The Ravenswood Investment Company, L.P. v. Winmill, C.A. No. 3730-VCN (Del. Ch. Nov. 27, 2013).

Issue Addressed:  The statutory requirements under DGCL Section 228 for a written consent of stockholder in lieu of meeting, and a written consent of director in lieu of meeting pursuant to DGCL Section 141. (N.B. After the date of this opinion, DGCL Section 228 was amended to address the date requirement discussed in this decision.)

Brief Overview:

The procedural and factual background of this case was highlighted on these pages in connection with prior decisions in this matter.

DGCL Section 228(c) provides that every written consent shall bear the date of the signature.  The issue in this case was that the date was preprinted and was preceded by the words “as of.”  There was no factual dispute however, that the signature was provided on that same date.  The Court distinguished the Wexford case which involved signatures of shareholders which bore the same date but which in realty were not all signed on the same date.

In essence, the Court reasoned that because there was no factual question that the signature of the stockholder was made on the date typed on the form, it complied with the requirement of Section 228.  By contrast, the Court noted, that the written consent of a director in lieu of a meeting is not required to be dated pursuant to DGCL Section 141(f).

PRACTICE POINTER:  The Court provides advice to practitioners that the better practice would be to place a separate date next to each shareholder signatory on a written consent pursuant to Section 228(c) which would thereby avoid issues that arose in this case.  But where, as here, there is no uncertainty as to the date that the signature was made and that is the same date stated on the written consent, the statute is satisfied.  (N.B. After the date of this opinion, DGCL Section 228 was amended to address the date requirement discussed in this decision.)

The Court also addressed a separate and unrelated issue about whether discovery of documents should be produced in original “native format.”  The Court relied on prior case law to explain that unless there is a “particularized showing of need,” there is no general requirement that documents be produced in their “native file format including metadata.”  See footnote 16 and accompanying text.

The following article first appeared in a recent edition of The Delaware Business Court Insider.

A recent decision of the Delaware Court of Chancery in the case of Osram Sylvania, Inc. v. Townsend Ventures, LLC, C.A. No. 8123-VCP (Del. Ch. Nov. 19. 2013), denied a motion to dismiss a breach of contract claim and a fraud claim brought against the seller of stock. The buyer claimed that the seller knew before closing that the company had underperformed substantially compared to forecasts but concealed this fact from the buyer and manipulated the financial condition of the company in the period leading up to the execution and the closing of the agreement in order to make the company appear more successful than it actually was. However, the court granted a motion to dismiss claims for equitable fraud and breach of the implied covenant of good faith and fair dealing, although the claim for common law fraud was allowed to proceed, along with an indemnification claim.

The parties entered into a stock purchase agreement (“SPA”) in which Osram Sylvania, Inc. (“OSI”) agreed to purchase from the defendants the remaining shares of a company called Enselium that it had not already owned.  In 2001, the defendants provided OSI with a presentation about Enselium that included information about its sales and financials, its competitive landscape and a review of its operations.  The presentation revealed that Enselium was projecting sales for 2011 of approximately $18 million and that two of its employees were responsible for about 32% of the sales forecasted for 2011.  The defendants understood that the 2011 forecast number was integral to OSI’s analysis of the purchase price it would pay for Enselium.  OSI agreed to pay approximately $47 million for the remaining capital stock of Enselium.  The transaction closed in October of 2011.

After the closing, OSI learned that instead of the $4 million forecasted for sales in the third quarter of 2011, the actual sales for the third quarter were approximately ½ of that forecasted number.  OSI alleged that the defendants knew that the actual sales of Enselium for the third quarter of 2011 were approximately ½ of the amount forecasted but did not inform OSI of that underperformance, even though the defendants knew of the drastic difference before the closing date.  OSI also discovered after the closing that the defendants allegedly manipulated the financials for the second quarter of 2011 to hide the fact that the actual financials were not as presented.

OSI sought indemnification based on the provisions of the SPA that required the defendants to indemnify for losses incurred as a result of breaches of the SPA.  The indemnification provision also covered breaches as a result of inaccuracies in representations made in the agreement.  There was a threshold of $200,000 for indemnification to apply.

