IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
RED CAT HOLDINGS, INC., a ) Nevada corporation; TEAL DRONES, ) INC., a Delaware corporation, ) ) Plaintiffs, ) ) v. ) C.A. No. 2022-0878-NAC ) AUTONODYNE LLC, a Delaware ) limited liability company; DANIEL ) SCHWINN, an individual, ) ) Defendants. )
ORDER DISMISSING PLAINTIFFS’ CLAIMS AGAINST DEFENDANT DANIEL SCHWINN WITH LEAVE TO TRANSFER
WHEREAS:
1. On January 30, 2024, I dismissed all claims in this action
brought against Defendant Autonodyne LLC.1 That same day, I also entered
an order regarding Defendant Daniel Schwinn’s motion to dismiss Plaintiffs’
claims against him on personal jurisdiction grounds.2 The order permitted
Plaintiffs to take targeted jurisdictional discovery concerning Schwinn’s
status as a de jure manager of Autonodyne. The order also asked for the
parties’ views on whether the Court continues to have subject matter
1 D.I. 46.
2 D.I. 47. jurisdiction over Plaintiffs’ limited remaining claims in light of the January
30th dismissal decision.
2. Following dismissal of Plaintiffs’ claims against Autonodyne, only
Plaintiffs’ claim for tortious interference against Schwinn, and their related
declaratory judgment claim against Schwinn, remain in this action.
3. Plaintiffs request the Court dismiss the claims against Schwinn
for lack of subject matter jurisdiction and permit them to transfer the action
to the Superior Court.3 Schwinn argues the Court should retain subject
matter jurisdiction over the claims under the clean-up doctrine as a matter of
judicial economy.4
NOW, THEREFORE, IT IS HEREBY ORDERED, this 14th day of
March 2024, as follows:
1. The parties agree the Court lacks subject matter jurisdiction over
the remaining claims in this action. Indeed, “[t]he Court of Chancery is
proudly a court of limited jurisdiction.”5 “Chancery jurisdiction is not
conferred by the incantation of magic words. . . . If a realistic evaluation leads
to the conclusion that an adequate remedy is available, this court . . . will not
3 D.I. 50.
4 D.I. 52.
5Perlman v. Vox Media, Inc., 2019 WL 2647520, at *4 (Del. Ch. June 27, 2019). accept jurisdiction over the matter.”6 It is well recognized in this context that
“[t]ortious interference claims are not equitable claims.”7 Likewise, “the
Court of Chancery has jurisdiction in a declaratory judgment action if there
is an ‘underlying basis for equity jurisdiction measured by traditional
standards.’”8
2. No party argues that, following the January 30th dismissal
decision, any of the remaining claims in this action provide a basis for subject
matter jurisdiction. Instead, as noted above, Schwinn argues this Court has
jurisdiction under the “clean-up doctrine.”
