SW Legal Educational Publishing

Fraud in Settlement Proceedings of a Tort May Result in Another Tort Claim
Description Delaware high court held that when a party conceals important information during discovery in proceedings that result in a settlement and release of a tort claim, a new tort cause of action exists due to the fraud. The original settlement may either be thrown out and the entire matter relitigated, or the settlement may be kept and a new tort suit litigated.
Topic Torts
Key Words Fraud; Settlement; Release
C A S E   S U M M A R Y
Facts A Florida plant nursery sued DuPont, alleging that a DuPont fungicide was defective and caused damage to the nursery's plants. The parties entered into a settlement agreement that resulted in DuPont's payment of $2.3 million in exchange for the nursery executing a release. Four years later, the nursery sued DuPont for fraud in the settlement, claiming that Dupont wrongfully withheld scientific information about the fungicide that it had a duty to reveal at the time of the original suit, which may have resulted in higher damages. Since Delaware law governed the suit between the parties, the federal court in Florida asked the Delaware supreme court if the original settlement agreement, which stated that it ended all legal claims, precluded the second suit for fraudulent inducement.
Decision "A party alleging fraud in the settlement of a tort claim may elect rescission and restoration to the status quo ante or, alternatively, may bring an action for the recovery of special, or expectancy, damages with retention of the settlement proceeds." That is, the nursery may return the money from the original settlement and start the litigation over, or may keep that money and begin another suit for additional damages. "Candor and fair-dealing are, or should be, the hallmark of litigation and required attributes of those who resort to the judicial process.... The fraud alleged here, including the concealment of evidence during discovery, represents a wrong not only as to the releasing party but to the court as well."
Citation E.I. DuPont De Nemours and Co. v. Florida Evergreen Foliage, 744 A.2d 457 (Sup. Ct., Del., 1999)

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