Taylor v. LSI Logic Corp., 302
| Decision Date | 22 January 1997 |
| Docket Number | 1996,No. 302,302 |
| Citation | 689 A.2d 1196 |
| Parties | Ethel TAYLOR, Plaintiff Below, Appellant, v. LSI LOGIC CORPORATION, Defendant Below, Appellee. . Submitted: |
| Court | Supreme Court of Delaware |
Upon appeal from the Court of Chancery. REVERSED and REMANDED.
Court Below: Court of Chancery of the State of Delaware in and for New Castle County; C.A. No. 13915.
Joseph A. Rosenthal and Kevin Gross of Rosenthal, Monhait, Gross & Goddess, P.A. Wilmington; H. Adam Prussin (argued), and Sidney B. Silverman of Silverman, Harnes & Harnes, New York City; and Berman, DeValerio, Pease & Tabacco, San Francisco, CA, for Appellant.
R. Franklin Balotti and Robert J. Stearn, Jr. of Richards, Layton & Finger, Wilmington; and Dennis J. Block, Stephen A. Radin (argued), and Jonathan M. Leibner of Weil, Gotshal & Manges LLP, New York City, for Appellee.
Before VEASEY, C.J., HARTNETT and BERGER, JJ.
In this appeal we consider the legal standards applicable to a motion to dismiss on the ground of forum non conveniens. We hold that the trial court in this case did not apply the proper legal standards in dismissing this action on the ground that a Canadian court would be a "more appropriate forum." The defendant has not established with particularity on this record that it would be subjected to overwhelming hardship and inconvenience if required to litigate in Delaware. This is not one of those rare cases where a plaintiff's choice of forum should be disturbed. Accordingly, we reverse.
Plaintiff below-appellant, Ethel Taylor, a citizen of Toronto, Canada, was at all relevant times a stockholder of LSI Logic of Canada ("LSI Canada"), a Canadian corporation with headquarters in Calgary, Alberta. LSI Canada designed and manufactured customized integrated circuit products. Defendant below-appellee, LSI Logic ("Logic"), is a Delaware corporation headquartered in Milpitas, California. Logic is the majority stockholder of LSI Canada, owning 55% of LSI Canada's outstanding shares immediately before the onset of the events resulting in this controversy.
On November 29, 1994, Logic announced that it intended to take LSI Canada private by buying back all of LSI Canada's publicly-held shares at $3.30 (Canadian) per share. ScotiaMcLeod, an independent investment banking firm retained by the outside directors of LSI Canada to consider the fairness of the price, appraised the shares at a value between $4.80 and $5.60 (Canadian) per share. Logic thereafter decided not to proceed with an offer at that time.
On June 1, 1995, Logic made an offer to purchase the minority's shares for $4.00 (Canadian) per share. At that time, ScotiaMcLeod had updated its appraisal to the range of $4.90 to $5.70 (Canadian) per share. In its offer to purchase the minority shares, Logic disclosed the ScotiaMcLeod valuation, but also disclosed a valuation performed by Prudential Securities at Logic's request. Prudential valued the shares at a range between $2.99 and $3.37 (Canadian) per share. Prudential regularly acts as underwriter for Logic's security offerings in the United States and provides financial advisory services to Logic. Logic does not represent that Prudential's valuation is independent.
Logic's offer also stated that, after the shares had been purchased, Logic would eliminate all of LSI Canada's independent design and manufacturing functions and would significantly increase the transfer prices it charges LSI Canada for computer systems and other products, effectively transforming LSI Canada from an independent design and manufacturing operation into a Canadian distributor of Logic's products.
LSI Canada's outside directors did not approve of the offer price, concluding that it did not reflect the fair market value of the shares, but recommended that the stockholders accept the offer before further erosion of share value resulted from the increase in transfer prices and the transformation of LSI Canada into a distribution center. On this advice, 10.1 out of 11.8 million shares were tendered. On September 8, 1995, LSI Canada, at Logic's behest, implemented a reverse stock split that had the effect of cashing out the rest of the public's shares at the same $4.00 (Canadian) per share price.
