Superior Court Upholds Jurisdiction After Merger

Universal Capital Management Inc. v. Micco World Inc., C.A. 10C-07-039 RRC (June 2, 2011)

This is a useful case because it covers just about every basis to assert jurisdiction over non-Delaware residents for their actions in Delaware.  It also upholds jurisdiction over a former Delaware corporation that merged out of Delaware.

Court Of Chancery Explains Jurisdictional Discovery

Reid v. Siniscalchi,  C.A. 2874-VCN (January 31, 2011)

 When personal jurisdiction over a defendant is challenged, the plaintiff has the right to take limited "jurisdictional discovery."  Exactly what that means is well explained by this decision.

Delaware Supreme Court Affirms Forum Selection Clause

Ingres Corporation v CA Inc. , C.A. 105, 2010 (December 1, 2010)

This decision strongly affirms that a forum selection clause that picks Delaware is going to be enforced in Delaware.  That is true even when there is prior litigation elsewhere.

Delaware Superior Court Creates Commercial Litigation Division

Delaware's Superior Court has joined the ranks of courts in other states by creating a "business court" for commercial disputes between companies. The new "court" is technically a division within the existing Delaware Superior Court and has major advantages for resolving business disputes. Among those are:

1. Three very experienced judges have been assigned to cases filed in the new divisions and will stay with those cases until they are completed.

2. Each case will be subject to a tight case management order designed to control litigation expenses and keep the litigation moving to completion.

3. Discovery of electronically stored data will be subject to special "e-discovery' orders that will limit expense and avoid disputes.

4. Protocols are to be adopted for each case to control expert witness discovery and the recovery of inadvertently produced privileged information.

The creation of this new division followed an extensive review of business courts through out the United States by a Special Committee and adopts the best procedures of those other courts. The Delaware Superior Court and the Delaware Court of Chancery have been consistently voted the best courts for business disputes in the United States.  For more details, see the Administrative Directive establishing the new division and the Special Committee's report.

Court Of Chancery Upholds Forum Selection In England

Ashall Homes Limited v. ROK Entertainment Group Inc., C.A. 4643-VCS (April 23, 2010)

This decision is interesting because it upholds a forum selection clause requiring litigation in England.  How these parties could have not chosen Delaware seems unbeliveable.

The opinion also applied the forum selection not just to disputes that were based on the parties' contract, but also to tort claims that arose out of the same facts.  In short, you cannot plead around the forum you chose.

Supreme Court Clarifies Forum Non Conveniens Rules

Lisa, S.A. v. Mayorga,  C.A. 410, 2009  (Del.  April 20, 2010)

This decision clarifies the effect of where an action is first filed.  When the case is filed first in Delaware, a Delaware court may only dismiss it on the grounds the forum is inconvenient when the defendant can show it will be an "overwhelming hardship" to litigate it in Delaware.

On the other hand, when an action is first filed in a forum other than Delaware, the general rule is to defer to the other jurisdiction and stay or dismiss the second suit filed in Delaware.  While there are numerous exceptions to this general rule, the burden is much less to have the case dismissed.

Court of Chancery Extends Jurisdiction to Parent Entity

Vichi v. Koninklijke Philips Electronics N.V., C.A. 2578-VCP (December 1, 2009)

This decision provides a full review of the basis for jurisdiction over foreign entities by the Court of Chancery. This includes a discussion of the limits of the conspiracy theory of jurisdiction.

Most interestingly, the Court holds that a parent company may be subject to Delaware jurisdiction because of the acts of agents of its subsidiaries, at least when those agents had the apparent authority to act for the parent. That may occur when, as here, the parent entity touts the business interrelationship of it and all its subsidiaries. This is another example of getting not wanting what you wished for and a caution against ignoring the separateness of corporate entities in how they do business.

Court of Chancery Explains McWane Exceptions

Choice Hotels International Inc. v. Columbus-Hunt Park DR BNK Investors LLC, C.A. 4353-VCP (October 15, 2009)

Delaware courts frequently must decide if a case filed in Delaware should be stayed in favor of another action filed elsewhere. While we wonder why anyone would want to leave Delaware, it happens. This decision carefully reviews when even "summary" proceedings filed in Delaware may be stayed in favor of another litigation. When a "summary" proceeding seeks to determine who is in change of a Delaware entity, there is a policy against staying the action because of the need to promptly resolve that important issue.

This is a case where that policy did not overcome the rule that a first filed action should proceed even over a Delaware case. Of course, given that the plaintiff in Delaware had filed first in Maryland, that hurt its claim to proceed in Delaware. The use of a status quo order also mitigated against the need to move quickly in Delaware.

Court of Chancery Upholds Jurisdiction Over Nonresident Partner

Total Holdings USA Inc. v. Curran Composites, Inc., C.A. 4494-VCS (October 9, 2009).

In a case of first impression, the Court of Chancery has upheld its jurisdiction over a nonresident partner in a Delaware partnership. The current version of the Delaware Uniform Partnership Act authorizes jurisdiction over nonresident partners for disputes arising out of the internal affairs of the partnership. Here the parties' joint venture agreement expressly created a partnership "under Delaware law," and that was enough to support the Court's jurisdiction over a partner who had no other contact with Delaware.

Superior Court Holds Chancery Has Exclusive Jurisdiction To Appoint Arbitrator

Firemen's Insurance Co. v. Birch Pointe Condo. Assoc., Inc., C.A. No. 08C-04-081 JAP (Del. Super. Dec. 17, 2008).

In this decision, the Superior Court ruled sua sponte that it lacked subject matter jurisdiction over an action seeking declaratory relief and requesting the appointment of an arbitrator. The court held that under 10 Del. C. § 5704 the Court of Chancery has exclusive jurisdiction to appoint an arbitrator when the parties’ agreed upon method of appointment fails for any reason.   

Court of Chancery Denies Jurisdiction Over Stock Appreciation Rights Suit

Testa v. Nixon Uniform Service, Inc., C.A.3886-VCS (Del. Ch. Nov. 21, 2008)

In a novel attempt to invoke the jurisdiction of the Court of Chancery, the plaintiff tried to rely upon Section 111(a)(2) of the Delaware General Corporation Law that provides the Court of Chancery jurisdiction in disputes over stock. Here the plaintiff was really seeking money damages for the failure to be paid the full value of his SARs. The court held this was a claim for money damages that it did not have jurisdiction to decide, not a claim over ownership of stock.

