Avaya, Inc. v. Charter Communications Holding Company, LLC ( 2015 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
AVAYA, INC., )
)
Plaintiff, )
)
v. ) C.A. No. N14C-03-052 EMD CCLD
)
CHARTER COMMUNICATIONS )
HOLDING COMPANY, LLC and )
CHARTER COMMUNICATIONS, INC., )
)
Defendants. )
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS CHARTER
COMMUNICATIONS HOLDING COMPANY, LLC AND CHARTER
COMMUNICATIONS, INC.’S RENEWED MOTION TO STAY ACTION
IN FAVOR OF PENDING NEW JERSEY ACTION
This 1st day of May, 2015, upon consideration of the Motion of Defendants Charter
Communications Holding Company, LLC and Charter Communications, Inc. (collectively,
“Charter”) to Dismiss or, in the Alternative, Stay This Action in Favor of Pending New Jersey
Action (the “Motion”); Plaintiff Avaya, Inc.’s (“Avaya”) Opposition to Defendants Charter
Communications Holding Company, LLC and Charter Communications, Inc.’s Renewed Motion
to Dismiss or Stay (the “Response”); Charter’s Reply Brief in Support of Its Renewed Motion to
Dismiss, or in the Alternative, Stay This Delaware Action in Favor of Pending New Jersey
Action (the “Reply”); the Court having held a hearing and heard arguments from the parties on
the Motion, the Response and the Reply on April 13, 2015; the letter dated April 15, 2015 from
David M. Fry to the Honorable Eric M. Davis; the letter dated April 20, 2015 from Andrew D.
Cordo to the Honorable Eric M. Davis, the Court finds as follows:
1. The first day on which the parties could file suit in court after the mediation was
March 6, 2014. Charter and Avaya both filed suit on March 6, 2014. Avaya filed this suit (the
“Delaware Action”) electronically at 12:01 a.m.. Avaya asked for declaratory relief and
attorneys fees and costs and claimed that Charter is barred from recovery. On the same day,
Charter filed suit (the “New Jersey Action”) against Avaya in the Superior Court of New Jersey,
Law Division: Somerset County (the “New Jersey Court”). Charter could not file suit until after
the New Jersey Court operating hours on March 6, 2014 because New Jersey does not have
electronic filing. Charter asked Avaya’s counsel to accept service on that day, but Avaya’s
counsel refused. Charter served Avaya with process on March 11, 2014. Avaya did not serve
Charter until March 28, 2014.
2. On May 7, 2014, Charter filed a motion in New Jersey to dismiss or stay the New
Jersey Action pending the Delaware Action. On June 24, 2014, the New Jersey Court dismissed
the case, holding that the Delaware Action was the first filed action and that Charter could obtain
adequate relief in this Court. Subsequently, on October 6, 2014, the New Jersey Court
reconsidered its earlier decision and held that, under New Jersey law, the New Jersey Action was
the first filed action and that this Court could not provide Charter adequate relief in the Delaware
Action.
3. The New Jersey Court relied on a three-factor test under New Jersey law. Under
this test, a defendant must show that (1) there is a first-filed action in another state, (2) both
actions have the same parties, claims, and legal issues, and (3) the plaintiff has the opportunity to
obtain adequate relief in the first-filed jurisdiction. If all of the factors are met, then the burden
is moved onto the plaintiff to prove that there are “special equities” that are compelling enough
to let the New Jersey action proceed. The New Jersey Court held that the first prong was not met
because the New Jersey Action was first-filed under CTC Demolition Co. v. GMH AETC
Management/Development LLC, which states that a demand for mediation may be regarded as a
2
first-filed action. 1 Further, the New Jersey Court held that the third prong of the test was not met
because Avaya could not demonstrate that Charter would have the opportunity to receive
adequate relief due to the expired statute of limitations in Delaware.
