inTEAM Associates, LLC v. Heartland Payment Systems, LLC, C.A. No. 11523-VCF (Del. Ch. Oct. 29, 2021)
Court of Chancery Rule 70(b) empowers the Court to hold a party in contempt for, among other things, failing to obey an injunctive order. The standard of proof required to obtain a contempt order has not been uniformly applied. This recent decision applies the preponderance of the evidence standard, in contrast to certain decisions over the past decade applying the clear and convincing evidence standard.
In earlier proceedings, and after a trial, the Court interpreted an acquisition agreement to contain certain covenants restricting the defendant’s competitive business activities. Here, the plaintiff brought a second motion for contempt for alleged violations of the Court’s judgment. In resolving Plaintiff’s motion, the Court reviewed the history of contempt motions in Delaware. The Court noted that early decisions of the Court of Chancery generally applied the preponderance of the evidence standard. Certain recent opinions starting in 2010, however, applied the clear and convincing evidence standard. Looking to the most recent decision of the Delaware Supreme Court addressing civil contempt, the Court noted that the Supreme Court had applied the preponderance of the evidence standard. The Court reasoned that it would not deviate from that precedent and, accordingly, applied the preponderance of the evidence standard. In doing so, the Court denied the plaintiff’s motion for contempt.
