Justia Delaware Supreme Court Opinion Summaries

Guaranteed Rate, Inc., a mortgage lender, purchased two types of insurance policies from ACE American Insurance Company: management liability and professional liability. Guaranteed Rate sought coverage under the policies for an investigation and eventual settlement of claims brought by the federal government under the False Claims Act. ACE denied coverage under both policies. According to ACE, the Professional Liability Policy expressly excluded False Claims Act charges. ACE also contended that the False Claims Act charges arose from Guaranteed Rate’s professional services, which were excluded under the Management Liability Policy. Only the Management Liability Policy was at issue in this appeal. In Guaranteed Rate’s suit against ACE, a Delaware superior court held that the False Claims Act investigation and settlement did not arise out of Guaranteed Rate’s professional services. Instead, it arose out of false certifications made to the government. Thus, the Management Liability Policy covered the loss. To this, the Delaware Supreme Court agreed with the superior court. View "ACE American Insurance Company v. Guaranteed Rate, Inc." on Justia Law

Appellant City of Newark sought review of a superior court order resolving appellees’ contractual indemnification obligations. The City sought a declaration from the superior court that appellees breached a settlement agreement between the parties and, under the terms of that settlement agreement, appellees had to indemnify the City for all its fees and costs associated with a 2019 subpoena and a separate declaratory judgment action appellees filed in 2019. The superior court held that appellees had to indemnify the City for the subpoena, but not the 2019 action. On appeal, the City contended the settlement agreement’s plain language obligated appellees to indemnify the City for the 2019 action, and the superior court erred in concluding otherwise. The indemnification provision at issue broadly required appellees to indemnify the City for any fees and costs it incurred in any proceeding related to appellees’ separate litigation against a third party in Pennsylvania. Appellees filed the 2019 action to clarify the City's obligation to cooperate with, and provide discovery in, that Pennsylvania litigation. In its summary judgment decision, the superior court denied the City's indemnification claim without expressly addressing whether the 2019 action was “related to” the Pennsylvania litigation. Because the City was entitled to indemnification under the plain terms of the parties' agreement, the Delaware Supreme Court reversed the superior court's decision. View "City of Newark v. Durkin, et al." on Justia Law

Plaintiff-appellant Tracey Weinberg (“Weinberg”) was the former Chief Marketing Officer of defendant-appellee Waystar, Inc.(“Waystar”). During her employment, the company granted her options to purchase stock in its co-defendant Derby TopCo, Inc.,(“Derby Inc.”), pursuant to a Derby TopCo 2019 Stock Incentive Plan (the “Plan”). Weinberg was awarded three option grants under the Plan pursuant to three option agreements executed between October 2019 and August 2020. By the time Weinberg was terminated in 2021, 107,318.96 of her options had vested. She timely exercised all of them in November 2021, and the options immediately converted to economically equivalent partnership units in co-defendant Derby TopCo Partnership LP, a Delaware limited partnership (“Derby LP”) (the “Converted Units”). Each Option Agreement contained an identical call right provision providing Appellees the right to repurchase Weinberg’s Converted Units (the “Call Right”), “during the six (6) month period following (x) the (i) [t]ermination of [Weinberg’s] employment with the Service Recipient for any reason . . . and (y) a Restrictive Covenant Breach.” This appeal turned on the meaning of the word “and” in the three option agreements. Specifically, the question presented for the Delaware Supreme Court was whether two separate events (separated by the word “and”) had to both occur in order for the company to exercise a call right, or whether the call right could be exercised if only one event has occurred. Although Weinberg had been terminated within the time frame specified by the Call Right Provision, a Restrictive Covenant Breach had not occurred. The parties disputed whether the Call Right was available in the absence of a Restrictive Covenant Breach. The Court of Chancery decided that it was, and the Delaware Supreme Court concurred, affirming the Court of Chancery. View "Weinberg v. Waystar, Inc." on Justia Law

A Delaware superior court held that Plaintiffs-Appellees-Cross-Appellants, two doctors who started a laboratory testing enterprise known as Bako Diagnostics (“Bako”), breached certain restrictive covenants when they left Bako to form a new, competing laboratory enterprise. Despite fee-shifting provisions in certain of the contracts, the trial court declined to award attorneys’ fees. The Delaware Supreme Court agreed with the superior court’s determinations that the two doctors breached certain of the restrictive covenants. But because it appeared that the superior court may have misapplied the formula that both sides employed for calculating damages, the Court remanded the case for the trial court to clarify how it derived its damages award and for any needed revisions. Further, the Supreme Court disagreed that no attorneys’ fees were warranted under certain of the contracts. View "Bako Pathology LP v. Bakotic" on Justia Law

