Barry M. Klayman, left, and Mark E. Felger, right. Courtesy photos The Requirements of Equitable Fraud as a Basis for Chancery Court Jurisdiction
The distinction between legal and equitable fraud is not always clearly drawn, yet subject matter jurisdiction in the Delaware Court of Chancery can depend on it.
November 09, 2022 at 09:00 AM
6 minute read
Contributors
The distinction between legal and equitable fraud is not always clearly drawn, yet subject matter jurisdiction in the Delaware Court of Chancery can depend on it. That was the case in Trust Robin v. Tissue Analytics, C.A. No. 2021-0806-SG, 2022 WL 4545174 (Del. Ch. Sept. 29, 2022), in which the jurisdiction of the Court of Chancery depended on whether the plaintiff had adequately pleaded a cause of action for equitable fraud. Vice Chancellor Sam Glasscock found that the complaint, taking into account all plaintiff-friendly inferences, stated a claim for equitable fraud; that a case at law absent such a count might be insufficient; and that the equitable fraud cause of action was more than a makeweight version of the legal torts also alleged. In light of the equitable fraud claim, the Court of Chancery had jurisdiction over the subject-matter of the lawsuit.
Plaintiff Trust Robin, a Canadian corporation, was hoping to bring the first user-friendly digital wound technology and education platform to market. It sought the assistance of the defendant Tissue Analytics, a Delaware corporation that specialized in developing artificial intelligence-powered software for the healthcare sector. The two companies entered into a memorandum of understanding outlining their plan to work together to develop and market Trust Robin's "iWound" application and integrate it into Tissue Analytic's software platform. The MOU was followed by a work order, pursuant to which Tissue Analytics agreed to develop and maintain Trust Robbin's software in exchange for a monthly fee, and a Master License & Services Agreement, which provided a more comprehensive legal framework for the work orders.
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