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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: April 6, 2020

Court Declines to Dismiss New York Action in Favor of First-Filed Delaware Action

On March 26, 2020, the First Department issued a decision in XL Specialty Ins. Co. v. Continental Cas. Co., 2020 NY Slip Op. 02116, affirmed a trial court’s refusal to dismiss an action in favor of an earlier-filed lawsuit in Delaware, explaining:

Supreme Court providently exercised its discretion in denying defendants’ motions to dismiss pursuant to CPLR 3211(a)(4) based on another action pending, or pursuant to CPLR 327 for forum non conveniens, or alternatively, to stay this action, which was filed a day before defendants-appellants commenced an action against plaintiffs in Delaware, seeking to litigate most, but not all, of the same issues. New York courts generally follow the first-in-time-rule, which instructs that the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of the rules of comity to interfere. However, chronology is not dispositive, especially, where, as here, this action at the early stages of litigation or filed in close proximity. Nevertheless, here New York has a more substantial nexus to the parties and the dispute, and this action is more comprehensive than the Delaware action.

Moreover, the fact that New York is the logical and proper place to go forward, negates any inference that this constitute preemptive litigation intended to deprive defendants of their chosen forum, and defendants-appellants offer no compelling reason why they should be entitled to their choice of forum. Defendants also bear some responsibility for the duplicative litigation, given that they commenced the Delaware action after learning that plaintiffs had commenced this action.

(Internal citations omitted).

Disputes regarding commercial contracts involving out-of-state parties end up being heard in New York courts. Even if the court has the power to assert jurisdiction of the parties, it can, under the forum non conveniens doctrine discussed above, dismiss the dispute so it can be heard in a forum that is more convenient for the parties. As this decision shows, however, the bar for dismissal on forum non conveniens grounds is a high one. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether New York is the appropriate forum in which a dispute should be heard.

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