Duncan v. Garvin

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ROBERT M. DUNCAN, :
:
Plaintiff, : K20M-11-022 JJC
:
v. :
:
SHAWN M. GARVIN, in his official :
capacity, and DELAWARE :
DEPARTMENT OF NATURAL :
RESOURCES AND :
ENVIRONMENTAL CONTROL, :
an agency of the executive branch of :
the State of Delaware, :
:
Defendants. :
Submitted: April 9, 2024
Decided: July 31, 2024
MEMORANDUM OPINION & ORDER
Motion for Reconsideration of Commissioner’s Order on Plaintiff’s Motion to
Amend – ADOPTED, in part.
Patrick C. Gallagher, Esquire, and Courtney R. Prinski, Esquire, Jacobs & Crumplar,
P.A., Wilmington, Delaware, Attorneys for the Plaintiff.
Kayli H. Spialter, Deputy Attorney General, State of Delaware Department of
Justice, Wilmington, Delaware, Attorney for the Defendant.
CLARK, R.J.
Plaintiff Robert Duncan sued Defendants Shawn Garvin and the Department
of Natural Resources (hereafter collectively referred to as “DNREC”) in November
2020.1 In Mr. Duncan’s original complaint, he sought a declaratory judgment,
sought damages for breach of contract, and petitioned for mandamus relief to declare
and enforce his rights under a 2017 settlement agreement and release (hereinafter
the “Settlement Agreement” or the “Agreement”).2 In August 2023, at the end of
discovery, Mr. Duncan deposed a witness. The witness testified that, in November
2017, he incorrectly told Mr. Duncan’s realtor and others that Mr. Duncan’s
environmentally contaminated commercial property (“the Site”) would not qualify
for Brownfields Development Program funding.3 By the time of the representation,
Mr. Duncan had contracted to sell the Site to a third-party who had a representative
present at that meeting.4 Mr. Duncan now contends that this misrepresentation
prevented the third-party from closing the deal.5
After the August 2023 deposition, Mr. Duncan moved to add the DNREC
employee who made the representation as a defendant.6 His proposed amendments
also include additional causes of action against DNREC.7 A commissioner of this
Court granted the motion to amend.8 DNREC disagrees with the Commissioner’s
decision and seeks reconsideration on two grounds: (1) the alleged expiration of the
statute of limitations, and (2) the alleged futility of the amendments.9
As discussed below, the proposed amendment to add an individual DNREC
employee as a party does not relate back to the original filing. Accordingly, that
1
Pl.’s Compl., D.I. 1.
2
Id. at 3 – 5.
3
Pl.’s Mot. to Am. Compl. (D.I. 73) ¶ 2.
4
Pl.’s Second. Am. Compl. (D.I. 87) ¶ 23.
5
Id. ¶ 37.
6
D.I. 73 at 4.
7
Id.
8
Order Granting Pl.’s Mot. to Am. Compl. (D.I. 84).
9
Def.’s Mot. for Reconsid. of Comm’r on Pl.’s Mot. to Am., D.I. 88 at ¶¶ 4, 8.
2
proposed amendment is barred by the applicable statute of limitation. In addition,
some of Mr. Duncan’s other proposed amendments are futile, and some are not. As
a result, the Commissioner’s order granting Mr. Duncan’s motion to permit a second
amended complaint must be adopted, in part, and rejected, in part.
I. PROCEDURAL AND FACUTAL BACKGROUND
Mr. Duncan filed his original complaint in November 2020. Thereafter, the
parties sought and received two trial continuances and stipulated to several deadline
extensions. At the end of discovery, DNREC identified its Director of the Division
of Waste and Hazardous Substances, Timothy Ratsep (“Mr. Ratsep”), as its Superior
Court Civil Rule 30(b)(6) designee. Mr. Duncan took the Rule 30(b)(6) deposition
in August 2023.
Soon after the deposition, DNREC moved to amend its answer to assert
standing as a defense and to allege that Mr. Duncan did not own the Site. Mr.
Duncan, for his part, sought permission to file a second amended complaint to add
Mr. Ratsep as a party. He also attempted to add additional causes of action and
update factual allegations. There is currently no trial date pending at the joint request
of the parties.
