Delaware Business Litigation Report

Court Of Chancery Dismisses Dissolution Case In Favor Of Ongoing California Litigation

Zebala v. Aminopterin LLC, C.A. No. 12186-VCS (September 28, 2016) (TRANSCRIPT) 

An issue of some debate is whether a non-Delaware court has the power to dissolve a Delaware entity.  Here, the Court of Chancery was asked to dismiss a later-filed dissolution action in Delaware based on a California forum selection clause in the parties’ LLC agreement, and in deference to a long-pending first-filed action in California where the court had already issued an injunction restricting the LLC’s assets that the Court of Chancery was being asked to wind up.  The Court thus had the opportunity to address the important power to dissolve question, but under the circumstances found it appropriate to defer to the California court relying on principles of comity and a McWane analysis to dismiss the dissolution action.  In other words, the Court of Chancery would not step on the California court’s toes under the circumstances, and the California court could decide for itself if it has the power to dissolve a Delaware entity should the parties present that issue there.

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