Alltrista Plastics, LLC d/b/a Jarden Plastic Solutions v. Rockline Industries, Inc. ( 2017 )

Superior Court
of the
Stote of De|clwclre
Joln R. Jurden New Cosi|e County Courthouse
PresiclemL Judge 500 North King S’rreei, Suite 10400
Wi|ming’ron, De|owore 19801-3733
Te|ephone (302) 255-0665
January18, 2017
Peggy L. Ableman, Esq. Joseph J. BelleW, Esq.
Daniel J. Brown, Esq. Cozen O’ Connor
McCarter & English, LLP 1201 North Market Street, Suite 1001
Renaissance Centre Wilmington, DE 19801
405 North King Street, Eighth Floor
Wilmington, DE 19801
RE: Alltrista Plastics, LLC d/b/a J arden Plastic Solutions v. Rockline Industries, Inc.,
C.A. No. NlZC-09-094 JRJ CCLD
Dear Counsel:
Defendant Rockline Industries, Inc. (“Rockline”) has moved for relief from the Court’s
April 8, 2016 oral ruling on the issue of whether the “Termination Fee” in the Supply Agreement
is a liquidated damages provision that caps Plaintiff Alltrista Plastics, LLC d/b/a J arden Plastic
Solutions’ (“Jarden”) potential recovery for its breach of contract claim to $1. 5 million. For the
following reasons, the Court finds that relief 1s Warranted based on the Court’s “plenary power to
‘,vacate modify or set aside judgments or orders’ where ‘reasonably necessary to ensure the
proper administration of justice.”’l
I. Background
In its Motion for Partial Summary Judgment, Rockline argued, inter alia, that the
Termination Fee is a liquidated damages clause that applies to Rockline’ s alleged breach of the
Supply Agreemcnt. During a teleconferencc on April 8, 2016,, the Court ruled on 2numerous
outstanding motions, including Rockline s Motion for Partial Summary Jl,rdgnient.2 011 the
Termination Fee issue, the Court held that the Termination Fee had not been triggered and,
therefore, Was not applicable to this case. This determination Was based upon the inclusion of
the Termination Fee schedule in Section 9(b)(iii) of the Supply Agreement, the parties’
submissions, and an October 12, 2012 Letter from Rockline to J arden specifically invoking the
l Rembrandt Techs., LP v. Harris Corp., 2009 WL 3865394, at *l (Del. Super. Oct. 15, 2009)
(quoting State v. Guthman, 619 A.2d 1175, 1178 (Del. 1993)).
2 April 8, 2016 Teleconference Proceeding Worksheet (Trans. ID. 58890583) (issuing decisions
on eleven outstanding motions in anticipation of April 11, 2016 trial date).
Section (9)(b)(i)(2) “for cause” termination provision.3
Rockline did not move for reargument under Superior Court Civil Rule 59(e), and on
April 11, 2016, the Court continued the trial based on the parties’ representation that settlement
negotiations were ongoing4
Over five months later, on October 12, 2016, Rockline filed a Motion for Reconsideration
asking the Court to reconsider its April 8, 2016 oral ruling on the applicability of the
Termination Fee.5 Rockline argued that the Court did not take into account the significance of
the Supply Agreement language providing that the Termination Fee “shall serve as and for
liquidated damages for Rockline’s breach of the Agreement.” In support of its argument that the
quoted language mandates a different result, Rockline-for the first time_cited the Delaware
Supreme Court’s Brazen v. Bell Atlantic Corp. decision.6
On October 21, 2016, the Court held a teleconference on Rockline’s Motion for
Reconsideration.7 Rockline admitted that it knew of the Brazen decision at the time it filed and
argued its Motion for Partial Summary Judgment, but failed to present Brazen to the Court.8 The
Court directed Rockline to re-file its Motion for Reconsideration under Superior Court Civil
Rule 60(b). Rockline complied; Jarden responded; and the Court heard oral argument on
November 16, 2016.
II. Discussion
As an initial matter, the Court finds it unnecessary to decide whether relief is available to
Rockline under Rule 60(b) because the Court bases the instant ruling upon its “plenary power to
‘vacate, modify or Set aside judgments or orders’ where ‘reasonably necessary to ensure the
proper administration of justice.”’)
The language at issue appears in Section 9(b) of the Supply Agreement: “The
Termination Fee shall not be a penalty but shall serve as and for liquidated damages for
Rockline’s breach of the Agreement.” The Supply Agreement defines “Termination Fee” in
Section (b)(iii): “If Rockline terminates the agreement without cause, it shall pay to J arden 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 . . . .”
3 Rockline’s Motion for Partial Summary Judgment, Ex. J (Trans. ID. 58197764).
4 At the November 16, 2016 oral argument on the instant Motion, the parties hotly disputed the
state of settlement at the time trial was re-scheduled. Because the Court is not basing its decision
upon inadvertence or excusable neglect under Superior Court Civil Rule 60(b), it is unnecessary
to parse the parties’ differing interpretations
5 Motion for Reconsideration (Trans. ID. 59689439).
6 695 A.2d 43 (Del. 1997).
7 October 21 , 2016 Teleconference Proceeding Worksheet (Trans. ID. 59733130).
8 October 21, 2016 Teleconference Transcript at 6:4-6 (Trans. ID. 59867444) (“Brazen should
have been cited in support of those arguments.”).
9 Rembrandt, 2009 WL 3865394, at *l (quoting Guthman, 619 A.2d at 1178).
2
In Brazen, the Court of Chancery did not analyze the termination fee provision at issue as
a liquidated damages provision because “notwithstanding section 9.2(e) of the merger
agreement, which states that the $550 million fee constitutes liquidated damages, ‘the event
which triggers payment of the fees is not a breach but a termination.”’10 The Supreme Court
disagreed with the Court of Chancery’s conclusion and found that the provision at issue should
be analyzed as a liquidated damages clause because “the express language of section 9.2(e) of
the agreement unambiguously states that the termination fee provisions ‘constitute liquidated
damages and not a penalty.”’11 Further, the Supreme Court affirmed that liquidated damages,
“by definition, are damages paid in the event of a breach of contract.1112
In its April 8, 2016 oral ruling, as the Court of Chancery did in Brazen, the Court found
that payment was triggered by a termination_not by a breach. However, viewing the Supply
Agreement in light of Brazen, the Court finds the Supply Agreement_although clumsily
structured_provides that the Termination Fee should be treated as liquidated damages for
Rockline’s breach of the Supply Agreement: “The Termination Fee shall not be a penalty but
shall serve as and for liquidated damages for Rockline’s breach of the Agreement.”13 As such,
the exercise of the Court’s plenary power to vacate, modify, or set aside its judgments is
necessary to ensure the proper administration of justice in this case.
For the foregoing reasons, Rockline’s Motion for Relief from Order on Summary
Judgment is GRANTED, and the Court’s Apn'l 8, 2016 oral ruling on this issue is VACATED.
IT IS SO ORDERED.
Very trul yours, . /‘
Pr sident Judge
JRJ:mls
cc: Prothonotary
‘° Bmzen, 695 A.2d ar 47 (quoting Bmzen v. Bell A¢l. Corp., 1997 wL 153810, at *4 (Del. ch.
Mar. 19, 1997)).
11 Id.
12 Id. (citing Restatement (Second) of Contracts § 356 (1981)).
13 Supply Agreement § 9(b) (emphasis added).
3