Schlosser & Dennis, LLC v. Traders Alley, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
Schlosser & Dennis, LLC, )
)
Plaintiff/Counterclaim )
Defendant in N16C-05-190 RRC )
and )
Plaintiff in Court of Chancery )
Action under 2017-0271-RRC )
)
v. ) C.A. No. N16C-05-190 RRC
) (Consolidated Case)
Traders Alley, LLC, )
)
Defendant/Counterclaim )
Plaintiff in N16C-05-190 RRC )
and )
Defendant in Court of Chancery )
Action under 2017-0271-RRC )
Submitted: June 23, 2017
Decided: July 6, 2017
On Defendant‘s ―Motion [for Partial Dismissal] of Plaintiff‘s First Amended
Complaint‖ in the Superior Court. GRANTED.
On Defendant‘s Motion to Dismiss or Stay Plaintiff‘s Verified Complaint in the
Court of Chancery. MOTION TO DISMISS GRANTED IN PART, DENIED
IN PART. MOTION TO STAY DENIED AS MOOT.
1
MEMORANDUM OPINION
Shawn P. Tucker, Esquire and Ryan T. Costa, Esquire, Drinker Biddle & Reath
LLP, Wilmington, Delaware, Attorney for Plaintiff/Counterclaim Defendant
Schlosser & Dennis, LLC.
Richard L. Abbott, Esquire, Abbott Law Firm, Hockessin, Delaware, Attorney for
Defendant/Counterclaim Plaintiff Traders Alley, LLC.
COOCH, R.J.
I. INTRODUCTION
Pending before the Court of Chancery and the Superior Court are Defendant
Traders Alley, LLC‘s motions to dismiss Plaintiff Schlosser & Dennis, LLC‘s
complaints in the respective courts. 1 The core issue in this case is whether
Defendant‘s redevelopment plan, which has been approved by the City of Newark,
constitutes a repudiation that places Defendant in breach of an easement agreement
relating to parking between Plaintiff and Defendant. Plaintiff has pleaded claims
for breach of contract (with the requested remedy of equitable rescission), a
declaratory judgment, and a permanent injunction against Defendant. All claims
(duplicative and non-duplicative) have been raised in Plaintiff‘s complaints filed in
both the Superior Court and the Court of Chancery.
Without needing to address the adequacy of the pleadings in the Superior
Court action, the Superior Court finds that Plaintiff‘s claims for breach of contract
and injunctive relief in its First Amended Complaint in the Superior Court request
equitable remedies that the Superior Court lacks subject matter jurisdiction to
afford. The equitable remedies requested by Plaintiff in the Superior Court action
are also pleaded in the Court of Chancery action. Therefore, Defendant‘s ―Motion
for Partial Dismissal] of Plaintiff‘s First Amended Complaint‖ in the Superior
1
The undersigned was designated to sit as Vice Chancellor on the Court of Chancery ―for the
purpose of hearing and deciding all issues‖ in the Court of Chancery action by Delaware Chief
Justice Leo E. Strine, Jr. on May 3, 2017.
2
Court is GRANTED. As Defendant‘s Motion to Dismiss Plaintiff‘s First
Amended Complaint does not seek to dismiss Plaintiff‘s claim for a declaratory
judgment, that claim remains in the Superior Court.
The Court also finds that Plaintiff‘s claim for breach of contract and the
accompanying remedy of equitable rescission have been adequately pleaded in the
Court of Chancery action. However, this Court finds that Plaintiff‘s request for a
declaratory judgment in the Court of Chancery is duplicative of its claim for a
declaratory judgment in the Superior Court. Accordingly, Plaintiff‘s claim for a
declaratory judgment in the Court of Chancery is moot, as an adequate remedy at
law exists in the Superior Court. Additionally, this Court finds that Plaintiff‘s
request for injunctive relief would afford, in effect, the same relief as that which
would be afforded by a potential favorable outcome of the declaratory judgment
claim pending in the Superior Court. As Delaware law provides that claims for a
declaratory judgment and injunctive relief cannot exist simultaneously if they
would afford the same remedy, Plaintiff‘s claim for injunctive relief must be
dismissed. Accordingly, this Court GRANTS IN PART Defendant‘s Motion to
Dismiss Plaintiff‘s Verified Complaint in the Court of Chancery.
With respect to Defendant‘s alternative Motion to Stay the Court of
Chancery Action pending a resolution of the Superior Court Action, the Court
finds that this motion is now moot given that the cases were consolidated on May
30, 2017, and given that the Superior Court trial scheduling order was vacated
following the consolidation. Accordingly, Defendant‘s Alternative Motion to Stay
the Court of Chancery Action is DENIED AS MOOT.
Thus: Defendant‘s Motion for Partial Dismissal (i.e., Count II–Breach of
Contract and its requested remedy of equitable rescission) of Plaintiff‘s First
Amended Complaint in the Superior Court is GRANTED. Count I in Plaintiff‘s
Complaint in the Superior Court remains. Defendant‘s Motion to Dismiss
Plaintiff‘s Verified Complaint in the Court of Chancery is GRANTED insofar as it
pertains to Plaintiff‘s claims for a declaratory judgment (Count II) and a permanent
injunction (Count III). Defendant‘s Motion is DENIED as it pertains to Plaintiff‘s
claim for Breach of Contract (Count I) and its requested remedy of equitable
3
rescission in the Court of Chancery. Defendant‘s alternative Motion to Stay the
Court of Chancery action is DENIED AS MOOT.
