Arbitration Constitutes a First-Filed Action Under 'McWane' Doctrine

Delaware litigators are likely familiar with the teachings of McWane Cast Iron Pipe v. McDowell-Wellman Engineering, 263 A.2d 281, 283 (Del. 1970), which, in a nutshell, advise that a Delaware court will freely exercise its discretion to stay an action pending before it where there is a prior pending action “in a court capable of doing prompt and complete justice, involving the same parties and the same issues.” Customarily, the prior pending action has been litigation before a court in another state. The existence of a prior action in another state court is no longer the exclusive factual predicate upon which a Delaware court will stay its hand under McWane. That is because in LG Electronics v. InterDigital Communications, No. 475, 2014 (Del.), the Delaware Supreme Court affirmed the Court of Chancery’s 2014 decision dismissing a complaint in favor of a prior pending arbitration being litigated by the same parties. Whether the impact of this decision is limited to its unique facts or has a broader application remains to be seen.

In LG Electronics, 98 A.3d 135 (Del. Ch. 2014), the Court of Chancery addressed a complaint seeking declaratory and injunctive relief relating to a nondisclosure agreement executed by the parties. However, prior to LG Electronics Inc.’s initiation of the Court of Chancery action against InterDigital Communications Inc., InterDigital Technology Corp. and IPR Licensing Inc. (collectively, InterDigital), the parties were engaged in litigation in multiple forums. Those disputes included an arbitration arising from a wireless patent license agreement, which included a mandatory arbitration provision for claims arising from the license agreement. During the pendency of these actions, the parties executed a nondisclosure agreement that governed the circumstances under which settlement discussions between the parties could be disclosed (the NDA). The NDA contained a broad provision permitting the parties to enforce the terms of the NDA in “any court, agency, or tribunal having personal jurisdiction over the party in alleged breach of this agreement.”