IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

RITCHIE MULTI-STRATEGY
GLOBAL, LLC, f/k/a/ CAPITAL, LLC,

Plaintiff,
C.A. NO. N18C-05-050 MMJ CCLD

V.

HUIZENGA MANAGERS FUND, LLC,

Defendant.

Submitted: December 17, 2018
Decided: January 15, 2019

On Defendant’s Motion to Dismiss the Amended Complaint
GRANTED IN PART.

MEMORANDUM OPINION

John A. Sensing, Esq. (Argued), Ryan C. Cicoski, Esq., Attorneys for Plaintiff

Steven L. Caponi, Esq., Matthew B. Goeller, Esq., K&L Gates, LLP, Christopher J.
Barber, Esq. (Argued), Williams Montgomery & John Ltd., Attorneys for Defendant

JOHNSTON, J.

FACTUAL AND PROCEDURAL CONTEXT
This case is one of nine actions brought by either the Defendant or an entity

related to the Plaintiff. Two cases Were flled in Cook County, Illinois, one case in

1

DuPage County, Illinois, one case in Madison County, Illinois, one case in St.
Clair County, Illinois, three cases in Delaware Superior Court, and one action in
the Delaware Court of Chancery. The first two cases Were brought by Huizenga
Managers Fund, LLC in Cook County. The subsequent cases Were filed by various
Ritchie entities. All of the pending Illinois cases have been transferred to Cook
County.

The 2007 Illinois suit arose from a dispute over the sale of securities.
Huizenga Managers Fund, LLC (“Huizenga”) is a hedge fund. Ritchie Multi-
Strategy Global (“Ritchie”) made two sales of securities to Huizenga through a
Subscription Agreement. Huizenga brought suit against Ritchie in the Cook
County Circuit Court in Illinois, alleging violations of the Delaware Securities Act
(“DSA”). After a twenty-siX-day trial, the Cook County court entered judgment in
favor of Huizenga in regard to one of the two sales. On appeal, the Illinois Court
of Appeals affirmed that judgment and granted Huizenga’s cross-appeal for
recovery relating to the other sale as Well. The trial court entered a second
judgment On November 9, 2017, Ritchie filed a notice of appeal of the second
judgment.

Huizenga’s second pending Cook County action asserts claims for fraud,

conspiracy and fraudulent transfer in connection With the judgments

A Ritchie entity filed the first Delaware action in this Court,l seeking
indemnification from Huizenga. By Opinion dated December 21, 2017, this Court
stayed in favor of the Illinois litigation.2

The Madison County Illinois case Was filed by “John Doe” against
Huizenga, alleging disclosure of confidential information and seeking injunctive
relief`. The next Illinois action originally Was filed in St. Clair County, also seeking
injunctive relief on the basis of disclosure of confidential information. The St.
Clair County judge transferred that case to Cook County.

A Ritchie entity filed suit in the Delaware Court of Chancery3 alleging
disclosure of confidential information and seeking injunctive relief. A motion to
dismiss is pending.

This action is the second Delaware Superior Court Case. A Ritchie entity
alleges breach of contract on the grounds that Huizenga pursued judgments in the
lllinois litigation, and disclosed confidential information in the course of the

judgment collection proceedings

 

lN17C-05-598 MMJ CCLD.
2 Ritchie v. Huizenga Managers Fund, LLC, 2017 WL 7803924 (Del. Super.).
3 C.A. No. 2018-0196-SG.

3

The latest DuPage County, Illinois action filed by a Ritchie entity alleged
that Huizenga disclosed confidential information and made disparaging comments
in breach of contract. Plaintiff s motion to voluntarily dismiss Was granted.

The pending DuPage County appeal Was dismissed by Order dated
December 21, 2018.

In the third case in Delaware Superior Court,4 a Ritchie entity requests
indemnification in connection With the Illinois judgments. Defendant’s motion to
dismiss or stay is in the briefing stage.

