Court Of Chancery Details Remedy For Unfaithful Employee

Wayman Fire Protection Inc. v. Premium Fire & Safety LLC, C.A. 7866-VCP (March 5, 2014)

When an employee departs and there is no agreement that restricts his post-employment actions, the law has been often unclear on the former employer's rights to protect itself from unfair competition. This decision pulls much of that prior scattered case law together in a coherent discussion of the former employer's rights.  It even deals with the misuse of computer systems statute that has seldom been discussed as a remedy for computer information theft.

Court Of Chancery Explains Loss Causation

Vichi v. Koninklijke Philips Electronics N.V., C.A. 2578-VCP (February 18, 2014)

This may be the longest opinion ever written by the Court of Chancery.  In one sense, that is too bad because it has the best explanation of loss causation in any recent opinion.  Briefly, if A invests in company ABC because of false representations about its earnings and then the value of ABC declines because all its officers die, A has lost money because he invested in ABC.  However, his loss is not caused by the fraud but by the deaths of the officers.  In that situation, A has not proved loss causation. This is an important point that is too often overlooked.

Court Of Chancery Explains Equitable Fraud Claim

Grzybowski v. Tracy, C.A. 3888-VCG (August 9, 2013)

When is there a claim for "equitable fraud" in the absence of a fiduciary relationship?  This may be an important issue when it is difficult to prove the scienter requirement to establish a common law claim for fraud. This decision holds that there may be a claim for equitable fraud even when the parties do not have a fiduciary relationship. However, the holding is limited to when the proper remedy is to rescind the transaction.

Court Of Chancery Explains Promissory Fraud

Boulden v. Albiorix Inc., C.A. 7051-VCN (January 31, 2013, rev. Feb. 7, 2013)

Plaintiffs often try to allege fraud by claiming that the defendant made a promise that he did not intend to keep.  As this decision points out, that mere allegation is not good enough to state a claim. Rather, the complaint must allege facts that support the allegation the promise was made all the while with the intent to not keep it.  For example, if the promisor lacked the means to keep his promise or had no reasonable expectation of getting the means to do so, then it might be said he lied when he said what he could not deliver.

This decision also has an excellent analysis of the conspiracy theory of jurisdiction.

Court Of Chancery Explains Requirements For Expedition

APC Workforce Solutions LLC v. Gary D. Nelson Associates Inc., C.A. 7672-VCP (July 23, 2012)

When a plaintiff is able to show a "colorable claim" and that absent prompt relief it will suffer "irreparable harm," the Court of Chancery will expedite a hearing on its claims. However, exactly what that all means varies from case to case.  This is a good example of such a showing to obtain expedition in a breach of contract case.

Supreme Court Determines What Constitutes Wrongful Interference With Contract

WaveDivision Holdings LLC v. Highland Capital Management L..P. , No. 649, 2011 (July 19, 2012)

This decision establishes Delaware law on what constitutes a wrongful interference with another's contract.  Thus, it resolves several unsettled questions, such as concluding that a proper motive trumps an improper motive to interfere with a contract's performance.

Court Of Chancery Upholds Power To Enjoin Employment

NuVasive Inc. v. Lanx, Inc.,  C. A. 7266-VCG (July 11, 2012)

Litigation to restrain the employment of former employees is often complicated by jurisdictional issues. This decision resolves some of those issues by holding that a Delaware court may restrain a Delaware corporation from employing a former employee of the plaintiff even when that employee is not himself subject to the jurisdiction of the Delaware courts.

This decision, coupled with the enforcement of the choice of Delaware law clauses in other employment decisions, means that Delaware is a preferred forum for such litigation.

Court Of Chancery Interprets Release

Travelers Casualty And Surety Company v. Sequa Corporation,  C.A. 7055-VCG (May 29, 2012)

This decision involved an interesting argument over the scope of a release.  As is common, the release was signed on behalf of a parent company and all its subsidiaries. To escape the scope of the release, a subsidiary argued that it was only bound to release the same claims that its parent had, but not any claims that were unique to the subsidiary.  The Court sidestepped that argument because in any case the release did not cover the claims asserted by the subsidiary.  However, this stands as a warning to better draft releases that cover all entities in a control group.

Court Of Chancery Explains Burden Of Proof In Accounting Case

Whittington v. Dragon Group LLC, C.A. 2291-VCP (May 25, 2012)

This decision explains how to apply the burden of proof in an accounting case.  Merely producing a cancelled check is not enough.

Superior Court Limits Savings Clause

Huffington v. T.C. Group LLC, C.A. N11C-01-030-JRJ-CCLD  (April 18, 2012)

Delaware has a savings statute that generally prevents the statute of limitations from expiring when a case is dismissed for technical reasons and then refiled in the right court.  But, as this decision points out, the savings statute has a much narrower scope than some might believe.  Thus, when as here, a case is filed in a jurisdiction other than that chosen by the parties in their contract and then dismissed for having violated the forum selection clause, the savings statute does not apply.

Court Of Chancery Limits Fraudulent Inducement Claims

Schonfeld Group Holdings LLC v. Trillium Holdings LLC, C.A. 6759-VCL (March 6, 2012)

It occurs more than you might think that a party to a release later claims that the release is not binding because she was fraudulently induced to sign it.  Applying recent New York law, here the Court holds that if the release covers "unknown claims," then it cannot be set aside by an claim that it was fraudulently induced.

Court Of Chancery Clarifies Pleading Rules For Bad Faith Claims

Clean Harbors Inc. v. Safety-Kleen Inc.,  C.A. 6117-VCP (December 9, 2011)

This decision clarifies the detail that must be pled to assert a claim that the defendant acted in "bad faith."  The short answer is that any set of facts that warrants such an inference is enough to state such a claim.

Superior Court Explains Physical Evidence Requirement

Elegant Slummimg Inc. v. NGM,  C.A. 810C-11-013-RFS (November 30, 2011)

This scholarly review of Delaware law explains the "physical evidence requirement" in some insurance policies. 

CCLD Explains Pleading Rules For Fraud

Brevet Capital Special Opportunities Funds L.P. v. Fourth Third LLC, C.A. N10C-12-071 JRS (CCLD)

The Superior Court's Complex Commercial Civil Division is issuing more and more opinions in the various matters that are now becoming ripe for decision.  Here the Court explains when both fraud and breach of contract claims may be filed in the same case and how to adequately plead the fraud count under the particularity standard required.

Delaware Superior Court Recognizes New Tort Theory

Allen Family Foods Inc. v. Capital Carbonic Corporation , C.A. N10C-10-313 JRS CCLD (March 31, 2011)

In this decision the Delaware Superior Court declined to follow federal precedent and adopted the liability theory of the Restatement (Second) of Torts Section 766A. Under that Section, a claim is permitted for interfering with a plaintiff's contract rights with a third party even when the contract is not broken.  This is different from a more typical interference claim where the third party refuses to perform because of some wrongful act.

