Document: AT&T Corp. v. Lillis, et al., No. 490, 2007, Berger, J. (Del. March 9, 2009)
Former officers and directors of MediaOne Corporation sought compensation from AT&T for the full value of their stock options. AT&T had admitted many of the substantive allegations, hoping to arbitrate a claim against another party for the same relief, but withdrew its admissions after it lost the arbitration. The Court of Chancery originally relied heavily on AT&T’s admissions in its answer and briefs in ruling against AT&T. Then, after appeal, where the Supreme Court reversed and remanded with instructions not to consider the admissions, the Court of Chancery reversed itself and ruled that the admissions should not have been considered because they did not relate to the stock option plan at issue. On this appeal, the Supreme Court reversed the Chancery Court’s new determination, holding that the Supreme Court had based its initial reversal on a factual mistake and that the admissions were relevant to the contract at issue and supported a conclusion that the Defendant agreed with the Plaintiff’s position. Although the admissions were no longer legally binding as admissions, withdrawal did not eliminate their probative value as evidence of a disputed material fact. The Defendant’s failure to explain its changed position, which coincided with the adverse arbitration decision, also supported the reasonable inference that the Defendant initially agreed with the Plaintiff’s position on the definition of a key contractual term.