Delaware Business Litigation Report

Wilmington Trust Co. v. Tropicana Entertainment LLC, C.A. 3502-VCN (Del. Ch. February 29, 2008)

The Court of Chancery rarely interprets bond indentures; so in the spirit of the date of this decision, the Court did so here. What is particularly interesting about this case is the way the Court reasoned to the result. While focusing on the specific language of the indenture, the Court did not hesitate to apply that language to circumstances that probably were not considered by the drafters. In this very un-Justice Scalia way, the Court held the indenture was violated.

The lesson here is that the Court is very realistic about what language should mean in the business world. It will not be swayed by hyper-technical interpretations that are not what the drafters would have said had they focused on the circumstances at hand. This does not mean that the Court will stretch language beyond what it really means, however. Instead, a sort of middle ground of interpretation is the mark of Delaware law in this regard.

Millett v. Truelink, Inc., 2008 WL 345937 (D.Del. Feb. 7, 2008)

In this opinion the District Court granted the provider of a credit report monitoring service summary judgment on claims that it violated state consumer protection provisions and contractual obligations. Plaintiffs, who were spouses, had purchased a subscription to Defendant’s service, and alleged that Defendant failed to alert them to activity that resulted from theft of the husband’s social security number. Plaintiffs alleged that Defendant had violated Kansas’ Consumer Protection Act (“KCPA”) as well as breached the Credit Monitoring Member Agreement (“Member Agreement”) that Plaintiffs entered into when purchasing the service. Plaintiffs moved for class certification and summary judgment on their KCPA claims, and Defendant moved for summary judgment on the KCPA and several breach of contract claims. The Court found that neither the activity nor the advertising and marketing activities of Defendant were in violation of the KCPA provisions on unconscionable acts and practices, and Defendant was not in breach of the Member Agreement. 

Drexel v. Harleysville Ins. Co., 2008 WL 356938 (D.Del. Feb. 11, 2008)

Here the District Court evaluated a claim from an insured that a denial of coverage based on policy expiration constituted a breach of contract. The insured owned a property that sustained fire damage, and submitted a claim to Defendant, his insurer. The policy required annual renewal, but the insured did not submit the payment required for renewal until after both the policy expiration date and the subsequent grace period. However, the insured submitted his claim during the grace period, such that Defendant began to process the request and retain an adjuster and contractor. Defendant subsequently determined that the policy had expired prior to the insured’s claimed damages, and the insured had not submitted payment during the grace period. Defendant therefore denied coverage, and the insured sued on a theory of breach of contract, estoppel, and waiver. Defendant moved for summary judgment on all claims, while the insured moved for summary judgment on the breach claim. 

Mizel v. Xenonics, Inc., 2008 WL 116203 (Del. Super. Jan. 11, 2008).

This decision addresses the question of whether an expert can testify as to materiality under the securities laws. The moving party argued that materiality was an ultimate issue in this breach of contract action and thus could not be the subject of expert testimony, citing Hill v. Equitable Banks, 1987 WL 8953 (D. Del. 1987), a case in which the ultimate issue was whether certain alleged misrepresentations and omissions were material. 

The court, however, distinguished this case from Hill, finding that materiality was not the core question before the jury. The critical issue was whether the plaintiff, a warrant holder, was prevented from exercising his purchase rights—a fact the company denied completely.   

Pharmathene Inc. v. SIGA Technologies. Inc., C.A. No. 2627-VCP (January 16, 2008).

Whether an agreement to agree may be enforced seems like an odd question. After all, if the parties really had an agreement then why not just say so and not use a term sheet or other vague type of "agreement to agree" to express their intent. This decision illustrates just why that may occur because the parties apparently were uncertain if they really wanted to bind themselves to one another just yet. Nonetheless, they did list all the essential terms of what they wanted in their contract in a term sheet and when they seemed to have acted to carry out their deal, the court here indicated it will enforce an agreement to agree when to let one party walk away seems inequitable.

Delta Eta Corp. v. University of Delaware, 2007 WL 4578278 (Del. Super. Ct., Dec. 27, 2007).

This decision addresses a party’s ability to amend its answer, under Rule 15(a), when the 20-day period to amend as a matter of right has expired. The litigation arose when the University of Delaware terminated a lease it entered into with a fraternity to maintain a chapter house and then took title to the property, triggering a requirement under the agreement that it pay the fraternity the fair market value of the remainder of its leasehold interest.

In its answer, UD admitted that it owed the amount determined by a neutral appraiser to be the value of the interest. But when the fraternity moved for summary judgment, UD moved to amend its answer to deny that the amount was accurate. UD argued that it learned of severe mold damage to the chapter house that should have been taken into account in the valuation.

MAA Real Estate LLC v. Patel, C.A. No. 06C-02-249 (Del. Super. Ct. Dec. 7, 2007).

In this breach of contract action, there was no written agreement, only an unsigned pricing sheet prepared by the contractor making the repairs. The court had to determine whether the parties nonetheless mutually assented to any of the terms on the sheet or otherwise entered into an oral contract.