The present dispute centers on whether the Commissioner properly permitted
the second amended complaint. When reviewing that decision for purposes of
futility, the Court considers only the four corners of the pleading. As a result, the
Court recites facts gleaned from it and the Settlement Agreement, which is integral
to it.
Mr. Duncan alleges that he owns the Site, a commercial property in
Harrington. He, and at least one tenant, operated a gas station on the premises. In
2000, DNREC tested the Site’s soil and found it to be environmentally contaminated.
Between 2000 and 2011, neither Mr. Duncan nor his then-tenant took steps to
3
remediate the property despite DNEC’s repeated requests. As a result, DNREC
issued a notice of violation (“NOV”) to both Mr. Duncan and his tenant regarding
soil and groundwater contamination. In 2014, DNREC settled with Mr. Duncan’s
tenant. In that agreement, DNREC released the tenant from liability in exchange for
a one-time payment. Then, in 2015, DNREC took control of the property because
Mr. Duncan allegedly failed to cooperate with DNREC’s efforts to remediate it.
On October 18, 2017, Mr. Duncan entered the Settlement Agreement with
DNREC. 10 The Agreement provided, inter alia, that Mr. Duncan would withdraw
an Environmental Appeals Board appeal, and pay $250,000 to DNREC upon the sale
of the property.11 Upon that sale and DNREC’s receipt of the money, DNREC
agreed to withdraw the NOV and release its lien on the property.12 DNREC also
agreed to issue a no further action letter (“NFA”) upon “satisfactory completion of
corrective action at the Site.”13
At some point prior to November 20, 2017, Mr. Duncan entered a contract to
sell the Site to Dilek, LLC (“Dilek”). As alleged, Dilek intended to purchase the Site
if it was eligible for Brownfields funding. The Brownfields Development Program
provides financial assistance to potential purchasers of contaminated sites.14 On
November 20, 2017, Mr. Duncan’s real estate agent met DNREC and Dilek
personnel to discuss Dilek’s eligibility to participate in the Program. During the
meeting, DNREC personnel suggested that Mr. Duncan reduce the sales price for the
Site to “reflect the work that needed to be done.” Mr. Ratsep also incorrectly
represented that Brownfields funds could not be used to remediate contamination on
the Site. To date, Dilek has not purchased the property, and there is no allegation
10
D.I. 20, Ex. A.
11
Id.
12
Id.
13
Id.
14
7 Del. C. Ch. 91, Sub. II.
4
that Dilek remains interested in the Site. Nevertheless, Mr. Duncan contends that
Mr. Ratesp’s misrepresentation and DNREC’s refusal to withdraw the NOV and
issue a NFA prevented Dilek from closing. In that way, Mr. Duncan contends that
Mr. Ratsep intentionally interfered with the Dilek contract.
In 2020, Mr. Duncan sued DNREC alleging that DNREC breached its
obligation to issue the NFA letter under the Settlement Agreement. Originally, he
sought mandamus relief, a declaration that DNREC breached the Agreement, and
contractual damages.15 In response, DNREC moved to dismiss the complaint. In a
June 2021 decision, the Court granted DNREC’s motion, in part, by dismissing Mr.
Duncan’s claim for mandamus relief because he sought to enforce a discretionary
decision.16
Discovery progressed and Mr. Duncan deposed Mr. Ratsep. During the
deposition, Mr. Ratsep testified that, “[as to] the funding of what was covered and
what was not covered may have— there may have been some issues or
misrepresentation.”17 Mr. Duncan contends that the alleged misrepresentation was
that Brownfields funds could not be used for remediation if Dilek purchased the
property.18
Mr. Duncan then moved to amend his first amended complaint. The proposed
amendments fall into three categories. First, Mr. Duncan seeks to add Mr. Ratsep as
a defendant. He alleges that Mr. Ratsep is liable for negligent misrepresentation and
tortious interference with Mr. Duncan’s contract with Dilek. As to those causes of
action, he contends that Mr. Ratsep “intentionally, recklessly, or with gross
15
D.I. 1.