District Court Denies Motion to Dismiss, Allows Duty of Care, Loyalty and Fraud Claims to Proceed

Ad Hoc Comm. of Equity Holders of Tectonic Network, Inc. v. Wolford, 2008 WL 212 7464 (D. Del. May 21, 2008)

The District Court recently allowed claims for breach of the duties of care and loyalty against former directors and officers of Tectonic Network, Inc. (the “Company”) to go forward, rejecting Defendants’ jurisdiction, standing and insufficient claim arguments. Plaintiff, an Ad Hoc Committee of Equity Holders in the Company, sued Defendants for purportedly improper conduct in connection with the acquisition of three businesses and the resulting sale of one of the Company’s subsidiaries. Plaintiff alleged that Defendant Officers (Officer #1 and Officer #2) committed fraud related to the Company’s actions, and all Defendants breached their fiduciary duties. Specifically, Plaintiff alleged that the Defendants breached their fiduciary duties in recommending and/or approving the acquisition of the three businesses, all of which Officer #1 had a majority interest in. Plaintiff also alleged that the Defendant Officers committed fraud in making material misrepresentations to the board regarding the profitability of the acquired businesses and the prospective profitability of a future business plan that resulted in the sale of the Company’s subsidiary. Subsequent to acquisitions and sales, the Company’s financial picture worsened, and it filed for voluntary Chapter 11 bankruptcy. The Bankruptcy Court lifted the stay to allow Plaintiff to press its claims outside of the bankruptcy proceedings.

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District Court Dismisses Declaratory Relief, Contract Claim for Lack of Personal Jurisdiction

Solae, LLC v. Hershey Canada Inc., 2008 WL 2011914 (D. Del. May 9, 2008)

Solae LLC (“Solae”), a Delaware LLC with a principal place of business in Missouri, brought a declaratory relief and breach of contract action in Delaware District Court against Hershey Canada, Inc. (“Hershey Canada”), a Canadian corporation with its principal place of business in Ontario. The claims arose out of a contract for Solea’s provision of soy lecithin to Hershey Canada’s Ontario facility. A shipment of the product contained salmonella, prompting a recall of Hershey Canada’s product in Canada and a Canadian government investigation. Hershey Canada informed Solae that it was liable for any ensuing damages from the recall and investigation, and also refused to accept or pay for additional deliveries of the product under the contract. Solae thereafter initiated this declaratory relief and breach action, and Hershey Canada sought dismissal, among other things, on lack of personal jurisdiction grounds. 

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Court of Chancery Upholds LLC Agreement Voting Rights

Fisk Ventuers LLC v. Segal, C.A. 3017-CC (Del. Ch. May 7, 2008)

A Delaware LLC is a creature of the members' contract. Here the LLC agreement gave voting rights to a class of members that effectively gave them veto rights over certain actions. When those members exercised those veto rights, the other members sued claiming that constituted a breach of duty. The Chancellor flatly rejected that argument as an attack on the veto rights that were given in the LLC Agreement.

The opinion also holds that a member's consultation with his designated managers on the LLC Board does not give Delaware jurisdiction over that member under the long arm statute's provisions that subject managers to jurisdiction in Delaware.

 

 

Delaware Retains Top Ranking for Fairness of Litigation Climate

For the seventh year in a row, Delaware received the highest score in a nationwide survey of state liability systems undertaken by the U.S. Chamber Institute for Legal Reform.  Delaware ranked at the top of eight of the twelve categories ranked, including judicial competence, judicial impartiality, timeliness of summary judgment or dismissal, treatment of class action suits, and overall treatment of tort and contract litigation.  The survey did record a slight decline from last year in Delaware's rankings of jury predictability and jury fairness.  The report can be viewed at www.instituteforlegalreform.com.

Court of Chancery Stays Action Against Bear Stearns In DE In Favor Of NY Proceedings

 In re The Bear Stearns Companies, Inc., Shareholder Litig., C.A. No. 3643-VCP (Del. Ch. Apr. 9, 2008).

In an opinion issued yesterday by Vice Chancellor Parsons (HT: M&A Law Prof and Pileggi), which you can access here, the Court of Chancery ordered a stay of the Delaware actions filed against Bear Stearns in favor of those filed in New York.  The Court’s reasoning recognizes the national importance of the matter and a concern for the stability of the financial markets and national economy.

This blog previously reported here on the class actions filed in Delaware against Bear Stearns and its directors, seeking to enjoin the sale to JPMorgan Chase.  A few days earlier, however, other Bear Stearns stockholders had filed similar suits in the New York Supreme Court.  Based on those earlier New York filings, the defendants moved the Court of Chancery to dismiss or stay the Delaware action.  This blog provided coverage of the oral argument here, remarking that the arguments raised several interesting questions, such as (1) the extent to which Delaware courts would defer to New York courts on matters of Delaware corporate law and (2) how Delaware courts would handle the issue of comity urged by the defendants. 

Those questions have now been answered.  The Court of Chancery decided to exercise its discretion to stay the Delaware proceedings for reasons of comity and the orderly and efficient administration of justice:

As discussed in this memorandum opinion, I have decided in the exercise of my discretion and for reasons of comity and the orderly and efficient administration of justice, not to entertain a second preliminary injunction motion on an expedited basis and thereby risk creating uncertainty in a delicate matter of great national importance.

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District Court Finds That Participation in Delaware Merger Confers Jurisdiction, Denies Motion to Dismiss

G & G LLC v. White, 2008 WL 205150 (D. Del. Jan. 25, 2008)

In this opinion declining to dismiss for lack of personal jurisdiction, the District Court found that it had personal jurisdiction over both the directors/officers of a Delaware corporation and over a foreign corporation that invested in a Delaware corporation. Plaintiff was a Virginia limited liability company that loaned $2.5 million to a Utah corporation. Plaintiff was granted a security interest in the Utah corporation’s assets, and perfected that interest by filing the required financing statements in Utah. However, the Utah corporation subsequently was merged with and into a Delaware corporation. Plaintiff asserted that this was done at the insistence of various defendants that were seeking to invest in the Utah corporation after Plaintiff informed them that it would not agree to subordinate its security interest to theirs. Plaintiff posited that the investor defendants thereafter controlled the Utah corporation and the Delaware corporation it was merged into, and fraudulently concealed the merger to prevent Plaintiff from perfecting its security interest upon the merger, while at the same time perfecting their own in Delaware. Plaintiff pointed to numerous instances where the Utah corporation, the Delaware corporation, their counsel, the directors/officers of the Delaware corporation (who were appointed by the investor defendants), and the investor defendants failed to notify Plaintiff of the merger and/or made misrepresentations regarding the continuing status of the corporation as a Utah corporation. Taking the allegations as true, the Court found that the actions of the investor defendants and the directors they appointed was sufficient to confer specific jurisdiction over them. 

