Justia Contracts Opinion Summaries

A borrower misrepresented his authority to act on behalf of two corporations he intended to acquire, providing false documents to a lender. Despite having documents contradicting the borrower's claims, the lender proceeded with a $7 million loan, including a confession-of-judgment affidavit naming the corporations as additional borrowers. When the borrower defaulted, the lender sought a confessed judgment against all borrowers, including the corporations, whose true officers were unaware of the transaction until served with notice of the judgment.The Superior Court of Delaware conducted a hearing and entered judgment in favor of the lender, finding that the borrower had apparent authority to bind the corporations. The court focused on the borrower's conduct and representations, concluding that they created the impression of authority sufficient to warrant the entry of a confessed judgment against the corporations.The Supreme Court of Delaware reviewed the case and found that the Superior Court's formulation of the test for apparent authority was flawed. The Supreme Court emphasized that apparent authority must be based on the principal's manifestations, not solely on the agent's conduct. The evidence did not support a finding that the corporations acted in a way that created a reasonable belief in the lender that the borrower was authorized to bind them. Consequently, the Supreme Court reversed and vacated the Superior Court's judgment, concluding that the borrower lacked apparent authority and that the corporations did not effectively waive their due process rights. View "Caribbean Sun Airlines Inc. v. Halevi Enterprises LLC" on Justia Law

Jason Terrell, M.D., provided consulting services and served on the board of directors of Kiromic Biopharma, Inc. between December 2014 and May 2021. During this period, Kiromic awarded Terrell stock options through three separate agreements. The first agreement granted Terrell an option to purchase 500,000 shares at $0.50 per share for consulting services. The second agreement, made when Terrell joined the board, granted him an option to purchase 500,004 shares at $0.17 per share. The third agreement, which included a waiver clause, granted him an option to purchase 500,004 shares at $0.19 per share. After Terrell resigned from the board in September 2019, Kiromic refused to honor the options from the first two agreements, claiming that Terrell waived his rights to those options in the third agreement.The Court of Chancery dismissed Terrell’s complaint seeking specific performance of the first two option grants, finding that the waiver clause in the third agreement unambiguously extinguished Terrell’s rights to the previous option awards. The court held that the language in the waiver clause, which stated that Terrell had no other rights to any other options or securities of the company, was clear and that the carveout for "securities issued" did not include unexercised options.The Supreme Court of the State of Delaware reviewed the case and found that the waiver language was susceptible to more than one reasonable interpretation. The court noted that the term "securities" could reasonably include options and that the parties' use of the word "issued" did not exclusively refer to shares. Therefore, the court concluded that the waiver clause was ambiguous and that the case should not have been dismissed at the pleadings stage. The Supreme Court reversed the Court of Chancery’s dismissal of the complaint and remanded the case for further proceedings. View "Terrell v. Kiromic Biopharma, Inc." on Justia Law

LKQ Corporation, a Delaware corporation in the auto salvage and recycled parts business, designated certain employees as "Key Persons" eligible for Restricted Stock Units (RSUs) through RSU Agreements. These agreements included non-competition clauses and provisions for forfeiture of RSUs and any stock issued if the employee competed with LKQ within nine months post-departure. Robert Rutledge, a plant manager at LKQ, signed these agreements and received stock under them. In April 2021, Rutledge resigned and joined a competitor shortly after.LKQ sued Rutledge in Illinois federal court for breach of contract and unjust enrichment, seeking to enjoin him from working for a competitor and to recover proceeds from the sale of LKQ stock. The district court dismissed the unjust enrichment claim and granted summary judgment for Rutledge on the contract claims, holding that the non-competition provisions were unreasonable restraints of trade under Illinois law and unenforceable under Delaware law, based on the Court of Chancery's decision in Ainslie v. Cantor Fitzgerald, L.P.The United States Court of Appeals for the Seventh Circuit affirmed the district court's dismissal of the unjust enrichment claim and the summary judgment ruling on the Restrictive Covenant Agreements. However, it was uncertain about the enforceability of the RSU Agreements' forfeiture-for-competition provisions under Delaware law, especially after the Delaware Supreme Court reversed the Court of Chancery's decision in Cantor Fitzgerald. The Seventh Circuit certified two questions to the Delaware Supreme Court regarding the applicability of Cantor Fitzgerald outside the limited partnership context.The Delaware Supreme Court held that the principles from Cantor Fitzgerald, which endorse the employee choice doctrine and prioritize freedom of contract, apply beyond the limited partnership context, including to RSU agreements. The court emphasized that forfeiture-for-competition provisions do not restrict competition or an employee's ability to work and should be treated as enforceable terms subject to ordinary breach of contract defenses. View "LKQ Corp. v. Rutledge" on Justia Law

