City of Newark v. Durkin

IN THE SUPREME COURT OF THE STATE OF DELAWARE
CITY OF NEWARK, §
§ No. 29, 2023D
Plaintiff Below, §
Appellant, § Court Below: Superior Court
§ of the State of Delaware
v. §
§ C.A. No. N21C-12-039
DONALD M. DURKIN §
CONTRACTING, INC., §
DONALD M. DURKIN, JR., §
JAMES DURKIN, and §
MICHAEL DURKIN, §
§
Defendants Below, §
Appellees. §
Submitted: July 26, 2023
Decided: August 28, 2023
Before VALIHURA, TRAYNOR, and LEGROW, Justices.
Upon appeal from the Superior Court of the State of Delaware: REVERSED.
Max B. Walton, Esquire, Shaun Michael Kelly, Esquire, Erica K. Sefton, Esquire,
CONNOLLY GALLAGHER LLP, Newark, Delaware, for Appellant City of
Newark.
Paul A. Logan, Esquire, POST & SCHELL, P.C., Wilmington, Delaware, for
Appellees Donald M. Durkin Contracting, Inc., Donald M. Durkin, Jr., James
Durkin, and Michael Durkin.
LEGROW, Justice:
The appellant seeks review of a Superior Court Order1 resolving the appellees’
contractual indemnification obligations. The appellant sought a declaration from the
Superior Court that the appellees breached a settlement agreement between the
parties and, under the terms of that settlement agreement, the appellees must
indemnify the appellant for all its fees and costs associated with a 2019 subpoena
and a separate declaratory judgment action the appellees filed in 2019. The Superior
Court held that the appellees must indemnify the appellant for the subpoena, but not
the 2019 action.
On appeal, the appellant contends the settlement agreement’s plain language
obligates the appellees to indemnify the appellant for the 2019 action, and the
Superior Court erred in concluding otherwise. The indemnification provision at issue
broadly required the appellees to indemnify the appellant for any fees and costs it
incurred in any proceeding related to the appellees’ separate litigation against a third
party in Pennsylvania. The appellees filed the 2019 action to clarify the appellant’s
obligation to cooperate with, and provide discovery in, that Pennsylvania litigation.
In its summary judgment decision, the Superior Court denied the appellant’s
indemnification claim without expressly addressing whether the 2019 action was
“related to” the Pennsylvania litigation. Because the appellant is entitled to
1
City of Newark v. Donald M. Durkin Contracting, Inc., 2023 WL 128258 (Del. Super. Jan. 6,
2023) [hereinafter “Durkin III”].
indemnification under the plain terms of the parties’ agreement, we reverse the
Superior Court’s decision.
I. RELEVANT FACTS AND PROCEDURAL BACKGROUND
A. The Federal Litigation
On March 16, 2004, Donald Durkin Contracting, Inc., Donald M. Durkin, Jr.,
James Durkin, and Michael Durkin (collectively, “Durkin”) brought an action
against the City of Newark (the “City”) in the United States District Court for the
District of Delaware for wrongful termination of a contract to erect a reservoir and
for violation of Durkin’s civil rights (the “Federal Litigation”).2 Tighe Cottrell &
Logan (“Cottrell”) initially represented the City in the Federal Litigation.3 In 2006,
a jury awarded Durkin approximately $25 million in damages.4 Both parties
appealed to the United States Court of Appeals for the Third Circuit and
simultaneously pursued mediation.5
B. The Settlement Agreement
On June 23, 2008, while the Third Circuit appeal was pending, Durkin and
the City entered into a fully integrated settlement agreement (the “Settlement
2
App. to Opening Br. at A12.
3
Id.4
Id.; Donald M. Durkin Contracting, Inc. v. City of Newark, 2020 WL 2991778, at *2-3 (Del.
Super. June 4, 2020) [hereinafter “Durkin I”].
5
App. to Opening Br. at A12-13.
