Posts in Business Torts

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.

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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.  More ›

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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.  More ›

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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. 

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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.  More ›

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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. More ›

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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. More ›

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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. More ›

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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. More ›

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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. More ›

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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.

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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. More ›

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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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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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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.

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