Tulum Management USA LLC v. Casten

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE 417 SOUTH STATE STREET
VICE CHANCELLOR DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
November 20, 2015
Brock E. Czeschin, Esquire Steven L. Caponi, Esquire
Richards, Layton & Finger, P.A. Blank Rome LLP
920 North King Street 1201 N. Market Street, Suite 800
Wilmington, DE 19801 Wilmington, DE 19801
Re: Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
Date Submitted: September 10, 2015
Dear Counsel:
This action is for alleged breaches of fiduciary duty and breaches of contract
and seeks advancement and indemnification. Plaintiffs George Polk (“Polk”),
Tulum Management USA LLC (“Tulum”), and RED Capital Investments LP
(“RED Capital”) bring this action on behalf of nominal defendant RED Parent
LLC (“RED Parent” or the “Company”) against certain members of the RED
Parent Board of Managers (the “Defendant Managers”), Recycled Energy
Development LLC (“RED LLC”) and RED Investment LLC (“Asset LLC,” and
collectively, the “Defendants”).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 2
I. BACKGROUND
The Court here provides a brief summary of the relevant facts, which were
set forth in greater detail in this Court’s letter opinion issued on November 9,
2015.1 Defendant Thomas Casten, RED Parent’s Chairperson, and his son,
Defendant Sean Casten, RED Parent’s CEO (together, the “Castens”), control RED
Parent.2 Red Parent wholly owns RED LLC, which “conduct[s] . . . operating and
development activities” in power projects, and Asset LLC, which is a “holding
company for RED Parent’s interests in various energy investments.”3 Polk,
through his ownership and control of RED Capital and Tulum, holds a controlling
share of the RED Parent “Preferred Membership Interests,” but only a minority of
RED Parent’s total ownership.4 Management of RED Parent is vested in a “Board
of Managers,” which runs the Company subject to the approval, for certain
1
Tulum Mgmt. USA LLC v. Casten, 2015 WL 7269811, at *1-2 (Del. Ch. Nov. 9,
2015) (the “Letter Opinion”). This letter opinion draws extensively from the text
of the Letter Opinion. Familiarity with the Letter Opinion is presumed.
2
Defs.’ Opening Br. in Supp. of Defs.’ Mot. to Dismiss, or in the Alternative, Mot.
to Stay Proceedings (“Defs.’ Opening Br.”) 5; Verified Compl. (“Compl.” or
“Complaint”) ¶¶ 20-21.
3
Compl. ¶¶ 18-19.
4
Defs.’ Opening Br. 4-5.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 3
decisions, of the “Investment Committee.”5 Polk, pursuant to his authority to
appoint two of the three Investment Committee members, may request a valuation
of RED Parent’s assets following a “material valuation event such as a material
financing event, . . . a pattern of consistent deviation greater than 10% relative to
the original pro forma financial projections, or a sale or acquisition of assets.”6 If
the valuation, conducted in accordance with RED Parent’s Operating Agreement
(the “Operating Agreement”), concludes that a “Trigger Event” has occurred, Polk
may take control of Asset LLC.7
Polk alleges that the Castens manipulated RED Parent’s capital to further
personal interests rather than those of the Company, which resulted in performance
shortfalls justifying Polk’s invocation of his right to request an independent
valuation.8 The Investment Committee selected Deloitte Transactions and
5
Letter from Andrew J. Peach, Esquire Enclosing Am. and Restated Operation
Agreement of RED Parent, LLC at Ex. 1 (“Operating Agmt.”) § 5.1 (Aug. 6,
2015); Compl. ¶¶ 30, 48-49; Defs.’ Opening Br. 5.
6
Operating Agmt. § 1.47(b).
7
Id. §§ 1.47(b), 3.8. One such Trigger Event occurs if RED Parent’s assets are
valued at less than the “accrued value of the preferred interest.” Compl. ¶ 30;
accord Operating Agmt. §§ 1.47, 3.8; Defs.’ Opening Br. 7-8.