Court Of Chancery Calculates Interest On A Judgment

Gentile v. Rossette, C.A. 20213-VCN (September 10, 2010)

A frequently asked question is how does the Court of Chancery determine the interest due on a judgment when the Court is not bound by the legal rate imposed by other courts.  This decision explains how the Court searches for a fair rate.

Court Of Chancery Explains Damage Calculations

Gentile v. Rossette, C.A. 20213-VCN (May 28, 2010)

The calculation of damages for the wrongful conversion of convertible stock is not easy.  This decision explains how.

Court Of Chancery Awards Big Damages In Stealing Business Case

Beard Research Inc. v Kates, C.A. 1316-VCP (April 23, 2010)

This is an excellant primer on how to litigate a business tort case arising out of an employee's stealing all your confidential information and using it to lure away your customers to his new firm. It also includes a good outline on how to prove damages.  What we found particularly interesting is the interplay between a trade secret claim and a claim for breach of fiduciary duty.  You can have both in one case.  Of course, the elements of proof vary but together these prove an efficient way to maximize a recovery.

Court Of Chancery Explains Damage Calculations In Trade Secret Litigation

Agilent Technologies Inc. v. Kirkland, C.A. 3512-VCS ( February 18, 2010)

Calculating damages in trade secret litigation is often difficult.  Lost profits may overlap with unjust enrichment claims and the whole process may be affected by possible injuntive relief. This decision explains how a court will decide the right remedy and calculate damages.  It is also a particularly good example of the Court of Chancery's thoughtful approach to remedies.

Court Of Chancery Explains Damages For Breach Of Non-compete Agreement

Great American Opportunities Inc. v Cherrydale Fundraising LLC., C.A. 3718-VCP (January 19, 2010)

This decision is a landmark case on Delaware law on non-compete agreements with employees. It establishes so many new precedents that it is hard to briefly summarize. For example, it holds that it is possible to assign an employee non-compete agreement in connection with an asset sale.

Perhaps the most significant part of the decision is its discussion on how to calculate damages when an at-will employee is lured away by a competitor and then violates his non-competition agreement.  Damages are not, under this decision, what the new employer won in new business with the purloined employee.  Instead, how to calculate damages in such a case is much more complicated and requires a careful reading of this decision.

Court Of Chancery Explains How To Limit Fraud Claims Post Deal

Mitsubishi Power Systems Americas Inc. v. Babock & Brown Infrastructure Group US LLC, C.A. 4499-VCL (January 22, 2010)

Deal attorneys try to limit the ability of a buyer to make post deal claims for misrepresentation. That is hard to do by contractual provisions that plainitffs are all too clever at avoiding and courts are often reluctant to enforce.

Here the Court of Chancery took the time to go over exactly what contract language may limit post deal claims. All deal lawyers should study it carefully.

Court of Chancery Holds Accountant Liable for Insider Trading

Deloitte LLP v. Flanagan, C.A. 4125-VCN (December 29, 2009)

This decision holds a partner in an accounting firm liable for trading on the nonpublic information that he received in connection with his work at his firm. The Court upheld several theories of liability in what appears to be a case of first impression in Delaware. Thus, this decision paves the way for enforcing the duty to not misuse insider information apart from the Federal Securities laws.

Court of Chancery Resolves How to Treat Preemption Issue

Petroplast Petrofisa Plasticos S.A. v. Ameron International Corp., C.A. 4304-CC (October 28, 2009)

When does the Uniform Trade Secrets Act preempt claims arising out of the misuse of documents based on other legal theories such as  conversion? While not answering that question definitively, this decision does go a long way to clarifying how to decide that issue at the pleading stage.

Briefly, it holds that, if the alternative legal theory may be applied after trial because the documents in dispute are found not to be trade secrets under the Trade Secret Act definition, the case should go forward on alternative theories of recovery. This let the Court decide the case on the evidence and not some preliminary assessment based on the pleadings alone.

Court of Chancery Upholds Forum for Trade Secret Litigation

LeCroy Corporation v. Hallberg, C.A. 4328-VCP (October 7, 2009).

This decision is another example of why Delaware is more frequently chosen to litigate trade secret or unfair competition disputes. For, while the defendant had no ties to Delaware other than its incorporation here, the Court declined to dismiss the litigation on venue grounds. Instead, the Court promptly dealt with the dispute, entering a status quo order, and resolving the venue dispute to get on with the case.

Moreover, it is widely thought that Delaware law is more favorable to protecting trade secrets than other jurisdictions. Delaware, for example, recognizes that it is inevitable that a former employee will use a valuable trade secret in competition with her old employer even if the secret is held only in her head. Other states are not so favorable.

Here, the defendant was dismissed for want of jurisdiction over the non-resident individual. Whether that result would have been the same had her employment contract contained a forum selection and consent to jurisdiction clause for Delaware remains to be seen.

Court of Chancery Enforces Non-Compete Agreement

Concord Steel Inc. v. Wilmington Steel Processing Co. Inc., C.A. 3369-VCP ( September 30, 2009).

This is another in a line of decisions enforcing agreements not to compete. What is striking about this case is the apparent utter disbelief of the defendants that the agreement would actually be enforced. Defendants in these cases seem to think that, if they are not actually engaged in the exact same business as the other party to their agreement not to compete, the Court will say there is "no harm, no foul." Wrong!

Agreements not to compete may cover not just exactly the same business but any line of work that may be a substitute for a business' normal work. In any case, it is the language of the agreement that counts, and this decision illustrates that point.

Court of Chancery Examines IP Claims

Sinomab Bioscience Limited v. Immunomedics, Inc., C.A. 2471-VCS (June 16, 2009)

In this rare case for the Court of Chancery, the Court determines the scope of noncompetition employment agreements. What is particularly interesting is the way the Court analyzed the testimony of the key witness to determine if he was telling the truth. This illustrates the critical role of circumstantial evidence in witness credibility and why it is so often a mistake to think that such evidence is not important or irrelevant to the real issues. Often that seemingly small point can make all the difference.

Court of Chancery Delineates Employee Duties in Case of First Impression

Triton Construction Company Inc v. Eastern Shore Electrical Services Inc., C.A. 32390-VCP (May 18, 2009)

While it is well known that directors and officers have fiduciary duties, what about employees who are neither a director nor an officer?  This decision addresses that issue.  While the decision goes into a detailed analysis, in general, even a non-essential employee may have a fiduciary duty to her employer as an agent of the employer.  That duty then would require the employee to disclose certain conflicts of interest and to not compete with her employer.

This decision also has an excellent discussion of how to calculate lost profits in a business tort case.

