Articles Posted in Delaware Supreme Court

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Homeland Insurance Company of New York appealed a superior court judgment entered against it in the amount of $13.5 million plus pre-judgment interest. The litigation that led to the judgment was initiated by CorVel Corporation, a Delaware company that operated a national Preferred Provider Organization (PPO) network. Homeland issued CorVel a claims-made errors and omissions liability policy with limits of $10 million and a policy period of October 31, 2005 to October 31, 2006. Thereafter, Homeland issued similar renewal policies. CorVel’s PPO network included agreements with medical providers in Louisiana. In late 2004 and early 2005, Louisiana medical providers began filing claims asserting that CorVel had improperly discounted medical payments without providing proper notice in violation of a Louisiana PPO statute. Litigation in Louisiana ultimately involved millions of dollars of claims against CorVel. In 2011, CorVel entered into a settlement of the litigation. As part of the settlement consideration, CorVel paid $9 million. In 2015, CorVel filed its complaint in this case, alleging that Homeland owed it damages and penalties under another Louisiana statute, La. R.S. 22:1973. CorVel alleged that Homeland knowingly misrepresented facts or policy provisions in a complaint that Homeland filed in a declaratory judgment action in Delaware in 2011. The alleged misrepresentation was an averment that CorVel had not timely reported the PPO claims in accordance with the policy’s requirements. The damages CorVel sought were the $9 million that it paid to settle the Louisiana litigation, penalties, attorneys’ fees, and pre-judgment interest. The Delaware superior court agreed with CorVel’s claim and awarded it $9 million in damages, $4.5 million in penalties, and pre-judgment interest. Homeland argued on appeal: (1) the allegation in its declaratory judgment complaint was a statement of a coverage position that could not give rise to a finding of bad faith under either Delaware or Louisiana law; (2) no causal connection existed between the allegation in the declaratory judgment complaint and CorVel’s decision to settle the PPO claims; and (3) the applicable statute of limitations barred CorVel’s claim. The Delaware Supreme Court concluded that the statute of limitations did bar CorVel’s claim and that the superior court erred by ruling that it did not. Because the statute of limitations barred CorVel’s claim, the Court did not address Homeland’s first two arguments. View "Homeland Insurance v. Corvel Corp" on Justia Law

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Appellant CompoSecure, LLC. appealed a nearly $17 million Chancery Court judgment for past-due commissions, legal fees and expenses, pre-judgment interest, and contract damages arising out of a sales agreement with Appellee CardUX, LLC. On appeal, CompoSecure argued the Court of Chancery erred by holding: (1) the Sales Agreement was voidable, not void, under CompoSecure’s Amended and Restated Limited Liability Company Agreement; and (2) CompoSecure impliedly ratified the Sales Agreement. CardUX argued that, even if CompoSecure were correct, the Delaware Supreme Court should enforce the Sales Agreement based on a provision in the LLC Agreement that addresses reliance by third parties on certain company actions, or based upon quantum meruit. After review, the Supreme Court determined the trial court needed to determine whether the Sales Agreement was a “Restricted Activity” as that term was defined by the parties’ contract. The Supreme Court agreed with the Court of Chancery’s conclusions that: (1) the Related Party Provision (leaving aside the Restricted Activities Provision) rendered the Sales Agreement voidable, not void, and was therefore subject to equitable defenses; (2) the parties impliedly ratified the Sales Agreement under New Jersey law; and (3) the Third Party Reliance Provision did not save the Sales Agreement from a failure to comply with the Related Party or Restricted Activities Provisions. Accordingly, the Supreme Court affirmed in part, reversed in part and remanded for further proceedings. View "Composecure, L.L.C. v. Cardux, LLC, et al." on Justia Law