8
Compl. ¶¶ 39-66.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 4
Business Analytics LLP (“Deloitte”) to conduct the valuation.9 On May 29, 2015,
after weeks of conflict regarding such details as whether Tulum is authorized to
provide valuation inputs and remain as a party to the Deloitte engagement letter,10
RED Parent filed an action in Illinois (the “Illinois Action”)11 to “prevent Polk
from acting contrary to the Operating Agreement and to ensure that the valuation
process was conducted in accordance with the Operating Agreement.”12 Polk
contends that the purpose of the Illinois Action is to delay resolution of the
dispute.13 Amidst the controversy, Deloitte eventually withdrew its engagement,
and the Investment Committee agreed to hire McGladrey LLP (“McGladrey”) as a
replacement independent valuation firm, though this relationship collapsed on
July 16 for similar reasons.14 On July 21, Polk filed the Complaint in Delaware,
alleging two counts of breach of fiduciary duty, breach of contract, and breach of
9
Id. ¶ 70; Defs.’ Opening Br. 9.
10
Compl. ¶¶ 71-79; Defs.’ Opening Br. 9.
11
First Amended Complaint for Declaratory Judgment, RED Parent, LLC v. Polk,
No. 2015 CH 08634 (Cir. Ct. Ill. Jul 15, 2015); Pls.’ Br. in Opp’n to Defs.’ Mot. to
Dismiss, or in the Alternative, Mot. to Stay Proceedings (“Pls.’ Answering Br.”)
Ex. 2 (“Illinois Action Compl.”).
12
Defs.’ Opening Br. 9.
13
Compl. ¶ 80.
14
Id. ¶¶ 82-85.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 5
the implied covenant of good faith and fair dealing, and seeking indemnification,
advancement, and fees on fees incurred in both the Illinois Action and the case at
bar (the “Delaware Action”).15
II. CONTENTIONS
Defendants argue that Delaware law requires that the Court stay the
Delaware Action in favor of the first-filed Illinois Action.16 Polk responds that the
Delaware Action should proceed notwithstanding the pending Illinois Action
because RED Parent failed in the Illinois Action to name as a defendant any party
to the Operating Agreement, the Illinois and Delaware Actions involve separate
parties and issues, and the Illinois Action is unable to “secure ‘complete justice.’”17
15
Id. ¶¶ 110-56. The Complaint seeks an injunction to prevent further
mismanagement; a declaration that RED Parent and the Defendant Managers
breached the Operating Agreement by engaging in the alleged mismanagement and
obstructing the independent valuation, that any valuation incorporate both RED
Parent and the Investment Committee, and that a Trigger Event (as defined by
Section 1.47 of the Operating Agreement) has occurred; monetary damages; and
litigation costs. Id. ¶¶ a-d.
16
Defs.’ Opening Br. 11.
17
Pls.’ Answering Br. 2.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 6
III. ANALYSIS
A. Procedural Posture
Polk’s claims divide into three categories: (1) advancement and
indemnification, (2) valuation, and (3) fiduciary duties.18 The Letter Opinion
denied Defendants’ Motion to Stay in favor of the Illinois Action Polk’s request for
advancement of expenses.19 The remaining issues, therefore, are whether to
proceed with or stay in favor of the Illinois Action Polk’s valuation and fiduciary
duty claims.
B. Legal Standard
Under Delaware law, the decision whether to stay or dismiss a Delaware
action in favor of one first-filed in another jurisdiction is within the discretion of
the Court.20 Well-settled Delaware policy favors resolution of “all claims arising
from a common nucleus of operative facts . . . in the same court at the same time,”
18
Id.; Teleconference Pls.’ Mot. for Expedited Proceedings 5 (Aug. 6, 2015)
(TRANSCRIPT).
19
Tulum, 2015 WL 7269811, at *5.
20
Brookstone P’rs Acq. XVI, LLC v. Tanus, 2012 WL 5868902, at *3 (Del. Ch.
Nov. 20, 2012); McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng’g Co.,
263 A.2d 281, 283 (Del. 1970).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 7
and a “preference” exists for “the first forum chosen.”21 In exercising its
discretion, the Court considers whether “(i) there is a prior action pending in
another jurisdiction, (ii) that action involves similar parties and issues, and (iii) the
foreign court can render prompt and complete justice.”22
The McWane doctrine favors granting a stay not only where the parties and
issues are identical, but also where there exists “substantial or functional identity”
between the two such that they “arise out of a common nucleus of operative
fact.”23 This Court has found the requisite substantial identity where “the primary
21
Schnell v. Porta Sys. Corp., 1994 WL 148276, at *3-4 (Del. Ch. Apr. 12, 1994);
accord McWane, 263 A.2d at 283 (“[L]itigation should be confined to the forum in
which it is first commenced, and a defendant should not be permitted to defeat the
plaintiff’s choice of forum in a pending suit by commencing litigation involving
the same cause of action in another jurisdiction of its own choosing . . . .”).