II. FACTS AND PROCEDURAL HISTORY2
The instant litigation relates to a ―Cross Easement Agreement‖ (the
―Agreement‖) entered into by the parties on or about July 10, 2007.3 The
agreement appears to establish three related rights for the parties: (1) Defendant‘s
right of access over Plaintiff‘s property to access a shared parking lot behind the
properties; (2) Plaintiff‘s right to use parking spaces behind Defendant‘s property;
and (3) Defendant‘s right to use parking spaces behind Plaintiff‘s property.
Plaintiff alleges in its complaint that the Agreement ―was entered into for the sole
purpose of providing access and parking for the Properties.‖4 Additionally, the
Agreement provides that the easement ―may not be modified, changed, or
supplemented, nor may any obligations and rights be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing and then only to the extent set forth in such instrument.‖5
In March 2011, Defendant submitted an application to the City of Newark to
redevelop its property. Plaintiff voiced its objections to the application on grounds
that the redevelopment project would cause Defendant to violate its obligations
under the Agreement. On March 14, 2016, Defendant received approval for its
redevelopment project. Plaintiff alleges that Defendant has made no effort to
amend the Agreement to accommodate its redevelopment project.
2
These facts are viewed in the light most favorable to the Plaintiff, as required under Superior
Court Civil Rule 12(b) and Court of Chancery Rule 12(b).
3
Prior to Plaintiff‘s filing of its Superior Court action, the parties litigated similar issues before
the Board of Adjustment regarding the City of Newark‘s approval of Defendant‘s redevelopment
plan. See Schlosser & Dennis, LLC v. City of Newark Bd. of Adjustment, 2016 WL 2766119
(Del. Super. May 9, 2016) (holding that the affected property owner, Traders, was an
indispensible party to an appeal from the Board of Adjustment, and granting the Board‘s motion
to dismiss the appeal); Traders Alley, LLC v. City of Newark Bd. of Adjustment, 2015 WL
4722978 (Del. Ch. Aug. 7, 2015) (holding that Traders had not adequately challenged an order
from the Chairman of the Board of Adjustment, warranting the Court of Chancery‘s grant of an
expedited proceeding and a temporary restraining order).
4
Pl.‘s Verified Compl. ¶ 18.
5
Pl.‘s Verified Compl., Ex. A, at 3.
4
Plaintiff contends that the redevelopment project will violate the Agreement
in two ways. First, Plaintiff contends that construction activities (e.g., ―storage and
ingress and egress of construction equipment, vehicles, supplies and materials6)
will violate the terms of the Agreement. Second, Plaintiff contends that
Defendant‘s post-construction use of the property will violate the Agreement and
cause damage to Plaintiff.
On May 19, 2016, Plaintiff filed a Complaint in the Superior Court.
Plaintiff‘s Complaint asserted one count that requested a declaratory judgment that
Defendant may not move forward with its redevelopment plan and construction
intentions, that the redevelopment implementation of the plan would violate the
Agreement, and that Defendant ―shall not interfere with [Plaintiff‘s] rights to park
in the Parking Lot Area, as described in the [Agreement].‖7 On November 28,
2016, Defendant filed a counterclaim in which it requests a declaratory judgment
that its implementation of the redevelopment plan would not violate the parties‘
rights under the Agreement. This is a non-jury action.
Plaintiff subsequently moved to amend its complaint to include a count of
Breach of Contract. The Court granted Plaintiff‘s motion, over Defendant‘s
opposition, and Plaintiff‘s First Amended Complaint was filed on December 2,
2016. Plaintiff‘s First Amended Complaint added one count alleging Breach of
Contract, and requested in its prayer for relief that the Court find the Agreement
―null and void‖ and to enjoin Defendant from proceeding with its construction
plans.8
Defendant filed its Motion to Dismiss Plaintiff‘s First Amended Complaint
on January 9, 2017, arguing, inter alia, that the Court did not have subject matter
jurisdiction over Plaintiff‘s claims for relief sounding in equity. Argument on
Defendant‘s Motion to Dismiss Plaintiff‘s First Amended Complaint was heard on
March 8, 2017.
6
Pl.‘s Verified Compl. ¶ 44.
7
Pl.‘s Compl. at 7.
8
Pl.‘s First Am. Compl. at 14, 18.
5
On April 7, 2017, Plaintiff filed its Verified Complaint in the Court of
Chancery. The Court of Chancery action was originally assigned to a Vice
Chancellor, but was subsequently reassigned to the undersigned after Chief Justice
Strine designated him a Vice Chancellor for the Court of Chancery action on May
3, 2017. Plaintiff‘s complaint in the Court of Chancery alleged essentially the
same substantive facts, and asserted three counts: (1) breach of contract, (2) a
declaratory judgment action, and (3) a permanent injunction. Plaintiff also
requested that the Court order the equitable rescission of the Agreement.
Defendant filed its Motion to Dismiss or Stay Plaintiff‘s Verified Complaint on
May 15, 2017. On May 30, 2017, the Court granted Plaintiff‘s Motion to
consolidate the two actions and heard argument on Defendant‘s Motion to Dismiss
or Stay Plaintiff‘s Verified Complaint in the Court of Chancery. 9 A trial date of
April 23, 2018 has been set on all Superior Court and Court of Chancery claims
and counterclaims in this consolidated case.
