Litigation

Chancery Applies "Course of Performance" and "Quasi-Estoppel" in Contract Dispute

By Francis G. X. Pileggi, Esq.

Personnel Decisions, Inc. v. Business Planning Systems, Inc., 2008 WL 1932404 (Del. Ch., May 5, 2008), read opinion here. This Chancery Court decision is 15 pages long in the Westlaw format which usually is the equivalent of over 40 pages in the original slip opinion format. This opinion contains precious iterations of Delaware law on contract principles, and  explains civil procedure rulings that deserve thorough review, but  in this post I will only highlight 5 key points that I have extracted:

1) Parties may consent to be governed by the Delaware Uniform Arbitration Act (DUAA) even if the Federal Arbitration Act (FAA) would otherwise apply absent specific provision in the agreement of the parties. (See, e.g., footnote 29),

2) The DUAA differs from the FAA and most other state arbitration acts in several respects. For example, a distinction is made in the DUAA between "notice" of the arbitration given to the opposing party--separate from the "demand" for  arbitration. After a thorough analysis, the court determined that this distinction could not be inequitably  leveraged to defeat the legislative intent of DUAA sections 5702 and 5703 which was to give the defending party an opportunity to seek an injunction in Chancery Court  to have the arbitration enjoined. (See, e.g., footnote 63).

3) Filing a complaint alone to initiate a lawsuit in a particular forum, without service of the complaint, in the nature of a placeholder, will not carry the customary weight of a "first-filed" suit for purposes of the familiar McWane analysis. (See footnote 58).

4) "Quasi-Estoppel" is a rarely applied doctrine that can be a useful arrow in a litigator's quiver. It can be used to prevent a party from changing its position "in mid-stream" during litigation--to another party's disadvantage, e.g., by asserting a right inconsistent with a previous position taken. (See footnotes 38 and 39).

5) "Course of Performance" is the second best means to employ in the interpretation of a contract, after first trying to determine the "plain meaning". Course of  performance may also be evidence of a party's intent to modify or waive certain terms of  the agreement. (See footnotes 21 and 22).

Full post as published by Delaware Corporate and Commercial Litigation Blog on May 07, 2008 (boomark / email).