IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CVR REFINING, LP, et al., )
)
Plaintiffs, )
) C.A. No. N21C-01-260 EMD CCLD v. )
)
XL SPECIALTY INSURANCE COMPANY, et ) al., )
)
Defendants. )
Submitted: July 7, 2021 Decided: August 11, 2021
Upon Defendants’ Motion to Dismiss, or Alternatively, to Stay DENIED
Jennifer C. Wasson, Esquire, Carla M. Jones, Esquire, Potter Anderson & Corroon LLP, Wilmington, Delaware, Robin L. Cohen, Esquire, Alexander M. Sugzda, Esquire, Cohen Ziffer Frenchman & McKenna, New York, New York. Attorneys for Plaintiffs CVR Refining, LP, CVR Refining GP, LLC, CVR Refining Holdings, LLC, CVR Energy, Inc. and David Lamp
Herbert Beigel, Esquire, Law Offices of Herbert Beigel, Tucson, Arizona. Attorney for Plaintiffs Carl C. Icahn and Icahn Enterprises L.P.
Robert J. Katzenstein, Esquire, Smith Katzenstein & Jenkins LLP, Wilmington, Delaware, Leland H. Jones, Esquire, Chiara Tondi Resta, Esquire, Wiley Rein LLP, Washington, D.C. Attorneys for Defendant XL Specialty Insurance Company.
John C. Phillips, Jr., Esquire, David Bilson, Esquire, Phillips McLaughlin & Hall, P.A., Wilmington, Delaware, Michael P. Duffy, Esquire, Scarlett M. Rajbanshi, Esquire, Boston, Massachusetts. Attorneys for Defendant Twin City Fire Insurance Company.
John C. Phillips, Jr., Esquire, David Bilson, Esquire, Phillips McLaughlin & Hall, P.A., Wilmington, Delaware, Erica J. Kerstein, Esquire, Robinson & Cole LLP, New York, New York. Attorneys for Defendant Allianz Global Risk US Insurance Company.
John C. Phillips, Jr., Esquire, David Bilson, Esquire, Phillips McLaughlin & Hall, P.A., Wilmington, Delaware, Geoffrey W. Heineman, Esquire, Ropers Majeski, P.C. Attorneys for Defendant Argonaut Insurance Company.
DAVIS, J.
I. INTRODUCTION
This insurance coverage dispute is assigned to the Complex Commercial Litigation
Division of the Court. Plaintiffs CVR Refining, LP (“CVR Refining”), CVR Refining GP, LLC
(the “General Partner”), CVR Refining Holdings, LLC (“CVR Holdings”), CVR Energy, Inc.
(“CVR Energy”), Icahn Enterprises, LP (“IELP”), Carl. C. Icahn, and David L. Lamp
(collectively, “Plaintiffs”) assert claims against Defendants XL Specialty Insurance Company
(“XL”), Twin City Fire Insurance Company (“Twin City”), Allianz Global Risks US Insurance
Company (“Allianz”), Argonaut Insurance Company (“Argonaut”), and Allied World National
Assurance Company (“AWAC”) (collectively, the “Insurers”). Specifically, Plaintiffs allege
that: (i) all the Insurers anticipatorily breached insurance policies by denying defense costs
coverage for Mr. Icahn, IELP and CVR Energy; (ii) all the Insurers anticipatorily breached the
policy by denying coverage of Plaintiffs’ indemnity costs; and (iii) the Insurers breached the
implied covenant of good faith and fair dealing by refusing to cooperate with Plaintiffs prior to a
mediation or to provide coverage for any settlement reached at that mediation.
The Insurers moved to dismiss, or alternatively, to stay this action under McWane1 (the
“McWane Motion”). In addition, Plaintiffs moved for summary judgment on Count I of the
Complaint (the “Partial SJ Motion”). The Court held a hearing on the McWane Motion and the
Partial SJ Motion on July 7, 2021. After the hearing, the Court took both matters under
advisement.
For the reasons set forth below, the Court will DENY the McWane Motion. The Court
will issue a decision on the Partial SJ Motion in a separate opinion at a later date.