The court held that there was no mutual assent to the items on the pricing sheet, as it did not state the specific materials required to complete the renovation. The customer could only show that the contractor represented that he would install non-skid tile flooring. That created an oral contract. By failing to install non-skid tile, the contractor breached the agreement.

The measure of damages was the cost of replacement and repair for the proper flooring.

United Rentals Inc v. RAM Holdings Inc. C.A. No. 3360-CC (December 12 and 21, 2007). 

In these two decisions the Court of Chancery sets out how it will interpret a contract. Following the objective theory of contract interpretation, the court searches for the "common understanding" of the parties. It will not hear evidence of a party's subjective mental impressions or unilateral understandings.

However, the court will apply the "Forthright Negotiator Principle" when a contract is ambiguous. Under that approach, a reasonable interpretation of contract language of one of the parties will be binding on the other party to the contract if he knew or should have known of the other party's understanding and did not object to it when the contract was signed. Silence then may be fatal.

Appriva Shareholder Litig. Co., LLC v. EV3, Inc., -- A.2d --, 2007 WL 3208783 (Del. Nov. 1, 2007)

Deciding whether a motion to dismiss based on lack of standing is considered under Rule 12(b)(6) or 12(b)(1) has implications and has divided some courts. First, lack of subject matter jurisdiction under 12(b)(1) is non-waivable and can be raised by the court sua sponte, whereas failure to state a claim under 12(b)(6) must be raised by motion. Second, a 12(b)(6) motion for failure to state a claim may be converted to a motion for summary judgment, considering matters outside the pleadings, but a 12(b)(1) motion may not. In this consolidated appeal, the Supreme Court held that when the issue of standing is closely related to the merits, a motion to dismiss for lack of standing is properly considered under 12(b)(6) for failure to state a claim. 

Boerger v. Heiman, 2007 WL 3378667 (Del. Super. Oct. 31, 2007)

The three-year statute of limitations under 10 Del. C. § 8106, which begins to run at the time of the alleged breach in the case of a contract claim and at the time the injury occurs for a tort claim, may be tolled by, among other circumstances, the absence of observable factors that would place a layman on notice. This exception is called the date of discovery rule. When it applies, the statute of limitations begins to run when the defect is or should have been discovered.

In this legal malpractice action, the Superior Court held that the statute of limitations expired prior to the filing of the complaint and that it was not tolled because “multiple factors and plaintiff’s own statements indicate knowledge of the relevant facts which establish a potential claim . . . .” The plaintiff argued that the defendant attorneys fraudulently concealed his potential tax liability, but based on the evidence, the court concluded that the plaintiff should have discovered this fact, at the very least, by the time he hired an independent consultant who brought the matter to his attention. 

Dubuque v. Taylor, 2007 WL 3106451 (Del. Super. Oct. 1, 2007)

This case demonstrates that a Delaware court will not consider extrinsic evidence of the parties’ intent at the time of entering an agreement if the terms of the document are unambiguous.

The buyer/plaintiff purchased a transmission business called Goodeal Discount Transmissions of Dover, Inc., thinking it was a sole proprietorship. But after the closing, the franchisor—not the seller—came knocking on the buyer’s door seeking unpaid franchise fees and stating the amount to be paid going forward. Soon thereafter, the buyer sued the seller/former owner for breach of contract for failing to disclose that the business was a franchise, for breach of the contractual warranties, and for fraudulent misrepresentation.

Seidensticker v. The Gasparilla Inn Inc., C.A. No. 2555-CC (November 8, 2007).

In this decision, the Court of Chancery has once again held that a contract means what it says, not what the parties say they subjectively intended. Thus, if the contract is unambiguous in its language, the Court will not accept explanations of what it was supposed to mean. Instead, the Court will enforce the contract as written. This opinion is useful for its review of recent case law that some have suggested adopted a "subjective" theory of contract interpretation under which, as the Cheshire Cat once said, "A word means what I say it means." Not so in Delaware.

XO Communications LLC v. Level 3 Communications Inc., C.A. No. 2131-VCL (November 2, 2007).

While the actual terms of a contract will control its meaning, there are occasions when legal rules will determine the result of a contract dispute. Here, the Court of Chancery noted the rule that in the case of a requirements contract, it is bad faith for the buyer to produce for its own use the materials that it committed to buy from the other party  to the contract. The Court held that rule did not apply when at the time the requirements contract was entered into, the buyer had the means of producing the goods it had agreed to buy from the other party as well. In short, the requirement was not to use the producing party exclusively.

