Court Opinion

ID: 4537271
Source: CourtListenerOpinion
Date Created: 2020-05-28 18:03:19.892341+00
Date Added: 2024-06-11T08:49:08.459635
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ENVEN ENERGY CORPORATION,                 )
                                          )
            Plaintiff,                    )
                                          )
      v.                                  )   C.A. No. 2019-0579-KSJM
                                          )
DAVID M. DUNWOODY, JR, AND                )
OILFIELD PIPE OF TEXAS, LLC,              )
                                          )
            Defendants.                   )

                          MEMORANDUM OPINION
                          Date Submitted: March 6, 2020
                           Date Decided: May 28, 2020

Kevin M. Coen, Sara Toscano, MORRIS, NICHOLS, ARSHT & TUNNELL LLP,
Wilmington, Delaware; Paul Spagnoletti, Antonio J. Perez-Marques, Matthew
Cormack, DAVIS POLK & WARDWELL LLP, New York, New York; Counsel for
Plaintiff Enven Energy Corporation.
Brock E Czeschin, Angela Lam, RICHARDS, LAYTON & FINGER, P.A.,
Wilmington, Delaware; Robin C. Gibbs, Anthony N. Kaim, Angus Dodson, Gabriel
D. Kaim, GIBBS & BRUNS LLP, Houston, Texas; Counsel for Defendant David
M. Dunwoody, Jr.
Daniel C. Herr, LAW OFFICE OF DANIEL C. HERR LLC, Wilmington, Delaware;
Counsel for Defendant Oilfield Pipe of Texas, LLC.

McCORMICK, V.C.
      The plaintiff company alleges that the defendant, its former president,

guaranteed the company’s business to a third-party vendor in exchange for

kickbacks to the former president’s father. The complaint asserts claims for breach

of fiduciary duty and equitable fraud against the former president, who has moved

to dismiss the action for improper venue. The former president argues that a forum

selection clause in his employment agreement with the company requires that the

claims asserted in this litigation be adjudicated in Texas. Alternatively, he argues

that the case should be dismissed or stayed in favor of a prior action he filed against

the company in Texas for breach of the employment agreement. This decision finds

that the forum selection clause in the employment agreement does not strip this

Court of venue over the plaintiff’s claims, but it is an appropriate exercise of

discretion to grant a stay pending resolution of the first-filed Texas action.

I.    FACTUAL BACKGROUND
      The background is drawn from the First Amended Verified Complaint (the

“Amended Complaint”) and the documents it incorporates by reference. 1

      A.     The Alleged Scheme
      Plaintiff EnVen Energy Corporation (“EnVen”) extracts and produces oil, gas,

and related hydrocarbons in the Gulf of Mexico. Defendant David M. Dunwoody,

1
 C.A. No. 2019-0579-KSJM, Docket (“Dkt.”) 55, First Am. Verified Compl. (“Am.
Compl.”).
Jr., co-founded EnVen in 2014. Dunwoody assumed the role of President and

maintained that position until he resigned in June of 2019.

          EnVen alleges that Dunwoody engaged in a self-dealing scheme whereby he

guaranteed EnVen’s business to Defendant Oilfield Pipe of Texas, LLC (“Oilfield”)

in exchange for kickbacks to his father totaling more than $475,000. EnVen further

alleges that Dunwoody failed to disclose his father’s financial interest in Oilfield and

“took steps to perpetuate and protect” EnVen’s relationship with Oilfield.2 Through

this scheme, Oilfield “often received business without a competitive bidding

process, resulting in EnVen paying higher prices.”3 Oilfield eventually became

EnVen’s near-exclusive pipe vendor, with sales to EnVen in excess of $16 million.

          B.    The Texas Action
          On June 7, 2019, Dunwoody sued EnVen in the District Court of Harris

County, Texas (the “Texas Action”).4 In the Texas Action, Dunwoody claims that

he exercised his right to terminate his employment agreement with EnVen (the

“Employment Agreement”)5 for “Good Reason,” which entitled him to certain

2
    Id. ¶ 24.
3
    Id. ¶ 30.
4
  Dkt. 19, Transmittal Aff. of Angela Lam in Supp. of Def. David M. Dunwoody, Jr.’s
Opening Br. in Supp. of the Mot. to Dismiss the Verified Compl. or to Stay Proceedings
(“First Lam Aff.”) Ex. 1.
5
    First Lam Aff. Ex. 2.