Court of Chancery Explains Scope of Exculpation Clause

Addy v. Piedmonte, C.A. 3571-VCP (Del. Ch. March 18, 2009)

It is now common to include a clause in contracts asserting that a buyer has not relied on anything she was told and instead has only relied on her own investigation and the promises contained in her written contract. Sellers then seek to defeat fraud claims by arguing that the buyer is barred from showing reliance on anything not exactly in the contract between the parties. Courts do enforce these provisions as they have a legitimate place in private ordering.

Here, the Court explains the limits of these exculpation clauses. Even sophisticated parties dealing with a purely commercial matter with the time to investigate may be able to state a claim for fraud despite such an exculpation clause. Briefly, it depends on how bad the lying seems to the court. This case reeks of a scheme to defraud an investor, and the Court was concerned that it would further the scheme if it dismissed the claim because of the exculpation clause. Note, however, that the plaintiff still has to prove he relied on what he claims was a false statement in the face of language in the contract that he was not relying on matters outside the contract itself. Somehow it seems, if he got past the motion to dismiss, he has a good shot at prevailing.

Court of Chancery Refuses To Dismiss Business Tort Case

Agilent Technologies, Inc. v. Kirkland, C.A. 3512-VCS (Del. Ch. Jan. 20,  2009)

 

This decision is interesting because it illustrates what a party to litigation can or cannot say about the case. The failure to adhere to the rules results in a business tort claim for unfair practices, etc. Here is the rule in a nutshell: You can say that there is a suit on file but you cannot say that you are sure to win and put the other side out of business. After all, that is for the Court to decide.

 

Court of Chancery Sanctions Counsel

Postorivo v. AG Paintball Holdings Inc., C.A. 2991-VCP (Del. Ch. Aug. 20, 2008)

This decision carefully reviews the rules that attorneys must follow in Delaware when dealing with possibly privileged documents belonging to another party or in interviewing former employees of an opposing party. Counsel must take care to preserve a possible privilege even if she thinks it is waived or not properly asserted. Further, what has become know as a Monsanto statement must be given to former employees of an opposing party before they are interviewed.

Court of Chancery Explains Tortious Interference Claim

Excite LLC v. Soni, C.A. 2476-CC (Del. Ch. Aug. 1, 2008)

In this decision, the Court explains in detail what is needed to plead a claim for tortious interference with a business relationship. The opinion is particularly helpful in tackling the difficult issue of when a director may be considered to have interfered in a contract with his own corporation.

District Court Denies Motion to Dismiss, Allows Duty of Care, Loyalty and Fraud Claims to Proceed

Ad Hoc Comm. of Equity Holders of Tectonic Network, Inc. v. Wolford, 2008 WL 212 7464 (D. Del. May 21, 2008)

The District Court recently allowed claims for breach of the duties of care and loyalty against former directors and officers of Tectonic Network, Inc. (the “Company”) to go forward, rejecting Defendants’ jurisdiction, standing and insufficient claim arguments. Plaintiff, an Ad Hoc Committee of Equity Holders in the Company, sued Defendants for purportedly improper conduct in connection with the acquisition of three businesses and the resulting sale of one of the Company’s subsidiaries. Plaintiff alleged that Defendant Officers (Officer #1 and Officer #2) committed fraud related to the Company’s actions, and all Defendants breached their fiduciary duties. Specifically, Plaintiff alleged that the Defendants breached their fiduciary duties in recommending and/or approving the acquisition of the three businesses, all of which Officer #1 had a majority interest in. Plaintiff also alleged that the Defendant Officers committed fraud in making material misrepresentations to the board regarding the profitability of the acquired businesses and the prospective profitability of a future business plan that resulted in the sale of the Company’s subsidiary. Subsequent to acquisitions and sales, the Company’s financial picture worsened, and it filed for voluntary Chapter 11 bankruptcy. The Bankruptcy Court lifted the stay to allow Plaintiff to press its claims outside of the bankruptcy proceedings.

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Superior Court Dismisses Negligent Misrepresentation Claim Because Contract Barred Reliance On Extra-Contractual Representations

Transched Sys. Ltd. v. Versyss Transit Solutions, LLC, 2008 WL 948307 (Del. Super. Apr. 2, 2008)

This case illustrates Delaware’s objective theory of contract interpretation and underscores the importance of certain standard contractual provisions. 

The plaintiff purchased software from the defendants and argued that it incurred significant losses due to material misrepresentations, including, for example, the extent of completion of the software.  The defendants argued that the material misrepresentation claim was barred by the plain language of the contract, namely the exclusive remedy clause, integration clause, and disclaimer of extra-contractual representations. 

The contract stated that indemnification was the exclusive remedy “in respect of any breach of or default under this Agreement . . . .”  The integration clause stated that the written agreement was the entire agreement.  And, the reps and warranties clause stated that the seller was making no representation or warranty in respect of any of its assets.  The court held that the thrust of these three provisions was unambiguous: “no representations made outside of the four corners of the Agreement are to be given consideration by the parties in interpreting the terms.”  That is, the provisions precluded the plaintiff’s argument that it justifiably relied on the extra-contractual claims made by the defendants.

Accordingly, the Superior Court dismissed the plaintiff’s negligent misrepresentation claim.   

Abbott Labs Sued by States Under Sherman Act

State of Florida, et al. v. Abbott Laboratories et al., Del. District Court 1:08-CV-00155 (filed March 18, 2008).

A group of eighteen states and the District of Columbia filed a complaint in Delaware District Court against Abbot Laboratories, Fournier Industrie et Sante and Laboratoires Fournier S.A. under the Sherman Act, alleging an unlawful monopolization of the fenofibrate market.  Defendants allegedly feared that competition from generic manufacturers would reduce profits from their TriCor product, a drug which regulates triglyceride and cholesterol levels.  The complaint can be viewed here.

District Court Grants Summary Judgment on Consumer Fraud, Breach Claims

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. 

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District Court Finds That Participation in Delaware Merger Confers Jurisdiction, Denies Motion to Dismiss

G & G LLC v. White, 2008 WL 205150 (D. Del. Jan. 25, 2008)

In this opinion declining to dismiss for lack of personal jurisdiction, the District Court found that it had personal jurisdiction over both the directors/officers of a Delaware corporation and over a foreign corporation that invested in a Delaware corporation. Plaintiff was a Virginia limited liability company that loaned $2.5 million to a Utah corporation. Plaintiff was granted a security interest in the Utah corporation’s assets, and perfected that interest by filing the required financing statements in Utah. However, the Utah corporation subsequently was merged with and into a Delaware corporation. Plaintiff asserted that this was done at the insistence of various defendants that were seeking to invest in the Utah corporation after Plaintiff informed them that it would not agree to subordinate its security interest to theirs. Plaintiff posited that the investor defendants thereafter controlled the Utah corporation and the Delaware corporation it was merged into, and fraudulently concealed the merger to prevent Plaintiff from perfecting its security interest upon the merger, while at the same time perfecting their own in Delaware. Plaintiff pointed to numerous instances where the Utah corporation, the Delaware corporation, their counsel, the directors/officers of the Delaware corporation (who were appointed by the investor defendants), and the investor defendants failed to notify Plaintiff of the merger and/or made misrepresentations regarding the continuing status of the corporation as a Utah corporation. Taking the allegations as true, the Court found that the actions of the investor defendants and the directors they appointed was sufficient to confer specific jurisdiction over them. 