MBIA Ins. Corp. v. Royal Indem. Co., 2007 WL 3125319 (D.Del. Oct. 25, 2007)

In this opinion the District Court resolved cross-motions for summary judgment on the defendant’s counterclaim for breach of contract. The relationship between the plaintiffs and the defendant arose out of the underwriting of student loans. Student Finance Corporation (“SFC”) underwrote loans to students using funds from banks, then allegedly fraudulently issued “forbearance payments” in order to hide delinquent and defaulting loans. SFC transferred the loans to several trusts, which then issued fixed income notes, called Certificates, to investors. Plaintiff #1 was the trustee of trusts holding the securitized student loans. Defendant insured the loans that backed the Certificates with insurance policies that unconditionally guaranteed the students’ repayment of principal plus 90 days interest. Plaintiff #2 guaranteed payment of the Certificates in the event that the Defendant failed to honor its policies on the loans. Plaintiffs sued Defendant seeking to enforce its unconditional guarantee to repay the loans. Defendant counterclaimed against Plaintiff #1 for breach of contract, arguing that Plaintiff #1 did not adequately fulfill its oversight responsibilities under applicable Pool Servicing Agreements (“PSAs”) with respect to the servicing of the loans, and thus did not discover the allegedly fraudulent forebearance payments, resulting in Defendant engaging in continual transactions with SFC. Plaintiffs’ claim for enforcement of Defendant’s guarantee obligation was settled, leaving the Court only Defendant’s counterclaim to resolve. 

Norman v. Elkin, 2007 WL 2822798 (D.Del. Sept. 26, 2007)

In this action the District Court evaluated the application of the statute of limitations to claims that a corporate fiduciary engaged in self-dealing at the corporation’s expense. Plaintiff was a 25% shareholder in a closely-held Delaware corporation with Pennsylvania headquarters, formed to participate in the wireless communications industry. Defendant #1 owned the remaining shares of the corporation, and also served as its President and sole director. Plaintiff alleged that Defendant #1 breached his duties to the corporation when he personally obtained newly-issued communications licenses from the FCC, then sold them along with the corporation’s pre-existing licenses to a third party, keeping the proceeds of the sale himself. Plaintiff further alleged that Defendant #1 took the action without notifying Plaintiff in his capacity as a shareholder, without holding an annual meeting, and without making any disclosure of the sale. Plaintiff sued Defendant #1, along with his wholly owned corporation and another corporate officer, in the Delaware Court of Chancery for breach of contract, unjust enrichment, declaratory relief, and breach of various fiduciary duties. Defendants removed the action to District Court based on diverse citizenship and moved for summary judgment, arguing that all claims were time-barred.

LaPoint v. Amerisourcebergen Corporation, C.A. No. 327-CC (September 7, 2007).

In this otherwise fairly common breach of contact case, the Court of Chancery has once again emphasized the importance of evidence that is contemporaneous with the parties' contract and their conduct. Explanations after the fact are viewed as much less convincing than, as in this case, emails created at the time when litigation was not on everyone's mind.

Hynansky v. 1492 Hospitality Group, Inc., C.A. No. 06C-03-200, 2007 WL 2319191 (Del. Super. Ct. Aug. 15, 2007).

This case sets forth the appropriate measure of damages under a quasi-contract theory (in this instance quantum meruit): the value of the services provided, not the value of the benefit received. 

The plaintiff made a typical business loan to the defendant to be paid back with interest, but also agreed to provide additional services to help the defendant avoid foreclosure on other loans, reduce the businesses debt load, and restore profitability. In return for these services, the defendant offered the plaintiff a partnership interest in the business. 

But when the business improved, the defendant allegedly stopped working with the plaintiff—and eventually sold the business for a profit. 

Roarty v. Tyco Int'l Ltd. Group, 2007 WL 2248086 (D. Del. Aug. 2, 2007)

In this action alleging violations of ERISA and state contract law, Defendants moved to dismiss two of the claims under F.R.C.P. Rule 12(b)(6). Plaintiff’s husband was employed by one of the defendants. Plaintiff brought the action against the employer and its insurance company, alleging that Defendants wrongfully denied her claim under an employee welfare benefit plan after her husband was killed while on a business trip. She alleged that defendants wrongfully denied benefits under ERISA, breached fiduciary duties owed under ERISA, and violated state contract law. Defendants moved to dismiss the fiduciary breach and state contract claims. The Court allowed the breach of fiduciary duties claim, but dismissed the state contract claim.

Data Mgmt. Int’l v. Saraga, C.A. No. 05C-05-108, 2007 WL 2142848 (Del. Super. Ct. July 25, 2007).

Generally, a plaintiff bringing a claim based entirely upon the breach of a contract must sue in contract and is limited to contract remedies. No tort exists merely because a party breaches a contract—even if intentionally. But, the same conduct upon which the breach of contract claim is grounded may give rise to a tort claim if the conduct independently amounts to the breach of such an independent duty imposed by law. And with a tort claim comes the availability of punitive damages.

Homsey v. Vigilant Ins. Co., C.A. No. 07-338-JJF (D. Del. July 31, 2007)

In this action alleging, inter alia, bad faith breach of contract and consumer fraud, the defendant insurance company sought dismissal of those counts pursuant to F.R.C.P. Rule 12(b)(6) for failure to state a claim for which relief could be granted. Plaintiffs held an insurance policy with Defendant that contained provisions covering credit card fraud and check forgery. Plaintiffs submitted a claim pursuant to those provisions for over $250,000 in allegedly fraudulent credit card charges and forged checks. Nearly one year later, Defendant tendered payment of $10,000 for the claim, contending that this amount represented the maximum amount due under the policy. Plaintiffs argued that the policy provided broader coverage, and alleged that Defendant denied or delayed payment on Plaintiffs’ claim without reasonable justification.   Defendants argued that there was a bona fide dispute as to the policy’s language, such that Defendant could not be found to have acted unreasonably. Defendant also argued that Plaintiffs did not plead consumer fraud with particularity. The Court denied Defendant’s motion, finding that Plaintiffs pled sufficient facts to state both the bad faith and consumer fraud claims.