III. PARTIES’ CONTENTIONS
A. Defendant’s Contentions
1. The Superior Court Action
Defendant contends that Plaintiff‘s First Amended Complaint in the Superior
Court should be dismissed insofar as it relates to Plaintiff‘s claims for breach of
contract, injunctive relief, and equitable rescission. With respect to the breach of
contract claim, Defendant asserts that Plaintiff‘s claim is not ―ripe,‖ as ―no []
development is alleged to have occurred[,]‖ and ―it is clear that there is no ripe
claim for money damages.‖10 Defendant further argues that the Superior Court
lacks subject matter jurisdiction to hear Plaintiff‘s claims for a permanent
injunction and equitable rescission, and that the claims should therefore be
dismissed. Defendant has not moved to dismiss Plaintiff‘s plea for a declaratory
judgment.
9
On May 30, the Court also requested that counsel for the parties meet to develop a stipulation
simply of facts, procedural history, and restated contentions. However, counsel were unable to
come to such an agreed upon stipulation.
10
Def.‘s Mot. to Dismiss Pl.‘s First Am. Compl. at 2.
6
2. The Court of Chancery Action
Defendant has also moved to dismiss Plaintiff‘s Verified Complaint in the
Court of Chancery in its entirety. Defendant asserts that adequate remedies at law
exist for the Breach of Contract and Declaratory Judgment causes of action in the
Verified Complaint, and that the Court of Chancery therefore lacks subject matter
jurisdiction over those claims. Additionally, Defendant argues that ―[t]he
prosecution of the Breach [of Contract claim] and the [declaratory judgment] claim
in the prior filed Superior [Court] [a]ction forecloses [the Court of Chancery] from
exercising jurisdiction over the exact same claims in [the Court of Chancery
action].11 In a final point on the breach of contract claim in the Court of Chancery,
Defendant asserts that it should be dismissed because Plaintiff has conceded that
―it may avail itself of the remedy of money damages[, which] constitutes a tacit
admission that it has an adequate remedy at law, thereby divesting this Court of
equitable jurisdiction.‖12
Defendant further asserts that Plaintiff‘s claim for a permanent injunction
should be dismissed. Arguing pursuant to Court of Chancery Civil Rule 12(b)(6),
Defendant contends that ―the Verified Complaint does not adequately plead the
elements of Irreparable Harm or Balance of Harms.‖ Moreover, Defendant
contends that the Court of Chancery lacks subject matter jurisdiction to consider a
claim for injunctive relief, as ―the true relief sought by [Plaintiff] is available at
law.‖13 Defendant also submits that a permanent injunction ―is [not] needed to
enforce a judgment on the [Declaratory Judgment] Claim in the Superior [Court]
[a]ction‖ as ―[t]here is no evidence that [Defendant] would decline to abide by a
Declaratory Judgment to be issued in the Superior [Court] [a]ction.‖14 Accordingly,
Defendant argues that Plaintiff‘s claim for injunctive relief should be dismissed.
Lastly, Defendant contends that Defendant‘s claim for equitable rescission
should also be dismissed. Defendant asserts that ―it is well-settled that a claim for
Equitable Rescission is founded upon Fraud, Misrepresentation, or Mistake, which
11
Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 4.
12
Id.
13
Id. at 6.
14
Id.
7
must be alleged in order for such a claim to be properly pled.‖ Defendant argues
that Plaintiff‘s Verified Complaint does not contain any allegation related to fraud,
misrepresentation, or mistake, and should therefore be dismissed for failure to state
a claim upon which relief can be granted under Court of Chancery Rule 12(b)(6).
Alternatively, Defendant requests that the Court stay Plaintiff‘s action
pending in the Court of Chancery pending a resolution of the Superior Court
action. Defendant contends that
if [Defendant] prevails in the Superior [Court] [a]ction, then there will be
no need to litigate [the Court of Chancery] action at all—the Plaintiff
would not be able to prove Actual Success on the Merits, which is the first
element of a Permanent Injunction claim. An[d] even if [Plaintiff] prevails
in the Superior [Court] [a]ction, an enforceable judgment will be entered
so as to obviate the need for injunctive relief.15
B. Plaintiff’s Contentions
1. The Superior Court Action
In opposition to Defendant‘s Motion to Dismiss Plaintiff‘s First Amended
Complaint, Plaintiff contends that its breach of contract claim is ripe for judicial
action. Plaintiff argues that, under Delaware law, ―a dispute will be deemed ripe if
litigation sooner or later appears to be unavoidable and where the material facts are
static.‖16 Moreover, Plaintiff contends that ―[b]y not first amending the easement
[to permit implementation of Defendant‘s redevelopment plan], [Defendant‘s]
redevelopment efforts breached the easement.‖17 Accordingly, Plaintiff contends
that Defendant has repudiated the easement through its decision to formulate and
receive approval of a redevelopment plan, and that Plaintiff is therefore entitled to
treat such repudiation as a breach of the Agreement, making the action ripe for
judicial action.18
15
Id. at 10.
16
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s First Am. Compl. at 3.
17
Id. at 6.
18
Id.
8
2. The Court of Chancery Action
Plaintiff contends that Defendant‘s Motion to Dismiss Plaintiff‘s Verified
Complaint should be denied. With respect to Defendant‘s claim that Plaintiff‘s
equitable rescission claim should be dismissed, Plaintiff asserts that ―equitable
rescission, or cancellation, is a form of remedy that provides equitable relief
beyond a judicial declaration of contract invalidity or award of money or property
and seeks to restore the plaintiff to his original condition.‖19 Accordingly, Plaintiff
asserts that, as equitable rescission is therefore a remedy for breach of contract, its
prayer for equitable rescission as a remedy is appropriately pleaded given its claim
for breach of contract.