22
Willis v. PCA Pain Ctr. of Va., Inc., 2014 WL 5396164, at *5 (Del. Ch. Oct. 20,
2014). Whether the Court grants a stay depends on whether doing so would
promote “comity and the necessities of an orderly and efficient administration of
justice.” McWane, 263 A.2d at 283.
23
Davis Int’l, LLC v. New Start Grp. Corp., 2005 WL 2899683, at *2 (Del. Ch.
Oct. 27, 2005) (internal quotation marks omitted); accord Choice Hotels Int’l, Inc.
v. Columbus-Hunt Park DR. BNK Investors, L.L.C., 2009 WL 3335332, at *7 (Del.
Ch. Oct. 15, 2009) (“In any McWane analysis, . . . the parties and issues in the
competing litigations rarely will be exactly identical.”). The doctrine, therefore,
values “substance over form.” Kurtin v. KRE, LLC, 2005 WL 1200188, at *4 (Del.
Ch. May 16, 2005).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 8
claims and substantive issues in both actions” arise from the same factual
nucleus.24 Here, the Court balances the lack of party and issue identity “against
the possibility of conflicting rulings which could come forth if both actions were
allowed to proceed simultaneously.”25 Still, the Court considers “each case . . . on
its own merits,” and will not grant a stay “as a matter of right [solely] by reason of
a prior action pending in another jurisdiction.”26
C. Application
The parties agree that RED Parent filed the Illinois Action before Polk filed
the Delaware Action. At issue, therefore, is whether the parties and issues in the
Delaware and Illinois Actions are sufficiently similar to justify staying the
Delaware Action, and whether the Illinois court is capable of “render[ing] prompt
and complete justice.”27
24
Brookstone, 2012 WL 5868902, at *6.
25
Choice Hotels, 2009 WL 3335332, at *7.
26
McWane, 263 A.2d at 283; accord Willis, 2014 WL 5396164, at *5.
27
Willis, 2014 WL 5396164, at *5.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 9
1. The Parties in the Delaware and Illinois Actions are Functionally
Identical
The Illinois Action was brought solely by RED Parent against Polk; Tulum;
Justin Goerke, who holds Preferred Membership Interests and is a member of the
Investment Committee; and McGladrey. The Delaware Action was brought by
Tulum, RED Capital, and Polk, on behalf of nominal defendant RED Parent,
against the Castens, the remaining Defendant Managers—Damien Casten, Fred
Brownson, Charles Bayless and Mark Gray—RED LLC, and Asset LLC.
The nominal identity of the parties, however, is not determinative;28 the
Court must also consider the substance of the distinctions.29 Here, the corporate
defendants named in Delaware and not Illinois, RED LLC and Asset LLC, are
subsidiaries of RED Parent, the plaintiff in the Illinois Action.30 This Court has
“found parties to be substantially the same under McWane where related entities
are involved but not named in both actions.”31 Further, the dispute in Illinois,
28
Davis, 2005 WL 2899683, at *2.
29
FWM Corp. v. VKK Corp., 1992 WL 87327, at *1 (Del. Ch. Apr. 27, 1992).
30
Compl. ¶ 1 n.1.
31
McQuaide v. McQuaide, 2005 WL 1288523, at *4 (Del. Ch. May 24, 2005).
Similarly, the fact that RED Capital, Tulum’s investment vehicle, is named as a
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 10
though filed by RED Parent, involves the process by which Polk may gain control
of Asset LLC. “[T]he Court cannot ignore the bigger picture and the clear,
practical interrelationships between the actions.”32
Neither does the fact that the Defendant Managers are named in the
Delaware Action but not the Illinois Action preclude a finding of substantial party
similarity. Defendants state in their Opening Brief that “[t]hese individual
managers have stated that they would not object to compulsory service on them in
Illinois for the purpose of joining them as counterclaim defendants in Illinois, to
defend against the claims asserted against them in this Court,”33 which provides a
“basis for a finding that the parties in the litigations are sufficiently similar to meet
the McWane standard.”34 In addition, the purpose for which the Defendant
Managers are named in the Delaware Action—to hold them accountable for their
alleged entrenchment and breach of contract and the covenant of good faith and
plaintiff in the Delaware Action but is excluded from the Illinois Action does not
destroy the functional identity of the parties.
