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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Chancery Declines to Dismiss Second-Filed Delaware Action Because Delaware Forum Selection Clause Preempts McWane
Defendants brought an action in Montana state court against plaintiffs. Plaintiffs later filed this action in the Delaware Court of Chancery, alleging several claims that shared a common nucleus of operative facts with those asserted in Montana. Defendants moved to dismiss or stay the Delaware action under the McWane doctrine, which generally gives deference to a first-filed action in another jurisdiction and authorizes a dismissal or stay of a second-filed Delaware action.
Here, however, the Court found McWane inapplicable because defendants were bound by a mandatory Delaware forum selection clause in the separation agreement underlying the parties’ dispute. While the Montana plaintiffs were not parties to the separation agreement, the Court determined they were bound nonetheless under the doctrine of equitable estoppel. And although the claims in the Montana action did not arise directly from the separation agreement, both disputes would involve litigation over the contract. Moreover, it was well-pled that the key defendant had caused the non-signatory entities under its control to sue in Montana in an effort to avoid the Delaware forum selection clause, making it equitable to enforce the clause under the circumstances. Accordingly, the Court declined dismissal under McWane.