17 F. Supp. 3d 418
D. Del.2014Background
- Respler, Magnum Hunter shareholder, filed a derivative action alleging fiduciary breaches and related claims against Magnum Hunter insiders.
- Magnum Hunter is a Delaware corporation with Texas-office facts; court has 28 U.S.C. § 1332 jurisdiction.
- Texas action Vitellone v. Evans et al. (2013) dismissed by SD Texas; concerns same facts and defendants.
- Texas action involved breach of fiduciary duties and waste; Respler’s complaint mirrors in part the Texas pleading.
- Texas court discussed close ties between GreenHunter, Evans, and Ormand; issue of pre-suit demand
- This court applies Texas collateral estoppel under federal common law and full faith and credit principles to bar relitigation
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars relitigation | Respler relies on Texas result that facts were litigated and essential | Vitellone’s preclusion should apply to Respler as shareholder derivative context | Collateral estoppel applies to bar Relitigation |
| Whether pre-suit demand requirements were satisfied | Respler contends pleading suffices under Delaware principles | Vitellone findings show failure to make pre-suit demand | Pre-suit demand failure barred relief; collateral estoppel upheld |
| Whether the case should be dismissed or transferred | Transfer should not be moot because of merits | Dismissal warranted by collateral estoppel; transfer moot | Dismissal granted on collateral estoppel grounds; transfer motion moot |
Key Cases Cited
- Pyott v. La. Mun. Police Emps.' Ret. Sys., 74 A.3d 612 (Del. 2013) (applies full faith and credit to out-of-state judgments)
- Tex. Dep’t of Public Safety v. Petta, 44 S.W.3d 575 (Tex. 2001) (elements of collateral estoppel)
- John G. & Marie Stella Kenedy Mem’l Found. v. Dewhurst, 90 S.W.3d 268 (Tex. 2002) (essential elements for collateral estoppel)
- In re Sonus Networks, Inc. S'holder Deriv. Litig., 499 F.3d 47 (1st Cir. 2007) (derivative suits bind corporation in subsequent actions)
- Scattered Corp. v. Chi Stock Exch., Inc., 701 A.2d 70 (Del. 1997) (no conflict of interest in derivative actions representations)
- In re Zoran Corp. Deriv. Litig., 511 F. Supp. 2d 986 (N.D. Cal. 2007) (repackaging of fiduciary duty claims as abuse of control)
- Clark v. Lacy, 376 F.3d 682 (7th Cir. 2004) (abuse of control premised on fiduciary breach)