16
Duncan v. Garvin, 2021 WL 2550656, at *3 (Del. Super. June 21, 2021).
17
Ratsep Dep. at 224: 20-23.
18
D.I. 87 ¶ 32.
5
negligence” made false representations regarding Dilek’s ability to use Brownfields
funds to remediate the property.19
Second, Mr. Duncan seeks to add respondeat superior claims against DNREC
for negligent misrepresentation and tortious interference with contract. Mr. Duncan
also includes a claim for breach of the implied covenant of good faith and fair dealing
against DNREC. The factual bases for all three new causes of action against
DNREC center on DNREC’s refusal to issue a NFA letter and DNREC’s allegedly
improper exclusion of Dilek from participation in the Brownfields Program. Again,
Mr. Duncan contends that DNREC took these actions to shift the financial burden
for remediating the property to Mr. Duncan in violation of the Agreement.
Third, Mr. Duncan seeks to amend his recitation of facts to reflect those
learned in discovery. The proposed amendments in this category relate primarily to
his ownership of the Site and DNREC’s alleged efforts to pressure Mr. Duncan to
pay more than the amount agreed upon.
DNREC opposed Mr. Duncan’s motion to amend. Following an oral
argument, the Commissioner granted the motion to amend in its entirety.20 DNREC
now requests that a judge of this Court reconsider the Commissioner’s decision.
II. THE PARTIES’ POSITIONS
DNREC asserts that the three-year statute of limitations for adding a party has
expired. It contends that the Commissioner did not explain why she found that Mr.
Duncan’s claims related back. More specifically, DNREC contends that the
Commissioner failed to examine the criteria in Superior Court Civil Rule 15 (c) that
19
Mr. Duncan also sought to include a claim against Mr. Ratsep for negligent misrepresentation.
He has since abandoned the claim because the Court of Chancery has exclusive jurisdiction over
such claims.
20
D.I. 88, Ex. B.
6
govern the relation back of amendments. DNREC also separately asserts that many
of Mr. Duncan’s claims against DNREC are futile because his pleading does not state
claims upon which relief can be granted. Finally, DNREC asserts sovereign
immunity as a defense against Mr. Duncan’s tort claim for interference with contract.
Mr. Duncan counters that the Commissioner correctly permitted the
amendments because the new claims relate back to when he filed his original
complaint. He contends that his claims against Mr. Ratsep and new claims against
DNREC arise from the same transaction at issue in the original complaint. He also
asserts that his proposals seek to include newly discovered facts regarding how
DNREC breached the Agreement – that is, by providing a more particular example
of Mr. Ratsep and DNREC’s efforts to sabotage Mr. Duncan’s efforts to sell his
property to Dilek.
As to his effort to add Mr. Ratsep as a party, Mr. Duncan asserts that the Court
should presume that Mr. Ratsep knew of the original lawsuit within one-hundred
twenty days of its filing because he oversaw gasoline tank remediation as the
Director of the Division of Waste and Hazardous Substances. Mr. Duncan also
implicitly asserts that the new claims against Mr. Ratsep relate back because he
either knew or should have known that he would have been a named party in the
initial suit but for a mistake of identity.
In the alternative, Mr. Duncan contends that the time of discovery rule and the
doctrine of fraudulent concealment should either delay the accrual of the statute of
limitations or toll it. To that end, Mr. Duncan contends that he (and inferably Dilek)
had no way of knowing that Mr. Ratsep misrepresented that Brownfields funds were
unavailable until Mr. Duncan deposed Mr. Ratsep in August 2023.
In response to DNREC’s futility arguments, Mr. Duncan contends that
sovereign immunity does not apply. He further contends that DNREC prematurely
raises factual disputes in what should be a Rule 12(b)(6) inquiry.
7
Finally, Mr. Duncan concedes two matters. First, he withdraws his claim for
negligent misrepresentation against both Mr. Ratsep and DNREC.21 He concedes
that the claim could have been raised only in the Court of Chancery.22 Second, Mr.
