Patrone v. Commerce Associates LP ( 2018 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ALDO PATRONE and MADELYN )
PATRONE, husband and wife, )
)
Plaintiffs, )
)
v. ) C.A. No.: N17C-08-086 EMD
)
COMMERCE ASSOCIATES LP d/b/a )
STAT INTERNATIONAL, LLC, STAT )
OFFICE SOLUTIONS, STAT )
INTERNATIONAL BUSINESS OFFICE )
SOLUTIONS, COASTAL )
INVESTMENT ADVISORS, INC., a )
Delaware corporation; ENERGY )
TRANSFER SOLUTIONS, INC., a )
foreign corporation, and DVL GROUP, )
INC., a foreign corporation, )
)
Defendants. )
)
and )
)
COMMERCE ASSOCIATES LP d/b/a )
STAT INTERNATIONAL, LLC, STAT )
OFFICE SOLUTIONS, STAT )
INTERNATIONAL BUSINESS OFFICE )
SOLUTIONS, )
)
Defendant/Third-Party Plaintiff, )
)
v. )
)
ENERGY TRANSFER SOLUTIONS, )
INC.; DVL GROUP, INC.; and ENERGY )
TRANSFER SOLUTIONS, LLC, )
)
Third-Party Defendants, )
Submitted: July 11, 2018
Decided: October 29, 2018
Upon Third-Party Defendant Energy Transfer Solutions LLC’s Motion to Dismiss Second
Amended Third-Party Complaint,
Upon Third-Party Defendant Energy Transfer Solutions LLC’s Motion to Dismiss DVL Group,
Inc.’s Cross-Claim
DENIED in part GRANTED in part.
DAVIS, J.
I. INTRODUCTION
Commerce Associates, LP (“Commerce Associates”)1 owns a property at 1201 North
Orange Street, 9th Floor, Wilmington, Delaware 19801 (the “Property”). On January 12, 2015,
Commerce Associates and Energy Transfer Solutions, Inc. (“Energy Solutions”), a division of
DVL Group, Inc. (“DVL”) entered into an agreement (the “Installment Agreement”) on January
12, 2015. Under the Installment Agreement, Energy Solutions would install a water source heat
pump at the Property. On November 9, 2015, DVL and Energy Solutions contracted with One
Commerce Condominium Council (“Condominium Council”) to provide preventative
maintenance services (the “Maintenance Agreement”) for the heat pump and other equipment at
the Property. DVL entered into an asset purchase agreement (the “APA”) with Energy Transfer
Solutions, LLC (“Energy Solutions LLC”) on December 30, 2016. Under the APA, Energy
Solutions LLC would purchase DVL’s Energy Transfer Solutions division. In addition, Energy
Solutions LLC would assume certain liabilities from DVL under the APA.
On February 27, 2017, Aldo Patrone was working as an HVAC mechanic at the Property
when he came into contact with unmarked live electrical wires. Mr. Patrone suffered injuries.
Mr. Patrone and Madelyn Patrone filed suit against Commerce Associates, Energy Solutions, and
DVL. Thereafter, Commerce Associates filed an answer and asserted third-party claims against
1
Commerce Associates LP d/b/a Stat International, LLC, Stat Office Solutions, Stat International Business Office
Solutions.
2
Energy Solutions, DVL, and Energy Solutions LLC. DVL, in turn, filed a cross-claim against
Energy Solutions LLC. Energy Solutions LLC filed (i) the Third-Party Defendant Energy
Solutions LLC’s Motion to Dismiss Second Amended Third-Party Complaint and (ii) Third-
Party Defendant Energy Transfer Solutions LLC’s Motion to Dismiss DVL Group, Inc.’s Cross-
Claim (collectively, the “Motion”). Commerce Associates, DVL and the Patrones opposed the
Motion. The Court held a hearing (the “Hearing”) on the Motion on July 11, 2018. Upon
conclusion of the Hearing the Court took the Motion under advisement.
For the reasons set forth below, the Motion is GRANTED in part and DENIED in part.
