Dias v. Purches, et al., C.A. No. 7199-VCG (Del. Ch. Mar. 5, 2012) (Glasscock, V.C.)

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In this memorandum opinion, the Court denied defendants’ motion to stay a putative class action in Delaware in favor of a prior-filed action in Florida state court. 

On December 23, 2011, Perfumania Holdings, Inc. announced an agreement to acquire Parlux Fragrances, Inc. (“Parlux”).  On January 5, 2012, a stockholder of Parlux filed a class action complaint in Florida state court seeking to enjoin the proposed takeover based upon allegations of inadequate disclosures and breaches of fiduciary duty (the “Florida Action”).  Two weeks later, a second Parlux stockholder moved to intervene in the Florida Action.  After the motion was denied, the second stockholder filed a separate complaint in Florida and moved to consolidate the two actions. 

On January 30, 2012, plaintiff filed a complaint in Delaware, based upon similar allegations, that also challenged the proposed takeover (the “Delaware Action”).   The Parlux defendants, relying on the McWane doctrine, moved to stay the Delaware Action in favor of the first-filed Florida Action.

The Court explained that under McWane, substantial weight should be given to the fact that a first-filed action exists in another jurisdiction.  When multiple suits are filed within a short time, however, the Court (i) will employ a test similar to that used in addressing motions on forum non conveniens grounds and (ii) will consider whether the complaint in the competing jurisdiction “is a better or fuller pleading.”   The Court found such a test appropriate given the “barely” first-filed nature of the Florida Action and the fact that the Florida complaint did not appear superior to the Delaware complaint.

Applying the forum non conveniens analysis, the Court rejected defendants’ argument that “significant” work had been done in the Florida Action.  While the Florida court had granted expedited discovery and denied an emergency motion to intervene, it had neither ruled on the motion to consolidate the two Florida cases nor appointed a lead plaintiff.  In Delaware, the Court had granted expedition, was considering the instant motion to stay, and discovery was at a stage similar to the Florida Action.  Accordingly, the Court determined that the Florida Action had not proceeded further than the Delaware Action.   The Court also rejected defendants’ argument that efficiency would be served by proceeding in Florida because of the same Florida court’s involvement in a separate case concerning Parlux and many of the individual defendants.  The Court reasoned that the unrelated derivative action, which likely involved different issues, would not serve as a primer for the Florida Action. 

For the foregoing reasons, and in light of Delaware’s strong interest in the behavior of fiduciaries for its corporate citizens, the Court held that a stay was not appropriate and denied defendants’ motion.

The full opinion is available here.

 

Published In: Business Organization Updates, Business Torts Updates, Civil Procedure Updates, Civil Remedies Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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