Gramercy Emerging Markets Fund v. Allied Irish Banks, P.L.C. ( 2016 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
GRAMERCY EMERGING MARKETS )
FUND, BALKAN VENTURES LLC, )
and RILA VENTURES LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 10321-VCG
)
ALLIED IRISH BANKS, P.L.C. and )
BULGARIAN-AMERICAN )
ENTERPRISE FUND, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: September 14, 2016
Date Decided: December 30, 2016
Stephen B. Brauerman, Vanessa R. Tiradentes, and Sara E. Bussiere, of BAYARD,
P.A., Wilmington, Delaware; OF COUNSEL: Sean F. O’Shea, Michael E. Petrella,
Amanda L. Devereux, and Brian B. Alexander, of BOIES, SCHILLER & FLEXNER,
New York, New York, Attorneys for Plaintiffs Gramercy Emerging Markets Fund,
Balkan Ventures LLC, and Rila Ventures LLC.
Kevin R. Shannon and Christopher N. Kelly, of POTTER ANDERSON &
CORROON LLP, Wilmington, Delaware; OF COUNSEL: Walter C. Carlson and
Elizabeth Y. Austin, of SIDLEY AUSTIN LLP, Chicago, Illinois, Attorneys for
Defendant Allied Irish Banks, p.l.c.
Kenneth J. Nachbar, Ryan D. Stottmann of MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, Delaware; OF COUNSEL: Brian D. Sieve, P.C. and
Jessica L. Staiger, of KIRKLAND & ELLIS LLP, Chicago, Illinois, Attorneys for
Defendant Bulgarian-American Enterprise Fund.
GLASSCOCK, Vice Chancellor
The factual background of this case is baroque. The Plaintiffs are an
investment fund—a corporate citizen of the Cayman Islands doing business out of
Greenwich, Connecticut—and its two wholly-owned subsidiaries. The Plaintiffs
owned 26% of a bank that is a corporate citizen of, and which does business in,
Bulgaria. Majority control of the Bulgarian bank was held by a non-profit entity
incorporated in Delaware. The non-profit was created by the Congress of the United
States in 1991, to facilitate investment and the development of market capitalism in
Bulgaria, then newly emerging from Soviet domination.
In 2008, the non-profit sold a 49.99% interest in the Bulgarian bank to a bank
holding company, a corporate citizen of Ireland. According to the Plaintiffs, this
triggered a right of all minority stockholders in the bank to participate in the sale,
“pursuant to Article 149 of the Bulgarian Public Offer[ing] of Securities Act” (the
“Bulgarian POSA”). 1 According to the Complaint, that act triggers a participatory
right for minority stockholders upon a sale of a majority stake in a publicly-traded
company. The Plaintiffs contend that the sale of stock from the non-profit to the
Irish entity was a “de facto” sale of control, triggering the requirement that the Irish
entity make a mandatory tender offer for all outstanding bank stock. Alternatively,
the Plaintiffs assert there was a secret voting agreement between the non-profit and
the Irish bank, evidenced by a purported voting pattern, in circumvention of the same
1
Compl. ¶ 34.
1
regulation. Whether the Bulgarian POSA should be so interpreted appears to present
a novel question of Bulgarian law, and forms a key legal issue presented in this
litigation.
The initial question before me is more fundamental. Is Delaware an
appropriate forum? The Defendants have moved to dismiss on forum non
conveniens grounds, arguing that Bulgaria is the clearly-appropriate forum for this
litigation. They made this same argument, successfully, as defendants before an
Illinois court, in a virtually identical action involving the same plaintiffs. This raises
an interesting question under the forum non conveniens doctrine: how should the
Court address such serial filers?
The parties agree that a motion to dismiss on forum non conveniens grounds
is addressed to the discretion of this Court, but fundamentally disagree as to the
appropriate scope of the exercise of that discretion. Where a litigant has made a first
choice of venue (within jurisdictional limits), that choice is entitled to strong
deference. Such deference is attributable to public policy concerns involving comity
and avoidance of forum-shopping. So strong is the deference in favor of a plaintiff’s
choice of forum, that our case-law describes the showing required to defeat the
plaintiff’s first choice as one of “overwhelming hardship.”2 Recent cases have
2
See, e.g., Chrysler First Bus. Credit Corp. v. 1500 Locust Ltd. P'ship, 669 A.2d 104, 108 (Del.
1995) (emphasis added).
2
clarified that that adjective is not to be read as preclusive, but also make clear that a
defendant must demonstrate that the plaintiff’s choice of forum is manifestly
unreasonable before a court may dismiss on grounds of forum non conveniens.3
Such considerations are absent when a litigants’ first choice of forum is not
Delaware. Where a matter has been first-filed elsewhere, interests of comity and the
avoidance of forum shopping cut the other way, and this Court is able to “freely”
exercise its discretion to dismiss or stay in favor of the first-filed action, as justice
requires.4 These two doctrines are colloquially referred to by the seminal cases
setting them forth; the forum non conveniens analysis for cases first-filed in
Delaware is the overwhelming hardship test, analyzed via the Cryo-Maid factors;
the analysis used where another, earlier-filed action is pending elsewhere is known
as the McWane doctrine.
This case must, as I see it, be analyzed under the latter standard, despite the
fact that no earlier-filed actions remain pending. The Defendants argue that the
interests of justice weigh strongly in favor of the litigation proceeding, if at all, in
3
See Martinez v. E.I. DuPont de Nemours & Co., 86 A.3d 1102, 1106 (Del. 2014), as revised
(Mar. 4, 2014) (“To summarize, although the overwhelming hardship standard is stringent, it is
not preclusive. Accordingly, in deciding forum non conveniens motions to dismiss, Delaware trial
judges must decide whether the defendants have shown that the forum non conveniens factors
weigh so overwhelmingly in their favor that dismissal of the Delaware litigation is required to
avoid undue hardship and inconvenience to them.”).
4
See, e.g., Lisa, S.A. v. Mayorga, 993 A.2d 1042, 1047 (Del. 2010).
3
Bulgaria. The Plaintiffs, for their part, did not choose this Court, or this jurisdiction,
as the appropriate forum for resolution of this dispute. Their first choice of forum
was Federal District Court in Illinois, where the bank holding company does
business, and where they had jurisdiction over an individual defendant resident
there, a party defendant in Illinois but not here. This first action was dismissed for
lack of diversity. They then tried Illinois state court, where those same defendants
sought a dismissal on forum non conveniens grounds. That issue was litigated, and
the Illinois court, applying that jurisdiction’s forum non conveniens analysis,
dismissed, finding that Bulgaria, not Illinois, was the appropriate venue for this
litigation. The Illinois Appellate Court affirmed the trial court’s decision, by its own
detailed written opinion. While Plaintiffs’ petition for leave to appeal was pending
before the Illinois Supreme Court, as a third choice the Plaintiffs filed here. After
the Delaware action was filed, the Illinois Supreme Court denied Plaintiffs’ petition
for leave to appeal. The Plaintiffs indicated at oral argument that, if Defendants’
forum non conveniens motions are granted here, they may seek to litigate in yet
another American jurisdiction.
