COURT OF CHANCERY
OF THE
SAM GLASSCOCK III
VICE CHANCELLOR
STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: September 27, 2021
Date Decided: October 4, 2021
Edward B. Micheletti, Esq. Blake Rohrbacher, Esq.
Jacob J. Fedechko, Esq. Andrew L. Milam, Esq.
SKADDEN, ARPS, SLATE, MEAGHER RICHARDS, LAYTON & FINGER, P.A.
& FLOM LLP One Rodney Square
One Rodney Square 920 North King Street
P.O. Box 636 Wilmington, Delaware 19801
Wilmington, Delaware 19899
RE: Brett Lay and Brian Mass v. Ram Telecom International, Inc.,
C.A. No. 2021-0631-SG
Dear Counsel:
This Letter Opinion considers, and denies, the Defendant’s Motion to Stay or
Dismiss and Opposition to Plaintiffs’ Motion for Expedited Proceedings (the
“Motion”).1 On June 9, 2021, the Plaintiffs sent a letter to the Defendant seeking
indemnification and advancement of their fees and expenses incurred in defending
an action the Defendant and others had filed against them in the Superior Court of
California (the “California Action”).2 The Defendant did not respond. 3 Instead, five
1
Def.’s Mot. Stay or Dismiss and Opp’n Pls.’ Mot. Expedited Proceedings, Dkt. No. 7
[hereinafter the “Motion”].
2
Verified Compl. for Advancement, Dkt. No. 1 [hereinafter the “Complaint”], Ex. E.
3
Pls.’ Opp. Def.’s Mot. Stay or Dismiss and Reply in Further Supp. Pls.’ Mot. Expedited
Proceedings, Dkt. No. 15 ¶ 12 [hereinafter the “Opposition”].
days later, on June 14, 2021, the Defendant and the other plaintiffs in the California
Action amended their complaint to add a claim for declaratory relief, asking the
California court to “declare that Lay and Mass are not entitled to indemnification or
advancement.” 4 About a month later, on July 20, 2021, the Plaintiffs initiated this
action, seeking advancement of their fees and costs incurred in the California Action,
as well as fees on fees incurred in this action.5
On August 2, 2021, the Defendant filed the Motion, seeking a stay or dismissal
of this action in light of the California Action and opposing the Plaintiffs’ Motion
for Expedited Proceedings (the “Motion to Expedite”) in this action.6 On August 11,
2021, the Plaintiffs filed an opposition to the Motion and a reply in further support
of their Motion to Expedite (the “Opposition”). 7 The Defendant filed a letter reply
on August 16, 2021. 8 On September 24, 2021, the Defendant filed a letter enclosing
supplemental authority.9 The Plaintiffs filed a letter response on September 27,
2021, 10 and I considered the matter fully submitted as of that date.
4
See Compl., Ex. D ¶¶ 526–29.
5
See Compl. ¶¶ 34–48.
6
See generally Motion.
7
See generally Opposition.
8
Dkt. No. 16.
9
Dkt. No. 21.
10
Dkt. No. 25.
2
The Defendant argues that this action should be stayed in favor of the
supposedly “first-filed” California Action, under the McWane doctrine. 11 Under
McWane, this Court’s “discretion should be exercised freely in favor of the stay
when there is a prior action pending elsewhere, in a court capable of doing prompt
and complete justice, involving the same parties and the same issues.”12
The Defendant argues that the California Action is a “prior pending action”
under McWane because it was filed more than four months before this action, and
because the amended complaint in the California Action asserting the declaratory
judgment claim concerning advancement was filed over a month before the Plaintiffs
initiated this action. 13 The Defendant cites Johnston v. Caremark RX, Inc.14 for the
proposition that a stay should be issued under McWane “where advancement claims
were already at issue in a prior-filed, pending action.”15
In Johnston, this Court stayed an advancement action in favor of a first-filed
action in which the same indemnitee had already asserted advancement rights.16 In
contrast, this Court has declined to stay an advancement action where the
11
See McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng’g Co., 263 A.2d 281, 283 (Del.
1970).
12
Id.
13
Motion ¶ 17.
14
2000 WL 354381, at *2–5 (Del. Ch. Mar. 28, 2000).
15
Motion ¶ 18.
16
Johnston, 2000 WL 354381, at *1, 3.
