Case Title: DVC Holdings, Inc. v. Conagra, Inc. et al.

Citation: 

Docket Number: 550, 2002

State: delaware

Court: Delaware Supreme Court

Date: 2003-04-29T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
 
DCV HOLDINGS, INC.,  
 
§ 
 
 
 
 
 
 
§  No. 550, 2002 
 
Plaintiff Below, 
 
 
§ 
 
Appellant,  
 
 
§  Court Below – Superior Court 
 
 
 
 
 
 
§  of the State of Delaware, 
 
v. 
 
 
 
 
§  in and for New Castle County 
 
 
 
 
 
 
§  C.A. No. 98C-06-301 
CONAGRA, INC., E.I. DU PONT 
§ 
DE NEMOURS AND COMPANY,  § 
and DU PONT CHEMICAL &   
§ 
ENERGY OPERATIONS, INC., 
§ 
 
 
 
 
 
 
§ 
 
 
Defendants Below, 
 
§ 
 
 
Appellees.  
 
§ 
 
 
 
 
 
  Submitted:  February 4, 2003 
 
 
 
 
     Decided:  April 29, 2003 
 
Before HOLLAND, BERGER and STEELE, Justices 
 
ORDER 
 
This 29th day of April, 2003, upon consideration of the briefs and 
arguments presented by the parties, it appears to the Court that:  
 
1) 
This is an appeal from a final judgment entered on September 
5, 2002.  The Superior Court granted summary judgment in favor of 
defendants ConAgra, Inc. (“ConAgra”), E.I. du Pont de Nemours and 
Company and DuPont Chemical & Energy Operations, Inc. (collectively, 
“DuPont” and together with ConAgra, the “Sellers”) and against plaintiff 
DCV Holdings, Inc. (“DCV Holdings”).  The Sellers previously owned 
 
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DCV, which in turn controlled a series of joint ventures that ConAgra and 
DuPont had established.  In 1997, the management of DCV joined together 
with an investment-banking firm, Windward Capital Partners, L.P. 
(“Windward”), to purchase DCV and its subsidiaries from the Sellers, using 
the newly formed DCV Holdings.  The purchase price was in excess of $100 
million. 
2) 
DCV Holdings sued the Sellers for fraud and breach of 
contract.  On April 1, 2002, upon cross-motions for partial summary 
judgment, the Superior Court granted partial summary judgment to the 
defendants. After unsuccessfully seeking entry of final judgment and 
interlocutory appeal on the dismissed claims, DCV Holdings moved for a 
voluntary dismissal of its remaining claims.  That motion was granted on 
September 5, 2002.  This appeal followed the entry of that final judgment.  
 
3) 
In the parties’ Purchase Agreement dated as of August 12, 
1997, the Sellers represented and warranted to DCV Holdings that DCV’s 
1996 audited financial statements complied with Generally Accepted 
Accounting Principles (“GAAP”) and fairly presented DCV’s financial 
condition.  The Sellers acknowledged that in 1996, DuPont falsely 
confirmed a non-existent rebate (the “TMA Rebate”) in a letter to one of the 
DCV Companies.  The Sellers also acknowledge the management of that 
 
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company included the non-existent TMA Rebate in the financial statements 
in order to inflate revenue and income artificially and thereby 
misappropriate over $400,000 in unearned bonuses.   
 
4) 
The Sellers also represented and warranted in Section 3.9 of the 
Purchase Agreement that the DCV Companies had no undisclosed 
“liabilities or obligations of any nature (whether absolute, accrued, 
contingent, unasserted, determined, determinable or otherwise).”  As of the 
closing, the record suggests that DCV had accrued nine years of unasserted, 
treble-damage antitrust liability arising from its affiliate’s participation in a 
criminal price fixing conspiracy. 
 
5) 
DCV Holdings has raised two issues on appeal. First, it argues 
that the “bogus” nature of the TMA rebate was never properly disclosed to 
DCV Holdings. The rebate was admittedly improperly obtained from 
DuPont by the management of DuCoa, L.P. (“DuCoa”), one of DCV’s 
subsidiaries. Second, DCV Holdings argues that DuPont and ConAgra 
should have to indemnify it under Section 3.9 of the Purchase Agreement for 
liabilities stemming from their participation in an antitrust conspiracy, even 
if it was unknown at the time of the closing of the transaction.   
 
