Court Opinion

ID: 4567337
Source: CourtListenerOpinion
Date Created: 2020-09-21 15:03:26.116704+00
Date Added: 2024-06-11T09:26:15.095887
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 PETER EARLY,                                 )
                                              )
               Plaintiff,                     )
                                              )
       v.                                     )   C.A. No. 2019-0064-KSJM
                                              )
 TREND CAPITAL MANAGEMENT                     )
 LP, a Delaware limited partnership,          )
 TREND CAPITAL GP LLC, a                      )
 Delaware limited liability company,          )
 TREND CAPITAL LLC, a Delaware                )
 limited liability company, and               )
 ASHWIN VASAN,                                )
                                              )
               Defendants.                    )

            ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

       1.     In a May 17, 2019 bench ruling, the Court granted the defendants’

motion to stay on the grounds that an arbitration provision delegated questions of

substantive arbitrability to the arbitrator. The plaintiff then submitted the claims

pending in this action to arbitration. On December 4, 2019, the arbitrator held that

all of the plaintiff’s claims are arbitrable. In view of the abitrator’s determination,

the defendants moved to dismiss this action. In opposition to the defendants’ motion,

the plaintiff argues that a continued stay, rather than dismissal, is appropriate. In the

alternative, the plaintiff requests that the case should be dismissed without prejudice

if it is to be dismissed.
         2.    Dismissal, not a stay, is appropriate. In this case, the arbitrator has

determined that the parties contractually agreed to arbitrate the dispute, and the

plaintiff does not contest the merits of that holding. Although the plaintiff identifies

potential future claims that he might pursue in Delaware, such claims are not

presently asserted and do not justify the continued existence of this action. A stay

would therefore serve no real purpose, and thus dismissal is the appropriate outcome.

         3.    Dismissal is without prejudice. “A motion to dismiss based on an

arbitration clause goes to the court’s subject matter jurisdiction over a dispute and is

properly reviewed under Court of Chancery Rule 12(b)(1).”1 Generally, when a Rule

12(b)(1) motion is granted, the dismissal is without prejudice to the plaintiff’s ability

to pursue the claims in a court of competent jurisdiction.2 The defendants argue that

the Court retains the discretion to dismiss with prejudice in these circumstances,

citing to Innovation Institute, LLC v. St. Joseph Health Source, Inc.3 That case,

1
 Legend Nat. Gas II Hldgs., LP v. Hargis, 2012 WL 4481303, at *4 (Del. Ch. Sept. 28,
2012).
2
 See Carder v. Carl M. Freeman Comtys, LLC, 2009 WL 106510, at *1, *8 (Del. Ch. Jan.
5, 2009) (granting dismissal without prejudice for lack of subject matter jurisdiction on the
basis of an arbitration clause). See also Takeda Pharm. U.S.A., Inc. v. Genetech, Inc., 2019
WL 1377221, at *7 & n.73 (Del. Ch. Mar. 26, 2019) (granting dismissal without prejudice
for lack of subject matter jurisdiction) (collecting cases); 5B Arthur R. Miller, Mary Kay
Kane, & A. Benjamin Spencer, Federal Practice & Procedure § 1350 (3d ed. 2020)
(observing that a dismissal made pursuant to Court of Chancery Rule 12(b)(1)’s federal
counterpart “basically is one in abatement, a dismissal is not a decision on the merits and
has no res judicata effect that would prevent the reinstitution of the action in a court that
has subject matter jurisdiction over the controversy”).
3
    2019 WL 4060351, at *6 (Del. Ch. Aug. 29, 2019).

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however, does not conclusively stand for the position that the defendants advance

nor does it persuade the Court that deviating from the general rule is appropriate in

this case.

      4.     During oral argument, the defendants requested fee-shifting.          The

matter was not raised in briefing, and the plaintiff’s litigation conduct in this action

provides no basis for granting the request. To the extent the defendants’ fee-shifting

request is rooted in the merits of the claims pending in the arbitration, then denial of

the defendants’ request is without prejudice.

      5.     For the foregoing reasons, the defendants’ motion to dismiss for lack of

subject matter jurisdiction is GRANTED without prejudice.

                                        /s/ Kathaleen St. J. McCormick
                                        Vice Chancellor Kathaleen St. J. McCormick
                                        Dated: September 21, 2020

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