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Court of Chancery Refuses to Dismiss Claims for Tortious Interference, Unfair Trade Practices, and Fraudulent Misrepresentation in Connection with Sale of Business

Griffin Corp. Services v. Jacobs, C.A. No. 396-N, 2005 WL 2000775 (Del. Ch. Aug. 11, 2005). Counterclaim plaintiffs Jacobs, Dobrzynski, Stewart, and Stewart Management Company ("SMC") asserted that Griffin Corporate Services ("Griffin") and other counterclaim defendants interfered with their existing contract and prospective business relationships and engaged in common law and statutory unfair trade practices. They also asserted that Griffin breached its confidentiality agreement with SMC and made misrepresentations to SMC. The counterclaim defendants moved to dismiss. Griffin, a limited liability company and subsidiary of Wachovia Bank, provided commercial domicile services to special purpose entities. This case arose after Wachovia initiated a closed bidding process to sell Griffin and, in doing so, invited SMC and Entity Services Group ("Entity") to participate. As part of the process, Wachovia required the bidders to enter into a confidentiality agreement. After two bids by SMC, Wachovia sold Griffin to Entity. And after Entity took over Griffin, Jacobs and Dobrzyncski, employees of Griffin, left for SMC. The court denied defendants' motion to dismiss plaintiffs' claim for tortious interference with prospective business relations. The counterclaim plaintiffs sufficiently showed that Griffin and the counterclaim defendants conducted a calling campaign to as many of the SPEs that had employment contracts with Dobrzynski and Jacobs instructing them that they needed to replace Dobrzynski and Jacobs and failing to provide accurate information as to how to contact them. The court denied defendants' motion to dismiss the counterclaim plaintiffs' claim for unfair trade practices, holding (1) that the counterclaim plaintiffs had standing as they did not affirmatively state that the harm had abated; and (2) that it could not grant the counterclaim defendants' claim that their acts did not constitute prohibited acts under the Delaware Deceptive Trade Practices Act because the counterclaim plaintiffs' allegations depicted statements made by Griffin and the defendants that disparaged the services of SMC, misrepresented characteristics of Entity/Griffin services, and created a likelihood of confusion regarding Entity/Griffin's association with Jacobs and Dobrzynski. In addition, the court denied the counterclaim defendants' motion to dismiss plaintiffs' claim for fraudulent misrepresentation because plaintiffs plead with sufficient particularity that the bidding process for Griffin was a sham. However, the court dismissed plaintiffs' breach of confidentiality agreement claim because although plaintiffs alleged that the contract was a sham, they did not allege a breach. Authored by: R. Christian Walker 302-888-6974 rwalker@morrisjames.com