Chancery Court in Brookstone Underscores Primacy of Comity and Efficiency

InBrookstone Partners Acquisition XVI v. Tanus , C.A. No. 7533-VCN, (Del. Ch. Nov. 20, 2012), Vice Chancellor John W. Noble, on the defendants’ motion and citing the long-standingMcWane doctrine, stayed a later-filed Chancery Court action in favor of a first-filed Texas proceeding. In concluding that principles of comity and judicial efficiency favored a stay, the court reaffirmed a long line of cases that have inexorably prioritized first-filed actions in other jurisdictions in order to prevent duplication of efforts and potentially conflicting results. In addition, the court left its own mark on theMcWane framework, making clear that application of that doctrine is appropriate even where one of the parties may have engaged in defensive forum shopping.

Brookstone is a member of Woodcrafters Home Products Holding LLC, a Delaware limited liability company governed by a six-person board of managers. Brookstone designates two of the company’s managers, with the remaining four designated by entities controlled by defendant Abraham Tanus. Tanus is an officer of the company and is also the chief executive officer of Woodcrafters Home Products LLC, which is fully owned by the company. On May 1, following Tanus’ acquisition of two important suppliers to the company, Tanus sued Brookstone and other parties in a Hidalgo County, Texas, district court, seeking a declaratory judgment that he did not breach his employment agreement with the company or Woodcrafters’ amended and restated limited liability company agreement in connection with acquiring one of the suppliers, Design Imaging. Brookstone, in turn, brought suit May 15 in the Delaware Court of Chancery, essentially alleging that Tanus had breached his employment agreement, the LLC agreement and his fiduciary duties by acquiring the two suppliers "without providing sufficient information to the board to consider these acquisitions," and by taking other steps to devalue the company and, correspondingly, Brookstone’s option to sell it after February 2013, for which entities controlled by Tanus have a right of first refusal.