Plaintiff also contends that its claim for injunctive relief should not be
dismissed. First, Plaintiff argues that ―[s]ince the Declaratory Judgment Act‘s
adoption, [the Court of Chancery] has regularly considered simultaneous claims for
declaratory and injunctive relief.‖20 Second, Plaintiff asserts that it has properly
pleaded the elements of injunctive relief, and that adequate remedy at law does not
exist despite its claim for monetary damages in the Superior Court action. Plaintiff
submits that although ―Plaintiff has also sought money damages, which may not
amount to more than a nominal award, [that] is in no way an admission that money
damages constitutes an adequate remedy or [is] the sole remedy.‖ 21 With respect
to the ―balance of the equities‖ element of injunctive relief, Plaintiff contends that
the ―Complaint reveals pled facts that more than satisf[y] the minimal notice
pleading standard.‖22 Accordingly, Plaintiff contends that its claims for equitable
rescission and injunctive relief in the Verified Complaint should not be dismissed.
Finally, Plaintiff contends that the Court of Chancery has jurisdiction to hear
Plaintiff‘s claim for breach of contract. Plaintiff asserts that a remedy at law on the
breach of contract claim would not afford ―full, fair and complete relief,‖ and
19
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 6 (internal quotations omitted)
(quoting Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial Practice in
the Delaware Court of Chancery, § 12.04[a] at 12-61–12-62 (Matthew Bender & Co., 2014)).
20
Id. at 9.
21
Id. at 11.
22
Id.
9
argues that the remedy of equitable rescission would afford them ―complete, fair,
and adequate relief.‖23 Moreover, Plaintiff contends that the Court of Chancery
has authority to award money damages under the clean-up doctrine if they were to
be requested by Plaintiff.
Plaintiff also opposes Defendant‘s alternative motion to stay the Court of
Chancery Action pending resolution of the Superior Court action. Plaintiff
contends that although the Court of Chancery action ―may be mooted by resolution
of the Superior Court action[,] . . . ―it also is true that it may not be mooted‖ if the
Superior Court action is resolved in favor of Plaintiff. Plaintiff suggests that a
bifurcation of the ―two related actions that are contested by the same parties and
pending before the same judicial officer‖ would not promote judicial economy.24
Finally, Plaintiff has asserted that it ―has no intent or desire to pursue
duplicative claims in separate Courts.‖ Accordingly, the Court will dismiss
duplicative claims, and will leave one of the duplicative claims in whichever Court
has proper subject matter jurisdiction.
IV. DISCUSSION
A. Standard of Review
The standards of review on a motion to dismiss in the Superior Court and in
the Court of Chancery are very similar. In the Superior Court, ―the Court must
assume all well-pleaded facts in the complaint to be true.‖25 For purposes of a
Motion under Rule 12(b)(6),
all factual allegations of the complaint are accepted as true. A complaint
will not be dismissed under Superior Court Civil Rule 12(b)(6) unless it
appears to a certainty that under no set of facts which could be proved to
support the claim asserted would the plaintiff be entitled to relief.
Therefore, the Court must determine whether a plaintiff may recover
23
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 12.
24
Id. at 13-14.
25
Read v. Carpenter, 1995 WL 945544, at *1 (Del. Super. June 8, 1995).
10
under any reasonably conceivable set of circumstances susceptible of
proof under the complaint.26
Similarly, in the Court of Chancery, the Court must again ―accept all well-
pleaded factual allegations in the Complaint—including vague allegations so long
as they provide sufficient notice of the claim—and draw all reasonable inferences
in favor of the plaintiff.‖ ―The Court is not, however, required to accept
conclusory allegations or inferences not logically linked to the alleged facts. . . .
Therefore, the Court will deny Defendant‘s motion to the extent that any of
Plaintiff‘s claims are reasonably conceivable.‖27
B. Plaintiff’s Claim for Breach of Contract is Dismissed in the Superior Court, but
Remains in the Court of Chancery
Defendant contends that Plaintiff has failed to plead a breach of contract
action because no damages have accrued, as Defendant has not yet begun
construction on its redevelopment plan. In response, Plaintiff contends that its
claim is one of anticipatory repudiation, and that it is entitled to treat such
repudiation as an immediate breach. The Court finds that Plaintiff has adequately
pleaded a claim for breach of contract, and that, as Plaintiff is seeking an equitable
remedy, the Superior Court is without jurisdiction to afford such a remedy.
Accordingly, the Superior Court claim for breach of contract is dismissed while the
Court of Chancery claim for breach of contract remains.
Under general principles of contract law, an anticipatory repudiation gives
rise to an immediate claim for total breach of contract damages against the
repudiating party.28 The Delaware Supreme Court has previously looked to the
Restatement (Second) of Contracts for a definition of ―repudiation.‖29 The
Restatement (Second) of Contracts defines ―repudiation,‖ in relevant part, as ―a
26
Highland Capital Mgmt., L.P. v. T.C. Grp., LLC, 2006 WL 2128677, at *2 (Del. Super. July
27, 2006) (internal quotations omitted).
27
Seiden v. Kaneko, 2015 WL 7289338, at *5 (Del. Ch. Nov. 3, 2015) (internal quotations
omitted).