The forum non conveniens analysis employed by the Illinois court differs in
some respects from that applied in Delaware, and I assume (without deciding) that
the determination in favor of a Bulgarian forum in Illinois has no issue-preclusive
effect here. I note that no other litigation is currently pending in any forum
4
concerning these issues; therefore, a concern to avoid inconsistent future judgments
is not present. It is a fact inescapable, however, that Delaware is not Plaintiffs’ first
choice of forum, and the extreme deference paid to a plaintiff’s first choice of forum
is not indicated here. I determine, therefore, that the overwhelming-hardship
standard of Cryo-Maid and its progeny is inapplicable, and that I must apply my
discretion, in the interest of justice, in determining whether this forum is appropriate.
In the exercise of my discretion, after considering the facts of this case I find
dismissal of this matter appropriate. My reasoning follows.
I. BACKGROUND5
A. The Parties and Relevant Non-Parties
The Plaintiffs are an investment fund, Gramercy Emerging Markets Fund
(“Gramercy”), and two of its wholly owned entities—Balkan Ventures LLC and Rila
Ventures LLC (collectively “the Plaintiffs”). 6 Gramercy is a “Cayman Islands
Exempted Company incorporated in the Cayman Islands” with its principal place of
business in Greenwich, Connecticut.7 Balkan Ventures LLC “is a Delaware limited
liability company wholly owned by [Gramercy]” with its principal place of business
5
The facts, except where otherwise noted, are drawn from the allegations of the Complaint and
the documents incorporated by reference therein, and are presumed true for purposes of evaluating
the Defendants’ Motions to Dismiss. Because of the posture of this case, I take notice of certain
submissions of the parties as well. See VTB Bank v. Navitron Projects Corp., 2014 WL 1691250,
at *1 n.3 (Del. Ch. Apr. 28, 2014).
6
Compl. ¶ 10.
7
Id. at ¶ 1.
5
in Greenwich, Connecticut. 8 Rila Ventures LLC is also a “Delaware limited liability
company wholly owned by [Gramercy]” with its principal place of business in
Greenwich, Connecticut.9 The Plaintiffs share the same Greenwich, Connecticut
address.10
The Defendants are Allied Irish Banks, p.l.c. (“Allied”) and the Bulgarian-
American Enterprise Fund (“BAEF”).11 Allied is an “Irish Public Limited
Company” with an office in Chicago, Illinois.12 Allied has its principal place of
business in Dublin, Ireland.13 BAEF is a “not-for-profit corporation established by
the U.S. Congress, and incorporated in Delaware . . . .”14 BAEF has a mailing
address in Chicago, Illinois.
Non-party Bulgarian-American Credit Bank (“BAC Bank”) is a Bulgarian-
based bank located in Sofia, Bulgaria with a full banking license from the Bulgarian
National Bank.15 Transactions regarding BAC Bank’s stock are regulated by the
Bulgarian Financial Supervision Commission. 16
8
Id. at ¶ 2.
9
Id. at ¶ 3.
10
See id. at ¶¶ 1–3.
11
Id. at ¶¶ 4–5.
12
Id. at ¶ 4.
13
Allied’s Opening Br., Transmittal Aff. of Ryan T. Costa, Esq., (“Feb. 16, 2015 Costa Aff.”) Ex.
C.
14
Compl. ¶ 5.
15
Id. at ¶ 25.
16
See id. at ¶ 34.
6
B. Factual Overview
This action arises from the sale of BAC Bank shares owned by BAEF to
Allied, which the Plaintiffs allege violated certain Bulgarian securities laws and thus
gives rise to claims for tortious interference, breaches of fiduciary duty, aiding and
abetting such breaches and tortious interference, and civil conspiracy in Delaware.17
1. The Origins of the BAEF and BAC Bank
Congress established BAEF in 1991 pursuant to the Support for East
European Democracy Act (the “SEED Act”). 18 The SEED Act was intended to
encourage American investment in Eastern Europe after the fall of the Soviet
Union.19 In light of this goal, “to fulfill its aim of encouraging American investment
in Eastern Europe, the SEED Act provided for the establishment of Enterprise
Funds.”20 BAEF is one of such funds.21 In 1996, BAC Bank was founded in Sofia,
Bulgaria, with a banking license from the Bulgarian National Bank, and was initially
funded “[u]sing money from BAEF raised primarily in the United States.” 22 “The
purpose of founding the [BAC Bank] by the U.S. Government was to foster
17
See id. at ¶¶ 9–17.
18
Id. at ¶¶ 19, 24.
19
Id. at ¶¶ 18–21.
20
Id. at ¶¶ 22, 24.
21
Id.
22
Id. at ¶ 25.
7
democracy in Eastern Europe, a mission the [BAC Bank] was to accomplish by
providing loans to small and medium sized businesses in Bulgaria.”23
2. The Plaintiffs Invest in BAC Bank
Prior to April 4, 2006, BAEF held a 65% stake in BAC Bank.24 On April 4,
2006, BAEF “issued an IPO through which it sought to reduce its 65% stake in [BAC
Bank] to a 53.88% stake.”25 The Plaintiffs participated in that IPO and bought
“approximately 3% of the outstanding shares of [BAC Bank].”26 The Plaintiffs
eventually increased their investment and “subsequently purchased additional shares
which increased their stake in [BAC Bank] to roughly 26%.”27 The Complaint
indicates that Plaintiffs’ investment decision was influenced by “statements
originating in the United States.”28
3. Sale of BAC Bank Shares by BAEF to Allied
BAEF announced on February 18, 2008, that it entered into an agreement to
sell 49.99% of the outstanding shares of BAC Bank to Allied. 29 At the time of this
announcement, “BAEF held 53.88% of the outstanding shares of [BAC Bank].”30
23
Id.
24
See id. at ¶ 26.
25
Id.
26
Id. at ¶ 27.
27
Id. at ¶ 30.
28
Id. at ¶ 28.
29
Id. at ¶ 32.
30
Id. at ¶ 33.
8
The Complaint alleges that “pursuant to Article 149 of the Bulgarian Public
Offer[ing] of Securities Act, a shareholder purchasing a majority stake in a publicly
traded company was, at the time of the purchase, required to file at the Bulgarian
Financial Supervision Commission a tender offer for purchase of all outside
shares.”31 This amounts to a “mandatory tender offer rule;” if Allied bought a
majority of BAC Bank’s outstanding shares from BAEF, it was required to make a
tender offer to all other holders at a price equal to what it paid BAEF, according to
the Bulgarian POSA.32 The Complaint alleges the transaction was structured with
the “goal” of permitting Allied to gain “de facto control over [BAC Bank] while
willfully attempting to avoid the mandatory tender offer rule.” 33
In addition to structuring the sale to avoid the mandatory tender offer rule, the
Complaint alleges that there is “circumstantial evidence of a pre-mediated agreement
between [Allied] and BAEF . . .” which permitted Allied “to exercise de facto
majority control over [BAC Bank] through an agreement with BAEF that BAEF
would vote its shares in the same manner as [Allied].”34 Such circumstantial
evidence includes a “voting pattern” which suggests that BAEF voted with Allied
subsequent to the sale.35 Prior to the transaction between BAEF and Allied, the
31
Id. at ¶ 34.
