COURT OF CHANCERY OF THE STATE OF DELAWARE
417 S. State Street JOSEPH R. SLIGHTS III Dover, Delaware 19901 VICE CHANCELLOR Telephone: (302) 739-4397 Facsimile: (302) 739-6179
Date Submitted: August 23, 2021 Date Decided: October 20, 2021
Seth D. Rigrodsky, Esquire Bruce E. Jameson, Esquire Herbert W. Mondros, Esquire John G. Day, Esquire Gina M. Serra, Esquire Prickett, Jones & Elliott, P.A. Rigrodsky Law, P.A. 1310 North King Street 300 Delaware Avenue, Suite 210 Wilmington, DE 19801 Wilmington, DE 19801
Re: Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS
Dear Counsel:
Plaintiffs are former stockholders of Zhongpin, Inc. and current judgment
creditors of Zhongpin and its board of directors (the “Class Action Defendants”).
The underlying judgment was entered in litigation where stockholders, including
Plaintiffs, asserted claims of breach of fiduciary duty against the Class Action
Defendants relating to a self-interested going-private transaction in which
Zhongpin’s controlling stockholder cashed-out Zhongpin’s minority stockholders
following an unfair process and at an unfair price. When the Class Action Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 2
Defendants defaulted on their obligation to defend the litigation, the Court entered
judgment against them in the amount of $41,282,758 (the “Default Judgment”).
That Default Judgment remains unsatisfied. Plaintiffs initiated this action to collect
the Default Judgment directly from Zhongpin’s director and officer liability
(“D&O”) insurance carrier, Defendant, Great American Insurance Company
(“GAIC”).1
GAIC disputes both Plaintiffs’ standing to assert a direct claim against the
Zhongpin D&O policy and whether Plaintiffs have stated a viable claim for coverage
under the clear and unambiguous terms of the policy. GAIC has moved to dismiss
Plaintiffs’ Verified Complaint for Declaratory Judgment (the “Complaint”) with
prejudice under Chancery Rule 12(b)(6). Following submission of GAIC’s motion
to dismiss (the “Motion to Dismiss”), the Court, sua sponte, asked the parties to
address in supplemental submissions whether this Court has subject matter
jurisdiction over this dispute.
1 Verified Compl. (“Compl.”) (D.I. 1) at ¶ 19; Opening Br. in Supp. Def.’s Mot. to Dismiss (“Def. OB”), Ex. B (“GAIC Policy”). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 3
“The Court of Chancery is proudly a court of limited [subject matter]
jurisdiction.”2 With this in mind, this court will “guard[] the historic and important
distinction between legal and equitable jurisdiction” even if it must raise the issue
sua sponte.3 “In view of this mandate, I begin and end with a question the parties
did not raise: whether this Court has subject matter jurisdiction to hear the plaintiff’s
claims.”4 Having determined that it does not, I dismiss the Complaint for want of
subject matter jurisdiction. Plaintiffs may elect to transfer the case to the Superior
Court under 10 Del. C. § 1902 within 60 days.
If Plaintiffs elect to transfer, they may also request that I be cross-designated
to preside over the case pro tempore as a Superior Court judge.5 Given the
procedural posture in which the subject matter jurisdiction issue has been addressed
2 Perlman v. Vox Media, Inc., 2019 WL 2647520, at *4 (Del. Ch. June 27, 2019), aff’d, 2021 WL 1042985 (Del. Mar. 18, 2021). 3 Id. (citation omitted). 4 Crown Castle Fiber LLC v. City of Wilm., 2021 WL 2838425, at *1 (Del. Ch. July 8, 2021). 5 Del. Const. Art. IV, § 13. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 4
here, and the Court’s progress in considering the Motion to Dismiss on the merits,
cross-designation may be particularly appropriate in this instance.