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Superior Court: Equitable Counterclaim Does Not Equal Ticket to Chancery

Rembrandt Technologies, LP v. Harris Corp., 2007 WL 4237752 (Del. Super. Nov. 30, 2007). 

This decision demonstrates the willingness of Delaware courts to uphold the plaintiff’s choice of forum (between the Superior Court and the Court of Chancery), despite an argument by the defendant that transferring courts would allow the hearing of all claims and thus promote judicial economy. 

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Court of Chancery Upholds Jurisdiction Over Nonresident Attorney

Sample v. Morgan, C.A. No. 1214-VCS (November 27, 2007).

In this major decision, the Court of Chancery has upheld its jurisdiction over a non-Delaware attorney who is alleged to have aided and abetted a breach of fiduciary duty by directors. Given the breadth of this decision, it has major implications for counsel to Delaware corporations.

First, the Court held that the attorney's arranging for the filing of a certificate with the Delaware Secretary of State satisfied the single act required to permit service of process on the attorney and his law firm under the Delaware Long Arm Statute. That is nothing new under Delaware law as other decisions have held that filing of such a certificate meets the statutory requirement for service.

Second, the Court held, in what may prove to be its most controversial decision, that Due Process was satisfied in subjecting the attorney to jurisdiction by a Delaware court. Noting that this "is a highly unusual case", the Court had no problem holding that giving advice on Delaware law and controlling the course of litigation in Delaware justified subjecting the attorney to jurisdiction here. What may prove to be controversial, however, are sections of the opinion that suggest that regularly providing advice on Delaware corporate law is sufficient to satisfy the requirement of Due Process in asserting jurisdiction over the non-Delaware lawyer for claims arising out of that advice.

Finally, the opinion holds that an attorney may be held liable for aiding and abetting a breach of fiduciary duty when he knows his advice is being used to carry out the breach. This is important because the knowledge requirement may be satisfied when the lawyer claims expertise in Delaware law and his advice is wrong. The inference then is that he knows his advice is wrong. While this seems to go too far, it is not clear how far the logic of the opinion may be stretched by other courts.

Court of Chancery Limits Jurisdiction Over Officers

Ryan v. Gifford, C.A. No. 2213-CC (November 21, 2007).

In 2003, Delaware amended its long arm statute to cover corporate officers who served in that capacity after January 1, 2004. Past decisions under the director section of this statute have focused on when a defendant is subject to it for acts committed before the date the statute deems the defendant's holding a corporate office is consent to jurisdiction by a Delaware court. Consistent with that case law, this decision holds that prior bad acts do not constitute continuing wrongs that subject the defendant to Delaware jurisdiction after January 1, 2004.

Of course, the decision also holds that there are acts some of the defendants committed before that date which were further implemented after that date and that may subject them to jurisdiction. For example, receiving a back dated option before January 1, 2004 does not subject the officer to jurisdiction in Delaware unless after that date he commits further acts, such as concealing that the option was back dated.

District Court Grants All Motions to Dismiss in Anti-Trust Class Action

Howard Hess Dental Laboratories Inc. v. Dentsply Int'l, 2007 WL 2807292 (D.Del. Sept. 26, 2007)

This opinion resolved several motions filed in two different antitrust class actions (the “Hess” action and the “Jersey Dental” action). The District Court denied Plaintiffs’ motion for partial summary judgment in the Hess action and granted various Defendants’ motions to dismiss in the Jersey Dental action. Plaintiffs were dental laboratories that purchased dental products from one Defendant, Dentsply, a manufacturer and distributor of dental products. In the Hess action, Plaintiffs sued Dentsply for alleged antitrust violations in connection with an adopted policy providing that dental dealers promoting Dentsply’s product not add competitive product lines. In the Jersey Dental action, Plaintiffs sued Dentsply and twenty six dental dealers alleging antitrust violations arising from the same Dentsply policy. 

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District Court Allows Estoppel, Breach of Contract, Fraud Claims Against LLC Member, Dismisses Other Defendants

Christ v. Cormick, 2007 WL 2022053 (D.Del. Jul 10, 2007)

In this action for damages based on promissory estoppel, breach of contract, fraud and civil conspiracy, Plaintiff sued the founding member of a Delaware LLC (“Member Defendant”), as well as various foreign individuals and entities (“other Defendants”) associated with the Member Defendant. Plaintiff’s claim arose out of an alleged agreement with the Member Defendant to invest $350,000 in exchange for a 50% equity interest in a South African investment management corporation and a Delaware LLC which owned certain intellectual property rights. Plaintiff claimed that the Member Defendant accepted $250,000 from Plaintiff, but diverted the money to another entity he was affiliated with. Plaintiff further alleged that the Member Defendant promised to repay Plaintiff the $250,000 that was invested, but did not do so. The Defendants moved to dismiss the action under F.R.C.P. Rule 12(b)(2) for lack of personal jurisdiction. The Defendants also moved for dismissal of the conspiracy claim under F.R.C.P. Rule 12(b)(6) for failure to state a claim, and dismissal of both the fraud and conspiracy claims as being outside the statute of limitations. Finally, the Defendants moved for a stay of the action under principles of comity in favor of Plaintiff’s earlier filed action in South Africa.

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District Court Grants Canadian Corporation's Motion to Dismiss for Lack of Jurisdiction

Alcoa Inc. v. Alcan Inc., C.A. No. 06-451-SLR (D.Del. July 17, 2007)

 

In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property, the contamination was detected. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff rejected the indemnification demand under the argument that it was outside the scope of the acquisition agreement, and sought declaratory judgment that it was not liable to any of the Defendants. Defendant 3, a Canadian corporation, moved to dismiss for lack of personal jurisdiction.

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District Court Declines to Exercise Supplemental Jurisdiction Over Fiduciary Duty Claims, Grants Motion to Dismiss

Lemon Bay Partners LLP v. Hammonds, C.A. No. 05-327 (D.Del. June 26, 2007)

 

In this shareholder derivative action for breach of fiduciary duties against various corporate defendants, the Court held that the state law claims asserted so predominated the lone federal claim that exercise of supplemental jurisdiction was inappropriate. Plaintiffs, former shareholders of MBNA Corporation, asserted various claims against the defendants based on breach of fiduciary duties in connection with earnings reports and the merger of MBNA with Bank of America. Defendants moved to dismiss based on lack of subject matter jurisdiction, arguing that the Plaintiffs’ sole claim that rested on federal jurisdiction was so predominated by the state law claims as to make the exercise of the Court’s supplemental jurisdiction inappropriate. The Court concurred with the defendants, concluding that Plaintiffs’ federal law claim bore only a tangential relationship to the rest of the claims. The Court therefore granted Defendants’ motion to dismiss for lack of subject matter jurisdiction. 