32
Kurtin, 2005 WL 1200188, at *7.
33
Defs.’ Opening Br. 16.
34
Willis, 2014 WL 5396164, at *6.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 11
fair dealing by hindering the valuation process35—shares a common nucleus of
operative fact with the Illinois Action in which RED Parent requests a declaratory
judgment defining appropriate valuation procedures under the Operating
Agreement.36 The distinctions among the parties named in the Illinois and
Delaware Actions, therefore, are insufficient to warrant denial of Defendants’
McWane motion.
2. The Issues in the Delaware and Illinois Actions are Functionally Identical
First, the valuation claims asserted in the Delaware and Illinois Actions are
identical. The plaintiffs in both actions request a declaration from the respective
court (1) that the valuation initiated by the Investment Committee be conducted in
accordance with the Operating Agreement, and (2) interpreting the Operating
Agreement’s provisions setting forth the valuation process.37 The remaining issue,
35
Compl. ¶¶ 119-43.
36
Illinois Action Compl. ¶¶ 1-2.
37
RED Parent’s complaint in the Illinois Action requests a declaratory judgment
that “any valuation conducted under the Operating Agreement must specifically
comply with the terms of” the Operating Agreement, and that the terms of the
Operating Agreement are as RED Parent suggests. Id. at 9. Polk, in the Delaware
Action, seeks, among other relief, a declaration that “the independent valuation
under the Operating Agreement must specifically comply with the valuation terms
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 12
therefore, is whether Polk’s fiduciary duty claims are sufficiently dissimilar to
warrant a denial of Defendants’ Motion to Stay in favor of the Illinois Action.
The Illinois Action is comprised entirely of RED Parent’s valuation claim.
The Delaware Action, however, contains Polk’s valuation claim, as well as his
claims for breach of fiduciary duty for self-dealing and entrenchment, breach of
contract, and breach of the implied covenant of good faith and fair dealing.38 First,
Polk characterizes the Defendant Managers’ alleged self-dealing as a mere
“overlapping [of] facts between the two cases.”39 Such conduct, however, if
proven, may adversely impact the value of the Company, thereby affecting whether
a subsequent valuation results in a Trigger Event.40
Further, while Polk attempts to paint the fiduciary duty claims as wholly
distinct from the valuation claims,41 the two originate from a common set of facts,
and both involve interpretation of the Operating Agreement. As Polk alleges in the
articulated in the Operating Agreement,” and that the terms of the Operating
Agreement are as Polk suggests. Compl. ¶¶ b(iii)-(vi).
38
Compl. ¶¶ 110-43.
39
Pls.’ Answering Br. 23 (alteration in original) (quoting Raymond Revocable
Trust v. MAT Five LLC, 2008 WL 2673341, at *4 (Del. Ch. June 26, 2008)).
40
Operating Agmt. §§ 1.47, 3.8.
41
Pls.’ Answering Br. 19.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 13
Complaint, “[t]he overall impact of the Castens’ mismanagement is substantial.
Under the Castens’ reign of error, all of the assets have yielded at least 20% less
cash flows—and in some cases as much as 80% less cash flows—than originally
projected.”42 Therefore, not only do the Castens’ and the other Defendant
Managers’ actions affect the independent valuation, they present potential breaches
of the Operating Agreement, which is subject to the Illinois court’s interpretation
with respect to the valuation claims.43 Therefore, though the fiduciary aspect of
the Castens’ alleged mismanagement is distinct, as a matter of legal technicality,
from the Illinois valuation claim, “both complaints [arise] from the same core
conduct,”44 that is, the Castens’ alleged mismanagement resulting in RED Parent’s
underperformance and Polk’s subsequent request for an independent valuation.
Finally, where the first-filed action is based on a contract claim and a
subsequent Delaware action alleges statutory and fiduciary duty claims, the Court
42
Compl. ¶ 64.
43
Id. ¶ 65 (“Each of these actions not only violates the terms of the Operating
Agreement, but also violates the Castens’ fiduciary duties to their fellow members.
They have chosen to fund their short-term financial payouts at the expense of
maximizing profit for the Company.”).