32
Id. at ¶¶ 34–35.
33
Id. at ¶ 35.
34
Id. at ¶ 43.
35
Id.
9
“Plaintiffs made repeated demands on Defendants that they abide by the mandatory
tender offer rule and offer to purchase Plaintiffs’ shares at the price to be paid by
[Allied].”36 The Plaintiffs expressed their concerns via letters to the Defendants but
the sale still closed as structured on August 28, 2008.37 Ultimately, Allied sold its
shares in BAC Bank on May 16, 2011, thus the Complaint alleges that from “August
28, 2008 until May 16, 2011, [Allied] exercised control over [BAC Bank] through
an agreement with BAEF that allowed for [Allied] to determine the way in which
BAEF’s shares would be voted.”38
The Complaint alleges BAEF’s then President and Chief Executive Officer,
Frank Bauer, who is not a named defendant in this action (but was in Plaintiffs’
dismissed Illinois actions), as well as all other members of BAEF’s management
board, “were beneficiaries of BAEF’s incentive program which was tied to profits
on asset disposals.”39 Purportedly, this presented a conflict as to “whether to
recommend a share sale that would enrich themselves but also violate BAEF’s legal
duties to minority shareholders, or to vote against the share sale and forego a
personal pecuniary gain.” 40 The Complaint concludes that even in the face of “the
clear risks of participation, BAEF and Bauer participated in the vote to allow [Allied]
36
Id. at ¶ 38.
37
Id. at ¶¶ 38–42.
38
Id. at ¶ 44.
39
Id. at ¶ 45.
40
Id. at ¶ 46.
10
to purchase the vast majority of BAEF’s [BAC Bank] shares” and thus “BAEF
therefore placed its own financial gain over the duties it owed to [BAC Bank]
minority shareholders.”41
4. The Plaintiffs Raised Their Concerns to Bulgarian Regulators
Prior to the closing of the sale from BAEF to Allied in August 2008, the
Plaintiffs raised their concerns to various Bulgarian regulators. On April 22, 2008,
Gramercy’s lawyers in Bulgaria sent a letter to the Bulgarian Financial Supervision
Commission. 42 The letter relayed Gramercy’s concerns that the transaction was
structured to avoid the mandatory tender offer rule and that there was possibly an
agreement between the parties to exercise control, “in circumvention of mandatory
provisions of the Bulgarian legislation.”43 Gramercy requested that the Bulgarian
Financial Supervision Commission investigate any voting agreement. 44 The
Bulgarian Financial Supervision Commission replied on May 27, 2008.45 The
Bulgarian regulators noted that the transaction had not yet been finalized, and the
mandatory tender offer rule does not attach until more than 50% of voting shares are
actually acquired.46 Further, because the companies would be required to disclose
any such agreement upon the close of the transaction the regulator declined to solicit
41
Id.
42
See Feb. 16, 2015 Costa Aff. Ex. A-8.
43
See Feb. 16, 2015 Costa Aff. Ex. A-8 at 2–3.
44
Feb. 16, 2015 Costa Aff. Ex. A-8 at 3–4.
45
See Feb. 16, 2015 Costa Aff. Ex. A-9.
46
Feb. 16, 2015 Costa Aff. Ex. A-9 at 4.
11
any purported voting agreements from the parties at that time. 47 There are also
documents indicating that other regulators, such as the Bulgarian Commission for
Protection of Competition, were aware, prior to closing, of Gramercy’s challenges
to the transaction—specifically that “the transaction has resulted in the
circumvention of the [Bulgarian mandatory tender offer rule].”48 The transaction
ultimately closed despite such challenges. Certain regulatory decisions included an
appeal process.49 The record does not disclose whether the Plaintiffs pursued these
appeal rights.50
5. The Illinois Actions
a. The Federal Action
The Plaintiffs filed suit in Federal District Court in Illinois, demanding a jury
trial, on August 26, 2011. The complaint in the federal action is strikingly similar
to the Complaint in the later-filed action here—the Illinois federal action alleges the
same counts, on the same factual basis, but includes an additional defendant—Frank
Bauer.51 Other than Bauer the parties are identical, and the claims and facts pled
mirror those brought in this action. 52 The federal action was dismissed on December
47
Feb. 16, 2015 Costa Aff. Ex. A-9 at 5.
48
Feb. 16, 2015 Costa Aff. Ex. A-17 at 3–4.
49
See, e.g., Feb. 16, 2015 Costa Aff. Exs. A-12, A-18.
50
I note that it appears appeals were not taken, at least with respect to certain regulatory approvals.
See Feb. 16, 2015 Costa Aff. Exs. A-13, A-19.
51
Compare Feb. 16, 2015 Costa Aff. Ex. D with Compl.
52
Id.
12
13, 2011 for lack of subject matter jurisdiction due to a failure of complete diversity
of citizenship.53
b. The Illinois State Court Action
On February 24, 2012, the Plaintiffs filed a complaint in Illinois state court,
again demanding a jury trial.54 The complaint in the Illinois state court action is also
strikingly similar to the complaint in the federal action, and the present Complaint. 55
This Illinois action involved the same parties as the present action, except it also
included Bauer as a defendant.56 Like the federal action, the Illinois state action
asserted the same claims pled in the present Delaware action on a very similar factual
basis.57
The Defendants moved to dismiss the Illinois state action for failure to state a
claim and on forum non conveniens grounds.58 The Illinois court ordered “extensive
discovery to allow the parties to fully articulate their positions.” 59 The court applied
Illinois forum non conveniens law to the motion and dismissed the action, finding
that, in light “of the tenuous connection the case has to Illinois, a dismissal in favor
53
Feb. 16, 2015 Costa Aff. Ex. E at 1, 3.
54
Feb. 16, 2015 Costa Aff. Ex. F at 1.
55
Compare Feb. 16, 2015 Costa Aff. Ex. D and Ex. F with Compl.
56
See Feb. 16, 2015 Costa Aff. Ex. F.
57
Compare Feb. 16, 2015 Costa Aff. Ex. D and Ex. F with Compl.
58
Feb. 16, 2015 Costa Aff. Ex. G at 1 (the “Circuit Court of Cook County Illinois Order”).
59
Circuit Court of Cook County Illinois Order at 7.
