Judge Davis Denies Defendants’ Motion to Dismiss, Finding a Justiciable Controversy that Was Not Barred by the Barton Doctrine

April 11, 2017

Publication

In TMC Consulting Servs. v. Wright et al., C.A. No. N15C-11-132-EMD-CCLD, Judge Davis denied the defendants’ motion to dismiss, holding that the plaintiff’s complaint presented a valid controversy. The plaintiff, TMC Consulting Services (“TMC”), initiated the lawsuit against the defendants, Matthew Wright (“Wright”), Christopher Kennedy (“Kennedy”), and six separate but related limited liability companies (collectively, the “Funds”). TMC claimed that Wright, Kennedy, and the Funds breached the parties’ consulting agreement by terminating the agreement before giving TMC the opportunity to cure an alleged breach.

In their motion to dismiss, the defendants argued that the plaintiff failed to state a claim. Additionally, the defendants argued that Wright and Kennedy signed the agreement in their representative capacity under the agreement, and therefore, the plaintiff could not bring a breach of contract claim against them in their individual capacity. The Court disagreed and found that it was possible that Wright and Kennedy signed in their personal capacity because the agreement recognized them as a party separate from the Funds. Judge Davis also noted that one of Wright and Kennedy’s signature blocks did not expressly state that they were signing in their representative capacity.

The defendants’ motion also alleged that Wright and Kennedy were protected by qualified immunity in their role as joint official liquidators appointed by a Cayman Islands court. The Court found that Wright and Kennedy were not serving as court-appoint liquidators when they executed the agreement.

The parties also disputed whether the Barton doctrine divested the Superior Court of subject matter jurisdiction because two of the Funds were in official liquidation in the Cayman Islands. The Barton doctrine originates from the United States Supreme Court decision in Barton v. Barbour and provides that before suit is brought against a receiver in another forum, a plaintiff must obtain leave of the court that appointed the receiver. To avoid application of the Barton doctrine, the plaintiff argued that it did not need to obtain approval from the Cayman Islands court because the present litigation would have no impact on the liquidation proceedings. Judge Davis agreed, finding that the present litigation would not affect the liquidation proceedings because the plaintiff sued Wright and Kennedy individually and not in their official capacity as liquidators.

Analysis: The CCLD routinely handles issues that are related to proceedings in other jurisdictions. Here, Judge Davis considered application of the Barton doctrine; previously, Judge Wallace considered indemnification claims stemming from the Lehman Brothers bankruptcy and addressed whether a bankruptcy court’s automatic stay applied to preclude litigation of certain claims. Security National Mort. Co. v. Lehman Brothers Holdings Inc., 2016 WL 6396343 (Del. Super. Ct. Aug. 24, 2016). These cases illustrate the CCLD’s familiarity with addressing subject matter at issue in related proceedings in other courts, and a willingness to examine whether the CCLD is in a position to adjudicate the dispute presented to it.