Background
Plaintiff FirstString Research, Inc. entered into an agreement with defendant JSS Medical Research Inc. in which JSS would manage clinical studies for an investigational new drug that FirstString was developing. When one of those studies was delayed and ultimately terminated, FirstString filed an action against JSS in the Court of Chancery seeking specific performance of JSS’s obligation to cooperate with FirstString in winding down the study. FirstString also brought claims for breach of contract, replevin, and conversion. In response, JSS filed a “mirror-image” breach of contract action against FirstString in the Delaware Superior Court and demanded a jury trial.
JSS moved to transfer the Court of Chancery action to the Delaware Superior Court, claiming that FirstString’s specific performance claim was pretextual and insufficient to vest subject matter jurisdiction in the Court of Chancery. JSS also claimed that its constitutional right to a jury trial for FirstString’s three other causes of action made the transfer necessary.
Analysis
The court began its analysis of JSS’s motion to transfer by determining whether FirstString’s claim for specific performance was an adequate claim to confer subject matter jurisdiction under the Court of Chancery’s equitable jurisdiction. The court found that JSS had contractually agreed that cooperation in winding down a study was important to ensure subject safety, continuity or discontinuity of treatment, and compliance with local and national regulations. The court further found that JSS’s simply returning the data from the study under FirstString’s count for replevin might not be an adequate remedy because ongoing collaboration was essential for wind-down, and specific performance might be required to achieve full relief. Therefore, the court held that FirstString could obtain equitable relief in the form of specific performance. The court further held that exercise of jurisdiction over the entire action was appropriate under the equitable cleanup doctrine, allowing the court to consider FirstString’s legal claims in addition to the claims for specific performance.
The court next turned to JSS’s argument that it has a constitutional right to a jury trial and that that right necessitated a transfer of the action to the Delaware Superior Court. Relying on a prior ruling from the Court of Chancery, the court rejected this argument. The court relied on Acierno v. Goldstein, C.A. No. 20056, 2004 WL 1488673 (Del. Ch. June 25, 2004), which held that a litigant is not entitled to a jury trial in the Superior Court for claims that are within the subject matter jurisdiction of the Court of Chancery. The court explained how this settled principle of law evolved in Delaware, the United States, and England between the eighteenth and twentieth centuries and observed that “[t]he predominant view is that, with some exceptions …, the clean-up doctrine took precedence over any right to a jury trial on civil claims as of 1776.” FirstString Research, Inc., slip. op. 15. And because Delaware has continued to maintain separate law and equity courts, when a party properly states a claim in equity, it is “within the court’s discretion to exercise its ancillary jurisdiction over the remainder of FirstString’s claims under the cleanup doctrine.” Id., slip op. 23.
Key takeaways
The right to a jury is a basic principle in American law, but that right is not absolute. When a party has properly stated a claim for relief in equity in the Delaware Court of Chancery, the court has the discretion to exercise ancillary jurisdiction over legal claims under which a party would otherwise be entitled to a jury trial.
Client Alert 2021-211
