Delaware Corporate Law Update

Updates on Delaware Corporate Law by Evan O. Williford, Esq., Delaware Corporate Litigation Attorney.

Chancery Has Jurisdiction Over Claims for Escrow Money

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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Delaware Corporate Law Update solely reflect the views of Evan Williford of The Williford Firm, LLP. Its purpose is to provide general information concerning Delaware law; no representation is made about the accuracy of any information contained herein, and it may or may not be updated to reflect subsequent relevant events. This website is not intended to provide legal advice. It does not form any attorney-client relationship and it is not a substitute for one.