13
of Bulgaria better serves the considerations of fundamental fairness, sensible and
effective judicial administration and the ends of justice.”60
The Illinois trial court, in applying its forum non conveniens analysis, made
the following observations: First, the court noted that Illinois was not the Plaintiff’s
“home forum” and their choice was therefore entitled to comparatively less
deference under Illinois law. 61 The court also noted that the “Plaintiffs chose to
invest in a Bulgarian bank in a transaction governed by Bulgarian securities laws, so
the risk of litigation in Bulgaria was foreseeable.” 62 Further the court found that
under the applicable Illinois standard “[o]btaining witness participation and access
to evidentiary sources favors having the case in Bulgaria.” 63 In support of this
finding the court observed that of the witnesses identified at the time “23 of the 25
reside in European Union countries with more than half residing in Bulgaria.”64 The
court also observed that while the Plaintiffs “have attempted to frame their claims as
recognized Illinois causes of action, their entire case is based on a violation of
Bulgaria’s Public Offering Securities Act.” 65 Further, the Court found that “the
courts and the public in Bulgaria have a significant interest in this controversy. The
alleged conspiracy to defraud foreign investors in one of its largest banks presents a
60
Id.
61
Id. at 4.
62
Id. at 3.
63
Id. at 5.
64
Id.
65
Id. at 6.
14
compelling interest in the subject matter.”66 Finally, the court observed that “[t]he
strong connection to Bulgaria cannot be ignored. Plaintiffs’ whole case is based on
Defendants’ alleged avoidance of a Bulgarian security law—a law which does not
exist in Illinois.”67
The Plaintiffs appealed the trial court’s June 27, 2013 dismissal to the Illinois
Appellate Court. On July 28, 2014, the Illinois Appellate Court affirmed the trial
court’s decision via a twenty-three page written opinion, finding the trial court did
not abuse its discretion in dismissing in favor of Bulgaria.68 The Plaintiffs then
petitioned for leave to appeal. The Illinois Supreme Court refused Plaintiffs’ appeal
on November 26, 2014. 69 I note the Complaint in the present Delaware action was
filed on November 5, 2014 and the Defendants moved to dismiss this action on
February 16, 2015.
6. The Purchase Agreement
BAEF and Allied entered into a purchase agreement (the “Stock Purchase
Agreement”) which governed the sale of BAC Bank shares from BAEF to Allied.70
The Plaintiffs were not parties to this agreement; in fact, they assert that existence
66
Id. at 7.
67
Id.
68
Feb. 16, 2015 Costa Aff. Ex. H at 1–2.
69
Gramercy Emerging Markets Fund v. Allied Irish Banks, p.l.c., 21 N.E.3d 714 (Ill. 2014)
(TABLE).
70
See Pls’ Answering Br., Transmittal Aff. of Amanda L. Devereux, Esq., Ex. 7 (the “Stock
Purchase Agreement”).
15
of this agreement was first revealed during forum non conveniens discovery in the
Illinois actions. Section 8.12 of the Stock Purchase Agreement provides a Delaware
choice of law clause indicating that “[t]his Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware . . . .”71
Additionally, Section 8.13 of the Stock Purchase Agreement provides that “[a]ny
suit, action or proceeding against any Party hereto arising out of or relating to this
Agreement or any transaction contemplated hereby may be brought in any federal
or state court located in the [S]tate of Delaware . . . .”72 Further, Section 8.4 indicates
that there are no third-party beneficiaries to the contract and that the “Agreement is
for the sole benefit of the parties hereto . . . and nothing herein express or implied
shall give or be construed to give any Person, other than the Parties hereto and such
permitted assigns, any legal or equitable rights hereunder.” 73 The parties to the
contract were defined as BAEF and Allied. 74
C. Procedural History of this Action
The Plaintiffs filed their Complaint in this action on November 5, 2014. The
Complaint pleads five counts. Count I asserts a claim for tortious interference with
prospective business advantage against BAEF, for allowing Allied to purchase
71
Stock Purchase Agreement § 8.12.
72
Id. at § 8.13.
73
Id. at § 8.4.
74
Id. at § 1.1.
16
49.99% of BAC Bank “with knowledge that [Allied] would circumvent the share
purchase requirements under applicable law.”75 Count II asserts a breach of
fiduciary duty claim against BAEF, as a majority and controlling shareholder of
BAC Bank, for allowing Allied’s purchase which was “deliberately structured in an
impermissible and unlawful attempt to avoid the mandatory tender offer rule under
applicable law.”76 Count III asserts a breach of fiduciary duty claim against Allied,
as the “controlling shareholder” from “August 28, 2008 until May 16, 2011” for
breach of its fiduciary duties by “refusing to offer to Plaintiffs and all other minority
shareholders a tender offer in connection with its August 28, 2008 purchase of de
facto control over [BAC Bank] as provided for by Bulgarian law.”77 Count IV
asserts against BAEF a claim for aiding and abetting tortious interference and a
breach of fiduciary duty.78 Finally, Count V asserts a claim of civil conspiracy
against BAEF and Allied for conspiring to avoid the mandatory tender offer rule and
taking overt acts in furtherance of such agreements. 79 Each of these causes of action
depends, directly or secondarily, upon the application of Bulgarian Securities Law,
specifically, Article 149 of the Bulgarian POSA.
75
Compl. ¶¶ 50–59.
76
See id. at ¶¶ 60–66.
77
See id. at ¶¶ 67–72.
78
See id. at ¶¶ 73–80.
79
See id. at ¶¶ 81–85.
17
Each Defendant moved to dismiss the Complaint on February 16, 2015 on
several grounds, including failure to state a claim, lack of personal jurisdiction and
forum non conveniens. The other grounds for Defendants’ Motions to Dismiss were
reserved, and the parties have proceeded solely on the forum non conveniens portion
of the motions.80 On October 16, 2015, I ordered that discovery provided in
connection with the Illinois state action be updated.81 An initial oral argument was
held on May 5, 2016. I requested supplemental briefing from the parties regarding
the appropriate standard of review under the unique facts of this case. Following
submission of supplemental briefing, a second oral argument was held on September
14, 2016. This Memorandum Opinion addresses Defendants’ Motions to Dismiss
on forum non conveniens grounds.
II. ANALYSIS
Stated simply, the Plaintiffs’ first choice of a forum was Illinois, presumably
because that state’s courts had jurisdiction over a greater number of potential
defendants than other American jurisdictions, and because (unlike Delaware) at least
some relevant actions—at least with respect to the Plaintiffs’ conspiracy theories—
arguably took place in Illinois.82 The Defendants sought a dismissal, arguing
80
See Order Regarding Briefing on Motions to Dismiss (Oct. 16, 2015); May 5, 2016 Oral
Argument Tr. 5:12–6:17 (indicating the parties are only proceeding on forum non conveniens).
81
See Order Regarding Briefing on Motions to Dismiss (Oct. 16, 2015).
82
See Feb. 16, 2015 Costa Aff. Ex. H. The intermediate appellate decision by the Appellate Court
of Illinois First Judicial District noted that the “plaintiffs contend the situs of the injury in Chicago
entitles them to substantial deference.” Id. at ¶ 22. It appears the Plaintiffs, in their earlier
18
Bulgaria was the appropriate forum for any litigation. Plaintiffs’ action was
accordingly dismissed by the Illinois state trial court on forum non conveniens
grounds in favor of Bulgaria—a decision affirmed by the Illinois Appellate Court.
