The Court of Chancery recently confirmed, in East Balt LLC v. East Balt US, LLC (available here), that it has subject matter jurisdiction over a breach of contract claim for damages to be paid from a contractually-established escrow.
Plaintiff sold assets to defendants for $250 million, $7.9M to be escrowed to indemnify defendants against losses from later claims. In the event of claims the escrow would continue unless otherwise agreed until a final non-appealable order resolved the dispute. Defendants asserted claims totaling more than $7.9M. Plaintiffs sued in Chancery to release the escrow; defendants argued that only Superior Court could hear the case.
The Court ruled for plaintiff, relying on a 2013 Chancery bench ruling, and a 1977 Chancery decision, to the same effect. The Court rejected defendants’ argument that Superior Court was adequate because (i) all the escrow agreement required was a final ruling; and (ii) its contempt powers could enforce declaratory relief.
East Balt confirms that parties with a contractual damages claim from an escrow may sue in the Court of Chancery.
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