Posts in Breach of Contract

Superior Court Interprets Jury Waiver

The Data Centers LLC v. 1743 Holdings LLC, C.A. N15C-02-042-EMD CCLD (October 27, 2015)

When is a waiver of a jury trial effective?  This is not always an easy question as some claims may be outside the scope of the waiver. This decision provides good guidance on how to decide how far the waiver reaches.

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Court Of Chancery Explains How To Interpret A Contract

Hartley v. Consolidated Glass Holdings Inc., C.A. 9360-VCN (September 30, 2015)

This is a great case for an explanation of how a court should go about interpreting an ambiguous contract. It explains how extrinsic evidence is used and the role of the good faith negotiator principle.

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Delaware Superior Court Clarifies Breach Of Implied Covenant Claims

Charlotte Broadcasting LLC v. Davis Broadcasting of Atlanta LLC,  C.A. 13C-04-143-WCC (June 10, 2015)

This is an interesting decision because of its comments on when the implied duty to act fairly and in good faith may be asserted as a separate claim even when a claim based on the contract between the parties has not been breached under the contract’s literal terms. More ›

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Delaware Superior Court Explains Fraudulent Inducement Claims

ITW Global Investments Inc. v. American International Partners Capital Fund IV, L.P., C.A. No. 14C-10-236 JRJ (June 24, 2015)

This decision explains several important aspects of Delaware law. First, a claim for fraud cannot overlap with a breach of contract claim or it will be dismissed. More ›

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Delaware Superior Court Addressed Limitations On Damages Clause

Delphi Petroleum  v. Magellan Terminals Holdings L.P., C.A. No. 12C-02-302 FWW ( June 23, 2015)

This decision explains when a limitations on damages clause may not be
enforceable, such as when the claim is for fraud. As the Court noted, bad faith
conduct may also be outside the protection of such a clause.

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Court Of Chancery Again Limits Covenant Claims

Akzo Nobel Coatings Inc. v. The Dow Chemical Company, C.A. No. 8666-VCP (June 5, 2015)

This is yet another decision declining to uphold a claim based on the covenant  to deal in good faith and fairly. More ›

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Court Of Chancery Notes The Outer Limits Of Contract/Fiduciary Claims

The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (April 20, 2015)

There is a long line of decisions that holds when the parties set out their mutual rights and obligations in a contract, only contract law governs and a breach of fiduciary duty claim cannot also be brought. That has other consequences because that also means that an aiding and abetting claim cannot be filed against third parties for helping a party breach its contract. There is no such claim under Delaware law. That is not true if the underlying claim was for breach of fiduciary duty where aiding and abetting claims are well recognized. In short, how to characterize the breach claim has real consequences insofar as suing third parties is concerned. This decision sets out this law and the issues, without resolving them, but in a helpful way.

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Supreme Court Explains Again The Limits Of The Fair Dealing Covenant

Nationwide Emerging Managers LLC v. Northpointe Holdings LLC, No. 441, 2014 (March 18,2015) This is yet another Supreme Court decision marking the bounds of the covenant  of good faith and fair dealing. The covenant is not to be used to modify the terms of a contract, to add terms the parties chose to not include or to provide a remedy that the parties never intended would apply in the event of a breach. While Delaware courts try to reach a "fair" result, that will not warrant letting a party alter what it bargained for after the fact.

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Delaware Supreme Court Leaves Open The Question Of Whether Breach Of Contract Is A Business Judgment

Friedman v. Khosrowshahi, No. 442,2014 (March 6, 2015) In this interesting order affirming a Chancery decision, the Supreme Court went out of its way to make a point.  A stockholder suit alleging that the board breached a stock option plan may state a claim for breach of contract that does not necessarily involve a business judgment rule analysis but instead may involve a breach of the duty of loyalty. If so, then it may not be easily dismissed under a Rule 23.1 motion.