After the Illinois Appellate Court affirmed the trial courts dismissal, but before the
Illinois Supreme Court denied Plaintiffs’ petition for leave to appeal, the Plaintiffs
filed this near-identical case in Delaware, and rely on our supposedly more-plaintiff-
friendly forum non conveniens standard for a result more favorable than received in
the Prairie State.83
My analysis, detailed below, must begin with whether the Cryo-Maid or
McWane standard applies here. The answer, to me, is made obvious by considering
that, if the Plaintiffs had initially responded to the Defendants’ motions to dismiss
in Illinois by filing this action in Delaware—before the Illinois trial court had an
opportunity to consider the motion—the Delaware placeholder action would clearly
have been subject to a McWane analysis on a motion to dismiss in Delaware. I see
no basis to employ a more plaintiff-friendly analysis here, simply because the
Plaintiffs were unsuccessful in Illinois before making this second-choice Delaware
filing.
litigation, asserted a theory that the purported secret voting agreement was related to a January
2008 meeting in Chicago. See id.
83
Obviously, a decision of the Illinois court that Illinois is a fatally-inconvenient forum for this
litigation is not res judicata of whether a Delaware forum is appropriate. Because of my decision
here, I need not decide whether the Plaintiffs are precluded from re-litigating particular issues
addressed by that court.
19
A. The Applicable Standard
“A forum non conveniens motion is addressed to the trial court's sound
discretion.”84 However, that discretion is not unlimited, and this Court must follow
the analysis prescribed by our Supreme Court.85
Our Supreme Court has recognized two principal forum non conveniens
doctrines.86 As recently explained in Lisa, S.A. v. Mayorga,87 the two doctrines of
“overwhelming hardship and McWane—operate consistently and in tandem to
discourage forum shopping and promote the orderly administration of justice ‘by
recognizing the value of confining litigation to one jurisdiction, whenever that is
both possible and practical.’”88 Which doctrine applies depends, primarily, upon the
posture of the case and the considerations which flow from that posture. The
Supreme Court has indicated, “[i]t is a well settled rule of Delaware law that
defendants moving to dismiss a first-filed suit on the ground of forum non
conveniens must establish with particularity that they will be subjected to
overwhelming hardship and inconvenience if required to litigate in Delaware.” 89
However, under certain circumstances the McWane doctrine, as interpreted in Lisa,
84
Martinez v. E.I. DuPont de Nemours & Co., 86 A.3d 1102, 1104 (Del. 2014) (citation omitted).
85
See, e.g., id. at 1105 n.11 (collecting cases where the Supreme Court reversed trial court
determinations that the overwhelming-hardship standard was met).
86
See Lisa, S.A. v. Mayorga, 993 A.2d 1042, 1047 (Del. 2010).
87
Id.
88
Id. (quoting United Phosphorus, Ltd. v. Micro-Flo, 808 A.2d 761, 764 (Del. 2002)).
89
Id. (citations omitted) (emphasis supplied by Supreme Court).
20
attaches and provides a trial court broader discretion in analyzing a motion to dismiss
on forum non conveniens grounds.90 Thus, as a threshold issue, I must determine
which doctrine attaches here.
1. Overwhelming Hardship
Our Supreme Court recently had occasion to discuss the “origins and
meaning” of the overwhelming-hardship standard in Martinez v. E.I. DuPont de
Nemours & Co.91 Our case law provides that, when seeking to vitiate a first-filed
choice of forum, “a defendant must meet the high burden of showing that the
traditional forum non conveniens factors weigh so heavily that the defendant will
face ‘overwhelming hardship’ if the lawsuit proceeds in Delaware.” 92 The Supreme
Court clarified that perceptions that this test presents an insurmountable burden are
“not accurate.”93 Rather, the Court held in Martinez that “‘a more restrained
meaning is at the essence of the [overwhelming hardship] standard.’” 94 Specifically,
“the overwhelming hardship standard is not intended to be preclusive. Rather, it is
intended as a stringent standard that holds defendants who seek to deprive a plaintiff
of her chosen forum to an appropriately high burden.”95
90
See id.
91
86 A.3d 1102, 1105 (Del. 2014).
92
Id. at 1104 (citation omitted).
93
Id. at 1105.
94
Id. (quoting IM2 Merchandising & Mfg., Inc. v. Tirex Corp., 2000 WL 1664168, at * 8 (Del.
Ch. Nov. 2, 2000)) (alterations supplied by Supreme Court).
95
Id. (citation omitted) (emphasis added).
21
One justification for application of the overwhelming-hardship standard is a
deference for a plaintiff’s choice of forum. 96 To my mind, this represents the default
rule in Delaware: when a plaintiff avails herself of our courts as her first choice of
forum, her choice is entitled to the extraordinary deference which the overwhelming-
hardship standard provides. Absent such a rule, unwholesome forum shopping
would result, comity would be damaged and inconsistent judicial decisions could
result. Here, however, Delaware was not Plaintiffs’ first choice of forum. Rather
the Plaintiffs filed their suit in Delaware only after being dismissed by both Federal
and State courts in Illinois. In light of this, I turn to a discussion of the other
applicable analysis available under our law.
2. McWane and Lisa
McWane addresses a scenario where one party has filed in a jurisdiction other
than Delaware, and the party-opponent has thereafter filed here. 97 It is obvious that,
in such a matter, the factors that weigh so strongly in favor of a first-filed Delaware
plaintiff under Cryo-Maid—the respect for a plaintiff’s choice of forum, to avoid
96
See, e.g, id.; Chrysler First Bus. Credit Corp. v. 1500 Locust Ltd. P'ship, 669 A.2d 104, 107
(Del. 1995) (noting that one of the rationales for the traditional Cryo-Maid analysis is the principle
that “only in a rare case should a plaintiff's choice of forum be defeated in favor of a later-filed
action in another jurisdiction”).
97
See McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng'g Co., 263 A.2d 281, 282–83
(Del. 1970).
22
forum-shopping and inconsistent judicial decisions—cut just as strongly against the
Delaware second filer. A McWane analysis directs the court to examine whether the
actions arise from the same facts, and whether the first forum can provide justice; if
so, the court may freely exercise its discretion to stay or dismiss. Thus, McWane
and Cryo-Maid are simply mirror-image analyses bent on serving the same
beneficial interests.
Cryo-Maid and McWane involve competing litigants with competing choices
of forum. But what of a plaintiff who sees an advantage to filing first in another
jurisdiction, then, while that action is pending, files in Delaware? That situation was
addressed by our Supreme Court in Lisa.
a. The Lisa Decision
Because it is central to my rationale here, it is worth reviewing Lisa in some
detail. In Lisa, the Delaware Supreme Court affirmed a Court of Chancery dismissal
on forum non conveniens grounds.98 Lisa arose from a later-filed Delaware action
in which the plaintiff, Lisa S.A. (“Lisa”), a Panamanian corporation, alleged that
after it commenced a prior 1998 Florida Action alleging fraud in a 1992 stock sale,
the defendants “fraudulently reorganized” in order “to eliminate or diminish Lisa's
ability to obtain relief in the 1998 Florida Action.” 99 Lisa was the plaintiff in the
98
Lisa, 993 A.2d at 1045–48.