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Superior Court Holds Date-of-Discovery Rule Does Not Toll Statute of Limitations in Legal Malpractice Action When Evidence Indicates Knowledge of Facts Relevant to 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. 

District Court Grants All Motions to Dismiss in Anti-Trust Class Action

Howard Hess Dental Laboratories Inc. v. Dentsply Int'l, 2007 WL 2807292 (D.Del. Sept. 26, 2007)

This opinion resolved several motions filed in two different antitrust class actions (the “Hess” action and the “Jersey Dental” action). The District Court denied Plaintiffs’ motion for partial summary judgment in the Hess action and granted various Defendants’ motions to dismiss in the Jersey Dental action. Plaintiffs were dental laboratories that purchased dental products from one Defendant, Dentsply, a manufacturer and distributor of dental products. In the Hess action, Plaintiffs sued Dentsply for alleged antitrust violations in connection with an adopted policy providing that dental dealers promoting Dentsply’s product not add competitive product lines. In the Jersey Dental action, Plaintiffs sued Dentsply and twenty six dental dealers alleging antitrust violations arising from the same Dentsply policy. 

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Superior Court Holds Punitive Damages Are Not Precluded Where Separate Tort Claim Exists Alongside Contract Claims

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.

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District Court Rejects Dismissal of Bad Faith Breach of Contract and Fraud Claims Against Insurer

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.

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District Court Allows Estoppel, Breach of Contract, Fraud Claims Against LLC Member, Dismisses Other Defendants

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.

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District Court Denies Motion to Dismiss For Failure to Join Indispensable Party

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.

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District Court Grants Canadian Corporation's Motion to Dismiss for Lack of Jurisdiction

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.

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Court of Chancey Upholds Fraud Claim In Company Sale

Cobalt Operating LLC v. James Crystal Enterprises LLC, C.A. No. 714-VCS (July 20, 2007).

This factually intense case is interesting for its example of the careful analysis of detail that is typical of the Court of Chancery. The opinion is a good outline of the proper remedies for fraud and breach of contract in the sale of a company.

District Court Rejects Federal Jurisdiction Over Breach Claims, Remands to Superior Court

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.

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Superior Court Dismisses Claim for Tortious Interference With Contract Because Complaint Failed to Allege a Breach of Contract

Luscavage v. Dominion Dental USA, Inc., No. 06C-07-219 RRC, 2007 WL 901641 (Del. Super. Ct. Mar. 20, 2007). 

Two dentists brought a claim for tortious interference with contract against their former employer after they each lost their new consulting contracts with Blue Cross/Blue Shield of Delaware. Both plaintiffs had worked for defendant Dominion Dental USA for several years, and both were subject to agreements with the company: (1) one plaintiff had signed a one-year employment agreement several years before, which contained a six-month non-compete; (2) the other had signed an independent contractor agreement, which also prohibited soliciting or otherwise interfering with defendant’s employees. Both plaintiffs terminated these agreements when they resigned.

Upon leaving, the two dentists obtained consulting contracts with Blue Cross in Delaware, but the agreements were quickly and unexpectedly terminated. The plaintiffs allege that Dominion Dental USA caused Blue Cross to terminate their agreements and consequently tortiously interfered with their contracts.

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Builders Sued After Construction Delayed, Move for Summary Judgment; Superior Court Denies Motion as to Contract Claims, Grants Motion as to Tort Claims Under Economic Loss Doctrine

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

A homebuyer brought this suit for breach of contract, negligence, and fraud after the builders delayed construction of his new modular home. The initial sales contract did not set a date for completion, but the parties entered into a subsequent, separate agreement setting a specific deadline. The defendants assured plaintiff they would finish by this date, but the buyer became concerned upon learning that no physical structure had been erected. So he demanded written assurance of timely performance or return of his deposit. The defendants responded, but informed the buyer that construction was 30 days behind schedule. 

The plaintiff, then, filed a complaint with the Delaware State Police seeking return of his deposit. And, the builders returned most of it. Soon thereafter, the buyer brought this action in Superior Court, and the builders moved for summary judgment.     

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Court of Chancery Extends Noncompete Period

Deloitte & Touche USA LLP v. Lamela, C.A. No. 1542-VCP (Del. Ch. April 6, 2007).

Contracts not to compete upon termination of employment must contain a limit on how long they last. A "reasonable" time is permitted. However, what happens if the contract is violated? Should the time limit then be extended to make up for the violation? This decision holds that the period should be extended so that the former employer gets the full benefit of the time limit on competition.

District Court Grants Summary Judgment on Contract, Fraud Claims

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.

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District Court Grants One Motion for Summary Judgment, Denies Other Motion

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.

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District Court Grants Motion for Judgment on the Pleadings

Magten Asset Mgmt. Corp. v. Paul Hastings Janofsky & Walker LLP, No. 04-1256-JJF (D.Del. Jan. 12, 2007)

In this opinion, the District Court of Delaware found that both Montana’s substantive fraudulent transfer law and Plaintiff’s inability to establish standing warranted granting Defendant’s motion for judgment on the pleadings. Plaintiff, a creditor of a Montana limited liability company by virtue of an indenture agreement, sued Defendant, alleging that Defendant assisted the LLC in transferring assets to its parent corporation in order to defraud the LLC’s creditors. Defendant moved for judgment on the pleadings, arguing that as a non-transferee of the assets, it could not be held liable for any alleged fraudulent transfer under Montana’s fraudulent transfer act, and that as a creditor of the LLC, Plaintiff did not have standing to bring its derivative claims against Defendant on behalf of the LLC. The court agreed with Defendant, and granted the motion for judgment on the pleadings.

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Court of Chancery Limits Tortious Interference Claims

Tenneco Automotive Inc. v. El Paso Corporation, C.A. No. 18810-NC (Del. Ch. January 8, 2007).

When all else fails, claims of tortious interference with contact and fraudulent inducement seem to be the last resort to remedy a seeming inequity in how a contract has worked out. This case is an example of a plaintiff with a wrong in search of a remedy and having a hard time finding one.

The Court again limits the scope of a claim for tortious interference with contract by holding that a defendant cannot be charged with interfering with its own contract. Hence, the claims against that defendant were dismissed.

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Court of Chancery Limits Noncompete Agreement

Edix  Media Group Inc. v. Mahani, C.A. No. 2186-N (Del. Ch. December 12, 2006).

