Weyerhaeuser Co v. Domtar Corp ( 2018 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 16-4159
_______________
WEYERHAEUSER COMPANY,
a Washington corporation,
Appellant
v.
DOMTAR CORPORATION, a Delaware Corporation;
DOMTAR PAPER COMPANY, LLC, a Delaware limited liability company
___
On Appeal from the District Court
of Delaware
(1-14-cv-00024)
District Judge: The Honorable Sue L. Robinson
_______________
Submitted Under Third Circuit L.A.R. 34.1(a)
September 15, 2017
Before: VANASKIE, RENDELL, and FUENTES, Circuit Judges
(Opinion Filed: January 18, 2018)
_______________
OPINION ∗
_________
∗
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
FUENTES, Circuit Judge.
Plaintiff-Appellant Weyerhaeuser Company (“Weyerhaeuser”) sold its fine paper
business to Defendants-Appellees Domtar Corporation and Domtar Paper Company, LLC
(together “Domtar”) in 2007 for $3.3 billion (the “Sale”). This case stems from a
contract dispute over which party is responsible for paying the workers compensation
claims of Weyerhaeuser’s former employees who had left prior to the Sale and thus had
never worked for Domtar (the “Retired Workers”). Weyerhaeuser appeals the District
Court’s partial grant of Domtar’s motion to dismiss and its grant of summary judgment in
favor of Domtar. For the reasons explained below, we affirm.
I.
As we write only for the parties, a summary of only the relevant facts is necessary.
Shortly after the Sale closed in 2007, Weyerhaeuser and Domtar disputed which party
was responsible for the workers compensation claims of the Retired Workers. In April of
2007, Weyerhaeuser tendered a workers compensation liability demand of over $13
million to Domtar, which Domtar rejected. Weyerhaeuser argued that under the Sale
contracts, such claims were Domtar’s responsibility. Weyerhaeuser also began to invoice
Domtar for claims including payments to the Retired Workers. Nonetheless,
Weyerhaeuser made the payments until the issue was resolved.
The parties engaged in negotiations regarding various post-closing disputes. Their
discussions resulted in a meeting in Montreal in September 2008 where Domtar took the
2
position that under the Sale contracts, it was not liable for the Retired Workers’ claims. 1
Weyerhaeuser preliminarily agreed, but stated it would need to discuss the matter
internally more fully.
Following these discussions, Weyerhaeuser adjusted its own accounting records to
show a decrease in income of over $9.2 million to reflect that Domtar would not be
covering the cost of the Retired Workers’ claims. Weyerhaeuser then provided Domtar
new invoices reflecting that Domtar was not liable to Weyerhaeuser for claims for
Retired Workers. The error with the initial invoices was confirmed by the general
counsel of its Canadian subsidiary, Anne Giardini, in a letter to Domtar. The letter,
marked “WITHOUT PREJUDICE” in the header on the first page, stated “we are all
agreed that US workers compensation liability went to Domtar only for employees who
became able to work in some capacity at Domtar.” For three years, Weyerhaeuser
continued to invoice Domtar for the claims of only these continuing employees. In 2012,
Weyerhaeuser realized its mistake in interpreting the contract and began tendering the
workers compensation claims of Retired Workers to Domtar. Domtar rejected this
demand and the litigation ensued.
Weyerhaeuser commenced this action for breach of contract in the District Court
for the District of Delaware to recover the money it had paid. 2 On Domtar’s motion to
1
The Sale was executed in two contracts; the Amended and Restated Contribution
Agreement (the “Contribution Agreement”) is the focus of this appeal.
2
Diversity jurisdiction existed in the District Court under 28 U.S.C. § 1332(a).
Weyerhaeuser is a citizen of Washington and Domtar is a citizen of Delaware. The
amount in controversy exceeds $75,000. We have jurisdiction to review the District
Court’s final decision under 28 U.S.C. § 1291.