6 Organovo Hldgs., Inc. v. Dimitrov, 162 A.3d 102, 113 (Del. Ch. 2017) (quoting McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987)). 7 See Enzolytics, Inc. v. Empire Stock Transfer Inc., 2023 WL 2543952, at *6
(Del. Ch. Mar. 16, 2023) (ORDER) (refusing to exercise clean-up jurisdiction over tortious interference claim where it dismissed all equitable causes of action); Organovo, 162 A.3d 102, 113 (Del. Ch. 2017) (“The Complaint asserts common law claims for libel, tortious interference with prospective economic advantage, and negligence. None of these are equitable claims[.]”). For the sake of completeness, I note that, in Organovo, the Vice Chancellor explained that “[c]ourts have recognized . . . a request for equitable remedies for tortious interference . . . against future speech.” Id. at 122. No party, however, has argued that Organovo applies in this capacity. And I already dismissed the only claim for injunctive relief in this action, which Plaintiffs asserted against Autonodyne, not Schwinn. 8 Abbott v. Vavala, 284 A.3d 77 (Del. 2022) (ORDER) (emphasis added) (quoting Diebold Computer Leasing, Inc. v. Comm. Credit Corp., 267 A.2d 586, 591 (Del. 1970)). The parties do not argue the remaining claim for declaratory judgment against Schwinn serves as a basis for ancillary subject matter jurisdiction under the clean-up doctrine. 3. “The ‘clean-up doctrine’ gives this court ancillary jurisdiction ‘to
resolve purely legal causes of action that are before it as part of the same
controversy over which the Court originally had subject matter jurisdiction in
order to avoid piecemeal litigation.’”9 When determining whether to exercise
clean-up jurisdiction, Delaware courts often consider whether retaining
jurisdiction would “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 modes of procedure at law.”10 “The Court’s
decision to retain jurisdiction under the clean-up doctrine is committed to the
Court’s discretion.”11
4. “Where . . . the only claims for which this court had subject
matter jurisdiction are dismissed at an early stage in the proceedings, it is
appropriate to decline jurisdiction under the clean-up doctrine.”12 In
9 FirstString Rsch., Inc. v. JSS Med. Rsch. Inc., 2021 WL 2182829, at *6 (Del.
Ch. May 28, 2021). 10 Id. (quoting Acierno v. Goldstein, 2004 WL 1488673, at *5 (Del. Ch. June
25, 2004)). 11 A & H Metals, Inc. v. Del. Dep’t of Lab., 2009 WL 1451889, at *2 (Del. Ch.
May 21, 2009). 12 Parseghian as trustee of Gregory J. Parseghian Revocable Tr. v. Frequency
Therapeutics, Inc., 2022 WL 2208899, at *10 (Del. Ch. June 21, 2022); see also Rizzo ex rel. JJ&B, LLC v. Joseph Rizzo & Sons Const. Co., 2007 WL addition, this Court has repeatedly declined to exercise clean-up jurisdiction
when doing so would not enhance efficiency or fairness.13
5. As noted, the parties agree the Court lacks subject matter
jurisdiction over the remaining claims against Schwinn. Retaining
jurisdiction under the clean-up doctrine is not necessary here to resolve
specific factual issues or “do full justice.” My exceptional colleagues on the
Superior Court are well-equipped to make any required findings of fact and
provide the parties with a just resolution of the remaining claims.
6. Retaining jurisdiction would do little to promote judicial
efficiency or to avoid litigation expenses incurred by the parties. This action
remains in its infancy and has not advanced beyond the pleading stage. The
parties have not taken discovery, nor has the Court made any findings of fact.
7. In addition, I have only had occasion to examine the claims
against one defendant in this action, and I dismissed those claims in their
entirety. Given Schwinn’s threshold arguments over personal jurisdiction, I
1114079, at *2 (Del. Ch. Apr. 10, 2007) (“[J]udges of this court are more reluctant to exercise discretionary jurisdiction over legal claims after the equitable claims have been resolved or have become moot, especially when those claims are resolved at an early stage, such as by a motion to dismiss.”). 13 See Nichols v.
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
RED CAT HOLDINGS, INC., a ) Nevada corporation; TEAL DRONES, ) INC., a Delaware corporation, ) ) Plaintiffs, ) ) v. ) C.A. No. 2022-0878-NAC ) AUTONODYNE LLC, a Delaware ) limited liability company; DANIEL ) SCHWINN, an individual, ) ) Defendants. )
ORDER DISMISSING PLAINTIFFS’ CLAIMS AGAINST DEFENDANT DANIEL SCHWINN WITH LEAVE TO TRANSFER
WHEREAS:
1. On January 30, 2024, I dismissed all claims in this action
brought against Defendant Autonodyne LLC.1 That same day, I also entered
an order regarding Defendant Daniel Schwinn’s motion to dismiss Plaintiffs’
claims against him on personal jurisdiction grounds.2 The order permitted
Plaintiffs to take targeted jurisdictional discovery concerning Schwinn’s
status as a de jure manager of Autonodyne. The order also asked for the
parties’ views on whether the Court continues to have subject matter
1 D.I. 46.
2 D.I. 47. jurisdiction over Plaintiffs’ limited remaining claims in light of the January
30th dismissal decision.
