Sperling & Slater v. SilkRoad, Inc., C. A. N21C-11-152-PRW CCLD

CourtSuperior Court of Delaware
Writing for the CourtPAUL R. WALLACE, JUDGE
PartiesSperling & Slater v. SilkRoad, Inc. and SilkRoad Equity, LLC
Docket NumberC. A. N21C-11-152-PRW CCLD
Decision Date14 November 2022

Sperling & Slater
v.

SilkRoad, Inc. and SilkRoad Equity, LLC

C. A. No. N21C-11-152-PRW CCLD

Superior Court of Delaware

November 14, 2022


Date Submitted: September 1, 2022

Kenneth J. Nachbar, Esq. Elizabeth A. Mullin, Esq. MORRIS, NICHOLS, ARSHT & TUNNELL LLP

Greg Shinall, Esq. SPERLING & SLATER, P.C.

Marc E. Rosenthal, Esq. PROSKAUER ROSE LLP

J. Matthew Belger, Esq. Clarissa R. Chenoweth-Shook, Esq. Charles R. Hallinan, Esq. POTTER ANDERSON & CORROON LLP

Maria Aprile Sawczuk, Esq. GOLDSTEIN &MCCLINTOCK, LLLP

B. Lane Hasler, Esq.

PAUL R. WALLACE, JUDGE

Dear Counsel:

This Letter Order resolves Third-Party Defendant, Thomas A. DePasquale Management Trust's Motion to Stay for Forum Non Conveniens or, in the Alternative, Dismiss for Improper Venue.

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I. BACKGROUND

The parties and the Court are well-acquainted with the factual and procedural background of this action.[1] A detailed summary of the facts is set forth more fully in the Court's earlier order granting the Trust's motion to intervene and denying the Trust's motion to stay or rescind the interpleader order.[2]

Given the parties' almost decade-long and still ongoing litigious relationship, the Court asked for a stipulated factual and procedural history of the parties' legal disputes.[3] Because their previous lawsuits largely occurred in Illinois, the instant motion has long been anticipated, and the Court deemed prudent a stipulated, truncated version of the parties' past to aid in a timely disposition of the now-pending forum question. But the parties failed to reach any agreement on such.[4]

In their most recent submissions, the parties repeated and incorporated the same versions of facts set forth in their initial submissions. Thus, given their inability to provide a concise, stipulated factual history, the disposition of the instant motion will be determined based on the incomplete record provided.

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The Trust filed the instant Motion to Stay for Forum Non Conveniens or, in the Alternative, Dismiss for Improper Venue.[5] Silkroad, Inc. ("SRI") docketed its Letter of No Position.[6] And Sperling & Slater, P.C. ("Sperling") filed an answering brief opposing a dismissal or stay.[7] The Court heard argument on the Trust's motion and that application is now ripe for decision.[8]

II. APPLICABLE LEGAL STANDARDS

A. Dismissal for Improper Venue

This Court's Civil Rule 12(b)(3) governs a motion to dismiss for improper venue.[9] A reviewing 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."[10] The Court "is not shackled to the plaintiff's complaint and is permitted to consider extrinsic evidence from the outset."[11] A dismissal motion may be granted "before the commencement of discovery on the basis of

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affidavits and documentary evidence if the plaintiff cannot make out a prima facie case in support of its position."[12]

When considering such a motion, the Court must "give effect to the terms of private agreements to resolve disputes in a designated judicial forum out of respect for the parties' contractual designation."[13] "If a forum selection clause validly limits a plaintiff to a single forum, that clause operates to divest a court that otherwise has jurisdiction of its status as a proper venue for the plaintiff to sue."[14]

B. Stays For Forum Non Conveniens

"Motions to stay litigation on grounds of forum non conveniens are granted only in the rare case."[15] Indeed, Delaware courts are "hesitant to grant motions to stay based on forum non conveniens, and the doctrine is not a vehicle by which the Court should determine which forum would be most convenient for the parties."[16]Any such stay determination is left to this Court's sound discretion.[17]

In analyzing a motion to stay or dismiss an action for forum non conveniens,

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the Court applies the Cryo-Maid factors.[18] Those factors are:

(1) the relative ease of access to proof; (2) the availability of compulsory process for witnesses; (3) the possibility of the view of the premises, if appropriate; (4) all other practical problems that would make the trial of the case easy, expeditious and inexpensive; (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; and (6) the pendency or nonpendency of a similar action in another jurisdiction.[19]

