Justia Delaware Supreme Court Opinion Summaries

In the first appeal, the Supreme Court upheld the Court of Chancery’s finding that SIGA Technologies, Inc. in bad faith breached its contractual obligation to negotiate a license agreement consistent with the parties’ license agreement term sheet, known throughout this litigation as the “LATS.” The Supreme Court also held that where parties have agreed to negotiate in good faith, and would have reached an agreement but for the defendant’s bad faith conduct during the negotiations, the plaintiff could recover contract expectation damages, so long as the plaintiff can prove damages with reasonable certainty. Because the Court of Chancery ruled out expectation damages in its first decision, the case was remanded for consideration of damages to SIGA ("SIGA I”). On remand, the Court of Chancery reevaluated the evidence, and held that PharmAthene, Inc. met its burden of proving with reasonable certainty expectation damages and awarded PharmAthene $113 million. The parties once again appealed to the Supreme Court. SIGA raised two claims of error in this appeal: (1) the Court of Chancery was not free to reconsider its prior holding that lump-sum expectation damages were too speculative; and (2) if reconsideration was permitted, the expectation damages awarded following remand were too speculative. After careful consideration of SIGA’s arguments, the Supreme Court found that the law of the case doctrine did not preclude the Court of Chancery from reconsidering its earlier determination that lump-sum expectation damages were too speculative. The Court also found that the court did not abuse its discretion when it awarded PharmAthene lump-sum expectation damages, and its factual findings supporting its new damages determination were not clearly erroneous. Accordingly, the Court affirmed the judgment of the Court of Chancery. View "SIGA Technologies, Inc. v. PharmAthene" on Justia Law

The U.S. Court of Appeals for the Second Circuit certified a question of Delaware law arising out of an appeal from a decision issued by the U.S. District Court for the Southern District of New York. The question pertained to contract interpretation. Plaintiff-appellant NAF Holdings secured a contractual commitment of its contracting counterparty, defendant Li & Fung (Trading) Limited, to render a benefit to a third party. The counterparty breached that commitment. Could "the promisee-plaintiff bring a direct suit against the promisor for damages suffered by the plaintiff resulting from the promisor's breach, notwithstanding that (i) the third-party beneficiary of the contract is a corporation in which the plaintiff-promisee owns stock; and (ii) the plaintiff-promisee's loss derives indirectly from the loss suffered by the third-party beneficiary corporation; or must the court grant the motion of the promisor-defendant to dismiss the suit on the theory that the plaintiff may enforce the contract only through a derivative action brought in the name of the third-party beneficiary corporation?" The Delaware Supreme Court answered that under Delaware law, a party to a commercial contract who sues to enforce its contractual rights can bring a direct contract action under Delaware law. "Although the relationship of that party to the third-party beneficiary might well have relevance in determining whether the contract claim is viable as a matter of contract law, nothing in Delaware law requires the promisee-plaintiff's contract claim to be prosecuted as a derivative action. " View "NAF Holdings, LLC v. LI & Fung (Trading) Limited" on Justia Law

In the name of controlling litigation costs, a heating and air conditioning contractor, Blue Hen Mechanical, Inc. sued Christian Brothers Risk Pooling Trust as subrogee for the Little Sisters of the Poor for malicious prosecution. In January 2008, the Little Sisters of the Poor contracted with Blue Hen to maintain the heating, ventilation, and air conditioning equipment at its nonprofit residential nursing home facility. Two months later, the nursing home's air conditioner broke, requiring the unit to be replaced at a cost of $168,740. The Little Sisters of the Poor filed suit against Blue Hen, alleging that the unit's failure was due to Blue Hen's negligence in inspecting and maintaining the equipment. After briefing and oral argument, the Superior Court determined that the Little Sisters of the Poor had not produced sufficient evidence of Blue Hen's negligence, and granted Blue Hen's motion for summary judgment. Rather than seek costs in that lawsuit, Blue Hen initiated another suit against the Little Sisters of the Poor, alleging malicious prosecution and abuse of process. Blue Hen conceded that the Little Sisters of the Poor initially had good cause to sue. But it contended that during the course of that litigation, the Little Sisters of the Poor should have realized that its suit lacked probable cause, and should have dismissed its claims against Blue Hen. The Superior Court refused to enlarge the tort of malicious prosecution, which has historically been disfavored by Delaware courts, and determined that under the tort (as Delaware court have defined it), Blue Hen failed to demonstrate that the Little Sisters of the Poor acted maliciously in bringing its action and granted summary judgment to the Little Sisters of the Poor. Blue Hen appealed, and the Supreme Court affirmed: "[w]hatever the original wisdom for sanctioning the tort of malicious prosecution, we refuse to extend it to encompass claims properly brought before the court in the first instance. As important, there is no basis in the summary judgment record to support a rational jury finding that the Little Sisters of the Poor acted maliciously in the original suit, rather than in a good faith belief that Blue Hen was responsible for the serious losses that the Little Sisters of the Poor had suffered." View "Blue Hen Mechanical, Inc. v. Christian Brothers Risk Pooling Trust" on Justia Law

