Often times parties will include a forum selection clause in a contract or operating agreement to govern the forum in which disputes between such parties must be brought. When a party to the contract files an action in a forum that was not stipulated to in the forum selection clause, would a second action filed by the opposing party in the proper forum be dismissible under the McWane doctrine?
The Court of Chancery recently addressed this issue in the case ironically styled as McWane, Inc., et al. v. Lanier, III, C.A. No. 9488-VCP (Del. Ch. Jan. 30, 2015). In this opinion, the Court examined the applicability of the McWane doctrine when the “first-filed” action did not adhere to the forum selection clause, i.e. it was filed in an improper forum.
Vice Chancellor Parsons held that defendants could not move to dismiss the lawsuit based upon the fact that the first filed suit initiated by Lanier, III, filed in Alabama was filed in an improper forum. In so ruling, the Court stated:
Another situation in which the McWane doctrine is not controlling is when the parties displace it by contract. Forum selection clauses are presumptively valid in Delaware and [case law] holds that such a clause displaces the traditional default presumptions under McWane.
Slip op. at 26 (internal quotations and citations omitted).
Accordingly, the Court found denied defendants’ motion to stay or dismiss the action in favor of the first filed Alabama proceeding. The McWane plaintiffs survived dismissal of their Delaware action notwithstanding the McWane doctrine.
If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.