                                           2
benefits. 6 Dunwoody further claims that EnVen wrongfully treated the termination

as a resignation and denied him benefits under the Employment Agreement. 7

          In EnVen’s original answer to Dunwoody’s complaint in the Texas Action,8

EnVen stated that Dunwoody terminated the Employment Agreement not for “Good

Reason,” but rather because “he simply could not handle anyone . . . questioning his

methods or decisions.” 9 The original answer asserted a variety of affirmative

defenses, including that Dunwoody breached the Employment Agreement and that

Dunwoody’s claim was barred by the doctrines of unjust enrichment and unclean

hands. 10 It also included a paragraph concerning facts at issue in this litigation:

                 What’s more, Dunwoody failed to abide by the most basic
                 requirement of his job as President—his duty of loyalty to
                 EnVen. Over a period of years, Dunwoody failed to
                 disclose to EnVen’s Board of Directors . . . that his
                 father . . . was enriching himself at EnVen’s expense as a
                 consultant of one of EnVen’s significant vendors,
                 [Oilfield]. . . . That knowing deception by Dunwoody is
                 the subject of a separate action the Company has
                 commenced in [the Delaware Court of Chancery] today
                 against Dunwoody for fraud and breach of his duty of
                 loyalty. 11

6
    First Lam Aff. Ex. 1 ¶ 39.
7
    Id. ¶ 33.
8
    First Lam Aff. Ex. 3.
9
    Id. ¶ 7.
10
     Id. ¶¶ 19, 24.
11
     Id. ¶ 5.

                                             3
         On August 22, 2019, Dunwoody amended his complaint in the Texas

Action,12 and EnVen answered the amended complaint on September 16, 2019.13

By the time EnVen answered the amended complaint, Dunwoody had already filed

in this action a dismissal brief arguing that there is substantial overlap between the

Texas Action and this litigation. 14 In its answer to the amended complaint, EnVen

reiterated its previously asserted affirmative defenses but removed the paragraph

block-quoted above concerning the alleged Oilfield scheme. 15

         C.     This Litigation
         On July 26, 2019, EnVen commenced this litigation, asserting claims against

Dunwoody for breach of the fiduciary duty of loyalty and equitable fraud.16 On

September 13, 2019, Dunwoody moved to dismiss the initial complaint or stay the

proceedings in favor of the Texas Action.17 Briefing on the initial motion to dismiss

12
     See generally First Lam Aff. Ex. 5.
13
  Dkt. 36, Transmittal Aff. of Angela Lam in Supp. of Def. David M. Dunwoody, Jr.’s
Reply Br. in Further Supp. of His Mot. to Dismiss the Verified Compl. or to Stay
Proceedings (“Second Lam Aff.”) Ex. 7.
14
  Dkt. 18, Def. David M. Dunwoody, Jr.’s Opening Br. in Supp. of the Mot. to Dismiss
the Verified Compl. or to Stay Proceedings (“Def.’s Opening Br.”) at 12–15 (filed on
September 13, 2019 and arguing that “[t]he Texas Action involves the same issues as the
Delaware Action”).
15
     See Second Lam Aff. Ex. 7.
16
     Dkt. 1, Verified Compl.
17
     Dkt. 17, Def. David M. Dunwoody, Jr.’s Mot. to Dismiss.

                                            4
was completed by October 29, 2019,18 and the Court held oral argument on

January 16, 2020. 19

         On January 31, 2020, EnVen amended its complaint to add Oilfield as a

defendant to claims for aiding and abetting breach of fiduciary duty and equitable

fraud. The Amended Complaint asserts four Counts:

         •      Count I for breach of the fiduciary duty of loyalty against Dunwoody;

         •      Count II for equitable fraud against Dunwoody;

         •      Count III for aiding and abetting breach of the fiduciary duty of loyalty
                against Oilfield; and

         •      Count IV for aiding and abetting equitable fraud against Oilfield.

