Trial Victory for Oaktree Against Plaintiff Who Sought $50 Million

Quinn Emanuel recently secured a trial victory in Delaware Chancery Court in International Rail Partners LLC v. American Rail Partners LLC, a case in which the plaintiff sued Oaktree for alleged breach of contract claims related to an auction of a short line railroad company. Although the plaintiff sought damages in excess of $50 million, the Court ruled that no damages were proven, resulting in judgment for Oaktree.

The case arose out of Oaktree's investment in a short line railroad company. After Oaktree purchased the company, it hired the plaintiff, IRP, to manage it. IRP failed spectacularly in that role, and Oaktree quickly canned them, which resulted in the parties suing each other. While that litigation was pending, Oaktree decided to exit the investment and conduct an auction of the short line railroad company. To facilitate the auction, Oaktree and IRP agreed to settle their litigation on terms which gave IRP the right to assist JPMorgan in bidding and gave them special rights in the auction, including the right to be the last bidder after knowing the amount of the then-highest bid.

JPM ultimately finished second in the auction, but before the sale could close, IRP filed suit and sought to enjoin the closing, claiming that Oaktree had failed to honor its special rights and had acted maliciously to keep JPM and IRP from winning the auction. Kirkland & Ellis, acting for Oaktree at that time, beat the motion for a preliminary injunction, but the Court ruled that IRP had shown that it was likely to succeed on its breach claims and denied injunctive relief only because it found that IRP's harm was compensable by money damages.

Shortly thereafter, Quinn Emanuel took over. The Firm filed a motion to dismiss and structured discovery with the hope of persuading the Court that its view on liability was wrong. But knowing that was an uphill battle, the Firm also made an early decision to aggressively attack Plaintiff's damages theory and show that its claimed damages were not merely exaggerated but non-existent.

            The plaintiff's damages theory was predicated on the assertion that, had Oaktree honored the special bidding rights it had granted to IRP and JPM, JPM would have won the auction and IRP would have gotten equity in the railroad company and management fees for running it through a partnership with JPM. This all seemed very speculative to Quinn Emanuel–especially since IRP and JPM never signed a document formalizing their partnership–so the Firm developed a record that allowed it to argue to the Court that each step in the chain leading to those alleged damages was highly contingent.

Even if JPM had received its special bidding rights, there was no guarantee it would win the auction. Even if JPM won the auction, there was no guarantee it would partner with IRP. Even if JPM partnered with IRP, there was no guarantee IRP would receive the amount of equity and management fees it claimed. Even if JPM agreed to give IRP the equity and management contract IRP presumed, there was no certainty the railroad company would perform at a level that would result in IRP receiving the value it expected. And so on.

On March 31, 2025, the Court adhered to its initial conclusion that Oaktree breached the parties' agreement, though the Firm persuaded it to narrow the scope of the supposed breaches significantly. Having done that, the Court then accepted the Firm’s damages argument in full, quoting liberally from the Firm’s briefing, agreeing with their formulation of the ladder IRP had to climb in order to prove damages, and finding the IRP had failed to prove many of the rungs comprising that ladder. No damages equaled no claim, which equaled judgment for Oaktree.