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

Morris James Blogs


Court Of Chancery Explains Anti-Reliance Clause

Posted In Business Torts

Prairie Capital III L.P. v. Double E Holding Corp., C.A. 10127–VCL (November 24, 2015)

This is an important decision because it explains so well the effect of an anti-reliance clause in the agreement for the sale of a business. The clause will bar fraud claims based on misrepresentations outside the terms of the agreement even if the clause just states what was relied on and does not need to say there are no other facts relied on and even if the allegations claim omissions.

The opinion also states well when corporate officers may be liable for fraud claims.

Superior Court Explains Interference With Prospective Business Relationship And Good Faith Claim

Posted In Business Torts

World Energy Ventures LLC v. Northwind Gulf Coast LLC, C.A. N15C-03-241 WCC (November 2, 2015)

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.

Court Of Chancery Spells Out Aiding And Abetting Claim Requirements

Posted In Business Torts

Matthew v. Laudamiel, C.A. 5957-VCN (September 28, 2015)

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.

Superior Court Explains When Officer Is Liable For Tort

Posted In Business Torts

Yavar Rzayev LLC v. Roffman, Del. Super. C.A. S14L-12-035 MJB (August 31, 2015)

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.

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.