3
dismiss, the District Court held that Domtar was contractually responsible for the workers
compensation claims of the Retired Workers. It further ruled that the statute of
limitations barred Weyerhaeuser from seeking recovery for Retired Workers’ workers
compensation claims that accrued prior to January 13, 2011. 3 Following discovery,
Domtar moved for summary judgment arguing that Weyerhaeuser had waived its
contractual rights in the payments it had made and that it had acquiesced to Domtar’s
interpretation of the contracts. The District Court agreed and granted its motion for
summary judgment. This appeal followed.
II.
We address four issues on this appeal, stemming from both the District Court’s
July 2014 opinion denying in part and granting in part Domtar’s motion to dismiss, and
its August 2016 opinion granting Domtar’s motion for summary judgment. They are: (1)
whether a signed writing was required to waive any rights under the Sale contracts; (2)
whether Weyerhaeuser intentionally waived its rights when it acted in accordance with
Domtar’s incorrect interpretation of the Sale contracts; (3) whether—assuming
Weyerhaeuser did waive its rights—it retracted this waiver in 2012; and (4) whether the
parties’ agreements to resolve their disputes concerning workers compensation claims at
a later date tolled the statute of limitations. 4 These issues will be addressed in turn.
3
Under Delaware law, breach of contract claims are subject to a three-year statute of
limitations. DEL. CODE ANN. tit. X, § 8106(a).
4
Given that we will affirm the District Court’s decision regarding waiver, we need not
address whether the District Court properly determined the acquiescence issues as they
are moot.
4
1. Signed Writing Requirement under the Sale Contracts
Section 9.10 of the Contribution Agreement states that “[n]o provisions of this
Agreement . . . shall be deemed waived, amended, supplemented or modified by any
party, unless such waiver, amendment, supplement or modification is in writing.”
Weyerhaeuser asserts that, contrary to what the District Court found, this clause means
that it could not have waived or acquiesced to any loss of contractual rights against
Domtar absent an additional writing.
The District Court properly noted that under Delaware law “contract provisions
deeming oral modifications unenforceable can be waived orally or by a course of conduct
just like any other contractual provision.” 5 Weyerhaeuser now argues, however, that
Domtar cannot establish Weyerhaeuser’s intent to modify Section 9.10 with the required
“specificity and directness as to leave no doubt of the intention of the parties to change
what they had previously solemnized by formal document.” 6 This is not the case. Such
intent is easily established by Weyerhaeuser’s conduct subsequent to the Sale. 7
The facts here establish that following Weyerhaeuser’s adoption of Domtar’s
position regarding liability for the Retired Workers’ claims, Weyerhaeuser engaged in a
5
Eureka VII, LLC v. Niagara Falls Holdings, LLC, 899 A.2d 95, 109 n. 26 (Del. Ch.
2006) (citing Continental Ins. Co. v. Rutledge & Co., 750 A.2d 1219 (Del. Ch. 2000)).
6
Continental Ins. Co., 750 A.2d at 1230.
7
The same facts which establish Weyerhaeuser’s waiver of its underlying substantive
rights against Domtar also establish its clear intent to modify the Section 9.10 writing
requirement. Because Weyerhaeuser’s conduct clearly establishes its intent to waive its
rights regarding the Retired Workers, something it could not do absent modifying Section
9.10, that same conduct must necessarily be understood to serve as a modification of
Section 9.10’s writing requirement.
5
course of conduct clearly establishing an intent to waive its rights under the contract. 8
The District Court was correct in stating that “[o]ver the course of several years,
Weyerhaeuser’s legal, finance, and human resources departments engaged in a
continuous, conscious, and voluntary course of action consistent with Domtar’s
interpretation of Section 2.03(a) and inconsistent with its own rights.” 9 Viewing these
facts together, Weyerhaeuser’s conduct leaves no alternative but to conclude that it had
specifically and directly intended to waive its rights. 10 Thus, we will affirm the District
Court in its holding that Weyerhaeuser waived the signed writing requirement of the
Contribution Agreement.