28
Restatement (Second) of Contracts, § 243(2) (providing that ―a breach by non-performance
accompanied or followed by a repudiation gives rise to a claim for damages for total breach.‖).
29
Citi Steel USA, Inc. v. Connell Ltd. Partnership, 758 A.2d 928, 931 (Del. 2000).
11
voluntary affirmative act which renders the obligor unable or apparently unable to
perform without such a breach.‖30 Section 250 of the Restatement further defines
the nature of an act that constitutes a repudiation: ―In order to constitute a
repudiation, a party‘s act must be both voluntary and affirmative, and must make it
actually or apparently impossible for him to perform.‖31 Moreover, Delaware law
provides that ―[a]n anticipatory repudiation constitutes a breach.‖32
Plaintiff alleges that Defendant has repudiated the contract in two ways.
First, Plaintiff alleges that Defendant‘s intention to perform ―construction
activities‖ on the encumbered properties would require construction vehicles to use
the right of access provided by the Agreement, and that construction vehicles and
equipment would be stored on the encumbered property. Plaintiff contends that
such use would make it impossible for Defendant to perform its obligation to use
the right of access and parking area for the purpose described in the Agreement.33
Second, and alternatively, Plaintiff alleges that such activities require an
amendment to the Agreement, as the Agreement provides that the ―Easement is for
parking, ingress, and egress only.‖34 Despite Plaintiff‘s concerns regarding a
violation of the easement, Plaintiff alleges that Defendant has made ―no attempt
whatsoever to amend the [Agreement] to accommodate the Plan.‖35 Accordingly,
Plaintiff claims that Defendant has anticipatorily repudiated the agreement because
of its affirmative step in ―obtain[ing] approval of its plan‖ from the City of
Newark, and is therefore in breach of the Agreement.36
Accepting the factual allegations of Plaintiff‘s complaint as true, the Court
finds that Plaintiff has adequately pleaded a claim for breach of contract in the
Court of Chancery under the theory of anticipatory repudiation. Plaintiff has
30
Restatement (Second) of Contracts, § 250(b).
31
Restatement (Second) of Contracts, § 250, Comment c.
32
Cochran v. Denton, 1991 WL 220547, at *1 (Del. Ch. Oct. 28, 1991). See also Carteret
Bancorp, Inc. v. Home Grp., Inc., 1988 WL 3010, at *6 (Del. Ch. Jan. 13, 1988) (providing that a
claim for breach of contract can be made under a theory of repudiation when the repudiation is
―positive and unconditional‖).
33
Pl.‘s Verified Compl. at 18.
34
Pl.‘s Verified Compl., Ex. A, at 2.
35
Pl.‘s Verified Compl. at 18-19.
36
Pl.‘s First Am. Compl. ¶¶ 51-59.
12
satisfactorily pleaded that Defendant has made substantial steps towards
implementing its redevelopment plan. Plaintiff has also satisfactorily alleged that
Defendant will use the property encumbered by the easement for a purpose that is
beyond ―parking, ingress, and egress.‖ As Plaintiff‘s allegations illustrate that
Defendant has (1) received approval of its plan and (2) shown no intention of
amending the Agreement to provide for ―construction activities,‖ Plaintiff has
adequately pleaded that Defendant has made a ―voluntary and affirmative‖ act that
will make it ―impossible for [Defendant] to perform‖ his contractual obligation to
use the right of access and parking area for ―parking, ingress, and egress only.‖
Accepting Plaintiff‘s allegation that Defendant will use the encumbered property
for the transportation and storage of construction vehicles and equipment as true,
the implementation of Defendant‘s plan would make it impossible for Defendant to
perform his duties under the Agreement. Accordingly, Plaintiff has adequately
pleaded that Defendant has breached the contract through repudiation, and
Defendant‘s motion to dismiss this claim in the Court of Chancery is denied.
Because Plaintiff requests equitable rescission, rather than rescission at law,
as the potential remedy for Defendant‘s alleged breach of the Agreement, the
Superior Court does not have jurisdiction over such an equitable remedy.37
Although Defendant suggests that Plaintiff has conceded that ―it may avail itself of
the remedy of money damages,‖ the Court of Chancery has the authority to afford
such damages under the well-established clean-up doctrine.38 However, the Court
notes that Plaintiff has not yet made any explicit claim for monetary damages, but
may envision them as part of the package of ―complete and final relief‖ that could
potentially be afforded if the outcome of this case is decided in its favor.39 As the
Court of Chancery has original jurisdiction over Plaintiff‘s claim for breach of
37
See E.I. DuPont de Nemours and Co. v. HEM Research, Inc., 1989 WL 122053, at *3 (Del.
Ch. Oct. 13, 1989) (providing that ―[a] court of law may, upon adjudication of a contract dispute,
determine, where the elements of the claim are proven, that a contract has been rescinded, and
enter an order restoring plaintiff to his original condition by awarding money or other property of
which he had been deprived.‖
38
Wilmont Homes, Inc. v. Weiler, 202 A.2d 576, 580 (Del. 1964) (providing that ―when equity
obtains jurisdiction over some portion of the controversy it will decide the whole controversy
and give complete and final relief, even though that involves the grant of a purely law remedy
such as a money judgment.‖).
39
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 12.
13
contract and with its requested remedy of equitable rescission, the Court of
Chancery may also potentially afford money damages (though Plaintiff has made
no explicit prayer for them in either action) under the clean-up doctrine.
