• In a Case Affording a “Second Bite at the Apple,” the Complex Commercial Litigation Division of the Delaware Superior Court Vacates its Holding that a Supply Agreement’s Termination Fee Was not Triggered
  • February 8, 2017
  • Law Firm: Shaw Fishman Glantz Towbin LLC - Chicago Office
  • In her January 18, 2017 letter order, President Judge Jan R. Jurden vacated her April 8, 2016 oral ruling denying Rockline Industries, Inc.’s (“Rockline”) motion for partial summary judgment. Alltrista Plastics, LLC d/b/a Jarden Plastic Solutions v. Rockline Industries, Inc., C.A. No. N12C-09-094 (Del. Super. Jan. 18, 2017).

    This case involved a breach of contract claim. The dispute centered on whether the Termination Fee contained in the Supply Agreement (the “Agreement”) constituted a liquidated damages provision that would, in effect, cap Alltrista Plastics, LLC d/b/a/ Jarden Plastic Solutions’ (“Jarden”) damages at $1.5M. The relevant provision of the Supply Agreement provided that “[t]he Termination Fee shall not be a penalty but shall serve as and for liquidated damages for Rockline’s breach of the Agreement.” Id. at 2, quoting Agreement, Section 9(b). Termination Fee is defined as:

    If Rockline terminates the agreement without cause, it shall pay to Jarden a fee within thirty (30) days of termination (the “Termination Fee”) based upon when the termination occurs, as follows: (A) Prior to the end of year one of this Agreement $1,500,000....”

    Id., quoting Agreement, Section 9(b)(iii).

    On April 8, 2016, the Court ruled on various pre-trial motions, including Rockline’s motion for partial summary judgment. The Court held the Termination Fee was not triggered and, therefore, did not apply. The Court based its holding on the Termination Fee Schedule, the parties’ submissions, and an October 12, 2012 letter from Rockline to Jarden invoking the Agreement’s for cause termination provision. Cf. Section 9(b)(iii), Supply Agreement (termination “without cause”). Three days later, on April 11, 2016, the Court continued the trial date for settlement negotiations. Rockline did not move for reargument pursuant to Superior Court Civil Rule 59(e). On October 12, 2016, Rockline moved for reconsideration of the Court’s April 8, 2016 denial of Rockline’s motion for partial summary judgment. Rockline pointed to Section 9(b) of the Agreement. Id. at 2. In support of its argument, Rockline relied for the first time on Brazen v. Bell Atlantic Corp., 695 A.2d 43 (Del. 1997), which, according to Rockline, warranted a different result. In that case, the Delaware Supreme Court reversed the Court of Chancery, holding that the express language of the parties’ agreement states that the termination fee “’constitute[d] liquidated damages and not a penalty.’” Id. at 2, citing Brazen v. Bell Atlantic Corp., 695 A.2d 43, 47 (Del. 1977). The Supreme Court also held that liquidated damages are damages “paid in the event of a breach of contract.” Id.

    Rockline admitted it knew about Brazen at the time it filed its motion for partial summary judgment but failed to bring it to the Court’s attention. Alltrista, at 2. The letter order does not contain any explanation for this failure. Notwithstanding, the Court ordered Rockline to refile its motion for reconsideration under Superior Court Civil Rule 60(b) and held oral argument on November 16, 2016.

    The Court did not utilize Rule 60(b) for its holding, instead basing its ruling upon its “plenary power to ‘vacate, modify or set aside judgments or orders’ where ‘reasonably necessary to ensure the proper administration of justice.’” Id. Reading the Agreement in light of Brazen, the Court found that the Agreement “provide[d] that the Termination Fee should be treated as liquidated damages for Rockline’s breach of the [...] Agreement.” Alltrista, at 3. The letter order does not explain how it squares with Rockline’s specific October 12, 2012 invocation of the Agreement’s “for cause” provision.

    The Complex Commercial Litigation Division (CCLD) of the Superior Court of the State of Delaware was formed in May 2010, answering the business community’s call for an alternate venue in which their disputes can be litigated. The CCLD presides over specific categories of complex business disputes, including cases with an amount in controversy of at least $1M. Benefits of the CCLD include: (1) each case remains with its assigned judge until the case reaches final resolution; (2) each case follows uniform procedures; and (3) each case and its respective trial date is given priority over the assigned judge’s other cases.