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EuroCapital Advisors, LLC v. Colburn, C.A. No. 3035-VCN (Del. Ch. February 14, 2008) (V.C. Noble)

February 14, 2008

The Court of Chancery granted a motion to stay this proceeding in favor of a case pending in a California state court. The pending California action, as well as a dismissed California federal action, involved claims by Defendant Colburn that she was a member of EuroCapital Advisors, LLC, a Delaware limited liability company (“EuroCapital”), and that Plaintiff Mark Dyne, among others, misappropriated EuroCapital’s corporate opportunities and failed to share profits with her. EuroCapital and Dyne filed this case, seeking a declaration that Colburn is not a member of EuroCapital. Alternatively, they sought rescission of her membership based on misrepresentations allegedly made by Colburn. The parties’ only connection to the State of Delaware is the fact that EuroCapital was formed as a Delaware limited liability company and that Colburn alleged to be a member of EuroCapital. All parties were California residents and all business was transacted in California.

Exercising its discretion, the Chancery Court stayed the proceeding, finding that the California state case involved substantially similar parties and issues, that the California court was capable of determining the key contract issue as to whether Colburn was a member of EuroCapital, and that the California court was capable of providing prompt and complete justice. Even though the California state case was not filed before this proceeding commenced, the related federal action involved the same parties and issues and was filed first among these three proceedings. Also, despite the fact that the pending California action may involve important governance questions involving a Delaware limited liability company, the Chancery Court stated that such issues were framed as derivative aspects of Colburn’s claims in the California case and had not been raised in this proceeding. Finally, the Chancery Court did not reach the issue of personal jurisdiction over Colburn, but acknowledged in dicta the argument by the Plaintiffs that even though Colburn was not a “manager” within the definition of 6 Del. C. § 18-101(10), she was a member who “participate[d] materially in the management of the limited liability company” within the meaning of 6 Del. C. § 18-109(a)(ii) and therefore was subject to personal jurisdiction as a manager.

The full opinion is available here