12/01/2011 08:50:00 AM EST
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.
Whether a release agreement previously signed among the parties served to
preclude the claims presented in this case.
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."
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