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District Court Finds Claims Don't Implicate ERISA, Remands to Superior Court

Gallagher v. E.I. Du Pont de Nemours & Co., C.A. No. 07-47-JJF (D. Del. June 19, 2007).

In this suit for breach of contract, specific performance, and wages under the Delaware Wage Payment and Collection Act, Plaintiff filed the action in Superior Court. Defendant subsequently filed Notice of Removal to the District Court, asserting that the state law claims were completely preempted by ERISA. The Court held that Plaintiff’s claims did not implicate ERISA, and no grounds existed for federal jurisdiction. Plaintiff’s Motion to Remand to Superior Court was therefore granted.

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Court of Chancery Denies Stay Even When Not First Filed

In re: The Topps Company Shareholder Litigation, C.A. No. 2786-VCS (Del. Ch. May 9, 2007).

The race is not always won by the first to start. In this case the Court of Chancery declined to stay a Delaware case attacking a proposed merger even though a similar New York case had been filed earlier. Explaining that the internal affairs doctrine leaves to the state of incorporation the right to decide internal corporate legal issues, the Court of Chancery held it would proceed with this case.

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District Court Rejects Federal Jurisdiction Over Breach Claims, Remands to Superior Court

CIT Commc’ns Fin. Corp. v. Level 3 Commc’ns, LLC, 2007 WL 951799 (D.Del. Mar. 29, 2007).

 

In this suit alleging breach of contract, unjust enrichment and conversion, Plaintiff moved for the District Court to remand the case to Delaware Superior Court, asserting that the District Court did not have subject matter jurisdiction. Plaintiff leased a telephone system to a company that later filed for bankruptcy. Through that bankruptcy, Defendants acquired the telephone system lease from the debtor, and the debtor was later liquidated pursuant to the Bankruptcy Court’s Confirmation Order. After the dissolution, Plaintiff filed several claims in the bankruptcy proceedings related to lease payments due by the debtor prior to Defendants’ acquisition of the lease. Plaintiff later filed the breach of contract, unjust enrichment and conversion claims against Defendants in the Delaware Superior Court, based on non-payment of Defendants’ non-payment of obligations under the acquired lease. Defendant filed notice of removal of the suit to federal court, alleging that the claims were pending in, and therefore related to, the bankruptcy proceedings, such that the District Court had subject matter jurisdiction over the claims. In seeking remand, Plaintiff argued that the claims against Defendants existed independent of the bankruptcy, such that the federal court did not have subject matter jurisdiction.

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Court of Chancery Limits Forum Selection

Troy Corporation v. Schoon, C.A. No. 1959-VCL (Del. Ch. March 26, 2007).

Forum selection clauses will be upheld by Delaware courts. However, when the dispute that is the subject of litigation in Delaware is not clearly subject to a contract clause requiring the dispute to be litigated elsewhere, the Delaware courts will not enforce such an unclear contract provision to bar litigation here.

In this decision, the contract required any litigation to be filed in federal court in New York. However, the federal courts lacked jurisdiction over the dispute set out in the complaint filed in Delaware. Thus, the Court of Chancery held that the forum selection clause was not enforceable.

This result illustrates the need to carefully draft forum selection clauses as they will not be read expansively.

Federal Court Grants Renewal of Motion To Demonstrate Jurisdiction

Remote Solutions Co., Ltd. v. FGH Liquidating Corp., Civil Action No. 06-004-KAJ, 2006 WL 3498657 (D. Del. Dec. 5, 2006).

Plaintiff filed a Motion for Reconsideration and to Amend the Court’s earlier Memorandum Order in which it denied the plaintiff’s motion to vacate or modify an arbitration award for failing to demonstrate a proper basis for subject matter jurisdiction. The plaintiff now sought to have the Court amend its order so it could cure the jurisdictional defect. The Court granted the motion to the extent that the plaintiff could renew its prior motion to vacate or modify the arbitration award by demonstrating proper subject matter jurisdiction.

The Court also permitted the motion to relate back to the date of the original filing. It further permitted the defendant to move independently for confirmation of the arbitration award regardless of the course of action chosen by plaintiff.

Federal Court Permits Motion To Transfer Using Multi-Factor Balancing Test

Weisler v. Barrows, C.A. No. 06-362 GMS, 2006 WL 3201882 (D. Del. Nov. 6, 2006).

Plaintiff, a shareholder of Sycamore Networks, Inc. (“Sycamore”), a Delaware corporation with its principal place of business in Massachusetts, brought this derivative action against several of its directors and officers, including its chairman, CEO and CFO. The complaint alleged six counts: (1) a count against each director for section 14(a) violations of the Securities and Exchange Act of 1934 (“Exchange Act”); (2) one count of disgorgement against four directors under section 304 of the Sarbanes-Oxley Act of 2002 (“Oxley Act”); (3) one count of breach of fiduciary duty against all directors; (4) one count of unjust enrichment against five directors; (5) one count of gross mismanagement against all defendants; and (6) one count of waste of corporate assets against all defendants.

The defendants moved to transfer the matter pursuant to 28 U.S.C. § 1404(a) and the Court granted the motion because it would convenience the parties and witnesses and serve the interests of justice.

The plaintiff alleged that the defendants had jointly and severally breached their fiduciary duties of care, loyalty, good faith, and candor by failing to: (1) discover or prevent the intentional manipulation of stock option grants between 1999 and 2004; (2) prevent the misreporting of earnings that was caused by the manipulation of the option grants; (3) oversee the administration of Sycamore’s stock-based compensation plans; (4) ensure Sycamore operated in compliance with applicable state and federal laws pertaining to dissemination of financial statements; (5) ensure the company did not engage in any improper or illegal practices; and (6) ensure that the company’s financial statements were compliant with GAAP. The conduct is alleged to have violated section 14(a) of the Exchange Act and section 304 of the Oxley Act.

