About This Blog
The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings. Brought to you by Ashby & Geddes, P.A.
Judges and Courts
- Delaware Court of Chancery
- Delaware District Court
- Delaware Supreme Court
- Judge Brendan L. Shannon
- Judge Christopher S. Sontchi
- Judge Kevin Gross
- Judge Kevin J. Carey
- Judge Laurie Selber Silverstein
- Judge Mary F. Walrath
- Judge Peter J. Walsh
- Third Circuit Court of Appeals
- United States Supreme Court
- Delaware District Court Disagrees with Bankruptcy Court’s Ruling and Holds That Committee’s Challenge Rights Survived Entry of the Sale Order and Consummation of Sale
- “Straddling the Line”: Delaware Bankruptcy Court Rules That Not All Tax Liabilities Incurred During a Debtor’s Petition Year are Eligible for Administrative Expense Priority
- Insider’s Scoop: Judge Silverstein Imposes Heightened Standard Regarding Appointment of Future Claims Representative
For more information
Delaware District Court Transfers Declaratory Relief Action Based on the Anticipatory Filing Exception to the First Filing Rule
Flintkote Co. v. Aviva P.L.C., No. 13-103-LPS, 2015 WL 1405922 (D. Del. Mar. 25, 2015)
This Memorandum Opinion stems from a Third Circuit reversal of a Delaware District Court ruling that granted a motion to compel arbitration and dismissed as moot a motion to dismiss or, in the alternative, to transfer filed by Defendant Aviva P.L.C. (“Aviva”). Because the Third Circuit vacated the Order denying the motion to transfer as moot, Aviva renewed its motion. Such renewed motion is the subject of this Memorandum Opinion. In granting the relief requested, Chief Judge Stark ruled that the anticipatory filing exception to the first filing rule applied to the facts of this case and transferred venue from District of Delaware to the District of Northern California.
On December 24, 2012, Aviva moved for relief from the automatic stay in order to file a suit for declaratory relief in the Northern District of California. While that motion was pending, Flintkote Company and related entities (“Flintkote”) filed an identical suit for declaratory relief in the District of Delaware. Aviva responded by filing a motion to dismiss or, in the alternative, transfer venue to the Northern District of California.
Generally, the first filing rule provides that “[i]n all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it.” Op. at *2 (internal quotation omitted). The doctrine’s purpose is to “encourage sound judicial administration” and “promote comity among federal courts of equal rank.” Id. However, “if a litigant’s behavior demonstrates extraordinary circumstances, inequitable conduct, bad faith, or forum shopping[,]” the Court may deviate from the rule. Id. (internal quotation omitted). Anticipatory filing is an example of forum shopping where “the first-filing party institute[s] suit in one forum in anticipation of the opposing party’s imminent suit in another, less favorable, forum.” Id.
As our regular readers might recall, the first filing rule was recently examined by Judge Gross in the involuntary chapter 11 proceeding of Caesars Entertainment Operating Company, Inc. (“CEOC”), which was commenced by unhappy noteholders shortly before CEOC’s voluntary chapter 11 proceeding in the Northern District of Illinois. After an expedited trial, Judge Gross ruled that the Delaware involuntary proceeding was an anticipatory filing and that the proceeding should proceed in Illinois. A more in-depth examination of that decision may be found here.
Similar to the CEOC decision, in Flintkote the Court did not apply the first filing rule for two reasons. First, Flintkote filed for declaratory relief one week before Aviva’s motion for relief from the automatic stay would have been heard by the bankruptcy court, thereby using the automatic stay as a sword to avoid suit in California. Second, the Court found that Flintkote filed in Delaware with the express purpose of avoiding unfavorable California law. Flintkote argued that Delaware became the more convenient forum when the bankruptcy petition and the underlying dispute with Aviva were filed in Delaware, but the Court noted that Flintkote had already filed post-petition a different action against Aviva in California. Under the totality of the circumstances, the Court determined that Flintkote’s actions constituted impermissible forum shopping as opposed to Aviva’s permissible logical decision to file in a district where the opposing party was headquartered and the parties previously litigated.
Ultimately, the timing of Flintkote’s filing (immediately after knowledge of Aviva’s intent to file in California) and its motivation to avoid adverse California case law constituted an anticipatory filing, and the Court held that the first filing rule should not apply. Therefore, the Court granted Aviva’s motion to transfer.