Court Opinion

ID: 4358592
Source: CourtListenerOpinion
Date Created: 2019-01-14 22:04:36.93191+00
Date Added: 2024-06-11T14:16:40.190346
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

    OPTICAL AIR DATA SYSTEMS, LLC,                  )
                                                    )
                           Plaintiff,               )
                                                    )    C.A. No.: N17C-05-619 EMD CCLD
                    v.                              )
                                                    )
    L-3 COMMUNICATIONS                              )
    CORPORATION, et al.,                            )
                                                    )
                           Defendants.              )

               ORDER GRANTING OPTICAL AIR DATA SYSTEM, LLC’S
                      MOTION FOR SUMMARY JUDGMENT

       On this 14th day of January, 2019, upon consideration of the Optical Air Data System,

LLC’s Motion for Summary Judgment (the “Motion”) filed by Plaintiff Optical Air Data

Systems, LLC (“Optical Air”); L-3’s Answering Brief in Opposition to Optical Air Data System,

LLC’s Motion for Summary Judgment (the “Opposition”) filed by Defendants L-3

Communications Corporation, Display Systems Division, and L-3 Communications Avionics

Systems, Inc. (collectively, “L-3”); Optical Air Data System, LLC’s Reply Brief in Support of Its

Motion for Summary Judgment (the “Reply”) filed by Optical Air; the Court having held a

hearing (the “Hearing”) on the Motion, the Opposition and the Reply on December 17, 2018; the

arguments made by counsel for Optical Air and L-3 at the Hearing; for the reasons set forth by

the Court at the Hearing; and the entire record pertaining to this civil action;

       1.      L-3 has asserted a number of counterclaims against Optical Air—declaratory

judgment, unjust enrichment, negligent misrepresentation, breach of contract and breach of the

implied covenant of good faith and fair dealing. Through the Motion, Optical Air moves for

summary judgment on L-3’s counterclaim for negligent misrepresentation (the “NM
Counterclaim”). At the Hearing, the Court explored with L-3 the nature of the NM

Counterclaim.

        2.       “It is well-settled Delaware law that the [Chancery Court] has exclusive

jurisdiction over claims of negligence misrepresentation.”1 “The one exception to the exclusive

jurisdiction of the [Chancery Court] would be cases where the negligent misrepresentation claim

is raised in the context of the Consumer Fraud Act.”2 The NM Counterclaim is not a claim

raised under the Consumer Fraud Act.

        3.       A claim for negligent misrepresentation requires the party to show: “(1) the

defendant had a pecuniary3 duty to provide accurate information; (2) the defendant supplied false

information; (3) the defendant failed to exercise reasonable care in obtaining or communicating

the information; (4) the plaintiff suffered a pecuniary loss caused by justifiable reliance upon the

false information.”4

        4.       In Radius Services, LLC v. Jack Corrozi Construction, Inc., the plaintiff alleged

that it received assurances from the defendants which the defendants knew or had reason to

know were false.5 The defendants filed a motion to dismiss the claim for negligent

misrepresentation.6 The Court found that the exclusive jurisdiction for claims of negligent

misrepresentation are in the Chancery Court.7 However, the Court determined that if plaintiffs

1
  Van Lake v. Sorin CRM USA, Inc., 2013 WL 1087583, at *11 (Del. Super. Feb. 15, 2013) (citing State Dep’t of
Transp. V. Figg Bridge Eng’rs, Inc., 2001 WL 5593163, at *4 (Del. Super. Nov. 9, 2011)).
2
  Van Lake, 2013 WL 1087583, at *11 (quoting Iacono v. Barici, 2006 WL 3844208, at *5 (Del. Super Dec. 29,
2006)).
3
  PECUNIARY, Black's Law Dictionary (10th ed. 2014) (defining pecuniary “Of, relating to, or consisting of
money; monetary”).
4
  Steinman v. Levine, 2002 WL 31761252, at *15 (Del. Ch. Nov. 27, 2002); see also Yu v. GSM Naation, LLC, 2017
WL 2889515, at *4 (Del. Ch. July 7, 2017) (stating that the elements for equitable fraud are the same as common
law fraud except for scienter).
5
  Radius Services, LLC v. Jack Corrozi Const., Inc., 2009 WL 3273509, at *1 (Del. Super. Sept. 30, 2009).
6
  Id.
7
  Id. at *2.

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are able to establish that defendants knew of the misrepresentations, then the plaintiff would

have a claim for fraud.8 The Court allowed the plaintiff to clarify which cause of action it meant

to plead. After the Hearing, the Court finds that the NM Counterclaims is not an unclarified

fraud claim.