Duncan concedes in his briefing that he can maintain no tortious interference of
contract claim against DNREC if Mr. Ratsep is not a party.23
III. STANDARD OF REVIEW
Superior Court Civil Rule 132 grants commissioners the power to hear both
case-dispositive and non case-dispositive matters. Technically, a commissioner
enters an order when deciding non-case-dispositive matters.24 Alternatively, a
commissioner issues findings of fact and recommendations in case dispositive
matters.25 Following either a commissioner’s order or proposed findings or
recommendations, either party has ten days to file written objections to seek review
by a judge.26 The primary difference in the two mechanisms is a different standard
of review. Namely, a reviewing judge considers whether there was an abuse of
discretion in non case-dispostive matters.27 The Court considers the objections of
an appealing party de novo in case dispositive matters.28
21
See D.I. 98 at 7 (withdrawing the claim for negligent misrepresentation).
22
See Sweetwater Point, LLC v. Kee et al, 2020 WL 6561567, at *7 (Del. Super. Nov. 5, 2020)
(citations omitted) (recognizing that the Court of Chancery has exclusive jurisdiction over
negligent misrepresentation claims). Furthermore, given Mr. Duncan’s voluntary withdraw of this
claim, the Court deems the removal provisions of 10 Del.C. § 1902 inapplicable.
23
See D.I. 98 at 11 (including Mr. Duncan’s concession “that the respondeat superior claim against
DNREC only survives if the tortious interference with contract claim against [Mr.] Ratsep
survives.”).
24
Del. Super. Ct. Civ. R. 132(a)(3)(i).
25
Id. 132 (a)(4)(i).
26
Id. 132 (a)(3)(ii), (a)(4)(ii).
27
Id. 132 (a)(3)(iv).
28
Id. 132 (a)(4)(iv).
8
In this case, the line between what is case dispositive and non-case dispositive
is somewhat blurred. On one hand, motions to amend pleadings are often considered
non case-dispositive matters. The Court’s review of Mr. Duncan’s new factual
allegations falls in this category. Nevertheless, a decision that grants or denies a
motion to amend can have case dispositive effects if the motion permits or prohibits
the addition of a new party or new substantive claims. Here, the bulk of DNREC’s
motion for reconsideration implicates the latter. As a consequence, the standard of
review in this matter is primarily de novo under Rule 132(a)(4).29
IV. ANALYSIS
The Court first addresses whether Mr. Duncan’s claims against Mr. Ratsep
relate back to his original filing. For the reasons explained below, they do not and
are precluded by the statute of limitations. Furthermore, given Mr. Ratsep’s absence
as a party, Mr. Duncan concedes that he has no vicarious liability claim against
DNREC for tortious interference with contract. Nevertheless, Mr. Duncan
successfully states a claim against DNREC for a breach of the covenant of good faith
and fair dealing. Finally, the Commissioner did not abuse her discretion when she
permitted Mr. Duncan to amend the pleadings to include additional factual
allegations.30
29
See id. 132(a)(4) (including “a motion … to dismiss for failure to state a claim upon which relief
can be granted” among other examples of case-dispositive matters which trigger do novo review
of a Commissioner’s order); see also Clark v. State Farm Mutual Auto. Ins. Co., 131 A.3d 806,
811–12 (Del. 2016) (recognizing that review of a Superior Court decision denying a party’s motion
for leave to amend based upon futility should be reviewed de novo, as would a Rule 12(b)(6)
motion).
30
The review of the Commissioner’s decision to permit factual amendments falls into the non
case-dispositive category which makes the standard of review of that aspect of the Commissioner’s
decision one for an abuse of discretion or clear legal error.
9
A. Mr. Duncan’s claims against Mr. Ratsep do not relate back to the
filing of the original complaint; they are barred by the statute of
limitations.
Mr. Duncan’s proposed second amended complaint seeks to add Mr. Ratsep
as a party liable for negligent misrepresentation and tortious interference with
contract. The statute of limitation governing both claims is three years, running
from the date of the alleged misrepresentation or the interference.31 In this case, the
statute for both claims began to run no later than November 20, 2017, which was the
day of Mr. Ratsep’s alleged misrepresentation that, in turn, allegedly interfered with
the Dilek contract.