2
Agreement”).6 In Paragraph 5 of the Settlement Agreement, Durkin released the
City from claims for anything transpiring before the settlement:
For and in consideration of the payment set forth in Section 2 above,
Durkin and Federal agree on behalf of themselves and . . . their
respective . . . employees, agents, principals, owners, directors,
officers, . . . to fully, finally and completely release and discharge . . .
the [City], from any and all claims, demands, damages, costs, expenses,
liability, actions, causes of actions, or claims of liability or
responsibility of any kind whatsoever (including attorneys’ fees and
costs) which the Durkin and Federal Parties now have or may hereafter
have on account of, or arising out of any matter or thing which has
happened, developed or occurred prior to the signing of this Agreement,
specifically including but not limited to, any and all claims on account
of, arising out of or in any way related to the matters that were or could
have been asserted in the Lawsuit, that arise from or are related to the
facts or matters at issue in the Lawsuit . . . .7
Although Durkin generally released the City from all claims arising out of any
matters at issue in the Federal Litigation, Durkin expressly retained any claims it
might have against Cottrell and clarified that the release did not extend to the City’s
obligations under the Settlement Agreement:
provided, however, that the Durkin and Federal Parties do not
release the [City] from their obligations under this Agreement, and
do not release any claims that they have or may have against Paul
Cottrell, Tighe & Cottrell P.A. and individuals associated with Tighe &
Cottrell P.A. (collectively the “Cottrell Firm”).8
By the time the parties executed the Settlement Agreement, Durkin had
initiated litigation against Cottrell. Durkin expressly agreed to indemnify the City
6
Id.7
Id. at A26-27.
8
Id. at A27 (emphasis added).
3
for any fees and costs the City incurred in any claim made against the City in the
action against Cottrell or in any proceeding related to that action.9 Specifically,
Paragraph 7 to the Settlement Agreement stated:
If . . . the [City] become[s] a party to the Litigation, or [is a] party to
any separate litigation or proceedings related in any way to the
Litigation, then Durkin . . . hereby fully release[s] and discharge[s] the
[City] from any claims or damages in the Litigation or any separate
litigation or proceedings related to the Litigation. . . . If a claim of any
nature and by any party . . . is brought against the [City] in the
Litigation, or in separate litigation or proceedings related to the
Litigation, [Durkin] agree[s] to: (1) pay all attorneys’ fees, expert
fees, and costs incurred by the [City] in defense of the Litigation, or
separate litigation or proceedings related to the Litigation; and (2)
indemnify, defend, and hold the [City] harmless from all actions,
causes of action, claims, demands, cost, liabilities, expenses and
damages (including attorneys’ fees) arising out of, or in connection
with any claim in the Litigation or any separate litigation or
proceedings related to the Litigation.10
The Settlement Agreement and associated mutual releases concluded the
Federal Litigation.11
C. The Pennsylvania Litigation
On May 14, 2008, Durkin filed a separate action against Cottrell in the
Pennsylvania Court of Common Pleas (the “Pennsylvania Litigation”) asserting
claims of abuse of process, malicious prosecution, and intentional interference with
contractual relations.12 In that action, Durkin alleged Cottrell advised the City to
9
Id. at A28. The Settlement Agreement refers to that action as the “Litigation.”
10
Id. at A15, A28-30 (emphasis added).
11
Durkin I, 2020 WL 2991778, at *3.
12
App. to Opening Br. at A12.
4
pursue frivolous and baseless counterclaims against Durkin and third-party claims
against Durkin’s surety, Federal Insurance Company, based on allegations Cottrell
knew were false.13 The Pennsylvania Litigation is what the parties referred to as the
“Litigation” in the Settlement Agreement.
Beginning in July 2012, Durkin sought discovery from Cottrell in the
Pennsylvania Litigation, and Cottrell invoked the attorney-client privilege for
discovery relating to Cottrell’s representation of the City in the Federal Litigation.14
In October 2013, Durkin asked the City to waive privilege for communications
between Cottrell and the City.15 The City refused,16 and on January 9, 2014, and
November 23, 2016, Durkin served the City with two subpoenas seeking documents
for Durkin’s use in the Pennsylvania Litigation.17 Durkin voluntarily withdrew those
subpoenas after the City moved to quash them.18 On January 15, 2019, Durkin
served its third and final subpoena demanding that the City produce in the
Pennsylvania Litigation communications between the City and Cottrell (the “2019
13
Answering Br. at 6.
14
App. to Opening Br. at A15.
15
Id.16
Id.17
App. to Opening Br. at A16.