Accordingly, the surviving breach of contract claim will be the one set forth in
Plaintiff‘s Verified Complaint in the Court of Chancery. Plaintiff‘s claim for
breach of contract and equitable rescission is therefore dismissed in the Superior
Court action.40
C. Plaintiff’s Claim for a Permanent Injunction is Dismissed, as the Potentially
Remedy would Afford the Same Relief as a Potentially Favorable Declaratory
Judgment in the Superior Court
Defendant has moved to dismiss Plaintiff‘s claim for a permanent injunction
in the Court of Chancery action. Plaintiff is seeking a permanent injunction to
prevent Defendant from using the right of access or parking area for construction
activities. Defendant argues that Plaintiff‘s claim for injunctive relief should be
dismissed on two grounds. First, Defendant contends that Plaintiff‘s request for a
permanent injunction should be dismissed because an adequate remedy at law
exists in the form of a declaratory judgment, thereby depriving the Court of
Chancery of subject matter jurisdiction over the claim. Second, Defendant asserts
that Plaintiff‘s Verified Complaint does not meet the requisite pleading standard
for injunctive relief. The Court finds that Defendant‘s argument that the Court of
Chancery lacks subject matter jurisdiction over Plaintiff‘s claim for injunctive
relief is meritorious. Accordingly, the Court does not reach Defendant‘s
contention that Plaintiff has not adequately pleaded a claim for a permanent
injunction.
40
Additionally, at oral argument on Plaintiff‘s Motion to Consolidate, after the Court granted
Plaintiff‘s motion, Plaintiff‘s counsel advised the Court that Plaintiff had changed its position
and that Plaintiff now wished to proceed with its claims in the Court of Chancery action first and
before presenting its claims in the Superior Court action. The Court denied this application
because it had just consolidated the two actions.
14
―In determining whether this Court has subject matter jurisdiction over an
asserted claim, the Court must look solely upon the allegations of the complaint
and [make] a determination of what the plaintiff really seeks by the complaint.‖41
The Court of Chancery ―is a court of limited subject matter jurisdiction. By
statute, the Court is conferred with subject matter jurisdiction to hear and
adjudicate all matters and causes in equity; it may not, however, exercise its
subject matter jurisdiction where an adequate remedy of law is available.‖42 As
Chancellor William Allen noted in 1987,
Chancery jurisdiction is not conferred by the incantation of magic words.
Neither the artful use nor the wholesale invocation of familiar Chancery
terms in a complaint will excuse the court . . . from a realistic assessment
of the nature of the wrong alleged and the remedy available in order to
determine whether a legal remedy is available and fully adequate. If a
realistic evaluation leads to the conclusion that an adequate legal remedy
is available this court, in conformity with the command of section 342 of
title 10 of the Delaware Code will not accept jurisdiction over the
matter.43
For a remedy at law to prevail over a claim for an equitable remedy, ―the remedy at
law must be available as a matter of right; full fair and complete; and as practical
and efficient to the ends of justice s the equitable remedy.‖44
In the recent case of Green v. GEICO Gen. Ins. Co., the Court of Chancery
addressed an issue of the Court‘s subject matter jurisdiction similar to the one in
this case. Green consisted of a contractual dispute between the plaintiff and the
defendant, GEICO. The plaintiff wished to enjoin GEICO from implementing
various rules that would allegedly cause GEICO to ―breach[] its contracts of
insurance with its insured or violate[] the applicable provisions of Delaware‘s PIP
statute.45 The Court of Chancery held that ―[a] declaration that either the insurance
41
U-H Acquisition Co. v. Barbo, 1994 WL 34688, at *5 (Del. Ch. Jan. 31, 1994).
42
Green v. GEICO Gen. Ins. Co., 2017 WL 438230, at *1 (Del. Ch. Feb. 1, 2017).
43
McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987).
44
USH Ventures v. Global Telesystems Group, Inc., 796 A.2d 7, 14-15 (Del. Super. 2000).
45
Green, 2017 WL 438230, at *1.
15
policies at issue or the applicable statute(s) do not permit GEICO to employ the
[contested rules] would not require an accompanying injunction. There is no
indication that GEICO would refuse to abide by a final declaratory judgment to
this effect.‖46 ―Moreover, [the] Plaintiffs would have remedies available in the
Superior Court to compel compliance, including a contempt citation, in the
unlikely event that GEICO demonstrated any reluctance to comply fully with the
Superior Court‘s order(s).‖47 The Court of Chancery found that ―the true nature of
[the] action [was] contractual; and complete relief [was] available at law,‖ and
dismissed the plaintiff‘s claim for injunctive relief.
In this case, like the plaintiff in Green, Plaintiff has an adequate remedy at
law. Having examined Plaintiff‘s declaratory judgment action and Plaintiff‘s claim
for a permanent injunction, it appears that a favorable outcome on both claims for
Plaintiff would afford the same relief. The declaratory judgment action seeks a
declaration that implementation of Defendant‘s redevelopment plan would violate
the Agreement. Defendant has represented that it will comply with an order from
the Court declaring that its redevelopment plan would violate the Agreement, and
abstain from performing the construction. The injunctive relief sought by Plaintiff
would provide the same remedy by ―preventing Defendant from moving forward
with its [redevelopment] Plan.‖48 To grant Plaintiff‘s request for injunctive relief,
the Court would have to make a determination, as the Court did in Green, that
Defendant had breached its contract with Plaintiff. Accordingly, it is apparent that
Plaintiff‘s claim is contractual in nature, and a declaratory judgment action is the
proper vehicle for pursuing Plaintiff‘s claim.