3
advancement right was not sought by the indemnitee in the prior filed action.17 In
Fuisz v. Biovail Technologies, Ltd., for instance, the plaintiffs sought advancement
under Section 145(k) for a Virginia action in which they had already asserted their
indemnification and advancement rights as an affirmative defense, but they “did
nothing to obtain any relief from the Virginia court on the basis of this defense.”18
This Court declined to stay the advancement action, stating,
Unless the person having such an entitlement first actively
invokes the jurisdiction of a foreign tribunal and seeks an
adjudication of that issue from it (or some other compelling
circumstance amounting to a substantial conflict between the
two jurisdictions exists), this court will not regard the foreign
action as “first-filed” for purposes of McWane’s comity-based
analysis.19
Here, as in Fuisz, “the [Plaintiffs] did not choose [California] as the forum
and have made no effort to obtain any adjudication from the [California] court of
any of the issues presented” in this action.20 Nor have the Plaintiffs here responded
to the declaratory relief claim in the California Action. 21 Rather, it was the
Defendant in this action who sought a declaratory judgment in the California Action
concerning the Plaintiffs’ advancement and indemnification rights.22
17
See Fuisz v. Biovail Techs., Ltd., 2000 WL 1277369, at *4 (Del. Ch. Sept. 6, 2000) (denying
stay of advancement action where prior action was not filed by indemnitee).
18
Id. at *2.
19
Id. at *1.
20
See id. at *4.
21
Opposition ¶ 12; Dkt. No. 16 at 2.
22
See Compl., Ex. D ¶¶ 526–29.
4
The reasoning of the Fuisz Court is especially compelling here, where the
Defendant amended the complaint in the California Action to add the declaratory
relief claim only after the Plaintiffs sent an indemnification and advancement
demand. 23 Indeed, under the Defendant’s theory, any plaintiff that receives an
advancement demand from a defendant could circumvent the indemnitee’s right to
a summary advancement proceeding in Delaware under Section 145(k) by simply
amending its complaint to add a declaratory relief claim on the advancement issue
upon receiving the demand. That is not our law. Accordingly, because the
California Action is not a “first-filed” action, the McWane doctrine is inapplicable.
The Defendant also cites Harmon 1999 Descendants’ Trust v. CGH
Investment Management, LLC, in which this Court stayed an advancement action in
favor of a federal action even though the plaintiff had not claimed advancement in
the federal action. 24 Harmon is also inapplicable. In Harmon, this Court reasoned
that the federal action was “in its penultimate phase” and contained the “overlapping
question of whether the [putative indemnitee] is a limited partner,” which was a
“material, factually rife, and disputed issue” in the advancement action. 25 Thus, the
Court held that because “the federal court is likely to resolve this factual issue before
this court could,” “efficiencies could be gained by staying this suit in favor of the
23
See Opposition ¶ 4.
24
2021 WL 4270220, at *3 & n.12 (Del. Ch. Sept. 21, 2021).
25
Id. at *1–2.
5
[federal] [a]ction.”26 In contrast, the Motion here does not identify any “material,
factually rife, and disputed issue” that must be decided in the California Action
before the question of advancement can be resolved here, nor does the Motion
contend that the California Action is “in its penultimate phase.” 27 In short, the
compelling circumstances cited by the Harmon Court are lacking here.
Accordingly, because the Motion does not present “exceptional
circumstances” warranting a departure from the rule that “claims under Section
145(k) for advancement of expenses should not be stayed or dismissed in favor of
the prior pending foreign litigation that give rise to them,” 28 I decline to stay this
action in favor of the California Action.
The Defendant also opposes the Plaintiffs’ Motion to Expedite, although it
does not articulate any basis for that opposition beyond its argument that this action
should be stayed or dismissed. Accordingly, I grant the Motion to Expedite for the
same reasons that I decline to stay this action.
26
Id. at *2.
27
See id. at *1–2. In fact, the California Action does not appear to be in an antepenultimate, or
even a preantepenultimate phase. It is in, as the British tend to say, early days.
28
See Fuisz, 2000 WL 1277369, at *1.
6
For the forgoing reasons, the Defendant’s Motion is DENIED and the
Plaintiffs’ Motion to Expedite is GRANTED.
IT IS SO ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
cc: All counsel of record (by File & ServeXpress)
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