OSI alleged that the manipulation and the concealment of the financial condition of the company breached the warranties in the SPA regarding the accuracy of the financial statements and the accuracy and completeness of the representations in the agreement.  The defendants argued that those allegations were merely conclusory and not supported by specific allegations.  The court, however, found that the allegations of OSI were adequately plead.  For example, OSI referred to specific revenues that were inflated by billing and shipping excess product without applying proper credits or discounts.  Taking those well plead factual allegations as true, the court found it would be reasonably conceivable that they could succeed in demonstrating that the inflation of sales and financial manipulation resulted in statements that did not fairly present the financial condition of the company and therefore breached the SPA.

Using the word possibility as a synonym for conceivability, the court also reasoned that there was a reasonable possibility that OSI could demonstrate that the changes in the business practices of Enselium in the period leading up to the closing could be expected to produce a “material adverse change,” thereby breaching the representations in the SPA.

The court also explained that it is reasonably conceivable that OSI could prove damages resulting from the breaches.  The financial manipulation is alleged to have resulted in breaches of the SPA that made the company appear to be more successful than it actually was.  Therefore that conduct may have caused OSI to agree to pay more for the company than it otherwise would have.

The court observed that OSI advanced the claim for indemnification based on the same allegations that support its breach of contract claims.  For purposes of indemnification, even if the court were to dismiss the breach of contract claim regarding the loss of two key employees, the court would be required to uphold the claim for indemnification based on the departure of those employees if that departure conceivably could be shown to constitute an adverse change.

The court also explained that because OSI alleged damages in excess of $8 million, the allegations make it reasonably conceivable that OSI could demonstrate that it exceeded the threshold of $200,000 in damages which would trigger the indemnification obligations under the SPA.

The court addressed the elements of fraud and whether the allegations satisfied the particularity requirement under Court of Chancery Rule 9(b) for averments of fraud.  Rule 9 requires a complaint alleging fraud to state:  (1) the time, place and contents of the false representation; (2) the identity of the person making the representation; and (3) what the person intended to gain by making the representation.  Conditions of mind, however, such as malice, intent and knowledge, may be averred generally.  Essentially, the court described the particularity requirement as obligating the plaintiff to allege the circumstances of the fraud “with details sufficient to apprise the defendant of the basis for the claim.”  The court found that OSI did allege with particularity facts supporting a claim of fraud.

The court distinguished forecasts about events that will occur in the future and “opinions and statements as to probable future results” as not generally being fraudulent even though they relate to material matters.  It follows that failing to disclose information to correct earlier forecasts is not actionable in fraud.

The opinion provides a helpful analysis of the nuances required to satisfy the prerequisites of particularity for a fraud claim.  Regarding the state of mind required for fraud, the court explained that a mere allegation that a defendant “knew or should have known” about a false statement is not sufficient to plead the requisite state of mind.  Although state of mind can be alleged generally, the court found that the defendants conceivably were knowing participants in an effort to defraud OSI.

Moreover, the court emphasized settled Delaware law that a plaintiff “cannot bootstrap a claim of breach of contract into a claim of fraud merely by alleging that a contracting party never intended to perform its obligations.”  Stated differently, the plaintiff cannot state a claim for fraud simply by adding the term “fraudulently induced” to a complaint that states a claim for breach of contract or by alleging that the defendant never intended to abide by the agreement at issue when the parties entered into it.  The court explained that this was not a situation where a claim improperly based fraudulent intent solely on subsequent activity and hindsight attempts to infer fraudulent intent based on activity that occurred after the date of the alleged fraud.

This opinion should be required reading for anyone planning to prevail on a claim for breach of contract and fraud in connection with the purchase of stock or assets of a company.

Doe v. Wilmington Housing Authority, Del. Supr., No. 403, 2013 (oral argument Dec. 18, 2013).

Issue addressed: The Delaware Supreme Court heard oral argument on the natural right to self defense exemplified in the right to bear arms recognized in Article I, Section 20 of the Delaware State Constitution, the analog to the Second Amendment of the U.S. Constitution. In particular, the issue presented was whether a housing authority can effectively deny this fundamental right to its residents.

Why is this case relevant to this blog that covers corporate and commercial litigation? Other than the fact that the author of this post made the oral argument before the Supreme Court (and the Third Circuit which certified the issue), because it involves a fundamental right that every person is born with and that the constitution recognized as pre-existing, as opposed to granting the right. Very few rights enjoy that exalted status.

Blurb: Delaware’s High Court heard oral argument on this case on Dec. 18. The issue was accepted upon certification from the U.S. Court of Appeals for the Third Circuit in an opinion highlighted on these pages. That opinion provides both procedural and factual background.