8
First, Weyerhaeuser began adjusting its own internal accounting records so as to reflect
that Weyerhaeuser no longer expected Domtar to pay for the Retired Workers’ claims.
Second, Weyerhaeuser communicated to Domtar that it was accepting Domtar’s
interpretation of the contract, specifically the definition of “transferred employee[s].”
Third, Weyerhaeuser employees discussed changing invoices sent to Domtar to reflect
that Domtar would only be responsible for the claims of employees who worked for
Domtar; in other words, not the Retired Workers.
9
Weyerhaeuser Co. v. Domtar Corp., 204 F. Supp. 3d 731, 743 (D. Del. 2016).
10
In any event, here there was indeed a signed writing waiving said rights, namely
Giardini’s November 26 letter. This letter confirmed that the required authorities at
Weyerhaeuser had agreed with Domtar’s interpretation of the liability for Retired
Workers. Weyerhaeuser argues now, as it did before the District Court, that Giardini’s
use of a “WITHOUT PREJUDICE” label on the letter forecloses any reliance on the
contents of the letter. The District Court disagreed for two main reasons. First it found
that Delaware courts disfavor such reliance on boilerplate markings. Weyerhaeuser, 204
F. Supp 3d at 742-43 (citing Balin v. Amerimar Realty Co., No. 12896, 1995 Del. Ch.
LEXIS 41, 1t *24-26 (Del. Ch. Apr. 10, 1995)). Second, it noted that while some sections
of the letter lend themselves to being understood as a negotiating point, the discussion of
the liability for the Retired Workers read more in terms of a confirmation of Domtar’s
interpretation as discussed at the Montreal meeting. Id. at 743. Thus, the District Court
concluded that “the court has no legal basis to hold that a single, boilerplate disclaimer on
Giardini’s November 26 letter is sufficient, by itself, to outweigh Weyerhaeuser’s
multitude of oral and written statements and years of conduct consistent with Domtar’s
interpretation of Section 2.03(a).” Id. We agree with the District Court’s conclusion.
6
2. Weyerhaeuser’s Waiver of its Rights
Weyerhaeuser also argues that the District Court erred in finding waiver because
there was no evidence of intent to waive its substantive rights against Domtar and
because it had no knowledge of its rights. Delaware law defines waiver as “the voluntary
and intentional relinquishment of a known right.” 11 As discussed above, the District
Court did not err in determining that Weyerhaeuser intended to waive its rights against
Domtar; Weyerhaeuser’s actions clearly demonstrate such intent. Thus, we turn to
analyzing whether the District Court properly found that Weyerhaeuser had knowledge of
its rights.
Weyerhaeuser relies chiefly on Moore v. Travelers Indem. Ins. Co., a case the
District Court already properly disregarded as distinguishable. 12 While the Moore court
did state that “[t]he requisite intention to establish a waiver cannot be found in mistake,”
the mistake made there was the erroneous one-time issuance of a check for just over
$1,000. 13 Here, by stark contrast, the “mistake” was a multi-year course of conduct. We
agree with the District Court that this case is closer to Julian v. Eastern States
Construction Serv., Inc. In Julian, a contract provision was held to be waived where
there was “at least an arguable basis” that the waiving party—which argued it lacked the
knowledge required for waiver—was aware of its rights under the contract. 14 Here,
11
AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., 871 A.2d 428, 444 (Del. 2005)
(citation omitted).
12
408 A.2d 298, 302 (Del. Super. 1979).
13
Id. at 301-02.
14
No. 1892-VCP, 2008 Del. Ch. LEXIS 86, at *54-*55 (Del. Ch. July 8, 2008)
7
Weyerhaeuser was—for years—clearly aware that there was “at least an arguable basis”
that Domtar was obligated to pay the claims of the Retired Workers. Indeed, it had
initially argued as much before accepting Domtar’s position to the contrary.
Accordingly, we agree with the District Court that Weyerhaeuser waived its substantive
rights.