         On February 11, 2020, counsel requested that the Court defer ruling on the

initial motion to dismiss while EnVen and Dunwoody discussed the need for

supplemental briefing, given the filing of the Amended Complaint. 20 On February 6,

2020, Dunwoody filed a motion to dismiss the Amended Complaint or to stay

proceedings in favor of the Texas Action. 21 By stipulation, the parties agreed to

18
  Def.’s Opening Br.; Dkt. 31, Pl. EnVen Energy Corporation’s Answering Br. in Opp’n
to Def.’s Mot. to Dismiss Verified Compl. or to Stay Proceedings (“Pl.’s Ans. Br.”);
Dkt. 35, Def. David M. Dunwoody, Jr.’s Reply Br. in Further Supp. of his Mot. to Dismiss
the Verified Compl. or to Stay Proceedings.
19
  Dkt. 58, Tr. of Oral Arg. on Def.’s Mot. to Dismiss Verified Compl. or Stay Proceedings
(“Oral Arg. Tr.”).
20
     Dkt. 59.
21
  Dkt. 62, Def. David M. Dunwoody, Jr.’s Mot. to Dismiss the First Am. Verified Compl.
or to Stay Proceedings.

                                             5
preserve the arguments set forth in briefing on the initial motion to dismiss and to

submit supplemental briefing in connection with the second motion.22 Supplemental

briefing was completed by March 6, 2020. 23 To date, Oilfield has neither filed a

motion to dismiss nor filed an answer in this matter.

II.      LEGAL ANALYSIS
         Dunwoody has moved to dismiss the Amended Complaint pursuant to Court

of Chancery Rule 12(b)(3) for improper venue. “Even if a court has jurisdiction over

the subject matter of a dispute, an action still may be dismissed under Rule 12(b)(3)

if that court is not the proper venue for resolving that dispute.”24             Under

Rule 12(b)(3), “the court ‘is not shackled to the plaintiff’s complaint’ and ‘is

permitted to consider extrinsic evidence from the outset.’” 25 Courts may dismiss or

stay a matter under Rule 12(b)(3) “in deference to a first-filed case in a different

22
  Dkt. 61, Stipulation and Order Extending Time to Answer, Move, or Otherwise Plead
and Schedule for Supplemental Briefing.
23
  Dkt. 63, Def. David M. Dunwoody Jr.’s Opening Suppl. Br. in Supp. of his Mot. to
Dismiss the First Am. Verified Compl. or to Stay Proceedings (“Def.’s Opening Suppl.
Br.”); Dkt. 66, Pl. EnVen Energy Corporation’s Suppl. Answering Br. in Opp’n to Def.’s
Mot. to Dismiss First Am. Verified Compl. or to Stay Proceedings; Dkt. 72, Def. David M.
Dunwoody, Jr.’s Reply Suppl. Br. in Further Supp. of his Mot. to Dismiss the First. Am.
Verified Compl. or to Stay Proceedings (“Def.’s Suppl. Reply Br.”).
24
     Lefkowitz v. HWF Hldgs., LLC, 2009 WL 3806299, at *3 (Del. Ch. Nov. 13, 2009).
25
  Luchi v. Luchi, 2020 WL 1274879, at *4 n.23 (Del. Ch. Mar. 17, 2020) (quoting Troy
Corp. v. Schoon, 2007 WL 949441, at *2 (Del. Ch. Mar. 26, 2007)).

                                            6
jurisdiction” under the well-settled McWane doctrine.26 Because a valid forum

selection clause can preempt the application of McWane, 27 this analysis first

evaluates the effect of the Texas forum selection clause.

         A.    The Forum Selection Clause in the Employment Agreement Does
               Not Strip This Court of Venue.
         Dunwoody argues that the Amended Complaint should be dismissed based on

the forum selection provision in the Employment Agreement, which requires that

“[a]ny lawsuit that may be brought by either party involving the enforcement of this

Agreement or the rights, duties, or obligations of this Agreement . . . be brought

exclusively in the state district or federal courts sitting in Harris County, Texas.”28

Dunwoody argues that this language subjects EnVen’s claims in this litigation to the

exclusive venue of Texas courts.

