Helix Generation LLC v. Transcanada Facility USA, Inc. ( 2019 )

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: May 8, 2019
Date Decided: May 10, 2019
Garrett B. Moritz, Esquire James M. Yoch, Jr., Esquire
Anne M. Steadman, Esquire Young Conaway Stargatt
Ross Aronstam & Moritz LLP & Taylor, LLP
100 S. West Street, Suite 400 1000 North King Street
Wilmington, Delaware 19801 Wilmington, Delaware 19801
Re: Helix Generation LLC v. Transcanada Facility USA, Inc., et al.,
C.A. No. 2018-0856-SG
Dear Counsel:
The Court of Chancery is a court of limited jurisdiction. Its jurisdiction is that
of the English Court of Chancery as it existed in the year of independence, 1776,1
and as expanded and limited by the General Assembly. Essentially, the Court of
Chancery is a court of equity, requiring an equitable cause of action (typically
involving breaches of duty by those in a position of special trust, as fiduciaries) or a
plaintiff’s need for an equitable remedy (such as injunction) to confer jurisdiction.2
The Delaware Code states that this Court “shall not have jurisdiction to determine
any matter wherein sufficient remedy may be had by common law, or statute, before
1
Clark v. Teeven Hold. Co., Inc., 625 A.2d 869, 875 (Del. Ch. 1992) (citing Glanding v. Indus.
Trust Co., 45 A.2d 553, 555–56 (Del. 1945)).
2
Int’l Bus. Machs. Corp. v. Comdisco, Inc., 602 A.2d 74, 78 (Del. Ch. 1991).
any other court or jurisdiction of this State.”3 “Thus, where a remedy provided by a
law court of the state would be sufficient, that is, complete, practical and efficient,
this Court is without jurisdiction.”4 Without jurisdiction, obviously, this Court has
no power to act, and it is not uncommon for the Court, sua sponte, to transfer legal
cases brought, improvidently, in Chancery.5 Those cases generally fit a pattern: they
are those where a “complete legal remedy otherwise exists but where the plaintiff
has prayed for some type of traditional equitable relief as a kind of formulaic ‘open
sesame’ to the Court of Chancery.”6 Such cases are dismissed unless the plaintiff
elects to transfer to an appropriate court of law. This case is different. Here, the
Complaint does not pray for equitable relief at all, nor does it recite a statutory basis
for jurisdiction in this Court. Instead, the Plaintiff recites the parties’ contractual
agreement as sufficient to confer jurisdiction in the Court of Chancery.7
To summarize this matter’s brief procedural history, the Plaintiff brought suit
on November 27, 2018, alleging breach of contract and fraud in the inducement
concerning a purchase of assets, and seeking damages. Its Complaint contains a
section titled “Jurisdiction and Venue,” which recites why the state of Delaware has
personal jurisdiction over the Defendants, and which recites a contractual stipulation
3
10 Del. C. § 342.
4
Int’l Bus. Machs. Corp., 602 A.2d at 78 (internal quotations omitted).
5
See, e.g., Feinberg v. Feinberg, 1977 WL 176279 (Del. Ch. Mar. 29, 2977); Mass. Mut. Life Ins.
Co. v. Certain Underwriters at Lloyd’s of London, 2010 WL 3724745 (Del. Ch. Sept. 24, 2010).
6
Int’l Bus. Machs. Corp., 602 A.2d at 78.
7
Compl. ¶ 25.
2
that “any Proceeding in connection with or relating to [the contract] or any matters
contemplated hereby . . . shall be brought exclusively in the Delaware Court of
Chancery . . . .”8 The Complaint does not address how the Court of Chancery has
equitable jurisdiction over this matter.9 As a cat may look at a king, so too may the
parties to a contract agree to litigate disputes in any court they wish; such election
may bind the parties, but can never bind a court, and cannot satisfy the jurisdictional
requirements of this Court of limited jurisdiction.