18
Id.5
Subpoena”).19 Once again, the City moved to quash the 2019 Subpoena, and Durkin
withdrew it.20
D. Durkin’s 2019 Declaratory Judgment Action
After withdrawing the 2019 Subpoena, Durkin filed a complaint in the
Superior Court for declaratory and other relief (the “2019 Declaratory Judgment
Action”).21 Durkin sought, inter alia,
[j]udgment in its favor against the City of Newark declaring that
pursuant to the City’s obligation to cooperate in the Settlement
Agreement, the City shall produce, without objection or cost to
Durkin, all requested documents and provide designees for deposition
and at trial in connection with Durkin’s [Pennsylvania Litigation]
against [Cottrell].22
Durkin’s theory that the City had a duty to cooperate in the Litigation was based on
Paragraph 18 of the Settlement Agreement, titled, “Continuing Cooperation.”23
Paragraph 18 states, “[t]he Parties agree to cooperate with each other and take such
additional actions as necessary to effectuate the purposes of this Agreement.”24
The City filed a motion to dismiss and a motion for indemnification, sanctions,
and other relief. On June 4, 2020, the Superior Court dismissed Durkin’s 2019
Declaratory Judgment Action as untimely because the claim was filed six years after
19
Id.20
Id. at A17.
21
Id. at A49-62.
22
Id. at A61-62.
23
Id. at A61.
24
Id. at A33.
6
the City’s alleged breach of Paragraph 18.25 Durkin moved for reargument, but the
Superior Court denied that motion, holding that the terms of the Settlement
Agreement were unambiguous and observing that nothing in the Settlement
Agreement suggested that the City had an obligation to cooperate in the
Pennsylvania Litigation.26
E. The City’s Indemnification Requests and Declaratory Judgment
Action
A few months later, on November 10, 2020, the Superior Court denied the
City’s motion for indemnification, sanctions, and other relief, concluding that the
City’s indemnification claim was not ripe because the City had not yet followed the
Settlement Agreement’s procedure for seeking indemnification.27 The City then
formally demanded that Durkin indemnify the City for the attorneys’ fees and costs
it incurred defending Durkin’s 2019 Declaratory Judgment Action and 2019
Subpoena.28 Durkin refused to indemnify the City for either proceeding,29 and on
December 6, 2021, the City filed the current action seeking indemnification and
damages.30
25
Id. at A17; Durkin I, 2020 WL 2991778, at *7-10.
26
App. to Opening Br. at A17-18; Answering Br. at 8; Donald M. Durkin Contracting, Inc. v. City
of Newark, 2020 WL 5797622, at *10-11 (Del. Super. Sept. 29, 2020) [hereinafter “Durkin II].
27
Donald M. Durkin Contracting, Inc. v. City of Newark, 2020 WL 6588903, at *7 (Del. Super.
Nov. 10, 2020).
28
App. to Opening Br. at A39-41.
29
Id. at A65-66.
30
Id. at A9-23.
7
The City’s complaint alleged Durkin (i) breached Paragraph 5 of the
Settlement Agreement by pursuing the 2019 Subpoena and the 2019 Declaratory
Judgment Action, and (ii) breached Paragraph 7 of the Settlement Agreement by
refusing to indemnify the City for its fees and expenses incurred in each of those
proceedings.31 The parties promptly cross-moved for summary judgment.32
On January 6, 2023, the Superior Court issued its Memorandum Opinion and
Order granting in part and denying in part each side’s motion for summary judgment.
The trial court granted the City’s motion for summary judgment with respect to its
indemnification claim for the 2019 Subpoena but denied the City’s motion with
respect to its indemnification claim for the 2019 Declaratory Judgment Action.33
The Superior Court held that Durkin’s 2019 Declaratory Judgment Action did not
breach Paragraph 5 of the Settlement Agreement because Durkin filed that action to
clarify the scope of the Settlement Agreement’s Continuing Cooperation provision.34
The Superior Court reasoned that Paragraph 5 of the Settlement Agreement did not
release, and in fact expressly preserved, the City’s obligations under the Settlement
Agreement, so Durkin’s action to enforce the Settlement Agreement did not
contravene the release.35
31
Id. at A19-22.
32
Id. at A42-48; A67-73. While the cross-motions were pending, the assigned judge retired and a
new judge was assigned to the case.