This decision is noteworthy for its careful analysis of what relief is appropriate for a breach of an agreement not to compete. The Court distinguished between the broader duties owed by employees from those more limited duties owed by independent contractors. The relief awarded was the product of a very specific analysis that tailored that relief to the harm proved to have been inflicted.

Court of Chancery Upholds Conspiracy Theory

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.

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Superior Court Rejects Affirmative Defense of Res Judicata at Damages Stage

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….” 

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Court of Chancery Applies Limitations Statute

Smith v. McGee, C.A. No. 2101-S (Del. Ch. October 16, 2006).

In this decision, the Court of Chancery discusses the application of Delaware's three year statute of limitations to claims for breach of fiduciary duty. The Court applied the statute to bar claims that arose three years before the suit was filed and declined to apply the potential saving rules such as when a claim is hidden from the plaintiff.

Court of Chancery Rejects Balancing Test Under Rule 23.1

Bakerman v. Frank Importing Co. Inc., C.A. No. 1844-N (Del. Ch. October 16, 2006).

When directors own shares in both the parent and its subsidiary, the question arises whether they are disinterested in considering a demand under Rule 23.1 in a case challenging a transaction between the two entities. This decision holds that the Court will test their interest in the transaction by focusing on their interest in the dominant party and will not also take into account their interest in the entity on the other side of the transaction. This makes sense because otherwise the Court would need to do a complex balancing to see if the interest in the subsidiary was as important as the interest in the parent. That involves tax and other issues that are difficult to determine. Note, however, that after discovery, those interests may be balanced in deciding on the merits if the directors should be given the benefit of the Business Judgment Rule.

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District Court Follows Reasoning Of Recent Court of Chancery Opinion On Whether Choice-of-Law Provision Governs Related Tort Claim

Millett v. Truelink, Inc., C.A. No. 05-599, 2006 WL 2583100 (D. Del. Sept. 7, 2006).

The plaintiffs in this case were several individuals who brought suit for breach of contract and violations of the Delaware Consumer Fraud Act ("DCFA") and Credit Reporting Agencies Act ("CRAA"), among other claims, after purchasing credit-monitoring services from defendant Truelink.

Truelink filed a motion to dismiss the DCFA and CRAA claims under 12(b)(6). And plaintiffs brought a motion to amend their complaint to substitute a claim under the California Consumer Legal Remedies Act ("CCLRA"). The District Court denied Truelink's motion to dismiss and plaintiffs' motion to amend the complaint to add a CCLRA claim, but did grant plaintiffs leave to amend their complaint to add a claim under the Kansas Consumer Protection Act.

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Court of Chancery Grants Ten Year Injunction

W.L. Gore & Associates, Inc. v. Wu, C.A. No. 263-N (Del. Ch. September 15, 2006).

The extent to which a court will enjoin the violation of a confidentiality agreement covering trade secrets is often questioned. In this decision, the Court of Chancery issued an injunction that for ten years barred the defendant from working in a business that might permit him to use the trade secrets he had stolen from his employer. In part, the remedy was based on the useful life of the stolen materials.

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Supreme Court Upholds Application of Daubert Rules

Bowen v. E.I. DuPont de Nemours & Co. Inc. C.A. No. 580, 2005 (Del. Supr. September 15, 2006).

The Supreme Court has upheld the decision of the Delaware Superior Court that rejected the testimony of an expert for the plaintiffs in a major toxic tort suit arising out of Benlate exposure to humans. The plaintiffs claimed that as a result of exposure to benlate while pregnant that their children had suffered serious birth defects. The plaintiffs' theory depended on the testimony of an "expert" that skin exposure would cause the fetus in turn to be exposed to benlate.

The Superior Court after an exhaustive hearing ruled that the plaintiffs' expert testimony failed to meet the standards set for by the United States Daubert decision. It was this ruling that the Supreme Court affirmed.

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Court of Chancery Rejects Deepening Insolvency Theory

Trenwick America Litigation Trust v. Ernst & Young LLP, C.A. No. 1571-N, 2006 WL 2333201 (Del. Ch. Aug. 10, 2006).

The Delaware courts have struggled for the last fifteen years over the scope of the duties of directors to creditors when their company is in the vicinity of insolvency. In two landmark decisions, the first in 2004, and just recently, the Court of Chancery sought to define the limits of that duty. Indeed, in this decision the Court rejected the very idea that there is a duty to avoid taking risks that may have the effect of deepening the insolvency of a Delaware corporation, at least in most circumstances.

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Court of Chancery Expands Duty To Act in Good Faith

Horizon Personal Communications, Inc. v. Sprint Corp., C.A. No. 1518-N, 2006 WL 2337592 (Del. Ch. Aug. 4, 2006).

There is no duty that is more often cited and so little understood as that requiring a contracting party to act in good faith and deal fairly with the other contracting parties. In this case the Court of Chancery exhaustively examined the contract between the parties, determined what was required to act in good faith, and fairly awarded an injunction to preclude a breach of that duty. In doing so, the Court's analysis provides a road map for tracking the duty to act in good faith in the performance of a contract.

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Superior Court Declines To Expand Economic-Loss Doctrine in Dismissing Negligent Mispresentation Claim

Millsboro Fire Company v. Construction Management Service, Inc., C.A. No. 05-06-137 MMJ, 2006 WL 1867705 (Del. Super. Ct. June 7, 2006).

Plaintiff fire company sued its contractor on a significant renovation and improvement project, alleging numerous design and workmanship defects. The defendant contractor in turn filed a third-party complaint against several parties hired by plaintiff who were involved in the design and management of the project, alleging negligence, breach of contract, and negligent misrepresentation. The third-party defendants subsequently filed a motion for summary judgment, which was granted.

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Court of Chancery Rescues Janitor

Elite Cleaning Company, Inc. v. Capel, C.A. No. 690-N, 2006 WL 1565161 (Del. Ch. June 2, 2006).

In this precedent setting case, the Court of Chancery refused to enforce a non-compete agreement against a janitor of the Elite Cleaning Company, apparently concluding his services were not so elite after all.

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District Court Issues Show Cause Order to Determine Whether Tort Action Should Be Dismissed for Failure to Prosecute

Cherry Line, S.A. v. Muma Services f/k/a Murphy Marine Services, Inc., C.A. No. 03-199-JJF, 2006 U.S. Dist. Lexis 29818 (D. Del. May 8, 2006).

Defendant filed a motion for sanctions and for dismissal for failure to prosecute.

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Court of Chancery Finds No Violation of an Enforceable Covenant Not To Compete

American Homepatient, Inc. v. Collier, C.A. No. 274-N, 2006 WL 1134170 (Del. Ch. Apr. 19, 2006).