Christ v. Cormick, 2007 WL 2022053 (D.Del. Jul 10, 2007)

In this action for damages based on promissory estoppel, breach of contract, fraud and civil conspiracy, Plaintiff sued the founding member of a Delaware LLC (“Member Defendant”), as well as various foreign individuals and entities (“other Defendants”) associated with the Member Defendant. Plaintiff’s claim arose out of an alleged agreement with the Member Defendant to invest $350,000 in exchange for a 50% equity interest in a South African investment management corporation and a Delaware LLC which owned certain intellectual property rights. Plaintiff claimed that the Member Defendant accepted $250,000 from Plaintiff, but diverted the money to another entity he was affiliated with. Plaintiff further alleged that the Member Defendant promised to repay Plaintiff the $250,000 that was invested, but did not do so. The Defendants moved to dismiss the action under F.R.C.P. Rule 12(b)(2) for lack of personal jurisdiction. The Defendants also moved for dismissal of the conspiracy claim under F.R.C.P. Rule 12(b)(6) for failure to state a claim, and dismissal of both the fraud and conspiracy claims as being outside the statute of limitations. Finally, the Defendants moved for a stay of the action under principles of comity in favor of Plaintiff’s earlier filed action in South Africa.

Alcoa Inc. v. Alcan Inc., 2007 WL 2083813 (D.Del. July 17, 2007)

In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property to the city in which the property was located, the city first required, both as part of the purchase agreement and through a letter to Plaintiff, that the contamination be sufficiently remedied. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff responded to the city’s letter that Defendant 3 was responsible for the clean up, and rejected Defendant 1’s indemnification demand under the argument that it was outside the scope of the acquisition agreement. Plaintiff sought declaratory judgment that it was not liable to any of the Defendants. Defendant 1 moved to dismiss under F.R.C.P. Rule 12(b)(7) for failure to join an indispensable party, arguing that Plaintiff should have joined the city.

Alcoa Inc. v. Alcan Inc., C.A. No. 06-451-SLR (D.Del. July 17, 2007)

In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property, the contamination was detected. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff rejected the indemnification demand under the argument that it was outside the scope of the acquisition agreement, and sought declaratory judgment that it was not liable to any of the Defendants. Defendant 3, a Canadian corporation, moved to dismiss for lack of personal jurisdiction.

Centreville Veterinary Hospital Inc. v. Butler-Baird, C.A. No. 1552-VCP (July 6, 2007).

Second thoughts sometimes reach the right conclusion. The problem, however, is that they may get there too late. This decision holds that once a contract offer is made, the rejection of that offer revokes the power to change your mind and later accept the offer. Based on the reasoning of the Restatement of Contracts (2nd) Section 38, the Court noted that rule works both ways and is grounded on the need to have a bright line test in such matters.

AT&T Wireless Services, Inc.v. Federal Insurance Company, C.A. No. 030-12-232-WCC (June 25, 2007).

What law applies is often a thorny issue in complicated business cases. It is even more complicated when tort and contract claims are mixed together. Throw in a merger or two and it is a real mess. Here, the Superior Court has cut through this fog to decide that one state's law applies in the whole litigation.

First, the Court determined that the principles of the Restatement of Conflict Section 188 that governs choice of law in contract cases would apply. This was done even though tort claims were also raised by the complaint. The Court reasoned that as the tort claims were based on the existence of the contract, it met the parties' probable expectations to apply contract choice of law principles.

In doing so, the Court focused on the principle place of business of the insured in this contract dispute with its insurers. While that is one of the five factors set out in the Restatement, the Court gave it great weight under the unusual circumstances of this case.

Gallagher v. E.I. Du Pont de Nemours & Co., C.A. No. 07-47-JJF (D. Del. June 19, 2007).

In this suit for breach of contract, specific performance, and wages under the Delaware Wage Payment and Collection Act, Plaintiff filed the action in Superior Court. Defendant subsequently filed Notice of Removal to the District Court, asserting that the state law claims were completely preempted by ERISA. The Court held that Plaintiff’s claims did not implicate ERISA, and no grounds existed for federal jurisdiction. Plaintiff’s Motion to Remand to Superior Court was therefore granted.

Seidensticker v. The Gasparilla Inn Inc., C.A. No. 2555-CC (June 17, 2007).

Agreements among stockholders of privately held companies usually restrict the sale of company stock and give the other stockholders a right of first refusal. As with any contract, these agreements will be enforced by Delaware courts in accordance with their terms and not as the stockholders may wish years later when a dispute arises. Here, the Court enforced the time limits set out in such an agreement for when the option to acquire a fellow stockholder's shares must be exercised.