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Court Of Chancery Explains Interrelationship Of Complaint Theories

The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (January 29, 2105) This decision explains how various liability theories in a complaint relate to one another so as not to be duplicative. For example, a breach of fiduciary duty claim will be dismissed when it relies on the same facts as a breach of contract claim. Moreover, a claim for violation of the duty to act in good faith and fairly may survive when it alleges a failure to uphold the reasonable expectations of the parties as to how a contract would operate. Note, however, that it would be a mistake to think that you can plead a violation of the covenant to act fairly in a very contract-based case. In a decision one day after Renco, the Court dismissed a claim based on the covenant when the contract language spelled out how the contract was to be implemented in more detail, leaving no gap for the covenant to fill. See  Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. 9522-CB (January 30, 2015). Share

Court Of Chancery Limits Implied Covenant Claims

Fortis Advisors LLC v. Dialog Semiconductor PLC, C.A. 9522-CB (January 30, 2015) When a contract spells out that  its obligations are to be carried out in a "commercially reasonable best efforts" manner, it will be harder to argue there is any gap that the covenant of good faith and fair dealing may fill.   That means the claim based on the implied covenant may be dismissed leaving the court to ponder what is "commercially reasonable."  This decision needs to be read in conjunction with The Renco Group Inc. v. MacAndrews AMG Holdings LLC, C.A. 7668-VCN (January 29, 2015) upholding a similar claim. Share

Court Of Chancery Explains Step-Transaction Theory

Ellis v. OTLP GP, LLC, C.A. 10495-VCN (January 30, 2015) Not infrequently a plaintiff will argue that 2 transactions are so interrelated that his rights have been violated by structuring the deal to take 2 steps to accomplish it.  An example is this case  of a purchase of a controlling interest at a premium followed by a cash out merger at a discount. This is a hard road to travel  and this decision explains what is needed to make the court consider 2 steps as if they were one. Briefly, one must be dependent on the other in such a way as to make the deal not possible unless both occurred. Share

Court Of Chancery Rejects Application Of Delaware Law

Ascension Insurance Holdings LLC v. Underwood, C.A. 9897-VCG (January 28, 2015) This is an important decision on choice of law. The Court held that the parties' choice of Delaware law to govern the terms of a noncompete agreement was unenforceable in the face of contrary public policy of California that limited such agreements. This result is arguably at odds with a Third Circuit decision that upheld the choice of Delaware law in a noncompete agreement despite the policy of Louisiana that limits such agreements - Coface Collections North America Inc. v Newton, 430 Fed. Appx. 162 (3rd Circ. June 6, 2011).  As the decision points out, limitations on former employees' right to work for a competitor are subject to a wide variety of state laws. Hence, the drafter of such agreements will now need to carefully consider what law to choose to apply to the agreement and cannot just adopt Delaware as binding in every case. Share

Court Of Chancery Requires More Cooperation In Pretrial Orders

Itron Inc. v. Consert Inc., C.A. 7720-VCL (January 15, 2015) This decision may change litigation practice in the Court of Chancery.  Most lawyers, myself included, dislike arguing over the statement of admitted facts required in a pretrial order. There are many reason for that, such as the need to go over statements carefully to be sure each does not spin the facts unfairly.  That is tedious, particularly when the facts asked to be admitted seem irrelevant to the proceedings or are prejudicial.  After all, who wants a client's past troubles aired before the Court when attempts to get them into evidence would never succeed during trial?  However, Chancery trials are bench trails before experienced chancellors and unfair prejudice is less a problem there. In any case, this decision requires the parties to admit anything that is true in a proposed statement of facts in a pretrial order. The facts may come from admissions in an answer, in discovery, or otherwise.  This will take work.  However, given that the Court is already burdened, that the lawyers are getting paid to do the work, and that arguments over what is or is not relevant are too time consuming in a judge-only trial, the need to do the work is justified. Share

Court Of Chancery Upholds Contractual Extension Of Limitations

Bear Stearns Mortgage Funding Trust 2006-SL1 v. EMC Mortgage LLC, C.A. 7701-VCVL (January 12, 2015) This is an important decision because it is the first to interpret the amendment to the general statute of limitations in contract actions to permit extending the limitations period by a contract. Share