Judge Johnston finds that the Law of the Case Doctrine and Collateral Estoppel Bars Re-Litigation of Findings by the Chancery Court after Transfer to Superior Court

March 30, 2021

Publication| Commercial Litigation

In Preston Hollow Capital LLC v. Nuveen LLC, 2020 WL 7365808 (Del. Super. Ct. Dec. 15, 2020), plaintiff Preston Hollow originally asserted claims against its business competitor Nuveen for tortious interference and defamation in the Court of Chancery.  Preston Hollow’s defamation claim was dismissed, with leave to transfer the claim to the Superior Court.  The Superior Court stayed the defamation action while litigation continued in the Court of Chancery.  There, the Court of Chancery ultimately found Nuveen liable on grounds that Nuveen used “threats and lies in a successful attempt to damage [Preston Hollow] in its business relationships.” 

After the conclusion of the Chancery action, Preston Hollow moved for summary judgment on its remaining defamation claim in Superior Court. In support of its motion, Preston Hollow asserted that the factual findings made by the Court of Chancery were binding through either (1) collateral estoppel or (2) the law of the case doctrine. In response, Nuveen argued that collateral estoppel should not apply because the Chancery Court’s findings were not “necessary or essential to the result” and such findings by a vice chancellor cannot bind a subsequent jury.  Nuveen further argued that because the Court of Chancery’s findings were factual and not purely legal, the law of the case doctrine could not apply.

Turning to the law of the case doctrine first, the Superior Court found that the doctrine applies where there is “one continuous action within the same court system.” The Court found that the simple transfer from Chancery did not create an entirely new action, and, for purposes of the law of the case doctrine, the prior rulings from the Court of Chancery should be “treated as if they were made by a Superior Court judge.”  Importantly, the Court further found that there was no meaningful distinction between factual and legal findings of the Chancery Court, especially where the judicial officer acts as both factfinder and judge.

Next, the Court found that collateral estoppel applied only to findings that were “necessary or essential” to the Chancery Court’s final judgment.  For example, the Court found that because the Chancery Court denied relief on the tortious interference claim with respect to Nuveen’s dealings with third-party Deutsche Bank, findings related to such conduct were not necessary or essential to final judgment.  Therefore, collateral estoppel did not apply.  Collateral estoppel was, however, applicable to findings related to the tortious interference claims upon which Preston Hollow was affirmatively granted relief, as those findings were necessary and essential to the final judgment.  Additionally, the Court noted that precedent from the U.S. Supreme Court supported Preston Hollow’s position that factual findings in an equitable court could bind a subsequent jury because once “fully and fairly adjudicated in a prior proceeding, nothing remains for trial, either with or without a jury.” 

Finally, the Court denied Preston Hollow’s motion for summary judgment because genuine issues of material fact still existed.  Although the Chancery Court’s findings in the prior proceeding applied in this action under the law of the case and collateral estoppel, the Court could not grant summary judgment on the defamation claim because the Chancery Court’s findings, while relevant to the defamation claim, were insufficient to impose liability.  The Court noted that “[i]t is left to the Superior Court to determine the legal impact of Nuveen’s conduct.”

Analysis:  The law of the case doctrine effectively bars re-litigation of factual or legal findings in a prior proceeding, even where the action is heard by separate judges or courts.  Collateral estoppel prevents re-litigation of facts or issues if the prior factfinder decided a fact or issue necessary or essential to its final judgment.   Even if the doctrine applies, summary judgment may not be appropriate where additional factual issues remain with respect to the subsequently litigated claims.

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