Case Financial, Inc. v. Alden, C.A. No. 1184-VCP (Del. Ch. May 11, 2011). The Delaware Court of Chancery has rendered several prior decisions in this somewhat obstreperous litigation, two of which have been highlighted on this blog here and here. See also 2009 WL 2581873 (Del. Ch. Aug. 21, 2009).

The central issue in this case was whether the claims alleged by the plaintiff were barred by a prior release signed by the parties.

This 67-page decision can be highlighted in short order. The claims brought in this matter were lodged against the former CEO of Case Financial, Inc., Eric Alden, who was retained by the new owners in a management role until he was forced out after issues arose about his handling of the company’s money. Case Financial is in the business of lending money to lawyers for the financing of contingency cases. The prior release signed between the parties in connection with a prior settlement, carved out an exception for criminal conduct–claims which Case Financial thought would not be covered by the release.

This post-trial opinion addressed whether the allegations of embezzlement and related criminal allegations  brought by the corporation were the types of criminal actions that were exceptions to the claims covered by the release. California law applied to most of the criminal allegations. The Court explains in detail why it concluded that none of the allegations of criminal conduct against the former CEO fit within the limited definition of “criminal behavior” as an exception to the release, and therefore, the court dismissed the claims with prejudice.

Moral of This Story

If one seeks to carve out an exception to a release for claims that one seeks to retain a right to pursue, this thorough opinion is a helpful example of why it is essential to describe those “hopefully retained” claims with specificity in order to avoid the claim preclusion suffered by the plaintiff in this case.