The Court permitted the transfer of the matter on its individualized consideration of the motion under section 1404(a) and on whether it would convenience the parties and witnesses and serve the interests of justice. The Court also held that it was the defendants’ burden to establish the need for transfer. The Court observed that the standard for transfer did not demand a demonstration of compelling circumstances; rather, the defendants only needed to show that the case would be better off if transferred to the other jurisdiction. That inquiry required a “multi-factor balancing test” that consisted of not only the convenience of the parties and the witnesses but also the examination of certain public and private interests. The Court listed the private interests as: (1) a plaintiff’s choice of forum; (2) the defendant’s preference; (3) where the claim arose; (4) the convenience of the parties and witnesses; and (5) the location of the books and records. The Court listed the public interests as: (1) the judgment’s enforceability; (2) practical trial considerations making it easy, expeditious or inexpensive; (3) the administrative difficulty presented in the two fora; (4) local interest in deciding the controversy at home; and (5) the public policies of the fora under consideration. The Court found that the private and public factors weighed in favor of transfer and therefore permitted the defendants’ motion.

Federal Court Dismisses Class Action For Lack Of Diversity

Davis v. Union Pacific Railroad Co., C.A. No. 06-128 KAJ, 2006 WL 3218707 (D. Del. Nov. 7, 2006).

Plaintiff, an incarcerated citizen of Nebraska, instituted a diversity-based class action for personal injuries allegedly sustained from lead poisoning from the soil in that state. Defendant, a Delaware corporation with its principal place of business in Nebraska, moved to dismiss for lack of subject matter jurisdiction. The Court dismissed the Complaint for lack of diversity under 28 U.S.C. § 1332 because both parties were citizens of Nebraska. The Court ruled that a corporation’s citizenship may be derived from its place of incorporation and its principal place of business.

Court of Chancery Interprets Common Merger Clause

ATS, Inc. v. Bachmann, C.A. No. 2374-N (Del. Ch. October 11, 2006).

Delaware corporations frequently ask the Court of Chancery to decide if a proposed course of action is appropriate, particularly when the board of directors' fiduciary duties are implicated. In this decision the Court focused primarily on when the Court may provide that guidance and when the matter is not ripe for judicial action. The Court has rejected becoming involved in hypothetical issues not framed by a real world transaction, but more of a "what if" set of questions. Here, the Court accepted one question for its review and rejected others, thereby illustrating how it will deal with those situations.

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District Court Dismisses Breach of Contract and Misappropriation of Trade Secrets Action for Lack of Personal Jurisdiction

Childcraft Education Corp. v. Alice's Home, et al., C.A. No. 05-461 (GMS) (D. Del. May 22, 2006).

Plaintiff filed complaint alleging breach of contract, miappropriation of trade secrets and unjust enrichment claims. Defendants moved to dismiss the action for lack of personal jurisdiction.

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Delaware Supreme Court Reverses Forum Non Conveniens Dismissal

Berger v. Intelident Solutions, Inc., No. 596, 2005, 2006 WL 1132079 (Del. Apr. 26, 2006).

Plaintiff, a minority shareholder in a Florida corporation, filed a breach of fiduciary duty action in connection with a freeze-out merger. The sole defendants were a Nevada limited partnership, which was the ultimate controlling entity of the Florida corporation, and a Delaware corporation formed to serve as an intermediate holding company in connection with the merger. Defendants moved to dismiss based on forum non conveniens, arguing that forcing them to litigate in Delaware would impose an overwhelming hardship. The Court of Chancery granted that motion, finding that the dispute would be more appropriately litigated in Florida and that Defendants had met the exacting standard applied in assessing forum non conveniens motions.

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District Court Denies Motion to Dismiss Declaratory Judgment Action for Lack of Jurisdiction and Failure to Allege a Controversy of Sufficient Immediacy

Shamrock Holdings of Ca., Inc. v. Arenson, C.A. No. 04-1335-SLR, 2006 U.S. Dist. LEXIS 9835 (D. Del. Mar. 14, 2006).

Plaintiff Shamrock Holdings of Ca., Inc. ("Shamrock") was a Class A member of ALH Holdings, Inc. ("ALH"), a Delaware limited liability company, and the other plaintiffs were employees and/or members of ALH's Supervisory Board (the "Board"). In connection with the failure of ALH's business, and its investors' subsequent loss of their investments, plaintiffs filed an action in the Court of Chancery seeking a declaration that (i) they did not breach ALH's operating agreement; (ii) they did not breach their fiduciary duties as ALH employees, members or Board members; (iii) they had relied in good faith on the advice of experts and professionals in making their decisions; (iv) they were not liable to the defendants under the terms of a consulting agreement; and (v) they were entitled to advan

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Court of Chancery Permits Third Complaint Amendment In Nigerian Judgment-Enforcement Action

Harry A. Akande v. Transamerica Airlines, Inc., et al., C.A. No. 1039-N, 2006 WL 587846 (Del. Ch. Feb. 28, 2006).

This is a motion to amend the Complaint under Court of Chancery Rules 15(a) and 15(aaa) for the third time before the Court of Chancery, involving a foreign judgment enforcement action. Plaintiff sought to withdraw his petition for receivership and add factual predicates to various claims he made. In an earlier hearing, the Court of Chancery permitted plaintiff's motion for discovery and converted the defendants' motion for dismissal upon plaintiff's motion to one of summary judgment.

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Court of Chancery Dismisses Caremark Claims But Retains Loyalty And Fraud Counts

Canadian Commercial Workers Industry Pension Plan v. Eric Alden, et al., C.A. No. 1184-N, 2006 WL 456786 (Del. Ch. Feb. 22, 2006).

In this derivative action brought against four former directors and officers of Case Financial, Inc., the nominal defendant, the two remaining defendants moved to dismiss after two others settled. Plaintiff alleged breach of loyalty, breach of the Caremark duty of oversight, corporate waste and common law fraud. The Court of Chancery partly granted the motions.

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Court of Chancery Holds "Anti-Reliance" Contract Provisions Cannot Exclude Liability For Fraudulent Misrepresentations

Abry Partners V, L.P., et al. v. F&W Acquisitions LLC, et al., C.A. No. 1756-N, (Del. Ch. Feb. 14, 2006) (published at 891 A.2d 1032 (Del. Ch. 2006).

This is plaintiffs' suit for rescission of a corporate acquisition contract. The seller moved to dismiss the case for failure to state a claim. The court focused on the law and policy of the unambiguous bar to recessionary relief and limitations in damage recovery for misrepresentations through the contract's exclusive indemnity-limiting provision.

The court reconciled the power of privately ordered contracts allocating risk between the parties and Delaware's public policy disfavoring a bar on recessionary remedies and damages for willful misrepresentations. Additionally, the court examined the elective remedies available to the plaintiff-buyer.

