Natural Flavors v. Firmenich Incorporated

• Court: Supreme Court of Delaware
• Decided: May 22, 2020
• Docket: 164, 2020
• Status: Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

NATURAL FLAVORS, INC., § HARRIS STEIN, HERBERT STEIN, § and JASON STEIN, § No. 164, 2020 § Defendants Below, § Court Below—Superior Court Appellants, § of the State of Delaware § v. § C.A. No. N19C-01-320 § FIRMENICH INCORPORATED, § § Plaintiff Below, § Appellee. §

Submitted: May 7, 2020 Decided: May 22, 2020

Before VALIHURA, VAUGHN, and TRAYNOR, Justices.

ORDER

Upon consideration of the notice of interlocutory appeal and the documents

attached thereto, it appears to the Court that:

(1) The appellants-defendants below Natural Flavors, Inc., Harris Stein,

Herbert Stein, and Jason Stein have petitioned this Court, under Supreme Court Rule

42, to accept this interlocutory appeal from a Superior Court opinion, dated April 7,

2020, denying their motion to dismiss Count I of the amended complaint filed by the

appellee-plaintiff below Firmenich Incorporated.1 The litigation arises from

1 Firmenich Inc. v. Natural Flavors, Inc., 2020 WL 1816191 (Del. Super. Ct. Apr. 7, 2020). Firmenich’s acquisition of Natural Flavors. Firmenich, a manufacturer seeking to

expand its natural organic and organic product manufacturing, entered into an Asset

Purchase Agreement to acquire Natural Flavors, a manufacturer of natural and

organic flavors. After the acquisition closed, Firmenich learned that Natural Flavors

did not produce flavors compliant with federal or industry standards.

(2) In January 2019, Firmenich filed its initial complaint against Natural

Flavors and its shareholders for breach of contract, fraud, and unjust enrichment.

The defendants filed a motion to dismiss that the Superior Court granted in part and

denied in part.2 The Superior Court held, among other things, that the fraud claim

was based on conduct distinct from the conduct underlying the breach of contract

claim, but had to be dismissed because the damages for both claims were

duplicative.3

(3) Firmenich then filed an amended complaint, pleading claims in the

alternative for fraud in the inducement, unjust enrichment, and breach of contract.

Firmenich also sought rescissory damages for the fraud claim. Natural Foods and

the Steins filed a motion to dismiss the fraud claim. The Superior Court denied the

motion, finding that the amended complaint for rescissory damages sufficiently

distinguished the fraudulent inducement claim from the breach of contract claim.4

2 Firmenich Inc. v. Natural Flavors, Inc., 2019 WL 6522055 (Del. Super. Ct. Oct. 29, 2019). 3 Id. at *3-6. 4 Firmenich, 2020 WL 1816191, at *9-10. 2 (4) Natural Foods and the Steins filed an application for certification of an

interlocutory appeal. Firmenich opposed the application. The Superior Court denied

the application for certification.5 The Superior Court first found that its ruling

decided a substantial issue of material importance.6 As to the Rule 42(b)(iii) criteria,

the Superior Court concluded that there appeared to be a conflict on the question of

law (Rule 42(b)(iii)(B)) concerning whether the addition of rescissory damages

distinguishes fraud damages from breach of contract damages, but that review of the

interlocutory order would not terminate the litigation (Rule 42(b)(iii)(G)) or serve

considerations of justice (Rule 42(b)(iii)(H)).7 The Superior Court noted that the

breach of contract and fraud claims should not present meaningful differences in the

discovery or the evidence presented at trial. 8

(5) Applications for interlocutory review are addressed to the sound

discretion of the Court. 9 In the exercise of our discretion and giving due weight to

the Superior Court’s denial of the application for certification, this Court has

concluded that the application for interlocutory review does not meet the strict

standards for certification under Supreme Court Rule 42(b). Exceptional

circumstances that would merit interlocutory review of the Superior Court’s

5 Firmenich Inc. v. Natural Flavors, Inc., 2020 WL 2193285 (Del. Super. Ct. May 6, 2020). 6 Id. at *1. 7 Id. at *1-2. 8 Id. at *2. 9 Supr. Ct. R. 42(d)(v). 3 interlocutory opinion do not exist in this case,10 and the potential benefits of

interlocutory review do not outweigh the inefficiency, disruption, and probable costs

caused by an interlocutory appeal. 11

NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is

REFUSED.

BY THE COURT:

/s/ James T. Vaughn, Jr. Justice

10 Supr. Ct. R. 42(b)(ii). 11 Supr. Ct. R. 42(b)(iii). 4