GXP Capital, LLC v. Argonaut Mfg. Servs., Inc., C.A. No. N18C-07-267 PRW CCLD

• Decision Date: 04 May 2020
• Docket Number: C.A. No. N18C-07-267 PRW CCLD
• Citation: 234 A.3d 1186
• Parties: GXP CAPITAL, LLC, Plaintiff, v. ARGONAUT MANUFACTURING SERVICES, INC. ; Telegraph Hill Partners III, L.P. ; Telegraph Hill Partners III Investment Management, LLC, Defendants.
• Court: Delaware Superior Court

234 A.3d 1186

GXP CAPITAL, LLC, Plaintiff,

v.ARGONAUT MANUFACTURING SERVICES, INC. ; Telegraph Hill Partners III, L.P. ; Telegraph Hill Partners III Investment Management, LLC, Defendants.

C.A. No. N18C-07-267 PRW CCLD

Superior Court of Delaware.

Submitted: February 18, 2020

Decided: May 4, 2020

Withdrawn and Reissued With Clarifications: July 1, 2020

David L. Finger, Esquire (argued), FINGER & SLANINA, LLC, Wilmington, Delaware, Benjamin M. Carson, Esquire (pro hac vice), LAW OFFICES OF BENJAMIN M. CARSON, P.C., La Jolla, California, Attorneys for Plaintiff GXP Capital, LLC.

John L. Reed, Esquire, Harrison S. Carpenter, Esquire, DLA PIPER LLP (US), Wilmington, Delaware, Brian A. Foster, Esquire (pro hac vice) (argued), Noah A. Katsell, Esquire (pro hac vice), Julie Gryce, Esquire (pro hac vice), DLA PIPER LLP (US), San Diego, California, Attorneys for Defendants Argonaut Manufacturing Services, Inc., Telegraph Hill Partners III, L.P., Telegraph Hill Partners III Investment Management, LLC.

OPINION

WALLACE, J.

On May 4, 2020, the Court issued an opinion on the Motion to Dismiss for forum non conveniens filed by Argonaut Manufacturing Services, Inc. ("Argonaut"), Telegraph Hill Partners, III, L.P. ("THP III"), and Telegraph Hill Partners III Investment Management ("THP"). That Opinion ordered a stay in the litigation here so as to permit GXP Capital, LLC ("GXP") to pursue the substance of its claims before a more appropriate tribunal. The Court granted a stay rather than the requested dismissal to ensure that some forum remains open to hear GXP's claims should all others decline to reach the merits of the dispute.

GXP filed a timely Motion for Reargument under Superior Court Civil Rule 59(e). Clarification is a form of relief that may be granted under Rule 59(e) where the meaning of what the Court has written is unclear.¹ Having considered GXP's claims on reargument, the Court recognizes the value of greater clarity in the Court's findings and holdings, hereby withdraws its May 4, 2020 Opinion, and issues in substitution this Opinion.

I. THE PARTIES

GXP is a limited liability company organized and headquartered in Nevada.² GXP is the assignee of GXP CDMO, Inc., formerly known as Bioserv Corporation, GXP's parent company.³

Argonaut is a Delaware corporation with its headquarters in California, and is the successor entity to Argonaut EMS ("Predecessor"), a California sole proprietorship.⁴ THP III is a Delaware-organized limited partnership whose general partner is THP, a Delaware-organized limited liability company.⁵ Both THP and THP III are headquartered and operating in California.⁶

II. INTRODUCTION AND PROCEDURAL HISTORY

This litigation arises out of GXP's accusation that Predecessor, THP, and THP III received confidential business information about Bioserv during acquisition negotiations, and agreed to keep that information confidential through express non-disclosure agreements ("NDAs"), but did not do so.⁷ Instead, GXP alleges, Argonaut, THP, and THP III, working with others, initiated and successfully executed a hostile acquisition of key Bioserv assets at below-market prices in a bankruptcy proceeding through use and disclosure of the confidential information in contravention of the NDAs.⁸ The residual Bioserv then assigned litigation rights to its subsidiary, GXP.⁹

GXP first filed an action seeking relief for the alleged wrongs in federal district court in the District of Nevada. Due to a lack of personal jurisdiction, GXP voluntarily dismissed that action and filed a second case in the Southern District of California. The second action was dismissed for lack of subject matter jurisdiction, because the parties lacked complete diversity.¹⁰

Following that second dismissal, GXP initiated this action by filing its Complaint here, alleging nine causes of action against Argonaut, THP, and THP III.

Argonaut, THP, and THP III filed the instant Motion to Dismiss, seeking dismissal of seven of the nine counts pursuant to Superior Court Civil Rule 12(b)(6) for failure to state a claim upon which relief can be granted, and also seeking dismissal of the entire Complaint based on forum non conveniens . At argument the parties stipulated to GXP's withdrawal of the counts challenged under Rule 12(b)(6).¹¹ This leaves only Counts I and III—respectively, breach of contract¹² and misappropriation¹³ —subject to the present forum non conveniens challenge.