Superior Court Civil Rule 15 governs amended pleadings. The Rule
memorializes the tenet that leave to amend pleadings “shall be given freely when
justice so requires.”32 Accordingly, the Court exercises its discretion to liberally
grant amendments unless the amendment unfairly prejudices the other party.33
The addition of a new party after the expiration of a statute of limitations falls
into a category of amendments that may unfairly prejudice a party. Rule 15(c)(3)
provides the requirements necessary for a proposed amendment to relate back for
purposes of adding a party. These criteria balance the interests of liberally
approving amendments while recognizing the need to mitigate unfair prejudice to a
currently absent party.
More specifically, an amended complaint that seeks to add an additional party
relates back to the original filing only when the claim arises out of the same conduct,
transaction, or occurrence addressed in the original complaint, and:
within the period provided by statute or these Rules for service of
the summons and complaint, the party to be brought in by
31
10 Del. C. §8106.
32
Del. Super. Ct. Civ. R. 15(a).
33
Farrow v. Teal Constr., Inc., 2020 WL 3422401 at *3 (Del. Super. June 22, 2020); Mullen v.
Alarmguard of Delmarva, Inc., 625 A.2d 258, 263 (Del. 1993).
10
amendment (A) has received such notice of the institution of the
action that the party will not be prejudiced in maintaining a defense
on the merits, and (B) knew or should have known that, but for a
mistake concerning the identity of the proper party, the action would
have been brought against the party.34
The claims against Mr. Ratsep involve the same conduct, transaction, or
occurrence set forth in the original complaint even though they assert different
theories of recovery. For that reason, the Court focuses its inquiry on the criteria
referenced in the block quote above. Namely, the Court must determine (1) whether
Mr. Ratsep would be unfairly prejudiced in maintaining a defense on the merits if
added as a party, and separately (2) whether Mr. Ratsep knew or should have known
that but for a mistake concerning the identity of the proper party, Mr. Duncan would
have sued him.
In this case, Mr. Duncan meets neither Rule 15(c)(3) requirement. First, Rule
15(c)(3)(A) requires that the newly added party suffer no unfair prejudice in
maintaining a defense on the merits. Adding Mr. Ratsep as a party at this late stage
of the litigation would unfairly prejudice him. Namely, Mr. Duncan filed the original
complaint nearly four years ago. The allegedly improper conduct occurred nearly
seven years ago. After two trial continuances, extensive discovery, and multiple
extended discovery deadlines, the addition of Mr. Ratsep as a party would unfairly
prejudice his ability to defend himself on the merits in what is already a fully
developed case. It would also cause him, and the other parties, significant
duplication of costs and require significant duplication of discovery.
Second, and independently, Rule 15(c)(3)(B) provides that a claim against a
new party relates back only if the new party “knew or should have known that, but
for a mistake concerning the identity of the proper party, the action would have been
34
Del. Super. Ct. Civ. R. 15(c)(2) (emphasis added).
11
brought against the party.” Mr. Ratsep could not have reasonably expected to be
named in a suit against DNREC for a breach of the Agreement. Specifically, he (1)
was not a party to the Agreement, and (2) had no independent obligations under the
Agreement. Moreover, Mr. Duncan filed his original complaint on the eve of the
expiration of the statute of limitations. At that point, the suit sought only a writ of
mandamus, a declaratory judgment, and contractual damages against DNREC.
Those causes of action had no direct relationship to Mr. Ratsep, a non-party to the
Agreement. While the proposed amendment involves the same transaction, when
considering the allegations in the original complaint, Mr. Ratsep had no reason to
suspect that Mr. Duncan mistakenly failed to add him as a party.
Alternatively, Mr. Duncan contends that the claims against Mr. Ratsep are
timely because of the time of discovery rule and the doctrine of fraudulent
concealment. In Delaware, the time of discovery rule tolls the statute of limitations
when an injury is “inherently unknowable and the claimant is blamelessly ignorant
of the wrongful act and the injury complained of.”35 Stated differently, the time of
discovery rule provides limited relief from a statute of limitations when the (1) injury
is inherently unknowable, and (2) the injury is sustained by a blamelessly ignorant
plaintiff.36 When the doctrine applies, the statute of limitations begins to run when
the plaintiff has inquiry notice of the actionable claim or injury.37
Here, Mr. Duncan had knowledge of the alleged injury by no later than
November 20, 2017, when DNREC allegedly pressured Mr. Duncan to pay more for
corrective action than the $250,000 agreed upon in the Settlement Agreement.38 At
35
Lemann Bros. Hlds, Inc. v. Kee, 268 A.3d 178, 194 (Del. 2021).