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Superior Court Grants Defendant's Motion to Dismiss for Lack of Personal Jurisdiction

Hutchison v. Bruehl, C.A. No. 05C-07-047 (JTV), 2006 WL 1149151 (Del. Super. Jan. 31, 2006)

Plaintiff's father had an interest in gas and oil property in West Virginia from which he received royalties through an agent in Maryland. When her father died, the right to the royalties passed to Plaintiff. Agent failed to make payments until Plaintiff took steps to stop payment through the agent and have checks sent directly to her. She then sued to recover the funds kept by the agent in the interim. Defendant agent moved to dismiss, claiming Delaware lacked personal jurisdiction over him as a Maryland resident.

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Court Of Chancery Upholds Voluntary Advancement Provisions Irrespective Of Alleged Wrongful Conduct

Radiancy, Inc. v. Zion Azar, et al., C.A. No. 1547-N, 2006 WL 224059 (Del. Ch. Jan. 23, 2006).

This is a summary judgment motion for advancement of legal fees made by defendant-officers. Their corporation alleged fraud, fiduciary violations and usurpation of corporate opportunity against defendants as a bar to advancement. Defendants replied with counterclaims under their respective employment contracts. The motion was granted and denied in part.

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Court Of Chancery Permits Interlocutory Appeal On Poison Pill Contract Issues

Unisuper, Ltd. v. New Corporation, C.A. No. 1699-N (Del. Ch. Jan. 20, 2006).

Opinion and order granting interlocutory appeal on two contract issues, after court dismissed corporate allegations of fraud, negligent misrepresentation and fiduciary duty breach.

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Federal Court Transfers Venue Under The Jumara v. State Farm Ins. Co. Articulation Of 28 U.S.C. Section 1412 Multifactor Considerations.

Bank of America, N.A. (USA) v. US Airways, Inc., No. Civ. A. 05-793-JJF, 2005 WL 3525680 (D.Del. Dec. 21, 2005).

This is an action founded on tort and breach of contract.

The Court granted defendants' motion to transfer the action to the Eastern District of Virginia and denied, without ruling, plaintiff's motion for expedited remand to the Delaware Court of Chancery.

Defendants include three Delaware entities: US Airways, Inc., US Airways Group, Inc., and America West Airlines, Inc. The first two defendants maintained their principal place of business in Virginia. America West, Inc., maintained its principal place of business in Arizona. Additionally, Juniper Bank intervened as a defendant.

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Actions Filed Four Months Apart Treated as Contemporaneous Filings for Purposes of Forum Non Conveniens Analysis

Rapoport v. The Litigation Trust of MDIP Inc., C.A. No. 1035-N, 2005 WL 3277911 (Del. Ch. Nov. 23, 2005).

Former directors moved to dismiss breach of fiduciary duty action brought against them by bankruptcy liquidation trust in Delaware District Court for lack of subject-matter jurisdiction. That same day, the former directors filed a parallel action in the Court of Chancery seeking a declaration that they did not breach their fiduciary duties in connection with the conduct challenged in the District Court action. Four months later, the directors' motion to dismiss was granted. The following day, the trust re-filed its breach of fiduciary duty action in Ohio state court. The directors moved to enjoin the trust from prosecuting the Ohio action. The trust cross-moved to stay or dismiss the Chancery action. The court denied both parties' motions.

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Superior Court Holds that a California Company that Places a Product in the "Stream of Commerce" Does Not Have Sufficient Contacts with Delaware for the Court to have Personal Jurisdiction over the Defendant

Sheer Beauty, Inc. v. Mediderm Pharmaceuticals & Laboratories, C.A. No. 05C-02-174 MMJ, 2005 WL 3073670 (Del. Super. Ct. Oct. 27, 2005).

The plaintiff brought a claim against the defendant for breach of contract, fraudulent misrepresentation, negligent misrepresentation, consumer fraud, and breach of express and implied warranties. The defendant, whose principle place of business was in California, moved to dismiss for lack of personal jurisdiction, and the court granted the defendant's motion

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Court of Chancery Finds LLC Member Had Standing To Bring Derivative Claims On Behalf Of LLC, But That Her Claims Were Subject To Arbitration

Ishimaru v. Fung, C.A. No. 929, 2005 WL 2899680 (Del. Ch. Oct. 26, 2005).

Plaintiff, a member of Paradigm Financial Products International LLC, sought to assert a cause of action on behalf of Paradigm against Defendant Ivy Asset Management Corp. for breach of contract. Ivy Asset moved to dismiss for lack of subject matter jurisdiction.

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Court of Chancery Vacates Arbitration Panel's Award

Travelers Ins. Co. v. Nationwide Mut. Co., C.A. No. 20418, 2005 WL 2896713 (Del. Ch. Oct. 25, 2005).

Plaintiff, insurer of motorist, sued Defendant, insurer of tortfeasor, to enforce arbitration award. Defendant moved for summary judgment.

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Federal Court Denies Transfer of Venue Applying Jumara Balancing Test

Ace Capital v. Varadam Foundation, 392 F.Supp.2d. 671 (D.Del. 2005).

This action arose under the admiralty and maritime jurisdiction of the Federal Court. Marine insurers Ace Capital filed in the United States District Court for the District of Delaware for declaratory judgment against the insured, Varadam Foundation, a Delaware corporation, and Jaime Jalife, the owner of the vessel, a citizen of Mexico. The suit was filed to seek a determination that the marine policy between the parties excluded coverage for damages sustained by the insured's vessel. Defendant Varadam moved to transfer the venue to Florida pursuant to 28 U.S.C. § 1404(a). The Court denied the motion applying the Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995) balancing test.

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District Court Denied Transfer to Other Venue Pursuant to Service of Suit Clause in Marine Insurance Policy

Ace Capital v. Varadam Foundation, 392 F.Supp.2d 671 (D.Del. 2005).

The United Stated District Court for the District of Delaware denied Defendants' Motion to transfer venue, finding that a clause in a marine insurance policy which governed service of suit did not mandate choice of venue.

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District Court Rules That Spanish Subsidiary of Delaware Parent Corporation is an Indispensible Party to Allegations under DUTSA

Ethypharm S.A. France v. Bentley Pharmaceuticals, Inc., 388 F. Supp. 2d 426 (D.Del. 2005).

United States District Court for the District of Delaware considered motions to dismiss for failure to join an indispensable party and a motion to dismiss various common law counts are precluded by the Delaware Uniform Trade Secret Act ("DUTSA").

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Court of Chancery Enjoins Consummation Of Purchase Agreement Pending Arbitration

Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. Sept. 20, 2005).

Plaintiff sought preliminary injunction against consummation of Purchase Agreement pending arbitration of its substantive disputes with Defendant.