99
Id. at 1045.
23
Delaware action as well as the related earlier-filed Florida actions.100 The Delaware
Supreme Court observed that “Lisa's Delaware action was the last filed in [a]
complicated family dispute.”101 Prior to dismissing the Delaware action, the Court
of Chancery stayed the later-filed Delaware action “in favor of the then-pending
first-filed 1998 Florida Action, and held the motion to dismiss in abeyance pending
the outcome of Lisa's appeal in that Florida action.” 102 Following Lisa’s
unsuccessful appeal of the dismissal of its 1998 Florida Action, the Court of
Chancery dismissed all claims against the defendants—with certain claims
dismissed on forum non conveniens grounds.103
In its analysis the Court of Chancery applied the traditional factors provided
by the Cryo-Maid standard. 104 On appeal of the Court of Chancery’s dismissal, the
Delaware Supreme Court framed Lisa’s argument as asserting
that the Vice Chancellor misapplied the forum non conveniens standard,
under which (Lisa says) the defendants were required to establish that
they would be subjected to ‘overwhelming hardship’ if forced to litigate
in Delaware. Lisa argues that although the Court of Chancery
purported to apply the overwhelming hardship test, in fact it merely
balanced the hardship to the defendants from being required to litigate
in Delaware against the hardship to Lisa from having to litigate in the
defendants' proposed forum-Guatemala. Lisa contends that the legal
standard, properly applied, required the Court of Chancery to determine
whether the defendants made a strong showing that the burden of
100
Id. at 1044–46.
101
Id. at 1047 n.16 (emphasis in original).
102
Id. at 1045.
103
Id. at 1045–46.
104
See Lisa, S.A. v. Mayorga, 2009 WL 1846308, at *8–10 (Del. Ch. June 22, 2009) (finding the
defendants met the “heavy burden” of showing an overwhelming hardship).
24
litigating in this forum is so severe as to result in manifest hardship to
them. The trial court did not do that, Lisa claims, and therefore
reversibly erred.105
The Supreme Court found that “Lisa's claim is without merit, because the
‘overwhelming hardship’ standard does not apply to Delaware actions—like this
one—that were not ‘first filed.’”106 The Supreme Court emphasized that “[i]ndeed,
in all cases where this Court has applied the ‘overwhelming hardship’ standard, the
Delaware action was either the first filed or the only filed action.” 107 The Court
discussed the deference given to first-filed complaints via the overwhelming-
hardship standard,108 but explained that
[c]onversely, where the Delaware action is not the first filed, the policy
that favors strong deference to a plaintiff's initial choice of forum
requires the court freely to exercise its discretion in favor of staying or
dismissing the Delaware action (the ‘McWane doctrine’). These two
forum non conveniens doctrines-overwhelming hardship and McWane-
operate consistently and in tandem to discourage forum shopping and
promote the orderly administration of justice by recognizing the value
of confining litigation to one jurisdiction, whenever that is both
possible and practical. 109
105
Lisa, 993 A.2d at 1046–47 (citations and internal quotations omitted).
106
Id. at 1047.
107
Id. at 1047 n.13 (collecting cases).
108
See id. at 1047 (“Where the Delaware action is the first-filed, the plaintiff's choice of forum
will be respected and rarely disturbed, even if there is a more convenient forum to litigate the
claim.”).
109
Id. (internal quotations and citations omitted) (emphasis supplied by Supreme Court).
25
The Supreme Court then conducted a McWane-style analysis.110 First, the
Court observed that the Delaware action was not the first-filed action. 111 Next, the
Court acknowledged that “[a]lthough the parties to the 1998 Florida Action are not
identical to the parties in this Delaware case, the 1998 Florida Action squarely
implicated the McWane doctrine, because it was filed in a jurisdictionally competent
court and was ‘functionally identical’ to the later-filed Delaware action.” 112 Further
the Court found that “[b]oth actions arose out of a ‘common nucleus of operative
fact’”113—both stemmed from the underlying allegation of fraud in the 1992 stock
sale.114
The Supreme Court indicated that “[t]he 1998 Florida Action was what
propped up this Delaware action. Its dismissal caused that prop to collapse and
warranted the dismissal of the Delaware action under McWane.”115 Importantly the
Supreme Court found “[t]hat the 1998 Florida Action is no longer pending does not
110
See id. at 1047–48. Our Supreme Court has stated the McWane considerations as follows:
“[u]nder McWane and its progeny, a judge, in the exercise of his or her discretion, may stay or
dismiss a later-filed suit where a first-filed suit is pending in a court capable of administering
prompt and complete justice, and involves substantially similar parties and issues.” Chadwick v.
Metro Corp., 2004 WL 1874652, at *2 (Del. Aug. 12, 2004) (TABLE) (citation omitted). I note
that the origins of the McWane doctrine arise from an inverse set of facts than present in Lisa. In
a traditional McWane circumstance a Delaware action is filed second in an effort to defeat the
plaintiff’s original choice of forum. See McWane, 263 A.2d at 282–83. Our case law, as evidenced
by Lisa, has evolved past such original circumstance.
111
Lisa, 993 A.2d at 1047.
112
Id. at 1047–48 (quoting Chadwick, 2004 WL 1874652, at *2).
113
Id. at 1048 (quoting Chadwick, 2004 WL 1874652, at *2).
114
Id.
115
Id.
26
change the outcome, even though language in McWane speaks in terms of a ‘prior
action pending in another jurisdiction.’”116 Immediately after making this
observation, the Court went on to discuss comity principles stating:
[t]o allow Lisa to proceed with this Delaware action after the dismissal
with prejudice of the predicate Florida action, would ignore the binding
effect of the Florida adjudication, and create the possibility of
inconsistent and conflicting rulings. That is precisely the outcome
McWane's doctrine of comity seeks to prevent. We therefore affirm the
Court of Chancery's dismissal of Lisa's action, on forum non conveniens
grounds, under McWane.117
b. Lisa’s Rationale Applied Here
Lisa involved a plaintiff who had filed in Florida, alleging fraud in a stock
sale, and sought to redress alleged bad-faith litigation tactics following
commencement of that action—as well as vindicate the underlying fraud118—via
litigation in Delaware; the Florida action was, in the Supreme Court’s words, a
“prop” beneath the Delaware action—the actions arose from a common nucleus of
operative facts, but the causes of action were only “functionally” identical.119
Here, by contrast, the Illinois and Delaware actions are, for practical purposes,
fully identical. The Illinois court dismissed in favor of Bulgaria on forum non
116
Id. (quoting McWane, 263 A.2d at 283) (emphasis added).
117
Id. at 1048 (citation omitted). The Supreme Court noted that the 1998 Florida Action “raises
questions of res judicata and collateral estoppel,” but such doctrines were not the basis of its
decision. See id. at 1048 n.19.