        5.       Similarly, in Van Lake v. Sorin CRM USA, Inc., the defendant moved to dismiss

the plaintiff’s claim for negligent misrepresentation.9 The Court also held that the Chancery

Court is the court of exclusive jurisdiction over all claims of negligence misrepresentation except

Consumer Fraud Act claims.10 The Court determined that it lacked subject matter jurisdiction on

the negligence misrepresentation claim.11 However, the Court also determined that “in

examining a negligent misrepresentation claim, the Court must go one step farther. In this

regard, the Court must look beyond the ‘labeling’ of the claim and examine its substance to

determine the true nature of the claim.”12 Ultimately, the Court determined that the plaintiff

truly pleaded a simple negligence claim.13 The Court finds that the NM Counterclaim is not a

claim that seeks relief for simple negligence.

        6.       There are cases from the Court discussing whether Section 552 of the Restatement

(Second) of Torts provides a basis for bringing a negligent misrepresentation claim here instead

of the Chancery Court.14 However, those cases appear to have been decided prior to the Court’s

8
  Id. at *3.
9
   2013 WL 1087583, at *11.
10
   Id.
11
   Id.
12
   Id.
13
   Id. at *12.
14
   See e.g., Christiana Marine Serv. Corp. v. Texaco Fuel and Marine Mktg., 2002 WL 1335360, at *6 (Del. Super.
June 13, 2002) (discussing whether Section 552 provides an exception to the economic loss doctrine relating to a
negligent misrepresentation claim).

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ruling in Atwell v. RHIS, Inc. 15 In Atwell, the Court determined that it does not have subject

matter jurisdiction for negligent misrepresentation even under Section 552.16

         7.       In Atwell, the defendant moved to dismiss two counts of negligent

misrepresentation from the complaint.17 The plaintiff had plead two counts of negligent

misrepresentation—Counts III and IX. 18 The Atwell Court determined that Count III was truly

alleging negligence.19 Next, the Atwell Court determined that Count IX alleged negligent

misrepresentation.20 The Atwell Court reasoned that, in Count IX, the plaintiff expressly

contended that “there was a pecuniary duty to provide accurate information, that Defendant [ ]

failed to exercise reasonable care in obtaining and communicating false and inaccurate

information to Plaintiffs and that Plaintiffs suffered injuries and damages as a result.”21

         8.       Like here, the plaintiff in Atwell cited to cases where the Court addressed the

issue of negligent misrepresentation and adopted Section 552. The Atwell Court addressed and

refused to adopt those cases. Instead, the Atwell Court relied upon more recent cases that held

the Court did not have jurisdiction under Section 552 for negligent misrepresentation claims.22

As such, the Court denied the motion to dismiss and gave the plaintiff leave to transfer the count

under 10 Del. C. § 1902.23 Recently, the Court followed the reasoning in Atwell and held that

15
   Atwell v. RHIS, Inc., 2006 WL 2686532, at *1 (Del. Super. Aug. 18, 2006).
16
   Id.
17
   Id.
18
   The two counts in Atwell are: (i) Count III, saying, in relevant part, “Defendant [ ] knew, or should have known,
that there were problems with moisture build-up as a result of the broken furnace and heating system at the time he
completed the Discloser form. Defendant [ ] negligently failed to disclose to Plaintiff the true condition of the home
and that he had numerous problems in the past that required repair of the home due to the formation of mold as a
result of humidity build-up[;]” and (ii) Count IX saying, in relevant part, “In the face of their pecuniary duties to
provide accurate information, the Seller, Defendant . . . failed to exercise reasonable care in obtaining and
communicating false and inaccurate information supplied to the Plaintiffs. As a result, the actions of Defendant . . .
have caused the Plaintiffs to suffer injuries and damages as set forth herein above.” Id.
19
   Id.
20
   Id.
21
   Id.
22
   Id. at *2.
23
   Id.

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negligent misrepresentation claims continue to lie in the Chancery Court.24 The Court agrees

with the reasoning in Atwell and WyPie Invs., LLC v. Homschek, that—unless the negligent

misrepresentation claim is made under the Consumer Fraud Act—the Chancery Court has exclusive

jurisdiction over negligent misrepresentation claims.

           9.      The NM Counterclaim is similar to Count IX in Atwell. L-3 alleges that Optical

Air knew or believed the representations to be false, made the statements with reckless disregard

for the truth, or was negligent in making the statements and that L-3 suffered harm. The Court

finds and holds that the Chancery Court has exclusive subject matter jurisdiction over such a

negligent misrepresentation counterclaim. As such, the Court will grant the Motion as to the NM

Counterclaim; the Court will stay entry of judgment on the NM Counterclaim for ten (10) days in order

to allow L-3 the opportunity to request transfer of the counterclaim to Chancery Court under 10 Del. C. §

1902.

           IT IS SO ORDERED.

                                                             /s/ Eric M. Davis
                                                             Eric M. Davis, Judge

cc: File&ServeXpress

24
     WyPie Invs., LLC v. Homschek, 2006 WL 2686532, at *16 (Del. Super. Mar. 28, 2018).

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