36
Kaufman v. C.L. McCabe & Sons, Inc., 603 A.2d 831, 835 (Del. 1992).
37
Id.38
Notably, on July 9, 2018, Mr. Duncan’s attorney received unequivocal notice that Dilek would
not consummate the sale without the NFA letter. D.I. 79, Ex. D. Even when using that later date
– the date Mr. Duncan had confirmed notice that Dilek would not close – the statute of limitations
12
a minimum, he was on inquiry notice of the harm at that point.39 That inquiry notice
fixed the point at which the statute of limitations began to run. As a result, his
attempt to add Mr. Ratsep as a party, seven years after he admits discovering
DNREC’s alleged breach, is barred by the statute of limitations.
Similarly, the doctrine of fraudulent concealment does not render the
attempted addition of Mr. Ratsep timely. That doctrine tolls a statute of limitations
when a defendant takes affirmative action to prevent the plaintiff from gaining the
knowledge necessary to bring suit.40 It is the plaintiff who has the burden of pleading
facts sufficient to demonstrate that the doctrine’s tolling applies.41 Mr. Duncan does
not allege that Mr. Ratsep somehow acted affirmatively to hide his alleged
misrepresentation regarding the Brownfields Program. Mr. Duncan had the ability
to discover the facts necessary to support his cause of action as soon as Mr. Ratsep
made the statement in November 2017 with the exercise of reasonable diligence.
The doctrine of fraudulent concealment has no application here.
In summary, the portions of the second amended complaint that seek to add
Mr. Ratsep as a party do not relate back to the date of the original filing.
Furthermore, neither the time of discovery rule nor the doctrine of fraudulent
concealment delayed the statute of limitations accrual or tolled it. As a result, the
Court rejects the portion of the Commissioner’s decision permitting the addition of
Mr. Ratsep as a defendant.
on the tortious interference of contract could have possibly run no later than July 2021, more than
two years before the attempted amendment.
39
Even apart from Mr. Duncan’s discovery of an injury by November 20, 2017, he
contemporaneously failed to avail himself of publicly available information regarding the
Brownfields Development Program. See D.I. 79, Ex. B (publicly listing those costs that are
considered reimbursable to a Brownfields developer or a party entering into a Brownfields
Development Agreement.).
40
Shockley v. Dyer, 456 A.2d 798, 799 (Del. 1983).
41
Van Lake v. Sorin CRM USA, Inc., 2013 WL 1087583, *10 (Del. Super. Feb. 15, 2013).
13
B. The Court need not address DNREC’s sovereign immunity defense to
Mr. Duncan’s tortious interference with contract claim given Mr.
Duncan’s concession.
DNREC contends, and Mr. Duncan concedes, that he has no vicarious liability
claim against DNREC based upon respondeat superior if Mr. Ratsep is not added as
a party.42 For that reason, the Court need not address whether the claim for tortious
interference against DNREC is futile because of sovereign immunity or whether the
allegations support a conceivable basis for recovery. The portion of the
Commissioner’s decision that permitted the tortious interference of contract claim
against DNREC must be rejected.
C. Mr. Duncan’s breach of the implied covenant of good faith and fair
dealing and the new factual allegations relate back to the original
filing, state a claim upon which relief may be granted, and are not
futile.
At the outset, DNREC does not dispute that Mr. Duncan’s implied covenant
of good faith and fair dealing claim (hereafter referred to as his “implied covenant
claim”) would have been timely had he included it in his November 2020 filing.