I. BACKGROUND
I have drawn the facts from well-pled allegations in the Complaint, documents
incorporated by reference or integral to that pleading and documents properly
subject to judicial notice.6 Because I have decided the matter under Chancery
Rule 12(b)(1), I am permitted to review matters outside the Complaint, although
I had no reason to do so here.7
A. The Parties and Relevant Non-Parties
Plaintiffs, Ernesto Rodriguez and Alan Hall, are former stockholders of
Zhongpin and were certified as class representatives in a class action against the
Class Action Defendants.8
6 Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (noting that on a motion to dismiss, the Court may consider documents that are “incorporated by reference” or “integral” to the complaint). 7 NAMA Hldgs., LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 422 (Del. Ch. 2007). 8 Compl. ¶ 9; In re Zhongpin Inc. S’holder Litig., C.A. No. 7393-VCS (Feb. 6, 2019). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 5
Defendant, GAIC, is an Ohio-based insurance company that issued the D&O
insurance policy to Zhongpin.9
Non-party, Zhongpin, was a Delaware meat and food processing company
that specialized in vegetables, fruits, pork and pork products.10 The company’s
principal corporate offices were in the People’s Republic of China (“China”).11
Non-party, Xianfu Zhu, was the de facto controlling stockholder of Zhongpin.
Zhu caused Zhongpin to enter a transaction with two of his wholly owned entities
whereby the minority stockholders of Zhongpin were cashed out for inadequate
consideration. That transaction prompted the claims against the Class Action
Defendants that resulted in the Default Judgment.12 It is alleged that Zhu resides in
China.13
9 Compl. ¶ 10. 10 Compl. ¶ 13. 11 Id. 12 Compl. ¶¶ 2, 14. 13 Compl. ¶ 20. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 6
B. The Underlying Action
As noted, the underlying action challenged a merger, memorialized in a
definitive merger agreement dated November 26, 2012, whereby Zhu, as controller,
squeezed out Zhongpin’s minority stockholders.14 The complaint in that action
asserted breach of fiduciary duty claims against the Class Action Defendants and
was premised on the contention that these defendants would be obliged to prove the
entire fairness of the squeeze-out.15
The Class Action Defendants initially were represented by Skadden, Arps,
Slate, Meagher & Flom LLP. On February 6, 2019, the Court granted Skadden’s
motion to withdraw as counsel after the Class Action Defendants failed to meet their
financial obligations to the firm.16 On November 21, 2019, the Court granted
Plaintiffs’ motion for class certification.17 And, on April 14, 2020, after the Class
Action Defendants failed to engage new counsel, and otherwise failed to participate
14 Compl. ¶ 15. 15 Id. 16 In re Zhongpin Inc. S’holder Litig., C.A. No. 7393-VCS (Feb. 6, 2019). 17 Compl. ¶ 18. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 7
in the defense of the litigation, the Court granted Plaintiffs’ motion for default
judgment.18 After further submissions from Plaintiffs, the Court entered the Default
Judgment against the Class Action Defendants in the amount of $41,282,758.19
The Default Judgment remains unsatisfied. According to Plaintiffs, they have
been unable to collect from the Class Action Defendants, inter alia, because they
and their assets are located in China.20 Having exhausted their efforts to execute on
the judgment against the Class Action Defendants, Plaintiffs now turn to Zhongpin’s
D&O policy for satisfaction.
C. The GAIC Policy
It is alleged that the D&O policy issued to Zhongpin by GAIC (the “D&O
Policy”) covered losses incurred during the time frame of the wrongdoing alleged in
the underlying action and that the losses are not excluded by the D&O Policy.21
GAIC disagrees on several grounds, including that Plaintiffs have no standing to
18 Compl. ¶ 2. 19 Id. 20 Compl. ¶ 10. 21 Compl. ¶ 21. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 8
seek coverage under the D&O Policy, the claims arose outside the coverage period,
and the claims are governed by several exceptions or failures of conditions in the
policy. On this latter point, GAIC refers to the D&O Policy’s “No Action Clause,”
found at Section IX, which reads, in relevant part:
No action shall be taken against the Insurer unless, as a condition precedent thereto, there shall have been full compliance with all the terms of this Policy, and until the Insured’s obligation to pay shall have been finally determined by an adjudication against the Insured or by written agreement of the Insured, claimant and the Insurer.22
Relatedly, Section VII(A) provides:
The Insureds shall not incur Costs of Defense, or admit liability, offer to settle, or agree to any settlement in connection with any Claim without the express prior written consent of the Insurer, which consent shall not be unreasonably withheld. The Insureds shall provide the Insurer with full cooperation and all information and particulars it may reasonably request in order to reach a decision as to such consent. Any Loss resulting from any admission of liability, agreement to settle, or Costs of Defense incurred prior to the Insurer’s consent shall not be covered hereunder.
