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Chancery Refuses to "Keep Delaware Case Open" Pending Application for Attorneys' Fees in Related Texas Class Action

By Francis G.X. Pileggi

In Re Dynegy Inc. Shareholders Litigation, C. A. No. 5739-VCS (Del. Ch. Mar, 16, 2011), read letter ruling here. This three-page letter decision is short on length but long on potential significance. It should be read as a postscript to the report of the Special Counsel in Scully v. Nighthawk that was highlighted here earlier this week.

This ruling dismissed as moot a Delaware class action that was initially filed to challenge a merger but was not prosecuted because "Counsel for the Delaware Action agreed to coordinate with Texas Counsel and jointly prosecute the Texas Action on behalf of all class members". The Court rejected the argument that there were "no costs or burden to Defendants to keeping this case open" in light of the litigation not being active. The Court explained that: "So long as a case remains open, the parties and the court must attend to it. There are costs to the public of maintaining files and of taking staff and judicial time in ensuring that an action is eventually resolved."

In further support of its dismissal, the Court reasoned that: "Plaintiffs are not entitled to file placeholder actions, choose not to prosecute them at all, and to keep them on file because they perceive that gives them some leverage in litigation elsewhere".

This decision implicates the following issues which also, at least tangentially, relate to the Scully Special Counsel report. (Links to scholarship on these issues are included as part of the Scully post here.)

1. Forum Shopping;
2. Jurisdictional Competition;
3. Courts outside of Delaware deciding issues of Delaware corporate law;
4. Forum Selection Clauses inserted into corporate organizational documents.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 17, 2011 (boomark / email).