"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."[20] McWane requires the Court analyze whether there "(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?" [21] "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."[22]

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III. PARTIES' CONTENTIONS

A. The Trust's Motion to Stay for Forum Non Conveniens or, in the Alternative, Dismiss for Improper Venue

Citing the three-factor McWane test, the Trust urges the Court to grant its motion because, in its view, the parties have a (1) previously-filed and competing action in an Illinois Court; (2) that involves the same parties and the same issues; and (3) the Illinois Court, as it has done in the past, is capable of providing "prompt and complete justice."[23] As such, it contends that Illinois "has been the location for all disputes between creditors asserting competing claims to Filipowski's assets," including the SRI Note, and should continue to be so.[24]

Alternatively, if the McWane factors don't apply, the Trust argues that the forum non conveniens factors articulated in Cryo-Maid do.[25] In addition to the previous/contemporaneous Illinois-based litigation, the Trust argues the following facts satisfy Cryo-Maid's considerations:

• Sperling is an Illinois-based law firm and Illinois is where all its attorneys and witnesses are located;
• SRE's principal place of business is in Illinois;
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• Sperling's legal services were mostly performed in Illinois;
• Sperling's attorney's lien is based on Illinois law;
• The Distribution Agreement related to the SRI Note was negotiated and executed in Illinois, with oversight by an Illinois judicial officer; and
• The Distribution Agreement contains an Illinois choice-of-law provision.[26]

And finally, the Trust contends Sperling's reliance on the Delaware choice-of-law provision in the SRI Note Agreement is misplaced because the provision only governs disputes between SRI and SRE; it wields no power over Sperling's priority claim to its attorneys' fees.[27]

B. Sperling's Opposition

According to Sperling, both McWane and Cryo-Maid are inapposite and the Trust's Motion should be denied.[28]

Sperling contends there is no prior pending action because this action involves Sperling, SRE, and SRI, whereas the Illinois lawsuits all involve creditor disputes

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over Mr. Filipowski's assets.[29] It says that the Illinois Court even held so in its April 27, 2022 Order dismissing the Trust's TRO.[30] That order reads:

[T]here are no proceedings pending before this court by Sperling to obtain judgment against SRE for past due attorneys fees relating to the prior Delaware Action, to enforce Sperling's alleged attorney's lien against the proceeds of the SRI Note, to enjoin the Delaware Action, or to foreclose upon the SRI Note.[31]

According to Sperling, the matters don't overlap and there isn't a current Illinois matter prohibiting this action.[32]

Sperling also asserts that the Trust has not met its hardship burden under Cryo-Maid.[33] It argues the Trust failed to show that Delaware law is inapplicable to the dispute-highlighting that the SRI Note expressly contains a Delaware forum selection clause.[34] Too, Sperling addresses the Trust's failure to particularize any hardship with respect to subpoenaing witnesses-especially since SRI and SRE both

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are Delaware-registered entities, the Trust is a Virginia entity, and Mr. Filipowski is a Florida resident.[35] Sperling also argues that its Illinois attorney's lien is governed by and enforceable under Delaware law because it provided legal services to a Delaware entity, in a Delaware-filed lawsuit, in a Delaware court.[36]

IV. DISCUSSION

A. The Trust Has Not Satisfied the Cryo-Maid Factors.

"When a case is not first-filed in Delaware and its predecessor remains pending, McWane applies . . . ."[37] That is not the case here. The Illinois action is not a predecessor-this action involves just Sperling and SRE, not Filipowski. SRE is a separate and distinct entity. Moreover, there is nothing pending in Illinois by SRE, SRI, or the Trust against Sperling.[38] The Trust argues "the impact of what

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Sperling is doing is to directly affect Filipowski's direct interest in the SRI note."[39]But that is not the standard. And because there is no real predecessor action, Cryo-Maid applies.[40]

Next, the Court must determine whether to apply the overwhelming hardship standard when analyzing the Cryo-Maid factors. Generally, when a party seeks dismissal on the grounds of forum non conveniens, the overwhelming hardship standard is applied.[41] And the same overwhelming hardship standard applies on a motion to stay, where a stay "would likely have the same ultimate effect as a dismissal."[42] Here, the Trust initially sought a preliminary injunction and temporary restraining order-applications it later withdrew.[43] If this action is stayed in favor

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