1 McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co., 263 A.2d 281 (Del. 1970).
3
II. RELEVANT FACTS
A. THE PARTIES
All five corporate plaintiffs are Delaware entities. CVR Refining is an oil refiner and
marketer of transportation fuels organized as a limited partnership in Delaware.2 CVR
Refining’s principal place of business is Texas.3 The General Partner is a Delaware LLC and is
an indirectly wholly owned subsidiary of CVR Energy through CVR Holdings.4 The General
Partner is the general partner of CVR Refining, and has direct responsibility for CVR Refining’s
business and operation management.5 CVR Holdings is a Delaware LLC and is an indirectly
wholly owned subsidiary of CVR Energy.6 CVR Energy is a Delaware corporation with its
principal place of business in Texas.7 Finally, IELP is a Delaware limited partnership.8
There are two individual plaintiffs—Carl Icahn and David L. Lamp. Mr. Icahn served as
the General Partner’s chairman from January 2013 to July 2018, as well as CVR Energy’s
chairman from June 2012 to July 2018.9 At all relevant times, Mr. Icahn, directly or indirectly,
wholly owned the general partner of IELP and owned approximately 91% of IELP’s outstanding
depositary units.10 Mr. Lamp has been a director of CVR Energy and the General Partner since
January 2018.11 Since December 2017, Mr. Lamp has also been the president and CEO of both
CVR Energy and the General Partner.12
2 Compl. ¶ 11. 3 Id. 4 Id. ¶ 12. 5 Id. 6 Id. ¶ 13. 7 Id. ¶ 14. 8 Id. ¶ 15. 9 Id. ¶ 16. 10 Id. 11 Id. ¶ 17. 12 Id.
4
The Defendants are all insurers. XL is a Delaware corporation with its principal place of
business in Connecticut.13 XL is an insurance company licensed to do business in the state of
Delaware.14 Twin City is an Indiana corporation with its principal place of business in
Connecticut and is an insurance company licensed to do business in Delaware.15 Allianz and
Argonaust are Illinois corporations and are licensed to do business in Delaware.16 Allianz has its
principal place of business in Illinois.17 Argonaust has Texas as its principal place of business.18
AWAC is a New Hampshire corporation with its principal place of business in New York and is
an insurance company licensed to do business in Delaware, among other states.19
B. THE POLICIES20
XL issued Executive and Corporate Securities Liability Insurance ELU159007-18 (the
“XL Primary Policy” or “Policy”) to CVR Energy.21
The Policy requires, in part, for XL to advance defense costs:
(C) Upon the written request of:
(1) the Company (or with respect to a Claim or Interview to which Insuring Agreements (A) or (D) apply, an Insured Person), the Insurer will advance Defense Expenses, no later than 60 days after the Insurer’s receipt of invoices and any additional information reasonably requested by the Insurer documenting such Defense Expenses, in excess of the applicable Retention, if any, before the disposition of the Claim, Interview or Investigation Demand for which this Policy provides coverage; or
(2) an Insured Person with respect to a Claim or Interview to which Insuring Agreements (B) or (C) apply (or would apply but for the
13 Id. ¶ 18. 14 Id. 15 Id. ¶ 19. 16 Id. ¶¶ 20 and 21. 17 Id. ¶ 20. 18 Id. ¶ 21. 19 Id. ¶ 22. 20 The Policies are not directly at issue in the McWane Motion. The Court is discussing the Policies in depth to provide context as to the coverage dispute between Plaintiffs and the Insurers. 21 Id. ¶ 26.
5
Company’s failure or refusal to pay Defense Expenses on behalf of such Insured Person), solely in the event that the Company fails or refuses to indemnify the Insured Person for Defense Expenses within 60 days of a written request of the Insured Person, the Insurer will advance Defense Expenses on a current basis, but not later than 60 days, after the Insurer’s receipt of invoices and any additional information reasonably requested by the Insurer documenting such Defense Expenses, in excess of the applicable Retention, before the disposition of the Claim or Interview for which this Policy provides coverage, subject in all events to Section VI. General Condition (G) of this Policy.22
The Policy sets out the Limit of Liability:
Item 3. Limit of Liability:23
(A) $1,000,000 Maximum Aggregate Sublimit of Liability each Policy Period for all Investigation Demands
(B) $10,000,000 Maximum Aggregate Limit of Liability each Policy Period (including Defense Expenses) for all Loss from all Claims, Investigation Demands, and Interviews.24
The Policy also specifies the Retentions:
Item 4. Retentions:
$0 Each Insured Person under INSURING AGREEMENT I (A) or (D)
$1,000,000 each Claim, other than a Securities Claim, under INSURING AGREEMENT I (B) or (C).
