Banet v. Fonds de Regulation et de Controle Cafe Cacao, C.A. No. 3742-CC (Del. Ch. March 12, 2010), read letter decision here. Prior Chancery decisions involving this matter have been highlighted on this blog here. The parties have also been engaged in extensive litigation in the New York courts.

The latest iteration of this matter involves a declaratory judgment action, pursuant to Chapter 65 of Tiitle 10 of the Delaware Code, seeking a ruling that Banet is not a stockholder of New York Chocolate and Confections Company ("NYC3"), and that Lion Capital Management, LLC ("LCM") is not a creditor of NYC3.  Due to the application of res judicata and judicial estoppel, the Court does not directly address the substance of  those claims. The background facts involve the parties’ participation in a chocolate factory in New York.

Chocolate lovers everywhere can appreciate the opening sentence of the Court’s letter decision: "The parties in this long-running dispute are locked in a fight over the status of their legal relationship, and, unfortunately, there is no amount of chocolate that can ease the pain."

This concise letter decision provides a helpful analysis and application of the elements of three important legal principles:

  • res judicata (n.28)
  • judicial estoppel (n.35)
  • declaratory judgment actions (n.20)

The prodecural posture of this case was presented to the Court as cross-motions for summary judgment and the lengthy and tortuous prior litigation history between the parties, and the many prior court decisions both in Delaware and in New York were reviewed in the context of this Court’s application of the above principles.

One noteworthy aspect of the res judicata discussion was the Court’s observation that the named parties in the prior suit need not be identical. Rather it suffices for there to be privity with a party in the prior adjudication. Privity in this context is defined as one having a "close or signficant relationship" with another. (n. 31). Moreover, as noted in other recent Delaware decisions, res judicata also bars claims that "could have been asserted" in the prior action. (n. 32).

Judicial estoppel barred Banet from claiming stock ownership because in a prior ruling this Court relied on  Banet’s argument that LCM was the owner of shares. Thus, Banet cannot now argue that he is the owner of the same shares. The Court explains in detail why prior adjudications and prior contrary positions taken by the plaintiff required that summary judgment be granted in favor of defendants.