Opinion ID: 1929470
Heading Depth: 1
Heading Rank: 2

Heading: the procedural posture before the court of chancery

Text: On December 21, 1992, at 8 a.m. (EST), the next business day after NHL announced the settlement, plaintiffs filed the Delaware derivative suits. Later that day three more derivative suits were filed by plaintiffs' lead counsel [3] in San Diego, California, Superior Court. About ten days later plaintiffs' counsel filed three more derivative actions in the California state courts. These complaints are all filed by the same lead counsel. They are virtually identical with each other and with the Delaware complaints, but the named plaintiffs in the Delaware actions differ from those in the California actions. The California state court actions and the Delaware actions allege that defendants breached their fiduciary duties to the corporation and the stockholders in connection with the management and supervision of the billing practices of NHL, allegedly concealed from stockholders the true facts concerning the company's billing practices, allegedly defrauded the stockholders by numerous omissions and misrepresentations, and unjustly enriched themselves at the expense of NHL and its stockholders. All complaints allege that demand on the directors was excused. After the Delaware actions and the California state court actions were filed, plaintiffs' lead counsel also filed a derivative action in the United States District Court for the Southern District of California alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) statute based upon the same events giving rise to the Delaware actions and the California state court litigation. Plaintiffs' lead counsel then filed several class actions, also in federal court in California alleging among other things violations of the Federal Securities Laws. The RICO derivative action and the federal class actions have been assigned to a single judge. Five defendants answered the RICO action. On March 10, 1993, defendants' motion to stay the RICO action was denied. Plaintiffs thereafter filed an amended complaint. In the federal class actions plaintiffs filed their consolidated amended complaint on March 3, 1993, and defendants filed a motion to dismiss the same on April 12, 1993. That motion is scheduled to be heard June 14, 1993. The California state court derivative actions were assigned to a single judge, and defendants in those actions filed motions to stay on February 3, 1993. The day following the Vice Chancellor's letter opinion of April 8, 1993, dismissing the Delaware actions, the California state court denied defendants' motion to stay the California actions. Discovery proceedings in both California and Delaware have just commenced and are in the very incipient stages. Defendants' motion for summary judgment in the Delaware cases centers around the sufficiency, under Delaware substantive corporation law and Chancery Rule 23.1, of plaintiffs' allegation that demand upon the directors was excused. In the California state court litigation, the issue of pre-suit demand is also before the court. According to defendants, plaintiffs' counsel has taken the position in the California litigation that the question of pre-suit demand is a procedural issue governed solely by Section 800 of the California Corporations Code, and not by Delaware substantive corporation law. Defendants claim that plaintiffs are taking the position in California that Section 800 creates standards different from those applicable under Delaware substantive law and under Chancery Rule 23.1. Defendants assert that plaintiffs' position is consistent with plaintiffs' counsel's strong, publicly expressed views that California law governing fiduciary obligations is significantly different from, and qualitatively superior to, Delaware law, and is binding on Delaware corporations that are sued in California. [4] As a result of certain telephone discussions between plaintiffs' Delaware counsel and defendants' Delaware counsel on or about January 8, 1993, the parties entered into a stipulation in the Delaware Court of Chancery extending time to move or answer in the Delaware action until January 28, 1993. Nevertheless, defendants answered on January 15, 1993, and filed a motion for summary judgment on January 19, 1993. In filing their answers on January 15, 1993, defendants thereby submitted themselves to personal jurisdiction in the Delaware actions. [5] By their motion for summary judgment in the Delaware actions, filed together with an opening brief, defendants seek dismissal of the Delaware actions on the demand issue and on the further issue that NHL's certificate of incorporation, adopted pursuant to 8 Del.C. § 102(b)(7), is a bar to at least part of the complaint. On January 26, 1993, the Delaware plaintiffs filed motions to dismiss or stay the Delaware actions under Chancery Rule 41(a)(2). On February 3, 1993, certain of the California defendants moved to stay the cases pending in California Superior Court. The Court of Chancery granted the Delaware plaintiffs' motion to dismiss on April 8, 1993. One day later the defendants' motion to stay the California state cases was denied by the California Superior Court.