COURT OF CHANCERY

OF THE

SAM GLASSCOCK III

VICE CHANCELLOR

STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE

34 THE CIRCLE

GEORGETOWN, DELAWARE 19947

Date Submitted: November 9, 2015

Date Decided: February 9, 2016

Michael A. Weidinger, Esquire

Alessandra C. Phillips, Esquire

Pinckney, Weidinger, Urban & Joyce LLC

1220 North Market Street, Suite 950

Wilmington, Delaware 19801

Blake Rohrbacher, Esquire

Elizabeth A. DeFelice, Esquire

Richards Layton & Finger, P.A.

One Rodney Square

920 North King Street

Wilmington, Delaware 19801

Re: Jerome Vaccaro v. APS Healthcare Bethesda, Inc., et al.,

Civil Action No. 9637-VCG

Dear Counsel:

This matter involves a dispute over severance obligations in an employment 

agreement between Plaintiff Jerome Vaccaro and Defendants APS Healthcare 

Bethesda, Inc. (“APS”) and Universal American Corp. (“Universal”). The 

agreement was initially entered into the day before a merger between the 

Defendants, and later amended many months thereafter. Before Vaccaro initiated 

this action, Universal, the buyer, filed suit in the United States District Court for the 

District of Delaware (the “Federal Action”) against a number of defendants 

representing the seller, including Vaccaro, alleging, among other things, that 

Universal was fraudulently induced to enter the merger. In this action, Universal 

asserts that it plans to raise the affirmative defense that the employment agreement 
2

is a nullity because, by its terms, the enforceability of the employment agreement is 

based on the closing of the merger, which it argues was induced by fraud, and that 

Universal was similarly fraudulently induced to enter the employment agreement. 

Defendants have asked that I stay this action because the parties and issues in the 

first-filed Federal Action are sufficiently similar to warrant a stay under McWane 

Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Comp.

1

 Based on the 

following reasons, I find that a stay of this action is warranted and grant the 

Defendants’ motion. 

Before applying the factors in McWane, I first describe the relevant facts2and 

procedural history as follows. On January 11, 2012, Universal, Partners Healthcare 

Solutions Holdings, L.P. (“APSLP”), and Partners Healthcare Solutions 

(“Partners”), a majority-owned subsidiary of APSLP, entered into an agreement (the 

“Merger Agreement”) whereby Universal would acquire Partners and rename the 

company APS Bethesda, Inc., which I refer to as “APS.”

3

 Leading up to the 

execution of the Merger Agreement, Plaintiff Jerome Vaccaro acted as President and 

Chief Operating Officer of Partners.4 In contemplation that Vaccaro would continue 

in that role post-transaction, on the day before the Merger Agreement was executed,

 

1

263 A.2d 281 (Del. 1970). 

2 For purposes of this Letter Opinion, I draw the facts from the Plaintiff’s Verified Complaint 

assuming their truth.

3 Pl’s Verified Complaint (“Compl.”) ¶ 9.

4

Id. at ¶ 10.
3

Vaccaro executed an employment agreement (the “Original Agreement”) with APS 

and Universal that provided that Vaccaro would serve as President of APS and 

included provisions entitling Vaccaro to severance benefits in certain situations.

5

 

The vitality of the Original Agreement was made explicitly contingent on 

consummation of the contemplated acquisition transaction (the “Merger”).6 The 

Merger closed on March 2, 2012. 

Following the Merger, Vaccaro alleges that his role in APS began to diminish 

and APS’s performance dwindled.

7

 As a result, in August 2012, Vaccaro expressed 

his desire to resign from APS and initiated discussion of an orderly transition of his 

duties and responsibilities.8 Despite Vaccaro’s desire to resign, however, he 

continued his employment. In early 2013, following the sustained decline in APS’s 

performance, Universal began investigating an action against the sellers of APS for 

their alleged fraudulent inducement of Universal into closing the Merger.9 Pursuant 

to its expected litigation, Universal asked Vaccaro to provide statements to support 

Universal’s position, but Vaccaro refused.10

 

5

Id. at ¶¶ 10–11. 

6

Id., Ex. A (Original Agreement), at 1 (“This Agreement shall be of no force or effect, and none 

of [Vaccaro], [APS or Universal] or any of [their] affiliates shall have any obligation or liability 

hereunder, unless and until the transactions contemplated by the Merger Agreement are 

consummated.”). 

7

Id. at ¶¶ 13–17.

8

Id. at ¶¶ 18–19.

9

Id. at ¶¶ 29–30.

