## Facts

- General Motors Corporation (GM) is a Delaware corporation with its principal place of business in Michigan.
- In 1984, GM acquired Electronic Data Systems Corporation (EDS) for about $2.5 billion; H. Ross Perot became GM’s largest individual shareholder and a GM director.
- In 1986, GM and Perot’s relationship deteriorated due to disagreements over corporate strategy and performance.
- On November 30, 1986, GM agreed to repurchase Perot’s GM stock and related securities for about $750 million, allegedly at a substantial premium.
- Perot resigned as EDS chairman and as a GM director and agreed to covenants including a five-year commitment not to publicly criticize GM’s management and not to attempt to gain control of GM, backed by a financial penalty for breach.
- A Texas shareholder filed a New York derivative action (and purported class claims) alleging the GM directors wasted corporate assets and breached fiduciary duties by paying a premium to remove and silence Perot; Perot was alleged to have breached fiduciary duties by extracting personal benefits tied to corporate positions.
- Similar derivative actions challenging the same transaction were already pending in the Delaware Court of Chancery and in federal courts.
- Defendants moved to dismiss the New York action, including on forum non conveniens grounds; the trial court denied dismissal, and defendants appealed.

## Issues

1. Whether New York should dismiss, on forum non conveniens grounds, a shareholder derivative action concerning the internal affairs of a Delaware corporation when parallel actions over the same transaction are pending in Delaware and federal courts.
2. Whether internal corporate governance claims concerning director fiduciary duties should be litigated and governed primarily under the law and forum of the state of incorporation rather than being evaluated under varying state public-policy standards.

## Decision

- The Appellate Division reversed the trial court’s order.
- The court dismissed the New York action on forum non conveniens grounds.
- The court reasoned that the claims centered on internal corporate governance of a Delaware corporation and implicated the need for uniform application of one body of law.
- The existence of parallel Delaware (and related federal) litigation over the same transaction supported dismissal to avoid duplicative proceedings and inconsistent outcomes.
- Delaware’s interest in applying its corporate law and providing an experienced forum for fiduciary duty disputes weighed strongly in favor of dismissal.

## Legal Principles

- Under CPLR 327, New York courts may dismiss an action when, considering parties’ residences, location of evidence and witnesses, applicable law, and related pending litigation, New York is an inconvenient forum compared to an available alternative.
- Claims alleging breach of directors’ fiduciary duties and corporate waste are internal affairs matters ordinarily governed by the law of the state of incorporation.
- A state’s generalized public-policy interest in regulating corporations doing business within its borders does not justify subjecting a single board’s internal governance decisions to multiple, potentially conflicting state standards.
- Where substantially similar derivative litigation is already proceeding in the incorporation state, dismissal may be warranted to conserve resources and reduce the risk of inconsistent adjudications.

## Conclusion

The court held that a New York forum was inappropriate for a derivative challenge to a Delaware corporation’s internal governance decisions when Delaware law would control and parallel actions were already pending, and it therefore dismissed the case on forum non conveniens grounds.


Hart v. Gen. Motors Corp., 129 A.D.2d 179, 517 N.Y.S.2d 490 (N.Y. App. Div. 1st Dep’t 1987)