Court Opinion

ID: 4233564
Source: CourtListenerOpinion
Date Created: 2017-12-29 22:08:53.198656+00
Date Added: 2024-06-11T09:23:57.388715
License: Public Domain

COURT OF CHANCERY
                                  OF THE
                            STATE OF DELAWARE
                                                                   417 S. State Street
JOSEPH R. SLIGHTS III                                           Dover, Delaware 19901
 VICE CHANCELLOR                                               Telephone: (302) 739-4397
                                                               Facsimile: (302) 739-6179

                        Date Submitted: December 19, 2017
                         Date Decided: December 29, 2017

R. Judson Scaggs, Jr., Esquire               Michael J. Barrie, Esquire
Ryan D. Stottmann, Esquire                   Stephen M. Ferguson, Esquire
Morris, Nichols, Arsht & Tunnell LLP         Benesch, Friedlander, Coplan
1201 North Market Street                          & Aronoff, LLP
Wilmington, DE 19899                         222 Delaware Avenue, Suite 801
                                             Wilmington, DE 19801

       Re:    The HC Companies, Inc. v. Myers Industries, Inc.
              C.A. No. 12671-VCS

Dear Counsel:

       This Letter Opinion addresses Myers Industries, Inc.’s and MYE Canada

Operations Inc.’s (together, “Myers”) motion for reargument regarding the Court’s

decision on The HC Companies, Inc.’s (“HC”) motion for partial summary

judgment. For the reasons that follow, the motion is denied.

       HC moved for an order declaring that it was entitled to escrow property set

aside as part of an asset purchase agreement (the “Purchase Agreement”)1 and

1
 Aff. of Jason Reed in Support of HC’s Mot. for Partial Summ. J., Ex. 1 (“Purchase
Agreement”).
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 2

escrow agreement (the “Escrow Agreement”).2 The Escrow Agreement required

Myers to object to HC’s indemnification claims within 10 days of receiving a claim

notice by stating in writing its bases for objecting.3 The Court ruled that Myers had

failed to object to HC’s second claim notice within the specified 10-day window,

and thus had “irrevocably waived the right to contest the distribution” of the escrow

property.4

         In order to succeed on a motion for reargument, the moving party must

demonstrate that the Court “‘misapprehended the law or the facts so that the outcome

of the decision would be affected.’”5 “[T]he court’s focus on a motion under

Rule 59(f) is solely on the facts in the record at the time of the decision.”6 When

2
 Aff. of Jason Reed in Support of HC’s Mot. for Partial Summ. J., Ex. 2 (“Escrow
Agreement”).
3
 Escrow Agreement § 1.3(c)(i); HC Companies, Inc. v. Myers Indus., Inc., C.A. 12671-
VCS, slip op. at 13–16 (Del. Ch. Dec. 5, 2017) (“Op. _”).
4
    Op. at 16 (quoting Escrow Agreement § 1.3(c)(i)).
5
 Bear Stearns Mortg. Funding Tr. 2006–SL1 v. EMC Mortg. LLC, 2015 WL 139731, at *8
(Del. Ch. Jan. 12, 2015) (quoting Miles, Inc. v. Cookson Am., Inc., 677 A.2d 505, 506
(Del. Ch. 1995)).
6
  Ambase Corp. v. City Investing Co., 2001 WL 167698, at *1 (Del. Ch. Feb. 7, 2001)
(citations omitted).
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 3

“the motion for reargument represents a mere rehash of arguments already

made . . . the motion must be denied.”7 “[And a] party may not present a new

argument for the first time in a motion for reargument.”8 With these standards in

mind, the motion must be denied because Myers either: (1) rehashes arguments it

raised in its opposition to HC’s motion; (2) raises entirely new arguments; or

(3) raises arguments that reflect a misapprehension of the Court’s decision.

         First, Myers argues that the Court “inexplicably” and incorrectly concluded

that Myers’ objection to HC’s first claim notice did not apply to items that overlap

in HC’s first and second claim notices.9 The Court addressed this issue squarely on

Page 15 of its decision, noting that the basis for Myers’ objection to HC’s first claim

notice was that it lacked detail, and finding HC unambiguously addressed that

7
    Miles, 677 A.2d at 506.
8
 inTEAM Assoc., LLC v. Heartland Payment Sys., Inc., 2016 WL 6819734, at *2 (Del. Ch.
Nov. 18, 2016).
9
 Def. Myers’ Mot. for Reargument 4–5. Myers also claims that it “did not argue that the
notices were the same.” Id. at 4 n.2 (emphasis in original). It did. E.g., Def. Myers’
Answering Br. in Opp’n to Pl.’s Mot. for Partial Summ. J. (“Myers’ Answering Br.”) 2,
20; Tr. at 41:16–18 (“And I would suggest, Your Honor, that if you take the two claim
notices, that you will find that they are substantially materially the same.”) (emphasis
supplied).
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 4

objection in its second claim by providing additional detail.10 The Court also

observed that objections to indemnification claims, under the Escrow Agreement,

are tied to the “corresponding Claim Notice,” and thus Myers’ only timely objection