4. After the October 6, 2014 decision by the New Jersey Court, on November 3,
2014, Charter filed the Motion. Avaya opposed the Motion through the Response. On January
21, 2015, Avaya filed an action in the Delaware Court of Chancery to enjoin the New Jersey
Action.
5. The Court has considered a number of uncontested facts. In September 2006,
Ronald A. Katz Technology Licensing, L.P. filed a suit for patent infringement against Charter,
among others. Charter purportedly told Avaya about the law suit, but Avaya claimed that the
suit was the result of Charter mixing Avaya with non-Avaya products. Under the Master
Purchase/Service Agreement, Charter and Avaya were to negotiate in good faith in case of a
dispute. If that failed after forty-five days, Charter and Avaya were to go through non-binding
mediation with the American Arbitration Association. If the mediation was unsuccessful, then
the parties could begin an arbitration or litigation. Here, Charter alerted Avaya to the dispute in
April 2013 and they had an unsuccessful mediation in February 2014.
6. The Court has also considered that the statute of limitations in New Jersey is six
years compared to three years in Delaware. 2 Absent tolling, Charter’s cause of action against
Avaya may be time-barred in Delaware; however, Charter can pursue its cause of action in New
Jersey because, in New Jersey, the statute of limitations has not run yet. Charter is incorporated
in Delaware and its principal places of business appear to be in Missouri. Charter does not
presently do business in and has no employees in New Jersey. Avaya is incorporated in
1
CTC Demolition Co. v. GMH AETC Mgmt./Development LLC, 34 A.3d 1258 (N.J. Super. Ct. App. Div. 2012).
2
N.J. STAT. ANN. § 2A:14-1; 10 DEL. CODE ANN. §§ 8106, 8121.
3
Delaware. Avaya initially identified its principal place of business in New Jersey, but Avaya
amended its complaint in the Delaware Action on May 13, 2014 to identify California as its
principal place of business.
7. In Delaware, a trial court may use its discretion when deciding whether to stay or
dismiss a case in favor of another jurisdiction’s action. 3 When the Supreme Court reviews a case
for abuse of discretion, it decides whether the Superior Court’s “findings and conclusions . . . are
supported by the record and are the product of an orderly and logical deductive process.” 4
8. This Court must now decide whether to defer to the decision by the New Jersey
Court and stay the case or to conduct its own legal analysis on whether the Delaware Action or
the New Jersey Action was filed first. The Court may follow the doctrine of comity, which
applies when two courts have “concurrent jurisdiction over the same matter.” 5 The doctrine is
not a legal rule but “an expression of one state's entirely voluntary decision to defer to the policy
of another, especially in the face of a strong assertion of interest by the other jurisdiction.” 6 A
court may use its discretion to stay a matter if the same matter is pending in a different court
because a court “should not assume to disturb another court's disposition of a controversy unless
there are good reasons for doing so.” 7
9. The Delaware Supreme Court recently applied the doctrine of comity in two
related cases, First Health Settlement Class v. Chartis Specialty Insurance Company and Corvel
Corporation v. Homeland Insurance Company of New York. 8 First Health depended on whether
the Delaware Supreme Court should defer to an interpretation of a Louisiana statute by the
3
Williams Gas Supply Co. v. Apache Corp., 594 A.2d 34, 37 (Del. 1991).
4
Id.5
16 AM. JUR. 2D Conflict of Laws § 11 (2015).
6
Id. (internal footnotes omitted).
7
Id.
8
Corvel Corp. v. Homeland Ins. Co. of N.Y., 2015 WL 1021459 (Del. Mar. 6, 2015); First Health Settlement Class
v. Chartis Specialty Ins. Co., 2015 WL 1021443 (Del. Mar. 6, 2015).
