While not adhering to the first-to-file rule, Delaware courts have long recognized that a stay of an action in favor of another action may be appropriate in the interests of comity and judicial efficiency when there is identity of the parties and issues in the two actions. The Court of Chancery has frequently stayed derivative actions (in favor of federal securities fraud actions) where the derivative action simultaneously seeks to prosecute fiduciary-duty claims based on similar facts and claims for misrepresentations and insider trading, or seeks indemnification from the directors based on a company’s potential liability in the federal securities action.
In these circumstances, the court has recognized a company may be unfairly prejudiced if forced to adopt conflicting positions and litigation strategies where the company is simultaneously a defendant in the federal securities action and a nominal plaintiff in the stockholder derivative action. Indeed, a company faces an inherent litigation conflict if forced to simultaneously defend against allegations that the directors and the company lacked knowledge of purported wrongdoing in a federal securities action while at the same time, a stockholder asserts derivative claims, on behalf of the same company, against the directors, alleging that they had knowledge of the wrongdoing.