10 Id. at ¶¶ 31–38.
4

Finally, after months of pursuing an agreement concerning Vaccaro’s 

transition from the company, APS, Universal, and Vaccaro executed an amendment 

to the Original Agreement (as amended, the “Amended Agreement,” and together 

with the Original Agreement, the “Employment Agreement”), dated April 25, 2013, 

wherein Vaccaro agreed to continue his employment until June 28, 2013. The 

Amended Agreement did not replace the Original Agreement; instead, the Amended 

Agreement explicitly provided that the bulk of the Original Agreement remained in 

force.11 Vaccaro alleges that on the final day of his employment, the Defendants 

attempted to obtain a general release from Vaccaro pursuant to the Employment 

Agreement.12 According to Vaccaro, the release had been improperly altered and, 

rather than wait for the Defendants to draft a revised release agreement, Vaccaro 

executed the general release (the “Release”) attached to the Original Agreement.13 

To date, Vaccaro has not received any severance compensation pursuant to the 

Employment Agreement. 

A few months after Vaccaro’s employment ended, on October 22, 2013, 

Universal filed the Federal Action (the “Original Federal Complaint”) against the 

 

11 Id. at ¶ 39. The Amended Agreement purported to delete Section 8(c)(iii)(C) of the Original 

Agreement, which expressed a portion of Vaccaro’s severance benefits, but otherwise stated, 

“[e]xcept as amended hereby, all other terms and conditions of the [Original Agreement] shall 

remain in full force and effect through the Termination Date.” Id., Ex. B (Amended Agreement), 

at 1.

12 Id. at ¶ 51.

13 Id. at ¶¶ 56–57.
5

sellers of APS and former APS executives, including Vaccaro, for fraudulently 

inducing the Merger and sought, among other things, rescission of the Merger on 

which the Employment Agreement is conditioned. On May 9, 2014, nearly seven 

months after Universal initiated the Federal Action, Vaccaro filed his Verified 

Complaint in this action, which includes claims for breaches of contract, fraud, and 

reformation, and seeks damages and declaratory relief. Shortly thereafter, the 

Defendants moved to dismiss or stay the Plaintiff’s action (the “Motion”) on two 

grounds. They argued that I should defer this action in favor of the first-filed Federal 

Action14 and that this Court lacks subject matter jurisdiction to hear the dispute. In 

my letter opinion of October 15, 2014, I denied the Defendants’ Motion to Dismiss 

for Lack of Subject Matter Jurisdiction, leaving undecided the Defendants’ other 

ground in its Motion. 

In their briefing of the Motion to Dismiss or Stay, the Defendants represented 

that, in the Federal Action, the District Court had dismissed the fraud counts against 

Vaccaro for failure to plead fraud with sufficient particularity, but with leave to 

replead those allegations. Subsequently, on September 22, 2014, Universal amended 

its complaint in the Federal Action (the “Amended Federal Complaint”). The 

Amended Federal Complaint reasserts many of the fraud claims against the 

 

14 At oral argument, the Defendants clarified that they seek a stay of this action in favor of the 

Federal Action, and, in the alternative, seek dismissal. Oral Argument Tr. 25:24–26:2.
6

defendants, including Vaccaro, and includes an additional claim (the “Reverse 

Liability Claim”) seeking “a declaratory judgment that Vaccaro is not entitled to any 

payment or other benefit under the [Employment Agreement].”15 Following oral 

argument on the Motion here, the Defendants represented to the Court that Vaccaro 

and other defendants had filed, on October 31, 2014, a motion to dismiss Universal’s 

Amended Federal Complaint in the Federal Action. In my letter opinion of January 

9, 2015, I postponed my consideration of the Defendants’ Motion to Dismiss or Stay 

in this action pending resolution of Vaccaro’s motion to dismiss in the Federal 

Action, the resolution of which, I noted, would necessarily clarify disputed issues 

that I must consider here. I also indicated in my letter opinion that any party could 

seek consideration of the Defendants’ Motion to Dismiss or Stay if circumstances so 

warranted. 

As discovery in this action proceeded, Vaccaro filed a Motion to Compel 

Production of Documents, on which I held oral argument on October 1, 2015—

nearly ten months after my decision to continue the Defendants’ Motion to Dismiss 

or Stay. At oral argument on that motion, the Defendants requested that I revisit the 

continuance of my decision on the Motion to Dismiss or Stay and, as a result, I 

directed the parties to submit letter memoranda on whether I should continue to hold 

my decision on that Motion in abeyance. In their respective letters, both parties 

 

15 Defs’ Reply Br. 1–2. 
7

indicated that, given the passage of time, I should revisit my decision. On October 

26, 2015, I lifted the stay of my decision of the Defendants’ Motion and informed 

the parties that they could submit further briefing, if necessary. After consideration 

of the parties briefing and argument to date, I find that a stay of this action is 

warranted and grant the Defendants’ Motion. 