6) 
DCV Holdings first argument is that the Sellers did not disclose 
that the TMA Rebate was “bogus” and the financial statements were 
 
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falsified.   With regard to the TMA rebate issue, the Sellers contend that all 
of the “material factual disputes” presented by DCV Holdings to the 
Superior Court and on appeal were disclosed by DuPont to representative of 
DCV.  In support of this, they refer to statements made by DCV’s CEO, 
CFO and an accounting expert retained for this litigation.  According to the 
Sellers, those statements demonstrate that the Sellers’ written disclosure of 
the TMA rebate should have been sufficient to reveal that DuCoa 
management had intentionally booked a false rebate in order to increase their 
management bonus compensation.   
7) 
Moreover, the Sellers assert that this written disclosure led 
Windward to express concern that the DuCoa finances had been 
intentionally manipulated. The Sellers also claim that, after discussing the 
validity of the TMA rebate with DuPont and with the President of DCV, 
who was slated to become the President of DCV Holdings, Windward 
considered withdrawing from the transaction or re-auditing DCV’s books 
and records. Instead, the Sellers submit that Windward demanded and 
obtained a substantial price reduction and closed the transaction.  DCV 
Holdings sharply disputes the Sellers’ factual allegations. 
8) 
On the second issue, DCV Holdings argues the Superior Court 
erred in ruling that the all-inclusive representation and warranty of the 
 
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Sellers in Section 3.9 was “inherently ambiguous” and did not encompass 
the accrued antitrust liability of DCV that existed at the time of the closing.  
The Sellers argue that there was no agreement for indemnification of 
potential liabilities stemming from an antitrust conspiracy that was unknown 
to all relevant parties at the time the transaction closed.  According to the 
Sellers, Section 3.9 of the parties’ Purchase Agreement, a provision the 
Sellers describe as “all-inclusive, boilerplate” should not be interpreted to 
mandate such indemnification.  
9) 
DCV Holdings disagrees.  According to DCV Holdings, the 
antitrust conspiracy was an “accrued” or “contingent” liability that was 
required to be disclosed pursuant to Section 3.9.  The Sellers claim that 
during the negotiation of Section 3.9 the parties agreed to delete from its 
coverage any “existing condition or situation” that could reasonably be 
expected to result in any liability or obligation.  The Sellers submit that this 
deletion shows that there was no obligation to disclose the unknown antitrust 
conspiracy pursuant to Section 3.9.  According to the Sellers, Section 3.13, a 
different, 
more 
specific 
contractual 
representation, 
addressed 
to 
“Compliance with Law” and requiring the “Knowledge of Sellers,” 
governed this issue.  The Sellers submit that unless the unknown antitrust 
conspiracy was governed by Section 3.13 and not by Section 3.9, the 
 
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“Knowledge of Sellers” requirement in Section 3.13 would become 
surplusage.  
10) 
A grant of denial of summary judgment by the Superior Court 
is reviewed de novo on appeal as to facts and law.1 A moving party is 
entitled to summary judgment if there is no genuine issue of material fact 
and the moving party is entitled to judgment as a matter of law.2 Conversely, 
if there is a genuine issue of material fact, or if the moving party is not 
entitled to judgment as a matter of law, summary judgment should be 
denied.  
11) 
The record in this case reflects material disputes of fact on both 
issues. There are material disputes of fact between the parties as to whether 
there was adequate disclosure of the “bogus” nature of the TMA rebate, 
which was admittedly improperly obtained from DuPont by the management 
of DuCoa.   
12)  The record also reflects material disputes of fact as to the intent 
of the parties in negotiating Section 3.9 of the Purchase Agreement.  After 
ruling that Section 3.9 was ambiguous, the Superior Court examined 
extrinsic evidence presented in the cross motions for summary judgment.  
                                          
 
1 Newtowne Village Serv. Corp. v. Newtowne Road Dev. Co., 772 A.2d 172, 174-75 (Del. 
2001).  
2 Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1061-62 (Del. 1988) (citation 
omitted). 
 
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Although we agree that Section 3.9 is ambiguous in the context of the entire 
Purchase Agreement, the extrinsic evidence reflects that intent of the parties 
is in material dispute.  A resolution of that intent must be made by the trier 
of fact prior to determining whether DuPont and ConAgra are liable to 
indemnify DCV Holdings under Section 3.9 of the Purchase Agreement for 
charges stemming from the antitrust conspiracy.  
13) 
The Superior Court should not have granted DuPont’s motion 
for summary judgment regarding either the TMA rebate issue or the 
indemnification issue.  The material facts that are in dispute with regard to 
both issues must be resolved by the trier of fact.  
NOW, THEREFORE, IT IS HEREBY ORDERED that the judgment 
of the Superior Court is reversed.  This matter is remanded for a trial on the 
material issues of fact that are in dispute between the parties. 
 
 
 
 
 
BY THE COURT: 
 
 
 
 
 
 
/s/ Randy J. Holland 
 
 
 
 
 
Justice