Court Opinion

ID: 9394561
Source: CourtListenerOpinion
Date Created: 2023-05-15 20:03:21.086648+00
Date Added: 2024-06-11T17:19:00.993804
License: Public Domain

COURT OF CHANCERY
                                      OF THE
    SAM GLASSCOCK III           STATE OF DELAWARE                        COURT OF CHANCERY COURTHOUSE
     VICE CHANCELLOR                                                              34 THE CIRCLE
                                                                           GEORGETOWN, DELAWARE 19947

                                Date Submitted: May 1, 2023
                                Date Decided: May 15, 2023

    Daulton Gregory, Esquire                          Karine Sarkisian, Esquire
    Bayard Marin, Esquire                             Kennedys CMK LLP
    The Law Office of Bayard Marin                    919 N. Market Street
    521 N. West Street                                Suite 1550
    Wilmington, DE 19801                              Wilmington, DE 19801

                 Re: Glenn Carpenter v. Liberty Mutual Insurance Co. and LM
                 General Insurance Co., Civil Action No. 2022-0628-SG

Dear Counsel:

         Before me is the Defendants’ Motion to Dismiss for failure of subject matter

jurisdiction.1 This is a court of limited jurisdiction; unless expanded by statute,

Chancery enjoys the jurisdiction provided the English Court of Chancery as of

1776.2 That jurisdiction was, and our jurisdiction is, limited to cases where effective

relief is unavailable in the law courts.3 That is, our jurisdiction is limited to cases

involving equitable causes of action not recognized at law, cases invoking statutes

that expanded our jurisdiction, and cases where only equitable relief is sufficient to

1
  Defendants also sought dismissal for failure to state a claim. Unless otherwise noted, facts are
drawn from the Pl.’s Verified Compl., Dkt. No. 1.
2
  Del. Const. art. IV, § 10; Clark v. Teeven Holding Co., Inc., 625 A.2d 869, 875–76 (Del. Ch.
1992) (citing Glanding v. Indus. Tr. Co., 45 A.2d 553 (Del. 1945)).
3
  Takeda Pharm. U.S.A., Inc. v. Genentech, Inc., 2019 WL 1377221, at *4 (Del. Ch. Mar. 26,
2019); Milhollan v. Live Ventures, Inc., 2023 WL 2943237, at *2–3 (Del. Ch. Apr. 13, 2023).
remedy a plaintiff’s claims.4 Because the bases stated by Plaintiff in invoking equity

are, in my view, insufficient, this matter must be dismissed subject to transfer to the

Superior Court, under 10 Del. C. § 1902.

       The Plaintiff’s Verified Complaint (the “Complaint”)5 pleads five causes of

action. These are: Count I, Under Insured Motorist Claim; Count II, Breach of

Contract; Count III, Equitable Fraud and Misrepresentation; Count IV, Promissory

Estoppel; Count V6 Waiver and Latches.7 Among these, the Plaintiff contends that

equitable fraud and promissory estoppel are equitable causes of action, and that his

request for specific performance of a contract also provides equitable jurisdiction in

this Court.8 Chancery jurisdiction is like the loop side of a Velcro tape; ever ready

to catch the hooks of equitable claims or remedies.9 Absent such a hook, however,

equitable jurisdiction cannot stick. Here, there is no hook.

       The facts alleged in the Complaint are simple. Plaintiff was injured in an

automobile accident and the tortfeasor carried the statutory minimum of liability

insurance, which was insufficient to make the Plaintiff whole.10 In regard to under

4
  Id.
5
  Compl.
6
  I refer to this count as Count V for the sake of clarity; it is denominated (redundant) Count IV
in the Complaint.
7
  Compl. ¶¶ 29–59.
8
  Pl.’s Reply Br. Opp’n Defs.’ Mot. Dismiss 8, Dkt. No. 18.
9
  Unlike the fasteners described by Ida of Castle Adamant, who urges that “the hook disdain the
fascination of the eye [and] the . . . button . . . evade . . . the button-hole!” Arthur Gilbert &
William Schwenck Sullivan, Princess Ida (1884).
10
   Compl. ¶¶ 15–17, 20.
                                                 2
insured motorists’ coverage (“UMC”), the Plaintiff spoke to a claims adjuster

working for his own insurance carrier, the Defendants Liberty Mutual Insurance

Company and LM General Insurance Company (together, “Liberty”).11 The adjuster

stated that there were two policies—one auto, one motorcycle—each with a

$100,000/$300,000 limit.12 Further, he stated “Policy 1 will be primary and Policy

