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Court of Chancery Denies Dismissal Despite Three-Year Failure To Diligently Prosecute Class Action

In re Cencom Cable Income Partners, L.P., C.A. No. 14634-NC, 2006 WL 452775 (Del. Ch. Feb. 16, 2006). This Court of Chancery action arose out of a breach of fiduciary duty claim filed on Oct. 20, 1995. Defendants unsuccessfully moved to dismiss for failure to prosecute under Court of Chancery Rule 41. The last substantive docketed action was a summary judgment motion, followed by mediation in mid-2000. Subsequently, plaintiffs offered to settle. Thereafter, correspondence between the parties ceased in 2002. Following a three-year gap, plaintiffs proposed a trial schedule. That proposal triggered defendants' motion to dismiss for failure to prosecute. The court examined whether under Court of Chancery Rule 41(e) and Orgel v. Cappelli, 2001 WL 1045627, at *3 (Del. Ch. Aug. 31, 2001) plaintiffs had established an "excusable delay" by demonstrating a good reason for the delay and absence of prejudice to the defendants. Acknowledging that defendants were adversely affected by the delay, the Court however refused to accept that they were prejudiced by the closure of their insurance carrier's business during the dormant period. The Court observed that notwithstanding the delay, it was unlikely the defendants could have sought indemnification from their defunct carrier following a timely trial. The Court's ruling factored in its preference for a resolution on the merits, plaintiffs diligent resumption of prosecution, defendants delayed filing of the motion to dismiss diminishing Court of Chancery Rule 41(b)'s applicability and a desire to obviate unique class action-based due process concerns. Authored by: Raj Srivatsan 302-888 6831 Share
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