Court Opinion

ID: 9950806
Source: CourtListenerOpinion
Date Created: 2024-03-14 20:03:18.954059+00
Date Added: 2024-06-11T14:36:55.595154
License: Public Domain

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.