Christiana Care Health Initiatives, Inc. v. Tri-State Imaging DE Holdings, LLC. ( 2014 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
CHRISTIANA CARE HEALTH )
INITIATIVES, INC., )
)
Plaintiff, )
)
) C. A. No. N14C-03-203 FWW
v. )
)
TRI-STATE IMAGING DE HOLDINGS, )
LLC, )
)
Defendant. )
Submitted: July 29, 2014
Decided: October 10, 2014
On Plaintiff’s Motion for Judgment on the Pleadings
DENIED
ORDER
This 10th day of October, 2014, upon consideration of the Plaintiff’s Motion
for Judgment on the Pleadings and the Defendant’s Response in Opposition, it
appears to the Court that:
(1) On July 15, 2014, Plaintiff filed a Complaint with the Court alleging
that Tri-State breached an Asset Purchase Agreement, executed by the parties on
March 1, 2014, by failing to pay the agreed upon purchase price of the assets and
1
that Plaintiff is entitled to a declaratory judgment for indemnification of all costs
arising from Tri-State’s failure to perform based upon a provision contained in the
Asset Purchase Agreement.
(2) On June 3, 2014, Defendant filed an Answer in which Defendant
denied all of the allegations set forth in the Complaint and asserted various
affirmative defenses. Defendant also filed an Affidavit of Defense pursuant to 10
Del. C. §3901 and attached to it a copy of the Asset Purchase Agreement and Bill
of Sale.
(3) In the Affidavit of Defense, Defendant asserts that on February 26,
2014, representatives of Tri-State inspected one of the assets, the MRI machine,
and it was not in working order and Plaintiff’s representatives agreed to restore the
machine to working order. On February 27, 2014, the MRI machine functioned
properly including the essential firmware and operating software. On March 10,
2014, after the parties executed the Asset Purchase Agreement, Tri-State tested the
machine and found that it did not function properly and that “the firmware and
operating software had been removed from the MRI machine or otherwise
damaged or corrupted so that the MRI machine became inoperable.” 1 Therefore,
Defendant asserts that Plaintiff failed to deliver the same equipment in the same
condition as when the equipment was inspected on February 27, 2014, after
1
Aff. of Defense, D.I. 5, ¶ 9.
2
Plaintiff had reason to know that Defendant executed the Asset Purchase
Agreement in reliance on the successful second inspection. Additionally, the
Affidavit states that, despite the disclaimers contained in the Agreement, “Seller
nevertheless represented and warranted to Tri-State that the Equipment that Tri-
State inspected would not be tampered with, damaged or rendered inoperable after
Closing.”2
(4) The Asset Purchase Agreement and Bill of Sale contain several
provisions including, in relevant part, the following:
Buyer is an informed and sophisticated participant in the
transactions contemplated hereby and acknowledges that it has
previously been given the opportunity to and has conducted such
investigations and inspections of the Property as it has deemed
necessary or appropriate for the execution, delivery and performance
of this Agreement.
Buyer acknowledges and agrees that…it is purchasing and taking
possession of the Property in its “AS IS, WHERE IS” and “WITH
ALL FAULTS” CONDITION WITHOUT ANY
REPRESENTATION OR WARRANTY OF ANY KIND OR
NATURE WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR
WRITTEN, AND IN PARTICULAR, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, WITHOUT ANY
IMPLIED WARRANTY OR REPRESENTATION AS TO (A) THE
CONDITION, VALUE, MERCHANTABILITY OR FITNESS OR
SUITABILITY FOR ANY SPECIFIC PURPOSE AS TO ANY OF
THE PROPERTY, (B) THE USE OR OPERATION OF THE
PROPERTY BY BUYER AT OR AFTER THE CLOSING DATE. 3
Additionally, the Asset Purchase Agreement contains indemnification clauses that
2
Id. at ¶ 12.
3
Id. at Ex. A, ¶ 12.
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require each party to indemnify the other for losses and costs incurred arising out
of a failure to fulfill the agreement.
(5) On July 15, 2014, Plaintiff moved for Judgment on the Pleadings on
the grounds that Defendant acknowledged that it is a sophisticated buyer and that
“the contract’s clear and unambiguous meaning required CCHI to deliver the
Equipment, not in the condition on the date of inspection, but rather, “‘as is, where
is’ and ‘with all faults’ to Tri-State in exchange for the purchase price.” 4 Plaintiff
argues that Plaintiff performed under the contract by delivering the Property as
described in the Asset Purchase Agreement and that the fact that the machine
became inoperable after delivery is irrelevant. Additionally, Plaintiff contends that
Tri-State is liable for all costs associated with litigation including reasonable
attorneys’ fees pursuant to the indemnification clause.
(6) On July 29, 2014, Defendant responded in opposition to the Motion
for Judgment on the Pleadings and conceded that Plaintiff specifically disclaimed
any representations or warranties but argued that “inherent in that disclaimer was
Plaintiff’s promise and undertaking to Tri-State, as Buyer, that the Equipment that
Tri-State inspected would not be tampered with, damaged or rendered inoperable
after Closing.”5 Specifically, Defendant claims that during the first inspection on
February 26, 2014, the equipment did not operate and that Plaintiff “unilaterally
4
Pl. Mot., D.I. 7, pg. 3.
5
Def. Resp., D.I. 9, pg. 2-3.
4
undertook to repair the MRI machine at the Second Inspection, prior to the Closing
Date.”6 Tri-State claims that, on February 27, 2014, the MRI machine functioned
properly and that Plaintiff knew or had a reason to know that Tri-State executed
the contract in reliance on a successful inspection. Defendant asserts that, on
March 10, 2014, Defendant discovered that the MRI machine did not operate
properly. Defendant claims that “Plaintiff’s conduct raises substantial questions or
[sic] material fact including, but not limited to, whether Plaintiff’s actions outside
of the provisions of the Agreement created an obligation under promissory
estoppel to deliver the Equipment in the same condition as when inspected…and/or
whether Plaintiff’s actions breached the implied covenant of good faith and fair
dealing.” 7
(7) Pursuant to Super. Ct. Civ. R. 12(c), “[a]fter the pleadings are closed
but within such time so as not to delay the trial, any party may move for judgment
on the pleadings.”8 Upon considering such a motion, the Court must accept all
well-pled facts as true and must construe all reasonable inferences in favor of the
non-moving party. 9 The motion may only be granted where the Court is satisfied
that “no material issue of fact exists and the movant is entitled to judgment as a
6
Id. at 2.
7
Id. at 3.
8
Super. Ct. Civ. R. 12(c).
9
Silver Lake Office Plaza, LLC v. Lanard & Axilbund, Inc., 2014 WL 595378, at *6 (Del. Super.
Jan. 17, 2014).
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matter of law.”10
(8) Viewing the facts in the light most favorable to Defendant, including
Defendant’s allegation that the firmware and operating software essential to
operating the MRI machine were removed after the successful inspection on
February 27, 2014, the Court finds that material issues of fact remain with respect
to both counts in the Complaint. Therefore, Plaintiff is not entitled to judgment as
a matter of law.
NOW, THEREFORE, IT IS ORDERED that the Plaintiff’s Motion for
Judgment on the Pleadings is hereby DENIED.
s/s Ferris W. Wharton, Judge
10
Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund II, L.P., 624 A.2d 1199, 1205
(Del. 1993).
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