         Although it is generally true that “[f]orum selection clauses can be applied not

only to contract-based claims but also tort claims arising out of, or depending upon,

26
  PPL Corp. v. Riverstone Hldgs. LLC, 2019 WL 5423306, at *6 (Del. Ch. Oct. 23, 2019)
(citing McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng’g Co., 263 A.2d 281,
283 (Del. 1970)).
27
   See Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010) (“[W]here contracting
parties have expressly agreed upon a legally enforceable forum selection clause, a court
should honor the parties’ contract and enforce the clause, even if, absent any forum
selection clause, the McWane principle might otherwise require a different result.”).
28
     Employment Agreement § 19 (emphasis added).

                                             7
the contractual relationship in question,” 29 the forum selection provision in the

Employment Agreement limits its application to contractual claims. The relevant

limiting phrase is as follows: “involving the enforcement of this Agreement or the

rights, duties, or obligations of this Agreement.”30 This language encompasses only

“claims directly pertaining to rights based on the contract at issue” and does not

cover tort or other claims that merely “touch on” or relate to the contract. 31 Because

the claims asserted against Dunwoody in this action derive from common law 32 and

29
   Ashall Homes Ltd. v. ROK Entm’t Gp. Inc., 992 A.2d 1239, 1245 (Del. Ch. 2010)
(collecting cases).
30
     Employment Agreement § 19 (emphasis added).
31
   ASDC Hldgs., LLC v. Richard J. Malouf 2008 All Smiles Grantor Retained Annuity Tr.,
2011 WL 4552508, at *5 (Del. Ch. Sept. 14, 2011) (comparing a forum selection provision
that required the parties to bring “[a]ll actions to enforce or seek damages, specific
performance or other remedy for the alleged breach of this Agreement” in Delaware with a
forum selection provision requiring the parties to bring “any claim or cause of action
arising under or relating to this Agreement” in Delaware and concluding that the former
was “narrow in scope and, therefore, only applied to claims directly pertaining to rights
based on the contract at issue” while the use of the phrase “arising under or relating to this
Agreement” in the latter indicated that it was a “broad forum selection clause”
encompassing “any issues that ‘touch on contract rights or contract performance’” (citing
El Paso Nat. Gas Co. v. Transamerican Nat. Gas Corp., 1994 WL 248195, at *1 (Del. Ch.
May 31, 1994); Parfi Hldg. AB v. Mirror Image Internet, 817 A.2d 149, 155 (Del. 2002)));
cf. Carlyle Inv. Mgmt. L.L.C. v. Nat’l Indus. Gp. (Hldg.), 2012 WL 4847089, at *12 n.103
(Del. Ch. Oct. 11, 2012) (applying the reasoning in ASDC Holdings but finding that the
forum selection clause at issue, which covered “any proceeding with respect to this . . .
Agreement,” was a broad one (emphasis added)); see also John F. Coyle, Interpreting
Forum Selection Clauses, 104 Iowa L. Rev. 1791, 1851 tbl. 1 (2019) (suggesting that “[i]f
the goal is to give the clause a broad scope, state that the clause shall apply to all claims
‘relating to’ the contract or the parties’ relationship” and also suggesting, “[i]f the goal is
to give the clause a narrow scope, state that the clause shall only apply to ‘contract claims’
or to claims ‘arising out of the alleged breach of this agreement’” (emphases added)).
32
  Brown v. T-Ink, LLC, 2007 WL 4302594, at *15 (Del. Ch. Dec. 4, 2007) (fiduciary duty
claims “arise from general fiduciary principles under Delaware law”); Metro Commc’ns
                                              8
do not directly pertain to the rights set forth in the Employment Agreement, they do

not fall within the scope of the forum selection provision.

