Saturday, August 30, 2014 8:55:04 AM
In Novel Finding, Delaware Chancery Court Invokes ‘McWane’ in Favor of Arbitral Action
Friday, August 29, 2014
from Corporate Law & Accountability ReportinShare
By Michael Greene
Aug. 22 — The Delaware Court of Chancery Aug. 20 dismissed a lawsuit seeking to compel action in an ongoing arbitration proceeding because the arbitration proceeding had been filed first.
Vice Chancellor J. Travis Laster dismissed LG's complaint under the McWane doctrine because the parties' ongoing arbitration proceeding constituted a prior action “capable of doing prompt and complete justice involving the same parties and the same issues.” Although Delaware courts apparently had never applied the doctrine when the qualifying prior action was an arbitration proceeding, Laster found the doctrine satisfied.
Arbitration Proceedings
Since early 2013, LG Electronics, Inc. and InterDigital Communications, Inc. have been arbitrating a dispute over a Wireless Patent License Agreement before the International Centre for Dispute Resolution. Shortly after LG filed a demand for arbitration, the parties entered into a non-disclosure agreement (“NDA”) that restricted the parties' use of certain documents and communications, defined as “Settlement Communications.” The NDA, however, did not include an arbitration provision.
In April 2013, InterDigital asked the arbitral tribunal whether the NDA applied to pre-NDA communications, including the Settlement Communications. The tribunal, however, ruled that the request was “premature.” Subsequently, InterDigital submitted a brief that LG contended improperly disclosed “Settlement Communications.” On June 9, 2014, after the parties agreed to lift about a year's stay of the arbitral proceedings, LG filed a complaint in the chancery court seeking to compel InterDigital to withdraw its brief from the tribunal and to bar it from breaching the NDA in the future.
‘McWane' Doctrine Applies
Vice Chancellor Laster noted that even though the court had subject-matter jurisdiction over the dispute, the court could exercise its discretion under the McWane doctrine to dismiss the action in favor of an earlier-filed arbitration proceeding. Pursuant to the doctrine, “such discretion should be exercised freely in favor of the stay when there is a prior action pending elsewhere, in a court capable of doing prompt and complete justice, involving the same parties and the same issues.”
LG argued that the arbitration proceed could not constitute a “prior action” under McWane because there were no Delaware court cases that had applied McWane to dismiss a lawsuit in favor of first-filed arbitration. The court acknowledged that the facts of this case were uncommon because in most cases involving an existing arbitration, the court lacks jurisdiction to hear the dispute or the arbitral tribunal cannot hear the dispute because the case is not arbitrable.
However, the court found that this case “presents the rare instance when both the arbitral tribunal and the court have jurisdiction such that McWane could apply.”
More, the court found that the arbitral tribunal could provide “prompt and complete justice,” even though the NDA did not contain an arbitration clause. Specifically, the court noted that the interests of justice are better served if the tribunal deciding the overall matter in the first instance determines procedural disputes like the instant one. “Allowing parties to seek judicial review every time an arbitrator rules on—or, as in this case, declines to rule on—a procedural issue would frustrate the arbitral process.”
The court also pointed out that the arbitral tribunal could provide equitable relief despite the PLA providing that the tribunal shall act “as arbitrators as law only.” Delaware is one of the few states that still separates courts of law and equity. Vice Chancellor Laster found that the PLA's reference to “arbitration at law” had nothing to do with Delaware's division of courts, however. Instead, he found that this reference is “to make clear that the arbitrators will decide the case by applying legal principles as a court would.”