Notwithstanding the foregoing, if a Claim can be resolved in which all Loss, including Costs of Defense, does not exceed the applicable Retention, then the Insurer’s consent shall not be required, provided, however, the Insureds agree to notify the Insurer of the disposition and provide the Insurer with all information and particulars it may
22 GAIC Policy at IX(C)(1). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 9
reasonably request about the Claim and its disposition as soon as practicable and in no event later than the expiration of this Policy.23
And Section VII.B provides: “The Insureds, and not the Insurer, have the duty to
defend all Claims, provided that the Insureds shall only retain counsel as is mutually
agreed upon with the Insurer.”24 According to GAIC, when read alone or together,
these provisions make clear that no coverage is available to insureds who refuse to
defend a claim and then allow a default judgment to be taken against them.
II. ANALYSIS
After oral argument on the Motion to Dismiss, the Court raised, sua sponte,
the question of whether it could exercise subject matter jurisdiction over Plaintiffs’
claims.25 Under Rule 12(b)(1), this Court will dismiss a claim “if it appears from
the record that the Court does not have subject matter jurisdiction over the claim.”26
23 GAIC Policy at VII(A). 24 GAIC Policy at VII(B). 25 D.I. 27. I note that, in its Motion to Dismiss, GAIC questioned whether the Court had subject matter jurisdiction over the claim as it moved to dismiss the Complaint under both Court of Chancery Rules 12(b)(1) and 12(b)(6). (D.I. 5) Despite citing Rule 12(b)(1) as grounds for dismissal in its Motion to Dismiss, this argument was not addressed by either party in the subsequent briefing or oral argument. 26 Pitts v. City of Wilm., 2009 WL 1204492, at *5 (Del. Ch. Apr. 27, 2009). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 10
“Unlike the standards employed in [a] Rule 12(b)(6) analysis, . . . [under
Rule 12(b)(1)], [t]he burden is on the Plaintiff[] to prove jurisdiction exists. Further,
the Court need not accept Plaintiff[s’] factual allegations as true and is free to
consider facts not alleged in the complaint.”27
A. Subject Matter Jurisdiction
The Court of Chancery is a court of “limited jurisdiction;” it maintains subject
matter jurisdiction “only when (1) the complaint states a claim for relief that is
equitable in character, (2) the complaint requests an equitable remedy when there is
no adequate remedy at law or (3) Chancery is vested with jurisdiction by statute.”28
Under the so-called “clean up doctrine,” the court may also exercise ancillary
jurisdiction over purely legal causes of action that are “part of the same controversy
over which the Court originally had subject matter jurisdiction in order to avoid
27 Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007) (cleaned up). 28 Perlman, 2019 WL 2647520, at *4; see also 10 Del. C. § 342 (“The Court of Chancery shall not have jurisdiction to determine any matter wherein sufficient remedy may be had by common law, or statute, before any other court or jurisdiction of this State.”). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 11
piecemeal litigation.”29 In other words, “[i]f a controversy is vested with equitable
features which would support Chancery jurisdiction of at least part of the
controversy, then the Chancellor has discretion to resolve the remaining portions of
the controversy as well.”30
Chancery protects its limited jurisdictional boundaries and “will not exercise
subject matter jurisdiction ‘where a complete remedy otherwise exists
[simply because] the plaintiff has prayed for some type of traditional equitable relief
as a kind of formulaic ‘open sesame’ to the Court of Chancery.’”31 “[U]nlike many
jurisdictions, judges in the Delaware Court of Chancery are obligated to decide
whether a matter comes within the equitable jurisdiction of this Court regardless of
whether the issue has been raised by the parties.”32 Indeed, even when all parties
29 Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 974 (Del. Ch. 2016). 30 Getty Ref. & Mktg. Co. v. Park Oil, Inc., 385 A.2d 147, 149 (Del. Ch. 1978) (emphasis added). 31 Christiana Town Ctr., 2003 WL 21314499, at *3 (quoting IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 78 (Del. Ch.1991)). 32 Mass. Mut. Life Ins. Co. v. Certain Underwriters at Lloyd’s of London, 2010 WL 3724745, at *2 (“Massachusetts Mut. II”) (Del. Ch. Sept. 24, 2010) (quoting IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch. 1991)). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 12
