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Chancery Court Transfers Case Due to Lack of Jurisdiction

In Helix Generation LLC v. Transcanada Facility USA, Inc., et al., C.A. No. 2018-0856-SG, the Delaware Court of Chancery transferred a case brought before it because the case could be heard more efficiently in Superior Court. The Court reaffirmed that it is Court of limited jurisdiction and even if Section 111(a) of the Delaware delegated jurisdiction to the Court, that jurisdiction is discretionary.

The plaintiff brought a suit against the defendants for breach of contract, fraud, and other damages. In its complaint, the plaintiff, argued the Court had jurisdiction over the defendants because the defendants contractually agreed that any proceeding would be brought exclusively in the Court. The defendants filed a motion to dismiss on unrelated grounds, however, at oral argument the Court asked both parties to provide an explanation for how the Court had jurisdiction to hear the claims. The plaintiff responded to the Court’s request by citing Section 111(a) of the Delaware General Corporation Law, which gives the Court jurisdiction, concurrently with the courts of law, to interpret, apply, enforce, or determine the validity of an agreement by which a corporation agrees to sell, lease, or exchange its assets and which by its terms provides for stockholder approval.

The Court did not find the plaintiff’s argument compelling. First, the Court restated that it is court of limited jurisdiction. Its jurisdiction is that of the English Court of Chancery as it existed in 1776, as expanded by the Delaware General Assembly. The Court of Chancery is a court of equity only able to hear disputes with an equitable cause of action or requiring an equitable remedy. Further, the Delaware Code states that the Court does not have jurisdiction over any matter where sufficient remedy may be had by common law or statute before any other court or jurisdiction of the State of Delaware. The Court stated, “[a]s a cat may look at a king, so too may the parties to a contract agree to litigate disputes in any court they wish; such any election may bind the parties, but can never bind a court, and cannot satisfy the jurisdictional requirements of this Court of limited jurisdiction.”

Second, even if Section 111(a) of the Delaware General Corporation Law permitted the Court to hear the case as the plaintiff argues, that jurisdiction is discretionary and not mandatory. In this case the Court determined that the plaintiff’s claims could more efficiently be handled by the Superior Court. Thus the Court transferred the suit to the Superior Court.

Copyright 2019 K & L Gates

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About this Author

Scott Waxman, Limited Liability Companies, Corporate, Attorney, KL Gates Law FIrm
Administrative Partner

Scott Waxman is a founding partner in the firm’s Wilmington, Delaware office and a member of the firm’s global Management Committee. His practice focuses on organizational and operational issues related to limited liability companies, limited and general partnerships, statutory trusts, and special purpose corporations, as well as general commercial and financial transactions, including structured financings, securitizations, mergers and acquisitions, joint ventures, private equity and hedge funds, preferred securities transactions, insurance premium financing transactions, life settlement...

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Douglas A. Logan, KL Gates, Chancery Arbitration Lawyer, Corporate Litigation Attorney
Associate

Douglas Logan is an associate in the firm’s Seattle office.

Mr. Logan was previously a judicial extern to the Honorable Ricardo S. Martinez of the United States District Court for the Western District of Washington. He was also a K&L Gates summer associate in 2014. Prior to law school, Mr. Logan worked for the Department of Justice Antitrust Division as a paralegal specialist in Washington, D.C.

206-370-8096