2. Following dismissal of Plaintiffs’ claims against Autonodyne, only
Plaintiffs’ claim for tortious interference against Schwinn, and their related
declaratory judgment claim against Schwinn, remain in this action.
3. Plaintiffs request the Court dismiss the claims against Schwinn
for lack of subject matter jurisdiction and permit them to transfer the action
to the Superior Court.3 Schwinn argues the Court should retain subject
matter jurisdiction over the claims under the clean-up doctrine as a matter of
judicial economy.4
NOW, THEREFORE, IT IS HEREBY ORDERED, this 14th day of
March 2024, as follows:
1. The parties agree the Court lacks subject matter jurisdiction over
the remaining claims in this action. Indeed, “[t]he Court of Chancery is
proudly a court of limited jurisdiction.”5 “Chancery jurisdiction is not
conferred by the incantation of magic words. . . . If a realistic evaluation leads
to the conclusion that an adequate remedy is available, this court . . . will not
3 D.I. 50.
4 D.I. 52.
5Perlman v. Vox Media, Inc., 2019 WL 2647520, at *4 (Del. Ch. June 27, 2019). accept jurisdiction over the matter.”6 It is well recognized in this context that
“[t]ortious interference claims are not equitable claims.”7 Likewise, “the
Court of Chancery has jurisdiction in a declaratory judgment action if there
is an ‘underlying basis for equity jurisdiction measured by traditional
standards.’”8
2. No party argues that, following the January 30th dismissal
decision, any of the remaining claims in this action provide a basis for subject
matter jurisdiction. Instead, as noted above, Schwinn argues this Court has
jurisdiction under the “clean-up doctrine.”
6 Organovo Hldgs., Inc. v. Dimitrov, 162 A.3d 102, 113 (Del. Ch. 2017) (quoting McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987)). 7 See Enzolytics, Inc. v. Empire Stock Transfer Inc., 2023 WL 2543952, at *6
(Del. Ch. Mar. 16, 2023) (ORDER) (refusing to exercise clean-up jurisdiction over tortious interference claim where it dismissed all equitable causes of action); Organovo, 162 A.3d 102, 113 (Del. Ch. 2017) (“The Complaint asserts common law claims for libel, tortious interference with prospective economic advantage, and negligence. None of these are equitable claims[.]”). For the sake of completeness, I note that, in Organovo, the Vice Chancellor explained that “[c]ourts have recognized . . . a request for equitable remedies for tortious interference . . . against future speech.” Id. at 122. No party, however, has argued that Organovo applies in this capacity. And I already dismissed the only claim for injunctive relief in this action, which Plaintiffs asserted against Autonodyne, not Schwinn. 8 Abbott v. Vavala, 284 A.3d 77 (Del. 2022) (ORDER) (emphasis added) (quoting Diebold Computer Leasing, Inc. v. Comm. Credit Corp., 267 A.2d 586, 591 (Del. 1970)). The parties do not argue the remaining claim for declaratory judgment against Schwinn serves as a basis for ancillary subject matter jurisdiction under the clean-up doctrine. 3. “The ‘clean-up doctrine’ gives this court ancillary jurisdiction ‘to
resolve purely legal causes of action that are before it as part of the same
controversy over which the Court originally had subject matter jurisdiction in
order to avoid piecemeal litigation.’”9 When determining whether to exercise
clean-up jurisdiction, Delaware courts often consider whether retaining
jurisdiction would “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 modes of procedure at law.”10 “The Court’s
