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Following Bench Trial in Breach of Contract Case, Superior Court Awards More than a Million Dollars to Plaintiff

Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513 (Del. Super. Ct. 2005), aff'd, 886 A.2d 1278 (Del. 2005). In this case, the purchasers of a home health care company brought an action against the seller to recover for multiple alleged breaches of a stock purchase agreement ("Agreement") and recovery under indemnification provisions. Following a non-jury trial, the court found for the plaintiff on certain claims, and awarded the plaintiff $1,070,719.47 in damages. The plaintiffs, Catamaran Acquisition Corp. ("Catamaran") and Cornerstone Equity Investors, IV L.P. ("Cornerstone"), alleged that Spherion Corp. ("Spherion") breached several representations and warranties in the Agreement by failing to adequately disclose numerous pre-sale liabilities of Interim and by misrepresenting the financial condition of Interim in the financial statements supplied to the plaintiffs during due diligence. Plaintiffs sought damages under the indemnification provisions of the Agreement and also expectation damages for the difference between what they paid for Interim and the actual value of Interim at the time of the Sale. According to plaintiffs, Spherion represented that Interim was worth $132 million when it was only worth $90 million. Additionally, the Agreement contained an indemnification provision for breaches of the agreement. After hearing the evidence, the court concluded that the plaintiffs were not denied the benefit of their bargain so as to be entitled to expectation damages, particularly with respect to liabilities for post-audit Medicare reimbursement amounts. Additionally, Spherion made no actionable misrepresentations in its financial statement regarding reserves reflecting potential liability for Medicare reimbursement adjustments. It also made no misrepresentations regarding allegedly underperforming franchisee loans. However, the court determined that Spherion did breach its obligation to disclose all threatened litigation. Spherion's failure to disclose potential liability on malpractice claims entitled the plaintiffs to indemnification for fees and expenses they were forced to pay when bringing an insurance coverage action. Finally, the court determined that Spherion had to indemnify plaintiffs for losses sustained as a result of claims and loan write-offs in connection with a failed student funding program. Authored by: Jason C. Jowers 302-888-6860 jjowers@morrisjames.com Share
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