         Dunwoody responds that forum selection clause is broader than EnVen

contends. Dunwoody points to Section 3(d) of the Employment Agreement titled

“Duty of Loyalty,” which Dunwoody argues creates a contractual duty of loyalty.33

In view of Section 3(d), Dunwoody contends that the claims at issue in this litigation

at least “involv[e]. . . the rights, duties, or obligations of this Agreement” so as to

fall within the forum selection provision.34

         The language of Section 3(d), however, provides only that Dunwoody

“acknowledges and agrees” that he owes a duty of loyalty. 35                    The word

“acknowledge” means “[t]o recognize (something) as being factual or valid” or “[t]o

Corp. BVI v. Adv. Mobilecomm Techs., Inc., 854 A.2d 121, 155 (Del. Ch. 2004)
(“Delaware’s law of fiduciary duty is itself an aspect of our common law.”); In re Citigroup
Inc. S’holder Deriv. Litig., 964 A.2d 106, 114 n.6 (Del. Ch. 2009) (“Delaware fiduciary
duties are based in common law and have been carefully crafted to define the
responsibilities of directors and managers, as fiduciaries, to the corporation.”); BAE Sys.
N. Am. Inc. v. Lockheed Martin Corp., 2004 WL 1739522, at *8 n.62 (Del. Ch. Aug. 3,
2004) (referring to the “tort of equitable fraud”); Mark Fox Gp., Inc. v. E.I. du Pont de
Nemours & Co., 2003 WL 21524886, at *5 (Del. Ch. July 2, 2003) (explaining that a claim
for equitable fraud “must be pursued exclusively in the [Delaware] Court of Chancery”);
Dura Pharms., Inc. v. Scandipharm, Inc., 713 A.2d 925, 928 (Del. Ch. 1998) (referring to
equitable fraud as a “tort theor[y]”).
33
     Def.’s Opening Br. at 6–7 (citing Employment Agreement § 3(d)).
34
     Employment Agreement § 19.
35
     Employment Agreement § 3(d).

                                             9
show that one accepts responsibility for” something.36 And the word “agree” in this

context means “to concur” in something or “to accept or concede something.” 37

Read as a whole, the phrase “acknowledges and agrees” indicates the underlying

existence of some fact or proposition. 38 In other words, through the Employment

Agreement, Dunwoody recognized that his position as an officer of a Delaware

corporation gave rise to a fiduciary duty of loyalty. Such language does not

transform a common law duty into a contractual one. 39

       The claim for breach of the duty of loyalty arising out of Delaware common

law thus does not “involve” obligations under the Employment Agreement. And the

36
  Acknowledge, Black’s Law Dictionary (11th ed. 2019); see also Acknowledge, Merriam-
Webster, https://www.merriam-webster.com/dictionary/acknowledge (last visited May 28,
2020) (“acknowledge” means “to recognize the rights, authority or status of” or “to disclose
knowledge of or agreement with”).
37
    Agree, Merriam-Webster, https://www.merriam-webster.com/dictionary/agree (last
visited     May      28,   2020);    see     also    Agree,     Cambridge     Dictionary,
https://dictionary.cambridge.org/us/dictionary/english/agree (last visited May 28, 2020)
(“agree” means to “accept a suggestion or idea”).
38
  See Sunline Commercial Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846
(Del. 2019) (“When the contract is clear and unambiguous, [Delaware courts] will give
effect to the plain-meaning of the contract’s terms and provisions.” (citing Estate of Osborn
ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010))).
39
   Cf. In re AgFeed USA, LLC, 546 B.R. 318, 334 (Bankr. D. Del. 2016) (observing that a
contract providing that an individual “acknowledges and agrees that . . . [he] ha[d] a duty
of loyalty to act in the best interests of [the company]” did not “impose an affirmative
duty”); see also cf. Windsor I, LLC v. CWCapital Asset Mgmt., LLC, 2017 WL 3499919,
at *2 (Del. Ch. July 31, 2017) (holding that the “plain and unambiguous language” of a
provision in which “the Parties acknowledge[d] that they [were] about to commence
negotiations” did not “support the existence of a binding obligation to negotiate” and that
other provisions in which the parties “acknowledge[d] and agree[d]” to certain things
supported the conclusion that the contract did not “obligate any party to negotiate”).