III. BURDEN AND LEGAL STANDARD FOR FACT-FINDING

The forum non conveniens tests applied by Delaware courts vary based on the specifics of both the litigation initiated here and the litigation history of the parties.¹⁴ But no matter which forum non conveniens analysis is applicable in a given situation, to gain dismissal it is always the defendant-movant who must show a sufficient burden visited by the plaintiff's choice of Delaware as the forum in which to bring suit. Ordinarily, at the motion to dismiss stage, the Court must accept as true all of a plaintiff's well-pleaded facts and draw all reasonable inferences in her favor.¹⁵ But on a motion to dismiss an action for forum non conveniens , this Court exercises its sound discretion when making findings of fact and drawing conclusions therefrom based on that supported by the record; the Court must, when doing so, use an orderly and logical deductive process.¹⁶

IV. DISCUSSION— FORUM NON CONVENIENS —GENERAL PRINCIPLES

A motion raising forum non conveniens is a request that a court possessing both personal and subject matter jurisdiction over an action nevertheless decline to hear it.¹⁷ Jurisdictional and venue statutes are broadly drawn, because principles of justice require that every right have a court available to vindicate it.¹⁸ By necessary consequence, many disputes are amenable to suit in several different jurisdictions.¹⁹ The common law doctrine of forum non conveniens²⁰ does not exist to deprive a plaintiff of his choice of forum, but rather as a backstop to prevent resort to intentionally inconvenient forums for illegitimate purposes.²¹ A plaintiff's choice of forum is ordinarily respected,²² and hardship, not mere inconvenience, must be shown to obtain relief.²³

A. FORUM NON CONVENIENS HARDSHIP FACTORS AND THEIR USE .

Delaware has long analyzed hardship using the " Cryo–Maid factors": (1) the relative ease of access to proof; (2) the availability of compulsory process for witnesses; (3) the possibility of a view of the premises; (4) whether 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; and (5) all other practical problems that would make the trial of the case easy, expeditious and inexpensive.²⁴ And though it does not strictly bespeak of litigants' hardship, the pendency or non-pendency of other lawsuits between the parties over the same subject²⁵ has consistently been added to the enumeration of the Cryo–Maid factors.²⁶

When the Delaware case is the first action filed, relief via forum non conveniens is available only in the face of "overwhelming hardship" from Delaware litigation.²⁷ This application of the Cryo–Maid factors constitutes the " Cryo–Maid test."²⁸ When an older case is pending in another jurisdiction, the hardship factors are measured using the " McWane test" instead, in which a trial court is directed to freely exercise its discretion in favor of the relief requested by the defendant in the later-filed Delaware action.²⁹

The Cryo–Maid and McWane tests cover the two poles of forum non conveniens cases, but left between them is an intermediate situation—where an earlier foreign lawsuit on the same matter was filed but already dismissed. Our Supreme Court recently explained that when a prior-filed case is no longer pending, relief will be granted or denied based on whichever party bears the greater weight of Cryo–Maid factors.³⁰

This intermediate case in turn resembles the framework the Court uses for requests for a stay in simultaneously-filed cases. When two cases are filed at approximately the same time, Delaware courts will weigh an application for a stay "under the traditional forum non conveniens framework" without "preference for one action over the other" to avoid rewarding the victor in a "race to the courthouse."³¹ In such cases, the reviewing court neutrally compares hardships imposed on each party by the adverse party's chosen forum, and stays the Delaware action if the foreign proceeding is less burdensome overall.³²

So the five original Cryo –Maid factors are examined for all forum non conviens claims. And the later-added sixth pendency-of-other-cases factor fixes the background presumptions and thresholds against which those five factors are analyzed. As explained by our high court:

When a case is first-filed, Delaware courts award dismissal only when the defendant has established overwhelming hardship, thus tilting the analysis in the plaintiff's favor. When a case is later-filed, and its predecessors remain pending, McWane 's "strong preference for the litigation of a dispute in the forum in which the first action relating to such dispute is filed" applies and the analysis is tilted in favor of the defendant. But when a case is later-filed and its predecessors are no longer pending, the analysis is not tilted in favor of the plaintiff or the defendant.³³

Just as the first two situations are referred to as the Cryo–Maid and McWane tests, Gramercy is now the defining precedent for the intermediate case.³⁴ And the analysis engaged in for that intermediate case is "a straightforward assessment of the Cryo–Maid factors, where dismissal is appropriate if those factors weigh in favor of that outcome."³⁵

As noted earlier, GXP has previously filed actions seeking relief against these same parties over these same grievances in federal district courts. It did so first in Nevada, then in California. The first of those federal cases was dismissed before the next was filed. Those...