The case involves an ex-wife, Stephanie P. Shilling, attempting to enforce an agreement with her ex-husband, Ebon T. Shilling, regarding the sale of her interest in a property acquired during their marriage. The ex-husband offered to purchase the ex-wife's interest via email, and she accepted the offer. However, the Family Court found that the email exchanges did not result in an enforceable contract because the parties did not adequately manifest their intent to be bound and the exchanges did not contain all material contractual terms.The Family Court of the State of Delaware previously reviewed the case. The court found that there was no enforceable contract between the parties because the email exchanges lacked a meeting of the minds and did not include all material terms. Additionally, the court concluded that signing a formal written agreement was a condition precedent to the contract, and even if there was a contract, the ex-wife acquiesced in the ex-husband's repudiation by continuing to negotiate.The Supreme Court of the State of Delaware reviewed the case and disagreed with the Family Court's findings. The Supreme Court found that the email exchanges did form an enforceable contract as they contained a clear offer and acceptance, and the parties intended to be bound by the terms discussed in the emails. The court also determined that the signing of a formal written agreement was not a condition precedent to the contract. Furthermore, the Supreme Court found that the ex-wife did not acquiesce in the ex-husband's repudiation. Consequently, the Supreme Court reversed the Family Court's judgment and remanded the matter for further proceedings to determine appropriate relief in light of the enforceable contract. View "Shilling v. Shilling" on Justia Law

The case involves a dispute over the control of Byju’s Alpha, Inc., a Delaware subsidiary of Think and Learn Private Ltd. (T&L), an Indian company. Byju’s Alpha entered into a $1.2 billion loan agreement with GLAS Trust Company LLC (GLAS) as the administrative and collateral agent. The agreement required Whitehat, another T&L subsidiary, to become a guarantor, contingent on approval from the Reserve Bank of India (RBI). However, changes in RBI regulations made it impossible for Whitehat to obtain the necessary approval.The Court of Chancery of Delaware held a trial and ruled that Timothy R. Pohl was the sole director and officer of Byju’s Alpha, following actions taken by GLAS to enforce its rights under the loan agreement. The court found that the failure of Whitehat to accede as a guarantor constituted a breach of the loan agreement, allowing GLAS to take control of Byju’s Alpha’s shares and appoint Pohl as the sole director and officer.The Delaware Supreme Court reviewed the case and affirmed the Court of Chancery’s decision. The Supreme Court held that the amendments to the loan agreement explicitly defined Whitehat’s failure to accede as a “Specified Default,” entitling GLAS to enforce its remedies. The court also rejected the impossibility defense, concluding that the changes in RBI regulations were foreseeable and could have been guarded against in the contract. The court found that the sophisticated parties involved should have anticipated the regulatory changes and included provisions to address such risks.In conclusion, the Delaware Supreme Court affirmed the lower court’s ruling that Pohl was the sole director and officer of Byju’s Alpha, and that GLAS was entitled to enforce its remedies under the loan agreement due to the breach caused by Whitehat’s failure to accede as a guarantor. View "Ravindran v. GLAS Trust Company LLC" on Justia Law

In this case, SARN SD3 LLC ("SD3") brought a breach of contract action against Czechoslovak Group A.S. ("CSG") regarding an option contract for shares in RETIA A.S. ("RETIA"). The contract stipulated that if CSG ceased to own a majority of RETIA before SD3's call option expired, CSG would pay SD3 a "Penalty Amount" based on an "Independent Valuation" of RETIA. CSG sold RETIA, triggering the Penalty Amount, but disputes arose over access to valuation information, leading SD3 to file suit.The Superior Court of Delaware granted SD3's entitlement to the Penalty Amount and calculated the Independent Valuation as the average of two valuations from Big Four accounting firms, despite CSG's objections. The court later determined that SD3's valuation was independently determined and in good faith. SD3 then filed a Rule 37 Motion for sanctions, alleging CSG withheld important valuation documents, but the court denied the motion, suggesting SD3 seek relief under Rule 60(b) for newly discovered evidence. SD3's subsequent Rule 60 Motion was also denied, as the court found the documents were not newly discovered and no exceptional circumstances warranted relief.The Delaware Supreme Court reviewed the case and affirmed the Superior Court's decisions. The Supreme Court held that the contract's provisions were clear and unambiguous, not requiring judicial inquiry into the valuation methodologies. The court also found no abuse of discretion in the Superior Court's handling of the Rule 37 and Rule 60 motions, as SD3 had the documents in question well before the summary judgment ruling and failed to demonstrate due diligence. Additionally, the Supreme Court upheld the Superior Court's decision to convert the judgment to U.S. dollars using the exchange rate as of the valuation date, rejecting SD3's arguments for a different conversion date. View "Czechoslovak Group A.S. v. SARN SD3 LLC" on Justia Law