II. RELEVANT FACTS
On January 12, 2015, Commerce Associates and Energy Solutions, as a division of DVL,
entered into the Installment Agreement to remove an existing water source heat pump on the 9th
floor of the Property.2 Energy Solutions would also sell and install a new water source heat
pump and “make all connections for wiring, piping, and duct work, as well as inspecting the new
system to assure that it worked safely and properly.”3 The Installment Agreement also contains
an arbitration clause that provides as follows:
. . .All claims, disputes, and controversies arising out of or relating to this contract,
or the breach thereof, shall, in lieu of court action, be submitted to arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) then in effect, and any judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. . . .4
On November 9, 2015, DVL and Energy Solutions contracted, under the Maintenance
Agreement, with Condominium Council to provide maintenance service for the heat pump and
other equipment at the Property.5 The maintenance service included testing and inspections,
2
Am. Compl., Ex. A; 2d Am. 3d Party Compl. ¶ 3.
3
2d Am. 3d Party Compl. ¶ 3.
4
Installment Contract at 3.
5
Am. Compl., Ex. B; 2d Am. 3d Party Compl. ¶ 4.
3
preventative maintenance, and repair and placement of components or parts of all of the heat
pumps in the Property, including the heat pump on the ninth floor.6 As alleged, Commerce
Associates is a third-party beneficiary of the Maintenance Agreement.7 The Maintenance
Agreement also explicitly excludes: “Electrical work external to the Equipment or maintenance
of accessories, attachments, equipment, features, or other devices no described in the
Maintenance Plan.”8
Energy Solutions and DVL merged in 2014. On December 30, 2016, DVL entered into
an the APA with Energy Solutions LLC.9 Pursuant to the APA and Assignment and Assumption
Agreement (the “Assignment”), Energy Solutions LLC assumed all liabilities and obligations
relating to the business of the Division of DVL which accrued after the closing date of the
agreement—December 30, 2016.10 Specifically, the Assignment states
Indemnification of Assignee by Assignor. Assignor shall indemnify, defend and
hold Assignee harmless from and against any and all loss, damage, cost or expense
(including reasonable attorneys’ fees incurred by Assignee) arising out of or
resulting from any breach by Assignor of obligations under or relating to the
Assigned Agreements up to and including the date hereof.
Indemnification of Assignor by Assignee. Assignee shall indemnify, defend and
hold Assignor harmless from and against any and all loss, damage, cost or expense
(including reasonable attorneys’ fees incurred by Assignor) arising out of or
resulting from any breach by Assignee of obligations under the Assigned
Agreements from and after the date hereof.11
The Assignment states that it only assigns the “rights, obligations, title and interest in and to the
contracts and agreements identified in Section 2.1.2 of the [APA].”12 Schedule 2.1.2 lists the
contracts, leases and agreements relating to the Business. They include: “(10) Post sale
6
2d Am. 3d Party Compl. ¶ 4.
7
Id.
8
Id., Ex. B § 10.
9
Id. ¶ 7.
10
Id.
11
Am. Compl., Ex D ¶¶ 3-4.
12
See Assignment at 1.
4
operating agreement between the companies”, “(14) Representative Agreement list (attached)”;
“(15) All warranties, extended warranties, and service contracts relating to the Business.”13
On February 27, 2017, Mr. Patrone was a business invitee at the Property.14 Mr. Patrone
was working as a HVAC mechanic at the Property and “suddenly and without warning he came
into contact with unmarked live electrical wires as a result of the negligence of Defendants.”15
The wire shocked and electrocuted Mr. Patrone causing him to fall off a six foot ladder and
become unconscious.16 At the time of the injury, Energy Solutions LLC was Mr. Patrone’s
employer.17
On August 7, 2017, the Patrones filed suit against Defendants.18 The Patrones seek
damages resulting from Mr. Patrone’s injuries sustained on February 27, 2017 including Ms.
Patrone’s loss of consortium.19
On October 14, 2017, Commerce Associates filed a third-party complaint. On April 23,
2018, Commerce Associates filed its Second Amended Third-Party Complaint (the “Third-Party
Complaint”) against Energy Solutions, DVL and Energy Solutions LLC. In the Third-Party
Complaint, Commerce associates seeks indemnification if found liable to Plaintiffs. Specifically,
the Third-Party Complaint alleges that Energy Solutions and DVL breached the contracts in that
they:
(a) sold a heat pump that was not fit for the purpose for which it was intended to be
used; (b) breached an implied warranty of merchantability; (c) breached
governmental and/or industry standards in testing, inspecting, maintaining, and
repairing the aforesaid heat pump; (d) failed to comply with governmental and/or
13
Mot., Ex. 1.
14
Am. Compl. ¶ 6.
15
Am. Compl. ¶ 7.
16
Am. Compl. ¶ 7.
17
Mot. at 3.