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District Court Finds Consumer Lacks Standing to Bring Claim under DTPA Against Seller of Chartered Motor Yacht Services

Worldspan, L.P. v. The Ultimate Living Group, LLC, 390 F.Supp.2d 412 (D.Del., 2005).

United States District Court for the District of Delaware considered a motion to dismiss a claim alleging breach of a maritime contract for a one-day charter of a motor yacht, unjust enrichment, conversion and a violation of Delaware's Deceptive Trade Practices Act ("DPTA").

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Federal Court Denies Remand Motion Despite Delaware Dissolution and Fiduciary Claims

Polak v. Kobayashi, No. Civ. A. 05-330 JJF, 2005 WL 2008306 (D.Del. Aug. 22, 2005).

Plaintiff filed a motion to remand a matter involving several Delaware state law claims, alleging lack of subject matter jurisdiction and because complete diversity of citizenship did not exist. Alternatively, plaintiff claimed that the Court should decline to exercise jurisdiction on the Burford abstention doctrine. Defendant filed a motion to remove the case pursuant to 28 U.S.C. §§ 1441 and 1446 to the District Court for the District of Hawaii. The court denied the motion to remand.

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Superior Court Refuses to Dismiss Delaware Action, But Stays Delaware Action in Favor of Michigan Action

Royal Indem. Co. v. General Motors Corp., C.A. No. 05C-01-223 RRC, 2005 WL 1952933 (Del. Super. Ct. July 26, 2005).

Royal Indemnity Company ("Royal") sought a declaratory judgment to determine whether it had an obligation to General Motors ("GM") in relation to insurance purchased by GM over the course of several decades from Royal. GM filed a motion to dismiss on forum non conveniens grounds, and the Court denied the motion to dismiss.

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Federal Court Declines To Exercise Jurisdiction Involving Predominantly State Law Claims

In Re Litigation Trust of MDIP, Inc., No. Civ.A. No. 03-779GMS, 2005 WL 1242157 (D.Del. May 25, 2005).

The Court considered six motions in this action: (1) motion to dismiss Count I, seeking to recover damages from directors for breach of fiduciary duties of care, duty and loyalty and to dismiss Count II, asserting a claim for damages against director Rapoport; (2) a motion for partial summary judgment on both counts above; (3) a motion to strike the plaintiff's summary judgment affidavits; (4) a motion to strike the plaintiff's jury demand; (5) a motion in limine for exclusion of evidence and testimony not disclosed in plaintiff's responses and contention interrogatories; and (6) a motion in limine to preclude evidence relating to events that took place prior to August 6, 1998. The Court granted the motions to dismiss Counts I and II but denied the other motions as moot to the extent they related to Counts I and II.

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Federal Court Denies Motion To Remand Because Plaintiffs Demand For Coverage Met the Amount-In-Controversy Requirement

Eames v. Nationwide Mut. Ins. Co., No. CIV.A. 04-1324-KAJ, 2005 WL 1385130 (D.Del. Apr. 27, 2005).

The plaintiffs filed a Motion to Remand a proposed class action involving insurance issues. The defendant removed the action from the Delaware Superior Court under 28 U.S.C. § 1441, diversity jurisdiction. The plaintiffs alleged that because the amount requirements under 28 U.S.C. § 1332 ($75,000) were not met, the action merited remand. The Court denied plaintiffs' motion.

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Federal Court Dismisses Claim Of Personal Jurisdiction Because Website Listing Did Not Meet Due Process Requirement

Kalk v. Fairfield Language Technologies, No. Civ.A. 04-1486-JJF, 2005 WL 945715 (D.Del. Apr. 22, 2005).

Pro se Plaintiff, a resident of Delaware, filed a Complaint against defendants' alleging tort claims. Defendants' filed a Motion to Dismiss the Complaint. The background to the suit involved violation of an alleged non-competition covenant by Plaintiff. Plaintiff alleged that subsequently, Defendants' caused the termination of his employment from Auralog, Inc., by sending a letter to them. Plaintiff filed this Complaint which alleged Tortious Interference with Contract and Conspiracy Against Rights.

Plaintiff claimed that the court had subject matter jurisdiction under diversity of citizenship. However, Plaintiff failed to allege sufficient facts to demonstrate personal jurisdiction over the defendants'. Accordingly, the court granted the Motion to Dismiss for lack of personal jurisdiction because: (1)Defendant Fairfield Language Technologies et al was a Virginia incorporated entity with its principal place of business in that state; (2) its President and Chairman, Defendant Eugene Stoltzfus, resided and worked in Virginia; (3) Defendant Kathryn S. Fairfield, its General Counsel likewise was a resident and worked in Virginia; and (4) none of the Defendants' had "purposefully availed" business in Delaware.

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Court of Chancery Dismisses Attorney General's Claims under the Consumer Fraud Act and the Deceptive Trade Practices Act as Being Time Barred, but Sustains Claim under the Health Spa Regulation

State ex rel. Brady v. Pettinaro Enterprises, 870 A.2d 513 (Del. Ch. 2005).

Attorney General brought consumer protection action under the Consumer Fraud Act, the Deceptive Trade Pratices Act, and the Health Spa Regulation against developer of condominium complex, alleging, among other things, that developer misled condominium purchasers into believing that clubhouse was part of the complex. Developer moved to dismiss action on the basis that the statute of limitations barred the Attorney General's claims and for failure to state a claim under the Deceptive Trade Practices Act. The court granted in part and denied in part Defendants' motion to dismiss.

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Federal Court Orders Supplementation Of Record With Citizenship Status Of LLC Members In Motion To Remand

Shamrock Holdings of California, Inc. v. Arenson, No. Civ. 04-1339-SLR, 2005 WL 400198 (D.Del. Jan. 27, 2005).

Plaintiffs commenced an action for declaratory relief pursuant to 10 Del. C. §§ 6501 et seq. (2004) in the Delaware Court of Chancery. The defendants had earlier threatened to sue the plaintiffs for "millions of dollars." The defendants removed the action to the federal court and filed separate motions to dismiss which were stayed under mutual stipulations, pending resolution of plaintiffs Motion to Remand. The Court ordered the defendants to supplement the record with respect to certain corporate members of defendants SELK and Laurel Equity Group, LLC. The Court also admonished the defendants that a failure to timely supplement the record would result in the grant of plaintiffs' Motion to remand.

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Court of Chancery Dismisses Claims Against Third-Party Defendants for Lack of Personal Jurisdiction Despite Officer and Agent Status

Amaysing Technologies Corp. v. CyberAir Communications, Inc., 2005 WL 578972 (Del. Ch. March 3, 2005).