 

In re Rural Metro Corporation Shareholders Litigation, Cons. C.A. No. 6350-VCL (Del. Ch. Dec. 17, 2013).

Issue Addressed:  Whether a post-trial declaration in a separate bankruptcy proceeding should be considered after the close of the trial record. Short Answer:  Not based on the facts of this case.

Brief Overview:

After the trial of this matter the company filed for bankruptcy.  The company sought to open the record after trial to introduce an affidavit by a new CFO that was filed in the bankruptcy proceeding.

The Court addressed the multiple factors that it considers in connection with a motion to open the record.  The Court described them as the Pope factors based on the case styled Pope Invs. LLC v. Benda Pharm., Inc., 2010 WL 3075296 at *1 (Del. Ch. July 26, 2010).  See also Carlson v. Hallinan, 925 A.2d 506, 520 (Del. Ch. 2006), clarified by 2006 WL 1510759 (Del. Ch. May 22, 2006).  The Court noted that whether the new evidence is material and not merely cumulative is subsumed by consideration of whether the evidence would likely change the outcome.

Ultimately, a motion to reopen and supplement the trial record is addressed to the discretion of the trial court.  The Court found the request to open the record in this case to be lacking in merit.

This short opinion is also useful for its analysis of Delaware Rule of Evidence 201 regarding judicial notice of adjudicative facts.  The Court described adjudicative facts as simply the facts of a particular case.  Under Rule 201(f) judicial notice of such facts “may be taken at any stage of the proceeding.”  The Court emphasized that simply because a document may be suitable for judicial notice “for certain purposes does not mean that its contents can be used for any conceivable purpose.”  The Court explained that even though the affidavit filed in a separate bankruptcy matter might be generally the subject of judicial notice, the Court explained that it could not take judicial notice of the contents of the declaration to establish the truth of its contents without discovery and a hearing.

The Court explained that Rule 201(f) regarding facts should be compared with and distinguished from Rule 202 which refers to the judicial notice of law.

The Court also referred to the comment to D.R.E. 202 which explained that there is no counterpart in the Federal Rules of Evidence or the Uniform Rules of Evidence to the Delaware version of Rule 202 which was intended to make it easier to encourage the admissibility of evidence of the law of other states and the federal government.  In particular, Delaware added subsection (d).  Rule 202(d) is entitled “private acts, regulations, ordinances, court records.”

The Court of Chancery concluded that it could take judicial notice of the declaration filed in the bankruptcy court for certain limited purposes, such as to understand the nature of rulings made by the bankruptcy court, but the rule did not permit the Court of Chancery to take notice of that filing for the truth of its contents.  In order to consider it, the record would need to be reopened so evidence could be presented about the declaration.  But the Court reasoned that an application of the Pope factors weighed against reopening the record, and judicial notice could not be used as a procedural shortcut to consider it.

MPEG LA, L.L.C. v. Dell Global B.V., C.A. No. 7016-VCP (Del. Ch. Dec. 9, 2013).

Issue Presented:  The Court reviewed in camera selected documents which were the subject of a motion to compel due to a dispute about whether the documents should be protected under the attorney-client privilege.

This short letter opinion is useful for the toolbox of litigators to the extent that it reiterates the governing principles to determine which documents will be entitled to protection under the attorney-client privilege.

Short Overview 

The beginning point for the analysis is Delaware Rule of Evidence 502(b) which specifies that communications may qualify for the attorney-client privilege even if no party to the communication is an attorney, for example, when it is a communication between representatives of the client or between the client and a representative of the client if it is a communication made for the purpose of facilitating the rendition of legal services to the client.  Other governing principles include the following:

1)         The attorney-client privilege protects legal advice only, and not business or personal advice.

2)         Where business and legal advice are inseparable in a communication – – or the communication includes individuals serving in both business and legal advisory roles – – the communication will be considered privileged only if the legal aspects predominate.  See footnotes 7 and 8.

3)         Even if the communication is with a legal advisor, it will not be protected if the communication involves only a business matter.

4)         If the communication includes both business and legal advice, the legal-related portions must be redacted where possible.  Where the legal and business advice, however, cannot be segregated or is too difficult to determine, the party asserting the privilege will be given the benefit of the doubt and the communication will be protected.  See footnote 11.

A prior Chancery decision in this matter highlighted on these pages provides more procedural and factual background.