33
Durkin III, 2023 WL 128258, at *7.
34
Id. at *5-6.
35
Id. at *6.
8
The Superior Court further held that the City was not entitled to
indemnification for the 2019 Declaratory Judgment Action.36 The Superior Court
did not, however, analyze the scope of the indemnification provision or its
application to the 2019 Declaratory Judgment Action. The trial court separately held
that the City was entitled to indemnification for the 2019 Subpoena because it was a
“claim” as that term was used in the Settlement Agreement, and the attorneys’ fees
and costs the City incurred in moving to quash the 2019 Subpoena were incurred in
a proceeding related to the Pennsylvania Litigation.37 On January 27, 2023, the City
filed its notice of appeal challenging only the Superior Court’s holding that the City
was not entitled to indemnification for Durkin’s 2019 Declaratory Judgment
Action.38
II. STANDARD OF REVIEW
A trial court’s decision resolving a motion for summary judgment is reviewed
de novo, applying the same standard as the trial court.39 Similarly, questions of
contractual interpretation are subject to de novo review.40
36
Id.
37
Id.
38
Opening Br. at 2.
39
AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 443 (Del. 2005); Paul v.
Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009).
40
CompoSecure, L.L.C. v. CardUX, LLC, 206 A.3d 807, 816 (Del. 2018).
9
III. ANALYSIS
The City argued to the Superior Court that the 2019 Declaratory Judgment
Action sought a specific declaration that the City was obligated to assist Durkin with
its discovery and trial efforts in the Pennsylvania Litigation, the actions therefore
were related, and the City was entitled to indemnification under the Settlement
Agreement. The City raises similar arguments on appeal. First, the City contends
that the plain language of Paragraph 7 requires indemnification because the actions
are related. Second, it asserts that the Superior Court’s other rulings support the
City’s position regarding relatedness. Third, it argues the parties’ intent is consistent
with the City’s indemnification claim.41
A. The Settlement Agreement’s plain language requires Durkin to
indemnify the City for the 2019 Declaratory Judgment Action.
The City first contends Durkin’s 2019 Declaratory Judgment Action was
related to the Pennsylvania Litigation because it specifically referred to and sought
relief compelling the City to assist with Durkin’s discovery efforts in the
Pennsylvania Litigation.42 According to this argument, the two actions are “related,”
and Paragraph 7 requires Durkin to indemnify the City.43
41
Because neither side contends Paragraph 7 is ambiguous, we have not relied on the City’s
argument regarding the extrinsic evidence of the parties’ intent.
42
Opening Br. at 14.
43
Id.10
Delaware follows the objective theory of contracts, meaning “a contract’s
construction should be that which would be understood by an objective, reasonable
third party.”44 Further, the Court will interpret clear and unambiguous terms
according to their ordinary meaning45 and will not “torture contractual terms to create
ambiguity.”46
The terms of the Settlement Agreement are unambiguous. The relevant
section of Paragraph 7 of the Settlement Agreement states:
If a claim of any nature and by any party, including but not limited
to a claim for indemnification or contribution, is brought against the
[City] in the Litigation, or in separate litigation or proceedings
related to the Litigation, [Durkin] agree[s] to: (1) pay all attorneys’
fees, expert fees, and costs incurred by the [City] in defense of the
Litigation, or separate litigation or proceedings related to the Litigation;
and (2) indemnify, defend, and hold the [City] harmless from all
actions, causes of action, claims, demands, costs, liabilities,
expenses and damages (including attorneys’ fees) arising out of, or
in connection with any claim in the Litigation or any separate
litigation or any separate proceedings related to the Litigation.47
Paragraph 7 makes it clear that Durkin agreed to indemnify the City for any
claim brought against it “related to” the Pennsylvania Litigation or “arising out of”
or “in connection with” any claim in the Pennsylvania Litigation. That language
44
Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting Osborn ex rel. Osborn v.
Kemp, 991 A.2d 1153, 1159 (Del. 2010)).
45
GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012).
46
Amtower v. Hercules Inc., 1999 WL 167740, at *12 (Del. Super. Feb. 26, 1999), aff’d sub nom.
Rowland v. Amtower, 748 A.2d 407 (Del. 2000).
47
App. to Opening Br. at A29-30 (emphasis added).
