A recent Delaware Court of Chancery decision is notable for its explanation of the basic law of damages for contract and fraud claims, as well as cautioning that a damage expert’s estimate of damages needs to correspond to each of the counts in the complaint.
In Great Hill Equity Partners IV, LP, v. SIG Growth Equity Fund I, LLLP, C.A. No. 7906-VCG (Del. Ch. Feb. 27, 2020), the court discussed the damages aspect of this bifurcated case in which liability was determined in a prior post-trial memorandum opinion now known as Great Hill I. See Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2018 WL 6311829 (Del. Ch. Dec. 3, 2018). That decision was highighted on these pages, as were several other prior rulings over the last few years in this long-running matter.
This case involved claims by the buyer of a company that the seller engaged in fraud and breach of contract regarding the sale.
Great Hill I found liability for only a few of the many claims in the complaint. The current decision noted that the damage expert prepared a report prior to the trial–but did not update it after the court’s ruling on liability and prior to the oral argument for the ruling on damages. See pages 44-45 and footnote 227.
The plaintiffs sought over $100 million in damages but were awarded less than $500 thousand in damages.
Highlights of Key Principles:
- One of the lessons to be learned from this 65-page opinion is that a damage expert needs to allocate damages to correspond to each claim in the complaint–or acknowledge which counts have overlapping damages. See pages 55 to 56.
- The court provides a useful recitation of the law of damages in Delaware for fraud and contract claims. See page 49–50; and footnote 239.
- The law in Delaware is that the estimate of damages need not be proven with mathematical certainty as long as the court has a basis to determine a responsible estimate. See pages 53 to 55.
- Notably, damages cannot be based on speculation, however. See footnotes 254-258, and accompanying text.
- The quantum of proof needed to show that damages exist, is higher than the proof needed to establish the amount of damages.