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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
This decision does an excellent job of setting out the elements of a claim for interference with prospective business relationships. Even better, it is a comprehensive summary of the elements of a claim for breach of the duty to act fairly and in good faith.
Aiding and abetting claims are often filed against those who have worked with a fiduciary that is breaching his fiduciary duty. This decision explains the requirements for such a claim, particularly the need to show the defendant is aware of the fiduciary’s breach of duty. The opinion is also a good primer on tortious interference law.
This decision explains well when a corporate officer may be personally liable for a business tort under the “personal participation doctrine.” Mere knowledge of wrongdoing is not enough, but active participation is also not required before an officer who encourages or directs wrongful conduct may be held personally responsible.
This is an interesting case just for the cast of characters involved. However, it also has 2 important legal points. More ›
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.