Pending before the Court at this time is Huizenga’s Motion to Dismiss the
Amended Complaint. Huizenga Managers Fund, LLC (“Huizenga”) contends that:
venue in Delaware is improper and the Mc Wane factors favor two prior actions in
Cook County, Illinois; this Court lacks jurisdiction over the claims of Ritchie
Multi-Strategy Global, LLC (“Ritchie”); and Ritchie has failed to state a claim

upon Which relief may be granted.

STANDARD OF REVIEW

Rule l2(b)(3) governs a motion to dismiss or stay on the basis of improper

venue. In Mc Wane Cast Iron Pz`pe Corp. v. McDowell- Wellman Engineerz`ng C0. ,5

 

4 Ni 8C-08-246 MMJ CCLD.
5 263 A.2d 281 (Del. 1970).

the Delaware Supreme Court prescribed a three-part test Delaware courts must
consider When deciding Whether to stay or dismiss an action: “(l) is there a prior
action pending elsewhere; (2) in a court capable of doing prompt and complete
justice; (3) involving the same parties and the same issues?”6 If those three factors
are satisfied, “Mc Wane and its progeny establish a strong preference for the
litigation of a dispute in the forum in Which the first action Was filed.”7 “[T]hese
concepts are impelled by considerations of comity and the necessities of an orderly
and efficient administration of justice.”8

When reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court
must determine Whether the claimant “may recover under any reasonably
conceivable set of circumstances susceptible of proof`.”9 The Court must accept as
true all non-conclusory, Well-plead allegations10 Every reasonable factual

inference Will be drawn in favor of the non-moving party.ll If the claimant may

recover under that standard of revieW, the Court must deny the motion to dismiss.12

 

6 LG Electronics, Inc. v. lnterdigital Communications, lnc., 114 A.3d 1246, 1252 (Del. 2015)
(citing McWane)).

7 Ia’. (internal quotations omitted).

8 McWane, 263 A.2d at 283.

9 Spence v. Funk, 396 A.2d 967, 968 (Del.1978).

10 Id.

ll Wilmington Sav. Fund, Soc ’y, F.S.B. v. Anderson, 2009 WL 597268, at *2 (Del. Super.) (citing
DO€ v. Cahl'll, 884 A.2d 45], 458 (Del.ZOOS)).

12 Spence, 396 A.2d at 968.

ANALYSIS
First Delaware Superior Court Action
Stayed Under McWane

In the first Delaware Superior Court action, this Court granted in part
Huizenga’s motion to Dismiss or Stay.13 This Court found that the action in
Illinois filed in 2007 is a prior action involving the same parties.

Ritchie argued that the prior action is “effectively resolved.” Ritchie urged
the Court not to consider: a remaining Writ of certiorari to the United States
Supreme Court; and the determination of attorneys’ fees and prejudgment interest,
significant enough to Warrant pending status under Mc Wane.

HoWever, on November 9, 2017,14 Ritchie filed Notices of Appeal
challenging the entry of the second judgment That judgment therefore Was not
final.15 Ritchie Was free to make its indemnification argument on appeal, raising
the possibility of conflicting rulings between this Court and the Illinois Court_one
of “the precise problems Mc Wane strives to eliminate.”16 This Court found that the

2007 Illinois action remained pending for Mc Wane purposes

 

13 Ritchie v. Huizenga Managers Fund, LLC, 2017 WL 7803924, at *4.
14 Two days after oral argument on this pending motion.
15 See Walsh v. Union Oil C0. of Calz'fornia, 268 N.E.2d 706, 712 (stating that a judgment
becomes final after the denial of appeal).
'6 Choice Hotels Intern., Inc. v. Columbus-Hunt Park DR. BNK Investors, LLC, 2009 WL
3335332, at *8 (Del. Ch.).