Superior Court Civil Rule 15(c)(2) provides that his proposed amendment to do so
relates back to the original filing if it “arose out of the conduct, transaction, or
occurrence set forth or attempted to be set forth in the original pleading.” The
gravamen of Mr. Duncan’s original complaint sought clarification regarding
DNREC’s obligations under the Settlement Agreement and sought to enforce
DNRC’s obligations through a petition for mandamus relief. Given those claims,
the initial complaint focused on the Agreement and its breach. His new claim for
breach of an implied covenant that arises from that same Agreement falls squarely
within the same transaction. For that reason, it relates back.
42
D.I. 98 at 11 (conceding that “[p]laintiff acknowledges that the respondeat superior claim
against DNREC only survives if the tortious interference with contract claim against Ratsep
survives.”).
14
DNREC alternatively contends that the amendment to add an implied
covenant claim should be denied as futile. A proposed amendment is futile if it
would be subject to dismissal under Rule 12(b)(6) for failure to state a claim.43
The standard to survive a motion to dismiss for failure to state a claim or for
a proposed amendment to survive a futility challenge is minimal.44 The Court must
“accept all well-pleaded factual allegations in the [c]omplaint as true[.]”45 Delaware
employs a notice pleading standard which requires that a plaintiff’s allegations
merely provide a defendant with notice of the nature of the claim.46 When deciding
whether a proposed amendment would be futile, the Court must draw all reasonable
inferences in favor of the plaintiff. Moreover, the amendment is not futile unless
the plaintiff cannot recover under any reasonably conceivable set of circumstances
susceptible of proof.47 The four corners of the second amended complaint, and any
documents integral to it, define the universe of facts that the Court may consider.48
With that in mind, the Court turns to the elements and basis for Mr. Duncan’s
claim for breach of the implied covenant. To properly plead such a claim, the
plaintiff must (1) allege a specific implied contractual obligation, (2) a breach of that
obligation, and (3) resulting damage.49 At a higher level, the implied covenant
imposes a good faith and fair dealing obligation when a contract confers discretion
on a party.50 In that way, it serves as a limited gap filler when the contract does not
specifically address an issue.51
43
Clark v. State Farm Mutual Auto. Ins. Co., 131 A.3d 806, 811–12 (Del. 2016).
44
Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).
45
Id.46
Id.47
Id.48
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006).
49
Cantor Fitzgerald, L.P. v. Cantor, et al., 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998).
50
Glaxo Group Ltd. v. DRIT LP, 248 A.3d 911, 920 (Del. 2021).
51
Id. at 919.
15
Mr. Duncan alleges in the second amended complaint that DNREC, with ill
will toward him, sought to circumvent the Agreement through Mr. Ratsep’s
misrepresentation regarding Brownfields funds. He further contends that DNREC
did so with the intent to force Mr. Duncan to pay more than the agreed upon
$250,000. The Settlement Agreement, which is integral to the pleading, includes
terms requiring DNREC’s withdrawal of a NOV, DNREC’s release of Mr.
Duncan’s liability when he sells the Site, Mr. Duncan’s payment of $250,000 to
DNREC, and (someone’s) satisfactory completion of correction action.52 With those
obligations in mind, Mr. Duncan’s second amended complaint sufficiently alleges
that DNREC declined in bad faith to exercise its discretion to issue an NFA. In
addition, his pleading places DNREC on notice that it allegedly breached the implied
covenant by refusing to exercise its discretion in good faith because it (1) did not
issue an NFA letter, and (2) misrepresented that Brownfield funding would not be
made available to Dilek upon purchase. Given these allegations, the claim would
survive a Rule 12(b)(6) motion and is not futile. Likewise, Mr. Duncan’s proposed
addition of factual allegations uncovered in discovery relate back and are
permissibly included in this suit. The Commissioner did not abuse her discretion
when permitting them.
V. CONCLUSION
In summary, the Commissioner’s recommendations are adopted, in part, and
rejected, in part. The addition of Mr. Ratsep as a party is precluded by the statute of
limitations. Furthermore, the tortious interference with contract claims and
negligent misrepresentation claims against DNREC are deemed withdrawn. All
52
D.I. 20, Ex. A.
16
other proposed amendments in the second amended complaint relate back to the
filing of the original complaint and are otherwise permissible.
IT IS SO ORDERED.
/s/ Jeffrey J Clark
Resident Judge
17