44
Citrin Hldgs. LLC v. Cullen 130 LLC, 2008 WL 241615, at *3 (Del. Ch. Jan. 17,
2008).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 14
may nonetheless stay the Delaware proceeding where it “is ‘in substance and
effect’ the same as [the] earlier-filed . . . action.”45 For example, in Glen Rose
Petroleum Corp. v. Langston, the court held that while the nature of the claims
may differ and involve “slightly different time periods,” the claims may
nonetheless retain sufficient similarity where they relate to a common set of facts
and “any breach of contract was a response to any fraud or breach of fiduciary
duties.”46 The Delaware Action appears to be, “at its core,”47 a controversy
surrounding the Castens’ alleged mismanagement as it relates to the value of RED
Parent—the same core as the valuation claim alleged in the Illinois Action. As
stated, to grant a stay under McWane, this Court need only find similarity in the
45
AT&T Corp. v. Prime Sec. Distribs., Inc., 1996 WL 633300, at *2 (Del. Ch. Oct.
24, 1996); accord Glen Rose Petroleum Corp. v. Langston, 2010 WL 2734621, at
*2 (Del. Ch. July 7, 2010) (“[A]lthough the Texas petition involves a contract
claim and the Delaware complaint involves fraud and fiduciary duty claims
(among others), this does not mean the two actions are not substantially or
functionally identical.”); Kurtin, 2005 WL 1200188, at *4 (“Delaware courts have
found . . . contract claims to be ‘in substance and effect’ the same as statutory and
fiduciary duty claims.”).
46
2010 WL 2734621, at *2.
47
Id.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 15
“primary claims and substantive issues in both actions . . . as a whole.”48
Accordingly, the issues alleged in the Delaware and Illinois Actions are
sufficiently similar to grant Defendants’ Motion to Stay in favor of the Illinois
Action.
3. The Illinois Court is Capable of Rendering Prompt and Complete Justice
Polk argues that the Illinois Action will not result in prompt and complete
justice because it names no party to the Operating Agreement as a defendant, and
is not proceeding expeditiously.49 First, the Illinois Action Complaint names as
defendants Polk, Tulum, Goerke, and McGladrey. Polk and Goerke serve on the
Investment Committee, and therefore have the right to request an independent
valuation. The Illinois Action arises out of RED Parent’s disagreement with Polk
and Goerke regarding their scope of authority as Investment Committee members,
namely, whether they are authorized to affect the scope of the independent
valuation firm’s engagement or provide valuation inputs. Therefore, the valuation
dispute arises between RED Parent on one hand, and Polk and Goerke on the other,
48
Brookstone, 2012 WL 5868902, at *6.
49
Pls.’ Answering Br. 7-8.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 16
all three of whom are named parties in the Illinois Action. The fact that RED
Capital is not named as a party in the Illinois Action does not, without more,
warrant a stay of the Delaware Action. The core of the dispute is whether Polk is
entitled to control of Asset LLC, and Polk, as controller of Tulum and RED
Capital, adequately represents RED Capital’s interests.50 Therefore, RED Capital’s
absence from Illinois is not a sufficient basis to deny a motion to stay the later-filed
Delaware Action. Further, to the extent that Polk wishes to bring additional
contract and fiduciary duty claims in Illinois, he may do so. As mentioned above,
Defendants state in their Opening Brief that the Defendant Managers “would not
object to compulsory service on them in Illinois for the purpose of joining them as
counterclaim defendants in Illinois, to defend against the claims asserted against
them in this Court.”51
50
Willis, 2014 WL 5396164, at *6 (“[W]hen the only party to a Delaware action
that is not named in the foreign action is owned by a party to both actions, ‘[t]here
is substantial or functional identity of all parties in both actions.’” (second
alteration in original)).
51
Defs.’ Opening Br. 16.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 17
Second, Polk alleges that the Illinois court is unable to provide prompt
justice because RED Parent, in that case, has not sought expedited relief, and
therefore “the Illinois court is unlikely to render a decision on the time frame that
this Court has found appropriate.”52 Defendants respond, however, that Polk is the
primary impediment to adopting an expedited schedule in Illinois because he
“actively dodg[ed] service” and delayed his filings.53 Further, in their Reply Brief,
Defendants note that they intend to “promptly move for a summary disposition”
upon Polk’s appearance.54 Defendants not only filed a motion for summary
judgment in the Illinois Action on October 9, 2015,55 but also expressed
willingness to enter into an expedited briefing schedule.56 While the parties
present conflicting speculations regarding the potential schedule governing the
Illinois Action,57 the Court cannot conclude, based solely on Polk’s allegations,
52
Pls.’ Answering Br. 8.
