SHERRY R. FALLON, Magistrate Judge.
Presently before the court in this breach of contract action is plaintiff Lummus Corporation's ("Lummus") renewed motion for judgment on the pleadings.
On October 12, 2018, Lummus originally filed this action against defendant TFII Legacy, LLC ("Legacy"), alleging breach of contract.
Lummus is a Delaware corporation with its principal place of business in Savannah, Georgia. (D.I. 1, Ex. A at ¶ 2) Legacy is a Delaware limited liability company with its principal place of business in Houston, Texas. (Id. at ¶ 3) Legacy is the successor-in-interest to Carter Control Systems, L.L.C. ("Carter Control"), a holding company which held all of the issued and outstanding shares of Carter Control Systems, Inc. ("the Company"). (Id.)
On May 21, 2018, Lummus and Carter Control entered into a Stock Purchase Agreement (the "SPA"), wherein Carter Control agreed to sell all issued and outstanding shares of the Company to Lummus.
On June 29, 2018, Lummus provided Carter Control notice that its preliminary analysis showed a Post-Closing Adjustment in the amount of $1,040,832. (D.I. 1, Ex. A at ¶ 20; D.I. 33, Ex. C) On July 24, 2018, Lummus provided Carter Control its closing working capital statement (the "Closing Working Capital Statement"), as required under the SPA, which confirmed that the Post-Closing Adjustment was $1,040,832. (D.I. 1, Ex. A at ¶ 21; D.I. 33, Ex. D) As a result, pursuant to the SPA, Carter Control's Statement of Objections became due on or before August 23, 2018. (D.I. 1, Ex. A at ¶ 22)
On August 6, 2018, Carter Control requested additional information regarding Lummus' calculation of the Closing Working Capital Statement.
On August 23, 2018, Carter Control submitted a letter, which it identified as its statement of objections (the "Statement of Objections"). (D.I. 1, Ex. A at ¶ 27; D.I. 33, Ex. I) The Statement of Objections included a cover letter that stated that "[e]ach item in the Closing Working Capital Statement that is disputed by [Carter Control] is highlighted in yellow on
On August 27, 2018, Lummus responded to Carter Control's Statement of Objections, and asserted that the Statement of Objections failed to include the requisite reasonable detail setting forth each disputed item or amount, and the basis for Carter Control's objections. (D.I. 1, Ex. A at ¶ 33; D.I. 33, Ex. J) On October 3, 2018, Lummus delivered a letter to Legacy, wherein Lummus noted that it was offsetting the Post-Closing Adjustment by $103,328.46, the amount collected post-closing from a customer of the Company. (D.I. 1, Ex. A at ¶ 35; D.I. 33, Ex. K) To date, Carter Control has not paid the Post-Closing Adjustment. (D.I. 1, Ex. A at ¶ 35) Lummus seeks net damages in the amount of $882,641.54. (Id. at ¶ 1 n.1)
The SPA outlines procedures for calculating the Post-Closing Adjustment in section 2.04(b), which states:
(D.I. 33, Ex. A at § 2.04(b)(i)-(ii)) (emphasis in original) Upon receipt of the Closing Working Capital Statement, Carter Control was permitted a thirty day review period and an opportunity to object to the Closing Working Capital Statement. (D.I. 1, Ex. A at ¶¶ 15-16) Section 2.04(c) explains:
(D.I. 33, Ex. A at § 2.04(c)(i)-(ii)) (emphasis in original) The Post-Closing Adjustment becomes due as set forth in section 2.04(c)(vi):
(D.I. 33, Ex. A at § 2.04(c)(vi)) The SPA includes a dispute resolution process which Lummus contends is not implicated in this case.
Under Federal Rule of Civil Procedure 12(c), "[a]fter the pleadings are closed — but early enough not to delay trial — a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Judgment will not be granted under Rule 12(c) "unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law." Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (citation omitted).
A motion for judgment on the pleadings is reviewed under the same standard as a Rule 12(b)(6) motion to dismiss. See Turbe v. Gov't of the Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991). Accordingly, "the [c]ourt must accept all well-pleaded factual allegations as true, and must draw all reasonable inferences in favor of the non-moving party." Giove v. Holden, 2012 WL 2357586, at *2 (D. Del. June 19, 2012) (citing Turbe, 938 F.2d at 428). This determination is a context-specific task requiring the court "to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). "In deciding whether judgment on the pleadings is appropriate, courts may consider the pleadings, corresponding exhibits thereto, and documents incorporated by reference." Novartis Pharms. Corp. v. Actavis, Inc., C.A. No. 12-366-RGA-CJB, 2012 WL 6212619, at *2 (D. Del. Dec. 5, 2012) (citing Butamax Advanced Biofuels LLC v. Gevo, Inc., C.A. No. 11-54-SLR, 2012 WL 2365905, at *1 (D. Del. June 21, 2012)).
