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Gramercy Emerging Markets Fund v. Allied Irish Banks, P.L.C.

Supreme Court of Delaware

October 27, 2017

GRAMERCY EMERGING MARKETS FUND, BALKAN VENTURES LLC, AND RILA VENTURES LLC, Plaintiffs Below, Appellants,
v.
ALLIED IRISH BANKS, P.L.C., AND THE BULGARIAN AMERICAN ENTERPRISE FUND, Defendants Below, Appellees.

          Submitted: September 13, 2017

         Court Below: Court of Chancery of the State of Delaware C.A. No. 10321-VCG

         Upon appeal from the Court of Chancery. AFFIRMED.

          Stephen B. Brauerman, Esquire, Sara E. Bussiere, Esquire, BAYARD, P.A., Wilmington, Delaware; Sean F. O'Shea, Esquire, (argued), Michael E. Petrella, Esquire, Amanda L. Devereux, Esquire, Brian B. Alexander, Esquire, BOIES SCHILLER FLEXNER LLP, New York, New York, Attorneys for Appellants, Gramercy Emerging Markets Fund, Balkan Ventures LLC, and Rilsa Ventures LLC.

          Kevin R. Shannon, Esquire, Christopher N. Kelly, Esquire, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Walter C. Carlson, Esquire, (argued), Elizabeth Y. Austin, Esquire, SIDLEY AUSTIN LLP, Chicago, Illinois, Attorneys for Appellee, Allied Irish Banks, P.L.C.

          Kenneth J. Nachbar, Esquire, Ryan D. Stottman, Esquire, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Christopher Landau, P.C.,

          KIRKLAND & ELLIS LLP, Washington, D.C.; Brian D. Sieve, P.C., Jessica L. Staiger, Esquire, KIRKLAND & ELLIS LLP, Chicago, Illinois; Jeremy M. Feigenbaum, Esquire, (argued), KIRKLAND & ELLIS LLP, New York, New York, Attorneys for Appellee, Bulgarian-American Enterprise Fund.

          Before STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and TRAYNOR, Justices, constituting the Court en Banc.

          STRINE, CHIEF JUSTICE

         In this case, a Cayman Islands investment fund and two of its Delaware subsidiaries (collectively "Gramercy") sue a bank organized under Delaware law with offices in Illinois and Bulgaria (Bulgarian-American Enterprise Fund, or "Bulgarian-American") and an Irish bank headquartered in Dublin (Allied Irish Banks, P.L.C., or "Allied") over claims they admit arise under Bulgarian law and have no connection to activity that took place in Delaware. Delaware is the second forum in which Gramercy sought to press its Bulgarian claims. Like Delaware, the first forum was not Bulgaria, it was Illinois, where: (i) after extensive discovery and briefing on the issue of forum non conveniens, the Circuit Court of Cook County in Chicago granted a motion to dismiss; (ii) the Illinois Appellate Court unanimously affirmed the Circuit Court's dismissal; and (iii) the Illinois Supreme Court denied Gramercy's petition for leave to appeal.

         After its suit reached a dead-end in Illinois, Gramercy, rather than going to Bulgaria and suing in the forum whose laws govern its claims and where its investment in Bulgarian-American took place, then sued in Delaware. Bulgarian-American and Allied filed a motion to dismiss, arguing Bulgaria was the appropriate forum for the litigation. In granting Bulgarian-American and Allied's motion and holding that Gramercy's suit did not merit the overwhelming hardship standard afforded to first-filed actions under Cryo-Maid, the Court of Chancery was forced to address confusing arguments about this Court's forum non conveniens precedent, in particular the relationship among this Court's longstanding decisions in Cryo-Maid[1] and McWane, [2] and a more recent decision, Lisa, S.A. v. Mayorga.[3]

         The fact pattern in this case diverges from the scenarios we usually see facing motions to dismiss for forum non conveniens: (1) a first-filed Delaware action with no pending descendants, which implicates Cryo-Maid's overwhelming hardship standard; and (2) a Delaware action with a predecessor pending elsewhere, which implicates McWane's discretionary standard. Likely for this reason, the Court of Chancery felt it had just two options for its legal analysis-Cryo-Maid or McWane- and looked to Lisa for guidance in choosing between the two.

         Bulgarian-American and Allied contended that Lisa, rather than being a very fact-specific ruling, set forth broad principles, principles about which the parties disagree. Although Gramercy interpreted Lisa to apply the McWane standard only to cases in which the no longer pending first-filed case was decided on the merits, Bulgarian-American and Allied interpreted Lisa as extending McWane to all cases in which the first-filed case was decided, regardless of whether that decision was on the merits. The heart of the parties' disagreement was this: when a first-filed suit is procedurally dismissed, is a motion to dismiss for forum non conveniens in a later-filed Delaware suit subject to the overwhelming hardship standard?

         The Court of Chancery correctly held that the Delaware action was not first-filed, and that to obtain dismissal on forum non conveniens grounds, Bulgarian-American and Allied did not need to show overwhelming hardship. But, because the Illinois case was no longer pending, and was not dismissed on the merits like the first-filed action in Lisa, McWane was no longer the proper focus for the Court of Chancery's analysis.