The Defendants moved to dismiss the suit on December 19, 2018, under Rule
12(b)(6), for failure to state a claim. The Defendants’ opening brief in support of
their motion, filed on February 13, 2019, did not address equitable jurisdiction, nor
did their reply brief filed on April 17, 2019. Oral argument was scheduled for April
29, 2019. Upon review of the papers, however, I questioned whether equitable
jurisdiction exists, given that from the face of the Complaint there appears to be an
adequate remedy at law. Accordingly, at the outset of oral argument, I asked the
parties to address that issue. I ultimately continued oral argument on the Motion to
Dismiss. I allowed the Plaintiff eleven days to consider the jurisdictional question
and provide me with a response, followed by a reply from the Defendants.
8
Id.
9
See id. ¶¶ 24–27.
3
In its response, the Plaintiff requests that I permit it to amend its Complaint
or that I transfer the case to Superior Court, where it will be content to stand on its
Complaint and the already-filed Motion to Dismiss briefing.10 In reply, the
Defendants argue that I should dismiss the Complaint without prejudice pursuant to
Court of Chancery Rule 12(b)(1) with leave to amend, or that I dismiss the
Complaint under the same Rule so that the Plaintiff may elect to transfer to Superior
Court under 10 Del. C. § 1902. In that situation, the Defendants “agree[] . . . that
the parties shall stand on the current complaint and motion to dismiss briefing.”11
The Plaintiff argues that a basis for statutory jurisdiction may exist here.
Section 111 of the DGCL expands this Court’s jurisdiction in the way of certain
corporate instruments and actions. Subsection (a)(2)(iii) of that Section gives
jurisdiction, concurrently with the courts of law, to “interpret, apply, enforce or
determine the validity” of an agreement “by which a corporation agrees to sell, lease
or exchange any of its property or assets,” and which provides “by its terms” for
stockholder approval of the transaction.12 The seller here, according to the Plaintiff,
is a wholly-owned subsidiary, and the Plaintiff argues that at some level its
owner/stockholder must have approved of the transaction;13 presumably, such
10
Pl.’s May 6, 2019 Ltr., at 4.
11
Defs.’ May 7, 2019 Ltr., at 2–3.
12
8 Del. C. § 111(a)(2)(iii).
13
See Apr. 25, 2019 Tr.; Pl.’s May 6, 2019 Ltr., at 3.
4
approval is inherent in the agreement, and can therefore be considered “by its terms”
to be required. The Plaintiff seeks leave to amend, so that it may assert that such is
the case.
The Plaintiff makes a lawyerly argument indeed. However, the Superior
Court has indisputable jurisdiction here: Section 111(a), to the extent it applies,
provides permissive, not mandatory, jurisdiction in this Court.14 The Plaintiff’s
proposed amendment to the Complaint would require the Court, with the assistance
of the parties, to make a further determination of Chancery jurisdiction, perhaps after
allowing discovery regarding jurisdiction. This would be an exercise rendered
valueless by the Superior Court’s availability to hear this breach of contract and tort
action—that is, to hear this legal action. The parties have agreed, if the matter is
transferred to the Superior Court, to stand on the Complaint and briefing on the
Motion to Dismiss, so that efficiency—with respect to both the parties and the
court—would be served.
Under 10 Del. C. § 1902, “no civil action, suit or other proceeding brought in
any court of this State shall be dismissed solely on the ground that such court is
without jurisdiction of the subject matter . . . . Such proceeding may be transferred
to an appropriate court for hearing and determination . . .”15 Based on the facts
14
Causes of action described in Section 111(a) “may be brought in the Court of Chancery . . . .” 8
Del. C. § 111(a).
15
10 Del. C. § 1902.
5
alleged in the Complaint, it is apparent to me that the Court of Chancery lacks
jurisdiction to hear this action as it now stands. It is equally clear to me, given the
time and expense that the parties have already dedicated to this litigation, that it is
most efficient for this action to proceed, as it currently exists, in the Superior Court.
Accordingly, this matter is transferred to the Superior Court, provided that the
Plaintiff files an election to transfer and otherwise complies with the requirements
set out in 10 Del. C. § 1902.
To the extent the foregoing requires an order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
6