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Licensed nurses may be disciplined if they engage in “unprofessional conduct.” The applicable Delaware statute did not define “unprofessional conduct,” so the Board of Nursing adopted a rule to flesh the term out. Two nurses who held supervisory roles at a correctional facility were disciplined by the Board under that rule after they participated in the retrieval of medication from a medical waste container for eventual administration to an inmate. The nurses appealed to the Superior Court, and the court set their discipline aside. The court read the Board’s rule to require not just proof that the nurses breached a nursing standard, but also proof that in doing so, they put the inmate or the public at risk. And in the court’s view, the State had not made that showing. Because the Board applied the correct standard and its decision was supported by substantial evidence, the Delaware Supreme Court affirmed its decision and reversed the Superior Court. View "Delaware Board of Nursing v. Francis" on Justia Law

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Gene Daskin, a Greek citizen residing in Greece, appealed two Delaware Family Court decisions finding subject matter jurisdiction over his wife's divorce petition and finding service of process on him was sufficient without requiring that service be properly made under the Hague Service Convention. The wife was a dual citizen of the United States and Greece. She was born in Wilmington and resided with her mother at her mother’s Wilmington home prior to the parties’ marriage. They married in Wilmington in 1990, and from then until November 2015, resided together in Greece. The husband contends that the time the wife has spent in Delaware since 2015 is temporary and for limited purposes. He contends she was not a resident of Delaware for the six months preceding the filing of her divorce petition. In his affidavit, the husband states that the wife pays taxes in Greece, has a Greek social security number, has a Greek identity card and has accounts in Greek banks. He also states that the wife continues to maintain a private marketing business out of their home in Greece. The husband’s position was that she was a resident of Greece, not Delaware. After review of the district court record, the Delaware Supreme Court determined the Family Court erred by dismissing the husband's motion to dismiss for lack of subject matter jurisdiction: service of process was insufficient. The matter was remanded for the Family Court to vacate the divorce decree and for further proceedings. View "Daskin v. Knowles" on Justia Law

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The Delaware Supreme Court granted review to an interlocutory appeal in a Family Court divorce proceeding. The wife, Gretchen Knowles, was a dual citizen of the United States and Greece. She was born in Wilmington and resided with her mother at her mother’s Wilmington home prior to the parties’ marriage. The respondent-husband, Gene Daskin, was a Greek citizen residing in Greece. The appeal came from the husband, raising two claims: (1) the Family Court erred in finding it had subject matter jurisdiction over the wife’s divorce petition because she was not a Delaware resident for six consecutive months prior to the filing of the petition; and (2) the Family Court erred in finding that service of process upon him was sufficient without requiring that service be properly made under the Hague Service Convention. After review, the Supreme Court vacated the judgment of the Family Court denying the husband’s motion to dismiss for lack of subject matter jurisdiction. The Court reversed the denial of the husband’s motion to dismiss for lack of personal jurisdiction due to insufficiency of service of process. This matter was remanded to the Family Court to vacate the divorce decree, the trial Judge’s order of November 1, 2017 and the Commissioner’s order of August 8, 2017, and for further proceedings. View "Daskin v. Knowles" on Justia Law

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In March 2016, soon after The Fresh Market (the “Company”) announced plans to go private, the Company publicly filed certain required disclosures under the federal securities laws. Given that the transaction involved a tender offer, the required disclosures included a Solicitation/Recommendation Statement on Schedule 14D-9 which articulated the Board’s reasons for recommending that stockholders accept the tender offer from an entity controlled by private equity firm Apollo Global Management LLC (“Apollo”) for $28.5 in cash per share. Apollo publicly filed a Schedule TO, which included its own narrative of the background to the transaction. The 14D-9 incorporated Apollo’s Schedule TO by reference. After reading these disclosures, as the tender offer was still pending, plaintiff-stockholder Elizabeth Morrison suspected the Company’s directors had breached their fiduciary duties in the course of the sale process, and she sought Company books and records pursuant to Section 220 of the Delaware General Corporation Law. The Company denied her request, and the tender offer closed as scheduled on April 21 with 68.2% of outstanding shares validly tendered. This case calls into question the integrity of a stockholder vote purported to qualify for “cleansing” pursuant to Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304 (Del. 2015). In reversing the Court of Chancery's judgment in favor of the Company, the Delaware Supreme Court held "'partial and elliptical disclosures' cannot facilitate the protection of the business judgment rule under the Corwin doctrine." View "Morrison, et al. v. Berry, et al." on Justia Law