 

Fletcher International, Ltd. v. ION Geophysical Corp., C.A. No. 5109-CS (Del. Ch. Dec. 4, 2013).

Issue Addressed:  The Court of Chancery addressed a claim for damages in this post-trial opinion that was based on an analysis that included a hypothetical negotiation that would have taken place if the defendant had obtained prior consent as required. The analysis was made in light of a breach of contract which already had been determined in a prior decision.

Brief Overview:

Background details are available from several prior Delaware decisions in this matter that were previously highlighted on these pages. [Refer to search box in right margin.] This opinion is of limited usefulness to the average litigator because however extensive the discussion, the opinion is based on the somewhat unusual situation involving hypothetical damages that would have been suffered if a breach of contract did not take place due to the failure to obtain prior consent.

The hypothetical negotiation that the court discussed was based on the right of the plaintiff to require the other party to obtain his prior consent to a financing transaction, which consent was not obtained. However, the court substantially discounted the “consent fee” that the court believed the plaintiff would have been able to extract for that consent.  In sum, the Court explained that the plaintiff over emphasized the amount of damages it would have been entitled to if the opposing party had complied with the contractual requirement to obtain his prior consent before the financing deal was done.  For that reason, this opinion is of only very limited utility to the average litigator. But a good craftsman keeps certain tools in her toolbox even if only rarely used.

 

Costantini v. Swiss Farm Stores Acquisition LLC, C.A. No. 8613-VCG (Del. Ch. Dec. 5, 2013).

Issue Addressed

Whether the agency relationship between the company and a person seeking indemnification rights was sufficient for purposes of the standard applicable for statutory indemnification.

Short Answer:  At the preliminary stage of a motion for judgment on the pleadings, there were too many factual issues to resolve the question.

Brief Overview

The prior Chancery decision in this case was previously highlighted on these pages here.  This letter opinion was in connection with a motion for reargument of that decision about whether Kahn, the person whose request for indemnification was denied in the earlier opinion, should be entitled to indemnification because, contrary to the court’s holding in the prior opinion, there was some agency relationship alleged between the company and  Kahn.  The Court said that there was insufficient information presented on that issue on a factual level – – until the motion for reargument was submitted.  In light of the motion for reargument and the additional information on that factual issue, the court, in sum, allowed for the issue to be further developed through discovery.

The parties chose to import language into their operating agreement from Section 145(a) and Section 145(b) of the DGCL, and therefore the Court used caselaw interpreting that provision for guidance.  The courts have explained that the provision in that statute provides for indemnification when an officer, director or agent of a company is sued “by reason of the fact” of the corporate position of that person.  That test is met when “there exists a causal connection or nexus between such proceeding and the defendant’s corporate capacity.”  See Homestore, Inc. v. Tafeen, 888 A.2d 204, 214 (Del. 2005).  The Court also explained that a “nexus” exists where a person’s “corporate powers are necessary or useful for committing the alleged misconduct.”  See footnote 17.

In this case, there was an issue about whether Kahn was an agent and whether that agency relationship had a nexus to the complaint brought against him in the underlying action.  Part of the factual dispute was whether or not he was a direct agent or subagent based on an entity through which he worked.  Assuming he was a subagent, there was a dispute about whether the entity was a corporation or, believe it or not, a sole proprietorship despite a corporate name.

In conclusion, the pleadings were insufficient at this early stage in order to make a determination, but the discussion by the Court regarding what is required to establish the necessary connection with a corporation that would make one eligible for indemnification, makes this short letter opinion necessary reading for those interested in this nuance of Delaware statutory indemnification law. Although the language interpreted was in an operating agreement, because the agreement incorporated the terms of the statutory provisions in Section 145, the Court used the statutory analysis.

 

 

Boris v. Schaheen, C.A. No. 8160-VCN (Del. Ch. Dec. 2, 2013).

Issue Addressed:  Whether the written consents of stockholders pursuant to DGCL Section 228 effectively selected new board members.

Brief Overview

This 51-page post-trial decision addressed the effectiveness of written consents of stockholders that were designed to select new board members.  The two entities involved were controlled by family members who had an informal corporate governance system.  The directors did not hold the proper board meetings and did not record proper board minutes.  The directors did not formally document the issuance of shares and the official stock ledger was not maintained in a manner which allowed the number of shares issued to each stockholder to be free from doubt.  The parties disputed what the exact number of shares were that each of them owned.

