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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Is an Offset Allowed for Amounts Unrelated to the Claim Asserted?
The plaintiffs in Brace Industrial Contracting v. Peterson Enterprises (Del. Ch. Dec. 10, 2015) moved for partial summary judgment on the issue of whether the defendants could “self-help themselves to $3.457 million of the plaintiffs’ money as an offset against different purported unliquidated claims.”
The plaintiffs contended the defendants retained nearly $3.5 million in payments from the plaintiffs’ customers as an offset against claims the defendants asserted against the plaintiffs. The court found that it was not clear that the full claim amount was owed to the plaintiffs and that such issue should be decided following the impending trial. The court, however, did order the defendants to pay, and the plaintiffs to accept payment of, the amount the defendants conceded the plaintiffs were owed.
On its motion for partial summary judgment, the plaintiffs sought to obtain payment of nearly $3.5 million in customer payments that they claimed the defendants were holding as an offset against claims the defendants asserted against the plaintiffs. Following oral argument, the court instructed the parties to meet and confer to determine if any of the payments were not in dispute and could be immediately released to the plaintiffs. In providing this instruction, the court informed the parties that any release of funds by the defendants "would not necessarily fully resolve the issues raised in the motion, the remainder of which would await resolution at trial in March."
Following oral argument, the parties conferred and agreed to a payment of about $1.65 million. The plaintiffs, however, attempted to condition their acceptance of this payment on the court ruling on their motion in advance of trial. The plaintiffs maintained that they were in need of the full payment and, therefore, wanted the motion decided before the impending trial date. As found by the court, the plaintiffs essentially wanted both a release of the undisputed amount and a decision on their pending motion. The court declined to provide the requested relief.
Instead, the court found that the purpose of the meet and confer was to determine what amount could be paid immediately, "allowing all other claims to await trial without inefficient motion practice." The court further found that the meet and confer would have been "a futile exercise" if a decision could be rendered on the motion, "as any amount agreed to by the parties would immediately thereafter be obviated by [the court's] determination of the full amount of the funds owed to the plaintiffs." With regard to the issues presented by the motion, the court found that the amount owed to the plaintiffs was hotly contested and the contractual and factual issues raised at oral argument could be more efficiently resolved after trial.
Accordingly, the court ordered the defendants to tender to plaintiffs the undisputed amount within 10 days. The court reserved judgment on the plaintiffs' claim to the balance of the funds sought by the motion until after trial.