agree that the court may exercise subject matter jurisdiction, our law is clear that
equitable jurisdiction “cannot be conferred by consent or agreement.”33
Plaintiffs seek a declaratory judgment that coverage exists under the D&O
Policy and a judgment on their breach of contract claim for damages in an amount
at least equal to the Default Judgment in the underlying action. There is no claim
based in equity and no prayer for equitable relief. “At heart, the [Plaintiffs] assert
that [GAIC] . . . [has] not fulfilled [its] obligations under [its] [] policies. This is
fundamentally a breach of contract action for money damages, which is the
traditional province of the Superior Court.”34 To be sure, “[i]t is well settled that the
Declaratory Judgment Act does not independently confer jurisdiction on this
court.”35 Similarly, “a breach of contract action for money damages . . . is the
traditional province of the Superior Court.”36
33 El Paso Nat. Gas Co. v. TransAmerican Nat. Gas Corp., 669 A.2d 36, 39 (Del. 1995). 34 Massachusetts Mut. II, 2010 WL 3724745, at *2. 35 Reader v. Wagner, 2007 WL 3301026, at *1 (Del. Ch. Nov. 1, 2007). 36 Massachusetts Mut. II, 2010 WL 3724745, at *2. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 13
In supplemental letters to the Court, the parties seek to invoke the Court’s
jurisdiction in two ways. GAIC argues that this Court has exclusive jurisdiction
under 8 Del. C. § 145(k)–(g), while Plaintiffs argue this Court should exercise its
clean-up jurisdiction.37 Neither argument is persuasive.
Statutory Jurisdiction
Under 8 Del. C. § 145(k), “[t]he Court of Chancery is . . . vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any . . . agreement, . . .
or otherwise.”38 Under 8 Del. C. § 145(g), Delaware corporations are authorized to
“purchase and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation.”39 GAIC argues that because
Plaintiffs seek payment through an insurance policy issued under Section 145(g),
Plaintiffs’ coverage claims against GAIC fall within Section 145(k)’s grant of
37 Letter from Herbert W. Mondros to the Court Regarding Subject Matter Jurisdiction (Aug. 23, 2021) (D.I. 30) (“Mondros Ltr.”), at 2; Letter from Bruce E. Jameson to the Court Regarding Subject Matter Jurisdiction (Aug. 3, 2021) (D.I. 31). 38 8 Del. C. § 145(k). 39 8 Del. C. § 145(g). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 14
plenary authority with respect to indemnification such that this Court has exclusive
jurisdiction.40
GAIC’s statutory argument was squarely addressed and rejected by
Vice Chancellor Laster in Massachusetts Mutual Life Insurance Co. v. Certain
Underwriters at Lloyd’s of London. There, the plaintiff sought indemnification
under a D&O policy. In addressing the plaintiff’s argument that D&O coverage
issues resemble the indemnification and advancement determinations this court
makes under Section 145, the court determined that while “[a] connection between
D&O insurance and indemnification admittedly exists,” this “does not [] control the
jurisdictional analysis.”41 The court went on to observe:
Although Section 145(g) authorizes Delaware corporations to “purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation,” neither it nor any other Delaware statute gives this Court jurisdiction over
40 GAIC also attempts to draw an analogy between its claims and contribution claims between joint indemnitors that have been adjudicated by this court, citing to Levy v. HLI Operating Co., Inc., 924 A.2d 210 (Del. Ch. 2007). For reasons explained by the court in Massachusetts Mutual, the analogy to contribution claims does not work when seeking to invoke equitable jurisdiction to bring a straightforward insurance coverage action in Chancery when the claim clearly belongs in a common law court. Massachusetts Mut. II, 2010 WL 3724745, at *3. 41 Massachusetts Mut. II, 2010 WL 3724745, at *5. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 15
D&O policy litigation. The plaintiffs have sued to enforce the policies in the D&O Tower. Until the General Assembly determines otherwise, jurisdiction over that species of case rests with the Superior Court.42
GAIC attempts to distinguish Massachusetts Mutual by noting that, there, the
insured entities, not a third party, were seeking coverage under the policies based on
a straightforward breach of contract theory. According to GAIC, the Court should
view Plaintiffs’ claims differently since Plaintiffs are not named insureds and the
Court has yet to determine whether an indemnity obligation even exists. 43 Neither