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In March 2016, soon after The Fresh Market (the “Company”) announced plans to go private, the Company publicly filed certain required disclosures under the federal securities laws. Given that the transaction involved a tender offer, the required disclosures included a Solicitation/Recommendation Statement on Schedule 14D-9 (together with amendments, the “14D-9”), which articulated the Board’s reasons for recommending that stockholders accept the tender offer—from an entity controlled by private equity firm Apollo Global Management LLC (“Apollo”). The 14D-9 incorporated certain required schedules by reference. After reading these disclosures, as the tender offer was still pending, stockholder-plaintiff Elizabeth Morrison suspected the Company’s directors had breached their fiduciary duties in the course of the sale process, and she sought Company books and records pursuant to Section 220 of the Delaware General Corporation Law. The Company denied her request, and the tender offer closed as scheduled. Litigation over the Section 220 demand ensued, and Plaintiff obtained several key documents, such as board minutes and a crucial e-mail from Ray Berry’s counsel to the Company’s lawyers. Plaintiff then filed this action, including a breach of fiduciary duty claim against all ten of the Company’s directors, including Ray Berry, and a claim for aiding and abetting the breach against Ray Berry’s son, Brett Berry, who did not serve on the Board. The thrust of Plaintiff’s breach of fiduciary duty claim was that Ray and Brett Berry teamed up with Apollo to buy The Fresh Market at a discount by deceiving the Board and inducing the directors to put the Company up for sale through a process that “allowed the Berrys and Apollo to maintain an improper bidding advantage” and “predictably emerge[] as the sole bidder for Fresh Market” at a price below fair value. Plaintiff also alleged the Board and the stockholders were misled into believing that Ray Berry would openmindedly consider partnering with any private equity firm willing to outbid Apollo, but, instead, “[t]he reality of the situation was that Ray Berry (a) had already formed the belief that Apollo was uniquely well situated to buy Fresh Market; (b) had already entered into an undisclosed agreement with Apollo; and (c) was incentivized not to create price competition for Apollo.” In moving to dismiss, Defendants argued that Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 312 (Del. 2015) applied. The Court of Chancery stated that this matter “presents an exemplary case of the utility of th[e] ratification doctrine, as set forth in Corwin and [In re Volcano Corp. S’holder Litig., 143 A.3d 727 (Del. Ch. 2016)].” The Delaware Supreme Court disagreed, finding defendants did not show under Corwin, that the vote was fully informed. Thus, “the business judgment rule is not invoked.” The Supreme Court reversed the Court of Chancery’s decision and remanded for further proceedings. View "Morrison, et al. v. Berry, et al." on Justia Law