18
As amended in the Amended Complaint filed on December 27, 2017.
19
See Am. Compl. ¶ 10.
5
industry standards in training their technicians in the proper methods of testing,
inspecting, maintaining, and repairing the aforesaid heat pump.20
On May 31 and July 2, 2018, Energy Solutions LLC filed the Motion. On June 12, 2018,
Commerce Associates filed their Response to Third-Party Defendant Energy Transfer Solutions,
LLC’s Motion to Dismiss (the “Opposition”). On June 15, 2018, DVL filed DVL Group, Inc.’s
Response to Third-Party Defendant Energy Transfer Solutions, LLC’s Motion to Dismiss Second
Amended Third-Part Complaint (“DVL’s Opposition”). On June 21, 2018, Plaintiffs filed a
Joinder of Plaintiffs, Aldo Patrone and Madelyn Patrone to defendant Raynor Worldwide’s
Response in Opposition to Third-Party Defendant, Energy Transfer Solutions, LLC’s Motion to
Dismiss Second Amended Third-Party Complaint (“Plaintiffs’ Opposition”).21 The Court heard
arguments on the Motion, the Opposition, DVL’s Opposition and Plaintiffs’ Opposition at the
Hearing.
III. STANDARD OF REVIEW
Upon a motion to dismiss, the Court (i) accepts all well-pleaded factual allegations as
true, (ii) accepts even vague allegations as well-pleaded if they give the opposing party notice of
the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only
dismisses a case where the plaintiff would not be entitled to recover under any reasonably
conceivable set of circumstances.22 However, the court must “ignore conclusory allegations that
lack specific supporting factual allegations.”23
20
2d Am. 3d Party Compl. ¶ 6.
21
The title of this filing contains the name “Raynor Worldwide.” From the document, the Court reads this to be an
opposition to Energy Solutions LLC’s motions to dismiss.
22
See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v.
Cedars Academy, 2010 WL 5825343, at *3 (Del. Super. Oct. 27, 2010).
23
Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
6
If the trial court “considers matters outside of the complaint, a motion to dismiss is
usually converted into a motion for summary judgment and the parties are permitted to expand
the record.”24 Civil Rule 12(b) states:
[i]f, on a motion asserting the defense . . . for failure of the pleadings to state a claim
upon which relief can be granted, matters outside the pleadings are presented to and
not excluded by the Court, the motion shall be treated as one for summary judgment
and disposed of as provided in Rule 56, and all parties shall be given reasonable
opportunity to present all material made pertinent to such a motion by Rule 56.25
However, a Court is not required to convert a motion to dismiss to a motion for summary
judgment when the newly submitted document “is integral to plaintiffs claim and it is
incorporated into the complaint.”26
Commerce Associates argues that the Court cannot decide the Motion and should convert
the Motion into a motion for summary judgment because Energy Solutions LLC relies upon,
among other things, Schedules to the APA and Assignment—which were not attached to the
Third-Party Complaint. Commerce Associates also argues that discovery is needed in several
areas before a decision can be made: (1) whether any warranty or service contract, except for the
disclosed Installation and Maintenance Agreements, involve Commerce Association as a party;
(2) what is meant by the term “Business” as defined in the APA and whether Business applies to
services such as the electrical work on HVAC.
The Court will not covert the Motion from a motion under Civil Rule 12(b) to one under
Civil Rule 56. The Installation Agreement, the Maintenance Agreement, the APA, the
24
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (citing Malpied v. Townson, 780 A.2d
1075, 1090 (Del. 2001).
25
Super. Ct. Civ. R. 12(b) (emphasis added); see Furman v. Del. Dept. of Transp., 30 A.3d 771 (Del. 2011) (finding
that trial court was required to convert a motion to dismiss into a motion for summary judgment when the Court
relied upon materials outside the pleadings); Veney v. United Bank, 2017 WL 3822657, at *3.
26
Willis v. City of Rehoboth Beach, 2004 WL 2419143, at *1 n.1 (Del. Super. Oct. 14, 2004) (citing In re Santa Fe
Pacific Corp. Shareholder Litig., 669 A.2d 59, 69 (Del. 1995)).
7
Assignment are all documents attached to the Second Amended Third-Party Complaint.27
Exhibit 1 to the Motion, entitled “2.1.2 Contracts, Leases & Agreements,” is a part of the APA
and the Assignment. Commerce Associates, not Energy Solutions LLC, chose to omit these
schedules. The Court finds, therefore, that Exhibit 1 is integral to the claims made by the parties
and is incorporated into the various complaints as appropriate.