53
Defs.’ Reply Br. 4 n.1.
54
Id.
55
Letter from Steven L. Caponi, Esquire at 1 (Oct. 20, 2015).
56
Letter from Steven L. Caponi, Esquire at 2 (Nov. 6, 2015).
57
Compare id., and Letter from Steven L. Caponi, Esquire (Oct. 20, 2015), with
Letter from Brock E. Czeschin, Esquire (Oct. 20, 2015), and Letter from Brock E.
Czeschin, Esquire (Nov. 5, 2015).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 18
that the Illinois court is incapable of rendering prompt justice.58 The Illinois court,
therefore, is capable of rendering sufficiently prompt and complete justice to
warrant granting Defendants’ Motion to Stay.59 This Court, however, retains
jurisdiction so that if, for any reason, the Illinois court is unable or unwilling to
rule on Polk’s contract or fiduciary duty claims, or such claims are delayed to an
58
Polk’s effort to stay the Illinois Action in favor of the Delaware Action was
unsuccessful. Letter from Steven L. Caponi, Esquire at Ex. B (Oct. 20, 2015)
(Illinois court’s order denying the Illinois defendants’ request for a stay and
adopting a briefing schedule governing RED Parent’s Motion for Summary
Judgment). The Delaware and Illinois Actions, therefore, have proceeded in
parallel pending this Court’s consideration of Defendants Motion to Stay. Though
this Court may be capable of resolving the matter more quickly, that does not mean
that the Illinois Action will not be resolved “promptly.”
59
Polk’s argument that, notwithstanding the McWane analysis, the Delaware
Action should proceed on the grounds of forum non conveniens is unavailing. Pls.’
Answering Br. 21-25. First, not only was the Illinois Action filed first, but RED
Parent’s principal place of business is in Illinois, the Operating Agreement was
negotiated in Illinois, and the Castens reside in Illinois. Defs.’ Opening Br. 1-2;
Compl. ¶¶ 17-22. Second, McWane limits application of the Cryo-Maid factors
governing forum non conveniens analysis to those situations “where (1) no other
action is pending elsewhere between the same parties involving the same issues, or
(2) such other pending action was filed subsequently to the Delaware action.”
McWane, 263 A.2d at 284; accord In re Asbestos Litig., 2012 WL 1980414, at *2
(Del. Super. May 16, 2012) (“McWane is applied when there is a case pending in
another jurisdiction and Cryo–Maid is applied when no other case is pending.”).
Accordingly, McWane provides the appropriate framework within which to
address Defendants’ Motion to Stay.
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 19
extent resulting in prejudice to Polk, Polk may move to lift the stay and proceed in
Delaware.60
IV. CONCLUSION
For the reasons above and except for the advancement and indemnification
claims as addressed in the Letter Opinion, the Court denies Defendants’ Motion to
Dismiss in favor of the Illinois Action, but grants Defendants’ Motion to Stay in
favor of the Illinois Action as to the valuation and fiduciary duty claims, and
retains jurisdiction over the Delaware Action. The stay may be lifted as the
circumstances may require.
60
Welbilt Corp. v. Trane Co., 2000 WL 1742053, at *4 (Del. Ch. Nov. 17, 2000)
(granting a stay but retaining jurisdiction in case “the Texas court should
ultimately conclude that it is unable to exercise personal jurisdiction over the
Welbilt Parties or if the decision on that matter is so delayed as to cause substantial
prejudice to the Welbilt Parties.”); id. (“[I]f the progress of the Texas Action is
unduly delayed by the resolution of this issue, the Welbilt Parties are free to move
to lift the stay if, as a result, they are prejudiced.”); Landesbank Baden-
Wurttemberg v. Walton Seattle Mezz Hldgs. VI-B, L.L.C., 2013 WL 1286192, at
*11 (Del. Ch. Apr. 1, 2013) (“Given the Plaintiff’s allegations that the streamlined
nature of the receivership action may cause the Washington court to refrain from
ruling on these issues, I have decided to order a stay and retain jurisdiction, so that
this matter may proceed in Delaware if the Washington court refrains from acting
on this matter.”).
Tulum Management USA LLC v. Casten
C.A. No. 11321-VCN
November 20, 2015
Page 20
IT IS SO ORDERED.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Register in Chancery-K