Amaysing Technologies Corp. ("ATC") brought an action for breach of a loan agreement against CyberAir Communications, Inc. ("CyberAir"). CyberAir filed a third-party complaint alleging various misrepresentations and frauds against Robert Mays, Jr., and Raymond Atilano, both of whom were officers and shareholders of ATC, and Med Fadel, an agent of ATC (together referred to as "Third-Party Defendants"). Third-party Defendants filed a motion to dismiss under Court of Chancery Rule 12(b)(2) for lack of personal jurisdiction, which the court granted.

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Court Of Chancery Ropes In Florida Corporation On Conspiracy Theory For Jurisdictional Nexus

Benihana of Tokyo, Inc. v. Benihana, Inc., et al., C.A. No. 550-N (Del. Ch. Feb. 28, 2005).

This case deals with several motions to dismiss on several grounds, the upholding of personal jurisdiction under a conspiracy or aiding/abetting theory and plaintiff's request for a declaratory judgment.

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Federal Court Approves Transfer Of Case To Connecticut Court Based On Valid Forum-Selection Clause In Franchise Agreement

Bbdova, LLC v. Automotive Technologies, Inc., 358 F.Supp.2d 387 (D.Del. 2005).

This is a diversity suit between plaintiff, a New Jersey limited liability corporation authorized to do business in Delaware with its principal place of business in Newark, Delaware and a Connecticut corporation with its principal place of business in that state. Defendant operated a business of franchising third parties to own and operate retail wireless stores. The plaintiff filed for declaratory judgment, challenging the validity of the Franchise Agreement and its Amendment. The defendant removed the case to the Federal District Court for the District of Delaware and then sought to either dismiss the case or transfer it to a court in Connecticut. The Court approved the forum selection clause and ordered transfer.

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Federal Court Declines To Transfer Case To Arizona After Applying The Jumara Test

J-Squared Technologies, Inc. v. Motorola, Inc., No. Civ.04-960-SLR, 2005 WL 388599 (D.Del. Feb. 4, 2005).

Plaintiff brought suit alleging: (1) breach of contract; (2) promissory estoppel; (3) negligent misrepresentation; (4) breach of the duty of good faith and fair dealing; and (5) violation of Arizona's Consumer Fraud Act. Plaintiff sought compensatory and punitive damages. The defendant moved to transfer the action to the District of Arizona or alternatively dismiss the case under Fed.R.Civ.P. 9(b) and 12(b)(6). The Court denied the Motion to Transfer.

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Plaintiff Loses Motion To Dismiss For Lack Of Jurisdiction

American Scheduling, Inc. v. Radiant Systems, Inc., C.A. No. 725-N, 2005 WL 736889 (Del. Ch. Feb. 09, 2005).

This is a motion to quash jurisdictional discovery. The court granted the motion, quashing the discovery.

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Court Tolls Appraisal Statute Despite First-Filing In Bankruptcy Court

Encompass Services Holding Corp. v. Prosero Incorp. f/k/a FacilityPro.com Corp., C.A. No. 578-N, 2005 WL 332810 (Del. Ch. Feb. 03, 2005).

This is a 8 Del. C. §262 share appraisal case brought by a "debtor in possession" after the dismissal of its earlier filed adversarial proceeding in the bankruptcy court.

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Superior Court Holds That It Has Personal Jurisdiction Over Foreign Limited Partnership Because of Forum Selection Clause in Contract

Alstom Power Inc. v. Duke/Fluor Daniel Caribbean S.E., C.A. No. 04C-02-275 CLS, 2005 WL 407206 (Del. Super. Ct. Jan. 31, 2005).

The plaintiff brought a breach of contract action in Superior Court. The defendant moved to dismiss for lack of personal jurisdiction. The court accepted the plaintiff's argument that it was appropriate for the court to exercise personal jurisdiction based on a forum selection clause in the contract.

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Federal Court Permits New York's Longer Statute Of Limitations Applying Delaware's Borrowing Statute And Case Law

B. Lewis Productions, Inc. v. Bean, No. 02-93-KAJ, 2005 WL 273298 (D.Del. Jan. 28, 2005).

The central dispute in this Memorandum Order that dealt with a motion in limine was which statute of limitations applied: Delaware's three year statute or New York's six year statute. Plaintiff brought a breach of contract and fraud action under the diversity jurisdiction of the Court. Plaintiff, counterclaim defendant and third-party defendant Butch Lewis ("Lewis"), a Delaware citizen, filed a motion in limine to prevent Vaughn Bean ("Bean"), a defendant and a citizen of Illinois, from introducing evidence of damages at trial predating February 4, 1999, under statute of limitation grounds. The Court denied the motion.

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Federal Court Denies Motion To Transfer Applying The Jumara Public-Private Balancing Factors

Kuck v. Veritas Software Corp., No. Civ. 04-831-SLR, 2005 WL 123744 (D.Del. Jan. 14, 2005).

Defendant filed a Motion to Transfer in a matter involving securities violations. The defendants sought to transfer the matter to the Northern District of California. The Court denied the defendants' motion.

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Corporation Seeking Injunction, Declaratory Judgment, Specific Enforcement And Contract Damages Prevails In Court of Chancery On Dismissal Motions

Randall Jacobson and Technology Development Corp. (USA), Ltd. v. Alfred Ronsdorf, C.A. No. 518-N, 2005 WL 29881 (Del. Ch. Jan. 06, 2005),aff'd, 2006 WL 212194 (Del. Ch. Jan 26, 2006) (TABLE).

Plaintiff-corporation, its president and major stockholder sought to enjoin defendant, a purported stockholder and former officer from acting as an officer or pursuing any claim against any officer, shareholder or contractor of the plaintiff company. Plaintiff also pursued a declaratory judgment that defendant was not an officer or director of the plaintiff under 8 Del. C. §225 and further sought to specifically enforce a stock-transfer agreement with defendant. Defendant sought to dismiss for lack of personal and subject matter jurisdictions and for forum non conveniens.

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Superior Court Grants Defendant's Motion to Dismiss Based on Doctrine of Res Judicata

Best Drywall Inc. v. Feeheley, C.A. No. 03C-04-005 (Del. Super. Ct. Jan. 6, 2005)

The plaintiff brought an action against a former officer for fraud, unjust enrichment, and breach of fiduciary duty. The defendant moved to dismiss based on doctrine of res judicata because a similar case had been brought and dismissed for failure to prosecute in the Court of Chancery. The Superior Court granted the motion to dismiss.

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