PENNSYLVANIA RECORD

The Pennsylvania Supreme Court has refused to reexamine a Philadelphia

judge’s decision that sent to Delaware a contract dispute between the owners of the Philadelphia Inquirer, the Daily News and the website Philly.com

In a March 21 per curiam order, the high court denied an emergency application for extraordinary relief that had been filed by H.F. “Gerry” Lenfest and Lewis Katz, two owners of the media company who have been feuding with a faction led by co-owner George Norcross.

Unresolvable differences led to the decision to dissolve and sell the company, but there was discrepancy with regard to how that would unfold; Norcross and his group seek a private auction while Katz and Lenfest are seeking a sealed-bid public action.

Venue also presented an issue, with Norcross seeking to have the sale supervised by the courts in the State of Delaware, which is where IGM was incorporated, and Lenfest and Katz looking to have the auction overseen by a Pennsylvania judge, since the media operates in Philadelphia.

In February, Philadelphia Common Pleas Court Judge Patricia McInerney decided that the case would be best left to the Delaware Court of Chancery.

Katz and Lenfest subsequently filed their emergency petition with the Pennsylvania Supreme Court seeking intervention.

The high court’s per curiam order last week was not accompanied by a full opinion, although Chief Justice Ronald Castille filed a four-page dissent outlining his reasons for going against the majority.

Castille was joined in his dissent by fellow Justice Correale Stevens.

In the dissent, Castille wrote that he believes the application raises an issue of first impression regarding whether the jurisdiction of Delaware courts is exclusive relative to dissolution proceedings for a Delaware limited liability company despite the fact that company documents don’t identify Delaware as the exclusive jurisdiction to resolve these types of disputes, and despite the fact that the matter involves the sale of a company whose operations, offices and assets are all located in Pennsylvania.

“It is undisputed that the Philadelphia Court of Common Pleas has personal jurisdiction over the parties, that the parties agree that IGM should be dissolved, and that petitioners selected the host state as their forum of choice for dissolution proceedings,” Castille wrote.

The chief justice also noted that the dissolution proceedings were filed by Katz and Lenfest in Philadelphia one day before similar proceedings were filed by the rival faction in Delaware.

In his dissent, Castille noted that McInerney, the Philadelphia trial judge, erred in interpreting Delaware’s statute regarding the authority of the Court of Chancery over dissolution matters such as this one as conferring “exclusive” subject matter jurisdiction upon the Delaware courts.

“In my view, petitioners have made a more than colorable showing that the provision [in the LLC agreement] does not purport to vest exclusive jurisdiction in the Delaware courts as against any other proper form, such as the Pennsylvania courts, but instead simply confers upon the Delaware Court of Chancery discretionary authority to decree dissolution of an LLC in appropriate circumstances.”

Castille stated that he has “strong reservations” against accepting the notion that a Delaware statute that speaks to the discretionary power of the Court of Chancery to order dissolution operates to deny Pennsylvania the power to render justice in a case that was properly brought within its borders.

“It would be one thing if the trial court dismissed the matter in an exercise of discretion, or for some other prudential reason founded in law; but dismissal based upon a misapprehension of Pennsylvania’s judicial power is quite another matter,” Castille wrote. “In my respectful view, this is the sort of issue warranting exercise of the Court’s extraordinary jurisdiction.

“In my view,” Castille continued, “the trial court’s broad holding that Pennsylvania courts lack subject matter jurisdiction to adjudicate the dissolution and liquidation of a foreign LLC whose operations, offices, and assets are all in Pennsylvania, and which operates the main media in Pennsylvania’s largest city, is of immediate public importance such that this Court should exercise plenary review.”