To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com
Recent IDCC News
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/06/2024 08:06:54 PM
- InterDigital Announces Financial Results for First Quarter 2024 • GlobeNewswire Inc. • 05/02/2024 12:30:08 PM
- InterDigital awarded injunction against Lenovo • GlobeNewswire Inc. • 05/02/2024 12:30:00 PM
- InterDigital’s Doug Castor Elected Co-Chair of the ATIS Next G Alliance Steering Group • GlobeNewswire Inc. • 04/29/2024 08:00:00 AM
- New Report Pins 6G Success on Novel Benchmarks Extending Beyond Speed, Latency, and Mobility • GlobeNewswire Inc. • 04/25/2024 08:00:00 AM
- InterDigital Announces Date for First Quarter 2024 Financial Results • GlobeNewswire Inc. • 04/19/2024 12:30:00 PM
- InterDigital and Concordia University Announce Research Collaboration on AI-enabled Immersive Media Delivery over 5G Networks • GlobeNewswire Inc. • 04/15/2024 08:00:00 AM
- InterDigital Announces Convertibility of 3.50% Senior Convertible Notes Due 2027 • GlobeNewswire Inc. • 04/04/2024 12:30:00 PM
- InterDigital to Showcase Innovations in High Definition and Sustainable Video Streaming Alongside Partners at NAB 2024 • GlobeNewswire Inc. • 03/26/2024 08:00:00 AM
- InterDigital Declares Regular Quarterly Cash Dividend • GlobeNewswire Inc. • 03/20/2024 08:30:00 PM
- InterDigital’s Xiaofei Wang Appointed Chair of the IEEE 802.11 Artificial Intelligence and Machine Learning (AIML) Standing Committee • GlobeNewswire Inc. • 03/20/2024 08:00:00 AM
- Interdigital to Speak at the 36th Annual Roth Conference • GlobeNewswire Inc. • 03/11/2024 12:30:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/06/2024 09:58:21 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 03/05/2024 09:03:32 PM
- InterDigital’s Atle Monrad Elected Chair of 3GPP’s SA6 Working Group • GlobeNewswire Inc. • 03/05/2024 09:00:00 AM
- InterDigital Honors Wireless and Video Innovation Leaders Michael Starsinic and Fabrice Le Léannec as Inventors of the Year • GlobeNewswire Inc. • 02/22/2024 09:30:00 PM
- Keysight and InterDigital to Demonstrate AI in 6G Systems at Mobile World Congress 2024 • Business Wire • 02/21/2024 04:00:00 PM
- At MWC, InterDigital to Showcase Innovation Empowering Connected Experiences ‘At Work, At Rest, and At Play’ • GlobeNewswire Inc. • 02/19/2024 09:00:00 AM
- Form 10-K - Annual report [Section 13 and 15(d), not S-K Item 405] • Edgar (US Regulatory) • 02/15/2024 01:37:02 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 02/15/2024 01:33:18 PM
- InterDigital Reports Fourth Quarter and Full Year 2023 Financial Results • GlobeNewswire Inc. • 02/15/2024 01:30:36 PM
- U.S. Futures Edge Higher Ahead of Key Economic Data Release, Oil Prices See Modest Declines • IH Market News • 02/15/2024 11:35:32 AM
- InterDigital and Broadpeak Announce Collaboration on MPEG V3C Standardized Content Distribution At Scale • GlobeNewswire Inc. • 02/13/2024 09:00:00 AM
- InterDigital appoints Ken Kaskoun as Chief Growth Officer • GlobeNewswire Inc. • 02/12/2024 01:30:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/07/2024 01:43:10 PM
Avant Technologies Equipping AI-Managed Data Center with High Performance Computing Systems • AVAI • May 10, 2024 8:00 AM
VAYK Discloses Strategic Conversation on Potential Acquisition of $4 Million Home Service Business • VAYK • May 9, 2024 9:00 AM
Bantec's Howco Awarded $4.19 Million Dollar U.S. Department of Defense Contract • BANT • May 8, 2024 10:00 AM
Element79 Gold Corp Successfully Closes Maverick Springs Option Agreement • ELEM • May 8, 2024 9:05 AM
Kona Gold Beverages, Inc. Achieves April Revenues Exceeding $586,000 • KGKG • May 8, 2024 8:30 AM
Epazz plans to spin off Galaxy Batteries Inc. • EPAZ • May 8, 2024 7:05 AM