118
See Lisa, 2009 WL 1846308 at *9. The Court of Chancery found that “[i]n order to prevail on
either of the remaining counts, Lisa will first have to prove the existence of the underlying fraud
alleged to have occurred in Guatemala in 1992.” Id.
119
See Lisa, 993 A.2d. at 1047–48.
27
conveniens grounds; Plaintiffs want an American forum; accordingly, they bring the
same action here as was dismissed in Illinois, seeking Delaware’s plaintiff-friendly
overwhelming-hardship standard.
It is, I think, beyond cavil that, had this case been brought prior to the
dismissal of the Illinois action, an appropriate motion would have been addressed
under the McWane analysis, and the Delaware action dismissed or stayed. The
McWane analysis would have proceeded thusly: The Illinois state action was first-
filed, predating the present action by several years. The Illinois state court was
“capable of administering prompt and complete justice,”120 and in fact had greater
jurisdictional scope over the litigants than this Court. The parties in each action are
nearly identical. The Plaintiffs are the same, and the Defendants are the same, except
Bauer is no longer named as a Defendant, presumably because of jurisdictional
strictures. Further, the disputes pursued in Illinois and here arise from a common
nucleus of operative fact—actually, they are identical: an alleged structuring of a
2008 stock sale that either violated Bulgarian securities law by the nature of its
structure or via a purported secret voting agreement. Dismissal would therefore have
been proper under McWane. The Plaintiffs point out that, unlike in McWane, no
prior action remains pending; they argue that having litigated and lost in Illinois,
they are entitled to the plaintiff-friendly overwhelming-hardship standard here, as
120
See Chadwick, 2004 WL 1874652, at *2.
28
though this jurisdiction were their first choice of forum. But this contention runs
afoul, not only of incongruity, but of our Supreme Court’s analysis in Lisa.
Lisa clarified that the forum non conveniens analysis of McWane applies
outside the factual scenario of McWane itself, and may apply despite the absence of
a pending action in another jurisdiction. 121 The Plaintiffs argue strenuously that Lisa
involved stronger principles of comity than the instant situation; they point out that
the Florida court’s substantive decision in Lisa had kicked the “prop” out of the
Delaware action, and that an inconsistent result would have been necessary in
Delaware for the plaintiff to be successful here, whereas the instant case involves an
Illinois dismissal on a non-substantive ground. That is true, but to my mind
unpersuasive. Lisa involved two (actually, several) related actions; the substantive
resolution in Florida served, under principles of comity, as a bar to the Delaware
action. The Plaintiffs here have brought two (actually, three) nearly identical actions
serially.122 The fact that the Plaintiffs waited to lose in Illinois, then take—and
121
See Lisa, 993 A.2d at 1048. Evincing McWane’s evolution, our Supreme Court, beyond its
decision in Lisa, has also explicitly expanded McWane to hold that the doctrine can be invoked
when an arbitration proceeding was pending before commencement of a Delaware action. See LG
Elecs., Inc. v. InterDigital Commc'ns, Inc., 114 A.3d 1246, 1253 (Del. 2015) (affirming a Court of
Chancery dismissal under McWane holding “that the parties' arbitration proceeding constitutes a
first-filed action for purposes of the McWane analysis”). I note the Court’s decision in LG
Electronics relied primarily on the principles of efficiency and consistency of results in reaching
its determination that McWane should apply. See id. at 1252–53.
122
Requiring the attachment of the overwhelming-hardship standard to this later-filed Delaware
action could incentivize such a species of serial litigation. Plaintiff’s counsel has candidly
admitted that all his client is “trying to do here is get a forum to be heard in the United States.”
May 5, 2016 Oral Argument Tr. at 58:22–23. Were the overwhelming-hardship standard to attach
29
lose—an appeal in that jurisdiction, before coming to Delaware to litigate the same
issues, does not, to my mind, strengthen their case. The fact that the forum non
conveniens analysis in Illinois differs in some respects from that in Delaware means
that the Illinois decision may not be issue-preclusive here, but it does not, to my
mind, completely eliminate issues of comity and forum-shopping as concerns.
Under McWane, a subsequent Delaware action would have been subject to dismissal
in favor of an identical first-filed pending action in Illinois; under Lisa, the fact that
the pending action has been resolved does not necessarily change this result. The
Illinois trial and appellate courts, after discovery and on consideration of the
positions of the parties, determined that Bulgaria provides an adequate forum and is
the appropriate forum for any litigation. I find, based on the record before me, that
dismissal under the McWane analysis is appropriate.123
I note that the Plaintiffs rely on two Delaware Superior Court cases applying
the overwhelming-hardship standard following a forum non conveniens dismissal in
to later-filed Delaware actions such as Plaintiffs’ here, litigants could, with little risk, test their ties
to another forum for strategic reasons and then file in Delaware and still benefit from the great
deference afforded by the overwhelming-hardship standard. Such a result, I believe, is not
consistent with inter-state comity.
123
In further support of the application of McWane here, I find instructive certain Delaware
Superior Court decisions interpreting Lisa. See, e.g., Chaverri v. Dole Food Co., Inc., 2013 WL
5977413, at *2 (Del. Super. Nov. 8, 2013) (applying McWane in light of Lisa and dismissing a
later-filed Delaware action on forum non conveniens grounds where a first-filed Louisiana action
was already dismissed pursuant to Louisiana’s prescription statute, stating that “[t]he Delaware
Supreme Court reaffirmed and expanded the McWane doctrine when it decided Lisa v. Mayorga”)
(citation omitted) aff'd, 2014 WL 7367000 (Del. Oct. 20, 2014).
30
a prior-filed action. 124 One, Trinity Investment Trust, L.L.C. v. Morgan Guaranty
Trust Co. of New York,125 was decided long before Lisa clarified the application of
the McWane doctrine; the second, In re Asbestos Litigation,126 was decided shorty
after Lisa; the opinion does not mention Lisa, and it appears that the litigants there
failed to make the court aware of the decision. 127 Accordingly I find neither Trinity
nor In re Asbestos persuasive here.
A final argument of the Plaintiffs should be briefly addressed. The Plaintiffs
point to a choice of law and a forum provision in favor of Delaware in the Stock
Purchase Agreement, which they learned of during discovery in the Illinois action.
They assert had they known of these clauses they would have brought their action in
Delaware initially. They argue that I should exercise discretion in favor of allowing
the action to proceed here, in light of the fact that this information was unknown at
the time of the Illinois filing. 128 This argument, however, overlooks the fact that
such provisions were explicitly limited to the parties to that agreement—BAEF and
124
See Pls’ Supp. Opening Br. at 5–7 (citing Trinity Inv. Trust, L.L.C. v. Morgan Guar. Trust Co.
of N.Y., 2001 WL 1221080 (Del. Super. Sept. 28, 2001) and In re Asbestos Litig., 2012 WL
1980414 (Del. Super. May 16, 2012)).
125
2001 WL 1221080 (Del. Super. Sept. 28, 2001).
126
2012 WL 1980414 (Del. Super. May 16, 2012).
127
See id. at *2 (stating “Delaware law consistently refers to pending cases and the court is aware
of no decision applying a differen[t] standard because other similar suits were previously filed and
dismissed elsewhere”).
