Delaware Business Litigation Report

Chancery Applies Rule 15(aaa), Declines to Revive Dismissed Claims under the Law of the Case Doctrine

Sciabacucchi v. Malone, C.A. No. 11418-VCG (Del. Ch. Aug. 18, 2021).
Court of Chancery Rule 15(aaa) provides that, if a plaintiff files an answering brief opposing a Rule 12(b)(6) or Rule 23.1 motion, a decision granting the motion is with prejudice unless the court “for good cause shown, shall find that dismissal with prejudice shall not be just under all the circumstances.” In this decision, the court applied that rule and the law of the case doctrine to deny a motion to amend to reassert dismissed claims.

Specifically, the court previously dismissed claims that John Malone and Liberty Broadband Corporation together were controlling stockholders of nominal defendant Charter Communications, Inc. because restrictions in the corporate charter and stockholders’ agreement that limited them to a maximum 35% ownership percentage and minority board representation and that prohibited them from soliciting proxies negated a potential inference of control. The stockholder-plaintiff claimed discovery showed that ruling should be revisited. 

The court reasoned that the law of the case doctrine will apply absent a “compelling reason,” such as (i) the discovery of new, material evidence, (ii) an intervening change of controlling authority, or (iii) a showing the prior decision is clearly incorrect and would work a manifest injustice. Here, contrary to the plaintiff’s characterization, Malone did not admit in his deposition that he was a controlling stockholder. In addition, although the counterparties to the transactions required his and Broadband’s support or amendments to his stockholders’ agreement, neither showed de facto control. The court reasoned that fiduciary duties generally do not require parties to waive their contractual rights, and Malone’s alleged refusal to do so did not make him a controller. 

The Court did, however, permit an amendment to add an aiding and abetting claim against Broadband, reasoning that such a claim was not addressed by its earlier dismissal ruling, accordingly Rule 15(a) controlled, and the amendment would not risk substantial prejudice. The Court ordered that the scheduling order should be amended if Broadband needed more time to take discovery.

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