$1,000,000 each Securities Claim under INSURING AGREEMENT I (B) or (C)
$0 each Investigation Demand under INSURING AGREEMENT I (F)25
22 Bourne Decl. Ex. 1 (hereinafter “XL Primary Policy”) Endorsement No. 26. 23 Words in bold appear in bold in the XL Primary Policy. 24 Id. Item 3. 25 Id. Item 4.
6
Under the XL Primary Policy, XL provided $10 million in coverage in excess of a $1
million retention. Endorsement No. 23, however, provides a higher retention limit for claims
arising from mergers and acquisitions:
. . . solely with respect to any Claim based upon, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving any: (a) acquisition, assumption, merger, consolidation or otherwise of any entity, asset, Subsidiary or liability described in Section VI General Conditions (D)(1) and (2); or (b) Change in Control, Item 4 of the Declarations is amended to read in its entirety as follows:
Item 4. Retentions
$0 each Insured Person under Insuring Agreement I (A) or (D) $2,500,000 each Claim, other than Securities Claim, under INSURING AGREEMENT I (B) OR (E)
$2,500,00 each Securities Claim under INSURING AGREEMENT I (B) OR (C)
$0 each Investigation Demand under INSURING AGREEMENT I (F)26
Section VI General Conditions (D) concerns conditions related to Mergers and
Acquisitions (Changes in Exposure or Control):
(1) If during the Policy Period the Company acquires any entity by merger, consolidation or otherwise such that the entity becomes a Subsidiary, coverage shall be provided for any Loss involving a Claim, Interview or Investigation Demand for a Wrongful Act occurring after the consummation of the transaction.
(2) If, however, by reason of the transaction (or series of transactions) described in (D)(1) above, the assets or liabilities so acquired or so assumed as a result of such acquisition, exceed thirty-five percent (35%) of the total assets or liabilities, respectively, of the Company, as represented in the Company's most recent audited consolidated financial statements, coverage under this Policy shall be provided for a period of ninety (90) days or to the Expiration Date, whichever occurs first, for any Loss involving a Claim, Interview or Investigation Demand for a Wrongful Act that occurred after the transaction has been consummated. Coverage beyond such period will be provided only if:
(a) the Insurer receives written notice containing full details of the transaction(s); and
26 Id. Endorsement No. 23.
7
(b) the Insurer at its sole discretion, agrees to provide such additional coverage upon such terms, conditions, limitations, and additional premium that it deems appropriate.27
There are three potentially applicable Insuring Agreements:
(A) The Insurer shall pay on behalf of the Insured Persons Loss resulting from a Claim first made against the Insured Person during the Policy Period for a Wrongful Act, except for Loss which the Company is permitted or required to pay on behalf of the Insured Persons as indemnification.
(B) The Insurer shall pay on behalf of the Company Loss resulting from a Claim first made against the Insured Persons during the Policy Period for a Wrongful Act to the extent the Company is required or permitted to pay on behalf of the Insured Persons as indemnification.
(C) The Insurer shall pay on behalf of the Company Loss resulting solely from any Securities Claim first made against the Company during the Policy Period for a Wrongful Act.
…28
“Loss” is a defined term:
“Loss” means damages, judgments, settlements, pre-judgment and post-judgment interest or other amounts (including punitive, exemplary or multiplied damages, where insurable by law) that any Insured is legally obligated to pay and Defense Expenses, including that portion of any settlement which represents the claimant’s attorneys’ fees.29
The definition of Loss also has certain exclusions:
. . . Loss will not include that portion which constitutes:
(3) any amount which is uninsurable under the law pursuant to which this Policy is construed; provided that the Insurer will not assert that the portion of any settlement or judgment in a Claim arising from an initial or subsequent public offering of the Company’s securities constitutes uninsurable loss due to the alleged violations of Section 11 and/or 12 of the Securities Act of 1933 as amended (including alleged violations of Section 11 and/or 12 of the
27 Id. § VI(D)(1) and (2). 28 Id. § I. 29 Id. § II(O).
8
Securities Act of 1933 by a Controlling Person pursuant to Section 15 of the Securities Act of 1933);
...