In this action, the Defendants argue that Vaccaro seeks to enforce an 

employment agreement that was merely one piece of a fraudulently induced merger, 

and that Vaccaro’s claim is therefore based on facts that are already at issue in the 

Federal Action. Accordingly, the Defendants assert that I should dismiss or stay this 

action in favor of the first-filed Federal Action pursuant to the Delaware Supreme 

Court’s holding in McWane. “The granting of a stay is not a matter of right, but rests 

within the sound discretion of the court.”16 Compelled by “considerations of comity 

and the necessities of any orderly and efficient administration of justice,”17 Delaware 

courts perform a three-part inquiry: (1) is there a prior action pending elsewhere; (2) 

involving the same parties and the same issues; (3) in a court capable of doing 

prompt and complete justice?

18 Through application of this inquiry, Delaware courts 

 

16 Adirondack GP, Inc. v. Am. Power Corp., 1996 WL 684376, at *6 (Del. Ch. Nov. 13, 1996) 

(citing McWane, 263 A.2d at 283).

17 McWane, 263 A.2d at 283. 

18 LG Elecs., Inc. v. InterDigital Commc’ns, Inc., 114 A.3d 1246, at 1252 (Del. 2015). 
8

seek to avoid wasteful and duplicative litigation, as well as the possibility of 

conflicting rulings in two courts.19

In this case, Vaccaro argues that the Federal Action is not a prior action, and 

thus does not implicate McWane, because the relevant counts in the Original Federal 

Complaint were dismissed and because the Amended Federal Complaint was filed 

after Vaccaro initiated this action. When the Court is presented with an otherwise 

first-filed complaint that has been amended, the Court will “compare[] the substance 

of the original case to that of the case as later composed.”20 The later-filed complaint 

will relate back to the first-filed complaint if they both “arise from a common 

nucleus of operative facts”—that is, if the claims “rely on and arise from the same 

factual foundation,” the amended complaint should be considered filed as of the date 

of the original complaint.21 Here, Universal initiated the Federal Action well before 

the filing of this action. The majority of the counts, however, including fraud in the 

inducement, were dismissed. Universal has represented to the Court that it has 

repled many of the dismissed claims, including fraud in the inducement, with greater 

particularity in the Amended Federal Complaint. I find that Amended Federal 

Complaint refers back to the Original Federal Complaint. Notwithstanding the 

 

19 See McWane, 263 A.2d at 283. 

20 See Choice Hotels Int’l, Inc. v. Columbus-Hunt Park DR. BNK Investors, L.L.C., 2009 WL 

3335332, at *6 (Del. Ch. Sept. 4, 2009) (quoting McQuaide, Inc. v. McQuaide, 2005 WL 1288523, 

at *4 (Del. Ch. May 24, 2005)).

21 See id. at *7. 
9

additional Reverse Liability Count, the Amended Federal Complaint realleges 

similar, if not the same counts that, like the Original Federal Complaint, arise from 

the facts surrounding the Merger. Therefore, the Federal Action constitutes a prior 

action such that I must consider the remaining McWane factors. 

The second factor of McWane tests whether the parties and issues in the 

present action are the same as those comprised in the first-filed foreign action. In 

general, it is rare that the parties and issues in each case are fully identical. This 

Court has found that when the parties and issues are not identical, the Court must 

balance the lack of complete identity of parties and issues against the 

possibility of conflicting rulings which could come forth if both actions 

were allowed to proceed simultaneously. Rather than insisting that the 

parties in both actions be identical, this court only requires substantial 

or functional identity.

22

Here, the parties in the two cases are not identical: Defendant APS is not a party to 

the Federal Action and the Federal Action includes nine parties that are not parties 

to the present action. Nonetheless, I find that the parties are functionally identical. 

Although APS is not a party to the Federal Action, its parent, Universal, is a plaintiff 

in the Federal Action as well as a party here. Moreover, the fact that there are more 

parties in the Foreign Action is not fatal because it merely reflects the fact that the 

Federal Action addresses issues that are broader than the action here. 

