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Judge LeGrow Stays Action to Allow Court of Chancery to Address Jurisdictional Issues

August 7, 2019

In Lennox Industries Inc. & Allied Air Enterprises LLC v. Alliance Compressors LLC, C.A. No. N19C-03-045 AML [CCLD] (the “CCLD action”), Judge LeGrow denied a motion to dismiss and stayed a first-filed CCLD action to allow the Court of Chancery to consider a competing motion in a later-filed action. Here, the competing actions were filed days apart—the plaintiff filed a declaratory judgment claim in Superior Court, and two days later, the defendant filed an action in the Court of Chancery containing a specific performance claim. Motions to dismiss followed in both actions.

The dispositive issue for the competing motions was the Court of Chancery’s jurisdiction. Specifically, the defendant in the CCLD action argued that only the Court of Chancery had jurisdiction over the specific performance claim, and therefore the entire matter, including the Plaintiff’s declaratory judgment claim, should proceed in Chancery under the “clean-up doctrine.” In response, the plaintiff in the CCLD action argued that the specific performance claim was a manufactured claim designed purely as a basis to seek equitable jurisdiction and that such claim should be dismissed (which, in turn, would mean that the Court of Chancery had no jurisdiction over the dispute).

Ultimately, Judge LeGrow determined that the Court of Chancery should decide in the first instance whether the specific performance claim was viable, noting that “[f]or the sake of expediency and in recognition of the Court of Chancery’s pending motion before it,” the Court of Chancery should decide the issue. In deciding whether to stay the CCLD action in favor of the Court of Chancery action, the court analyzed the Burris factors. The court found that four factors were particularly relevant and weighed in favor of the staying the action. See Burris v. Cross, 583 A.2d 1364 (Del. Super. Ct. 1990). First, the court found that the defendant in the CCLD action did not appear to be an unwilling litigant, as both sides agreed the underlying issue would be resolved in a Delaware court. Second, the court determined that the plaintiff in the CCLD action would not need to seek supplemental relief from another court. Third, the court found that if the Court of Chancery concluded that there was a valid claim for specific performance, then the Court of Chancery would be the only forum in Delaware that could afford that relief. Judge LeGrow also opined that the Chancery action placed the parties on the “right side of the v,” so to speak, although she said that this factor did not weigh heavily in her consideration. Fourth, there was another action pending where the plaintiff in the declaratory judgment action would be able to raise all claims and defenses. The fifth and sixth factors relating to tactics or procedural gamesmanship in a race to the courthouse were neutral because no such behavior had occurred. Finally, the court found that dismissal and transfer of the CCLD action at this stage to the Court of Chancery could be prejudicial, but that there was no prejudice as a result of a stay.

In conclusion, Judge LeGrow found that a short stay was appropriate to give the Court of Chancery time to resolve the jurisdictional issue involving the specific performance claim; if the Court of Chancery found it lacked jurisdiction, then the stay in the CCLD action could be lifted “relatively quickly” and the parties could proceed in Superior Court.

Analysis: This case is a prime example of the interplay between the Delaware Superior Court (which only has jurisdiction over legal claims) and the Court of Chancery (which can exercise equitable jurisdiction). Given Delaware’s split between law and equity, there are often a number of early procedural skirmishes over which court is the appropriate venue for litigation. Here, competing actions were filed days apart, and the Superior Court deferred to the Court of Chancery to analyze the jurisdictional issues in the first instance.

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