(5) any amount which represents or is substantially equivalent to an increase in the consideration paid, or proposed to be paid, by the Company in connection with its purchase of any securities or assets of any person, group of persons, or entity
. . .30
“Defense Expenses” are defined as:
“Defense Expenses” means reasonable and necessary legal fees, expenses and other costs (including experts’ fees):
(1) Incurred in the investigation, adjustment, settlement, defense and/or appeal of any Claim . . .31
“Claim” is defined under Endorsement 25:
Section II Definitions (C)(2) of the Policy is amended to read in its entirety as follows:
(2) any civil, criminal, judicial, administrative or regulatory proceeding commenced by:
(a) service of a complaint or similar pleading;
. . .32
“Securities Claim,” by contrast, is defined:
“Securities Claim” means a Claim, other than an administrative or regulatory proceeding against or investigation of the Company:
(1) made against an Insured for any actual or alleged violation of any federal, state or local statute, regulation, or rule or common law regulating securities, including but not limited to the purchase or sale of, or offer to purchase or sell, securities, which is:
30 Id. §§ II(O)(3) and II(O)(5). 31 Id. § II(F)(1). 32 Id. Endorsement No. 25 (Amend Definition of Claim).
9
(a) brought by any person or entity resulting from, the purchase or sale of, or offer to purchase or sell securities of the Company; or
(b) brought by a security holder of the Company with respect to such security holder’s interest in securities of the Company.
. . . 33
Endorsement No. 42 amends the definition of “Securities Claim”:
“. . .‘Securities Claim,’ as defined in Section II Definitions (S) of the Policy, is amended to include any Claim, other than an administrative or regulatory proceeding against or investigation of the Company, made against any Insured for any actual or alleged act, error, omission, misstatement, misleading statement or breach of duty arising from or in connection with the purchase or sale of, or offer to purchase or sell any securities issued by the Company, whether such purchase, sale or offer involves a transaction with the Company or occurs in the open market.34
“Insured” means the Insured Persons and the Company.35
“Insured Person” is defined:
“Insured Person” means:
(1) any past, present or future natural person director or officer, or member or manager of the board of managers, of the Company and those persons serving in a functionally equivalent role for the Parent Company or any Subsidiary operating or incorporated outside the United States.36
Endorsement No. 46 further amends the definition of “Insured Person”:
(2) any past, present or future natural person employee or intern of the Company (other than an individual described in (J)(1) above) to the extent any Claim is: (a) a Securities Claim, or (b) made and maintained against both such employee and an Insured Person as defined in (J)(1) above;”37
Endorsement No. 23 of the Policy increased the retention to $2.5 million for claims
related to Mergers and Acquisitions.
33 Id. § II(S)(1). 34 Id. Endorsement No. 42. 35 Id. § II(I). 36 Id. § II(J). 37 Id. Endorsement No. 46.
10
“Company” is defined:
“Company” means the Parent Company and any Subsidiary created or acquired on or before the Inception Date set forth in ITEM 2 of the Declarations or during the Policy Period, subject to GENERAL CONDITIONS VI (D). The term Company shall include any such entity as a debtor in possession, as such term is used in Chapter 11 of the United States Bankruptcy Code or any equivalent provision in any foreign jurisdiction.38
“Parent Company” means the entity named in ITEM 1 of the Declarations.39 ITEM 1
names CVR Energy as the Company.40
“Subsidiary” is defined:
“Subsidiary” means any entity during any time in which the Parent Company holds directly or indirectly:
(1) more than fifty percent (50%) of the voting rights or issued share capital of such entity.
. . .41
“Wrongful Act” means:
(1) any actual or alleged act, error, omission, misstatement, misleading statement, neglect, or breach of duty by an Insured Person while acting in his or her capacity as such or due to his or her status as such;
...
