Israel Discount Bank of New York v. First State Depository Co., C.A. 7237-VCP (Del. Ch. Sept. 27, 2012).

This case addresses the economic loss doctrine as well as the often discussed issue of arbitrability.

The court describes the economic loss doctrine as one “which prohibits a party from recovering in tort for economic losses, the entitlement to which flows only from a contract.” Slip op. at 35 and n. 91-96 (also noting exceptions to the doctrine for fraud and intentional torts.) The doctrine has been expanded to apply to commercial transactions where there is no harm to persons or property other than what was the subject of the contract between the parties.

The most noteworthy aspect of the court’s arbitrability discussion is how the court distinguishes an earlier decision that found an affiliated party bound by an arbitration agreement even though it was not a signatory. In that case, all the parties were affiliated, and all the documents were inter-related, and all were designed as part of a Master Transaction Agreement (MTA). See BAYPO Ltd. P’ship . Tech JV, LP, 940 A.2d 20-21-22 (Del. Ch. 2007). Thus, the court reasoned in BAYPO, unlike the instant case, that a non-signatory would be bound by the arbitration clause in the MTA because all the various agreements “served no other independent purpose than their function in the framework of the MTA.” Slip op. at 20 and n. 54.

Supplement: More recent transcript rulings denied a motion to withdraw by defense counsel, and denied a motion for protective order to stay a deposition based on an assertion of Fifth Amendment privilege. Rather, the court explained that a Fifth Amendment privilege must be asserted on a question by question basis. Moreover, a company cannot generally assert such a privilege but due to the closely held nature of the entity involved here the court was willing to revisit that issue at a later time.