factual circumstance justifies a departure from the core holding in Massachusetts
Mutual. First, the parties in Massachusetts Mutual, like the parties here, contested
whether the carrier owed any indemnification obligation.44 And, like the plaintiff in
Massachusetts Mutual, Plaintiffs here seek to compel coverage and the payment of
42 Id. 43 Def. OB. 11, 22, 36–37. 44 Mass. Mut. Life Ins. Co. v. Certain Underwriters at Lloyd’s of London, 2010 WL 2929552, at *2 (Del. Ch. July 23, 2010) (“Count VI seeks a declaration that together, the Bond Underwriters and D&O Insurers must indemnify the plaintiffs for all eventual settlements or judgments in the Underlying Actions.”). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 16
a claim under a D&O policy directly against the insurer.45 This is precisely the type
of dispute that fits squarely within the jurisdiction of our Superior Court and which
the judges of that court have developed expertise in resolving.46
The Clean-Up Doctrine
Plaintiffs argue that because this Court exercised jurisdiction over the
underlying action, it should exercise jurisdiction under the clean-up doctrine to
adjudicate a dispute arising from an attempt to enforce the underlying judgment.47
I disagree.
This court often considers several factors when determining whether to
exercise its jurisdiction to hear ancillary legal claims, including:
[W]hether retention of the claims will: 1) resolve a factual issue which must be determined in the proceedings; 2) avoid a multiplicity of suits; 3) promote judicial efficiency; 4) do full justice; 5) avoid great expense; 6) afford complete relief in one action; or 7) overcome insufficient
45 Compl. ¶¶ 1, 8. 46 Massachusetts Mut. II, 2010 WL 3724745, at *1 (“Because insurance coverage disputes are typically heard by the Superior Court, I asked myself why this case should be in Chancery.”). 47 Mondros Ltr. at 2 see also Nicastro v. Rudegeair, 2007 WL 4054757, at *2 (Del. Ch. Nov. 13, 2007) (explaining the court’s “clean-up” subject matter jurisdiction). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 17
modes of procedure at law.”48 Even assuming the Plaintiffs’ claims can be classified as “ancillary legal claims,” this Court declines to exercise jurisdiction.49
To start, aside from the claims for declaratory relief regarding coverage and
the associated breach of contract claim, there are no other claims (sounding in equity
or otherwise) that must be decided by this Court. Dismissal will not prompt
“multiple lawsuits” as the entire claim would be dismissed in favor of litigation of
the identical claims in a court with subject matter jurisdiction. As for judicial
efficiency, expense, and affording complete relief, the Superior Court is, obviously,
fully capable of adjudicating Plaintiffs’ claims.50 And there is no doubt that, if they
48 Acierno v. Goldstein, 2004 WL 1488673, at *5 (Del. Ch. June 25, 2004). 49 “Ancillary legal claims” implies the existence of equitable claims. In this action, as between the former shareholders of Zhongpin and GAIC, there are no equitable claims. This action concerns the interpretation of an insurance policy; the parties’ key disputes do not involve whether Zhongpin was liable in the class action lawsuit. Plaintiffs’ claims involve new issues against a new party, all of which are legal. “Clean-up” jurisdiction will not be employed as a means to force a new party to litigate purely legal claims in this Court. 50 Indeed, all of the Delaware cases cited by the parties involving insurance law were either Superior Court cases or Supreme Court appeals of Superior Court cases. See, e.g., Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 534 (Del. Super. Ct. 1990); Jones v. State Farm Fire & Cas. Ins. Co, 1997 Del. Super. LEXIS 201, at *6 (Del. Super. Ct. Apr. 14, 1997); Walden v. Allstate Ins. Co., 913 A.2d 570 (Del. 2006); Lewis v. Home Ins. Co., 314 A.2d 924, 925 (Del. Super. Ct. 1973); Broadway v. Allstate Prop. & Cas. Ins. Co., 2015 WL 4749176, at *5 (Del. Super. Ct. Aug. 11, 2015). Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 18
prove their entitlement to coverage, Plaintiffs will have remedies at law that will
afford full, fair and complete relief, namely, a declaratory judgment and, if proven,
damages.51 In the unlikely event the Superior Court determines it is unable to
provide complete relief, it can transfer the case back to Chancery.52
B. Transfer to the Superior Court
Finally, the fact that another judge might need to become familiar with the
facts and legal issues presented in this case is not a persuasive reason to keep it.
