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8 In holding that the derivative claims should go for- ward, Molycorp rejected the argument that a stay would favor the interests of comity and judicial economy. However, the court did not substantially engage with the consideration set forth in Massey, Brenner, and South, of whether the prosecution of the derivative claims at the same time as the securities claims may conflict with the corporation’s defense in the securities action – for instance, by potentially leading to adverse findings of fact regarding the defendants’ knowledge and state of mind regarding the disputed transactions.75 Thus, while Molycorp may suggest possible arguments against a stay, the case should not be read broadly, since in many instances, a stay will remain appropriate because derivative actions and parallel proceedings, de- spite alleging differing legal theories, will still present practical and strategic difficulties for corporations fac- ing simultaneous parallel litigation. Other courts have recognized the potential for simi- larity between securities actions and derivative cases that allege differing legal theories but which arise out of the same underlying conduct. For example, Groupon involved the simultaneous prosecution of a federal se- curities action and a derivative claim alleging breach of fiduciary duty. The Groupon court noted that, while the 75 Id. at n.3 (noting that competing derivative actions filed in Colorado state court had been stayed, and actions filed in Colorado federal court had been dismissed without prejudice in favor of the Delaware action, though the dismissal was re- versed and remanded for further consideration of an issue that had been briefed but upon which the federal court had not yet ruled). legal claims of the two actions were distinct, the under- lying issues were similar. In fact, the court noted that ‘‘these alternate theories are merely two sides of the same coin, and courts have regularly stayed one action in favor of the other despite the different nature of the claims.’’76 V. Conclusion Corporations named as nominal defendants in share- holder derivative actions are often simultaneously sub- ject to parallel proceedings based on the same underly- ing facts. The concurrent filing of a shareholder deriva- tive suit alongside a pending legal proceeding can present important practical and strategic consider- ations for a corporation. Courts have generally recog- nized these difficulties and have often stayed derivative suits until the parallel proceeding has concluded. The practice of staying derivative suits in this context pre- serves the resources of courts as well as all parties and prevents companies from being forced to take a posi- tion adverse to themselves in litigation. Although the re- cent Molycorp decision may appear to cast uncertainty on this framework, the prior precedent of the Delaware Chancery Court and other courts has recognized that certain of the aforementioned considerations will still weigh in favor of a stay even where a derivative action is premised on a different theory of liability than the parallel litigation. 76 In re Groupon Derivative Litig., 882 F. Supp. 2d 1043, 1051 (N.D. Ill. 2012) (listing several cases falling under this de- scription). 8-25-14 COPYRIGHT 2014 BY THE BUREAU OF NATIONAL AFFAIRS, INC. SRLR ISSN 0037-0665PDF Image | Securities Regulation and Law Report
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