Superior Court Stays First-Filed Declaratory Judgment Action in Nokia Technology Dispute
Delaware law recognizes several doctrines intended to respect principles of comity and the efficient administration of justice when there is competing litigation across jurisdictions. Those doctrines are applied flexibly and have developed to avoid incentivizing races to the courthouse, as illustrated by this Delaware Superior Court decision staying a first-filed declaratory judgment action.
Plaintiff (Nokia) and Defendant (a technology start-up company) engaged in pre-suit mediation regarding Defendant’s allegation that the parties had entered a binding oral contract to transact in Defendant’s technology. Minutes after the mediation stand-still agreement expired, Plaintiff filed a declaratory judgment action in Delaware seeking a declaration that it owed no contractual duties to Defendant. Two days later, and before being aware of the Delaware action, Defendant filed suit in Massachusetts to enforce the alleged oral contract, featuring broader causes of action. After it was served with the Delaware action, Defendant moved to stay it in favor of the Massachusetts action.
The Delaware Superior Court granted the stay. First, the Court found that Plaintiff’s action was not entitled to deference as a first-filed action under McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co., 263 A.2d 281 (Del. 1970) because the two actions were contemporaneously filed. Summarizing precedent on the issue, the Court noted that “if the party that is naturally defending a claim files an action for declaratory judgment within days of the natural plaintiff filing an action elsewhere, Delaware courts are inclined to find the actions are filed contemporaneously.” Here, the Court declined to reward Plaintiff for “plainly engag[ing] in a race to the courthouse” and instead concluded that the two actions were contemporaneously filed.
After concluding that Plaintiff’s Delaware action was not entitled to McWane deference, the Court found that all relevant forum non conveniens factors favored Defendant’s request for a stay. The Massachusetts action was broader in scope and featured a more natural alignment of the parties. By contrast, neither the claims nor the parties had strong ties to Delaware, and litigating in Delaware would have been more burdensome to the Defendant, a start-up company of more limited resources than the Plaintiff, a large multi-national corporation.