CIT Commc’ns Fin. Corp. v. Level 3 Commc’ns, LLC, 2007 WL 951799 (D.Del. Mar. 29, 2007).

In this suit alleging breach of contract, unjust enrichment and conversion, Plaintiff moved for the District Court to remand the case to Delaware Superior Court, asserting that the District Court did not have subject matter jurisdiction. Plaintiff leased a telephone system to a company that later filed for bankruptcy. Through that bankruptcy, Defendants acquired the telephone system lease from the debtor, and the debtor was later liquidated pursuant to the Bankruptcy Court’s Confirmation Order. After the dissolution, Plaintiff filed several claims in the bankruptcy proceedings related to lease payments due by the debtor prior to Defendants’ acquisition of the lease. Plaintiff later filed the breach of contract, unjust enrichment and conversion claims against Defendants in the Delaware Superior Court, based on non-payment of Defendants’ non-payment of obligations under the acquired lease. Defendant filed notice of removal of the suit to federal court, alleging that the claims were pending in, and therefore related to, the bankruptcy proceedings, such that the District Court had subject matter jurisdiction over the claims. In seeking remand, Plaintiff argued that the claims against Defendants existed independent of the bankruptcy, such that the federal court did not have subject matter jurisdiction.

Wilmoth v. Kuhn, No. 06A-10-002-JEB, 2007 WL 925616 (Del. Super. Ct. Mar. 28, 2007).

Homebuyer entered into contract with defendant builder for purchase of a lot and construction of a home. The contract provided that the buyer’s obligations were contingent on being able to install an in-ground pool according to the buyer’s specifications. If such a pool could not be installed, the buyer could terminate and the seller had to return the deposit. 

A month after the buyers signed the contract, they informed the seller that they were unable to build a pool of their choice and thus were terminating the agreement. They asked the seller to return their $50,000 deposit. The seller rejected the termination and refused to turnover the funds. 

Brasby v. Morris, No. 05C-10-022-RFS, 2007 WL 949485 (Del. Super. Ct. Mar. 29, 2007).

Viking Pump, Inc .v Liberty Mutual Insurance Company, C.A. No. 1465-VCS (Del. Ch. April 2, 2007).

Perhaps no rule of contract construction is more often applied to ambiguous contracts than the rule that the parties' actions show their intent. This decision applies that maxim with full force to decide the parties' obligations over a 20 year old dispute on insurance coverage.

While this decision turns on its unique facts, the Court's reasoning illustrates a method of proceeding that has implications for all contract disputes. First, the Court carefully considered the business problems faced by the parties at the time they entered into their contract. Next it considered how a rational business would have resolved those problems to fit the business needs. Then the Court reviewed what the parties actually did as evidence of what they intended their contract to mean. 

Rimmax v. RC Components, Inc., 2007 WL 521214 (D.Del. Feb. 21, 2007).

Plaintiff asserted breach of contract, fraud, and intentional interference with contractual relations, arising out of a purported agreement between the parties to manufacture wheel covers for motorcycles. Under Plaintiff’s theory, Plaintiff and Defendant agreed to manufacture the covers based on allegedly confidential information and proprietary technology that Plaintiff provided. Plaintiff asserted that Defendant breached their contract to manufacture and supply the covers, then misappropriated Plaintiff’s confidential information, proprietary technology, and actual and potential contractual relations. The District Court of Delaware granted Defendant’s motion for summary judgment, finding that Plaintiff had not provided sufficient evidence on any of its claims to withstand the motion.

Chase Manhattan Bank v. Iridium Africa Corp., 2007 WL 518440 (D.Del. Feb. 16, 2007)

In this breach of contract case, the defendant members of a bankrupt LLC asserted various defenses to their alleged contractual obligation to make capital contributions after the bankruptcy. The plaintiff lender had made an $800 million dollar loan to the LLC, and asserted that the members were contractually obligated to continue capital contributions despite the bankruptcy. The District Court entered summary judgment for the plaintiff on its breach of contract claim, but delayed entering final judgment until the parties could brief remaining “open issues”. The defendants argued that the plaintiff’s alternate theory of recovery should be dismissed as moot prior to a final entry of summary judgment for the plaintiff, that the plaintiff was not entitled to attorneys’ fees, and that the Court’s grant of summary judgment had left unresolved various defenses asserted by the defendants. The Court concluded that the entry of summary judgment was appropriate without addressing the plaintiffs’ alternate theories of recovery and did not leave any defenses unresolved, and that the plaintiff was contractually entitled to attorneys’ fees. The Court therefore found that the entry of final judgment for the plaintiff was appropriate.