Plaintiff brought an action in the Delaware Court of Chancery, requesting a preliminary injunction against Logic, enjoining it from acquiring the public minority interest of LSI Canada pursuant to the June 1, 1995 offer and from implementing any plan to change current transfer pricing policies or otherwise undermining LSI Canada's profitability. The Court of Chancery refused to issue an injunction.
Logic then moved to dismiss the action based on the doctrine of forum non conveniens. There is no substantially identical companion litigation pending in Canada. 1 The Court of Chancery granted Logic's motion. 2 This is plaintiff's appeal of the decision of the Court of Chancery.
The Court of Chancery based its decision upon its determination that Canada would be a "more appropriate forum" for this litigation. It may well be that Canada is the more appropriate forum, but Logic failed to demonstrate adequately how plaintiff's choice of forum results in an overwhelming hardship to it.
Delaware courts consistently uphold a plaintiff's choice of forum except in rare cases. 3 When deciding motions to dismiss on the ground of forum non conveniens, Delaware courts abide by the Cryo-Maid 4 factors to guide those decisions. This Court, in Cryo-Maid and its progeny, has held that the following matters should be considered:
(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;
(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;
(5) the pendency or nonpendency of a similar action or actions in another jurisdiction; and
(6) all other practical problems that would make the trial of the case easy, expeditious and inexpensive.
We held in Parvin v. Kaufmann, 5 and reinforced recently in Chrysler First, 6 that defendants moving to dismiss a first-filed suit on the ground of forum non conveniens must establish with particularity that they will be subjected to overwhelming hardship and inconvenience if required to litigate in Delaware. An action may not be dismissed upon bare allegations of inconvenience without a particularized showing of the hardships relied upon. "To do otherwise would put ... 'a powerful weapon into the hands of corporations alleged to have improperly conducted their affairs.' " 7 Moreover, judicial discretion is to be exercised sparingly where, as here, there is no prior action pending elsewhere. 8
This Court in Chrysler First stated that the Cryo-Maid factors listed above
provide the framework for an analysis of hardship and inconvenience. They do not, of themselves, establish anything. Thus, it does not matter whether only one of the Cryo-Maid factors favors defendant or all of them do. The issue is whether any or all of the Cryo-Maid factors establish that defendant will suffer overwhelming hardship and inconvenience if forced to litigate in Delaware. Absent such a showing, plaintiff's choice of forum must be respected. 9
The Court of Chancery analyzed each of the factors relevant to this case.
First, since plaintiff conceded that Canadian law governs the substantive issues in this case, the Court of Chancery found that the choice of law factor weighed in favor of Logic's motion to dismiss this action brought in Delaware.
Second, regarding the relative ease of access to sources of proof, the Court of Chancery pointed out that none of the sources is located in Delaware. All are either in Canada or in California or both. Logic failed to identify any witnesses it intended to call at trial or to demonstrate that any of them would suffer overwhelming hardship if this action is litigated in Delaware. Accordingly, the Court of Chancery concluded that there was no clear advantage nor clear disadvantage in access to evidence by litigating in any one of the three jurisdictions competent to hear this matter.
Third, the Court of Chancery found that the availability of compulsory process for procuring the testimony of witnesses weighed in favor of Logic because Canadian courts would find it easier to serve process on the necessary witnesses in Canada. The Court of Chancery did not speak to the identical difficulties faced by Canadian courts serving process on the necessary witnesses in California, however. We hold that these mirror-image difficulties cancel out each other. Accordingly, as to service of process, there is no clear advantage nor clear disadvantage to litigating in Canada, Delaware or California.
Fourth, the Court of Chancery noted that there is a later-filed action pending in California involving the same subject matter and the same parties. That action has been stayed awaiting disposition of this case. Without commenting on the weight of this factor, the Court of Chancery determined that, although there is no action pending in a Canadian court, Canada would be the more appropriate forum for this suit since Canadian courts are better positioned to interpret Canada's laws governing the internal affairs of its corporations.
Returning to the significance of the stayed California action, we find that this factor carries little weight in the analysis because the California action was filed later than the action at issue in this appeal, involves a different stockholder-plaintiff and because both actions are in their preliminary stages.
Finally, the Court of Chancery found that other practical considerations weighed in favor of Logic's motion to dismiss....
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