COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JOHN W. NOBLE 417 SOUTH STATE STREET
VICE CHANCELLOR DOVER, DELAWARE 19901
TELEPHONE: (302) 739-4397
FACSIMILE: (302) 739-6179
April 20, 2015
Stephen P. Lamb, Esquire Kevin G. Abrams, Esquire
Meghan M. Dougherty, Esquire J. Peter Shindel, Jr., Esquire
Paul, Weiss, Rifkind, Wharton Abrams & Bayliss LLP
& Garrison LLP 20 Montchanin Road, Suite 200
500 Delaware Avenue, Suite 200 Wilmington, DE 19801
Wilmington, DE 19801
Joel Friedlander, Esquire
Benjamin P. Chapple, Esquire
Friedlander & Gorris, P.A.
222 Delaware Avenue, Suite 1400
Wilmington, DE 19801
Re: The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
Date Submitted: April 9, 2015
Dear Counsel:
Plaintiff The Renco Group, Inc. (“Renco”) seeks certification of an
interlocutory appeal of the Court’s Order of March 18, 2015, which implemented
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 2
its Memorandum Opinion of January 29, 2015.1 There, the Court dismissed
Renco’s fiduciary duty claims against Defendant MacAndrews AMG Holdings
LLC (“MacAndrews AMG”) because they could not proceed in parallel with
Renco’s breach of contract claims based on the complex and sophisticated
contractual relationship documented by the limited liability company agreement of
Nominal Defendant AM General Holdings LLC (“Holdco”). The Court also
concluded that there was no “independent basis for the fiduciary duty claims apart
from the contractual claims.”2 In addition, Renco objects to the Court’s dismissal
of fiduciary duty claims and corresponding aiding and abetting claims against
Defendants MacAndrews & Forbes Inc. (“M&F”) and Ronald O. Perelman
(“Perelman”), parties closely linked to MacAndrews AMG.
The law regarding parallel pursuit of contract and fiduciary duty claims upon
which the Court relied is not novel. There is no material conflict about the
principles that guided the Court. The Court did not hold that fiduciary duties had
been eliminated. Instead, for purposes of this litigation, the sophisticated, privately
1
The Renco Gp., Inc. v. MacAndrews AMG Hldgs. LLC, 2015 WL 394011 (Del.
Ch. Jan. 29, 2015).
2
Id. at *7 (quoting Grayson v. Imagination Station, Inc., 2010 WL 3221951, at *7
(Del. Ch. Aug. 16, 2010)).
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
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ordered contractual obligations came ahead of, and encompassed the scope of,
traditional fiduciary duties, and it is to the parties’ contract that the Court should
turn for resolution of this dispute. Perhaps the Court has construed Renco’s
contractual protections too broadly, but, even if it did so, an overly expansive
reading of a contract in the context of a motion to dismiss is not a decision that
would ordinarily qualify for an interlocutory appeal.
In order to obtain certification of an interlocutory appeal under Supreme
Court Rule 42, the party seeking to appeal must demonstrate that the decision from
which an appeal is sought determined a substantial issue and established a legal
right. In addition, one of the criteria identified in Supreme Court Rule 41
applicable to certifications of questions of law or from a list of factors specifically
set forth in Supreme Court Rule 42(b) must be satisfied. In this instance, Renco
asserts that the Court decided a question of law that is one of first instance in
Delaware; is subject to conflicting decisions of the trial courts; and relates to the
constitutionality, construction, or application of a Delaware statute which has not
been, but should be, resolved by the Delaware Supreme Court. It adds that an
interlocutory appeal will serve the interests of justice.
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 4
Renco asserts, and Defendants do not seriously dispute, that the
Memorandum Opinion and Order resolved a substantial issue and established legal
rights. The Court’s decision had the effect of reducing the scope of the dispute to
one of contract. In the course of that effort, Renco’s fiduciary duty claims, aiding
and abetting breach of fiduciary duty claims, aiding and abetting breach of contract
claims, tortious interference claims, and fraudulent transfer claims were dismissed.
A corollary consequence was that claims against other defendants who are not
parties to the contract were dismissed. Thus, the Court resolved both a substantial
issue and established legal rights (or, perhaps more accurately, diminished Renco’s
legal rights).
