Posts tagged Business Torts

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. More ›

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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.

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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. More ›

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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….”  More ›

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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. More › Share

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. Share

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. More ›

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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. More › Share

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. More › Share

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. More › Share

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. More › Share

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. More › Share

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. More › Share

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. More › Share

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. More ›

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