2 will be excess/2nd layer.”13 Defendants’ counsel conceded at oral argument that

the adjuster should be considered to have communicated that the limits of the second

policy would “stack” onto the first, implying UMC limits of $200,000. The Plaintiff,

who consulted with counsel and believed the UMC policies to be stackable such that

$200,000 was available to him, settled with the tortfeasor for policy limits.14 Liberty,

the Plaintiff’s insurer, subsequently determined that only $100,000 of UMC

coverage was in fact available, because the policies, by their terms, were not

stackable.15 Therein lies the dispute. I turn to the alleged bases for jurisdiction in

Chancery.

       The Complaint states that the basis for equitable jurisdiction is Plaintiff’s

assertion of “equitable claims.”16 Of the five causes of action pled, Counts I and II

are legal claims for breach of contract, in which Plaintiff alleges bad faith and seeks

11
   Compl. ¶ 20.
12
   Compl. ¶ 20.
13
   Compl. ¶¶ 20, 25, Ex. 4.
14
   Compl. ¶¶ 23–24.
15
   Compl. ¶ 26.
16
   Compl. ¶ 12.
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punitive damages as available at law. Count IV seeks that the Court impose a

promissory estoppel against the Defendants’ assertion of the anti-stacking provision

in the insurance policies; that is likewise relief available at law.17

       Count V seeks “Waiver and Laches.” Waiver seems to be a restatement of

the estoppel claim; laches, by contrast, is an equitable defense, not a cause of action.

After examining the Complaint, then, I determine that Count III, seeking damages

for “equitable fraud,” is the only count to attempt to state an exclusively equitable

cause of action.18

       Equitable fraud is the Chancery analog to common-law fraud. It is both

broader (not requiring scienter) and narrower (requiring a relationship between the

parties that invokes equity) than common-law fraud.19 “To establish a claim for

[common law] fraud, a plaintiff must prove (i) a false representation, (ii) a

defendant’s knowledge or belief of its falsity or his reckless indifference to its truth,

(iii) a defendant’s intention to induce action, (iv) reasonable reliance, and (v)

causally related damages.”20 Equitable fraud, by contrast does not require proof of

17
   See Chrysler Corp. (Delaware) v. Chaplake Holdings, Ltd., 822 A.2d 1024, 1031 (Del. 2003).
A claim for promissory estoppel, therefore—standing alone—cannot serve as the basis for
equitable jurisdiction. See Int’l Bus. Machines Corp. v. Comdisco, Inc., 602 A.2d 74, 84–85
(Del. Ch. 1991) (“If there is a full, complete, practical and efficient remedy at law, this Court is
without jurisdiction to hear the matter”).
18
   Compl. ¶¶ 40–47.
19
   Narrowstep, Inc. v. Onstream Media Corp., 2010 WL 5422405, at *13 (Del. Ch. Dec. 22,
2010).
20
   In re Wayport, Inc. Litig., 76 A.3d 296, 323 (Del. Ch. 2013). Because I lack jurisdiction, I do
not examine whether the Complaint adequately states a cause of action for common-law fraud.
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factor (ii): It can be conceived of “as a form of fraud having all of the elements of

common law fraud except the requirement of scienter.”21              The principal that

distinguishes equitable “fraud from [common law] fraud is the existence of a special

relationship between the plaintiff and the defendant, such as where the defendant is

a fiduciary for the plaintiff.”22 If, at this pleading stage, the complaint states a cause

of action for equitable fraud, jurisdiction exists to hear it in Chancery. But the

