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Court of Chancery Holds Limitation Act In 10 Del. C. 8111 And Not 8106 Applies For "Other [Work] Benefits"

Little Switzerland, Inc. v. Patrick J. Hopper, C.A. No. 590 (Del. Ch. Jan. 24, 2005)(published at 867 A.2d 955). This case involved a request for an injunction filed by the employer-corporation seeking to stop an arbitration of a contractual claim by a plaintiff-employee. The employee sought significant payments under a Change in Control transaction that allegedly triggered a clause vesting the right to payment in the employee. The court held the claim was time-barred under 10 Del. C. §8111 and not 10 Del. C. §8106. This matter involves an agreement between the plaintiff-employee and the defendant-corporation that acquired the employee's stock in a Change in Control transaction. The Change in Control transaction triggered substantial payments to plaintiff under the agreement. Defendant-employee sought to challenge the consideration paid by plaintiff-employer by specifically enforcing the arbitration mandated under the agreement. In denying the employee's claims, the court addressed the sole issue: whether 10 Del. C. §8111, providing a one-year limitation, or §8106, prescribing a three-year limitation, would apply to govern this breach of contract action. Plaintiff-employer claimed that the one-year limit under section 8111 applied whereas defendant-employee claimed that the three-year statute applied. The court held that the former governed under these set of facts because the statute covered "other benefits arising from ... work ... performed," and was predicated on the past services of the defendant predating the Change in Control transaction. The court also distinguished other Delaware precedent dealing with the two statutes, namely Scharf v. Edgecomb Corp, 1997 WL 762656 (Del. Ch. Dec. 4, 1997) and Stifel Financial Corp. v. Cochran, 809 A.2d 555 (Del. 2002) in particular. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com