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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Chancery Holds That Res Judicata Precludes Plaintiff’s Claim for Information Rights Under Merger Agreement
The doctrine of res judicata bars a plaintiff from splitting claims arising from a single transaction into multiple actions. As this decision illustrates, the requirement to plead all claims arising from a transaction in a lawsuit to avoid claim preclusion on res judicata grounds may include a claim for information rights arising from a merger agreement. A party with information rights should carefully evaluate those rights when bringing a claim for breach of contract, and should not assume that subsequent claims for information rights under the contract will avoid claim preclusion under the doctrine of res judicata.
The plaintiff in this action first sued defendant in 2016, seeking milestone payments from a 2013 merger. The Court of Chancery dismissed that action in 2017, concluding that payment was not owed under the merger agreement. Plaintiff then sought to enforce its information rights against defendant under the merger agreement in a second lawsuit, with the requested information relating to disputed milestone payments. In Fortis Advisors LLC v. Shire US Holdings, Inc., the Court of Chancery dismissed the second lawsuit on the grounds of res judicata because plaintiff’s 2016 action for milestone payments under the merger agreement should have included its claim for information rights. The Court reasoned that the 2016 action was dismissed with prejudice, the information rights of plaintiff under the merger agreement were triggered in 2016, and there was no allegation that any conduct by defendant had caused plaintiff to refrain from asserting its claim for information rights in 2016.