The Complex Commercial Litigation Division of the Superior Court routinely presides over actions involving insurance coverage and contractual indemnification clauses. In Avaya, Inc. v. Charter Communications Holding Co., Inc., et al., the Court was asked to interpret the notice provision within an indemnification clause. The relevant language in the contract is as follows:

Avaya will defend or settle, at its own expense, any claim or suit against you alleging that any Avaya Products purchased under this Agreement infringe any United States patent or copyright or trade secret. Avaya will also pay all damages and costs that may be assessed against you due to such infringement as such damages and costs are incurred. Avaya’s obligation is expressly conditioned upon the following: (1) you shall promptly notify Avaya in writing of such claim or suit ….

At the outset of the case, Avaya filed a summary judgment motion seeking a declaration that it was not required to defend or indemnify the defendants because they failed to give ‘prompt notice’ of suit as a matter of law–specifically, Avaya claimed that defendants waited 10 months to provide notice and demand coverage of an infringement suit. Defendants did not dispute the 10 month lapse in notice, however they contend that the term ‘prompt’ is subject to some interpretation, and sought the opportunity to take discovery on attendant facts and circumstances. The Court agreed with defendants:

I am not persuaded that the fact alone of a ten month period between the commencement of the Katz Lawsuit and the giving of the July 2, 2007 notice constitutes lack of prompt notice as a matter of law. I agree with Charter that the phrase [Prompt Notice] is subject to some interpretation, and that the interpretation may be influenced by attendant facts and circumstances.

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Seth Niederman is a partner with the law firm Fox Rothschild LLP. Seth practices in Fox Rothschild’s Wilmington, Delaware office. You can reach Seth at 302-622-4238, or sniederman@foxrothschild.com.

Liquidated damages clauses are contract terms that set forth in advance the amount of monetary damages due for a beach of the contract. In the matter of KOLD, LLC v. Croman, No. N13C-05-249, Johnston, J. (Nov. 25, 2014), the Superior Court was asked to examine a liquidated damages clause contained in an employment contract. Employer, KOLD, alleged that its prior employee, Croman, breached their employment contract. KOLD sought to recover $35,000 pursuant to a liquidated damages clause, which provided:

Termination of this Agreement by Employee, for any reason, prior to the expiration date of this Agreement or any renewal thereof, will cause loss to the Employer, including but not limited to, lost productivity/revenues/ratings, increased operating costs, loss of training/promotion provided the Employee, as well as costs in advertising, interviewing and other associated costs related to replacing the employee. The parties acknowledge however, that such costs are difficult to ascertain, calculate and foresee. Therefore, the parties agree that, in the event of breach of this contract on the part of the Employee, the Employee shall pay to the Employer, the sum of $35,000 dollars. Such payment is not a penalty but is for liquidated damages sustained, it being mutually agreed and understood between the parties hereto that such amount is reasonable as liquidated damages.

Croman challenged the enforcement of the clause arguing that it was a penalty and therefore violated Delaware law.

The Court noted that liquidated damages clauses are presumptively valid and enforceable in Delaware. However, these clauses are not enforceable if the damages are a penalty rather than compensatory. Liquidated damages will not be viewed as a penalty if: (1) at the time of contracting, damages were difficult or impossible to determine; and (2) the stipulated amount of damages found in the contract reasonably estimates the damages that would likely be caused by a breach, or the stipulated amount of damages is reasonably proportionate to the damages that have actually been caused by the breach. The Court upheld the clause and KOLD’s claim finding that damages were difficult to ascertain at the time the contract was formed and the sum of $35,000 was was a reasonable forecast of damages.

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Leslie Spoltore is a Partner with the law firm Fox Rothschild LLP.  Leslie practices in Fox Rothschild’s Wilmington, Delaware office.  You can reach Leslie at (302) 622-4203, or lspoltore@foxrothschild.com.

In two recent Delaware Superior Court cases before different Judges, the Court denied motions for judgment on the pleadings due to the existence of a material factual dispute.  These decisions underscore the importance of ensuring that, if you are going to move for judgment on the pleadings (“MJOP”), there are no disputed material facts.

