The Court of Chancery recently considered the scope of its limited jurisdiction related to claims of equitable fraud. In Trust Robin, Inc. v. Tissue Analytics, Inc., et al., C.A. No. 2021-0806-SG (Del. Ch. Sept. 29, 2022), the Plaintiff asserted various causes of action sounding in contract and fraud arising out of a services agreement between the parties. Defendants moved to dismiss the Complaint for failure to state a claim. At argument on Defendants’ motion to dismiss, the Court raised the issue of equitable subject matter jurisdiction and directed the parties to submit supplemental briefing on the issue.
While noting the importance of ensuring that all cases are properly filed in Chancery, the Court held that a well-pled claim of equitable fraud is enough to invoke the Court’s subject matter jurisdiction, even where most of the claims pled are legal in nature. The Court explained the difference between legal and equitable fraud, the latter of which lacks the scienter requirement but requires a special relationship between the parties. The Court concluded that the Plaintiff’s allegations supporting the existence of a special relationship were sufficient to invoke the Court’s equitable jurisdiction. The Court concluded its ruling by directing the parties to discuss the pending motion to dismiss the remaining claims in light of its decision on the equitable fraud claim.
This decision provides an important reminder for Chancery Court litigators to evaluate their claims before filing to ensure that equitable subject matter jurisdiction is asserted in the Complaint.