Justia Civil Procedure Opinion SummariesArticles Posted in Delaware Supreme Court
Overstock.com, Inc. v. State
Appellant, Overstock.com, Inc. (Overstock) appealed a superior court judgment awarding Appellees/Plaintiff-Relator William French and the State of Delaware (Plaintiffs), $22,000 in civil penalties and $7,266,412.94 in treble damages for violations of the Delaware False Claims and Reporting Act (the DFCRA or the Act). Plaintiffs alleged Overstock engaged in what they described as a scam to evade its obligation to escheat balances owed on abandoned gift cards to the Delaware State Escheator. It did so, they claimed, by making it falsely appear that its gift cards were held by an Ohio company, not Overstock. It was undisputed that Overstock did not file escheat reports or pay the money value of abandoned gift cards to the Delaware Escheator during the years in question. The case was tried before a jury on a theory that Overstock violated the Act between 2010 to 2013. Overstock raised several claims on appeal, but the Delaware Supreme Court addressed only one. Overstock contended the superior court misinterpreted the Act and erred by instructing the jury that the knowing failure to file escheat reports when required to do so was no different than actively making a false statement. Overstock contended that the failure to file such reports does not satisfy the Act’s requirement that a false record or statement be made or used to avoid, conceal or decrease an obligation to pay money to the Government. Furthermore, Overstock contended it did not make or use any false record or statement in connection with gift cards that violated the Act. The Supreme Court agreed that the evidence failed to establish the making or use of a false record or statement in violation of the Act. Accordingly, the superior court’s judgment was reversed and the matter remanded for further proceedings. View "Overstock.com, Inc. v. State" on Justia Law
Borealis Power Holdings Inc. v. Hunt Strategic Utility Invesment
Hunt Strategic Utility Investment, L.L.C. (“Hunt”) owned a one-percent stake in Texas Transmission Holdings Corporation (“TTHC”), a utility holding company. The remaining ninety-nine percent was split equally between the Borealis entities (Borealis Power Holdings, Inc. and BPC Health Corporation, together, “Borealis”) and Cheyne Walk Investment PTE LTD (“Cheyne Walk”); neither Borealis nor Cheyne Walk owned a majority stake in TTHC, each owned 49.5%. TTHC wholly owned Texas Transmission Finco LLC, which wholly owned Texas Transmission Investment LLC (“TTI”). TTI in turn owned 19.75% of Oncor Electric Delivery Company LLC (“Oncor”). The remaining 80.25% of Oncor is held by Sempra Texas Holdings Corp. (“STH) and Sempra Texas Intermediate Holding Company, LLC (“STIH” and, together with STH, “Sempra”). This dispute involved a purported conflict between two separate contracts binding two discrete sets of parties who owned Oncor. Hunt’s sale of its one-percent stake is subject to the TTHC Shareholder Agreement (the “TTHC SA”), which gives Borealis and Cheyne Walk a right of first offer in the event that Hunt wishes to sell (the “ROFO”). But Sempra argued the sale was also subject to a separate contract - the Oncor Investor Rights Agreement (the “Oncor IRA”) - which provided Sempra with a right of first refusal (the “ROFR”) in the event Oncor LLC units were transferred. The Court of Chancery decided in Sempra’s favor, holding that Hunt’s sale of its 1% stake in TTHC was also a “transfer” of Oncor LLC units, as defined in the Oncor IRA. The court thus held Hunt’s proposed sale triggered Sempra’s ROFR, which preempted Borealis’s ROFO because the source of the ROFO was the TTHC SA, which itself stated that enforcement of the TTHC SA could not breach the Oncor IRA. After a de novo review of the language of both the TTHC SA and the Oncor IRA, the Delaware Supreme Court concluded the Oncor IRA, which, by its terms, restricted transfers by Oncor’s Minority Member (TTI) and not by Hunt, did not apply to Hunt’s sale of its interest in TTHC. The Court therefore reversed the judgment of the Court of Chancery. View "Borealis Power Holdings Inc. v. Hunt Strategic Utility Invesment" on Justia Law
Salzberg v. Sciabacucchi
