The US Court of Appeals for the Seventh Circuit affirmed a district court’s denial of a jury trial, concluding it was harmless error because the defendant would have been entitled to a directed verdict regardless. Overwell Harvest Ltd. v. Trading Techs. Int’l, Inc., Case No. 23-2150 (7th Cir. Aug. 12, 2024) (Kirsch, Pryor, Kolar, JJ.)

Overwell Harvest was established to invest in Neurensic, a company specializing in market surveillance technology. Despite Overwell’s investment of millions of dollars, Neurensic faced significant financial distress, leading its management to pursue a sale. Neurensic’s CEO and COO accepted an offer from Trading Technologies, which subsequently hired former Neurensic employees with the CEO and COO’s approval. Prior to the sale, Overwell submitted a competing bid, to which Trading Technologies responded by raising its offer. Neurensic chose to accept Trading Technologies’ offer.

Overwell sued Trading Technologies for aiding and abetting breaches of fiduciary duties by Neurensic’s leadership. The district court dismissed Overwell’s jury demand and ruled that the claim was equitable despite the damages sought. In a bench trial, the district court ruled in favor of Trading Technologies, determining that Overwell waived its claims that Trading Technologies had aided and abetted breaches of fiduciary duty by Neurensic’s leadership. The district court’s decision was based on Overwell’s failure to advance arguments concerning improper notice to shareholders regarding the vote on Trading Technologies’ offer. Overwell appealed.

The Seventh Circuit decided that Overwell had a Seventh Amendment right to a jury trial because the case involved legal relief in addition to equitable relief. While the Court agreed that Overwell’s claim for aiding and abetting breaches of fiduciary duty under Delaware law was historically equitable, the request for compensatory and punitive damages constituted legal relief. The Court emphasized that even if a claim is equitable, the pursuit of legal relief (such as money damages) entitles a party to a jury trial. The Seventh Circuit determined that the district court erred by denying Overwell this right because determining legal relief is traditionally the role of a jury.

The Seventh Circuit concluded that this error was harmless, however, because under Delaware law Trading Technologies would have been entitled to a directed verdict. The Court explained that a directed verdict is appropriate when no reasonable jury could find for the losing party based on the evidence, viewing the record in the light most favorable to the losing party.

The Seventh Circuit rejected Overwell’s breach of fiduciary duty claims, finding that the alleged breaches lacked merit under the Delaware standard for aiding and abetting fiduciary breaches. First, the Court held that Overwell failed to show that Trading Technologies knowingly participated in a fiduciary breach, as the continued servicing of Neurensic’s customers by former employees benefitted Neurensic, not Trading Technologies.

Second, the Seventh Circuit determined that Overwell’s claim of blocking competitive bids could not succeed as Neurensic still held its most valuable asset – its source code – and could have repossessed its servers. Trading Technologies’ negotiation tactics were permissible under Delaware law, which allows [...]

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