In a Memorandum Opinion issued August 31, 2015, the Delaware Court of Chancery dismissed third-party claims asserted against two Wilks, Lukoff & Bracegirdle clients. The action, Israel Discount Bank of New York v. Higgins, originally was brought by a judgment creditor seeking to enforce an award of damages granted by the Court of Chancery in 2013 against an entity defendant arising from its mishandling of collateral (namely, rare coins and bullion) that secured a $10 million loan. Specifically, the plaintiff sought to enforce an approximately $7 million judgment against the individual sole shareholder of the entity defendant under corporate veil-piercing and fraudulent transfer theories. The defendants then alleged third-party claims against an intermediate lender and its individual principal, claiming that their conduct was fraudulent and caused the defendants' underlying judgment liability.
In its Memorandum Opinion (which may be accessed here), the Court of Chancery granted the third-party defendants' Motion to Dismiss, holding that its fact findings in the prior action barred the third-party claims under the collateral estoppel doctrine. Among other things, the Court found that it previously rejected, following trial in the earlier case, the entity defendant's defense that the intermediate lender's conduct relieved it of liability to the plaintiff. The prior holdings were binding not only on the entity defendant, but also its individual sole shareholder on privity grounds. Since these previous findings were fatal to critical elements of the defendants' third-party claims, the Court dismissed them with prejudice.
WLB attorneys Thad Bracegirdle and Samuel Moultrie represented the third-party defendants in Israel Discount Bank of New York v. Higgins.