Delaware Business Litigation Report

Court of Chancery Stays Litigation in Favor of First-Filed Suit in Another Jurisdiction under McWane

W.C. McQuaide, Inc. v. Leland R. McQuaide, et al., C.A. No. 612-N, 2005 WL 1288523 (Del. Ch. May 24, 2005) Court considered a motion to dismiss or stay this action in favor of an earlier filed case in Pennsylvania. The Court concluded that the Pennsylvania Action was first-filed and that this case should be stayed pending resolution of that action. The parties' dispute regarded the validity of a transfer of 50% of the stock of W.C. McQuaide, Inc., a Delaware corporation (the "Company"), from defendants Leland McQuaide and Nora Gene Walker to R. Tim McQuaide. The Company refused to issue stock certificates to Tim, contending that the transfer violates a stock transfer restriction adopted at a meeting of the Company's Board of Directors in 1960. On March 11, 2004, the Pennsylvania Plaintiffs filed the Pennsylvania Action. That action sought an order compelling William and Stan to issue stock certificates to Tim. The Complaint did not name the Company as a party. The Company filed the Delaware Action on July 30, 2004. William and Stan, as officers and directors of the Company, approved the Company's hiring of counsel and authorized the filing of that Complaint. Under McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng'g Co., 263 A.2d 281, 283 (Del. 1970), a key consideration is whether the first-filed action involves "the same parties and the same issues" as the competing action. The first step of the McWane analysis is to determine whether the foreign action is first-filed. Next the Court must determine whether the issues in this action and the competing action are substantially or functionally identical. The court maintained the stay of the Delaware litigation, finding that "[A] defendant should not be permitted to defeat the plaintiff's choice of forum in a pending suit by commencing litigation involving the same cause of action in another jurisdiction of its own choosing." To be sent a PDF copy of this opionion, please click here. Authored by: Liza Haley Sherman 302.888.6940 lsherman@morrisjames.com Share