B.E. Capital Management Fund LP v. Fund.com Inc.
171 A.3d 140
| Del. Ch. | 2017Background
- B.E. Capital petitioned for a receiver for Fund.com Inc. after the company allegedly abandoned its business; the court appointed a receiver by default.
- The Receiver set an April 14, 2017 bar date for claims; former CEO Philip Gentile filed a claim for $497,739 for alleged breaches of his March 4, 2008 Employment Agreement, asserting nonpayment beginning February 16, 2009.
- The Receiver disallowed Gentile’s claim as time-barred under New York’s six‑year breach‑of‑contract statute; Gentile appealed.
- The Court of Chancery held that appeals from a receiver’s disallowance of claims are reviewed de novo, with the court having discretion to receive additional evidence.
- Applying Delaware choice‑of‑law rules and laches principles, the court concluded Gentile’s claim was time‑barred even under New York’s six‑year period (latest accrual June 18, 2010); Gentile’s claim was filed Feb 14, 2017.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for appeal from receiver’s disallowance of claim | Receiver’s determination should be upheld (deferential or on the record) | Receiver argued his determination entitled to deference | Court: de novo review applies; court may receive additional evidence at its discretion |
| Governing limitations period (choice of law) | Employment agreement selects New York law, so NY statute of limitations applies | Receiver applied NY statute based on contract choice‑of‑law clause | Court: contractual choice‑of‑law clause does not by itself import foreign statutes of limitations; forum (Delaware) rules apply, requiring choice‑of‑law analysis; however, NY period was assumed for favorability to claimant |
| Application of laches/statute of limitations | Gentile contends claim tolled or otherwise timely due to prior NY suit, company acknowledgments, or equity | Receiver contends no tolling; claim accrued on resignation/latest breach, and limitations ran | Court: equity applies (laches), uses analogous statute as presumptive period; claim is time‑barred even under NY six‑year rule; tolling arguments fail (discontinued NY action does not toll; disclosure did not sufficiently revive beyond April 2016; no equitable tolling) |
| Adoption of receiver’s determination as court judgment | Gentile requests reversal of receiver’s disallowance | Receiver moved to confirm his determination | Court adopts Receiver’s disallowance as its decision and overrules Gentile’s exceptions |
Key Cases Cited
- DiGiacobbe v. Sestak, 743 A.2d 180 (Del. 1999) (de novo review standard discussed)
- Williams v. Geier, 671 A.2d 1368 (Del. 1996) (explaining de novo appellate review on paper records)
- Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (de novo review of dismissal under Rule 12(b)(6))
- Certain Underwriters at Lloyds, London v. Chemtura Corp., 160 A.3d 457 (Del. 2017) (choice‑of‑law analysis for limitations issues)
- Ely‑Cruikshank Co., Inc. v. Bank of Montreal, 615 N.E.2d 985 (N.Y. 1993) (rule that a breach accrues when the breach occurs)
- Reid v. Spazio, 970 A.2d 176 (Del. 2009) (equity courts apply laches distinct from statutes of limitation)
- Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764 (Del. 2013) (using statute of limitations as presumptive laches period)