(3) solely with respect to Insuring Agreement (C) of the Policy, any actual or alleged act, error, omission, misstatement, misleading statement, neglect, or breach of duty by the Company;
. . .42
The XL Primary Policy also contains an allocation provision:
If both Loss covered by this Policy and loss not covered by this Policy are incurred, either because a Claim, Interview or Investigation Demand made
38 Id. § II(D). 39 Id. § II(Q). 40 Id. Item 1. 41 Id. § II(T). 42 Id. § II(U).
11
against the Insured contains both covered and uncovered matters, or because a Claim, Interview or Investigation Demand is made against both the Insured and others (including the Company for Claims other than Securities Claims) not insured under this Policy, the Insured and the Insurer will use their best efforts to determine a fair and appropriate allocation of Loss between that portion of Loss that is covered under this Policy and that portion of loss that is not covered under this Policy. Additionally, the Insured and the Insurer agree that in determining a fair and appropriate allocation of Loss, the parties will take into account the relative legal and financial exposures of, and relative benefits obtained in connection with the defense and/or settlement of the Claim, Interview or Investigation Demand by, the Insured and others.43
Twin City. Allianz, Argonaut and AWAC issued excess insurance policies (collectively
with XL Primary Policy, the “Policies”) creating an insurance coverage tower.44 The Policies
follow form to the XL Primary Policy.45
C. THE UNDERLYING ACTIONS
The coverage dispute between Plaintiffs and the Insureds arises out of two putative class
action lawsuits. Certain plaintiffs filed a lawsuit against CVR Refining in the Court of
Chancery, In re CVR Refining, LP Unitholder Litigation, No. 2019-0062-KSJM (the “Delaware
Litigation”).46 In addition, certain other plaintiffs initiated a lawsuit in the Southern District of
New York, White Pine Investments v. CVR Refining, LP, No. 1:20-cv-02863 (the “White Pine
Action”) (collectively, the “Underlying Actions”).47 The factual allegations of both lawsuits are
substantially similar.48 The Delaware Litigation plaintiffs alleged that CVR manipulated the
price of CVR Refining’s stock to enable CVR Energy to call the plaintiffs’ common units at an
artificially depressed price.49 The plaintiffs in the Delaware Litigation and in the White Pine
Action are not parties to this civil proceeding.
43 Id. § V(D). 44 See Compl. ¶¶ 41-44. 45 See id.; see also Bourne Decl. Exs. 2-5. 46 Compl. Ex. F 47 See id. ¶ 45. 48 Id. 49 Id. ¶ 46.
12
The Delaware Litigation complaint names CVR Energy, CVR Refining, CVR Holdings,
the General Partner, and Mr. Icahn and various individual directors and officers.50 The Delaware
Litigation alleges breach of contract against the CVR entities, breach of the implied covenant of
good faith and fair dealing against the CVR entities, and tortious interference against CVR
Energy and Mr. Icahn.51
The White Pine Action complaint names as defendants CVR Energy, CVR Refining,
CVR Holdings, the General Partner, IELP, and Mr. Lamp.52 The White Pine Action alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5; and Section 20(a) of the
Exchange Act.53
Plaintiffs gave notice of the Underlying Actions to the Insurers.54 On March 25, 2019,
XL contacted CVR Energy regarding coverage.55 XL stated the Delaware Litigation constituted
a Claim against Insured Persons for Wrongful Acts and constituted a Securities Claim against
CVR Energy, CVR Refining, CVR Holdings and the General Partner.56 XL denied coverage as
to Mr. Icahn and IELP.57
D. THE INSURERS DENY COVERAGE.
Mediation for the Delaware Litigation was scheduled for February 17, 2021.58
On January 8, 2021, XL sent a letter to CVR Energy, noting that coverage may not be
available in the Delaware Litigation.59 First, XL argued that the “relief sought in the Litigation
50 Id. ¶ 51. 51 Id. ¶ 52. 52 Id. ¶ 53. 53 Id. ¶ 54. 54 Id. ¶ 55. 55 Id. ¶ 56. 56 Id. 57 Id. 58 Id. ¶ 57. 59 McWane Mot. Reply Br. Ex. K (January 8 XL Letter).
