Related’s suit a hard sale to Delaware court
October 26, 2011
SNOWMASS VILLAGE – Delaware Chancery Court Vice Chancellor Leo Strine Jr. apparently has not been sympathetic to claims from Related Cos, suggesting during a May 2010 hearing that the company’s attorney was wasting the court’s time.
“People wasting people’s time is something everybody whines about in society – the cost of litigation,” Strine said. “It’s usually business-to-business litigation where there are the silliest claims made.”
Two months later, Strine issued a bristling opinion dismissing Related’s claims for unspecified damages against the JER Snowmass LLC and several of its entities. JER was set up to be a primary investment vehicle in the larger Snowmass Village project.
During oral arguments in the Related v. JER Snowmass case, Strine sounded hostile to the arguments being made by Related’s attorneys.
“What is your point on the capital calls?,” he asks Related’s attorney Paul O’Connor. “I mean, really, because, you know, I don’t know how much clearer it could be.”
The judge read the agreement between Related and JER to say that the investors could say no to changes in the deal that qualified as “material actions.”
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At one point, O’Connor mentions that he doesn’t think a certain point about material actions is relevant.
The judge fires back at him, “What your belief is as to whether something is relevant is nice, and you may be right, but let me tell you that I don’t believe that it’s irrelevant whether this is a material action or not, when the material actions are not qualified by the words ‘not be unreasonably withheld or delayed.’
“Because I believe, because I must, given that I am a Delaware judge, that people have contractual freedom,” the judge continued. “But I’ve got a contract provision that says ‘not to be unreasonably withheld or delayed except.’ Now, what you say is ‘except’ doesn’t matter. Well, I’m a more traditional person. Those words matter to me.”
Like the oral argument in the New York case, this one had also not gone well.
In his July 23, 2010 ruling on the case, Judge Strine dismissed Related’s complaint, writing ” … JER Snowmass was clearly free to give or withhold its consent in its commercial interests.
“In the complaint, Related goes through at length, if not necessarily with clarity, a series of situations where it, as operations manager, sought consent and/or additional capital from JER Snowmass and JER Snowmass refused,” Strine writes.
“At bottom, Related senses that JER Snowmass either is not as bullish on the project as it was when the LLCs were formed or does not have the wallet or stomach to go forward as Related claims the parties had initially agreed.”
Then the judge concludes, “Related struck a bargain whereby it realized that JER Snowmass had only made certain contractual obligations to it, and had not made others.”
Case dismissed, and not in Related’s favor.