The case involves a dispute between two parties who entered into a partnership agreement that specified the financial conditions under which the appellant would receive a distribution upon the sale of the partnership’s principal asset. The agreement set a net-sale-price threshold above which the appellant would receive a distribution, and it directed the general partner to calculate that net sale price by deducting certain categories of costs from the gross sales price. The general partner determined that the deductions reduced the net sale price below the minimum threshold for a distribution. The appellant challenged several of these deductions, particularly the costs incurred to defease the interest payments on the mortgage.The Court of Chancery of the State of Delaware reviewed the case and held that the deduction for the costs to defease the interest payments on the mortgage was proper under the partnership agreement. The court concluded that this deduction was outcome determinative and entered judgment in favor of the partnership. The court also noted that the general partner acted in good faith in calculating the net sale price, which eliminated any breach of contract claim.The Supreme Court of the State of Delaware reviewed the case and affirmed the Court of Chancery’s judgment. The Supreme Court held that the plain language of the partnership agreement and the formula used permitted the challenged deduction for defeasance costs. The court did not reach the effect or correctness of the Court of Chancery’s alternative holding regarding the general partner’s good faith. The Supreme Court concluded that the defeasance costs were properly deducted, which reduced the net resale price below the threshold required for the appellant to receive a distribution. View "Exit Strategy, LLC v. Festival Retail Fund BH, L.P." on Justia Law

The case involves Ferrellgas Partners L.P. and its subsidiaries (collectively "Ferrellgas") and Zurich American Insurance Company ("Zurich"). Ferrellgas had an insurance policy with Zurich, which included a provision for the advancement of defense costs for litigation. Ferrellgas was involved in a separate lawsuit with Eddystone Rail Company, LLC ("Eddystone") over a breach of contract. Ferrellgas sought to have Zurich cover the defense costs for the Eddystone litigation under their insurance policy.In the lower court, the Superior Court of the State of Delaware, Ferrellgas filed a motion for summary judgment seeking a declaratory relief obligating Zurich to advance defense costs for the Eddystone litigation. Zurich also filed a motion for summary judgment seeking a declaration that it had no obligation to advance defense costs. The Superior Court denied Ferrellgas' motion and granted Zurich's motion, finding that the Eddystone litigation was excluded from coverage under the Zurich policy.On appeal, the Supreme Court of the State of Delaware affirmed the decision of the Superior Court. The Supreme Court found that the Eddystone litigation was a claim seeking relief for a breach of contract that occurred after the commencement of the Run-Off Coverage Period in the Zurich policy. As such, Zurich had no duty to advance defense costs for this matter due to the Run-Off Exclusion in the policy. The court also found that Ferrellgas' appeal was timely filed. View "Ferrellgas Partners, L.P. v. Zurich American Insurance Company" on Justia Law

The case involves NGL Energy Partners LP and NGL Energy Holdings LLC (collectively, "NGL") and LCT Capital, LLC ("LCT"). NGL, entities in the energy sector, engaged LCT, a financial advisory services provider, for services related to NGL's 2014 acquisition of TransMontaigne Inc. However, the parties failed to agree on payment terms, leading LCT to file a lawsuit in 2015. The Superior Court held a jury trial in July 2018, which resulted in a $36 million verdict in LCT's favor.NGL appealed the Superior Court's decision, challenging the $36 million final judgment and a set of evidentiary rulings. LCT cross-appealed, contesting the Superior Court's methodology for computing post-judgment interest. NGL argued that the Superior Court erred by admitting evidence and arguments about the value/benefit supposedly gained by NGL in the Transaction, asserting that such evidence is prejudicial and irrelevant to a quantum meruit claim. NGL also argued that the Superior Court erred by admitting evidence of benefit-of-the-bargain or expectancy damages when assessing the quantum meruit value of LCT’s services.The Supreme Court of the State of Delaware affirmed the Superior Court’s evidentiary rulings and rejected NGL's contention that the Superior Court incorrectly allowed LCT to recover benefit-of-the bargain/expectancy damages. However, the Supreme Court disagreed with the Superior Court’s post-judgment interest determination. The Supreme Court held that prejudgment interest is part of the judgment upon which post-judgment interest accrues under Section 2301(a). Therefore, the Supreme Court reversed the Superior Court as to this issue and remanded the case to the Superior Court for entry of judgment consistent with its opinion. View "NGL Energy Partners LP v. LCT Capital, LLC" on Justia Law

The case involves BitGo Holdings, Inc. and Galaxy Digital Holdings Ltd., who entered into a merger agreement. BitGo, a technology company, was required to submit audited financial statements to Galaxy, the acquirer, by a specified date. When BitGo submitted the financial statements, Galaxy claimed they were deficient because they did not apply recently published guidance from the Securities and Exchange Commission’s staff. BitGo disagreed, but submitted a second set of financial statements. Galaxy found fault with the second submission and terminated the merger agreement. BitGo then sued Galaxy for wrongful repudiation and breach of the merger agreement.The Court of Chancery sided with Galaxy and dismissed the complaint. The court found that the financial statements submitted by BitGo did not comply with the requirements of the merger agreement, providing Galaxy with a valid basis to terminate the agreement.On appeal, the Supreme Court of Delaware reversed the decision of the Court of Chancery. The Supreme Court found that the definition of the term “Company 2021 Audited Financial Statements” in the merger agreement was ambiguous. The court concluded that both parties had proffered reasonable interpretations of the merger agreement’s definition. Therefore, the court remanded the case for the consideration of extrinsic evidence to resolve this ambiguity. View "BitGo Holdings, Inc. v. Galaxy Digital Holdings Ltd., et al." on Justia Law