Court Opinion

ID: 9365363
Source: CourtListenerOpinion
Date Created: 2023-01-23 21:02:42.515636+00
Date Added: 2024-06-11T17:15:45.112143
License: Public Domain

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: January 4, 2023
                              Date Decided: January 23, 2023

    Stacey A. Scrivani, Esquire                     Mr. Vamsidhar Vurimindi
    STEVENS & LEE, P.C.                             821 Gunter Street
    919 N. Market Street, Suite 1300                Austin, TX 78702
    Wilmington, DE 19801

         Re:     Numoda Corporation and Mary Schaheen v. Vamsidhar Vurimindi and
                 Ann Shainline (formerly Ann Boris), C.A. No. 2022-0555-SG

Dear Counsel and Mr. Vurimindi:

         This action represents the latest skirmish in a long-running dispute over

ownership interests in a closely held corporation, here a Plaintiff. Though most of

the litigation has taken place in Pennsylvania, this Court determined in 2015 that

Ann Shainline (née Boris), a party Defendant in the instant action, owned 7,745,000

shares of Plaintiff-here, Numoda Corporation (“Numoda”).1 Those same shares

were awarded to Defendant-here, Vamsidhar Vurimindi, by an order of the

Pennsylvania Court of Common Pleas, Family Court Division in May 2020 (the

“Family Court Order”). 2 As I address below, currently pending in the Pennsylvania

1
    In re Numoda Corp., 2015 WL 1056143, at *1 (Del.Ch. Mar. 10, 2015).
2
    Df.’s Mot. to Stay, Ex. A ¶ V, Dkt. No. 7.
Court of Common Pleas is Vurimindi’s action to effectuate the Family Court Order

(the “Pennsylvania Action”).

       The present dispute centers on a purported conflict between a stock transfer

agreement (the “STA”) 3 of a predecessor entity to Numoda, and the Family Court

Order. 4 Specifically, Plaintiffs—Numoda and a stockholder, Mary Schaheen—

contend in this action that Shainline’s attempts to transfer her shares to Vurimindi

in compliance with the Family Court Order are unenforceable, due to STA

provisions requiring that any stock transfers to non-stockholders be ratified by a

majority vote of the existing stockholders.5 Vurimindi, appearing pro se in both

actions, argues here that his ownership interest in Numoda is valid; he also attempts

to assert rights associated with his status as a stockholder, here through

counterclaims. 6 He has also sued Numoda in the Pennsylvania Action, asserting

similar claims to those here, including resolution and enforcement of Shainline’s

contested transfer of the stock. 7 Thus, the predicate issue for both this litigation and

the Pennsylvania Action is the same—the viability of the Family Court Order in light

of the STA.

3
  Pls.’ Verified Compl., Ex. A, Dkt. No. 1 [the “STA”].
4
  See generally Pls.’ Verified Compl. (seeking declaratory and injunctive relief to enforce the
STA).
5
  Id. ¶ 45.
6
  See Df.’s Answer to Petition’s Compl. at 53-66, Dkt. No. 5.
7
  Df.’s Mot. to Stay, Ex. C ¶ 11(b)-(c). That action was filed the day before the Delaware action.
                                                2
       As mentioned, in both this and the Pennsylvania Action, Vurimindi seeks

vindication of his rights as a (theoretical) stockholder of Numoda, rights which are

nugatory if Plaintiffs are correct concerning the STA. Faced with Vurimindi’s

claims arising from his purported status as a Numoda stockholder, and citing the

Internal Affairs Doctrine, the Court of Common Pleas stayed that action pending

resolution of this case. 8 Vurimindi seeks to dismiss or stay this action in favor of

the Pennsylvania Action. 9 For the reasons below, I find a stay appropriate.

       Vurimindi’s counterclaims, as well as many of his claims in the Pennsylvania

Action,10 are predicated on his status as a Numoda stockholder. As mentioned

above, that status is itself a contested issue in both litigations. Because of this, any

claims arising out of Vurimindi’s rights as a stockholder cannot be ripe until the STA

dispute is resolved. Because I find, for the reasons explained below, that this

predicate issue should be determined in the Pennsylvania Action, Vurimindi’s

counterclaims are not ripe, and I dismiss them, without prejudice. 11

       Having established that any claims involving Numoda’s internal corporate

affairs are not yet ripe, I turn now to the issue of forum for the STA issues. I first

note that the STA in question involved stockholders to Numoda’s predecessor, MCR

8
  Notice of Suppl. Authority, Ex. A at fn. 2, Dkt. No. 16.
9
  Df.’s Mot. to Stay ¶¶ 18-19.
10
   See generally Df.’s Mot. to Stay, Ex. C (asserting breach of duty claims against defendants).
11
   It is a matter for the Pennsylvania Court of Common Pleas, of course, to determine whether
my decision on ripeness is res judicata with regard to any similar claims in the Pennsylvania
Action.
                                                3
Systems Inc., a Pennsylvania corporation; 12 and that the STA specifically, though

not exclusively, calls for disputes thereunder to be resolved in Pennsylvania courts.13

Next, I note that the Pennsylvania Action was first-filed by Vurimindi, the natural

plaintiff in the matter, to enforce the Family Court Order. 14 Vurimindi cites McWane

for the proposition that a stay in favor of the Pennsylvania Action should result. 15