Creedon Controls, Inc. v. Banc One Bldg. Corp., 2007 WL 149002 (D.Del. Jan. 22, 2007)

In this opinion, the District Court granted one co-defendant’s motion for summary judgment while denying the other’s. Defendant Banc One was involved in construction of two data centers, and contracted with Defendant Forest to coordinate all electrical power and data connections work on the project. Forest then contracted with Plaintiff as an electrical subcontractor on the project. Plaintiff later filed suit against both defendants, alleging that their inefficiency and improper behavior resulted in significant delays and cost increases.  Banc One moved for summary judgment as to Banc One because it had no contractual relationship with Plaintiff and no agency relationship with Forest could be established, and therefore it was not liable for damages to Plaintiff. Forest moved for partial summary judgment, arguing that its contract with Plaintiff expressly precluded damages for delay, and that it was merely an agent of Banc One and therefore could not be held liable for damages. The court granted Banc One’s motion, finding that there was no contractual relationship with Plaintiff and no jury could reasonably find that Forest served as Banc One’s agent. The court denied Forest’s motion, however, finding that there were genuine issues of material fact as to how the alleged delays arose and whether the contract provision precluding delay damages was enforceable.

Rimmax Wheels LLC v. RC Components, 2007 WL 81829 (D.Del. Jan. 9, 2007)

In this order denying Defendant’s motion to transfer venue, the District Court reviewed the applicable standards and guidelines employed to evaluate motions to transfer. Plaintiff, a Delaware limited liability company holding patents for motorcycle rims, sued Defendant, a Kentucky corporation engaged in the manufacturing of motorcycle rims, for breach of contract, fraud, and intentional interference with contractual relations. Defendant moved for transfer of venue to the Western District of Kentucky, contending that it was the locale of the parties’ contractual negotiations, Defendant’s business, and two essential witnesses who refused to appear in Delaware to testify. After reviewing the standards developed by the U.S. Supreme Court, Third Circuit Court of Appeals, and District Court of Delaware, the court denied Defendant’s motion to transfer, finding that Delaware had a substantial connection to the case.

Cypress Associates LLC v. Sunnyside Cogeneration Associates Project C.A. No. 1607-N (Del. Ch. January 17, 2007).

It is often plead that a party to a contract has acted unreasonably in withholding consent if the contract requires for the other party to take certain action. This decision holds that such a pleading, even as an affirmative defense where vagueness is a tradition, must state facts that support the claim. The opinion is also enlightening in applying long settled corporate law principles that a party to a contract has the right to act in its own self-interest in exercising its contractual rights.

Psilos Group Partners, L.P. v. Towerbrook Investors L.P., C.A. No. 1479-N (Del. Ch. January 17, 2007).

When the terms of a contract do not quite cover what one party, in retrospect, wished was included, there is a great temptation to argue the court should rewrite the deal to include what the disappointed party wants. Naturally, the courts reject such attempts, as in this case, when the other party to the contract objects to its rights being altered after the fact. This case illustrates this scenario. The court's method of analysis included not just reviewing the contract terms, but understanding the economics behind the deal. These facts show that the "reformation" the plaintiff sought would not have been agreed to had the parties thought about it when the contract was signed. That is important in denying the claim to change the contract terms, absent fraud or mistake.

PNC Bank v. Sills, 2006 WL 3587247 (Del. Super. Ct. Nov. 30, 2006)

In this opinion denying Defendants’ motion to vacate confessed judgment against them, the Superior Court examined whether the Defendants had satisfied any of the considerations relevant to whether an entry of confessed judgment should be vacated. Defendants guaranteed a loan that Plaintiff made to a Delaware limited liability company for a boat. Plaintiff recorded a mortgage on the boat, and upon the limited liability company’s default, initiated proceedings in Superior Court to confess judgment against Defendants. After Defendants failed to appear to object to the entry of judgments, the Court issued final judgments against them. The mortgaged boat was then sold at a court approved judicial sale for less than the outstanding loan balance, and Plaintiff initiated proceedings to execute upon the confessed judgment to recover the deficiency. Defendants filed an objection to execution and the motion to vacate the confession of judgment under Superior Court Rule 60(b). The Court found that Defendants had received proper notice of the confessed judgment, had no meritorious defense to the confessed judgment, and did not use reasonable diligence in filing the motion to vacate. The motion was therefore denied.

Union Oil Company of California v. Mobil Pipeline Company, C.A. No. 19395-N (Del. Ch. December 15, 2006).

In this fact intensive decision the Court of Chancery reviewed the Delaware law on contract construction and remedies. It upheld the general rule that the unilateral mistake of one party to a contract that is not known by the other party will not justify the cancellation of the contract on the basis of that mistake.

Tropical Nursing, Inc. v. Ingleside Homes, Inc., 2006 WL 3579075 (Del. Super. Ct. Dec. 11, 2006).

In this opinion granting Defendant’s motion for summary judgment, the Superior Court evaluated the liquidated damages provision contained in Defendant’s contract with Plaintiff. Plaintiff had a non-exclusive agreement with Defendant to provide temporary nursing employment services to Defendant on an “as needed” basis. Timecards that the temporary nurses were required to have signed by Defendant contained a clause that restricted Defendant’s ability to hire the nurses, and provided for a “work release payment” in the event that Defendant breached that was equivalent to 500 times the hourly billing rate for the employee. Defendant sought a ruling from the court that the provision was an unenforceable penalty clause. The Superior Court found that the provision did not meet the standards for an enforceable liquidated damages clause, and therefore granted Defendant’s motion for summary judgment. 

Tropical Nursing, Inc. v. Accord Health Serv., Inc., 2006 WL 3604783 (Del.Super. Ct. Dec. 7, 2006).

