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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 6 posts in Statute of Limitations.
Litigation seeking to inspect a corporation’s records under Section 220 of the DGCL might toll the statute of limitations for certain claims under the right circumstances. There are important limits to this form of tolling. For example, it is not automatic and will only apply to claims that are the subject of the inspection demand. This decision does a good job of explaining these limits and the factors a court will consider in determining whether inspection-based tolling should apply. It otherwise examines and applies the law on the statute of limitations and issues of inquiry notice.
If a contract spells out when the time to sue under it starts to run, the time of discovery rule does not apply. Instead, the contract provision for accrual of a claim governs.
Some assume that a statute of limitations will not apply in the Court of Chancery. But as this decision illustrates, that is an oversimplification. The Court of Chancery may well use the same statute of limitations period applicable in an action at law, by analogy, under the equitable doctrine of laches. This is especially true when the claim is a legal one seeking legal relief. This decision also illustrates an important point regarding claim accrual. When a claim arises out of an obligation to make a series of payments over time, it is possible the Court will start to run the laches period from the first non-payment. In other words, subsequent non-payments might not constitute a new claim with a new limitations period or otherwise lengthen the time period to sue.
This decision explains the difference between a defendant’s right of setoff and recoupment. The key difference is that the right of setoff arises out of an independent transaction, while recoupment must be based on the same facts that support the main claim. Another difference concerns the statute of limitations. Setoff is subject to a three-year statute of limitations, while time-barred claims can be considered for recoupment when they arise out of the same factually-related transaction as the plaintiff’s claim.
There is often some confusion over how the Court of Chancery will determine when a plaintiff has filed its action too late. A statute of limitations may apply directly or the doctrine of laches may apply and then apply the same statute by analogy. Through a careful historical analysis, the Chancellor explains how to decide, while also noting some tension in the case law. The answer, whether statute or laches, controls what arguments are available to the dilatory plaintiff.
This decision confirms that the statute of limitations on a claim for indemnification does not begin to run until the underlying litigation is concluded. Indeed, equitable tolling may also extend the time when a suit may be filed.