Business contracts frequently contain remedy clauses whereby the parties agree that a breach constitutes irreparable harm entitling the nonbreaching party to specific performance or injunctive relief to enforce the agreement. The effect of such clauses seemed to be settled in Delaware when the Delaware Supreme Court in Martin Marietta Materials v. Vulcan Materials, 68 A.3d 1208, 1226 (Del. 2012), stated that “contractual stipulations as to irreparable harm alone suffice to establish that element for the purpose of issuing … injunctive relief.” However, cases before and after Martin Marrieta make clear that such clauses constitute a party stipulation and admission, but do not alone establish irreparable harm sufficient to warrant preliminary injunction relief. In a recent Court of Chancery decision, Vice Chancellor John W. Noble discussed the helpful, but nondeterminative, effect of such remedy clauses, making clear that the ultimate determination of harm necessary to support injunctive relief rests with the court, not the parties, as in The Renco Group v. MacAndrews AMG Holdings, C.A. No. 7668-VCN (Del. Ch. Feb. 19, 2016).
BACKGROUND
The plaintiff in Renco had sought a mandatory preliminary injunction against the defendant to secure its information rights under the parties’ LLC operating agreement. The court denied the motion because it concluded that “there was not a sufficient showing of risk of irreparable harm in the absence of interim injunction relief.” The plaintiff moved for reargument, citing Martin Marietta and contending that the contractual stipulation conclusively established the irreparable harm element. It also argued that the defendant was judicially estopped from avoiding the remedy stipulation because it had previously relied on the provision to seek injunctive relieve at an earlier stage of the case.
