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Supreme Court Rules on Interface between Indemnification Rights and Res Judicata

By Francis G. X. Pileggi, Esq.

LaPoint  v. AmerisourceBergen Corp., (Del. Supr., March 12, 2009), read opinion here.  The Delaware Supreme Court in this decision addressed the procedural issues in connection with pursuing indemnification rights based on a contract in light of defenses based on res judicata and statute of limitations. Delaware's High Court reversed a decision of the Superior Court which had granted summary judgment in favor of AmerisourceBergen ("ABC"). The reversal was based on the trial court's ruling that the statute of limitations and res judicata barred the claims for indemnification.

 This decision should be read by anyone who needs to pursue an indemnification claim in Delaware based on a contractual right. In sum, the Supreme Court determined that neither res judicata nor the statute of limitations barred the indemnification claim because the cause of action did not arise until after the Chancery Court determined that the agreement was breached--at which time the indemnification obligation was triggered. That Chancery Court decision was appealed and the Supreme Court affirmed. At that point, the claim for indemnification was filed in the Superior Court. It was that  decision in the Superior Court that is the subject of this appellate opinion.

Several of the prior opinions in this case were highlighted here.

The Supreme Court found that the indemnification claim for attorneys' fees was not presented to the Chancery Court (which is contrary to the ruling of the Superior Court appealed from, granting summary judgment).

The Supreme Court traces the doctrine of res judicata back to Roman law and its implementation in English law during the twelfth century (fn 12). The essence of the doctrine, explained the court, was:

"to prevent a multiplicity of needless litigation of issues by limiting parties to one fair trial of an issue or cause of action which has been raised or should have been raised in a court of competent jurisdiction".

A five-part test to describe situations where res judicata would bar a claim, and which was previously enunciated by the court, was also explained (fn.18 and 19). In addition to finding that the claim of indemnification was neither raised nor adjudicated in the Chancery Court proceedings, the High Court explained the contours of Delaware's "transactional approach" to res judicata. The Supreme Court reasoned that the indemnification claim that arose after the Chancery Court determined that ABC breached the merger agreement was not part of the same "transaction". Likewise, it was not barred by the three year statute of limitations for contracts found at  Section 8106 of Title 10 of the Delaware Code.

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 13, 2009 (boomark / email).