Delaware Business Litigation Report

Court of Chancery Enforces the Absolute Litigation Privilege

Ritchie CT Opps, LLC v. Huizenga Managers Fund, LLC, C.A. No. 2018-0196-SG (Del. Ch. May 30, 2019).

The absolute litigation privilege is an affirmative defense that bars claims arising from  statements made in the course of a judicial proceeding.  Here, the Delaware Court of Chancery addressed the scope of the absolute litigation privilege in response to a request for an injunction to bar defendant from prospectively disparaging plaintiff in other litigation.  The agreements governing an investment by defendant in the plaintiff’s funds contained confidentiality and non-disparagement clauses.  A falling out between the parties resulted in years of protracted litigation in Illinois and Delaware.  This Court of Chancery action for breach of confidentiality and non-disparagement clauses in the controlling agreements is based on information disclosed in the prior actions.

Defendant asserted that plaintiff’s non-disparagement claim was barred by the absolute litigation privilege.  In contrast to seeking money damages for a prior disparaging statement, plaintiff sought to prospectively enjoin defendant from breaching the non-disparagement clause in related litigation through an injunction. The Chancery Court rejected application of the non-disparagement clause to bar prospective statements in other litigation.  The Court reasoned that the proposed application would potentially allow a party to enjoin its counterparty from prosecuting a claim by prospectively labeling all potential adverse statements as disparaging.  The Court also observed that its equitable powers to enjoin future misconduct generally should not be used as a prior restraint on speech.  In addition to dismissing the non-disparagement claim, the Court also dismissed plaintiff’s claim for breach of a confidentiality provision for lack of standing because the alleged confidential information did not belong to plaintiff.

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