128
Of course, the Plaintiffs did not react to discovery of this contractual provision by seeking
dismissal without prejudice in Illinois, in favor of a Delaware filing; far from it. They continued
litigating in favor of their first choice of forum and pursued an unsuccessful appeal.
31
Allied. The agreement in no way creates a contractual right for another shareholder
to sue the parties to that contract in Delaware to enforce purported violations of
Bulgarian securities laws. The issues, burdens, and considerations in litigating in
Delaware a sale contract governed by Delaware law, between the parties to that
contract, are radically different than the burden raised by litigating in Delaware an
alleged violation of Bulgarian securities law, premised on a purported secret
agreement and accompanying conspiracy. Thus, on the facts of this case, and given
the clear terms and intent of the parties to the contract, the provisions in the Stock
Purchase Agreement do not require nor favor that this litigation occur in Delaware.
Because of my decision here, I need not reach the question of whether
litigation in Delaware would create an overwhelming hardship for the Defendants.
I note, however, that I am dubious of the Plaintiffs’ assertion that, if the
overwhelming-hardship standard attached, they would easily defeat this motion.
The following considerations would inform such an analysis, as they inform my
decision here under McWane and Lisa. Plaintiffs’ claims in the present action hinge
on whether Bulgarian law was violated. 129 I note that Bulgarian regulators, despite
having been on notice and responding to Plaintiffs’ concerns, did not find such a
violation of the Bulgarian POSA existed. The Plaintiffs ask, nonetheless, that I
129
See, e.g., Pls’ Supplemental Answering Br. 9–10 (stating “Plaintiffs’ claims under U.S. law
(e.g., tortious interference with prospective business advantage) hinge on Defendants’ POSA
violation . . . which Plaintiffs do not dispute”).
32
interpret Bulgarian securities law in light of the instant fact pattern, a matter which,
according to the record, poses certain questions of first judicial impression. 130 They
then ask that I apply that law, find that a violation of Bulgaria’s mandatory tender
offer rule occurred, and that such violation provides a basis for the causes of actions
currently pled in Delaware. This presents questions presumably of keen interest to
Bulgaria, but not Delaware. At bottom, the relief sought would require that I find
the regulators of Bulgaria failed to enforce their law, or applied their law incorrectly.
As noted earlier, it is unclear from this record whether the Plaintiffs pursued rights
to review actions of the regulators, and addressing this matter here would,
presumably, require me to apply Bulgarian law on exhaustion of remedies, as well
as doctrines of deference to regulators, a daunting matter for this Court, and of
interest primarily to Bulgaria, not Delaware. Additionally, as the Illinois court
noted, the record indicates that a number of the witnesses necessary to the
Defendants are in Europe, including in Bulgaria, and there would be some burden
securing their testimony. Obtaining the live testimony of some witnesses would
130
See Allied’s Reply Br., Declaration of Silvy Chernev ¶ 22 (stating “no interpretive decisions
(which carry the greatest precedential value) are available regarding what constitutes an agreement
under Article 149 of the POSA”). The Plaintiffs point out that Bulgaria is a civil-law country, and
that case precedent—and thus the decision of this Court—is accordingly less important to the
development of Bulgarian law than would be the case in a common-law jurisdiction; nonetheless,
I presume a Bulgarian interest in the development of its law regarding a novel issue. See Martinez,
86 A.3d at 1109–10 (“If, as our jurisprudence holds, significant weight should be accorded the
neutral principle that important and novel issues of Delaware law are best decided by Delaware
courts, then it logically follows that our courts must acknowledge that important and novel issues
of other sovereigns are best determined by their courts where practicable.”) (citations omitted).
33
require overseas travel on their part, and would raise questions of the availability of
compulsory attendance. Undoubtedly, trial here would require translation of some
documents written via the Cyrillic, not Latin, alphabet.
While it is obvious that the Plaintiffs desire to litigate this matter in an
American forum, the fact is that the Plaintiffs bought stock in a Bulgarian company
regulated by Bulgarian law, and are trying to vindicate a right under that law. A
foreign judge blundering in to vindicate such rights under the circumstances present
here seems problematic. 131 A decision by this Court could have serious, unintended
consequences on the development of Bulgarian law and on conditions for investment
of capital in that country.
Delaware’s interests in this litigation, in contrast, are sparse. Two of the
Plaintiffs are Delaware entities who chose to first sue in Illinois. Each is an on-shore
limited liability company wholly owned by a Cayman Islands hedge fund. One of
the Defendants—BAEF—is not-for-profit and is a creature of the United States
Congress, incorporated in Delaware. There are no novel issues of Delaware
corporate governance to be decided. Rather there is a decision to be made whether
certain individual actors at the Defendants’ respective entities—all of whom are
131
I note that I am cognizant of our case law which indicates that a balancing analysis is
inappropriate in a traditional forum non conveniens analysis. See, e.g., Mar-Land Indus.
Contractors, Inc. v. Caribbean Petroleum Refining, LP, 777 A.2d 774 (Del. 2001). The Supreme
Court in Lisa characterized Mar-Land “as reversing dismissal for forum non conveniens because
the Court of Chancery inappropriately applied a balancing test to a Delaware lawsuit that was the
only action filed.” Lisa, 993 A.2d at 1047 n.13 (emphasis added).
34
outside of Delaware—structured a transaction which violated Bulgarian securities
law.
Accordingly, I note that Plaintiffs’ first choice of forum resulted in a decision
that justice required the litigation to proceed, if at all, in Bulgaria; that issues of
Bulgarian law would require expert testimony; and that the Illinois courts’
determination—that notions of efficiency and comity indicate that a dismissal on
forum non conveniens grounds would be just—appear to be supported by the record
here.132 In light of these considerations, the outcome here if Cryo-Maid applied is
by no means obvious. At any rate, all these factors inform my exercise of discretion
in favor of dismissal here, consistent with McWane and Lisa.
III. CONCLUSION
For the foregoing reasons, Defendants’ Motions to Dismiss are granted. An
appropriate order accompanies this Memorandum Opinion.
132
I note that the parties vigorously dispute the head-count and location of witnesses and the
location and language of relevant documents. The only thing that is clear from this dispute is that
many documents and witnesses are abroad, primarily in European Union nations including
Bulgaria, while none are in Delaware.
35
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
GRAMERCY EMERGING MARKETS )
FUND, BALKAN VENTURES LLC, )
and RILA VENTURES LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 10321-VCG
)
ALLIED IRISH BANKS, P.L.C. and )
BULGARIAN-AMERICAN )
ENTERPRISE FUND, )
)
Defendants. )
ORDER
AND NOW, this 30th day of December, 2016,
The Court having considered Defendants’ motions to dismiss, and for the
reasons set forth in the Memorandum Opinion dated December 30, 2016, IT IS
HEREBY ORDERED that Defendants’ Motions to Dismiss are GRANTED.
SO ORDERED:
/s/ Sam Glasscock III
Vice Chancellor