Seven Investments, LLC v. AD Capital, LLC
2011 Del. Ch. LEXIS 174
Del. Ch.2011Background
- Seven Investments, LLC and AD Capital, LLC formed Canvas Companies, LLC through the Contribution Agreement and LLC Agreement, with Discala as manager.
- Robbins learned AD Capital assets were encumbered and Discala lacked a purchaser network, and suspected fraud/misuse of Canvas to pay personal debts.
- In March 2009 Seven terminated the venture; the April 3, 2009 Termination Agreement dissolved Canvas and released obligations under Canvas Agreements.
- Seven agreed to pay about $579,000 in Purported Accumulated Expenses, listed on Schedule A, as part of the Termination Agreement.
- The Termination Agreement included broad general releases of claims related to Canvas Agreements, with a provision preserving obligations created by the Agreement.
- May 4, 2011 Seven filed suit asserting fraud and related claims; defendants moved to dismiss based on the General Release.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of the General Release | Seven argues the release cannot bar fraud-related claims | Release extinguishes all claims arising from Canvas Agreements | General Release barred the asserted claims |
| Fraud in the inducement under DuPont exception | DuPont allows voiding a release for fraud induced by the defendants | DuPont is not applicable; release should stand | DuPont exception does not salvage the fraud claims; release stands |
| Effect of dissolution/certificate filing requirement | Certificate of dissolution not filed excusing performance conditions | No real dispute over filing; not a basis to circumvent release | Non-filing issue not dispositive; release remains enforceable |
Key Cases Cited
- Hicks v. Soroka, 188 A.2d 133 (Del. Super. 1963) (release termination governs entering party's rights)
- Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156 (Del. 2010) (affirmative defenses on motion to dismiss a release)
- Corporate Prop. Assocs. 6 v. Hallwood Gp. Inc., 817 A.2d 777 (Del. 2003) (general releases extinguish claims arising from related agreements)
- DuPont de Nemours & Co. v. Fla. Evergreen Foliage, 744 A.2d 457 (Del. 1999) (fraud in inducement to settle generally rare but recognized; release may bar)
- Abry P’rs v. F & W Acq. LLC, 891 A.2d 1032 (Del. Ch. 2006) (settlement and exclusionary provisions; concerns about exclusive remedies)
- Centro Empresarial Cempresa S.A. v. American Movil, S.A.B. de C.V., 929 N.E.2d 995 (N.Y. 2011) (sophisticated principals may release claims knowingly; fiduciary duty context)
- In re Philadelphia Stock Exchange, Inc., 945 A.2d 1123 (Del. 2008) (settlement peace and release utility in corporate disputes)