Posts in Business Torts

Superior Court Upholds Claims that Entities Transferred Funds in Violation of Agreements with Creditor

CIBC Bank USA v. JH Portfolio Debt Equities, LLC, C.A. No. N18C-07-130 EMD CCLD (Del. Super. June 2, 2021)
Plaintiff CIBC Bank USA (“CIBC”) entered into a credit agreement with a group of borrowers to provide them with a revolving line of credit that was secured via a security agreement, which granted CIBC a priority interest in certain collateral. Under the security agreement, the borrowers agreed not to take any actions that would materially impair the collateral, or to permit any of their subsidiaries to amend their organizational documents to adversely affect the interests of CIBC. CIBC also entered into acknowledgment agreements with the borrowers’ joint venture partners, under which those partners agreed not to amend their own agreements with the borrowers without CIBC’s consent. More ›

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Chancery Shifts Attorneys’ Fees, Reasoning Perjury Is Bad Faith Per Se

Lyons Ins. Agency Inc. v. Wilson, C.A. No. 2017-0092-SG (Del. Ch. Apr. 29, 2021).
In this action, the Court of Chancery noted that it heard “perhaps the most cogent, and certainly the briefest, argument for fee shifting under the bad faith exception I have been privileged to hear: ‘perjury is bad faith.’” Plaintiff Lyons Insurance Agency Inc. (“Lyons”) sued its former employee Howard Wilson, an insurance broker, for breach of the non-compete in his employment contract. At a hearing for a preliminary injunction, Wilson testified that he needed to follow his clients to another firm because he could not entice them to stay at Lyons. Throughout the litigation, he maintained that he had not intended to rob Lyons of business. But, before a damages hearing, Wilson submitted an affidavit repudiating his earlier testimony. At the damages hearing, he testified that he conspired with the other firm to breach his employment agreement, recanting his earlier testimony. More ›

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Delaware Choice of Law Provision in Stock Purchase Agreement Does Not Eliminate Claim for Fraud under California Securities Act

Swipe Acquisition Corp. v. Krauss, C.A. No. 2019-0509-PAF (Del. Ch. Jan. 28, 2021)

This decision concerned a motion to dismiss a claim for fraud under the California Securities Act, which the defendants argued was waived by a choice of law provision in the parties’ stock purchase agreement (“SPA”) indicating that “all claims or causes of action (whether in contract, tort or statute) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement … shall be governed by, and enforced in accordance with, the internal laws of the State of Delaware, including its statutes of limitations.” More ›

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Superior Court Dismisses Tortious Interference with Contract Claim against Corporate Officer

American Bottling Co. v. Repole, C.A. No. N19C-03-048 AML CCLD (Del. Super. Dec. 30, 2020)

This case illustrates that a Delaware court will dismiss a claim against an officer for tortious interference with a contract to which his or her company is a party unless a plaintiff can assert non-conclusory allegations that the officer acted outside the scope of his or her agency. In this case, the plaintiff and defendant-company were parties to a distribution agreement. The plaintiff brought a claim for tortious interference with contract against the CEO and chairman of the defendant-company claiming that the CEO terminated the agreement to enrich himself and his management team to the detriment of the plaintiff.  More ›

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CCLD Bars Tort Claims Overlapping with Contract Claims under Economic Loss Doctrine

GEA Sys. N. Am. LLC v. Golden State Foods Corp., C.A. No. N18C-11-242 EMD CCLD (Del. Super. Ct. June 8, 2020)

This case illustrates the extent to which the economic loss doctrine bars tort claims arising out of the same transaction as claims for breach of contract. In this case, plaintiff GEA Systems North America LLC (“GEA”) sold defendant Golden State Food Corp. (“Golden State”) three industrial freezers for use in Golden State’s hamburger patty facility. Golden State argued, among other things, that the freezers did not meet the production figures that GEA promised and GEA failed properly to install or repair the freezers. For this alleged misconduct, Golden State brought claims for negligence, fraudulent inducement, and intentional misrepresentation as well as for breach of contract. On a motion to dismiss, the Delaware Superior Court held that the economic loss doctrine barred the fraudulent inducement and intentional misrepresentations claims, but not the claims for negligence and gross negligence. More ›

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CCLD Addresses Ripeness Doctrine and the “Stranger Rule” in Tortious Interference Claims, Partially Dismisses Claims for Breach of Corporate-Owned Group Variable Life Insurance Policies

Athene Life and Annuity Co., et al. v. Am. Gen. Life Ins. Co., et al., C.A. No. N 19C-10-055 PRW CCLD (Del. Super. May 18, 2020)

Policy holders (the “Plaintiffs”) brought a suit against American General Life Insurance, Co. (“American General”) for breach of corporate-owned group variable life insurance policies (the “Policies”) and against certain related entities managing the Policies, ZC Resource Investment Trust (“ZCRIT”) and ZC Resource LLC (“ZC Resource”) (together with ZCRIT, “ZC Defendants”) (together with ZCRIT and American General, “Defendants”) for tortious interference with contract. When the Defendants moved to dismiss, the Delaware Superior Court’s Complex Commercial Litigation Division (“CCLD”) granted the motion in part on ripeness grounds and denied it in part. More ›

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Chancery Finds Tortious Interference By Financial Industry Competitor and Addresses the Requirements for Obtaining Permanent Injunctive Relief

Preston Hollow Capital LLC v. Nuveen LLC, C.A. No. 2019-0169-SG (Del. Ch. April 9, 2020). 

This case illustrates the type of competitive conduct that will qualify as tortious interference with business relationships while demonstrating that permanent injunctive relief is unavailable absent a likelihood of future irreparable harm.  More ›

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Court Of Chancery Summarizes Law On Reliance Disclaimers

IAC Search LLC v. Conversant LLC, C.A. No. 11774-CB (November 30, 2016)

Large commercial contracts frequently try to limit a buyer’s remedies for any extra-contractual misrepresentations by the seller.  Many Delaware decisions deal with disclaimers of extra-contractual representations and this decision does a nice job of summarizing some of that existing law. For example, it notes that a statement from the seller that it has not made any extra-contractual representations may not suffice, while a statement of non-reliance from the buyer should do the trick.

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Court Of Chancery Explains Anti-Reliance Clause

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.

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

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.

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Court Of Chancery Spells Out Aiding And Abetting Claim Requirements

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.

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Superior Court Explains When Officer Is Liable For Tort

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.

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Court Of Chancery Enforces Delaware Law On Restrictive Covenants

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 ›

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Court Of Chancery Permits Appeal Of Its In Pari Delicto Decision

The Honorable Karen Weldin Stewart, Insurance Commissioner v. Wilmington Trust SP Services Inc., C.A. 9306-VCP (April 27, 2015)

It is often difficult to decide if an interlocutory opinion is appealable.  This decision well explains the governing law on when the Court will permit such an appeal.

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Court Of Chancery Issues Mother Of All In Pari Delicto Decisions

The Honorable Karen Weldin Stewart v. Wilmington Trust SP Services, Inc., C.A. 9306-VCP (March 26, 2015) This and the AIG decisions are the leading decisions on when the in pari delicto defense works. The Court carefully summarizes the 3 exceptions to when in pari delecto bars a recovery: (1) the adverse interest exception, (2) the fiduciary duty exception, and (3) the public policy exception such as in the case of the federal securities laws.  Of these, the "greatest of all" is the fiduciary duty exception that even permits aiding and abetting clams to proceed.

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