The issue raised on appeal to the Delaware Supreme Court centered on the validity of a provision in several Delaware corporations’ charters requiring actions arising under the federal Securities Act of 1933 (the “Securities Act” or “1933 Act”) to be filed in a federal court. Blue Apron Holdings, Inc., Roku, Inc., and Stitch Fix, Inc. were all Delaware corporations that launched initial public offerings in 2017. Before filing their registration statements with the United States Securities and Exchange Commission (the “SEC”), each company adopted a federal-forum provision. Appellee Matthew Sciabacucchi bought shares of each company in its initial public offering or a short time later. He then sought a declaratory judgment in the Court of Chancery that the FFPs were invalid under Delaware law. The Court of Chancery held that the FFPs were indeed invalid because the “constitutive documents of a Delaware corporation cannot bind a plaintiff to a particular forum when the claim does not involve rights or relationships that were established by or under Delaware’s corporate law.” The Supreme Court disagreed and reversed, finding that such a provision could survive a facial challenge under Delaware law. View "Salzberg v. Sciabacucchi" on Justia Law
In RE: Asbestos Litigation
In this appeal, the issue presented for the Delaware Supreme Court's review was whether the Superior Court abused its discretion when it accepted the Special Master’s report denying the plaintiffs a second extension to move the trial date. To warrant the extension, the plaintiffs had to show good cause. According to the court, the plaintiffs failed to show good cause because they were not diligent in meeting Texas law requirements for asbestos exposure claims, the time pressures faced by counsel were foreseeable, counsel should not have missed deadlines, and, under the circumstances, refusing to grant another trial date extension was not unfair. On appeal, the plaintiffs tried to switch to a new standard to evaluate the Superior Court’s decision. The Delaware Supreme Court, however, declined to do so. "The Superior Court applied the law correctly and based its findings on the record and reason. There was no abuse of discretion, and we affirm." View "In RE: Asbestos Litigation" on Justia Law
Germaninvestments AG v. Allomet Corporation
Plaintiff-appellant Germaninvestments Aktiengesellschaft (AG) (“Germaninvestments”) was a Swiss holding company formed to manage assets for the Herrling family. Defendant Allomet Corporation (“Allomet”) was a Delaware corporation that manufactured high-performance, tough-coated metal powders using a proprietary technology for coating industrial products. Defendant Yanchep LLC (“Yanchep”), was also a Delaware limited liability company with Mirta Hereth as its sole member (together, Allomet and Yanchep are referred to as “Appellees”). Allomet struggled with declining performance as early as 2002. In mid-2016, Tanja Hausfelder, an insurance professional who apparently knew or worked with the Herrlings and Hereth, advised Herrling that Hereth was looking for a joint venture partner to join Allomet. After a meeting in Switzerland, Herrling and Hereth discussed a general structure for their joint venture to raise capital for Allomet. The issue this case presented for the Delaware Supreme Court’s review centered on whether the Court of Chancery correctly determined that a provision in a Restructuring and Loan Agreement between the parties was a mandatory, as opposed to a permissive, forum selection clause. The Court of Chancery held that Austrian law governed the analysis of the forum selection provision, and determined that the provision is governed by Article 25 of the European Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters. Based upon these conclusions, the court granted Defendants’ motion to dismiss in favor of the Austrian forum. The Delaware Supreme Court held that Appellees, who raised Austrian law as a basis for their motion to dismiss, had the burden of establishing the substance of Austrian law, and that the Court of Chancery erred in determining that Appellees had carried that burden. Accordingly, the forum selection provision analysis should have proceeded exclusively under Delaware law. Applying Delaware law, the Delaware Court determined the forum selection provision was permissive, not mandatory. “As such, the forum selection provision is no bar to the litigation proceeding in Delaware.” The Court affirmed the Court of Chancery’s holding that 8 Del. C. section 168 was not the proper mechanism for the relief Appellants sought. Therefore, this matter was affirmed in part, reversed in part, and remanded to the Court of Chancery for further proceedings. View "Germaninvestments AG v. Allomet Corporation" on Justia Law
McElrath v. Kalanick, et al.