                                             10
forum selection clause in the Employment Agreement does not strip this Court of

proper venue. Dunwoody’s motion to dismiss this action on the basis of the forum

selection provision is denied.40

         B.     A Stay of These Proceedings Is Warranted.
         Dunwoody next argues that the Court should dismiss or stay this litigation in

favor of the Texas Action under the “first-filed rule” set forth in McWane Cast Iron

Pipe Corp. v. McDowell-Wellman Engineering Co. 41 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 justice.” 42 Such discretion is exercised “freely” to prevent a defendant

from “defeat[ing] the plaintiff’s choice of forum in a pending suit by commencing

40
   The parties’ dispute raises other interesting questions, such as whether it would
contravene public policy to interpret the forum selection provision at issue to apply to
common law claims for breach of fiduciary duty, or whether an officer of a Delaware
corporation can effectively “opt out” of the practical consequences of 10 Del. C. § 3114
through an employment agreement with a Delaware corporation. During oral argument,
Dunwoody’s counsel claimed that the Court in Bonanno v. VTB Holdings, Inc. resolved
the precise policy question at issue in favor of private ordering. 2016 WL 614412 (Del.
Ch. Feb. 8, 2016); Oral Arg. Tr. at 9:3–8. I do not share defense counsel’s view of
Bonanno, which involved a forum selection clause in an agreement signed by the
stockholder against whom the agreement was being enforced. 2016 WL 614412, at *15
(observing that the 2015 enactment of 8 Del. C. § 115 was not intended to “regulate the
use of exclusive forum selection provisions in contracts signed by, and later enforced
against, particular stockholders”). In any event, because the parties did not meaningfully
brief these questions, and because the plain language of the forum selection provision does
not warrant dismissal, this decision does not address them.
41
     263 A.2d 281 (Del. 1970).
42
     Ingres, 8 A.3d at 1145 (citing McWane, 263 A.2d at 283).

                                            11
litigation involving the same cause of action in another jurisdiction.” 43 The rule

articulated in McWane derives from “considerations of comity and the necessities of

an orderly and efficient administration of justice.”44 “[D]ismissals are rarely granted

when the first-filed doctrine is invoked.”45 “[I]t is preferable to merely stay the later-

filed action because it is impossible to predict with certainty the course of earlier-

filed litigation in another jurisdiction.”46

           EnVen contends that McWane does not apply because the Texas Action

involves different issues than those at play in this litigation. The analysis of whether

the two cases raise the same issues is a practical one: “[I]t is not necessary to

establish that the . . . issues in both actions are identical . . . ; the pragmatic focus is

on whether the claims ‘are closely related and arise out of the same common nucleus

of operative facts.’” 47

43
     McWane, 263 A.2d at 283.
44
     Id.
45
  Donald J. Wolfe & Michael A. Pittenger, Corporate and Commercial Practice in the
Delaware Court of Chancery § 5.01[a] (2d ed. 2019).
46
   Schnell v. Porta Sys. Corp., 1994 WL 148276, at *6 (Del. Ch. Apr. 12, 1994); see also
Hurst v. Gen. Dynamics Corp., 583 A.2d 1334, 1341 (Del. Ch. 1990) (“In my view, a stay
is the more appropriate form of relief, because that will assure that the plaintiffs are not
deprived of a forum.”).
47
  EuroCapital Advisors, LLC v. Colburn, 2008 WL 401352, at *2 (Del. Ch. Feb. 14, 2008)
(quoting Dura Pharms., 713 A.2d at 930); see also ODN Hldg. Corp. v. Hsu, 2012 WL
1345487, at *8 (Del. Ch. Mar. 30, 2012).