6

This Court also found that the second Mc Wane factor had been met. The
pending prior action was before a court with the capacity to hear it. As a court of
general jurisdiction,17 the Circuit Court of Cook County, lllinois is capable of
“doing prompt and complete justice.”18 “[T]he full faith and credit clause of the
Constitution precludes any inquiry into the merits of the cause of action, the logic
or consistency of the decision, or the validity of the legal principles on which the
judgment is based.”19 Allowing this claim for indemnification to proceed in the
forum in which the underlying action has been litigated for ten years allows for
prompt justice, in line with “the general policy embedded in the Mc Wane doctrine
that all related claims should be heard in the court in which an action is first

brought.”zo

“Mc Wcme does ‘not require that the parties and issues in both actions be
identical Substantial or functional identity is sufficient.”’21 To determine whether

issues are sufficiently identical for Mc Wane purposes, courts ask whether “the

 

17 Ill. Const., art. 6, § 9.

'8 McWane, 263 A.2d at 283.

19 V.L. V. E.L., 136 S. Ct. 1017, 1020 (2016).

20 See Fuisz v. Biovail Techs., Ltd., 2000 WL 1277369, at *1 (Del. Ch.).

21 LG Electronics, lnc. v. lnterDigital communications lnc., 98 A.3d 135, 146 (Del. Ch.)

(quoting AT&T Corp. v. Prime Security Distribs., Inc., 1996 WL 633300, at *2 (Del. Ch.)).
7

events underlying all the claims arose out of a common nucleus of operative

facts.”22

The events underlying the first Delaware action are substantially identical to
the pending lllinois action. Ritchie is seeking relief based on the contract that
facilitated the sales involved in the Illinois action. Both cases arise out of the same
sales of securities between the same parties. Therefore, both actions involve the
same issues under Mc Wane. Indemnification could have been brought in the
Illinois action as a matter of lllinois procedure and would not have been prohibited
by Delaware substantive law. As a practical matter, the indemnification sought by
Ritchie is a pending contractual setoff that should have been brought in the prior
pending case.

This Court concluded that there is a prior action, pending before a court
capable of doing prompt and complete justice, between the same parties, and
involving the same issues. Therefore, the case must be stayed until the prior action
is final. At that point, the Court can rule on Huizenga’s argument that the case

should be dismissed under Rule l2(b)(6).

 

22 Kennedy v. Barboza, 2016 WL 6276903, at *5 (Del. Super.).
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McWane F actors Favor a Stay in T his Case

Ritchie argues that the subject of this case is “purely contractual.” The
specific allegations in this Complaint seek relief for Huizenga’s alleged breaches
of its contractual obligations to indemnify Ritchie and to keep business information
confidential. Ritchie further states that certain amendments to the Operating
Agreement are presumptively valid and support venue in Delaware. The validity
of the amendments (also referred to as “Resolutions” or “Consents”) was raised in
the action first filed in St. Clair County and transferred to Cook County.

lt cannot be disputed that the original action involving the basic disputes
among the parties was filed in Illinois. At this juncture, there are multiple cases
pending in Cook County, Illinois. Even though the Ritchie entities in certain
actions are legally distinct, the Plaintiff in this case has not disputed that all of the
Ritchie entities are related. Although the claims in the various actions may have
been styled to assert different theories for relief, all claims are based on the same
operative facts. The contracts at issue appear to involve identical or similar
language defining the rights and obligations of the parties. lf all of the cases had
been brought in Delaware in the first instance, it is likely that the cases would have

been consolidated _ at the very least for purposes of case management

For the same reasons set forth in this Court’s December 21, 2017 Opinion,

the Mc Wane factors weigh in favor of staying this case.

CONCLUSION
Defendant’s Motion to Dismiss the Amended Complaint is hereby
GRANTED IN PART. The Court finds that there is at least one prior action
pending in Illinois, in a court capable of doing prompt and complete justice,
3

involving substantially the same parties and substantially the same issues.2

IT IS SO ORDERED.

  

 

norabl€Mary M. Johnston

 

23 See McWane, 263 A.2d at 283.

10

 

ill

