Delaware Update: Derivative Claims Dismissed Elsewhere Cannot Be Relitigated In Delaware

Last June, the Delaware Court of Chancery ruled that a shareholder derivative suit could be litigated in Delaware even after an identical claim had been dismissed with prejudice by a federal court in California. As we reported at the time,¹ that decision suggested that Delaware corporations might not be able to achieve finality in Delaware following an out-of-state dismissal of a derivative case.

On April 4, 2013, the Delaware Supreme Court reversed the Chancery Court's decision.² Citing the "strong[ ] national interests that all state and federal courts have in respecting each other's judgments," the high court held that once a derivative claim has been dismissed in a sister jurisdiction, the identical claim cannot be relitigated in Delaware if it would be barred under the rules of the other jurisdiction. The Supreme Court's ruling provides added assurance that once a company has achieved a complete win in derivative litigation, its victory cannot be undone by