In Sheets v. Quality Assured, Inc., No. N14C-03-010-VLM (Medinilla, J.), a case involving a dispute over the enforceability of a purported settlement agreement memorialized in an email exchange, the Court denied the defendant’s MJOP, noting that “[w]hile Defendant relied solely on the email exchange between the parties, the pleadings give rise to a reasonable inference that an oral agreement to settle their dispute existed between them.”  [Opinion at 7.]  [The full opinion is available here.]  The Court further noted that “[i]f material facts concerning the existence or terms of an agreement to settle are in dispute, courts should not summarily enforce a settlement agreement absent an evidentiary hearing.”  [Id.]

Similarly, in Hedgewood v. Rommell Motorsports Delaware, Inc., No. N13C-11-192 (Wharton, J.), a case involving allegations of negligence and breach of warranty arising out of allegedly defective merchandise, the Court denied the defendant’s MJOP.  [The full opinion is available here.]  The defendant in Hedgewood argued that it was entitled to judgment on the pleadings because the executed sale documents attached to the pleadings included conspicuous disclaimer language that disposes of the plaintiff’s breach of warranty claims.  In response, the plaintiff raised a material factual dispute as to whether the disclaimer of warranties, which was executed on the same date as the sales invoice, had been executed as part of the sales contract or after the sales contract.  The Court agreed with the plaintiff, finding that material issues of fact remain.

These decisions serve as a helpful reminder to assess whether there are any material facts in dispute before filing a MJOP.  While your client may ultimately deserve to win on the merits, it might not be appropriate at the pleadings stage to try to sink the battleship.

It is not uncommon for marital property agreements to contain terms for tasks that have yet to be completed.  For example, one party may need to refinance the debt associated with the marital residence to remove the other spouse from the obligation.  Or, one party may need to prepare two lists for the division of personal property.  What happens if the agreement does not specify the time period in which an act must occur?

This is one of the questions recently presented to the Delaware Supreme Court in the matter of Harris v. Frank-Harris, No. 511, 2013, Ridgely, J. (March 7, 2014).  In Harris, the Court upheld the Family Court conclusion that where a valid marital property agreement fails to specify a time for performance of an act, a reasonable time can be implied.  Id. at *5.  To determine what constitutes a reasonable period of time the court will consider the “subject matter, situation of the parties, their intentions and what was contemplated when the agreement was signed.”  Id.  at *6.

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Leslie Spoltore is a Partner with the law firm Fox Rothschild LLP.  Leslie practices in Fox Rothschild’s Wilmington, Delaware office.  You can reach Leslie at (302) 622-4203, or lspoltore@foxrothschild.com.

On November 7, 2011, the Delaware Superior Court (Abelman, J.) in Landry v. Mabey Bridge & Shore, Inc., C.A. No. N11C-09-146 PLA (Del. Super. Ct.), reaffirmed the well-established principle that punitive damages are generally not available in breach of contract cases.  (Read full opinion here.) 

The plaintiff, Marty Landry (“Landry”), brought suit against his former employer, Mabey Bridge & Shore, Inc. (“MBSI”), alleging that MBSI: (1) breached the implied covenant of good faith and fair dealing “by falsely claiming that Landry was terminated for cause”; and (2) “breached the employment contract by failing to pay him the severance benefits to which he claims he was entitled under the contract.”  (Opinion at 1.)  MBSI moved to dismiss Landry’s claim for breach of the implied covenant of good faith and fair dealing pursuant to Superior Court Civil Rule 12(b)(6) and to strike Landry’s claim for punitive damages.  While the court concluded that “Landry has sufficiently pled facts to withstand dismissal of his claim for breach of the implied covenant of good faith and fair dealing,” the court concluded that “Landry has not alleged facts that would permit him to recover punitive damages.”  (Id. at 1-2.)  Accordingly, the court denied MBSI’s motion to dismiss and granted its motion to strike.

In striking Landry’s punitive damages claim, the court explained that “[i]n general, a plaintiff cannot recover punitive damages for breach of contract unless the conduct also amounts independently to a tort.”  (Id. at 7.)  The court further noted that the Delaware Supreme Court in E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436 (Del. 1996) “held that breach of the implied covenant of good faith and fair dealing, in an employment relationship, was not an exception to the rule against punitive damages in breach of contract cases.”  (Opinion at 7.)  Landry’s punitive damages claim failed, the court concluded, because Landry had not “alleged any conduct by his employer, such as conversion, that would amount independently to a tort.”  (Id.)