Court Opinion

ID: 4647547
Source: CourtListenerOpinion
Date Created: 2020-12-29 20:02:54.508547+00
Date Added: 2024-06-11T08:01:06.516175
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

    PARK G.P., INC., a Missouri                  )
    corporation,                                 )
                                                 )
                    Plaintiff,                   )
                                                 )
           v.                                    )       C.A. No. 2020-0230-KSJM
                                                 )
    CCSB FINANCIAL CORP., a                      )
    Delaware corporation,                        )
                                                 )
                    Defendant.                   )

                ORDER GRANTING DEFENDANT’S MOTION TO STAY

          1.        Defendant CCSB Financial Corporation (the “Company”) has moved

to dismiss or stay the First Amended Complaint 1 of Plaintiff Park G.P., Inc.

(“Plaintiff”) challenging the Company’s January 2020 board election. Plaintiff, a

stockholder of the Company, nominated two candidates to run against two of the

incumbent directors up for reelection at the Company’s annual stockholder meeting.2

          2.        Plaintiff’s candidates lost the election, and Plaintiff seeks to invalidate

the election results pursuant to 8 Del. C. § 225. The basis for Plaintiff’s claim is that

the Company made allegedly false and misleading statements in a letter sent to

stockholders prior to the election.3

1
 C.A. No. 2020-0230-KSJM, Docket (“Dkt.”) 40, First Am. Verified Compl. of Pl. Park
G.P., Incorporated (“Am. Compl.”).
2
    Id. ¶¶ 2, 10.
3
    Id. ¶ 1.

                                                     1
         3.    The allegedly false statements concern Plaintiff’s President and one of

the Plaintiff’s two candidates, DeAnn Totta.        In 2011, Totta obtained a Non-

Objecting Beneficial Owner list (the “NOBO List”) from Broadridge Financial

Services, Inc. The list was sent to Totta mistakenly—only authorized representatives

of the Company were entitled to request the list.4 Based on these events, the

Company accused Totta of “fraud or, at the very least misrepresent[ing] herself in

attempts to obtain confidential shareholder information” in a letter to its stockholders

dated January 6, 2020, concerning the annual election (the “January 6 Letter”). 5

         4.    After Totta and Plaintiff’s other board nominee lost the election, the

parties exchanged several communications regarding Plaintiff’s gripe with the

January 6 Letter.6

         5.    On March 11, 2020, Totta sued the Company in the Circuit Court of

Clay County, Missouri, for the allegedly defamatory statements contained in the

January 6 Letter.7

4
    See Am. Compl. Ex. E at 1.
5
    Am. Compl. Ex. B at 5; Am. Compl. ¶ 14.
6
    See Am. Compl. Exs. J–M.
7
    Am. Compl. Ex. D.

                                              2
         6.    Plaintiff then filed this action on March 26, 2020, seeking invalidation

of the election based on the Company’s purportedly false communication to

stockholders.8

         7.    The Company moved to dismiss Plaintiff’s complaint or, in the

alternative, to stay this action in favor of the Missouri action. In response, Plaintiff

amended its complaint on May 15, 2020.9 The parties fully briefed the Company’s

renewed motion to dismiss on July 10, 2020, and the court heard oral argument on

that motion on December 3, 2020.10

         8.    In part, the Company argues that Plaintiff’s claims should be stayed

under the “first-filed rule” set forth in McWane Cast Iron Pipe Corp. v. McDowell-

Wellman Engineering Co.11 Under McWane, “Delaware courts should exercise

discretion in favor of a stay where a prior action, involving the same parties and

issues, is pending elsewhere in a court capable of doing prompt and complete

8
 Dkt. 1, Verified Compl. for Invalidation of Election of Directors and Requirement for a
New Election Pursuant to Delaware General Corporation Law § 225.
9
    Am. Compl.
10
  See Dkt. 47, Opening Br. in Supp. of Def. CCSB Financial Corporation’s Rule 12(b)(6)
Mot. to Dismiss Pl.’s First Am. Compl. or Stay This Action; Dkt. 49, Pl. Park G.P.’s
Responsive Br. in Opp’n to Def. CCSB Financial Corporation’s Mot. to Dismiss Pl.’s First
Am. Verified Compl. for Failure to State a Claim Upon Which Relief May Be Granted, or
in the Alternative, to Stay; Dkt. 51, Reply Br. in Further Supp. of Def. CCSB Financial
Corporation’s Rule 12(b)(6) Mot. to Dismiss the First Am. Compl. or Stay this Action;
Dkt. 58, Tr. of Dec. 3, 2020 Telephonic Oral Arg. on Def.’s Mot. to Dismiss or Stay (“Oral
Arg. Tr.”).
11
     263 A.2d 281 (Del. 1970).