The Delaware Supreme Court certified two questions of New York law to the New York Court of Appeals. This case was a consolidated appeal in an insurance-coverage dispute from separate trial court judgments by the Delaware Court of Chancery and the Delaware Superior Court. Viking Pump, Inc. and Warren Pumps, LLC sought to recover under policies issued to Houdaille Industries, Inc. Viking claimed it was the successor to insurance policies that Liberty Mutual Insurance Company issued to Houdaille, or in the alternative, sought partition of the Liberty policy limits. Liberty, Viking and Warrant settled their dispute, but Viking and Warren then filed new complaints in the Court of Chancery against more than twenty other insurers that had issued excess policies to Houdaille. The Court of Chancery held that Houdaille's policies unambiguously provided for an all sums allocation. The case was then transferred to the Superior Court to determine several other issues. That court held that as a matter of New York law, Viking and Warren were obligated to horizontally exhaust all triggered "primary and umbrella insurance layers before tapping" any of Houdaille's excess coverage. The legal insurers in this appeal were controlled by New York law. As such, the Delaware Supreme Court certified two questions of New York law to the New York Court of Appeals, centering on the proper method of allocation and interpretation of the policies at issue here. View "In Re Viking Pump, Inc." on Justia Law

The issue this case presented for the Supreme Court's review arose from a business merger. Appellant, Lazard Technology Partners, LLC, represents former stockholders of Cyveillance, Inc. (the seller). Appellee Qinetiq North America Operations, LLC paid $40 million up-front money to the company and promised to pay up to another $40 million if the company's revenues reached a certain level. When the earn-out period ended, the revenues had not reached the level required to generate an earn-out. The seller filed suit in the Court of Chancery, arguing that the buyer breached the merger agreement. The seller also argued that the buyer violated the merger agreement‟s implied covenant of good faith and fair dealing by failing to take certain actions that the seller contended would have resulted in the achievement of revenue sufficient to generate an earn-out. After review, the Court of Chancery found that the seller had not proven that any business decision of the buyer was motivated by a desire to avoid an earn-out payment. Further, the Court found that the merger agreement's express terms were supplemented by an implied covenant. But as to whether conduct not prohibited under the contract was precluded because it might result in a reduced or no earn-out payment, the Court of Chancery held that, consistent with the language of implicated section of the merger agreement, the buyer had a duty to refrain from that conduct only if it was taken with the intent to reduce or avoid an earn-out altogether. On appeal, the seller argued the Court of Chancery misinterpreted the merger agreement. Finding no misinterpretation, the Supreme Court affirmed. View "Lazard Technology Partners v. Qinetiq North America Operations LLC" on Justia Law

This dispute arose from a contract signed by the parties in 2006, the Wireless Patent License Agreement, which provided for arbitration as the mechanism to resolve any claims arising under that Agreement. LG Electronics, Inc. sought a declaration in the Court of Chancery that InterDigital Communications, Inc., InterDigital Technology Corporation, and IPR Licensing Inc. that InterDigital had breached a nondisclosure agreement between the parties by disclosing confidential information during a pending arbitration proceeding. The Court of Chancery granted InterDigital's motion to dismiss, holding that all of LG's claims were properly before the arbitral tribunal, and deferred to the "first-filed proceeding" based on the factors established by the Delaware Supreme Court in "McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co." After review, the Supreme Court agreed that the McWane doctrine applied in this case, and that it supported dismissing LG's claims. View "LG Electronics, Inc. v. InterDigital Communications, Inc." on Justia Law

