When untimely claims are brought before the Delaware Court of Chancery, they are often met with challenges based upon laches or the applicable statute of limitations.  But the application of these concepts are not entirely clear and at times inconsistent.

In the recent decision of In Kraft v. WisdomTree Investments, C.A. No. 10816-CB (Del. Ch. Aug. 3, 2016), Chancellor Bouchard shed new light on the applicability of these defenses, and provided a helpful analysis which will undoubtedly serve as a “roadmap” to analyze these defenses moving forward.

In so doing, the Court distinguished between the following claims: (i) legal claims seeking legal relief, (ii) equitable claims seeking equitable relief, and (iii) matters involving legal and equitable claims, and provided the following analysis:

Legal Claims Seeking Legal Relief

If a plaintiff brings a legal claim seeking legal relief in the Court of Chancery, the statute of limitations (and its tolling doctrines) logically should apply strictly and laches should not apply. Otherwise, one may be able to circumvent the statutory time-bar that would have applied to the same claim if it had been brought in a court of law. Under the precedents of IAC and Levey, however, extraordinary circumstances may provide an exception to the strict application of statutes of limitations for purely legal matters, separate and apart from the application of tolling doctrines.

Equitable Claim Seeking Equitable Relief

If a plaintiff brings an equitable claim seeking equitable relief, the case falls under the Court’s exclusive equity jurisdiction. In this case, the doctrine of laches applies and any applicable statute of limitations would apply only by analogy, although the Court tends to afford great weight to the analogous statutory period, if one exists, and may bar a claim without further laches analysis if that period has been exceeded and the Court does not consider it inequitable to do so.

Matters Involving Legal and Equitable Claims

When an equitable claim seeks legal relief or a legal claim seeks equitable relief, the Court also will apply the statute of limitations by analogy, but with at least as much and perhaps more presumptive force given its quasi-legal status, and will bar claims outside the limitations period absent tolling or extraordinary circumstances.

This decision will undoubtedly be cited by many Chancery practitioners in future disputes where a defending party raises as a defense the timeliness of asserted claims.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.