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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Court Of Chancery Enforces Delaware Law On Restrictive Covenants

Posted In Business Torts

KAN-DI-KI, LLC v. Suer,  C.A. No. 7937-VCP (July 22, 2015)

This is an interesting case just for the cast of characters involved. However, it also has 2 important legal points. More ›

Court Of Chancery Establishes Post-Judgment Interest Rate

Posted In Business Torts

Sequoia Presidential Yacht Group LLC v. FE Partners LLC, C.A. 8270-VCG (June 12, 2014)

What is the post-judgment rate of interest when there is a contract rate?  This decision holds that the contract rate applies, at least in matters over $100,000.

Court Of Chancery Grants Reformation

Posted In Business Torts

Miller v. National Land Partners LLC, C.A. 7977-VCG (June 11, 2014)

Rare is it that a party convinces a court to grant it reformation of a contract.  This is that case.  The result was made easier when both parties to the contract agreed it omitted key language that warranted reformation.  The plaintiff, an outsider to the contract but who was hurt by its reformation, had those bad facts to overcome.

Court Of Chancery Rejects Delaware Securities Act Claim

Posted In Business Torts

Eurofins Panlabs Inc. v. Ricerca Biosciences LLC, C.A. 8431-VCP (May 30, 2014)

This decision holds that the Delaware Securities Act does not apply to trades outside of Delaware, even those between Delaware corporations.  The opinion also has some useful descriptions of what constitutes a basis for a fraud claim.

Court Of Chancery Details Remedy For Unfaithful Employee

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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

Posted In Business Torts

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.