Prior Release Bars Claims in Delaware Court of Chancery

Seven Investments, LLC v. AD Capital, LLC, C.A. No. 6449-VCL (Del. Ch. Nov. 21, 2011), read opinion here.

Issue Addressed: Whether a release agreement previously signed among the parties served to preclude the claims presented in this case.

Short Answer: Yes

Very Short Overview
This relatively concise decision of the Court of Chancery provides an excellent primer on the "law of releases" and in what types of situations the terms of releases in settlement agreements will - - or will not allow one of the parties to the release to bring claims that would otherwise be barred by the release. In addition to the illuminating amplifications, especially of releases in general, and their legal effect, the opinion refers to a Delaware Supreme Court decision that is one of those rare cases which define the fraud exception to allow claims otherwise covered by a release. See E.I. duPont Nemours & Co. v. Florida Evergreen Foliage, 744 A.2d 457, 461 (Del. 1999). The Court of Chancery cabined the DuPont decision to the unusual facts of that case where a cause of action for fraud in the inducement could void a release. See generally Abry Partners V, L.P. v. F&W Acquisitions LLC, 891 A.2d 1032, 1062 (Del. Ch. 2006) (noting in the context of exclusive remedy provision in an agreement that "permitting a party to seek a relief that it has contractually promised not to pursue creates the possibility that buyers will face erroneous liability and uncompensated costs.")

Noteworthy about this decision is the discussion at footnote 2 which discusses cases from other jurisdictions that impose different and often higher standards when a fiduciary negotiates a release. The Court did not need to address that issue in this case and confirmed that it did not "intimate any opinion on that most interesting question."

Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.

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