The parties join issue with respect to the third factor which Renco must
demonstrate in order to support an application for an interlocutory appeal. In
substance, Renco notes that its contract with MacAndrews AMG did not
unambiguously eliminate fiduciary duties and, thus, they must be deemed to have
survived as to all Defendants, either directly or in the aiding and abetting context.3
3
For purposes of this application, the Court focuses on Renco’s arguments
regarding dismissing secondary claims against M&F and Perelman. The Court’s
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 5
Renco argues that (i) the agreement did not eliminate all applicable fiduciary
duties owed to it; (ii) priority of contract does not affect its fiduciary duty rights
against third (non-contracting) parties; and (iii) the agreement imposes obligations
on MacAndrews AMG in the nature of fiduciary duties and an exception to the
general rule that one cannot aid and abet a breach of contract allows for claims of
aiding and abetting a breach of contractually imposed fiduciary duties. In Renco’s
view, because the fiduciary duties survive, parties who are not signatories to the
underlying agreement remain liable for aiding and abetting, even if the fiduciary
claims against the contracting party are not considered in the litigation because
they are subsumed by the contract terms. In other words, even though the Court
might not be addressing fiduciary duties as between Renco and MacAndrews
AMG, it still needs to address those very same fiduciary duties in terms of whether
their breach by MacAndrews AMG has been aided by other defendants.
Moreover, although not framed as contractually-imposed fiduciary duties,
the agreement establishes duties as between the parties to the contract that are fully
consistent with standard fiduciary undertakings. The Court’s decision is said to
contract interpretation, even if wrong, would not seem to warrant interlocutory
appeal.
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C.A. No. 7668-VCN
April 20, 2015
Page 6
conflict with cases where the scope of fiduciary duty is defined by contract but a
third party could aid and abet the breach of a contractually-defined fiduciary duty.4
Thus, Renco plausibly argues that even if the fiduciary duties as such were
properly removed from the case, there would still remain an exception to the
general rule that one cannot aid and abet the breach of contract. It contends that
the aiding and abetting of a breach of contract which has defined fiduciary duties is
a proper cause of action.5 Whether due to conflicting decisions or a novel question
of Delaware law that needs resolution, one could argue appellate consideration is
warranted and serves the interests of justice because the nature of the case has
materially changed.
On the one hand, when there is a complex, comprehensive, and sophisticated
agreement defining the parameters and expectations of a financial and business
arrangement, the parties who accepted that structure should look to the contract for
guidance. There are two sides to this dispute, and the parties on each side are
4
See, e.g., Allen v. El Paso Pipeline Gp. Co., LLC, 2014 WL 2819005, at *19 (Del.
Ch. June 20, 2014).
5
The risk, of course, is that such an exception could be construed to allow for an
aiding and abetting a breach of contract claim whenever the contract is between
those with a fiduciary relationship because contractual good behavior and proper
execution of fiduciary duties will frequently be consistent with one another.
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C.A. No. 7668-VCN
April 20, 2015
Page 7
closely connected to each other. The principle that contract will draw the Court’s
attention instead of comparable fiduciary duties makes sense in this context: it
focuses the litigation on the norms the parties established for themselves and
presumably would lead to a more efficient proceeding. That benefit is largely lost
if aiding and abetting a comparable breach of fiduciary duty claim survives. To
process an aiding and abetting claim will require proof (of the very same fiduciary
duties) that was bypassed between the primary contracting parties.
On the other hand, these sophisticated parties knew how to eliminate
fiduciary duties within their framework of limited liability companies. They did
not do so; that supports the conclusion that fiduciary duties survive for some
purposes—and aiding and abetting claims would be one such purpose. Moreover,
without aiding and abetting liability, deep pocket controllers could avoid liability
while the contracting party which they controlled might be rendered unable to pay
any judgment. That consequence is inconsistent with the intention to avoid
unnecessary duplication but not to alter materially the substance of the economic
arrangement and the possible litigation outcome. Giving primacy to the contract,
however, brings along the principle that one cannot aid and abet a breach of
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 8
contract, certainly a contract without a standard of fiduciary duty. A potential
wrongdoer should not be able to achieve the same unpalatable objective through
inducing a breach of fiduciary duty that has been superseded for litigation
efficiency.
