Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Estate Fund
68 A.3d 665
| Del. | 2013Background
- Reformation action in three ASB-Scion real estate JVs to correct a Waterfall distribution misplacement that favored Scion; suspected scrivener's errors in Breckenridge, 2040 Lofts, and Dwight Lofts; ASB sought reform to align with May 2007 Terms; Scion counterclaimed for enforcement as written; DLA Piper drafted and ASB approved deals through multiple joint ventures; ASB represented pro bono by DLA Piper; court-ordered reform and fees, with an ensuing appeal on various legal theories.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unilateral mistake with knowing silence supports reformation | ASB follows Cerberus standard allowing reformation for unilateral mistake with knowing silence | Scion contends stricter, non-misconduct-based limits on unilateral-mistake reformation | Yes; unilateral mistake with knowing silence supports reformation under Delaware law. |
| Ratification bars reformation only with actual knowledge of the error | ASB argues ratification can bar reform even without reading if knowledge is present | Scion argues ratification bars reform regardless of knowledge | Actual knowledge required; ratification does not bar reformation if knowledge of error is not shown. |
| Failure to read a contract bars reformation under Delaware law | Scion argues failure to read prevents reform | ASB contends reading has no such universal bar | No; failure to read does not bar reformation when other elements of mistake exist. |
| Attorneys’ fees under contract vs statutory costs; who pays | ASB should recover fees via contractual provision or §5106 | Fees not incurred under contract; failure to reimburse; §5106 does not authorize attorneys’ fees | Contractual fee provision not triggered; remand for equitable-fees analysis; §5106 governs costs, not fees. |
Key Cases Cited
- Cerberus Int'l, Ltd. v. Apollo Mgmt., L.P., 794 A.2d 1141 (Del. 2002) (reformation based on unilateral mistake with knowing silence admissible)
- Collins v. Burke, 418 A.2d 999 (Del. 1980) (established requirement of mutual mistake or unilateral mistake with knowing silence)
- ENSTAR Corp., 604 A.2d 413 (Del. 1992) (unilateral-mistake doctrine; commentary on exceptionality of cases)
- Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012) (analysis of equitable fees and related remedies)
- Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55 A.3d 330 (Del. 2012) (context on equity and contract interpretation)
- City Investing Co. Liquidating Trust v. Cont’l Cas. Co., 624 A.2d 1191 (Del. 1993) (plain-language contract interpretation as source of intent)