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By Yin Wilczek
The Delaware Supreme Court Sept. 13 will hear oral argument on whether a lower court properly dismissed a shareholder’s lawsuit against a nonprofit established by Congress to facilitate development in Bulgaria and an Irish bank-holding company.
The state high court must consider whether its “overwhelming hardship” analysis for determining whether Delaware is the appropriate venue can apply to serial plaintiffs that filed their actions elsewhere before suing in the state ( Gramercy Emerging Markets Fund v. Allied Irish Banks plc, Del., No. 49,2017, oral argument 9/13/17 ).
The case could change how state courts decide whether they can take jurisdiction in cases involving multinational parties or issues, and how plaintiffs weigh where they will sue.
The nonprofit enterprise, the Bulgarian-American Enterprise Fund, held a majority stake in a Bulgarian bank. In 2008, the BAEF sold a 50 percent interest in the bank to Allied Irish Banks plc, a bank-holding company incorporated in Delaware.
Gramercy Emerging Markets Fund, an investment fund incorporated in the Cayman Islands, owned 26 percent of the bank. It sued BAEF and Allied in Illinois federal court alleging that the sale violated Bulgarian securities laws, to the detriment of minority shareholders. The Illinois federal court found it had no jurisdiction to hear the claims and dismissed them.
Gramercy next sued in Illinois state court. Lower courts, concluding as the federal court did that Bulgaria was the more appropriate forum, dismissed the shareholder’s claims. The Illinois Supreme Court affirmed the lower courts’ rulings on Nov. 26, 2014. While the Illinois high court was considering the matter, Gramercy filed a lawsuit in Delaware state court on Nov. 5, 2014.
Delaware Chancery Court judge Sam Glasscock III dismissed the case for lack of jurisdiction. The judge said that under Delaware law, defendants trying to dismiss a lawsuit first filed in Delaware on the grounds that state courts aren’t the best venue, have the challenging burden of showing they will have to endure “overwhelming hardship and inconvenience” if forced to litigate in Delaware. Because Delaware was not Gramercy’s first choice, Glasscock reviewed the case under a standard more friendly to defendants.
In their appeal, Gramercy argued that Glasscock wrongly applied the “overwhelming hardship” standard as a “blanket rule” that only applies to litigants that file first in Delaware. “The instant case is a particularly poor candidate for such an inflexible rule because two Plaintiffs and one of the Defendants are Delaware citizens, and it is undisputed that Plaintiffs would have initially brought this action in Delaware had they known that the contract between the Defendants governing the transaction at issue contained a Delaware forum selection clause,” it said.
The defendants argue that the court applied the right standard.
The plaintiffs are represented by Stephen Brauerman, Bayard PA in Wilmington, Del. Defendant BAEF is represented by Ryan D. Stottmann, Morris, Nichols, Arsht & Tunnell LLP in Wilmington. Defendant Allied is represented by Kevin R. Shannon, Potter, Anderson & Corroon LLP in Wilmington.
To contact the reporter on this story: Yin Wilczek in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Seth Stern at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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