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This was a “take-home” asbestos case in which an employee’s now-deceased wife sued the companies who supplied asbestos products to her husband’s employer. Her husband’s employer caused him to work with those products, and the asbestos in them came home on his clothes. The wife’s theory of recovery against the asbestos product manufacturers was under section 388 of the Restatement (Second) of Torts, an asbestos product manufacturer has a duty to warn foreseeable users of the dangers of its products, to the extent the asbestos product manufacturer has actual or constructive knowledge of that danger, and when it is unlikely that the user will discover the dangerous condition.2 The legal question underlying this appeal reduced to whether the spouse of an employee harmed by take-home asbestos exposure could sue an asbestos product manufacturer and recover if it failed to provide warnings and safe laundering instructions to her spouse’s employer, so he could protect himself or whoever laundered his clothes. "When applying section 388, the mundane realities of life make the spouses of employees who launder asbestos-covered clothes foreseeable plaintiffs to whom the manufacturers can be held liable. Taking into account, though, the argument that the asbestos product manufacturers are not in a position to warn employees directly, much less the other people who might launder employees’ clothes," the Delaware Supreme Court reversed the grant of summary judgment in favor of the defendant-manufacturers. "If, as the Manufacturers suggest, claims from plaintiffs with more momentary exposure to and tenuous relationship to an exposed employee are filed in the future, the answer is to address those cases then in a reasoned way that takes into account the practicalities that must inform our common law. But, the answer is not to ignore the equity due to the plaintiff before us, and the plaintiffs like her, who base their claims on a clearly foreseeable consequence of common, and necessary, human conduct: workers often have family members who launder their work clothes, and if those work clothes are covered in asbestos dust, those family members can suffer serious injury and even death." View "Ramsey v. Georgia Southern University Advanced Development Ctr" on Justia Law

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Jane D.W. Doe, the deceased plaintiff whose estate was the appellant, was validly arrested by a Delaware State Police Officer for shoplifting, and “was subject to an outstanding capias.” Doe alleged that, rather than properly processing her arrest, the Officer instead told her that if she performed oral sex on him, he would take her home and she could just turn herself in on the capias the next day. If she refused, he would “take her to court, where bail would be set, and . . . she would have to spend the weekend in jail.” The Officer originally denied that the oral sex occurred, but after DNA evidence of the oral sex was found on Doe’s jacket. The State charged the Officer with multiple crimes, including: (1) “intentionally compel[ling] or induc[ing] [Doe] to engage in sexual penetration/intercourse;” and (2) “solicit[ing] a personal benefit from [Doe] for having violated his duty” to bring her in on her capias. What was disputed in this appeal was whether the jury verdict finding that the State was not responsible in tort as the officer’s employer for this misconduct should have been affirmed. The Delaware Supreme Court agreed with Doe that the jury verdict should have been vacated, finding that the jury was improperly asked to decide whether the employer of a police officer who received oral sex from an arrestee for his own personal gratification, and with no purpose to serve his employer, was acting within the scope of his employment. This question was submitted to the jury because the Supreme Court found in its initial decision (“Doe I”) that the jury should have decided the issue. In a second decision (“Doe II”), the Supreme Court adhered to the law of the case and did not revisit that earlier ruling. In this decision, the Court admitted it erred in leaving this issue of law to the jury, and for leaving the superior court in "the impossible position of crafting sensible jury instructions to implement a mandate that was not well-thought-out." The Court held, as a matter of law, if a police officer makes a valid arrest and then uses that leverage to obtain sex from his arrestee, his misconduct need not fall within the scope of his employment under section 228 of the Restatement (Second) of Agency to trigger his employer’s liability. In so finding, the Supreme Court took into account the unique, coercive authority entrusted in police under Delaware law, and the reality that when an arrestee is under an officer’s authority, she cannot resist that authority without committing a crime. The Court vacated the jury verdict in this case and remanded for entry of a judgment in Doe's favor on the issue of liability, with a jury trial to follow on the issue of damages. View "Sherman v. Dept of Public Safety" on Justia Law

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In this appeal, at issue before the Delaware Supreme Court was whether stipulated court orders agreed to in 2005 by a property owner and the Town of Cheswold prevented the Town from enacting new ordinances affecting the property. Applying res judicata, the Superior Court found that they did, and entered a judgment prohibiting the Town from enacting any ordinance impairing the property owner’s existing development rights. The Supreme Court reversed, holding that the 2005 stipulated orders did not prohibit the Town from enacting future ordinances affecting the property. "If the Town eventually adopts a new ordinance, any future litigation over the property owner’s vested rights should be resolved by applying the balancing test in In re 244.5 Acres of Land, 808 A.2d 753 (Del. 2002)." View "Town of Cheswold v. Central Delaware Business Park" on Justia Law