In 2016, Uber Technologies, Inc. acquired Ottomotto LLC to gain more traction in the autonomous vehicle space, hiring key employees from Google's autonomous vehicle program. Though steps were taken to ensure the former Google employees did not misuse Google's confidential information, it eventually came to light Google's proprietary information had indeed been misused. Uber settled Google's misappropriation claims by issuing additional Uber stock to Google, valued at $245 million. An Uber stockholder and former Uber employee filed suit in the Delaware Court of Chancery against the directors who approved the Otto acquisition. Plaintiff claimed the directors ignored the alleged theft of Google’s intellectual property and failed to investigate pre-closing diligence that would have revealed problems with the transaction. According to plaintiff, the board should not have relied on the CEO’s representations that the transaction had the necessary protections because he and Uber had a history of misusing the intellectual property of others. Defendants responded by moving to dismiss the complaint under Court of Chancery Rule 23.1. As they asserted, the plaintiff first had to make a demand on the board of directors before pursuing litigation on the corporation’s behalf. The Court of Chancery found that a majority of the Uber board of directors could have fairly considered the demand, and dismissed the complaint. The Delaware Supreme Court found, as did the Court of Chancery, that a majority of the board was disinterested because it had no real threat of personal liability due to Uber’s exculpatory charter provision. And a majority of the board was also independent of the one interested director. Therefore, the Supreme COurt affirmed the Court of Chancery's judgment dismissing the complaint with prejudice. View "McElrath v. Kalanick, et al." on Justia Law
Imbragulio v. UIAB
Elizabeth Imbragulio appealed a Superior Court decision that reversed the decision of the Unemployment Insurance Appeals Board (“the Board”) and concluded that she had been terminated for just cause by her employer, Civic Health Services, LLC (“Civic Health”). The Board cross-appealed, arguing that the Superior Court lacked jurisdiction to consider Civic Health’s appeal in the first instance because it was not filed in a timely manner. The issue raised by the cross-appeal was whether Superior Court Civil Rule 6(a)’s method for computing time applied to the requirement in 19 Del. C. section 3323(a) that a party seeking judicial review of a decision by the Board must do so within ten days after the decision becomes final. After careful consideration, the Delaware Supreme Court agreed with the Board that it did not, and therefore concluded that the Superior Court did not have jurisdiction over Civic Health’s appeal. Accordingly, the Supreme Court directed the Superior Court to vacate its judgment. View "Imbragulio v. UIAB" on Justia Law
Ford Motor Company v. Knecht, et al.
Plaintiff-appellee Paula Knecht, individually and as executrix of the estate of her late husband, Larry Knecht filed suit against 18 defendants alleging defendants failed to warn Mr. Knecht of the dangers of asbestos. During his lifetime, Mr. Knecht developed mesothelioma from exposure to asbestos. While the case was awaiting trial, Mr. Knecht passed away. When the trial date arrived, there was only one remaining defendant appellant Ford Motor Company. A jury held Ford liable for Mr. Knecht's illness and awarded damages. Negligence was apportioned between the parties, Ford was assigned a 20% share of the total negligence. The trial judge then applied 20% to the $40,625,000 damages award and arrived at a compensatory damages award against Ford of $8,125,000. The jury also awarded plaintiff $1,000,000 in punitive damages. After the jury returned its verdict, Ford filed two motions: (1) a renewed motion for judgment as a matter of law under Superior Court Rule 50(b) or, in the alternative, a new trial; and (2) a motion for a new trial, or, in the alternative, remittitur. The trial judge denied both motions. On appeal to the Delaware Supreme Court, Ford argued: (1) the Superior Court erred by not granting Ford judgment as a matter of law on the ground that plaintiff failed to prove that Mr. Knecht’s injury was caused by Ford’s failure to warn of the dangers of asbestos; (2) the Superior Court erred by not granting a new trial on the ground that the jury rendered an irreconcilably inconsistent verdict; and (3) the Superior Court erred by not granting a new trial or remittitur on the ground that the compensatory damages verdict is excessive. The Supreme Court concluded the Superior Court’s rulings against Ford on the first two claims were correct. However, the Court concurred the third contention had merit, reversed judgment and remanded to the Superior Court for further consideration of Ford’s motion for a new trial, or, in the alternative, remittitur. View "Ford Motor Company v. Knecht, et al." on Justia Law
Christiana Care Health Services Inc. v. Carter, et al.
