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Chancery Rules that Release Bars Claims; Grants Motion for Judgment on the Pleadings

By Francis G.X. Pileggi

CorVel Enterprise Comp, Inc. v. Schaffer, C.A. No. 4896-VCN (Del. Ch. May 19, 2010), read opinion here.

Factual Background
The factual background of this case began with the execution of a Stock Purchase Agreement and, for additional consideration, a Non-Competition Agreement, with the defendant, a major stockholder and an executive vice president. After a dispute arose, a 'Settlement and General Release Agreement' was signed in February 2009.

Procedural Posture
This suit was brought alleging violations of a Non-Competition Agreement. Schaffer contends that the Release relieved him of his duty under the Non-Competition Agreement. Both parties moved under Court of Chancery Rule 12(c) for judgment on the pleadings.

Discussion
The Court analyzed the Release based on contract interpretation principles and observed that a motion for judgment on the pleadings is an appropriate procedural device for resolving a contract dispute because 'the interpretation of a contract is a question of law.' See footnote 6.
Schaffer argued that the Release absolved him of any continuing obligation under a Non-Competition Agreement. The Court parsed the language and the scope of the Release. The Court also emphasized that the parties were represented by attorneys during the preparation of the Release and that the document clearly expressed, on an objective level, that it was comprehensive enough to cover the Non-Competition Agreement, and therefore Schaffer's motion for judgment on the pleadings was granted.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on May 19, 2010 (boomark / email).