Plaintiff‘s contention that the Court of Chancery ―regularly consider[s]
simultaneous claims for declaratory and injunctive relief‖ is without merit. 49
Plaintiff has cited four cases in support of its position;50 however, the claims for
46
Id. at *2.
47
Id.
48
Pl.‘s Verified Compl. at 20.
49
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 9.
50
I/Mx Info. Mgmt. Solutions, Inc. v. MultiPlan, Inc., 2013 WL 3322293 (Del. Ch. June 28,
2013); American Legacy Foundation v. Lorillard Tobacco Co., 2002 WL 927383 (Del. Ch. Apr.
29, 2002); University Relaty Assocs., L.P. v. Wendy’s Old Fashioned Hamburgers of New York,
16
declaratory relief and injunctive relief were substantially different in each case. For
example, in University Realty Assocs., L.P. v. Wendy’s Old Fashioned
Hamburgers of New York, Inc., the Court of Chancery permitted simultaneous
claims for injunctive and declaratory relief.51 However, the relief sought in each
claim would have provided different remedies. The plaintiff was a property owner
who wished to bring a new restaurant into its shopping plaza. The defendant, also
a restaurant, claimed that its contract with the plaintiff prevented the plaintiff from
leasing space to another restaurant. The injunction sought would have prevented
the defendant from interfering with contractual relationships, and the declaratory
judgment action would have declared the obligations of the parties with respect to
the ―use restriction clause‖ of the lease agreement between the plaintiff and the
defendant. As the remedies afforded by the declaratory judgment action and the
claim for a permanent injunction in this case are substantially the same, Plaintiff‘s
reliance on University Realty Assocs., L.P. is inapposite.
Moreover, Plaintiff‘s reliance on Diebold Computer Leasing, Inc. v.
Commercial Credit Corp. is inapposite, as the rule established in that case supports
this Court‘s decision in this case. Plaintiff asserts that the Supreme Court held in
Diebold that ―the Declaratory Judgment Act‘s statutory creation of subject matter
jurisdiction ‗in another court and a remedy elsewhere that may be adequate,‘ but is
not the same was insufficient ‗for the ouster of equity jurisdiction.‘‖52 Indeed, the
Delaware Supreme Court held that the Court of Chancery‘s ―jurisdiction remains .
. . unless the new remedy [under the Declaratory Judgment Act] is equivalent and
is expressly made exclusive in the other tribunal.‖53 As the injunctive relief sought
by Plaintiff would afford the same remedy as the declaratory judgment that it
seeks, and as the exclusive jurisdiction for Plaintiff‘s declaratory judgment action
is in the Superior Court, the Court of Chancery lacks subject matter jurisdiction
over Plaintiff‘s claim for injunctive relief. Accordingly, Defendant‘s motion to
dismiss Plaintiff‘s claim for a permanent injunction is granted.
Inc., 1992 WL 56802, (Del. Ch. Mar. 19, 2002); Diebold Computer Leasing, Inc. v. Commercial
Credit Corp., 267 A.2d 586, 591 (Del. 1970).
51
1992 WL 56802, at *1 (Del. Ch. Mar. 19, 1992).
52
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 9.
53
Diebold Computer Leasing, Inc., 267 A.2d 586, 591 (Del. 1970).
17
As previously stated, because the Court has dismissed Plaintiff‘s claim for
injunctive relief on grounds that the Court of Chancery does not have subject
matter jurisdiction over it, the Court does not reach Defendant‘s contention
regarding adequate pleading.
D. Plaintiff’s Claim for Equitable Rescission as a Remedy is Adequately Pleaded
Defendant contends that Plaintiff‘s claim for equitable rescission should be
dismissed because Plaintiff has failed to assert such a claim ―in the body of the
Verified Complaint.‖54 Defendant asserts that the request for equitable rescission
in Plaintiff‘s prayer for relief is inadequate to permit the Court to order such relief,
as such a claim must meet the pleading standards of Court of Chancery Rule
8(a)(1). Moreover, Defendant argues that a claim for equitable rescission ―must be
based upon the grounds of Fraud, Misrepresentation, or Mistake.‖55 In response,
Plaintiff contends that equitable rescission is an available remedy for breach of
contract even in the absence of fraud, misrepresentation, or mistake. Plaintiff
further contends that ―Delaware law does not require a plaintiff to assert a claim
for equitable rescission separate and apart from breach of contract,‖ as it is a
remedy for such a breach.56
The Court finds that Plaintiff has adequately presented its request for
equitable rescission in its prayer for relief. The Court of Chancery discussed the
doctrine of equitable rescission at length in E.I. du Pont de Nemours and Co. v.
HEM Research, Inc.:
Equitable rescission . . . , which is otherwise known as cancellation, is a
form of remedy in which, in addition to a judicial declaration that a
contract is invalid and a judicial award of money or property to restore
plaintiff to his original condition is made, further equitable relief is
required. Thus, the remedy of equitable rescission typically requires that
the court cause an instrument, document, obligation or other matter
affecting plaintiff‘s rights and/or liabilities to be set aside and annulled,
54
Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 7.
55
Id. at 8.
56
Pl.‘s Resp. to Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 6.
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thus restoring plaintiff to his original position and reestablishing title or
recovering possession of property.57
A request for equitable rescission is essentially a request for a remedy.
