Superior Court Examines Choice of Law Principles For Mixed Contractual and Non-Contractual Claims
Arkray America, Inc. v. Navigator Business Solutions, Inc., C.A. No. N20C-12-012 MMJ [CCLD] (Del. Super. June 9, 2021)
Arkray, a Delaware corporation based in Minnesota, manufactures diabetes testing and management supplies. Arkray brought claims against Navigator, a provider of Enterprise Resource Planning software solutions based in Utah, and N’Ware, a provider of custom “add-on” software for warehouse management based in New Hampshire. Arkray had contracted with Navigator under a software and consulting services agreement (the “Agreement”), which provided that it “shall be governed by and construed under the laws of the State of Utah without reference to its conflicts of law principles.” Arkray contracted with N’Ware under a similar “License Agreement,” which provided that it “shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America, without reference to its conflicts of laws principles.”
Arkray asserted contract claims, fraudulent misrepresentation claims, and violations of Minnesota’s Unfair Trade Practices Act against both Navigator and N’Ware. The parties agreed that Utah law governed the contract claims against Navigator, and Delaware law governed the contract claim against N’Ware. The parties disputed which state law governed the tort and statutory claims.
The Superior Court noted a distinction between “broad” choice of law provisions, that might apply to any claims “arising from” or “related to” a contract, and “narrow” choice of law provisions, that by their terms are limited to the actual contract itself. The Court found the choice of law provisions here to be narrow, and so conflicts of law principles would control the law applicable to the related tort and statutory claims. The Superior Court noted that there was “divergent precedent” on this issue in Delaware, and that in Abry Partners V., L.P. v. F&W Acquisition LLC, the Court of Chancery had concluded that a “narrow” choice of law provision would nonetheless apply to related tort claims. Abry concluded that to hold that the choice of law provision “is only effective as to the determination of contract claims, but not as to tort claims seeking to rescind the contract on grounds of misrepresentation, would create uncertainty of precisely the kind that the parties’ choice of law provision sought to avoid.” Notwithstanding that the plaintiff before it, Arkray, was asserting fraudulent misrepresentation, the Superior Court distinguished Abry because Arkray was not actually seeking to rescind the contract based on that claim.
The Superior Court ultimately concluded that there were no conflicts warranting a conflict of law analysis on the misrepresentation claims, and that Delaware public policy would not be offended by applying Minnesota law to the statutory claims.Share