13
may not constitute covered Loss” because (1) the damages are based solely on contractual
obligations, (2) it is “any amount which represents or is substantially equivalent to an increase in
the consideration paid, or proposed to be paid, by the Company in connection with its purchase
of securities or assets of any person, group of persons, or entity,” and (3) the amount may be
uninsurable under Texas law.60 Furthermore, XL took the position that coverage was
unavailable for IEP and Mr. Icahn because IELP was not an Insured and that Mr. Icahn was not
being sued in his capacity as an Insured Person.61
On January 15, 2021, CVR Energy responded, setting out its position on why there was
coverage under the Policies.62 CVR requested that XL confirm by February 3, 2021 that XL
“will provide coverage for any settlement reached at mediation…scheduled for February 17,
2021.”63 Instead of responding to the January 15, 2021 letter, the Insurers filed suit in Texas.
E. PROCEDURAL POSTURE
The Insurers filed a petition in Texas District Court on January 27, 2021 (the “Texas
Action”).64 The Insureds then filed the Complaint in this litigation on January 30, 2021 seeking
recovery for (1) anticipatory breach of contract regarding the Insurers’ denial of coverage for
defense costs to Mr. Icahn, IELP, and CVR Energy; (2) anticipatory breach of contract for
denying indemnity costs; and (3) breach of the implied covenant of good faith and fair dealing.65
60 Id. 61 Id. 62 McWane Mot. Op. Br. at 9. 63 McWane Mot. Reply Br. Ex. L (January 15 CVR Letter) 64 McWane Mot. Op. Br. Ex. A (Insurers’ Texas Petition). 65 D.I. No. 1.
14
The Insureds moved for partial summary judgment on XL’s duty to advance defense
costs on March 12, 2021.66 The Insurers moved to dismiss, or alternatively, to stay the action
under McWane on April 9, 2021.67 The parties oppose the respective motions.
The Court held a hearing on the McWane Motion on July 7, 2021. The Court understands
that Texas District Court will hold a hearing on outstanding motions in the Texas Action in mid-
August.
III. PARTIES’ CONTENTIONS
The Insurers argue that this action should be dismissed in favor of the first-filed Texas
Action, which involves the same parties and same coverage dispute. The Insurers argue that the
Texas Action is first-filed because this civil proceeding was filed as a reaction to the Texas
Action.
Plaintiffs argue that this action and the Texas Action are contemporaneously filed and
that traditional forum non conveniens analysis should apply. Plaintiffs further contend that the
Insurers cannot demonstrate that it would be an overwhelming hardship and inconvenience to
litigate in Delaware. As such, Plaintiffs claim that the Court should not dismiss the case under
the traditional forum non conveniens rules.
The Court notes that, at present, there are four separate actions filed involving four
different courts and three different states. As remarked at the July 7, 2021 hearing, judicial
economy would have been best served through a traditional intervention in the Delaware
Litigation or the White Pine Action for purposes of determining coverage.
