Delaware Business Litigation Report

Chancery Decision Explains Availability of Reformation as a Targeted Remedy

AECOM, et al. v. SCCI Nat’l Hldgs., Inc., C.A. No. 2022-0727-MTZ (Del. Ch. Sept. 27, 2023)
Although the Court of Chancery frequently resolves contractual disputes, it grants contractual reformation only when “intervention [is necessary] to ensure the deal is what the parties agreed upon.” This pleadings-stage decision provides insight into the Court’s approach to reformation because the Court found that one claim supported reformation but the other did not.

The buyer-defendants filed counterclaims seeking to reform the parties’ purchase agreement to conform to buyer’s expectation that earn-out payments would only be made in the event the purchased company accrued a profit from specified claim recoveries. In an earlier bench ruling, the Court determined that the buyer adequately pleaded fraud, and here, the Court explained why reformation — which is a remedy — did not need to be pleaded as separate count. Therefore, reformation remained an available remedy because the Court may order reformation “when the contract does not represent the parties’ intent because of fraud[.]” But the Court concluded that reformation was not available for the buyer’s contract counterclaim, because the buyer’s pleading did not establish that the parties had come to a specific prior understanding with respect to the provision at-issue. Rather than supporting a “meeting of the minds,” the allegations supporting the fraud claim included that the sellers deceived the buyers on this issue. Without that prior shared understanding, reformation was unavailable, because there was no “specific correction” for the Court to make, and reformation is not a tool to rebalance an agreement after the fact.

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