Plaintiff alleged that a former employee of plaintiff breached a confidentiality and non-compete agreement (the "Non-Compete"), that the former employee and his new employer both breached a related settlement agreement (the "Settlement" and collectively with the Non-Compete, the "Agreements"), and that the new employer tortiously interfered with the Non-Compete and prospective business relations. Plaintiff sought damages and injunctive relief. The court concluded that while the Agreements were enforceable, they were not breached by defendants and there was no tortious interference.

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Superior Court Denies Defendant's Motion to Dismiss and Motion for a More Definite Statement in Breach of Contract Case

Spanish Tiles, Ltd. v. Hensey, C.A. No. 05C-07-025 RFS, 2005 WL 3981740 (Del. Super. Ct. March 30, 2006).

Plaintiff Spantis Tiles, Ltd. D/b/a Terra Tile and Marble ("Terra Tiles") and Plaintiff Steel Buildings, Inc. d/b/a Northern Steel buildings, Inc. ("NSB") brought an action against Kurt and Ken Hensey (the "Henseys") for breach of contract, tortious interference with contracts and prospective contracts, violation of the Deceptive Trade Practices Act, common law fraud, unlawful practice and defamation. The defendant moved to dismiss for failure to state a claim and moved for a more definite statement. The court denied both motions.

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Court of Chancery Dismisses Complaint Because a Creditor Erroneously Asserted Derivative Claims as Direct in the Hope of Escaping Bankruptcy Court Jurisdiction

Big Lot Stores, Inc. v. Bain Capital Fund VII, LLC, C.A. No. 1081-N, 2006 WL 846121 (Del. Ch. Mar. 28, 2006).

In 2000, in a sponsored management buyout, a corporation sold a subsidiary business that operated a chain of toy stores (KB Toys) in exchange for $257.1 million in cash and a $45 million note due in 2010. In 2002, the new owners refinanced the business and distributed approximately $120 million to the buyout sponsor, affiliates, two officers and directors of the subsidiary that invested in the buyout, and others. In 2004, the KB Toys filed for Chapter 11 bankruptcy. Plaintiff Big Lots, Inc, an unsecured creditor and holder of the $45 million note, brought this action asserting direct claims of breach of fiduciary duties, fraud, and civil conspiracy. The plaintiff sought recovery for the amount due on the note and restitution for alleged unjust enrichment. The Court of Chancery dismissed the complaint namely because the claims were derivative in nature, not direct, and thus belong to the bankruptcy estate.

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Court of Chancery Permits Third Complaint Amendment In Nigerian Judgment-Enforcement Action

Harry A. Akande v. Transamerica Airlines, Inc., et al., C.A. No. 1039-N, 2006 WL 587846 (Del. Ch. Feb. 28, 2006).

This is a motion to amend the Complaint under Court of Chancery Rules 15(a) and 15(aaa) for the third time before the Court of Chancery, involving a foreign judgment enforcement action. Plaintiff sought to withdraw his petition for receivership and add factual predicates to various claims he made. In an earlier hearing, the Court of Chancery permitted plaintiff's motion for discovery and converted the defendants' motion for dismissal upon plaintiff's motion to one of summary judgment.

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Court of Chancery Dismisses Caremark Claims But Retains Loyalty And Fraud Counts

Canadian Commercial Workers Industry Pension Plan v. Eric Alden, et al., C.A. No. 1184-N, 2006 WL 456786 (Del. Ch. Feb. 22, 2006).

In this derivative action brought against four former directors and officers of Case Financial, Inc., the nominal defendant, the two remaining defendants moved to dismiss after two others settled. Plaintiff alleged breach of loyalty, breach of the Caremark duty of oversight, corporate waste and common law fraud. The Court of Chancery partly granted the motions.

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Court of Chancery Holds "Anti-Reliance" Contract Provisions Cannot Exclude Liability For Fraudulent Misrepresentations

Abry Partners V, L.P., et al. v. F&W Acquisitions LLC, et al., C.A. No. 1756-N, (Del. Ch. Feb. 14, 2006) (published at 891 A.2d 1032 (Del. Ch. 2006).

This is plaintiffs' suit for rescission of a corporate acquisition contract. The seller moved to dismiss the case for failure to state a claim. The court focused on the law and policy of the unambiguous bar to recessionary relief and limitations in damage recovery for misrepresentations through the contract's exclusive indemnity-limiting provision.

The court reconciled the power of privately ordered contracts allocating risk between the parties and Delaware's public policy disfavoring a bar on recessionary remedies and damages for willful misrepresentations. Additionally, the court examined the elective remedies available to the plaintiff-buyer.

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Court of Chancery Partially Grants Plaintiffs' Motion For A Preliminary Injunction Enforcing A Non-Competition Agreement

Deloitte & Touche USA LLP v. Lamela, C.A. No. 1542-N, 2005 WL 2810719 (Del. Ch. Oct. 21, 2005).

Plaintiffs sought a preliminary injunction against Defendant to prevent him from soliciting any current, former or prospective clients that he had contact with while employed by Plaintiffs.

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Court Of Chancery Upholds Voluntary Advancement Provisions Irrespective Of Alleged Wrongful Conduct

Radiancy, Inc. v. Zion Azar, et al., C.A. No. 1547-N, 2006 WL 224059 (Del. Ch. Jan. 23, 2006).

This is a summary judgment motion for advancement of legal fees made by defendant-officers. Their corporation alleged fraud, fiduciary violations and usurpation of corporate opportunity against defendants as a bar to advancement. Defendants replied with counterclaims under their respective employment contracts. The motion was granted and denied in part.

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Superior Court Finds that Plaintiff Was Entitled to Advisory Fee Pursuant to Contract

Barker Capital LLC v. Rebus LLC, C.A. No. 04C-10-269 MMJ, 2006 WL 246572 (Del. Super. Ct. Jan. 12, 2006).

The plaintiff, Barker Capital LLC ("Barker"), a Delaware LLC, sued Rebus LLC ("Rebus"), also a Delaware LLC, Mark A. Fox ("Fox"), and Twinlab Corporation ("Twinlab"), a Delaware corporation, alleging breach of contract, quantum meruit, tortious interference with contract, and unjust enrichment. Rebus and Barker entered into an Engagement Agreement, pursuant to which Barker would act as Rebus' nonexclusive financial advisor to identify and consummate a transaction to purchase two medical newsletters. Under the terms of the Engagement Agreement, Barker was entitled to an Advisory Fee in the amount of 2.5% of the transaction's value. Both sides moved for summary judgment. The court found that Barker was entitled to 2.5% of a $12 million loan associated with the deal, but was not entitled to a percentage of a $35 million loan connected with the deal. The court also found against the plaintiff on the quantum meruit claim because the plaintiff had been made whole when the court ruled in his favor on the breach of contract claim. Turning to the tortious interference claim, which was only alleged against Fox, the court found that it did not have the subject matter jurisdiction to pierce the corporate veil.