66 D.I. No. 24.
67 D.I. No. 30.
15
IV. STANDARD OF REVIEW
The granting of dismissal or a stay rests within the sound discretion of the trial court.68
Dismissal under forum non conveniens is drastic relief and only warranted in “rare cases.”69 To
avoid the plaintiff’s choice of forum, a defendant must show “with particularity that it will be
subjected to overwhelming hardship and inconvenience if required to litigate in Delaware.”70 A
defendant must show that the inconvenience and hardship are so profound that they
“overwhelm” the plaintiff’s choice of forum.71 It is intended as “a stringent standard that holds
defendants who seek to deprive of a plaintiff of her chosen forum to an appropriately high
burden.”72
When determining whether a suit should be stayed or dismissed for forum non
conveniens, Delaware applies different standards depending on the circumstance.73 If the foreign
action is first-filed, the Court will conduct an analysis under McWane.74 Under McWane,
Delaware courts generally defer to a case filed first in time in another forum if that action
involves substantially the same parties and issues as the litigation pending in Delaware.75 But, if
two cases are filed contemporaneously, the Delaware case is filed first or there is no other
pending action, the Court examines the motion under the traditional forum non conveniens
framework, applying the factors set forth in Cryo-Maid under an “overwhelming hardship”
standard.76
68 BP Oil Supply Co. v. Conoco Phillips Co., 2010 WL 702382, at *2 (Del. Super. 2010). 69 See Ison v. E.I. DuPont de Nemours and Co., Inc., 729 A.2d 832, 842 (Del. 1999). 70 Pipal Tech Ventures Private Ltd. V. MoEngage, Inc., 2015 WL 9257869, at *5 (Del. Ch. Dec. 17, 2015). 71 Id at *10. 72 Martinez v. E.I. DuPont de Nemours and Co., Inc., 86 A.3d 1102, 1105 (Del. 2014), as revised (Mar. 4, 2014). 73 See Gramercy Emerging Markets Fund v. Allied Irish Banks, P.L.C., 173 A.3d 1033, 1036 (Del. 2017). 74 See id. 75 BP Oil Supply Co., 2010 WL 702382, at *2. 76 See Ethica Corp. Finance S.r.L., 2018 WL 3954205, at *5 (Del. Super. Aug. 16, 2018).
16
V. DISCUSSION
The Court’s decision of whether to apply McWane and therefore whether or not to
proceed to the Cryo-Maid analysis hinges upon whether a prior action was filed. The Insurers
contend that the Texas Action is first filed both as to timing and because this action is reactive to
the Texas Action. The Court does not agree with this legal conclusion. While the Texas Action
was filed three days before this civil proceeding, the Court notes that merely using a timeline is
not how to legally analyze the issue.
“Delaware courts have not created a ‘bright line’ test to determine whether two actions
are contemporaneously filed” because that determination is fact-specific to each case.77
Delaware courts may treat cases that are filed within the same general time frame as
contemporaneous.78 This is to avoid a situation where the parties “race to the courthouse” to file
actions that otherwise indicate independent decision making.79 Furthermore, declaratory actions
filed in anticipation of the natural plaintiff are not entitled to deference “generally afforded to a
first-filed action.”80
By contrast, if the Delaware action is reactive, Delaware courts will defer to the first-filed
suit, even if the competing suits were filed close in time.81 A reactive Delaware action will not
“succeed in ousting a foreign plaintiff of its choice of forum simply by the speed with which it
was filed.”82 “[S]uch a rule would undermine the very considerations of comity and efficiency
77 Royal Indem. Co. v. Gen. Motors Corp., 2005 WL 1952933, at *2 n. 18 (Del. Super. Jul. 26, 2005). 78 See In re Bear Stearns Cos., Inc. Shareholder Litigation, 2008 WL 959992, at *5 (Del. Ch. Apr. 9, 2008) (finding actions filed contemporaneously when they were “filed in the same general time frame, only three days apart”). 79 Tex. Instruments Inc. v. Cyrix Corp., 1994 WL 96983, at *4 (Del. Ch. Mar. 22, 1994); see also Dura Pharms., Inc. v. Scandipharm, Inc., 713 A.2d 925, 929 (Del. Ch. 1998) (“[T]he two complaints were filed within one business day of another . . . an indication of independent decision making”). 80 Nat. Union Fire Ins. Co. of Pittsburg, PA v. Crosstex Energy Servs., L.P., 2013 WL 6598736, at *4 (Del. Super. Dec. 13, 2013). 81 See Dura Pharms, Inc., 713 A.2d at 929 (Del. Ch. 1998) 82 Id.
17
on which the general rule of McWane based, by encouraging a ‘race’ to file responsive or
reactive complaints.”83 Therefore, if the parties were “free to file suit” for a significant period of
time before the purportedly contemporaneous suits were filed, courts are more likely to find the
second-filed suit reactive and defer to the first-filed action.84
The facts demonstrate that the Insurers engaged in a “race to the courthouse.” Here, the
parties negotiated coverage until January 15, 2021.85 Plaintiffs set a deadline of February 3,
2021 for the Insurers to take a final position on the February 17, 2021 mediation in the Delaware
Litigation. Instead of continuing discussions with their insureds, the Insurers filed the Texas
Action on January 27, 2021.86 While Plaintiffs’ cause of action may have existed when Insurers
refused to cover the claim on January 8, 2021, Plaintiffs did not file suit for a significant amount
of time within the context of negotiations. Without warning, the Insurers, who did not deny
coverage until 2021, filed the Texas Action without additional notice to Plaintiffs. Importantly,
Plaintiffs are the natural plaintiffs in this action.87 Under these circumstances, the Court will not
defer to the Insurers’ choice of forum. Therefore, the Court finds that the actions were filed
contemporaneously. As such, Cryo-Maid and not McWane governs here.