 

22 Id. (emphasis added) (citations omitted) (internal quotation marks omitted).
10

The issues present in the two cases are also not identical, at least they were 

not initially. Two separate cases will be deemed to implicate the same issues if they 

arise from a “common nucleus of operative facts.”23 In this case, the Defendants do 

not allege that Vaccaro’s Complaint, by itself, implicates the Federal Action, but that 

they will raise an affirmative defense that implicates the issues raised in the Federal 

Action. In the Federal Action, Universal intends to show that it was fraudulently 

induced to execute the Merger Agreement and close the Merger, and thus seeks its 

rescission. If Universal is successful, it argues that it follows that the Employment 

Agreement is a nullity, thereby preempting Vaccaro’s action here. Vaccaro argues 

that the issues in the two actions are not sufficiently similar because they are 

separated by time: the issues in the Federal Action are limited to the Merger, which 

occurred in March 2012, and the relevant issues in this action implicate only the 

facts surrounding the Amended Agreement, which was executed over a year later in 

April 2013, and the Release executed in June 2013. Vaccaro misstates the breadth 

of each action, however. In the Federal Action, Universal intends to establish facts 

showing that Vaccaro contributed to the alleged fraudulent inducement of the

Merger Agreement; that Vaccaro helped perpetuate the fraud until the Merger 

closed; and that Vaccaro aided the concealment of the fraud post-Merger. Similarly, 

 

23 Lisa, S.A. v. Mayorga, 993 A.2d 1042, 1048 (Del. 2010) (quoting Chadwick v. Metro Corp., 856 

A.2d 1066 (Del. 2004) (TABLE)). 
11

in this action Universal will seek to establish these facts to show that the Merger, on 

which the Employment Agreement hinged, was fraudulently induced. 

Despite the apparent similarities between the two cases, Vaccaro argues that 

Universal is estopped from raising pre-Merger fraud to dispute the Employment 

Agreement here. According to Vaccaro, Universal waived its claims against 

Vaccaro because, at the time the parties executed the Amended Agreement,

Universal was already aware of its fraudulent inducement claims. At this stage of 

the litigation, Vaccaro’s “waiver” argument fails for two reasons. First, it is unclear 

to what extent Universal was aware of Vaccaro’s involvement in the alleged fraud 

at the time it executed the Amended Agreement. Second, to the extent Vaccaro’s 

argument that Universal waived its affirmative defense requires a determination of 

the merits, I find it premature to make that determination at this stage of the 

litigation. In sum, I conclude that the issues raised in the Federal Action are 

sufficiently similar to the issues raised in the Defendants’ affirmative defense. In 

addition, despite the lack of precise identity between the parties and issues, I find

that there is a perceptible risk of conflicting rulings if both cases were to proceed 

simultaneously. The Defendants have raised an affirmative defense in this action 

that may lead to a determination concerning the validity of the Merger, which 

determination could conflict with the findings in the first-filed Federal Action. 
12

I note that Vaccaro challenges Universal’s addition of the Reverse Liability 

Claim in the Amended Federal Complaint. Vaccaro asserts that the Defendants only 

belatedly inserted claims concerning the Employment Agreement into the Federal 

Action after Vaccaro had chosen to litigate those claims in this court. I need not 

reach a determination regarding the Reverse Liability Claim because I have already 

found that the remainder of Universal’s Amended Federal Complaint, which relates 

back to the Original Federal Complaint, raises issues functionally identical to those 

present in the affirmative defense here. 

Finally, I must determine that the District Court is capable of providing 

prompt and complete justice. It clearly is able to do so, and the parties do not suggest 

that the District Court lacks complete competence and jurisdiction to adjudicate the 

issues in question, which involve the application of New York contract law as well 

as the common law doctrine of fraud in the inducement. Vaccaro argues, however,

that the District Court lacks the ability to offer prompt justice because it has failed 

to render what he perceives as a timely decision on his motion to dismiss, which has 

remained pending for over fifteen months. This factor alone does not render the 

District Court incapable of providing reasonably prompt justice; McWane does not 

instruct that an alternative forum must provide the most expeditious relief. The 

District Court has already granted one motion to dismiss and is sufficiently familiar 
13

with the issues to determine whether Universal was fraudulently induced. Therefore, 

I find that the District Court is capable of providing prompt and complete justice. 

Based on the foregoing, I conclude that the first-filed Federal Action involves 

the same issues and facts as are presented here, and that the Federal Court is capable 

of providing prompt and complete justice. The Defendants’ Motion to Dismiss or 

Stay is GRANTED. This action is stayed pending the resolution of the Federal 

Action. The parties should update the Court of the progress of the Federal Action 

every 60 days or sooner, as the parties find appropriate. To the extent the foregoing 

requires an Order to take effect, IT IS SO ORDERED.

Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III