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Court Enforces Lease Provision Protecting Supermarket from Competition from Other Shopping Center Tenants

Penn Mart Supermarkets, Inc. v. New Castle Shopping LLC, C.A. No. 20405-NC, 2005 WL 3502054 (Del. Ch. Dec. 15, 2005).

Liquor store chain acquired leasehold rights in commercial shopping center under a Bankruptcy Court order that authorized it to operate one of its typical stores. In addition to alcohol products, those chain stores also sold food products and a wide range of products typically sold in supermarkets. Tenant who operated supermarket in same shopping center sued landlord and liquor store to enforce provision in its lease protecting it from competition by other tenants in the operation of a supermarket and in the sale of food or food products intended for off-premises consumption.

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Court Denies Motion to Dismiss Claims for Tortious Interference and Civil Conspiracy in Connection with Telecommunications Merger

UbiquiTel v. Sprint Corporation, C.A. No. 1489-N, 2005 WL 3533697 (Del. Ch. Dec. 14, 2005, rev'd Dec. 19, 2005).

UbiquiTel was the exclusive operator of Sprint's wireless network in several states pursuant to a management agreement. In December 2004, Sprint announced that it intended to merge with Nextel and that Nextel or its successor entity would be taking over much of the work that had previously been performed by UbiquiTel. In response, UbiquiTel sued Sprint and Nextel alleging a number of claims, including tortious interference and civil conspiracy against Nextel. Nextel moved to dismiss for failure to state a claim.

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Court of Chancery Grants Motion To Stay Litigation Pending Resolution Of Prior Filed Case In District Court

Davis Int'l, LLC v. New Start Group Corp., C.A. No. 1297-N, 2005 WL 2899683 (Del. Ch. Oct. 27, 2005).

Defendants moved to stay Court of Chancery action pending resolution of prior filed district court case.

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Federal Court Denies Motion to Dismiss For Failure To Join Indispensable Party Pending Discovery On Agency Issue But Dismisses Common Law Counts As Merged In Trade Secret Claim

Ethypharm S.A. France v. Bentley Pharmaceuticals, Inc., 388 F.Supp.2d 426 (D.Del. 2005).

This action was brought by Ethypharm, a French pharmaceutical company and its Spanish subsidiary alleging fraud, violation of the Delaware Uniform Trade Secret Act ("DUTSA"), unjust enrichment and intentional interference with ongoing and prospective business relationships. Defendant Bentley Pharmaceuticals, Inc., a Delaware corporation, filed a Motion To Dismiss For Failure To Join An Indispensable Party, namely Belmac, a Spanish company, under Fed. R. Civ. P. 19(a) and (b) and a motion to dismiss the various common law claims.

The Court treated the motions as that of summary judgment and held that: (1) the defendant's subsidiary Spanish company, Belmac, was an indispensable party; (2) DUTSA preempted the unjust enrichment and fraud claims; and (3) the business tort claims could exist independent of the misappropriation claim because they were not preempted by DUTSA.

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Court of Chancery Allows Employer To Recover Its Confidential Information From Former Employee's Computer

Rockwell Automation, Inc. v. Kall, C.A. No. 526-N, 2005 WL 2266592 (Del. Ch. September 9, 2005).

Plaintiff Rockwell Automation, Inc. filed complaint against Defendant, a former employee of Plaintiff, to obtain documents containing its confidential and proprietary information.

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Court of Chancery Holds that Purchasers of Small Business Failed to Prove that Sellers Defrauded Them

Homan v. Turoczy, C.A. No. 19220, 2005 WL 2000756 (Del. Ch. Aug. 12, 2005).

Plaintiffs bought a small printing and copying business from defendants, who ran the business successfully for 19 years. However, plaintiffs were not so successful. A year after the sale they filed for bankruptcy, closed down the business, and liquidated the company's assets. In their complaint, plaintiffs alleged that the defendants and their agent fraudulently misrepresented the condition of the business and thus sought rescission of the sales agreement. The court held that by waiting over a year before suing, the plaintiffs forfeited any right to seek actual rescission. As a result, the court's opinion after trial only considered whether plaintiffs were entitled to an award of damages for fraud.

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Court of Chancery Refuses to Dismiss Claims for Tortious Interference, Unfair Trade Practices, and Fraudulent Misrepresentation in Connection with Sale of Business

Griffin Corp. Services v. Jacobs, C.A. No. 396-N, 2005 WL 2000775 (Del. Ch. Aug. 11, 2005).

Counterclaim plaintiffs Jacobs, Dobrzynski, Stewart, and Stewart Management Company ("SMC") asserted that Griffin Corporate Services ("Griffin") and other counterclaim defendants interfered with their existing contract and prospective business relationships and engaged in common law and statutory unfair trade practices. They also asserted that Griffin breached its confidentiality agreement with SMC and made misrepresentations to SMC. The counterclaim defendants moved to dismiss.

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Court of Chancery Denies Preliminary Injunction to Business Partner Who Alleges Breach of Confidentiality and Misappropriation of Trade Secrets

Nutzz.com v. Vertrue Inc., C.A. No. 1231-N, 2005 WL 1653974 (Del. Ch. July 6, 2005).

Plaintiff Nutzz.com ("Nutzz") sought a preliminary injunction against defendant Vertrue Inc. ("Vertrue"), a company with which Nutzz contracted to develop an online membership program for NASCAR fans. After Vertrue terminated the agreement (claiming that Nutzz missed deadlines and promotion requirements), it sent an email to 1,200 Nutzz members advertising Vertrue's own membership program as an upgrade. Nutzz claimed that Vertrue's actions constituted a breach of their confidentiality agreement and a misappropriation of trade secrets.

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Court of Chancery Refuses to Pierce Corporate Veil or Impose Successor Liability to Enable a Former Employee to Recover Judgment

Mason v. Network of Wilmington, Inc., C.A. No. 19434-NC, 2005 WL 1653954 (Del. Ch. July 1, 2005).

Plaintiff won an employment discrimination suit against Network Personnel, Inc. ("Personnel"), a Delaware corporation solely owned by defendant Barry Schlecker ("Schlecker"). But plaintiff was unable to collect on the judgment, so she sought to recover from Schlecker personally by piercing the corporate veil and recovering from his new company, Network of Wilmington ("Network"), under a theory of successor liability. The parties filed cross-motions for summary judgment.

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Superior Court Dismisses the Action Because Statue of Limitations for Fraud had Expired

Reading Int'l, Inc. v. St. Francis, C.A. No. 02C-10-223 SCD, 2005 WL 1654343 (Del. Super. Ct. June 17, 2005).