In this breach of contract case, the Superior Court found that Defendant became contractually bound to Plaintiff based on actual and apparent authority it granted to both its permanent and temporary employees, and subsequently breached those contracts. Plaintiff was a provider of temporary nursing staff, and supplied temporary nurses to Defendant’s healthcare facility. Plaintiff’s contract claim was based on the terms provided for on the back of the temporary nurses’ timecards, which stated that Defendant would not interfere with the temporary nurse’s contractual relationship with Plaintiff, and if it did so Defendant would immediately pay a “work release payment”. Plaintiff alleged that Defendant breached these contracts with respect to 14 former employees of Plaintiff’s that Defendant had hired. Defendant argued that the nursing supervisors who signed the timecards did not have the authority to contractually bind Defendant to their terms. The Court found that Defendant had in fact given the supervisors actual and apparent authority to bind Defendant to the terms of the timecards, and Defendant was therefore in breach when it did not honor those terms.

Tulstar Prods., Inc. v. Ionsep Corp., 2006 WL 3604782 (Del. Super. Ct. Dec. 7, 2006)

In this breach of contract case, the Superior Court evaluated Defendant’s counterclaim that it had an exclusive distributorship contract with Plaintiff that was breached, thus entitling it to offset the amount of that contract from any amount owed to Plaintiff. Plaintiff, a chemical distributor, sued Defendant, a chemical process developer, alleging that Defendant owed almost $175,000 in past due invoices for orders of Plaintiff’s product. Defendant counterclaimed that Plaintiff owed Defendant $250,000 under the alleged exclusive distributorship contract. After reviewing the testimony and evidence produced at trial, the Superior Court found that there was inadequate support for a finding that the parties had agreed to an exclusive distributorship contract, and therefore awarded Plaintiff its claimed damages for the past due invoices, and dismissed Defendant’s counterclaim with prejudice.

Pisano v. Delaware Solid Waste Auth., C.A. No. 05-C-03-132-FSS (Del. Super. Nov. 30, 2006).

In this opinion granting Defendant’s motion for summary judgment, the Superior Court rejected Plaintiff’s argument that Defendant had breached an alleged contract with Plaintiff to sell used waste-processing equipment, and found that Plaintiff’s argument that Defendant granted apparent authority to a third party to sell the equipment unconditionally lacked merit. Plaintiff alleged that he had entered into an unconditional contract with a third party serving as Defendant’s agent to acquire the equipment for $150,000, and that Defendant breached that contract when it later sold some of the equipment to another party. Defendant argued that it did not have a contractual relationship with Plaintiff, and that Plaintiff’s argument that the third party had authority to act on Defendant’s behalf was clearly unfounded. The Superior Court concluded that even viewing the facts in a light most favorable to Plaintiff, there was no basis for a jury to determine that Defendant had breached any contract with Plaintiff or had given the third party authority to act on Defendant’s behalf.

Pell v. E.I. DuPont de Nemours & Co. Inc., Civil Action No. 02-21 KAJ, 2006 WL 3391375 (D. Del. Nov. 22, 2006).

Plaintiffs filed a Motion for Reconsideration and/or Alteration in Judgment pursuant to Fed.R.Civ.P. 59(e). The Court had earlier found for plaintiffs under an equitable estoppel theory of relief involving misrepresentation but had denied the plaintiffs’ request for restitution for unduly low pension payments made to him. Plaintiffs now sought to have the Court reconsider its earlier holding that the defendants did not owe them compensation for unduly low pension payments because - allegedly - the Court had viewed the governing ERISA provision – Section 502(a)(3) - more restrictively that the Supreme Court did in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002).

The Court denied the motion because there were no grounds presented for reconsideration. Specifically, the Court noted that the motion failed because the plaintiffs did not demonstrate: (1) an intervening change in the controlling law; (2) that new evidence was available; or (3) that there was clear error of law or fact present on the record or to avoid causing manifest injustice. Here, plaintiffs sought to implicate the “clear error of law or fact” provision but did not discharge the high burden required to prevail on such a motion. Accordingly, the Court denied the motion.

Allied Capital Corporation v. GC-Sun Holdings, LP, C.A. No. 1954-N (Del. Ch. November 22, 2006).

This is the first decision that applies the law of civil conspiracy in the context of a parent and its subsidiaries. While there is authority that entities under common control cannot be held to have conspired together, that is not now the law of Delaware. This holding is particularly important in the way it may be applied to deal with coordinated conduct by related entities. The implications include that civil conspiracy may take the place of other legal theories, such as veil piercing, that previously were used to hold parent entities responsible for the wrongful conduct of their subsidiaries.

Gibbs v. Fairbanks Capital Corp., C.A. No. 04C-06-258-JRJ (Del. Super. Nov. 20, 2006).