11
sweeps broadly, and Delaware courts recognize the phrases “relating to” and “arising
out of” as “paradigmatically broad terms.”48
The trial court’s decision does not apply this language to the 2019 Declaratory
Judgment Action. The Superior Court correctly concluded the 2019 Declaratory
Judgment Action did not breach Paragraph 5 of the Settlement Agreement. The City
does not appeal this conclusion. But, without analyzing whether the 2019
Declaratory Judgment Action was related to or arose out of the Litigation, the
Superior Court concluded, “[t]he City is also not entitled to indemnification for its
costs and attorneys’ fees under Paragraph 7.”49 The City’s indemnification claim,
however, was distinct from its breach claim under Paragraph 5, and the conclusion
that the 2019 Declaratory Judgment Action did not breach Paragraph 5 does not lead
inexorably to the conclusion that the City is not entitled to indemnification under
Paragraph 7. Paragraph 7 requires indemnification for proceedings “related to” and
“arising out of” the Pennsylvania Litigation. The relief Durkin sought in the 2019
Declaratory Judgment Action was the City’s cooperation in the Pennsylvania
Litigation, including an order requiring the City to produce documents and provide
a witness for deposition and at trial. That relief relates to and arises out of the
Pennsylvania Litigation.
48
Lillis v. AT & T Corp., 904 A.2d 325, 331 (Del. Ch. 2006); see Snow Phipps Grp. v. KCAKE
Acquisition, Inc., 2021 WL 1714202, at *35 (Del. Ch. Apr. 30, 2021).
49
Durkin III, 2023 WL 128258, at *6.
12
B. The Superior Court’s other rulings recognize the relationship
between the Pennsylvania Litigation and the 2019 Declaratory
Judgment Action.
The conclusion that the Pennsylvania Litigation and the 2019 Declaratory
Judgment Action are related is consistent with the Superior Court’s prior rulings in
the 2019 action. In its dismissal of Durkin’s 2019 Declaratory Judgment Action, the
Superior Court stated: “[a]fter reviewing the Complaint, Response, and
Supplemental Briefs, it is apparent that [Durkin] requests this Court to interpret the
terms of the Settlement Agreement and declare that [the City] is henceforward
obligated to provide [Durkin] with requested documents for use in the Pennsylvania
[L]itigation.”50 And in its September 2020 Opinion denying reargument, the
Superior Court again observed: “[Durkin] seeks a declaration that the Settlement
Agreement obligates [the City] to assist [Durkin] in its case against Cottrell (the
Pennsylvania Litigation).”51
The Superior Court’s analysis in this case regarding the 2019 Subpoena also
underscores the relatedness between the 2019 Declaratory Judgment Action and the
Pennsylvania Litigation. The Superior Court considered the plain language of
Paragraph 7 when it awarded the City indemnification for the 2019 Subpoena.52 In
that portion of its analysis, the Superior Court focused on the plain meaning of the
50
Durkin I, 2020 WL 2991778, at *7.
51
Durkin II, 2020 WL 5797622, at *3.
52
Durkin III, 2023 WL 128258, at *6.
13
word “claim” and held that “the attorneys’ fees and costs incurred by the City in
moving to quash the 2019 Subpoena were incurred in a proceeding related to the
Pennsylvania Litigation, as required by Paragraph 7.”53 That holding, which neither
party appealed, aligns with the City’s position that Durkin’s 2019 Declaratory
Judgment Action also is related to the Pennsylvania Litigation. After all, the 2019
Declaratory Judgment Action and the 2019 Subpoena sought the same relief from
the City: production of documents and witnesses in the Pennsylvania Litigation.
Accordingly, because indemnification was required under both the plain
language of the Settlement Agreement and the Superior Court’s other holdings
regarding the scope of the proceedings between the parties, the Superior Court
should have entered judgment in the City’s favor for its indemnification claim
relating to the 2019 Declaratory Judgment Action.
IV. CONCLUSION
For the foregoing reasons, we reverse the portion of the Superior Court’s
January 6, 2023 Memorandum Opinion and Order awarding summary judgment to
Durkin for the City’s claim for indemnification for the 2019 Declaratory Judgment
Action. This case is remanded to the Superior Court for further proceedings
consistent with this opinion. Jurisdiction is not retained.
53
Id.14