Delaware Continues Struggle Over Multijurisdictional Litigation
By Morris James LLP on November 19, 2014
Authored By Edward M. McNally
This article was originally published in the Delaware Business Court Insider |
November 19, 2014
Delaware's courts continue to struggle with the problem of how to control multiple suits in multiple jurisdictions, over the same basic dispute. Just recently, the Delaware Supreme Court explained how the lower courts should deal with this problem, in its decision in The North River Insurance v. Mine Safety Appliances
, 2014 Del. LEXIS 527 (Del. Nov. 6, 2014). The Supreme Court's careful analysis is worth reviewing.
involved some all-too-common facts. The North River Insurance Co. issued several insurance policies to Mine Safety Appliances Co., a manufacturer of safety products. When Mine Safety faced thousands of personal injury claims and North River denied coverage under its insurance policies, the inevitable litigation followed. First, Mine Safety sued for coverage in both federal and state courts in Pennsylvania in 2009-10. Apparently not content with just two suits to resolve the coverage issue, Mine Safety later filed suit against North River and other insurers in Delaware. When that action was stayed in favor of the prior Pennsylvania actions, Mine Safety turned to West Virginia where it was already a defendant in various personal injury actions. That is when things got really complicated.
West Virginia permits direct actions by an injured plaintiff against an alleged tortfeasor's insurance carrier, without the need to first obtain a judgment against that tortfeasor defendant. Mine Safety allegedly "engineered" such direct action lawsuits against North River in West Virginia by entering into settlements with personal injury plaintiffs that included an assignment of Mine Safety's insurance rights against North River. The personal injury plaintiffs sued North River to collect on their settlements with Mine Safety and Mine Safety joined with them to assert coverage. North River then tried to get the West Virginia courts to stay those claims. North River lost its stay application. It then turned to the Delaware Court of Chancery for relief by way of a motion to enjoin Mine Safety from proceeding in West Virginia on its coverage claims or to at least not assign any more rights under the North River policies to new plaintiffs in West Virginia.
The Delaware Court of Chancery denied relief to North River in North River Insurance v. Mine Safety Appliances
, 2013 Del. Ch. LEXIS 307 (Del. Ch. Dec. 20, 2013). North River then appealed to the Delaware Supreme Court. The Supreme Court affirmed and provided guidance on how the problem of multiple suits in multiple jurisdictions over the same issue should be handled in the future.
First, the Supreme Court noted that a litigant who seeks relief from exposure to multiple litigations must make a factual record that such litigation will cause it real harm. Decisions enforcing forum selection clauses in contracts are examples of when such a showing is made. But in North River
, the plaintiffs alleging injuries due to Mine Safety's negligence were free under West Virginia law to sue North River directly. Those plaintiffs were not subject to the Delaware court's jurisdiction. Hence, an injunction could not be issued that would prevent multiple litigations against North River.
Second, the Supreme Court was sympathetic to the argument of North River that Mine Safety was deliberately fostering multiple suits in West Virginia by assigning its insurance rights to West Virginia plaintiffs. While that sympathy did not get North River much relief, it does offer hope to those who wish to avoid multiple lawsuits in multiple jurisdictions over the same issue that there may be a way to avoid that problem.
What, then, are the possible solutions to this mess of such duplicitous litigation? Several remedies may help alleviate, if not totally avoid, the problem. First, a forum selection provision in a contract that expressly prohibits instituting litigation in other than the selected forum will provide a basis for an anti-suit injunction in many states, including Delaware. That will not necessarily always lead to such an injunction, of course, but it helps.
Second, the threat of multiple litigations needs to be addressed promptly. If you wait until multiple suits progress through discovery and work toward trial, your claim for relief will lack appeal to any court. Indeed, it may seem that you are just trying to avoid an adverse ruling in a case that is going badly. This does not mean that you should jump the gun by asking for an injunction before any new case is filed after the first litigation is filed. That is premature absent a solid threat of additional litigation being filed elsewhere.
Third, it may also help if your contract prohibits any assignment of rights under that contract, absent all parties' consent. States that permit direct action by tort plaintiffs may still permit such non-party suits to be filed without consent of the insurers. Nonetheless, in those states, such as Delaware, that do not permit direct actions by non-parties, a prohibition of any assignment may cut down on encouraging such suits the way that Mine Safety was alleged to have done.
In short, the North River
decision helps decide how you might address the threat of multiple litigations in multiple jurisdictions over the same basic issue. While there is no sure cure of this "ill," there are steps to take to possibly mitigate the problem.