Appellant Christiana Care Health Services, Inc. (“CCHS”) brought an interlocutory appeal of a Superior Court decision to deny its motion for partial summary judgment. The alleged medical negligence at issue in the underlying case occurred during surgery performed on Margaret Rackerby Flint at Christiana Care Hospital, which is operated by CCHS. The surgery allegedly caused her death two days later. The complaint was filed by Meeghan Carter, Ms. Flint’s daughter, individually and as administratrix of Ms. Flint’s estate. It named as defendants Dr. Michael Principe, who performed the surgery, Dr. Eric Johnson, who assisted him, and CCHS. Later, the medical practices of the two doctors were added as defendants. The sole claim against CCHS was that the two doctors were its agents and it is vicariously liable for their alleged negligence. Mediation resolved claims against Dr. Principe and his medical practice. As part of that settlement, plaintiff signed a release which released all such claims. CCHS was not a party to the settlement or the release. Following that settlement, CCHS filed its motion for partial summary judgment against plaintiff on the theory that the release of Dr. Principe released it from any vicarious liability for Dr. Principe’s alleged negligence. The Superior Court denied the motion. CCHS argued: (1) the release of an agent released a vicarious liability claim against the principal as a matter of law; and (2) the terms of the release which plaintiff signed when she settled with Dr. Principe and his medical practice also released it from liability for Dr. Principe’s conduct. The Delaware Supreme Court agreed with CCHS’s second contention, finding that the written release operated as a complete satisfaction of plaintiff’s vicarious liability claim against CCHS arising from Dr. Principe’s alleged conduct, and the motion for partial summary judgment should have been granted. View "Christiana Care Health Services Inc. v. Carter, et al." on Justia Law
In Re Verizon Insurance Coverage Appeals
In 2006, Verizon divested its print and electronic directories business to its stockholders in a tax-free “spin-off” transaction. As part of the transaction, Verizon created Idearc, Inc. and appointed John Diercksen, a Verizon executive, to serve as Idearc’s sole director. Verizon then distributed Idearc common stock to Verizon shareholders. Idearc launched as a separate business with $9.1 billion in debt. In connection with the Idearc spinoff, Verizon and Idearc purchased primary and excess Executive and Organizational Liability Policies (“Idearc Runoff Policies"). The Idearc Runoff Policies covered certain claims made against defined insureds during the six-year policy period that exceeded a $7.5 million retention. Relevant here, Endorsement No. 7 to the policies stated that “[i]n connection with any Securities Claim,” and “for any Loss . . . incurred while a Securities Claim is jointly made and maintained against both the Organization and one or more Insured Person(s), this policy shall pay 100% of such Loss up to the Limit of Liability of the policy.” “Securities Claim” was defined in pertinent part as a “Claim” against an “Insured Person” “[a]lleging a violation of any federal, state, local or foreign regulation, rule or statute regulating securities (including, but not limited to, the purchase or sale or offer or solicitation of an offer to purchase or sell securities).” Under the policy, Verizon could recover its “Defense Costs” when a Securities Claim was brought against it and covered directors and officers, and Verizon indemnified those directors and officers. Idearc operated as an independent, publicly traded company until it filed for bankruptcy in 2009; a litigation trust was set up to pursue claims against Verizon on behalf of creditors. Primary amongst the allegations was Dickersen and Verizon saddled Idearc with excessive debt at the time of the spin-off. This appeal turned on the definition of a "Securities Claim;" the Superior Court found the definition ambiguous. Using extrinsic evidence, the court held that fiduciary duty, unlawful dividend, and fraudulent transfer claims brought by a bankruptcy trustee against Verizon Communications Inc. and others were Securities Claims covered under the policy. The Delaware Supreme Court disagreed, finding that, applying the plain meaning of the Securities Claim definition in the policy, the litigation trustee’s complaint did not allege any violations of regulations, rules, or statutes regulating securities. Thus, the Superior Court’s grant of summary judgment to Verizon was reversed and that court directed to enter summary judgment in favor of the Insurers. View "In Re Verizon Insurance Coverage Appeals" on Justia Law