Brady O’Neill
Styles Editor, Delaware Journal of Corporate Law, Volume 50
Introduction
Delaware law has long recognized that a claim of fraud cannot be “bootstrapped” to a claim of breach of contract.[1] The purpose of the anti-bootstrapping rule (the “Rule”) is to prevent a party pleading breach of contract to assert a claim of fraud premised on the same wrongdoing under liability theories of both tort and contract.[2] A drive-by glance of the Rule almost seems incongruent with Delaware’s liberal pleading standard[3] and its recognized public policy against those committing fraud in the commercial context.[4] Ostensibly, in recognition of this, it “has become customary in cases involving fraud claims asserted alongside breach of contract claims” for defendants to argue the “fraud claims must be dismissed because they are nothing more than ‘bootstrapped’ breach of contract claims.”[5] Perhaps even more frustrating for plaintiff’s lawyers was the far from clear application of the Rule. The confounding jurisprudence surrounding the Rule ultimately led to the observation among practitioners that the “Delaware caselaw on the anti-bootstrapping doctrine is ‘a little bit muddled.’”[6] In response, Vice Chancellor Slights remarked that “[e]ven a cursory review of the substantial jurisprudence on this subject reveals that ‘a little bit muddled’ may understate the point.”[7]
Muddled Meaning of Separate and Distinct Conduct
It could be said that the muddled application of the Rule was first the result of the oft-cited demand that to survive a pleading stage motion to dismiss, a fraud claim and breach of contract claim must be premised on “separate and distinct conduct.”[8] As such, a plaintiff cannot merely intone the elements of the tort while telling a story of the defendant’s failure to perform under the contract.[9] No matter the intentional, wanton, or malicious action by the defendant, the action would not sustain a claim in fraud unless the conduct arose from an independent legal duty, apart from the duty imposed by contract.[10] More specifically, separate and distinct conduct barred a claim for fraud when a party was “induced into entering a contract by promises that were then included in the negotiated language of that very contract,” pressing the theory that under such facts the “remedy should be in contract, not tort.”[11] Such a demanding bar sounds more like a proscription against pleading fraud and breach of contract than a rule designed to prevent double recovery.[12]
Courts Provide Clarity
More recently, Delaware courts have provided some much-needed clarity as to the application of the anti-bootstrapping rule. In Levy Family Investors, LLC v. Oars + Alps LLC, the Court of Chancery, first recognizing the muddled state of the law, and the authority that supports the proposition that a fraud claim cannot survive the pleading stage if it is premised of separate and distinct conduct, stated definitively that the separate and distinct demand “is too limiting.”[13] Rather than necessitating separate and distinct conduct, the Court of Chancery made clear that that a plaintiff can “plead a fraud claim that is not the product of improper bootstrapping by alleging facts that support an inference that the defendant knowingly made false representations in a contract,” contemporaneously with facts that the defendant “then breached that contract by violating the representation(s) that were falsely made.”[14] In that case, the courts will find support for two separate viable claims, fraud and breach of contract.[15]
To leave no doubt as to the bounds of the anti-bootstrapping rule, the Court of Chancery stated:
“[T]he anti-bootstrapping rule does not prevent parties from bringing a fraud claim if (1) the plaintiff alleges the seller knowingly made false representation, (2) damages for plaintiff’s fraud claim may be different from plaintiff’s breach of contract claim, (3) the conduct occurs prior to the exeution of the contract and thus with the goal of inducing plaintiff’s signature and willingness to close on the transaction, or the breach of contract is not well-pled such there is no breach claim on which to bootstrap the fraud claim.”[16]
The New Anti-Bootstrapping Rule
In the cases since the Court of Chancery brought clarity to the anti-bootstrapping rule, a new rule has taken shape.[17] Consistent with this new clarity, Delaware courts have been much less skeptical of dually pled fraud and breach of contract claims—particularly of fraud claims brought that allege misrepresentations made in the parties’ agreement.[18] Now, fraud claims routinely survive the pleading stage provided the parties alleging the claims do more than add the phrase “fraudulently induced”[19] or simply assert a conclusory allegation that the defendant never intended to perform.[20] Accordingly, in stark contrast to the previous muddled state of the law, there is now little question as to the application of the anti-bootstrapping rule.
[1] Iotex Comm’cns, Inc. v. Defries, No. 15817, 1998 WL 914265 (Del. Ch. Dec. 21, 1998).
[2] See Mosaic US Holdings v. Atlas Tech. Sols. Inc., C.A. No. N24C-05-118, 2025 WL 483064 (Del. Super. Jan. 22, 2025).
[3] Central Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 536 (Del. 2011) (“The pleading standards governing the motion to dismiss stage of a proceeding in Delaware . . . are minimal.”).
[4] Abry Partners V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1035 (Del. Ch. 2006) (recognizing the contractual freedom to immunize a seller from liability for false contractual statement end with fraud).
[5] Pilot Air Freight, LLC v. Manna Freight Sys., Inc, C.A. No. 2019-0992, 2020 WL 5588671, at *25 (Del. Ch. Sept. 18, 2020)
[6] Levy Fam. Invs., LLC v. Oars + Alps LLC, C.A. No. 2021-0129, 2022 WL 245543 at *7 (Del. Ch. Jan 27, 2022).
[7] Id.
[8] Furnari v. Wallpang, Inc., C.A. No. N13C-04-287, 2014 WL 1678419, at *8 (Del. Super. Apr. 16, 2014) (“Essentially, a fraud claim alleged contemporaneously with a breach of contract claim survive, so long as the claim is based on conduct that is separate and distinct from the conduct constituting breach.”) (citations and internal quotations omitted).
[9] Cornell Glasgow, LLC v. La Grange Props., LLC, C.A. No. N11C-05-016, 2012 WL 2106945, at *6 (Del. Super. June 6, 2012).
[10] Data Mgmt. Internationale, Inc. v. Saraga, C.A. No. 05C-05-108, 2007 WL 2142848, at *3 (Del. Super. July 25, 2007).
[11] Anschutz Corp. v. Brown Robin Cap., LLC C.A. No. 2019-0710, 2020 WL 3096744, at *15 (Del. Ch. June 11, 2020).
[12] Levy Fam. Invs., 2022 WL 245543 at *7.
[13] Id.
[14] Id.
[15] Id.
[16] Levy Fam. Invs., 2022 WL 245543 at *8.
[17] Mosaic US Holdings, 2025 WL 483064 at *6 (“Recent clarity was brought to the anti-bootstrapping rule when the Delaware Court of Chancery recogniz[ed] the muddled state of the law.”) (internal quotation omitted).
[18] See id.
[19] CoVenture – Burt Credit Opportunities GP, LLC v. Coleman, C.A. No. N22C-07-197, WL 7179488, at *8 (Del. Super. Nov. 1, 2023).
[20] Sykes v. Touchstream Techs., Inc., C.A. No. 2022-0861, 2024 WL 1299928, at *9 (Del. Ch. Mar. 27, 2024).
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