Complaint, I find, fails to state a claim of the equitable tort. It lacks the sine qua non

of equitable fraud: “a plaintiff claiming equitable fraud must sufficiently plead a

special relationship between the parties or other special equities, such as some form

of fiduciary relationship or other similar circumstances,” to state a claim.23

      Plaintiff contends that because his insurance contracts require him to

cooperate with Liberty in “the investigation, settlement, or defense of any claim or

suit,” he had a “special relationship” with the Defendant insurers.24 But this is not

an equitable relationship.     The duty to cooperate is a contractual duty.          The

Complaint alleges that the relationship of insurer and insured here is “based off trust,

equity and confidence,”25 but this averment is purely conclusory; it is manifest from

the pleadings that the relationship is based only on contract. The insured and the

21
   Id. at 327.
22
   Id.
23
   Narrowstep, 2010 WL 5422405, at *13.
24
   Compl. ¶¶ 22, 41–42.
25
   Compl. ¶ 42.
                                            5
insurer are contractual counterparties.26 It is settled Delaware law that, absent

unusual circumstances, there is no special relationship between an insurer and the

insured of the variety required to plead equitable fraud.27

       Finally, the Plaintiff avers that he seeks the remedy of specific performance;28

that remedy is limited to equity, and if specific performance is necessary to redress

the contractual case pled, this Court has jurisdiction. The Complaint is silent as to

this remedy, however. To the extent that Plaintiff’s contract claims ask the Court to

direct that the policy limits must be “stacked,” I note that this is nothing more than

a request to compel Liberty to pay sums owed under Plaintiff’s view of the contracts

of insurance, either as written or supplemented by the implied covenant of good faith

26
   See Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 626 (Del. Ch. 2005), aff’d in
part, rev’d in part, 901 A.2d 106 (Del. 2006) (citing Crosse v. BCBSD, Inc., 836 A.2d 492, 497
(Del. 2003)) (“It is settled law that an insurer does not generally owe a fiduciary duty to its
insured because this relationship is usually an arm’s-length contractual relationship.”).
27
   Id.; Zebroski v. Progressive Direct Ins. Co., 2014 WL 2156984, at *8 (Del. Ch. Apr. 30, 2014);
Biegler v. Underwriting Serv. Mgmt. Co., LLC, 2022 WL 17820533, at *4 (Del. Ch. Dec. 20,
2022). The Plaintiff, I note, attempted to supplement the record through statements of counsel at
oral argument. I cannot allow those statements to amend the Complaint. In re Gen. Motors
(Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006). Even if I did consider these additional
facts, however, they go only to whether reliance on the adjuster’s statements was reasonable, and
not to whether there was a relationship outside the one created by contract. I also note that the
Plaintiff’s additional facts included conversations that took place between Plaintiff’s counsel and
representatives of the Defendants. Such a dual role as witness and trial counsel is problematic.
See Matter of Estate of Waters, 647 A.2d 1091, 1098 (Del. 1994) (setting out the nature of the
conflict). Given my lack of subject matter jurisdiction, I need not address the issue.
28
   Pl.’s Reply Br. Opp’n Defs.’ Mot. Dismiss 8.
                                                6
and fair dealing, or as modified by estoppel. A money judgement is available at law,

and no specific performance is required.29

       The claims brought here, based on the allegations of the Complaint, are by no

means frivolous. They are legal claims, however, for which relief is available in

Superior Court.30 Equitable fraud does not lie here because the relationship is

contractual. Specific performance is not necessary to compel payment of money

owed under a contract where money damages are available. I find that the Plaintiff

has failed to invoke equitable jurisdiction. Accordingly, I dismiss the Complaint

with leave to transfer pursuant to 10 Del. C. § 1902.

       To the extent the foregoing requires an Order to take effect, IT IS SO

ORDERED.

                                                    Sincerely,

                                                    /s/ Sam Glasscock III

                                                    Sam Glasscock III

29
   Equitable Tr. Co. v. Gallagher, 102 A.2d 538, 546 (Del. 1954) (“It is elementary that the
remedy of specific performance is designed to take care of situations where the assessment of
money damages is impracticable or somehow fails to do justice.”).
30
   Some of the relief sought—punitive damages—is available only at law.
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