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Inconsistent Positions Appear to Contribute to Interlocutory-Appeal Denial

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May 6, 2015
By: Morris James LLP
Delaware Business Court Insider

In The Renco Group v. MacAndrews AMG Holdings LLC (Del. Ch. Apr. 20, 2015), the Delaware Court of Chancery denied a motion for interlocutory appeal of a decision dismissing the plaintiff's breach of fiduciary duty, aiding and abetting breach of fiduciary duty and business tort claims and limiting the plaintiff to its contract-based claims. In its underlying decision, the court dismissed the claims for breach of fiduciary duty and business torts because "they could not proceed in parallel with Renco's breach of contract claims based on the complex and sophisticated contractual relationship documented by the limited liability company agreement." On the plaintiff's motion for interlocutory appeal, the court applied the familiar standard under Supreme Court Rule 42, but also noted that the present action proceeded "in parallel with another action involving the same parties and their controllers." According to the court, the main plaintiff in the case before it (Renco) had successfully "moved to dismiss claims asserted by Holdco [the nominal defendant] for virtually the same reasons that the defendants in this case asserted and prevailed upon." Accordingly, the court denied certification of an interlocutory appeal.


In this matter, Renco asserted claims for breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, tortious interference and fraudulent transfer. On the defendants' motion to dismiss, the court found that, based on the "complex and sophisticated contractual relationship" between the parties, "there was no 'independent basis for the fiduciary duty claims apart from the contractual claims.'" The court, however, did not hold that fiduciary duties had been eliminated under the terms of the contract. Instead, the court found that, "for purposes of this litigation, the ... contractual obligations came ahead of, and encompassed the scope of, traditional fiduciary duties, and it is to the parties' contract that the court should turn for resolution of the dispute."

On its motion for certification of an interlocutory appeal, Renco argued that, under Supreme Court Rule 42, the court's decision determined a substantial issue and established a legal right and also involved a question of law that is one of first instance in Delaware and subject to conflicting decisions of the trial courts. Initially, the court agreed that its earlier decision determined a substantial issue and established a legal right, as it reduced the scope of the dispute to one of contract and dismissed the non-contract-based claims.

Next, the court found that its decision to dismiss the breach of fiduciary duty and business law claims were based on its construction of the parties' agreement. To the extent the court's contract interpretation was too narrow in this regard, the court determined that an interlocutory appeal was unwarranted. As such, the court's analysis focused on the aiding and abetting claims, which involved the interests of related defendants who would be dismissed from the case. In analyzing the aiding and abetting claims, the court balanced the apparent conflicting relevant decisions in this area of the law with the parties' decision to govern their affairs under the terms of the contract. Ultimately, the court concluded that, "giving primacy to the contract ... brings along the principle that one cannot aid and abet a breach of contract, certainly a contract without a standard of fiduciary duty."

Renco also argued the interests of justice would be served by an interlocutory appeal, "because of the important issues presented and the potential waste of resources if a second trial regarding the dismissed claims becomes necessary." In addressing this argument, the court first found that the requested interlocutory appeal offered "no hope that the litigation will be resolved." The court also noted that "weighing against an interlocutory appeal are the circumstances of this and related litigation."

In particular, the court found that the present matter was proceeding in parallel with another action involving many of the same parties or their controllers. The outcome in the other matter, "with respect to the Renco parties' efforts to dismiss comparable claims, was substantially the same as the outcome on this motion to dismiss." The court further compared the arguments offered by Renco in the related action to the arguments asserted by the defendants in the present action and found them to be virtually the same. For instance, Renco argued in the other matter that: "Under Delaware law, if a contract claim addresses the alleged fiduciary wrongdoing, any fiduciary duty claim arising out of the same conduct is superfluous." The court further concluded that "Renco seeks an interlocutory appeal to undo the law upon which the court relied and upon which Renco prevailed in parallel litigation." The court was unwilling to countenance such a result. Accordingly, Renco's motion for certification of an interlocutory appeal was denied.

Delaware Business Court Insider  |  May 6, 2015

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