At issue in this appeal was a breach-of-contract dispute involving a stock purchase agreement for the sale of all the shares of stock of International Specialty Products Inc. (“International Specialty”). The selling shareholders were nine trusts and RFH Investment Holdings LLC (the “Heyman Parties”). The purchaser was Appellee Ashland Inc., a leading global specialty chemical company. International Specialty had two wholly owned subsidiaries that went with the sale, Appellee ISP Environmental Services Inc. and Appellee Chemco LLC (“Chemco”). ISP Environmental owned a property known as the Linden property, which for years had been home to chemical manufacturing operations and had an extensive environmental history. As part of the transaction, the parties agreed that the Heyman Parties would keep the Linden property. At the time of closing on the Stock Purchase Agreement, ISP Environmental caused the Linden property to be transferred to Appellant Linden Property Holdings LLC, the Heyman Parties’ designated entity for that purpose. A dispute arose between the parties as to who was responsible for the Linden property’s pre-closing, environmental liabilities. The parties agreed the Heyman Parties assumed responsibility in the agreement for the environmental contamination on the property itself. They disagreed as to who was responsible for environmental contamination to areas that were not part of the Linden property but were contaminated because of the activities on the Linden property. Ashland claimed that under the agreement, the Heyman Parties were responsible for all of the liabilities. The Heyman Parties claimed they never assumed any liability in the agreement for the off-site liabilities. The Superior Court agreed with Ashland and found that the Heyman Parties assumed responsibility in the agreement for the Linden property’s off-site environmental liabilities. The Delaware Supreme Court concluded, however, that under the unambiguous language of the agreement, the Heyman Parties assumed liability only for the Linden property’s on-site environmental liabilities, and assumed no liability for the property’s off-site liabilities. View "The Samuel J. Heyman 1981 Continuing Trust for Lazarus S. Heyman v. Ashland LLC" on Justia Law

The issue this appeal presented for the Delaware Supreme Court’s review asked for a determination of whether premiums paid on insurance policies declared void ab initio for lack of an insurable interest should be returned. Geronta Funding argued Delaware law required the automatic return of all premiums paid on the void policy. Brighthouse Life Insurance Company argued a party must prove entitlement to restitution. The trial court agreed with Brighthouse and relied on the Restatement (Second) of Contracts to determine whether Geronta was entitled to restitution. Specifically, the court held that Geronta could obtain restitution if it could prove excusable ignorance or that it was not equally at fault. Applying this test, the court ruled that Geronta was only entitled to the return of the premiums it paid after alerting Brighthouse to the void nature of the policy at issue. Geronta appealed this ruling, arguing that the court erred when it adopted the Restatement instead of automatically returning the premiums, erred in its actual application of the Restatement, even assuming that is the proper test, and erred by precluding certain testimony from Geronta witnesses. Because this was a matter of first impression, the Supreme Court adopted restitution under a fault-based analysis as framed by the Restatement as the test to determine whether premiums should be returned when a party presents a viable legal theory, such as unjust enrichment, and seeks the return of paid premiums as a remedy. The Court held, however, that despite applying the Restatement, the Superior Court’s application of the Restatement failed to account for the relevant questions encompassed by that approach. The Supreme Court reversed the trial court’s holdings regarding entitlement to premiums and remanded for further consideration, but found no fault in the Superior Court preclusion of certain testimony from Geronta’s witnesses. View "Geronta Funding v. Brighthouse Life Insurance Company" on Justia Law