was tied to the first claim notice, not the second claim notice.11 Myers’ rehashed

argument is based on a misapprehension of the Court’s decision and the Escrow

Agreement.12

         Second, Myers argues that once it objected to an indemnification claim

(creating a “Disputed Claim”) HC could not “override” Myers’ objection by making

another claim.13 It also contends that the Court did not “cite any contractual

10
   Op. at 13–15 & n.38; Escrow Agreement § 1.3(c)(i) (providing that Myers’ objection
notice “shall include a statement of the reason or basis” for Myers’ objection). Because
Myers’ basis for rejecting HC’s first claim notice was that it lacked detail, under the terms
of the Escrow Agreement, Myers could not “stand on its original objection” after HC made
efforts to provide additional detail. Op. at 15 n.38. A responsive objection, if an objection
was to be made, was required.
11
     Op. at 15.
12
   To the extent Myers seeks to reargue that its objection to the second claim notice was
timely, that argument was raised in its opposition to HC’s motion for partial summary
judgment and the Court rejected it. Op. at 13–16. Again, that is not a proper basis for
reargument. Miles, 677 A.2d at 506 (“Where, as here, the motion for reargument represents
a mere rehash of arguments already made . . . the motion must be denied.”).
13
     Def. Myers’ Mot. for Reargument 5 (quoting Escrow Agreement § 1.3(c)(i)).
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 5

language . . . that supports [the opposite] conclusion.”14 Myers seeks to rehash an

argument that the Court rejected based on the clear terms of Section 1.3(c)(i) of the

Escrow Agreement.15 HC was free to make more than one claim, and once the claim

notice was served, Myers was obligated to object to that claim within 10 days, which

it did not do.16

           Third, Myers makes a new argument that it could have (but did not) raise in

response to HC’s motion for partial summary judgment. It appears to argue that

even if Myers “irrevocably waived the right to contest distribution” of the escrow

property,17 it may still raise “defenses” to prevent “distribution of the entire escrow

14
     Id.
15
   Op. at 15 (“Section 1.3(c)(i) provides that Myers was obligated timely to ‘contest [the]
Indemnification Claim(s)’ and further provides that if it did not do so, it lost the right to
‘contest the distribution of that portion of the Escrow Property specified in the
corresponding Claim Notice.’ This language unambiguously requires that Myers object
to claims as made and makes clear that objections raised will be tied to ‘the corresponding
Claim Notice.’ The language also reveals that the parties anticipated HC might make more
than one claim. Thus, Myers’ first objection (the only timely objection) was tied to the
‘corresponding’ First Claim Notice and did not carry over to the Second Claim Notice.”)
(emphasis in original).
16
     Id. at 15–16 (quoting Escrow Agreement § 1.3(c)(i)).
17
     Escrow Agreement § 1.3(c)(i) (emphasis supplied).
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 6

amount.”18 This argument is both untimely and flawed as a matter of contract

construction.19 Myers fails to explain how raising a “defense” to the distribution of

escrow funds is different from “contesting” a distribution.             I can discern no

meaningful distinction. As the Court previously determined, Myers “irrevocably

waived the right to contest distribution” of the escrow property, and HC is entitled

to the full amount of the escrow property under the plain terms of the Escrow

Agreement.20 That waiver extends to “raising defenses” to the distribution(s) as

well. With that said, to be clear, this decision, like the Court’s earlier decision,

18
     Def. Myers’ Mot. for Reargument 2–3, 6–7 (emphasis supplied).
19
   The Court addressed Myers’ original argument that HC’s delay in providing notice
caused it to “forfeit[] its rights and defenses” under Section 8.05(c) of the Purchase
Agreement. Myers’ Answering Br. at 25 (quoting Purchase Agreement § 8.05(c)); Op. at
20–21 (same). Myers now claims that the Court’s discussion was an incorrect
interpretation of the Escrow Agreement. Def. Myers’ Mot. for Reargument 2–3, 6–7
(arguing that “nothing in the Escrow Agreement addresses waiver of Myers’
defenses . . . .”). As noted, this is a new argument that Myers is raising for the first time
on this motion and is, therefore, an improper basis for reargument. inTEAM Assoc., 2016
WL 6819734, at *2 (“A party may not present a new argument for the first time in a motion
for reargument.”).
20
     Op. at 16, 22–23.
The HC Companies, Inc. v. Myers Industries, Inc.
C.A. No. 12671-VCS
December 29, 2017
Page 7

expresses no opinion as to the parties’ rights and obligations regarding HC’s claim

for amounts in excess of the escrow property.21

       For the reasons discussed above, Myers’ motion for reargument is DENIED.

IT IS SO ORDERED.

                                                  Very truly yours,

                                                  /s/ Joseph R. Slights III

21
  Id. at 22 n.56. Myers takes issue with the Court’s analogizing Section 1.3(c)(i) of the
Escrow Agreement to a short statute of limitations. Def. Myers’ Mot. for Reargument 6.
Of course, Section 1.3(c)(i) is not literally a statute of limitations; the Court simply noted
that the “parties structured [it] in a way that resembles” one. Op. at 22 n.55.