When two cases are filed contemporaneously, the Court should examine the motion
“under the traditional forum non conveniens framework, applying the factors set forth in
Cryo-Maid under an ‘overwhelming hardship’ standard.”88 The Cryo-Maid factors are (1) the
relative ease of access to proof; (2) the availability of compulsory processes for witnesses; (3)
83 Id. 84 Id.; see also Chemtura Corp. v. Certain Underwriters at Lloyd’s, 2015 WL 5340475, at *4 (Del. Super. Aug. 26, 2015) (finding that a second-filed action was reactive when defendants could have filed suit long before plaintiffs). 85 See January 15 CVR Letter. 86 Insurers’ Texas Petition. 87 See Lima Delta Co. v. Global Aerospace, Inc., 2016 WL 691965, at *4 n.42 (Del. Super. Feb. 19, 2016) (“[Plaintiff] is the insured, and therefore, the “natural plaintiff” in an insurance coverage dispute”). 88 Ethica Corp. Finance S.r.L, 2018 WL 3954205, at *5 (Del. Super. Aug 16, 2018).
18
the possibility of the view of the premises; (4) whether the controversy is dependent upon the
application of Delaware law; (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.89
The Insurers do not argue that the Cryo-Maid factors apply, therefore they cannot meet
their burden of proof.90 Furthermore, the Insurers waived any Cryo-Maid argument by failing to
assert it in their opening brief.91 Even if the Insurers argued under traditional forum non
conveniens standards, the Court finds that cannot prove overwhelming hardship if forced to
litigate in Delaware. All the Insureds are licensed to do business in Delaware. XL is a Delaware
corporation. In addition, there is a very good chance that Delaware law will apply to the
Policies.92
VI. CONCLUSION
For all the foregoing reasons, the McWane Motion is DENIED.93
The Court understands that this decision does not help preserve judicial resources.
Ideally, the parties would have intervened in either the Delaware Litigation or the White Pine
Action for a coverage determination. This is a commonly accepted practice and one usually
welcomed by the courts.94 Unfortunately, the Insurers initiated litigation in an entirely new State
89 See Taylor v. LSI Logic Corp., 689 A.2d 1196, 1198-99 (Del. 1997). 90 See Williams Gas Supply Co. v. Apache Corp., 594 A.2d 34, 36 (Del. 1991) (“The burden [of proof] is imposed upon the moving party . . .”). 91 See Franklin Balance Sheet Inves. Fund v. Crowley, 2006 WL 3095952, at *4 (Del. Ch. Oct. 19, 2006) (“[A] party is obliged in its motion and opening brief to set forth all of the grounds, authorities and arguments supporting its motion.”). 92 See RSUI Indem. Co. v. Murdock, 248 A.3d 887, 896-901 (Del. 2021). 93 Arguments regarding forum shopping were made at the June 28, 2021 hearing. The Court disregarded such arguments in making its decision. The Court firmly believes that both this Court and the Texas District Court can competently and impartially preside over the litigation between the parties. 94 See, e.g., Bradley Corp. v. Zurich Ins. Co., 984 F.Supp. 1193, 1998 (E.D. Wis. 1997) (parties should move to intervene in primary litigation and request a determination as to coverage).
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(Texas as opposed to Delaware or New York) and Plaintiffs filed a fourth lawsuit in this Court.
Now four different courts in three different States are involved. This conduct does not preserve
scarce judicial resources. Despite this, the Court—applying, as it must, governing Delaware
law—has determined that it will not stay or dismiss this civil proceeding.
Dated: August 11, 2021 Wilmington, Delaware
/s/ Eric M. Davis Eric M. Davis, Judge
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