Written Consent of Stockholders

The two companies involved in this case are Numoda Corporation and Numoda Technologies, Inc.  The Numoda Corp. bylaws allowed stockholders to act by written consent.  First, the plaintiffs, John and Ann, delivered the Numoda Corp. Written Consents to the registered agent of the company and then filed the consents with the books and records of the company.  Then, two days later, as the purported directors of Numoda Corp., John and Ann executed a unanimous written consent of directors in which they resolved, that “no officer of Numoda Corp. shall take any action on behalf of the company without the prior written consent of the board.”

Similar to the Numoda Corp., Numoda Technologies, Inc. (“Numoda Tech”) had a stock book in which most stock issuances were not properly documented nor did the corporate records include board approval of corporate acts.  The parties understood Numoda Tech to be a wholly owned subsidiary of Numoda Corp.  It was disputed whether Numoda Tech ever issued stock from the time it was incorporated to be a subsidiary of Numoda Corp.  No Numoda Tech stock certificates were ever issued.  The plaintiffs, John and Ann, took the position that because no stock was ever issued, Numoda Tech is a corporation with no stockholders.  It was disputed who the original members of the board of Numoda Tech were.

The Numoda Tech bylaws also allow stockholders to act by written consent.  Just as they did in connection with Numoda Corp., John and Ann, as purported majority stockholders, delivered a written consent of Numoda Tech stockholders.

Legal Analysis

This action was brought pursuant to Section 225 of the DGCL which allows any stockholder or director to petition the court to determine the validity of the removal or appointment of a director.

The Court explained that the DGCL contemplates, generally, a formal approach to corporate governance especially relating to changes in the capital structure.  The DGCL implies an affirmative duty to maintain the stock ledger.  See footnote 159.  See also DGCL Section 219(c) (the stock ledger shall be the only evidence as to the stockholders who are entitled to vote in person or by proxy or by written consent).

If the corporation does not have a stock ledger then the Court may consider extrinsic evidence to determine stock ownership.

Stock is not validly issued unless the board of directors exercises its power to issue stock in conformity with statutory requirements.  The Court addressed two related questions that are implicated:  (1) whether the DGCL requires a written instrument evidencing board approval to issue common stock; and (2) whether, if a written instrument is required, the lack of such approval by a written instrument renders the issued stock void or voidable.  Although these issues have been addressed in Delaware as they relate to preferred stock, no cases have been presented previously to the Court involving a common stock issue.  See footnote 166.

The Court discussed the recent amendments to the DGCL, adding Sections 204 and 205, that address the ability to correct defective corporate acts and to clarify the distinction between void and voidable acts.  The Court discussed public policy reasons behind the strict requirement of a written instrument for a stock issuance implicated by DGCL Section 151(a), among other provisions.  One of the reasons for such a bright line rule is that it promotes certainty that facilitates investments in stock.

The Court cited established Delaware law for the position that:  “Stock issued without authority of law is void and a nullity – – and this includes stock that is not issued pursuant to a written instrument evidencing board approval.  That the stock is void means that it cannot be remedied by equity . . ..”  See footnote 176.  The Court explained that:  “Put simply, for changes to the corporation’s capital structure, law trumps equity.”  See footnote 179.

The Court concluded as a matter of law that under the case of Waggoner v. Laster, 581 A.2d 1127 (Del. 1990), and the current DGCL, “that it may not apply estoppel in this context.  Equitable estoppel may apply ‘when a party by his conduct intentionally or unintentionally leads another, in reliance upon that conduct, to change position to his detriment.’”  In Waggoner, the Supreme Court addressed the stockholders’ equitable argument that a board, which had previously issued preferred stock with super-majority voting rights, should be prohibited under equitable estoppel from contesting the validity of the voting rights, even though there were void from want of authorization in the corporation’s charter.  In conclusive terms, the Supreme Court held that estoppel

“has no application in cases where the corporation lacks the inherent power to issue certain stock or where the corporate contract or action approved by the directors or stockholders is illegal or void.  Neither can a board ratify void stock.  Only voidable acts are susceptible to these equitable defenses.  In brief, because equity cannot directly remedy void stock, neither should equity be able to indirectly remedy void stock.”  See footnotes 186 through 191.