Renco also contends that the interests of justice would be served because of
the important issues presented and the potential waste of resources if a second trial
regarding the dismissed claims becomes necessary. Of course, the interlocutory
appeal sought by Renco offers no hope that the litigation will be resolved.6 Further
weighing against an interlocutory appeal are the circumstances of this and related
litigation.
In order to appreciate the breadth of Renco’s application, it is important to
recognize that this action proceeds in parallel with another action involving many
of the same parties or their controllers.7 In that case, Renco and its related parties
moved to dismiss claims asserted by Holdco for virtually the same reasons that the
Defendants in this case asserted and prevailed upon. The outcome in the
6
See TCV VI, L.P. v. TradingScreen Inc., No. 117, 2015, at 4 (Del. Apr. 7, 2015)
(ORDER) (“We also decline to exercise interlocutory review when doing so would
not be case dispositive.”).
7
See AM Gen. Hldgs. LLC v. The Renco Gp., Inc., C.A. No. 7639-VCN.
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 9
AM General Holdings case, with respect to the Renco Parties’ efforts to dismiss
comparable claims, was substantially the same as the outcome on this motion to
dismiss.8 For example, Renco argued: “Under Delaware law, if a contract claim
addresses the alleged fiduciary wrongdoing, any fiduciary duty claim arising out of
the same conduct is superfluous.”9 It then went on to argue that, “[a]s a matter of
law and logic, there cannot be secondary liability for aiding and abetting an alleged
harm in the absence of primary liability.”10 Renco continued, “For that reason, to
the extent an underlying breach of fiduciary duty claim is dismissed, the aiding and
abetting claim must also be dismissed.”11
Accordingly, Renco seeks an interlocutory appeal to undo the law upon
which the Court relied and upon which Renco prevailed in parallel litigation. The
parallel litigation is ongoing, and Renco, if it is to prevail on an interlocutory
appeal, would have fiduciary duty-based claims against the parties in the parallel
8
AM Gen. Hldgs. LLC v. The Renco Gp., Inc., 2013 WL 5863010 (Del. Ch.
Oct. 31, 2013).
9
The Renco Gp., Inc.’s, ILR Capital’s, and Ira L. Rennert’s Opening Br. in Supp.
of Their Mot. to Dismiss (Tr. ID. 50013206) at 16, Mar. 8, 2013 (internal quotation
marks omitted).
10
Id. at 21 (internal quotation marks omitted).
11
Id. (internal quotation marks omitted).
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C.A. No. 7668-VCN
April 20, 2015
Page 10
litigation while the plaintiff in the parallel litigation would not have the equivalent
claims against Renco’s affiliated parties. Although there may be some differences
in the scope of the contract and the fiduciary duty claims as between the cases, one
would think that the interrelationship between contract and fiduciary duty should
be resolved with a consistent set of principles.12 This incongruity, if that is not too
strong of a word, counsels against an interlocutory appeal.
In sum, whether novel, in conflict, or driven by a fact-specific context,
interesting and important questions of law and case administration lie at the
intersection of contract, fiduciary duty, and aiding and abetting. As desirable as
appellate instruction would be, interlocutory appeals are not favored if they would
not be case dispositive. Moreover, regardless of whether the interests of the
administration of justice might arguably be served in this action, the parallel case
of AM General should not be ignored. The cases are, in so many ways, mirror
images of each other and should proceed, as they have, on the same basis. Renco
12
The two pivotal contracts, the Amended and Restated Limited Liability
Company Agreement of Ilshar Capital LLC and the Limited Liability Company
Agreement of AM General Holdings LLC, are substantially similar in material
respects.
The Renco Group, Inc. v. MacAndrews AMG Holdings LLC
C.A. No. 7668-VCN
April 20, 2015
Page 11
prevailed in that action on similar grounds for which it now seeks interlocutory
appellate intervention here. Under the circumstances, the Court exercises its
discretion and declines to certify an interlocutory appeal.
An implementing order will be entered.
Very truly yours,
/s/ John W. Noble
JWN/cap
cc: Thad J. Bracegirdle, Esquire
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