         The Illinois action had relevance in the forum non conveniens analysis because it meant that analysis would not be tilted in Gramercy's favor under the overwhelming hardship standard. But, because the Illinois action was not dismissed on its merits, but instead for forum non conveniens, it should not have shifted the Court's focus from Cryo-Maid to McWane. Between Cryo-Maid's overwhelming hardship standard and McWane's discretionary standard lies an intermediate analysis that applies to situations like Gramercy's: a straightforward assessment of the Cryo-Maid factors, where dismissal is appropriate if those factors weigh in favor of that outcome.

         I.

         To understand how this case was presented before the Court of Chancery, it is useful to consider the three key cases that framed the parties' duel over overwhelming hardship. We begin with the first, Cryo-Maid.

         A.

         In Cryo-Maid, this Court considered whether to stay a first-filed Delaware action in favor of an action pending in Illinois. In deciding to stay the Delaware action, this Court considered the following factors: "(1) [t]he relative ease of access to proof; (2) the availability of compulsory process for witnesses; (3) the possibility of the view of the permises [sic], if appropriate; . . . (4) all other practical problems that would make the trial of the case easy, expeditious and inexpensive;" and (5) "whether or not the controversy is dependent upon the application of Delaware law which the courts of this State more properly should decide than those of another jurisdiction."[4] "A sixth [factor]-the pendency or nonpendency of a similar action in another jurisdiction-was added to the Cryo-Maid framework by subsequent decisions."[5] Together, these factors have come to form the core of Delaware's traditional forum non conveniens analysis.

         Typically, when Cryo-Maid is invoked, the plaintiff has chosen Delaware as its first forum. When that is the case, for dismissal to be granted, the Cryo-Maid factors must weigh "overwhelmingly in favor of the defendant."[6] The "short-hand phrase 'overwhelming hardship' emerged" from the post Cryo-Maid case law, reflecting our courts' reluctance to lightly disturb a plaintiff's first choice of fora.[7]When a case first-filed in Delaware is challenged by a motion to dismiss for forum non conveniens, "[d]ismissa[l] on the basis of forum non conveniens [is] appropriate only in the rare case involving undue hardship and inconvenience."[8]

         B.

         In McWane, this Court considered whether or not to stay a later-filed Delaware action in favor of a first-filed Alabama action. In deciding to stay the Delaware action, this Court distinguished the forum non conveniens analysis for first-filed Delaware actions from the forum non conveniens analysis for later-filed Delaware actions related to an action pending in another jurisdiction. As McWane clarified, "in view of [a] prior action pending, " Delaware courts considering a motion to dismiss for forum non conveniens should ask whether "there are facts and circumstances sufficient to . . . grant the stay within the range of the Court's discretion."[9] As this Court recently summarized:

Delaware courts considering a motion to stay or dismiss in favor of a previously filed action have applied McWane's three-factor test: (1) is there a prior action pending elsewhere; (2) in a court capable of doing prompt and complete justice; (3) involving the same parties and the same issues? If all three criteria are met, McWane and its progeny establish a strong preference for the litigation of a dispute in the forum in which the first action was filed.[10]

         When a case is not first-filed in Delaware and its predecessor remains pending, McWane applies, and Delaware courts "typically will defer to [the] first-filed action in another forum if that action involves substantially the same parties and issues as the litigation pending in Delaware, and will stay the later-filed Delaware action pending adjudication of the issues in the competing forum."[11]

         Although the evidentiary burden a moving party faces under Cryo-Maid's overwhelming hardship analysis is more demanding than what that party would face under McWane's discretionary analysis, the relevant considerations under the two analyses are related. "In addition to the comity considerations articulated in McWane, the Court of Chancery, in assessing motions to stay Delaware litigation under the first-filed rule, frequently analyze[s] the same 'practicality' factors traditionally applied under the forum non conveniens doctrine."[12] In fact, in McWane itself, this Court recognized five of the six Cryo-Maid considerations in deciding to stay the Delaware action in favor of the first-filed Alabama action that was still pending.[13]

         It is no coincidence that McWane discussed the Cryo-Maid factors in its analysis of the circumstances compelling a stay in the case. "McWane does not hold that consideration of the forum non conveniens factors is inappropriate in connection with the analysis mandated by the first-filed rule. Instead, McWane holds that imposing the same high burden on defendants in the first-filed context as in the forum non conveniens context and failing to consider principles of comity in conjunction with the first-filed analysis constitutes error."[14]

         McWane draws on Cryo-Maid's factors because both tests are rooted in forum non conveniens doctrine. "[W]hat distinguishes the application of [the forum non conveniens] factors in the McWane [and Cryo-Maid] contexts is 'the background presumption against which the elements are applied.'"[15] Under Cryo-Maid, defendants must establish overwhelming hardship for Delaware courts to grant dismissal. Under McWane, Delaware courts have greater discretion in determining whether a stay or dismissal is proper.

         C.

         In Lisa, this Court considered whether a later-filed Delaware action whose predecessors were no longer pending still triggered McWane's discretionary analysis. Lisa was an unusual case because the Delaware action was the fourth action filed by Lisa, S.A., which had previously filed two actions in the Florida state courts, and one in the Florida federal courts.[16]

         The Court of Chancery previously stayed Lisa's Delaware action pending the resolution of the 1998 Florida Action, the first of its three predecessors in Florida.[17]This made sense because Lisa's Delaware action was brought to ensure that it could obtain relief in the 1998 Florida Action: the Delaware suit involved a challenge to ...


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