Although Defendant has suggested that Plaintiff must plead his request for
equitable rescission as its own distinct cause of action, and must meet the pleading
requirements of Court of Chancery Rule 8(a)(1), Defendant has cited no authority
to support this position. Nor has the Court found any authority to support
Defendant‘s position that a request for the remedy of equitable rescission must
meet the pleading standard of Rule 8(a)(1). To the contrary, the Court of Chancery
has held that ―[r]escission is not a cause of action but a remedy.‖58 The Superior
Court has also noted the same.59 As Delaware law has established that equitable
rescission is a remedy, Plaintiff‘s request for equitable rescission must only meet
the requirements of Rule 8(a)(2), requiring that a plaintiff make ―a demand for
judgment for the relief to which the party deems itself entitled.‖60 As Plaintiff has
sufficiently demanded such relief in its prayer for relief, Defendant‘s first
argument is without merit.
Defendant‘s reliance on Norton v. Poplos61 for the proposition that a claim
for equitable rescission must be ―based upon the grounds of fraud,
misrepresentation, or mistake‖ is inapposite. Norton provides that fraud,
misrepresentation, and mistake are only ―common grounds for rescission.‖62
Norton does not say that fraud, mistake, and misrepresentation are the exclusive
grounds for which equitable rescission may be sought.
The Court of Chancery has previously entertained prayers for equitable
rescission in conjunction with claims for breach of contract. ―Misrepresentation,
57
E.I. du Pont de Nemours and Co. v. HEM Research, Inc., 1989 WL 122053, at *3 (Del. Ch.
Oct. 13, 1989) (emphasis added).
58
Eni Holdings, LLC v. KBR Grp. Holdings, LLC, 2013 WL 6186326, at *24 (Del. Ch. Nov. 27,
2013) (emphasis added).
59
Deutsche Bank Nat’l Trust Co. v. Goldfeder, 2014 WL 7692441, at *1 (Del. Super. Dec. 9,
2014) (stating that ―rescission is itself a remedy, not a cause of action.‖).
60
Court of Chancery Rule 8(a)(2).
61
443 A.2d 1, 4 (Del. 1982).
62
Id.
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mistake, and breach of fiduciary duty are perhaps the most commonly asserted
bases for rescission in the Court of Chancery, although other grounds that may
support the remedy include misconduct, illegality, duress and/or undue influence,
lack of capacity or incompetence, failure of consideration, unconscionability, and
even breach of contract.‖63 For example, in Sheehan v. Hepburn, the Court of
Chancery held that ―an unjustified failure to perform basic terms of a contract
warrants rescission rather than mere damages.‖64 Accordingly, Delaware law
provides that a claim for equitable rescission can be based on grounds other than
fraud, misrepresentation, or mistake, including breach of contract. Defendant‘s
second argument is therefore also without merit, and Defendant‘s motion to
dismiss Plaintiff‘s claim for equitable rescission is denied.
E. Defendant’s Alternative Motion to Stay the Court of Chancery Action was
Mooted by the Consolidation of the Two Actions
Finally, the Court finds that a stay of the Court of Chancery action is not
warranted. Defendant contends that the Court of Chancery action should be stayed
pending a resolution of the Superior Court action in order to ―conserve resources
and keep the Superior Court action on track.‖65 On May 30, 2017, the Court
consolidated the Court of Chancery action with the Superior Court action. After
granting Plaintiff‘s Motion to Consolidate, the Court requested the parties to
submit a proposed amended trial scheduling order that would establish a new trial
date of April 23, 2018. As the trial scheduling order in the Superior Court action
has been vacated and a new trial date has been set for April 23, 2018, Defendant‘s
assertion that a stay would preserve the original November 13, 2017 trial date is
now moot. Additionally, the Court sees no efficient purpose supporting a stay of
the Court of Chancery action, thereby unnecessarily bifurcating the two trials,
given that the claims in each case involve the same evidence and similar
arguments. By consolidating the actions, the motion to stay filed before the
consolidation is no longer relevant, as the Court has already decided to proceed
63
Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and commercial Practice in the
Delaware Court of Chancery, § 12.04[a] at 12-61–12-62 (Matthew Bender & Co., 2014).
64
138 A.2d 810, 812 (Del. Ch. 1958).
65
Def.‘s Mot. to Dismiss Pl.‘s Verified Compl. at 9. At the time, the Superior Court action was
set for trial on November 13, 2017 (but subsequently was rescheduled to April 23, 2018).
20
with trial in both actions on April 23, 2018. Accordingly, Defendant‘s alternative
Motion to Stay the Court of Chancery Action is denied as moot.
V. CONCLUSION
Thus: Defendant‘s Motion for Partial Dismissal (i.e., Count II–Breach of
Contract and its requested remedy of equitable rescission) of Plaintiff‘s First
Amended Complaint in the Superior Court is GRANTED. Count I in Plaintiff‘s
Complaint in the Superior Court remains. Defendant‘s Motion to Dismiss
Plaintiff‘s Verified Complaint in the Court of Chancery is GRANTED insofar as it
pertains to Plaintiff‘s claims for a declaratory judgment (Count II) and a permanent
injunction (Count III). Defendant‘s Motion is DENIED as it pertains to Plaintiff‘s
claim for Breach of Contract (Count I) and its requested remedy of equitable
rescission in the Court of Chancery. Defendant‘s alternative Motion to Stay the
Court of Chancery action is DENIED AS MOOT.
IT IS SO ORDERED.
______________________
Richard R. Cooch, R.J.
cc: Prothonotary
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