The plaintiffs brought an action for fraud, alleging that the value of certain equipment the plaintiffs purchased in 1996 was not as the defendants represented. One of the defendants moved to dismiss, arguing that the statute of limitations had expired. Treating the motion to dismiss as a motion for summary judgment, the court dismissed the action against the defendant because the statute had expired.

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Court of Chancery Finds Misappropriation of Trade Secrets and Awards Attorneys' Fees for Defendants' Willful and Malicious Misappropriation

NuCar Consulting, Inc. v. Doyle, 2005 WL 820706 (Del. Ch. April 5, 2005).

Plaintiff NuCar Consulting, Inc., claimed that Defendants, former employee Timothy Doyle and Doyle's newly created company, Dealer Rewards, Inc., misappropriated certain of NuCar's trade secrets. NuCar requested that the court determine whether Defendants misappropriated NuCar's trade secrets under the Delaware Uniform Trade Secrets Act and the extent to which NuCar should receive monetary damages or injunctive relief for the alleged misappropriation. NuCar also sought an award of attorney's fees pursuant to 6 Del. C. - 2004 for Defendants' allegedly willful and malicious misappropriation. The Court granted NuCar's request for a permanent injunction prohibiting Defendants' further use of the contract used for automotive deals and found Defendants liable for $69,750 in unjust enrichment damages for their misappropriation of the potential client list. Finally, the Court found that Defendants' misappropriation was willful and malicious and awarded NuCar its reasonable attorney's fees expended on its misappropriation of trade secrets claims.

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Court of Chancery Dismisses Wal-Mart's Claims Regarding Corporate-Owned Life Insurance Policies

Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611 (Del. Ch. 2005).

Wal-Mart brought suit against all the parties involved in its purchase of corporate-owned life insurance ("COLI") policies. Its complaint alleged a broad range of legal and equitable claims against the insurance brokers and providers, all seeking to recover from them the losses it incurred in connection with this risky tax avoidance scheme. On consolidated motions to dismiss brought by the insurers and brokers, the court concluded that the retailer failed to state a claim upon which relief could be granted. The court, therefore, granted the defendants' motions to dismiss.

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Superior Court Finds that Plaintiff Had Security Interest in Certain Items Formally Owned by Restaurant Owner that Defaulted on Loan, But Not in Fixtures Placed in Restaurant

Wilmington Savings Fund Society v. Chillibilly's, Inc., C.A. No. 03C-11-021 THG, 2005 WL 730060 (Del. Super. Ct. March 30, 2005), aff'd, 886 A.2d 1279 (Del. 2005).

Wilmington Savings Fund Society ("WSFS"), the plaintiff, sought replevin of certain collateral it claimed pursuant to a contract it held with Chillibilly's Incorporated ("Chillibilly's") and Joseph Jeffery Stein Corporation ("Stein Corp.") WSFS also alleged fraud, misrepresentation, and various other claims. Essentially, WSFS argued that it was induced into extending a loan to Chillibilly's based on certain misrepresentations by the principal of Stein Corp., Jeffrey Stein. Stein Corp. moved for summary judgment. The Court denied the motion as to replevin of items Stein Corp. had earlier conceded belonged to WSFS pursuant to its security interest. However, the court granted summary judgment as to the other claims.

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In Bench Trial, Superior Court Finds Defendants Did Not Commit Common Law Fraud

DCV Holdings, Inc. v. ConAgra, Inc., C.A. No. No. 98C-06-301-JEB, 2005 WL 698133 (Del. Super. Ct. March 24, 2005).

The Plaintiffs brought an action against ConAgra, Inc. ("ConAgra") and E. I. Du Pont de Nemours and Co. and Du Pont Chemical and Energy Operations, Inc. (collectively "DuPont"). The Plaintiff alleged that the defendants committed common law fraud. In a bench trial, the Superior Court found for the defendants.

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Court of Chancery Dismisses Attorney General's Claims under the Consumer Fraud Act and the Deceptive Trade Practices Act as Being Time Barred, but Sustains Claim under the Health Spa Regulation

State ex rel. Brady v. Pettinaro Enterprises, 870 A.2d 513 (Del. Ch. 2005).

Attorney General brought consumer protection action under the Consumer Fraud Act, the Deceptive Trade Pratices Act, and the Health Spa Regulation against developer of condominium complex, alleging, among other things, that developer misled condominium purchasers into believing that clubhouse was part of the complex. Developer moved to dismiss action on the basis that the statute of limitations barred the Attorney General's claims and for failure to state a claim under the Deceptive Trade Practices Act. The court granted in part and denied in part Defendants' motion to dismiss.

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Court Sanctions Counsel Under R.11 & R.37 For Inexcusable Violations

Heinrich Beck v. Atlantic Coast PLC., et al., C.A. No. 303-N, (Del. Ch. Feb. 11, 2005)(published at 868 A.2d 840 (Del. Ch. 2005)).

This opinion deals with attorney sanctions under Court of Chancery Rules 11 and 37.

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Court of Chancery Denies Answer Amendment On Public Policy Grounds

Oliver, et al. v. Boston University., et al., C.A. No. 16570-NC (Del. Ch. Jan. 28, 2005).

Plaintiff filed a motion to amend its answer to limit its liability exposure to its shareholders in a publicly traded corporation, by asserting an affirmative defense under the law of Massachusetts.

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Court of Chancery Holds Claims Accrue Upon Receipt Of Inquiry Notice Of Wrongful Act

Certainteed Corp. v. Celotex Corp., et al., C.A. No. 471, 2005 WL 217032 (Del. Ch. Jan. 24, 2005).

Plaintiff brought a breach of contract action against defendant sellers under their asset purchase agreement for indemnification of losses and other related claims.

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Federal Court Permits Amendment Of Answer And Addition Of Counterclaim In Suit Involving Trade Secrets Violation Under Kansas Law

CC Investors Corp. v. Raytheon Co., No. Civ. A. 03-114-JJF, 2005 WL 81591 (D.Del. Jan. 07, 2005).

This opinion considered a Motion For Leave To File Its First Amended Answer and Counterclaim filed by Defendant Raytheon Travel Air Company ("Travel Air"). Travel Air filed the motion to amend its answer to include a counterclaim against CC Investors Corp. ("CCI"), the plaintiff in this action. This counterclaim intended to allege that CCI had misappropriated Travel Air's trade secrets violating the Kansas Uniform Trade Secrets Act ("Kansas UTSA"), Kan. Stat. Ann. §§ 60-3320 et seq. The Court granted Travel Air's motion.

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Court of Chancery Denies Unpleaded Prejudgment Interest Request

All Pro Maids, Inc. v. Susan Layton, et al., C.A. No. 058-N, 2005 WL 82689 (Del. Ch. Jan. 11, 2005).

This opinion discusses a post-judgment motion objecting to the form of the judgment and order relating to prejudgment and post-judgment interest awards pursuant to 6 Del. C. §2301.

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