While the underlying action may have been litigated in this Court, the present action
against GAIC, including the insurance law questions associated with Plaintiffs’
claims, are new and do not require intimate familiarity with the claims in the
51 Massachusetts Mut. II, 2010 WL 3724745, at *4 (“Here, the plaintiffs have a remedy at law that will afford them full, fair, and complete relief. The Superior Court regularly handles suits seeking to allocate liability among insurers.”). 52 Id. at *4. Plaintiffs point to In re RJR Nabisco, Inc. S’holders Litig. to support this Court’s exercise of clean-up jurisdiction. 576 A.2d 654, 658 (Del. Ch. 1990). The court in Nabisco exercised clean-up jurisdiction over legal counterclaims given their compulsory nature and “how closely the matters sought to be introduced into the case are tied to those facts that form the basis of the existing pleadings [which alleged equitable claims].” Id. Indeed, “the counterclaim appear[ed] largely to present a new legal theory of the already pleaded facts.” Id. at 659. Those same dynamics are not even remotely present here given that, as mentioned, this action involves new claims against a new party, and those claims have not even a hint of equity among them. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 19
underlying action, only the procedural manner in which they were resolved. “Given
the Superior Court’s greater expertise in the insurance arena, the relatively early
stage of the case, and the potential for assignment to the Complex Commercial
Litigation Division, this case should be heard by the Superior Court.”53
Plaintiffs also contend that transferring this action to “the Superior Court
would exacerbate the delay already inflicted by the Class Action Defendants’
misconduct.”54 Again, I disagree. Following the transfer, the parties may promptly
present the already briefed motion to dismiss to the court in accordance with
Section 1902, which provides that, following transfer:
All or part of the papers filed, or copies thereof, and a transcript of the entries, in the court where the proceeding was originally instituted shall be delivered in accordance with the rules or special orders of such court, by the prothonotary, clerk, or register of that court to the prothonotary, clerk or register of the court to which the proceeding is transferred. The latter court shall thereupon entertain such applications in the proceeding as conform to law and to the rules and practice of such court, and may by rule or special order provide for amendments in pleadings and for all other matters concerning the course of procedure for hearing and determining the cause as justice may require.55
53 Massachusetts Mut. II, 2010 WL 3724745, at *5. 54 Mondros Ltr. at 5. 55 10 Del. C. § 1902. Ernesto Rodriguez and Alan Hall v. Great American Insurance Company C.A. No. 2020-0387-JRS October 20, 2021 Page 20
Accordingly, any delay that a transfer may cause will be de minimums; upon transfer,
the parties will likely resume the litigation precisely where they left off in
Chancery.56
III. CONCLUSION
For the foregoing reasons, I am satisfied this Court lacks subject matter
jurisdiction. Plaintiffs’ claims, therefore, must be dismissed. Plaintiffs shall have
60 days within which to file a written election of transfer of the action to the Superior
Court under 10 Del. C. § 1902, failing which this case will be dismissed with
prejudice.
IT IS SO ORDERED. Very truly yours, /s/ Joseph R. Slights III
56 I note that, upon transfer, the parties may request that I be cross-designated to sit as judge of the Superior Court to preside over the action there. See Del. Const. Art. IV, § 13. I was privileged to have served as a judge on that court for twelve years and presided over insurance coverage disputes while assigned to the Complex Commercial Division. Given my involvement in the underlying dispute, and my familiarity with (and careful consideration of) the merits of the pending motion to dismiss, cross-designation may be particularly appropriate in this case.