       I find that this action should be stayed pending resolution of the STA dispute

in Pennsylvania court. McWane encourages Delaware courts to stay an action when

(1) there is 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.16 This is

premised on the principle that “litigation should be confined to the forum in which

it is first commenced, and a defendant should not be permitted to defeat the plaintiff's

choice of forum in a pending suit by commencing litigation involving the same cause

of action in another jurisdiction of its own choosing[.]”17

       Plaintiffs argue that I should consider the two actions contemporaneous, given

that the Pennsylvania Action was only filed one day before this one. 18 This is a

12
   As stated by Numoda’s counsel. Oral Argument on Motion to Dismiss Counterclaims, January
4, 2023.
13
   STA § XXIV.
14
   See Pls.’ Answering Br. in Opp’n to Df.’s Mot. to Stay at 4 (acknowledging that the
Pennsylvania Action was filed one day earlier).
15
   Df.’s Mot. to Stay ¶ 18.
16
   McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng'g Co., 263 A.2d 281, 283 (Del.
1970).
17
   Id.
18
   Pls.’ Answering Br. in Opp’n to Df.’s Mot. to Stay at 4-5.
                                             4
facially reasonable request. It fails, however, to account for the fact that both actions

are merely the latest iteration of a dispute that has been litigated in Pennsylvania

courts for much of the last decade. 19 As a result, I give some weight to the fact that

the Pennsylvania Action was first-filed.

       More to the point, I note that the Pennsylvania Court of Common Pleas is

capable of doing prompt and complete justice, and is perhaps the court best poised

to do so. If the Plaintiffs are correct that the STA precludes the relief the Defendant

seeks in the Pennsylvania Action, that contract question may be resolved as readily

in the Pennsylvania Action as here. Moreover, equitable resolution of the STA

dispute will likely involve revisiting the Family Court Order. Vurimindi received

the shares at issue pursuant to his divorce from Shainline.20 Under that equitable

distribution, the Pennsylvania Family Court presumably awarded property to

Shainline in consideration of provision of the stock at issue to Vurimindi. If, as

Plaintiffs contend, effective transfer of the shares to Vurimindi is impossible, 21 a

court will need to assess how to equitably resolve the resulting paradox.22 Given

that the equitable distribution was ordered by a division of the Pennsylvania Court

19
   See Df.’s Mot. to Stay ¶¶ 1-13.
20
   Df.’s Mot. to Stay, Ex. A.
21
   Because Numoda’s other stockholders would never approve such a transfer.
22
   Given Numoda’s opposition to Vurimindi’s stock ownership, one potential resolution would
involve compelling Shainline to cause Numoda to repurchase Shainline’s shares, pursuant to the
process provided in the STA. STA § XXI-XXIII. In that scenario, while Shainline would remain
the legal owner of the shares, Vurimindi would be the beneficial owner and the sale proceeds
would flow to him.
                                              5
of Common Pleas, I believe that court is best positioned to provide complete relief

in the STA dispute.

       Finally, Numoda asserts that its by-laws provide for exclusive Delaware

venue for internal affairs litigation.23 Numoda seeks a declaration in this litigation

that Vurimindi is not, and cannot be, a stockholder. If so, there is no internal affairs

question in this litigation.         On that ground, I have dismissed Vurimindi’s

counterclaims, which do pose questions of internal affairs, as unripe. Accordingly,

any venue provision in the by-laws is unavailing. Of course, should Vurimindi

prevail in the predicate STA litigation and perfect transfer of the shares to himself,

he would be free to file against Numoda qua stockholder. That hypothetical

litigation, presumably, would be subject to the venue provision in the bylaws.

       For the foregoing reasons, whether pursuant to McWane or to my inherent

discretion to oversee my docket, I stay the Plaintiffs’ claims pending resolution of

the Pennsylvania Action.24 I am mindful that the court in that action stayed in

deference to this decision, and that the parties should not be left without a venue.

Accordingly, I retain jurisdiction for further action, as circumstances may require.

Any party may seek to lift the stay in this Court, as appropriate.

23
   Numoda’s by-laws have not been provided. See Pls.’ Answering Br. in Opp’n to Df.’s Mot. to
Stay at 6-7, Dkt. No. 14 (citing an exhibit to a previous brief, where no such exhibit is on file).
24
   See Brenner v. Albrecht, 2012 WL 252286, at *4 (Del. Ch. Jan. 27, 2012) (holding that this
Court has broad discretion to stay actions in the furtherance of judicial, litigant, and counsel
economy).
                                                 6
An Order is attached.

                            Sincerely,
                            /s/ Sam Glasscock III
                            Vice Chancellor

                        7
   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

NUMODA CORPORATION and           )
MARY SCHAHEEN,                   )
                                 )
               Plaintiffs,       )
                                 )
    v.                           ) C.A. No. 2022-0555-SG
                                 )
VAMSIDHAR VURIMINDI and ANN )
SHAINLINE (formerly known as ANN )
BORIS),                          )
               Defendants.       )

                                     ORDER

     For the reasons provided in my letter opinion of January 6, 2023, Defendant

Vurimindi’s counterclaims are dismissed without prejudice as unripe, and the

matter is stayed pending resolution of the parallel action in Pennsylvania Court.

IT IS SO ORDERED.

                                             /s/ Sam Glasscock III
                                             Vice Chancellor