In this case, the buyer persuaded the Superior Court to award it $15.1 million in damages when the buyer bought a 65% interest in an investment advisory firm for $25 million. The buyer’s premise was that it would not have paid $25 million but for its expectancy that it would manage seven funds for three or more years. But the majority of the assets under management at the investment advisory firm were attributable to accounts other than the seven funds. Significantly, the contract enabled the seller to terminate the buyer’s right to manage the seven funds for any reason, so long as it paid a termination fee capped at $3.5 million, and to terminate the buyer without any compensation if the seller believed its fiduciary duties required or if the buyer’s performance fell below a contractual standard. After three years, the seller could terminate the buyer as manager of the funds for any reason and owe no compensation at all. The Delaware Supreme Court reversed the Superior Court. The Supreme Court found that instead of giving effect to the parties’ contractual bargain, the Superior Court erred by implying contractual obligations on the part of the seller that were inconsistent with the contract’s express terms. This enabled the buyer to obtain in litigation benefits in excess of those potentially available under the contract, and contractual protections that the buyer had failed to obtain in negotiations. The case was remanded for a determination of what, if any, termination fee is due to the buyer because of the seller’s termination of it as manager of the funds. View "Nationwide Emerging Managers, LLC, et al. v. Northpointe Holdings, LLC, et al." on Justia Law

Defendant-Appellant First Health Settlement Class appealed a superior court order that granted partial summary judgment in favor of plaintiff-appellee Chartis Specialty Insurance Company. This was one of a number of class action cases filed against First Health and others in the State of Louisiana. In those actions, medical service providers alleged that First Health violated notice provisions contained in a Louisiana statute known as the Preferred Provider Organizations Act. First Health ultimately entered into a settlement in which it resolved all of the Louisiana litigation. Chartis was First Health's errors and omissions insurance insurer. The policy had a number of exclusions, one of which was an exclusion for "penalties." The issue this case presented for the Delaware Supreme Court's review was whether the amount that First Health paid to settle the Louisiana litigation was a "penalty," and, therefore, not a covered loss under the insurance policy. The superior court concluded that the amount paid was a "penalty." The Delaware court disagreed, concluding that it was not a "penalty," and that the policy's exclusion for "penalties" did not apply. View "The First Health Settlement Class v. Chartis Speciality Insurance Co." on Justia Law

Defendant-Appellant CorVel Corporation appealed a superior court order that granted partial summary judgment in favor of plaintiff-appellee Homeland Insurance Company of New York. This was one of a number of class action cases filed against CorVel and others in the State of Louisiana. In those actions, medical service providers alleged that CorVel violated notice provisions contained in a Louisiana statute known as the Preferred Provider Organizations Act. CorVel ultimately entered into a settlement in which it resolved all of the Louisiana litigation. Homeland was CorVel's errors and omissions insurance insurer. The policy had a number of exclusions, one of which was an exclusion for "penalties." The issue this case presented for the Delaware Supreme Court's review was whether the amount that CorVel paid to settle the Louisiana litigation was a "penalty," and, therefore, not a covered loss under the insurance policy. The superior court concluded that the amount paid was a "penalty." The Delaware court disagreed, concluding that it was not a "penalty," and that the policy's exclusion for "penalties" did not apply. View "Corvel Corporation v. Homeland Insurance Company of New York" on Justia Law

Textron, Inc. appealed a Superior Court judgment which held that the company was not entitled to reimbursement from its former fastening manufacturing business, now known as Acument Global Technologies, Inc. for paying certain pre-closing contingent liabilities in the United States. The Superior Court's opinion centered on the meaning of a "tax benefit offset" provision in the parties' Purchase Agreement under which Acument was required to reimburse Textron if Acument received a "tax benefit" related to the contingent liabilities. Textron argued that even if the tax benefit had to be actual rather than merely hypothetical, the Superior Court erred by not finding that Acument actually enjoyed the right to tax benefits. Textron contended that its payment of the pre-closing liabilities constituted a tax benefit because the payments automatically increase Acument's tax basis under U.S. tax law. The Supreme Court disagreed after its review of the appeal: the Agreement, taken as a whole, guaranteed that Acument would not receive a net tax benefit simply because Textron made a required indemnification payment. Accordingly, Textron's argument that Acument has received a tax benefit triggering Textron's right to reimbursement was without merit, as the total effect of Textron's payments is tax-neutral. Similarly, Textron's second and related claim that the Superior Court erred in "redefining" the required tax benefit to mean only a "deduction" rather than any "reduction" was meritless. The therefore affirmed the Superior Court's judgment. View "Textron v. Acument Global Technologies, Inc." on Justia Law