Delaware Supreme Court.

The Delaware Supreme Court has vacated a nearly $17 million judgment against a company accused of trying to avoid a contract with a marketing firm it had retained to market metal cards to high-end customers. The panel in vacating the judgment said it was doing so ”reluctantly.”

A three-judge panel of the high court said Wednesday that CompoSecure, a Delaware limited liability company that markets its products to JPMorgan Chase & Co. and other firms in the credit card industry, would have another chance to argue that its contract with CardUX was void and unenforceable under New Jersey law.

Chancery Court Vice Chancellor Travis Laster in February found the contract was voidable, and not void, meaning that the agreement could still be ratified, despite not being properly authorized by the board, its investors and a majority of its Class A unit holders. The ruling approved more than $14 million in compensatory damages for CardUX, plus almost $2 million in attorney fees and expenses and pre- and post-judgment interest.

The Supreme Court, however, found that Laster's ruling did not fully take into account a provision of the contract that had the potential to render the agreement void, and remanded the case to make the necessary findings.

“Because resolution of this issue could change the outcome, we remand for a determination as to whether the sales agreement is a restricted activity,” Justice Karen Valihura wrote in a 27-page opinion.

She was joined in the ruling by Justices James T. Vaughn Jr. and Collins J. Seitz Jr.

But the decision to remand the case to the Chancery Court was a reluctant one, because the “equities do not favor CompoSecure,” Valihura said. In her opinion, the judge said that CompoSecure only “weakly” raised its argument below, and that Laster's 114-page ruling earlier this year was “rife with findings suggesting that CompoSecure consistently attempted to avoid its obligations under that agreement.”

According to court documents, CompoSecure grew unhappy with the economic terms of the agreement after it realized that CardUX was eligible for a flat 15 percent commission on credit card orders in which it was “meaningfully involved.” The sales agreement, however, did not include a provision requiring CardUX to show that its efforts led directly to a particular sale.

The conflict came to a head after Amazon placed a massive order for metal cards through Chase, which entitled CardUX to a $9 million up-front commission. By that time, CompoSecure discovered that it had not complied with the related-party approval provision, and the company petitioned the Chancery Court to have the contract declared void.

On appeal, CompoSecure switched gears to argue that the agreement qualified as a “restricted activity” under the contract, and failure to obtain prior approval made the contract void and incapable of being ratified.

“The answer to this question is important because, if the restricted activities provision applies, the sales agreement would be void, as opposed to merely voidable, and, therefore, would be incapable of being ratified,” Valihura wrote. “Accordingly, we will remand to allow the trial court to determine whether the sales agreement is a restricted activity and to make any necessary related determinations.”

David Margules, an attorney for CardUX, said Thursday that he was optimistic about his client's chances on remand.

“We view that ruling as a very positive development, and we look forward to getting the whole thing resolved,” he said.

An attorney for CompoSecure did not return a call Thursday afternoon seeking comment on the Supreme Court's ruling.

CompoSecure was represented by Myron Steele, Arthur Dent and Andrew Sauder of Potter Anderson & Corroon and Steven Coren and David DeVito of Kaufman, Coren & Ress in Philadelphia.

CardUX was represented by Margules, Elizabeth A. Sloan and Jessica C. Watt of Ballard Spahr in Wilmington and Burt M. Rublin from the firm's Philadelphia office.

The case is captioned CompoSecure v. CardUX.