3. Retraction of Waiver
Weyerhaeuser next argues that, assuming it had waived its rights, it had properly
retracted its waiver by 2012, making Domtar liable for the Retired Workers’ workers
compensation claims beyond that point. The District Court held that the waiver had not
been properly retracted “because Weyerhaeuser unjustifiably delayed in giving
reasonable notice to Domtar” of its intent to retract its waiver. 15
On appeal, the parties dispute the applicable law regarding the retraction of
waiver. 16 Because Weyerhaeuser cannot establish that the facts here satisfy the
Amirsaleh test for retraction of waiver, we need not address the interplay of these cases.
In Amirsaleh, the Delaware Supreme Court stated that while retraction of waiver is
typically prohibited, “the waiving party may retract the waiver by giving reasonable
15
Weyerhaeuser, 204 F. Supp. 3d at 745.
16
Weyerhaeuser argues that the Delaware Supreme Court established a test for the
retraction of waiver in Amirsaleh v. Bd. of Trade of the City of New York and that the
District Court erred by considering the timelines of the retraction. 27 A.3d 522 (Del.
2011). In contrast, Domtar asserts that the section of Amirsaleh relied upon by
Weyerhaeuser was dicta and that the operative rule should then be the one announced in a
previous Delaware Supreme Court case, Harleysville Ins. Co. v. Church Ins. Co., where it
was held that “[o]nce a right is waived, it is gone forever.” 892 A.2d 356, 364 (Del.
2005).
8
notice to the non-waiving party before that party has suffered prejudice or materially
changed his position.” 17 Here, it cannot be said that Weyerhaeuser gave reasonable
notice. As the District Court properly noted, Weyerhaeuser waited over three years from
when it became aware of the facts necessary to discover the interpretive mistake the
parties had made. 18 Accordingly, we affirm the District Court in its determination that
Weyerhaeuser did not properly retract its waiver.
4. Tolling of the Statute of Limitations
Finally, Weyerhaeuser argues that the District Court erred in its July 2014 opinion
by dismissing Weyerhaeuser’s claims that accrued prior to January 2011. Weyerhaeuser
claims that the District Court failed to properly account for two contracts in which
Weyerhaeuser and Domtar agreed to toll the statute of limitations. Domtar opposes this,
asserting that not only do the contracts Weyerhaeuser points to not constitute an
agreement to toll the statute of limitations, but that neither contract even mentions the
statute of limitations at all.
While Weyerhaeuser is correct that Delaware law allows for tolling agreements,
for such an agreement to be effective it must be just that—an agreement. Neither
contract Weyerhaeuser points to can reasonably be understood to be an agreement to toll
the statute of limitations. 19 Moreover, the case Weyerhaeuser cites to in support of its
17
27 A.3d at 530.
18
Weyerhaeuser, 204 F. Supp. 3 at 744.
19
Weyerhaeuser’s brief refers to both the Settlement Agreement, effective December 21,
2009, and the Agreement to Terminate Certain Health and Welfare Transition Services,
executed on February 28, 2013. Weyerhaeuser Br. at 34.
9
assertion that the contract did toll the statute of limitations, E.I. du Pont Nemours & Co.
v. Medtronic Vascular, Inc., is entirely inapposite. 20 There, the contract asserted to have
tolled the statute of limitations was literally referred to as the “Tolling Agreement” and it
specifically stated that “the running of any statute of limitations . . . [is] hereby tolled.” 21
Here, by contrast, there are no references to the statute of limitations in either agreement.
Accordingly, we affirm the partial dismissal.
III.
For the foregoing reasons, we affirm the District Court’s order granting in part
Domtar’s motion to dismiss and the District Court’s order granting Domtar summary
judgment.
20
C.A. No. N10C-09-058, 2013 Del. Super. LEXIS 9 (Del. Super. Ct. Jan. 18, 2013), as
corrected (Jan. 29, 2013).
21
Id. at *29.
10