In this opinion denying Defendant’s motion for summary judgment, the Superior Court rejected Defendant’s argument that the affirmative defense of res judicata barred Plaintiffs’ claims for damages. Plaintiffs, residential mortgage customers of Defendant, sued for breach of contract, consumer fraud, defamation, and violation of the Uniform Deceptive Trade Practices Act. After Defendant failed to answer the complaint, the Court entered default judgment against it, and Defendant’s subsequent motion for an order vacating that judgment was denied. Defendant then moved for summary judgment as to Plaintiffs’ damages claims, arguing that res judicata barred the claims because Plaintiffs were class members in a similar suit in Massachusetts, and could not relitigate the same damages claims in the Delaware action. The Superior Court denied Defendant’s motion for summary judgment, concluding that it “[could not] assert res judicata as an affirmative defense under the particular circumstances….” 

Millennium Validation Services, Inc. v. Thompson, C.A. No. 02-1430 (GMS), 2006 WL 3159821 (D. Del. Nov. 3, 2006).

Plaintiff, a Delaware corporation, and defendant filed motions to vacate/modify and confirm the arbitration award respectively. The Court granted the defendant’s motion to confirm the award. Defendant Thompson and two others founded Millennium Validation Services, Inc. (“Millennium”) with equal shareholding. Due to some differences, the two other members sought to compel defendant Thompson to withdraw from Millennium, by triggering some clauses under their Shareholder Agreement (“Agreement”). Subsequently, plaintiff sought to buy-out the defendant’s shareholding, with its valuation computed under the Agreement. In the interim, the plaintiff discovered through its agents that defendant was allegedly violating the terms of his non compete provisions of the Agreement because he was employed by a competitor. Plaintiff therefore suspended its buy-out of his shares.

Plaintiff then filed suit for breach of contract and interference with prospective contractual relations and the defendant cross-claimed for breach of fiduciary duty. Thereafter, the parties stipulated to binding arbitration. The independent arbitrator denied the plaintiff’s claims for lost profits, breach of contract and tortious interference and ordered it to pay defendant a far greater amount representing the buy-out value of his shares and accumulated interest, in addition to a loan that the defendant had advanced the plaintiff company. The arbitrator declined to amend or modify the award and the above cross-motions ensued.

The Court held that the limited grounds on which the arbitration award could have been vacated were absent in the present matter. Here, the plaintiff alleged that the arbitrator had exceeded his powers by revaluing the shares of the defendant, a matter solely governed by the Agreement. This argument was dismissed because the parties had agreed to arbitration of the entire dispute – a term that included the valuation of the shares too. Similarly, the Court found that plaintiff’s non-compete violation and other claims failed to assert any grounds for vacating the arbitration award. Finally, the Court dismissed plaintiff’s argument that it was impermissible for the arbitrator to order a subsequent hearing to determine attorney fees and costs because there was no authoritative support for that contention.

Fuller v. Gemini Ventures, LLC, C.A. No. 05C-06-019-RFS (Del. Super. Ct. Oct. 2, 2006).

Plaintiff moved for summary judgment on its breach of contract claim, notwithstanding another agreement (the "Release") subsequently executed between the parties that purported to release each of them from any claims related to the contract and cancel the terms of the contract.

Superior Vision Services, Inc. v. Reliastar Life Insurance Company, C.A. No. 1668-N (Del. Ch. August 25, 2006).

This decision answers the question of when a minority shareholder may block a dividend payment pursuant to the authority to do so in the company's certificate of incorporation. The Superior Vision charter provided that a dividend could not be paid absent the consent of 2/3 of the shareholders. As a 44% owner, the defendant refused to consent to the dividend. The company sued alleging that the defendant had violated a fiduciary duty to consent to the dividend and its duty of good faith and fair dealing.

The Court first held that absent actual control over the board of directors, a minority shareholder would not be deemed to be in control of the board just because it can block a board decision to pay a dividend. As a result, the Court concluded that the defendant did not owe a fiduciary duty to the company or its shareholders. In addition, the Court held that when, as here, the certificate of incorporation confers a power to veto a transaction and does not condition the exercise of that right, then there is no duty to act reasonably in that regard. Hence, the duty of good faith and fair dealing was not implicated and the Court dismissed the complaint.

Appriva Shareholder Litigation Co. v. ev3, Inc., C.A. No. 05C-11-208 JOH, 2006 WL 2555348 (Del. Super. Ct. Aug. 24, 2006).

Plaintiff entity controlled by certain former stockholders of acquired corporation sued acquirer alleging breach of merger agreement and fraud. Upon motion by defendant acquirer, the court dismissed the action on ground that plaintiff lacked standing.

The court noted that the merger agreement appointed two individuals as shareholder representatives who were required to act in concert, one of whom the complaint reflected was not affiliated with plaintiff in any way. The court also noted that the merger agreement did not permit assignment of the shareholder representatives' rights without defendants' consent, which was never given. Finally, the court rejected plaintiff's argument that it be permitted to bring the action as a third-party beneficiary as inconsistent with the merger agreement's express terms.

Moore v. O'Conner, C.A. No. 01C-02-103 MJB, 2006 WL 2442027 (Del. Super. Ct. Aug. 23, 2006).

Doctor sued former colleague for money allegedly owed pursuant to agreements the parties entered into upon the separation of their ophthalmology practice. Defendant counterclaimed for various alleged bre