Lummus seeks a declaratory judgment that Carter Control's Statement of Objections failed to meet specific requirements outlined in section 2.04(c)(ii) of the SPA and, therefore, the Post Closing Adjustment totals $985,970. (D.I. 33 at 1, 8-9) In the present motion for judgment on the pleadings, Lummus does not dispute that the Statement of Objections was timely submitted, but argues that it fails to comply with the SPA because it lacks a written statement setting forth objections "in reasonable detail, indicating each disputed item or amount and the basis for disagreement therewith." (Id. at 8 & n.5; Ex, A at § 2.04(c)(ii)) Specifically, Lummus asserts that Carter Control did not address each individual line item in the Exhibit D table, and instead highlighted in yellow all but one item. (D.I. 33 at 9-10) Lummus contends that Carter Control failed to provide any analysis or commentary that could be characterized as a basis for its disagreement. (Id. at 10-11)
Conversely, Legacy argues that it specifically denied all material allegations regarding the Statement of Objections and that the question of whether Carter Control provided "reasonable detail" presents a material question of fact. (D.I. 35 at 6-7) Furthermore, Legacy argues that the court must review all pleadings, including Legacy's Second Amended Counterclaim, in the light most favorable to Legacy and accept Legacy's denials and allegations as true. (D.I. 35 at 7 n.1) In the Second Amended Counterclaim, Legacy avers that Lummus did not prepare the Closing Working Capital Statement in accordance with GAAP
The court recommends denying Lummus' motion for judgment on the pleadings because, assuming the veracity of the well-pleaded factual allegations of the competing pleadings in the light most favorable to the non-moving party, genuine issues of material fact exist. The SPA requires Carter Control to "set[] forth ... objections in reasonable detail, indicating each disputed item or amount and the basis for ... disagreement therewith." (D.I. 33, Ex. A at § 2.04(c)(ii)) Here, Carter Control stated that "[e]ach item in the Closing Working Capital Statement that is disputed by [Carter Control] is highlighted in yellow" and attached a table where all items, except for a term defined in the SPA, were highlighted in yellow. (D.I. 33, Ex. F; Ex. I) Legacy also denied Lummus' allegations regarding the alleged inadequacy of the Statement of Objections' in its answer. (D.I. 9 at ¶¶ 17, 28-32, 34, 42-43) Moreover, the SPA does not provide a definition for "reasonable detail" and Lummus' reliance on its own interpretation of "reasonable detail" does not eliminate the fact question as to Legacy's compliance with the SPA. (D.I. 33, Ex. A) The interpretation of the SPA's requirements for objections is not apparent on the face of the pleadings and is to be determined by a trier of fact at a later date.
Furthermore, viewing the factual allegations in the light most favorable to Legacy, the non-moving party, there is a genuine issue of material fact as to whether Lummus breached the SPA in its preparation of the Closing Working Capital Statement. The Second Amended Counterclaim sets forth adequate factual allegations that Lummus did not prepare the Closing Working Capital Statement in accordance with GAAP, nor in accordance with the Company's ordinary accounting practices, as required under section 2.04(b)(i) of the SPA. (D.I. 51 at ¶¶ 11-13) A genuine issue of material fact exists as to whether Lummus breached the SPA by failing to adhere to GAAP, before Carter Control submitted its Statement of Objections.
On the face of the competing pleadings and their respective exhibits, there are genuine issues of material fact regarding each party's compliance with the SPA and the amounts due under the SPA, which preclude granting Lummus' motion for judgment on the pleadings. Therefore, the court recommends denying Lummus' motion.
For the foregoing reasons, the court recommends denying plaintiff's original and renewed motions for judgment on the pleadings (C.A. No. 18-1475, D.I. 32; D.I. 59).
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B), Fed. R. Civ. P. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific written objections within fourteen (14) days after being served with a copy of this Report and Recommendation. Fed. R. Civ. P. 72(b)(2). The objection and responses to the objections are limited to ten (10) pages each. The failure of a party to object to legal conclusions may result in the loss of the right to de novo review in the District Court. See Sincavage v. Barnhart, 171 F. App'x 924, 925 n.1 (3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987).
The parties are directed to the court's Standing Order For Objections Filed Under Fed. R. Civ. P. 72, dated October 9, 2013, a copy of which is available on the court's website, http://www.ded.uscourts.gov.
(D.I. 33, Ex. A at art. 1) (emphasis in original)