                                            3
justice.”12 Issuing such a stay invokes “considerations of comity and the necessities

of an orderly and efficient administration of justice.” 13 The court’s goal is to avoid

“the wasteful duplication of time, effort, and expense that occurs when judges,

lawyers, parties, and witnesses are simultaneously engaged in the adjudication of the

same cause of action in two courts,” as well as “the possibility of inconsistent and

conflicting rulings and judgments and an unseemly race by each party to trial and

judgment in the forum of its choice.”14

         9.     A McWane analysis addresses three factors: “(1) is there a prior action

pending elsewhere; (2) in a court capable of doing prompt and complete justice;

(3) involving the same parties and the same issues?”15 This court’s discretion to

award a stay under McWane “should be freely exercised in favor of the stay.” 16

         10.    Though McWane is not a perfect fit, a McWane-like stay is appropriate

in this case. Plaintiff accurately contends that this action does not fully meet all three

McWane factors. For example, Plaintiff in this case is not a named party in the first-

filed Missouri action. There is sufficient overlap and privity, however, that the

12
  Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010) (citing McWane, 263 A.2d at
283).
13
     Id. (quoting McWane, 263 A.2d at 283).
14
     McWane, 263 A.2d at 283.
15
     LG Elecs., Inc. v. InterDigit. Commc’ns, Inc., 114 A.3d 1246, 1252 (Del. 2015).
16
     McWane, 263 A.2d at 283.

                                              4
policy rationale underlying the McWane factors, however, warrants a stay of this

case pending resolution of Totta’s defamation suit in Missouri.

         11.   Plaintiff’s only justification for seeking invalidation of the January 23,

2020 election is that the stockholders were misinformed by the Company’s

January 6, 2020 letter. 17    Whether the information in that letter was false or

improperly submitted to stockholders is therefore a dispositive issue in this case.

Totta’s first-filed defamation suit asks the Missouri court to address exactly that

question. 18 Asking this court to simultaneously consider that question invokes the

very concerns outlined in McWane: the inefficiency of repetitive litigation and the

potential for inconsistent adjudication of the same issue. 19

         12.   Totta filed her defamation suit in Missouri before Plaintiff filed this

case in Delaware. The Missouri action has proceeded faster than this case and is

already approaching discovery. 20 The parties to this matter completed briefing the

17
    Am. Compl. ¶¶ 49–52. The First Amended Complaint asserts only one count:
“Invalidation of January 23, 2020, Election of Directors Pursuant to DGCL § 225 and
Requirement to Hold New Election.” Id. Count I (describing the nature of the claim in the
Count I heading). The only underlying rationale offered for invalidation of the January 23,
2020 election is the Company’s allegedly false statements in the January 6 Letter.
Id. ¶¶ 49–52.
18
     Am. Compl. Ex. D ¶ 11.
19
     See McWane, 263 A.2d at 283.
20
   Oral Arg. Tr. at 20:8–23 (noting that “a ruling on a motion to consolidate the various
lawsuits is expected later this month, . . . [and] they expect discovery would get underway
after that. And I think it would be wrapped up in several months’ time, given . . . . [i]t’s
                                             5
motion to dismiss in July 2020, but did not appear for a hearing on that motion until

December 3, 2020, just one month before the Company’s next board election for

which Plaintiff has put forth the same nominees. 21

         13.    In the interest of comity, efficiency, and consistency of adjudications, it

is prudent to stay this case pending resolution of the core issue in the Missouri

defamation suit—namely, whether the January 6 Letter contained materially

misleading and inappropriate statements about Totta.

         14.    For the foregoing reasons, this matter is STAYED pending resolution

of the first-filed Missouri action.

                                           /s/ Kathaleen St. J. McCormick
                                           Vice Chancellor Kathaleen St. J. McCormick
                                           Dated: December 29, 2020

not a terribly extended process there,” and that a similar case filed in 2012 reached
complete resolution in “about 19 months”).
21
     See id. at 25:2–13.

                                              6