This appeal involved a breach of contract claim arising out of an indemnitee’s refusal to repay money advanced pursuant to an LLC Agreement. Under the Agreement, a Person was entitled to indemnification if the Person acted in good faith and in a manner believed to be in or not opposed to the best interests of the Company. The indemnification payments were further conditioned on the Person’s written undertaking to repay all amounts advanced under the LLC Agreement if it was later determined that the Person did not satisfy the standard of conduct, and thus, was not entitled to indemnification. New Wood Resources operated a plywood and veneer manufacturing facility in Mississippi known as Winston Plywood & Veneer LLC (“WPV”). Dr. Richard Baldwin (“Baldwin”) served as a manager of New Wood starting in September of 2013, and served as a member of New Wood’s Board of Managers. Baldwin was asked to invest in New Wood, and to oversee the revitalization of a newly acquired plywood mill in Louisville, Mississippi. The WPV manufacturing facility in Louisville had been dormant for years and was in need of repair. New Wood began to make repairs so that it could operate a mill. However, prior to the WPV facility’s completion, the facility was destroyed by an EF-4 tornado. WPV received funding from FEMA, and Baldwin took the lead role on behalf of New Wood to restore the WPV facility and transform it into a functioning and profitable plywood manufacturing facility. In 2016, just before the WPV mill was set to begin operations, Baldwin was terminated from his position as the President and General Manager of WPV. The Delaware Court addressed the narrow issue of whether the LLC Agreement pertinent here contained an implied covenant of good faith that would require the determination of a Person’s entitlement to indemnification to be made in good faith. After review of the Agreement, the Court held that it did. It therefore reversed and remanded this case for further proceedings. View "Baldwin v. New Wood Resources LLC" on Justia Law

Two questions of law were certified to the Delaware Supreme Court by the United States Court of Appeals for the Eleventh Circuit: (1) when faced with an action brought by an estate under 18 Del. C. 2704(b), an innocent downstream investor in a stranger-originated life insurance (“STOLI”) policy, or its securities intermediary, could assert certain defenses under the Delaware Uniform Commercial Code; and (2) whether downstream investors in a STOLI policy could sue to recover any premiums they paid. The Court answered question one in the negative: in the sui generis context of STOLI schemes, these defenses are not available. The Court answered question two in the affirmative: yes, if the party being sued can prove its entitlement to those premiums under a viable legal theory. View "Wells Fargo Bank v. Estate of Phyllis M. Malkin" on Justia Law

Pursuant to the Ownership Interest Purchase Agreement dated April 23, 2014 (the “Agreement”), Appellant North American Leasing, Inc. purchased Appellant NASDI, LLC, and Appellant Yankee Environmental Services, LLC. NASDI was in the business of providing demolition and site redevelopment services throughout the United States. The seller was Appellee NASDI Holdings, LLC, which before the sale, possessed all ownership interests in NASDI and Yankee. Great Lakes Dredge and Dock Corporation (“Great Lakes”), the parent company of NASDI Holdings, agreed that performance and payment bonds on existing projects being performed by NASDI and Yankee at the time of the sale would remain in place for the duration of each project. The Agreement also provided that North American Leasing, NASDI, Yankee, and Appellant Dore & Associates Contracting, Inc. (“Dore”), would indemnify NASDI Holdings and its affiliates for any losses arising from those bonds that Great Lakes agreed would remain in place on existing projects. After the sale of NASDI and Yankee was completed, Great Lakes incurred losses from performance and payment bonds on a project known as the Bayonne Bridge project. The Defendants have taken the position throughout this litigation that they have no obligation to indemnify the Plaintiffs because the Plaintiffs’ claims notices were untimely under the Agreement. The Court of Chancery rejected the Defendants’ contention and entered judgment against the Defendants for the total amount of the Plaintiffs’ claim. Finding no reversible error in this judgment, the Delaware Supreme Court affirmed. View "North American Leasing, Inc. v. NASDI Holdings, LLC" on Justia Law

This appeal involved a challenge to how Geico General Insurance Company (“GEICO”) processed insurance claims under 21 Del. C. 2118. Section 2118 provided that certain motor vehicle owners had to obtain personal injury protection (“PIP”) insurance. Plaintiffs, all of whose claims for medical expense reimbursement under a PIP policy were denied in whole or in part, were either GEICO PIP policyholders who were injured in automobile accidents or their treatment providers. Plaintiffs alleged GEICO used two automated processing rules that arbitrarily denied or reduced payments without consideration of the reasonableness or necessity of submitted claims and without any human involvement. Plaintiffs argued GEICO’s use of the automated rules to deny or reduce payments: (1) breached the applicable insurance contract; (2) amounted to bad faith breach of contract; and (3) violated Section 2118. Having reviewed the parties’ briefs and the record on appeal, and after oral argument, the Delaware Supreme Court affirmed the Superior Court’s ruling that the judiciary had the authority to issue a declaratory judgment that GEICO’s use of the automated rules violated Section 2118. The Supreme Court also affirmed the Superior Court’s judgment as to the breach of contract and bad faith breach of contract claims. The Court concluded, however, that the issuance of the declaratory judgment was improper. View "GEICO General Insurance Company v. Green" on Justia Law