decision to retain jurisdiction under the clean-up doctrine is committed to the
Court’s discretion.”11
4. “Where . . . the only claims for which this court had subject
matter jurisdiction are dismissed at an early stage in the proceedings, it is
appropriate to decline jurisdiction under the clean-up doctrine.”12 In
9 FirstString Rsch., Inc. v. JSS Med. Rsch. Inc., 2021 WL 2182829, at *6 (Del.
Ch. May 28, 2021). 10 Id. (quoting Acierno v. Goldstein, 2004 WL 1488673, at *5 (Del. Ch. June
25, 2004)). 11 A & H Metals, Inc. v. Del. Dep’t of Lab., 2009 WL 1451889, at *2 (Del. Ch.
May 21, 2009). 12 Parseghian as trustee of Gregory J. Parseghian Revocable Tr. v. Frequency
Therapeutics, Inc., 2022 WL 2208899, at *10 (Del. Ch. June 21, 2022); see also Rizzo ex rel. JJ&B, LLC v. Joseph Rizzo & Sons Const. Co., 2007 WL addition, this Court has repeatedly declined to exercise clean-up jurisdiction
when doing so would not enhance efficiency or fairness.13
5. As noted, the parties agree the Court lacks subject matter
jurisdiction over the remaining claims against Schwinn. Retaining
jurisdiction under the clean-up doctrine is not necessary here to resolve
specific factual issues or “do full justice.” My exceptional colleagues on the
Superior Court are well-equipped to make any required findings of fact and
provide the parties with a just resolution of the remaining claims.
6. Retaining jurisdiction would do little to promote judicial
efficiency or to avoid litigation expenses incurred by the parties. This action
remains in its infancy and has not advanced beyond the pleading stage. The
parties have not taken discovery, nor has the Court made any findings of fact.
7. In addition, I have only had occasion to examine the claims
against one defendant in this action, and I dismissed those claims in their
entirety. Given Schwinn’s threshold arguments over personal jurisdiction, I
1114079, at *2 (Del. Ch. Apr. 10, 2007) (“[J]udges of this court are more reluctant to exercise discretionary jurisdiction over legal claims after the equitable claims have been resolved or have become moot, especially when those claims are resolved at an early stage, such as by a motion to dismiss.”). 13 See Nichols v. Lewis, 2007 WL 1584622, at *1 (Del. Ch. May 24, 2007); Midland Food Servs. v. Castle Hills Hldgs., 1999 WL 669324, at *3 (Del. Ch. Aug. 10, 1999), aff’d, 782 A.2d 265 (Del. 2001). have not undertaken an in-depth examination of the substance of the
remaining claims asserted against him.14 Thus, aside from some frankly de
minimis overlap, “there will be no duplication of prior effort involved if the
Superior Court handles the remaining claim[s].”15
8. In the circumstances presented here, “[d]eclining jurisdiction” at
this early stage over the remaining claims after having dismissed the
equitable claims “will not result in duplicative litigation in two courts or
great additional expense.”16
9. Accordingly, and for the foregoing reasons, “I am exercising my
discretion to dismiss this case”17 subject to Plaintiffs’ right to elect to transfer
this action to the Superior Court under 10 Del. C. § 1902.18
/s/ Nathan A. Cook Vice Chancellor Nathan A. Cook
14 See Solomon v. Pathe Commc’ns Corp., 672 A.2d 35, 40 (Del. 1996) (“jurisdictional matters should be decided before substantive matters”). 15 Nichols, 2007 WL 1584622, at *1.
16 Parseghian, 2022 WL 2208899, at *11.
17 Nichols, 2007 WL 1584622, at *1.
18 The dismissal and closure of this action will take effect upon the expiration
of the transfer period if Plaintiffs do not transfer this action to the Superior Court in conformance with 10 Del. C. § 1902. If Plaintiffs fail to transfer this action to the Superior Court within the statutory period, the remaining claims will be dismissed with prejudice.