Delaware Business Litigation Report

District Court Rejects Defenses to Breach of Contract, Awards Attorneys' Fees

Chase Manhattan Bank v. Iridium Africa Corp., 2007 WL 518440 (D.Del. Feb. 16, 2007)

In this breach of contract case, the defendant members of a bankrupt LLC asserted various defenses to their alleged contractual obligation to make capital contributions after the bankruptcy. The plaintiff lender had made an $800 million dollar loan to the LLC, and asserted that the members were contractually obligated to continue capital contributions despite the bankruptcy. The District Court entered summary judgment for the plaintiff on its breach of contract claim, but delayed entering final judgment until the parties could brief remaining “open issues”. The defendants argued that the plaintiff’s alternate theory of recovery should be dismissed as moot prior to a final entry of summary judgment for the plaintiff, that the plaintiff was not entitled to attorneys’ fees, and that the Court’s grant of summary judgment had left unresolved various defenses asserted by the defendants. The Court concluded that the entry of summary judgment was appropriate without addressing the plaintiffs’ alternate theories of recovery and did not leave any defenses unresolved, and that the plaintiff was contractually entitled to attorneys’ fees. The Court therefore found that the entry of final judgment for the plaintiff was appropriate.

The defendants argued that the plaintiff’s fraud claim should be dismissed as moot prior to entering final judgment on the breach of contract claim. The Court, however, found that it was not required to address a mutually exclusive theory of recovery where a plaintiff recovers under another theory. The Court also accepted the plaintiff’s argument that by virtue of the LLC Agreement, when read in conjunction with the loan’s Pledge Agreement, the plaintiff had acquired all rights and remedies of the LLC, including the right to recover attorneys’ fees in actions to enforce the LLC members’ obligation to make capital contributions. Rejected were the defendants’ arguments that the LLC Agreement did not give the plaintiff a right to attorneys’ fees as against the members, and that a grant of summary judgment on the basis of breach of the LLC Agreement precluded reliance on the terms of the Pledge Agreement. The Court found that the defendants, through the LLC Agreement’s provisions, had waived any defenses to their capital contribution obligations and had not right to “set off” these obligations against a breach by the LL itself. Finally, the Court rejected the defendants’ argument that the ruling on summary judgment, while addressing their lack of consideration defense, had left unresolved their defenses of impracticability, frustration of purpose, and lack of unanimous consent to amendment of the LLC Agreement. The Court concluded that its “decision to grant summary judgment in favor of [the plaintiff] necessarily implied a rejection of remaining affirmative defenses.”

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