Wachovia Update: NY Dismissal Not a Harbinger for NC Litigation

Fervent followers of the Business Court may remember the case of Wachovia Bank, N.A. v. Harbinger Capital Partners Master Fund I, L.P., which this blog has discussed before.  Just over two years ago, Wachovia preemptively sued certain defendants whom it accused of trafficking in litigation and obtained an anti-lawsuit injunction against the defendants.  After designation as a Rule 2.1 case, Judge Diaz modified the injunction and stayed the Business Court lawsuit in favor of pending litigation before the Southern District of New York.

Over the two intervening years, three new developments occurred:  the S.D.N.Y. dismissed the lawsuit before it in August 2008, on the grounds that the federal claim was premature and that the court declined to exercise supplemental jurisdiction over the state law claims; some of the New York plaintiffs (but not those that were North Carolina defendants) filed a new lawsuit asserting the state law claims before the New York Supreme Court; and the North Carolina Court of Appeals affirmed Judge Diaz's injunction modification and stay order.

Given those developments, the North Carolina defendants asked Judge Diaz to modify the injunction so as to permit them to join as plaintiffs in the New York Supreme Court action, and Wachovia asked Judge Diaz to lift the stay so that it could pursue its case in North Carolina.  In a March 15 order, Judge Diaz re-adopted all of the findings of fact from his original order and further found that "(1) the NY State Action is better able to arrive at a more comprehensive resolution of the dispute in this case, given the broader scope of claims and parties before it, and (2) judicial economy counsels again in favor of litigation in New York."  As a result, he granted Defendants' motion to modify the injunction and denied Wachovia's request to lift the stay.  He also denied Wachovia's motion to hold certain defendants in contempt for asserting a RICO claim in the S.D.N.Y. lawsuit, holding that the original injunction did not prohibit the assertion of claims arising under federal law.

 

 

This Empire State Building photo is from jorbasa's photostream on Flickr, some rights reserved.

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