IV. DISCUSSION
A. THE ARBITRATION IN THE INSTALLMENT AGREEMENT REQUIRES SEVERANCE OF
THOSE CLAIMS FROM THE OTHER CLAIMS MADE IN THE THIRD PARTY COMPLAINT.
Delaware favors arbitration and generally interprets contractual arbitration clauses
broadly.28 “As a matter of public policy, Delaware favors the resolution of disputes by
arbitration.”29 In fact, “Delaware courts lack subject matter jurisdiction to resolve disputes that
litigants have contractually agreed to arbitrate.”30 When a lawsuit relates to different contracts
and only some of the contracts have arbitration clauses, the whole case does not need to go to
arbitration.31 Rather, only the issues relating to the contract that demands arbitration must go to
the arbiter.32
27
2nd Am. Compl. ¶¶ 3, 4and 7
28
See Elia v. Hertrich Family of Auto. Dealerships, Inc., 2013 WL 6606054, at *2 (Del. Super. Dec. 13, 2013).
29
GreenStar IH Rep, LLC v. Tutor Perini Corp., 2017 WL 715922, at *4 (Del. Ch. Feb. 23, 2017) (citing James &
Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 79 (Del. 2006)).
30
Behmn v. Am. Int’l. Grp., Inc., 2013 WL 3981663, at *4 (Del. Super. July 30, 2013). But see Liveware Publ’g,
Inc., v. Best Software, Inc., 252 F. Supp. 2d 74, 78-79 (D. Del. 2003) (“the existence of a valid arbitration clause
does not technically deprive the Court of subject matter jurisdiction. It instead requires the Court to forego the
exercise of jurisdiction in deference to the parties’ contractual agreement to address in another forum those disputes
which fall within the scope of the agreement to arbitrate.”).
31
See GreenStar IH Rep, LLC, 2017 WL 715922, at *4, 7-8 (finding that arguments relating to the contract needed
to go to arbitration, but arguments relating to a contract that did not contain an arbitration clause could continue
without arbitration).
32
Id.8
The Installment Agreement contains an arbitration provision. The Maintenance
Agreement and the APA do not contain arbitration clauses. If the claims relate to the Installment
Contract, then those claims need to be arbitrated while other claims can go forward.33
The Court has reviewed the Third-Party Complaint. Commerce Associates alleges that
Energy Solutions and DVL breached the Installment Agreement in Paragraph 6(a) and 6(b).
Commerce Associates goes on to allege that, as a result of the breach of the Installment
Agreement, Commerce Associates is entitled to indemnification from Energy Solutions, DVL
and Equity Solutions LLC. As such, the Court finds that the Installation Agreement’s arbitration
provision controls and the claims of Commerce Associates and the other parties “must be
submitted to arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.” 34
B. THE MOTION’S REMAINING ARGUMENTS NEED ADDITIONAL DISCOVERY BEFORE THE
COURT CAN GRANT JUDGMENT.
The Court notes that the Motion, the Opposition, DVL’s Opposition and Plaintiffs’
Opposition have been properly, and effectively, presented to the Court. Counsel for the parties
have done a good job of arguing their respective positions; however, the Court finds that too
many issues of fact remain given the pleading set out in the Third-Party Complaint and DVL’s
cross-claim to grant relief to Energy Solutions LLC under Civil Rule 12.
Discovery on this point should be proportional to the open issues of the case.
The Maintenance Agreement and Installment Contract do not contain indemnification
provisions. However, Section 4.2 of the APA states that “ETSL shall assume and thereafter
discharge, only . . . (c) all liabilities and obligations relating to the Business, accruing after the
33
Id.34
Installment Contract at 3.
9
Closing Date under the Assigned Agreements . . ..” Section 1.1.9 defines Business as “(a) the
business of Seller’s division known as ‘Energy Transfer Solutions’ and internally as Division 22,
(b) the business of Seller’s northern New Jersey division known as ‘Klima New Jersey,’ and (c)
the business of Seller’s HVAC service division known internally as Division 35, excluding
Liebert HVAC service, as presently conducted by Seller.” Further, Section 4.2 of the APA
defines liabilities and obligation” to include any “. . . guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation or responsibility. . ..”