Based on the lack of written instruments and lack of equitable power of the Court to remedy these statutory defects, the Court determined that Mary did not establish her burden and as a result John and Ann were held to be the majority stockholders of the Numoda Corp Class B voting stock.  The Court relied on the presumption that John and Ann were the holders of a majority of the Class B voting stock based on the stock ledger, which shifted the burden to Mary to establish a different ownership structure for Numoda Corp.

Regarding the Numoda Tech’s stock ledger, which was blank, the Court had to look beyond it to determine the shareholders.

The Court determined that all of the stock of Numoda Tech is void.  No Numoda Tech stock had been validly issued and Mary was not able to rebut that position because a Numoda Tech board never approved, by written instrument, any stock issued.

The Court determined that because all the Numoda Tech stock is void, equity was not able to remedy the defect in the context of this case, nor were equitable defenses applicable.  Because the Court concluded that Numoda Tech is a corporation with no stockholders, a written consent of Numoda Tech stockholders based on the proposition that John and Ann were majority stockholders, is invalid.

Regarding the directors of Numoda Tech, it was not disputed that Mary was a director immediately preceding the delivery of the written consent of Numoda Tech stockholders.

The Court explained that DGCL Section 141(b) has been interpreted to allow a director to orally resign and that subsequent actions consistent with an oral resignation can support finding a resignation without written notice.

The Court relied on annual franchise tax reports submitted to the Delaware Secretary of State under oath, as well as related evidence that supports the position that Mary was the sole director of Numoda Tech.  The Court found the testimony that sought to discredit statements in the annual franchise tax which listed Mary as the sole director to be unreasonable and therefore not credible.

The only issues in this Section 225 action were the validity of the written consents to determine the directors of Numoda Corp and Numoda Tech.  In order to make this determination, the Court had to determine whether certain stock was validly issued.

Conclusion
The Court concluded that John and Ann comprised the board of Numoda Corp. because they were found to have a majority of the valid shares of voting stock.  However, the Court concluded that Mary was the sole director of Numoda Tech because John and Ann had previously resigned as directors and Numoda Tech had no validly issued stock.

Postscript: On Nov. 27, 2013, in The Ravenswood Investment Co., L.P. v. Winmill, the Court of Chancery also addressed an issue involving DGCL Section 228, in connection with the date of the signature on the written consent and if the date of the signature complied with the statute.

Policemen’s Annuity and Benefit Fund of Chicago v. DV Realty Advisors LLC, C.A. No. 7204-VCN (Del. Ch. Nov. 27, 2013)

Issue Addressed:  Whether the removal of the general partner converts that interest into a limited partnership interest or a “mere economic interest.”

Brief Overview:

The court observed that pursuant to the Delaware Revised Uniform Limited Partnership Act (“DRULPA”), unless the partnership agreement provides otherwise, a person may be admitted to the partnership as a limited partner only upon the consent of all the limited partners.  See Section 17-301(b)(1) of the DRULPA.  In this case none of the existing limited partners consented to the removed general partner becoming a limited partner, and there is no statutory authority for that status nor did the limited partnership agreement support that new status.

Because the court concluded that the former general partner did not become a limited partner, it was not necessary for the court to address the issue of whether or not it retained a “economic interest.”  The agreement provided a mechanism for the return of its capital which the court also addressed in connection with an issue of the value of that capital and when it was required to be returned.

For a more complete description of the background and procedural facts of this case, refer to prior Delaware decisions in this matter highlighted on these pages.

 

United Health Alliance LLC v. United Medical LLC, C.A. No. 7710-VCP (Del. Ch. Nov. 27, 2013).

This Chancery opinion is noteworthy because it addresses the enforceability of an apparent oral settlement agreement reached in mediation.  Although both parties claim to have reached an oral settlement agreement during mediation, during the subsequent confirmation of the details, a dispute arose as to whether the settlement included a general release or a partial release of all claims.  The court determined after a hearing that even though oral agreements can be enforceable, in the circumstances of this case there was a failure to agree on a material term and therefore, the agreement was not enforceable.

This opinion is also helpful for its discussion of what types of evidence can be admissible as exceptions to the hearsay rule, as well as when the general rule about confidentiality and inadmissibility of statements by a mediator can be waived.

For further procedural and factual background information, refer to a prior Chancery decision in this case highlighted on these pages.

Obvious Practical Takeaway: If a settlement is reached at a mediation, finalize the important terms in a writing signed by the parties before the parties leave the mediation (regardless of how late the hour), if one hopes to be able to enforce the mediation.