                                               12
         To distinguish this case from the Texas Action, EnVen describes the Texas

Action as a “narrow contract dispute that turns on whether the circumstances of

Dunwoody’s resignation constitute the contractually defined conditions that

constitute ‘Good Reason.’” 48 As EnVen’s original answer in the Texas Action

reflects, however, the alleged scheme involving Oilfield at issue in this litigation is

potentially relevant to whether Dunwoody resigned for “Good Reason.”49 After

Dunwoody developed his McWane arguments in this action, EnVen removed all

mention of the Oilfield scheme from its answer to Dunwoody’s amended complaint

in the Texas Action. EnVen now disclaims any intent to litigate those issues in

Texas.50 But it is common for companies to raise fiduciary duty claims in disputes

over a departing officer’s entitlement to compensation. 51 And EnVen’s efforts to

remove from the Texas Action the alleged scheme underlying their claims for breach

of fiduciary duty seem designed to strengthen EnVen’s position on the instant

motion only. 52 EnVen’s tactics do not obscure the common nucleus of operative

48
     Pl.’s Ans. Br. at 12.
49
     First Lam Aff. Ex. 3 ¶ 5 (describing the Oilfield scheme).
50
     Pl.’s Ans. Br. at 13–15.
51
  This Court sees this pattern with some frequency in the advancement context. See, e.g.,
Fillip v. Centerstone Linen Servs., LLC, 2013 WL 6671663, at *2 (Del. Ch. Dec. 3, 2013);
Paolino v. Mace Sec. Int’l Inc., 985 A.2d 392, 403 (Del. Ch. 2009); Weaver v. ZeniMax
Media, Inc., 2004 WL 243163, at *1 (Del. Ch. Jan. 30, 2004).
52
  As discussed above, EnVen’s decision to remove allegations concerning the Oilfield
scheme from its original answer in the Texas Action did not materialize until after
                                              13
facts and an overlap of issues in the cases, which is sufficient to warrant application

of McWane.

         Despite the common facts and overlapping issues, it is true that the claims in

both lawsuits are not identical. The Texas Action involves Dunwoody’s contractual

claim that he had the right to terminate the Employment Agreement for “Good

Reasons.” By contrast, this action concerns whether Dunwoody adhered to his

fiduciary obligations or committed fraud in connection with the alleged Oilfield

scheme, and whether Oilfield aided and abetted in those actions. Resolving the

claims in this case might not necessarily resolve the ultimate legal issues to be

litigated in the Texas Action, and vice versa. At this stage, “it is impossible to predict

with certainty the course of” the Texas Action. 53 For this reason, dismissal of the

instant action could work injustice by foreclosing relief to EnVen. By contrast, a

stay of this litigation achieves the goals of McWane by giving deference to

Dunwoody’s chosen forum, avoiding waste of scarce judicial resources, and

Dunwoody filed in this action a dismissal brief arguing that both lawsuits involve
substantially similar factual bases.
53
     Schnell, 1994 WL 148276, at *6.

                                           14
foreclosing potential conflicting rulings on common issues.54 Thus, this litigation is

stayed pending the outcome of the Texas Action. 55

III.   CONCLUSION
       For the foregoing reasons, the case is STAYED pending resolution of the

Texas Action. The parties shall report to the Court concerning the status of the Texas

action on a quarterly basis.

54
  See In re Bay Hills Emerging P’rs I, L.P., 2018 WL 3217650, at *8 (Del. Ch. July 2,
2018) (staying Delaware litigation in favor of a Kentucky action where “[t]he simultaneous
procession of both actions risks the significant waste of scarce judicial resources and, more
importantly, the inconsistent resolution of relevant issues”); Gen. Video Corp. v. Kertesz,
2006 WL 2051023, at *4 (Del. Ch. July 19, 2006) (staying Delaware litigation in favor of
a Texas action “based on the substantial overlap of issues between the actions and real
possibility of inconsistent rulings if all actions were allowed to proceed simultaneously”).
55
    Dunwoody further argues that this Court should consider EnVen’s lawsuit improperly
“reactive” and retaliatory in determining whether to dismiss or stay these proceedings, and
further argued that EnVen engages in impermissible “claim splitting” by pursuing this
litigation. Def.’s Opening Suppl. Br. at 3–6; Def.’s Suppl. Reply Br. at 2. Because the
Court finds that a discretionary stay is warranted, it need not address these arguments.

                                             15