Delaware Business Litigation Report

Applying Rare Intermediate Review of Forum Non Conveniens, the Delaware Superior Court Stays a Delaware Action to Permit Filing of Claims in California

GXP Capital, LLC v. Argonaut Mfg. Servs., Inc., C.A. No. N18C-07-267 PRW CCLD (Del. Super. July 1, 2020)

When evaluating a forum non conveniens challenge, Delaware has a seldom used, intermediate framework of review. Under Gramercy Emerging Markets Fund v. Allied Irish Banks, P.L.C., 173 A.3d 1033, 1044 (Del. 2017), when a prior foreign lawsuit was filed, but is no longer pending, relief in Delaware will be granted or denied based on whichever party the Cryo-Maid factors favor under the traditional forum non conveniens framework. There is no presumption in favor of a plaintiff (such as when a Delaware action is first-filed) or in favor of a defendant (such as when a foreign action is first-filed and still pending).

In GXP Capital, plaintiff accused defendants of violating non-disclosure agreements (“NDAs”) executed during acquisition negotiations. Plaintiff voluntary dismissed its initial action in federal court in Nevada due to lack of personal jurisdiction. Its second action, in California federal court, was dismissed for lack of subject matter jurisdiction because the parties lacked complete diversity. Both dismissals were without prejudice, and not on the merits. Plaintiff then filed a nine-count complaint in Delaware, and subsequently, withdrew seven counts. Defendants challenged the remaining two counts on forum non conveniens grounds, and argued that California’s state courts provided a better forum.

The Superior Court ruled that the intermediate framework of review applied to the forum non conveniens challenge because the Delaware action was not first-filed, and both prior-filed actions were no longer pending. Applying the Cryo-Maid factors, the Court found that all parties had their headquarters and operations in California or Nevada, and that their only connection to Delaware was their state of incorporation. Parties would be unable to compel attendance of third-party witnesses in Delaware, and the claims were governed by California law. Importantly, the Court noted that California state courts were available to plaintiff as an alternative forum, and that defendants had conceded jurisdiction in California and had agreed to a stipulation that a case filed in California state court would reach a ruling on the merits. Accordingly, the Court stayed the Delaware action for ninety days to permit plaintiff to file suit in California, and indicated that it would continue the stay to permit a final adjudication on the merits in California, or alternatively, dismiss the Delaware action if plaintiff did not file in California.

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