Counterclaims in a breach of contract action, which are not purely defensive in nature, but seek an affirmative declaration that Letter Agreements at issue are void and unenforceable, are subject to applicable statutes of limitation, and those limitation periods are not tolled by the original underlying contract action.
Coit Capital Securities, LLC vs. Turbine Asset Holdings, LLC, No. 17C-05-020 (Del. Super., 8/21/19).
For its role in securing institutional financing for a series of complex aircraft parts sale transactions, plaintiff brought a breach of contract and tortious interference action for a share of past and future sale proceeds. In response, the Turbine defendants, Delaware special purpose entities organized to hold inventory and distribute payment in the complex transactions, filed a counterclaim which, inter alia, sought a declaration that, because plaintiff had failed to register as a securities broker under the Delaware or Texas Securities Acts, it was not entitled to receive any compensation for its services.
Plaintiff moved to dismiss the failure-to-register counterclaim on the ground that the claim was time-barred under the Securities Acts’ three-year-from-date-of-sale limitation period. The Delaware Superior Court agrees and dismisses the counterclaim. The central question, according to the Court, is whether the counterclaim is solely “defensive” in nature and, therefore, timely as filed as defendants argued, or whether defendant’s claim that the underlying contracts were void and unenforceable for failure to satisfy the registration requirements of the Securities Acts sought affirmative relief subject to the statutes’ limitations periods.
Drawing a distinction between defensive claims for set-off or recoupment, which are not subject to statutes of limitation so long as the main action is timely, and a declaration seeking non-monetary affirmative relief, the Court concludes, based on Chancery Court and other precedent, that defendants’ attempt to void the Letter Agreements at issue with a declaration that they have no obligation to plaintiff under those agreements is such affirmative relief. The Letter Agreements for the sale of the goods at issue having been executed more than three years prior to the filing of defendants’ counterclaim, the Court finds the counterclaim is barred under both Securities Acts’ limitations periods.
Having dismissed the counterclaim as untimely, the Court does not reach plaintiff’s additional arguments (1) that the Letter Agreements are not securities, and (2) that these defendants may not bring a private cause of action because they were neither harmed by, nor protected under, the Securities Acts at issue.
(SOLA Ref. No. SOLA Ref. No. 2019-42-02)
NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis.
Like what you see here?
Twice a week we present blog posts consisting of one write-up from each of our two flagship weekly online Alert services. Consider a subscription to these publications to receive the full array of coverage right on your desktop every week. Give it a try and sign up for a free trial to the Securities Arbitration Alert and the Securities Litigation Alert.