Litigation

Chancery Declines to Enforce Settlement Agreement among Rich and Famous

By Francis G. X. Pileggi, Esq.

In Yucaipa Corporate Initiatives Fund I, LP v. Follieri Group, L.L.C., 2008 WL 638273 (Del.Ch., Feb 27, 2008), the Delaware Chancery Court declined to grant a motion to enforce a settlement where the parties both admitted that there was a binding agreement and that one party was in material breach for not making a payment required under the agreement, as part of a settlement of the litigation. A prior Chancery Court decision in this same case which involves lives of the rich and famous was summarized here.

The court observed that it often entertains motions to enforce settlements--typically where there is an issue about whether the terms are enforceable or whether a final agreement was actually entered into to settle a case. Here, however, there was agreement that the obligation was clear and that it was breached. The court's concern was not so much that it is normally outside its equitable jurisdiction to be asked to render a money judgment, but that there were other aspects of the agreement in addition to the payment of money, such as additional steps to be taken by both parties after the initial payment, that could not easily be subject to a final judgment of the court as a practical matter.

In sum, the court said that the options left for the moving party were to consider the agreement a nullity due to the material breach (that was admitted), and resume the litigation, or pursue a separate action for breach of contract seeking money damages in a "law court". (Both not very palatable choices).

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 13, 2008 (boomark / email).