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National Union Fire Insurance Co. of Pittsburgh PA. v. Crosstex Energy Services, L.P.

Superior Court of Delaware, New Castle

December 13, 2013

NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA., et al., Plaintiffs,
v.
CROSSTEX ENERGY SERVICES, L.P., Defendant.

Submitted: September 19, 2013

Upon Defendant's Motion to Dismiss.

Upon Defendant's Alternative Motion to Stay.

Francis J. Murphy, Esquire (Argued), Murphy & Landon, Christopher H. Coleman, Esquire, Jacob T.E. Stutzman, Esquire, Alexandra F. Markov, Esquire, James L. Warren, III, Esquire, Carroll Warren & Parker PLLC, Attorneys for Plaintiffs

David J. Baldwin, Esquire, Janine L. Hochberg, Esquire, Potter Anderson & Corroon LLP, Ernest Martin, Jr., Esquire (Argued), Britton D. Douglas, Esquire, Haynes & Boone LLP, Attorneys for Defendant

OPINION

The Honorable Mary M. Johnston.

FACTUAL AND PROCEDURAL CONTEXT

Plaintiffs ("Underwriters") issued several property insurance policies ("Policies") to Defendant Crosstex Energy Services, L.P. ("Crosstex") for the period from May 1, 2012 to May 1, 2013. In 2012, a sinkhole began forming adjacent to a pipeline that Crosstex owns near Assumption Parish, Louisiana. Crosstex notified Underwriters that it intended to file a claim under the Policies. On January 7, 2013, Underwriters sent Crosstex a denial of the coverage letter. Underwriters filed suit in Delaware Superior Court on the same day.

Crosstex filed suit in the 162nd District Court of Dallas County, Texas, on January 10, 2013. Crosstex was served with process in the Delaware case on January 16, 2013. Crosstex had actual knowledge of the Delaware suit prior to receiving service of process.

The Texas court issued an Order on September 16, 2013, denying a stay of the Texas proceedings. The Order did not state the Texas court's reason for denying the stay. The Texas court subsequently held a hearing on Underwriters' Motion for Protective Order, which was denied.

On July 15, 2013, Crosstex filed this Motion to Dismiss, or in the Alternative, to Stay on the grounds of improper venue pursuant to Rule 12(b)(3) of the Rules of Civil Procedure for the Superior Court of the State of Delaware; and on forum non conveniens grounds in favor of the action filed in Texas.

STANDARD OF REVIEW

Improper Venue

Superior Court Civil Rule 12(b)(3) governs a motion to dismiss or stay due to improper venue. The Court should "give effect to the terms of private agreements to resolve disputes in a designated judicial forum out of respect for the parties' contractual designation."[1] "The Court can 'grant a dismissal motion before the commencement of discovery on the basis of affidavits and documentary evidence if the plaintiff cannot make out a prima facie case in support of its position.'"[2] However, the Court usually must allow the plaintiff to take discovery where the plaintiff "advances a non-frivolous legal argument that would defeat the motion if the facts turn out to be as it alleges."[3] "In reviewing a motion to dismiss, the court must assume as true all the facts pled in the complaint and view those facts and all reasonable inferences drawn from them in the light most favorable to the plaintiff."[4]

Forum non Conveniens

At issue in this case is the standard of review applicable to dismiss this action or to grant a stay based on forum non conveniens. The Court first must address the timing of the Delaware action and the Texas action to determine which standard is applicable. "A motion to stay or dismiss on grounds of forum non conveniens is addressed to the sound discretion of the Court."[5] The doctrine of forum non conveniens is not a vehicle for the Court to determine which forum would be most convenient for the parties.[6] The Court "cannot perfunctorily apply McWane or forum non conveniens if either doctrine is to accomplish the purposes for which they were crafted by the Delaware Supreme Court."[7] When applying either doctrine, the Court "always must consider judicial economy and principles of comity."[8]

"Where one of two 'competing' actions is filed before the other, the so-called McWane standard controls and the first-filed action generally is entitled to preference."[9] "Where two or more actions are contemporaneously filed, the Court 'examines a motion to stay under the traditional forum non conveniens framework without regard to a McWane-type preference of one action over the other.'"[10]

If the Court finds that the actions were filed contemporaneously, the movant seeking dismissal has the burden to prove that litigating in Delaware would cause overwhelming hardship.[11] Where a stay of litigation likely would have substantially the same effect as a dismissal, the overwhelming hardship standard applies. [12]

"To justify a stay, the movant need only demonstrate that the preponderance of applicable forum factors 'tips in favor' of litigating in the non-Delaware forum."[13] "In balancing all of the relevant factors, the focus of the analysis should be which forum would be the more 'easy, expeditious, and inexpensive' in which to litigate."[14]

"Delaware courts examine six factors, known as the Cryo-Maid[15] factors, when determining whether to dismiss or stay an action on forum non conveniens grounds."[16] The Court will consider: (1) whether Delaware law governs the case; (2) the relative ease of access to proof; (3) the availability of compulsory process for witnesses; (4) the pendency or nonpendency of a similar action or actions in another jurisdiction; (5) the possibility of a view of the premises; and (6) all other practical considerations that would make the trial easy, expeditious, and inexpensive.[17]

ANALYSIS

Contentions of the Parties

Crosstex offers two arguments in support of its Motion: (1) venue is improper in Delaware; and (2) the forum non conveniens factors weigh in favor of a dismissal or stay. First, Crosstex contends that the Court should dismiss or stay the Delaware action pursuant to Rule 12(b)(3) because venue is improper. Crosstex interprets the Policies' Service of Suit clause to mandate venue in Dallas, Texas. Second, Crosstex contends that the Court should dismiss or stay the Delaware action based on forum non conveniens. Crosstex argues that the actions were filed contemporaneously and should be evaluated under the six forum non conveniens factors. Crosstex argues that the six factors favor the Texas lawsuit and that none of the factors favor the Delaware lawsuit.

Underwriters contend that Delaware is a proper venue, and support this claim with three main points: (1) the Policies allow Plaintiffs to choose their venue; (2) the Texas precedent regarding service of suit, relied upon by Crosstex, does not apply under these circumstances; and (3) Underwriters did not prevent Crosstex from exercising its Policy rights. Underwriters contend that to justify a dismissal or stay, Crosstex bears the burden of demonstrating that litigating in Delaware is an overwhelming hardship and inconvenience, and that Crosstex fails to meet this burden. Underwriters argue that the actions ...


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