Any injuries sustained by Mr. Patrone on February 27, 2017 occurred after the Closing of
the APA on December 31, 2016. Therefore, taking every reasonable inference in favor of
Commerce Associates, it is possible that Mr. Patrone’s claims accrued after December 21, 2016
and Commerce Associates could have an indemnification claim against Energy Solutions LLC.
In the Opposition, Commerce Associates relies upon Diamond State Telephone Co. v.
University of Delaware for the proposition that “when the contract between the employer and the
third party called for the performance of specified duties, there was an implied covenant to
perform the service in a workmanlike way, and that breach of this covenant imposed liability for
indemnification upon the employer.”35 The Court notes that the Delaware Supreme Court in
Howard, Needles distinguished the Diamond State case.36 In Howard, Needles, the Court noted
that there were two fundamental differences from Diamond State.37 First, “the action is between
two contractors who have contracted with [the landowner], but enjoy no contractual relationship
with each other.”38 “Secondly, in Diamond, there was not written contract. In this case, we have
35
Diamond State Tel. Co. v. Univ. of Delaware, 269 A.2d 52, 57 (Del. 1970).
36
Howard, Needles, Tammen and Bergendoff v. Steers, Perini and Pomeroy, 312 A.2d 621 (Del. 1973).
37
Id. at 624.
38
Id.10
a written contract between Contractor and Authority, with a clause which expressly sets forth the
former’s indemnity liability.”39
Although there is no indication at this stage of the litigation whether Mr. Patrone received
Worker’s Compensation, if he did receive money through Worker’s Compensation, then Energy
Transfer Solutions LLC may still be liable to Commerce Associates. “An employer, even though
it has paid workmen’s compensation benefits to an injured employee, can be held contractually
liable to a third party where a contract between the employer and third party contains provisions
requiring the employer to: (i) perform work in a workmanlike manner; and (ii) indemnify the
third-party-indemnitee for any claims arising from the employer-indemnitor’s own
negligence.”40 Further, the contract must clearly show the employer’s intent to indemnify.41
Although the Installment Agreement and Maintenance Agreement do not contain
indemnification provisions, the APA does allocate liabilities for Energy Solutions LLC. If there
is underlying liability for one of the Installment Agreement or Maintenance Agreement, then
Energy Solutions LLC could potentially be liable through the Assignment of liability in the
APA. However, the Installment Contract contains a warranty provision that is only valid for one
year. The injury occurred more than one year after installation. As plead and presented, the
Court has questions that need a more developed factual record.
The Maintenance Agreement excludes “Electrical work external to the Equipment or
maintenance of accessories, attachments, equipment, features, or other devices not described in
the Maintenance Plan.”42 From the record, it is unclear whether the electrical wire that caused
injury to Mr. Patrone falls within that exclusion. The Complaint only alleges that Mr. Patrone
39
Id.40
Precision Air, Inc. v. Stand. Chlorine of Delaware, Inc., 654 A.2d 403, 407 (Del. 1995).
41
See id (citing Howard, Needle, 312 A.2d at 624).
42
Maintenance Agreement § 10.
11
“suddenly and without warning [ ] came into contact with unmarked live electrical wires as a
result of the negligence of the Defendants.”43
Additionally, the Maintenance Agreement states that “[a]ll service will be performed by a
fully factory trained and qualified HVAC Service Technician.”44 Commerce Associates alleges
that Energy Solutions and DVL failed to comply with governmental and/or industry standards in
training their technicians in the proper methods of testing, inspecting, maintaining, and repairing
. . .”45 It is too early to make a determination whether Energy Solutions LLC failed to properly
train Mr. Patrone—which could potentially lead to a breach of the Maintenance Contract
The Court finds it unclear from the APA whether Energy Solutions LLC has to indemnify
Commerce Associates (or DVL) for any breaches of the Installment Contract or Service
Agreement. Further, at this point, it is unclear whether the electrical wire was from the heat
pump or something else.
Therefore, summary judgment after discovery or trial is more appropriate than judgment
under Civil Rule 12.
43
Am. Compl. ¶ 7.
44
Maintenance Agreement at 2.
45
2d Am. 3d Party Compl. ¶ 6.
12
V. CONCLUSION
For the reasons set forth above, the Court GRANTS in part and DENIES in part the
Motion. The Court will not dismiss all of Commerce Associates’ third-party claims against
Energy Solutions LLC or DVL’s cross-claim against Energy Solutions LLC at this time.
However, any claims arising under the Installation Agreement must be severed and arbitrated.
IT IS SO ORDERED.
Dated: October 29, 2018
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
13