4
Louisiana Court of Appeals from collateral litigation. 9 In a 3-2 decision with a dissent, the
Delaware Supreme Court adopted the Louisiana court’s interpretation, instead of using Delaware
law. 10 Both the majority and the dissent addressed the doctrine of comity. The Court
acknowledged that “[c]omity permits one state to give effect to the laws of a sister state, not out
of obligation, but out of respect and deference.” 11 The dissent agreed that comity is important
and that courts should try to avoid conflicting rulings. 12 The dissent disagrees with the majority
because the Louisiana court should have shown comity to Delaware courts 13 and because
following what the Louisiana court decided would be “demonstrably unfair” to the parties. 14
The Corvel decision is nearly identical to the First Health decision. 15
10. This Court is going to apply the doctrine of comity here and stay this action in
deference to the New Jersey Action. The New Jersey Court has already decided that the New
Jersey Action is the first filed action and that the matter should proceed in New Jersey. In this
case, staying the Delaware Action out of deference to the New Jersey court would avoid
confusion, particularly on the issue of whether the New Jersey Action or the Delaware Action
was filed first. As stated by the Delaware Supreme Court, the doctrine of comity is important
and courts should try to avoid issuing conflicting rulings on the same issue. 16
11. The Court does need to clarify some matters that were discussed in the New
Jersey Court’s October 6, 2014 decision. This Court is a court of law and does not provide
affirmative equitable relief as that jurisdiction lies exclusively with the Delaware Court of
9
First Health, 2015 WL 1021443, at *3-6.
10
Id. at *4-5.
11
Id. at *4.
12
Id. at *6.
13
“Had the Louisiana trial court itself showed comity by staying its hand after the Delaware Superior Court made
the first ruling in the coverage issue and letting this case run its course to finality, the conflict the Majority Opinion
is trying to avoid would not have arisen in the first instance.” Id. at *12.
14
Id.
15
Corvel, 2015 WL 1021459.
16
First Health, 2015 WL 1021443, at *6.
5
Chancery. However, the Court does have available to it what the New Jersey Court described as
“equitable defenses” and the ability to apply equitable tolling doctrines. Rule 8 of the Superior
Court Civil Rules expressly lists available affirmative defenses. 17 Under Rule 8, the Court
recognizes defenses that were once considered “purely equitable defenses in nature,” including
laches. 18 Moreover, the Court has the power to toll the statute of limitation under a number of
theories including, among others, under (i) the discovery rule, (ii) fraudulent concealment, and
(iii) equitable tolling. 19
12. As was stated by the Court at the hearing on the Motion, the Court is unclear why
the attorneys for the parties did not provide readily available Delaware case law on these issues
to assist the New Jersey Court when it made its decision on October 6, 2014. 20 Accordingly, as
part of this Order, this Court is requiring Charter’s counsel to provide this Order to the New
Jersey Court.
13. The Court will stay this action. However, the Court finds no reason to dismiss
this action until a final resolution is reached in the New Jersey Action. 21
IT IS ORDERED that the Motion is GRANTED in part and DENIED in part. In
addition, counsel for Charter is to provide a copy of this Order to the Superior Court of New
Jersey, Law Division: Somerset County within ten (10) days.
/s/ Eric M. Davis
Eric M. Davis
Judge
17
Super. Ct. Civ. R. 8(c).
18
See, e.g., John Petroleum, Inc. v. Parks, C.A. No. 06C-10-039 FSS, 2010 WL 3103391, at *7 (Del. Super. June 4,
2010); USH Ventures v. Global Telesystems Group, Inc., 796 A.2d 7, 18-20 (Del. Super. 2000).
19
Van Lake v. Sorin CRM USA, Inc., C.A. No. 12C-04-036 JRJ CCLD, 2013 WL 1087583, at * 7-8. (Del. Super.
Feb. 15, 2013).
20
See Del. Rules of Prof’l Conduct R. 3.3(2)(stating that an attorney must disclose to the tribunal legal authority in
the controlling jurisdiction known by the lawyer to be directly adverse to the position of the client).
21
This is consistent with the argument made by Charter in the New Jersey Action on reconsideration that the New
Jersey Court should not have dismissed the New Jersey Action with prejudice.
6