Court Opinion

ID: 9749912
Source: CourtListenerOpinion
Date Created: 2023-08-28 14:04:36.504815+00
Date Added: 2024-06-11T09:05:12.294061
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

CITY OF NEWARK,                      §
                                     §     No. 29, 2023D
      Plaintiff Below,               §
      Appellant,                     §     Court Below: Superior Court
                                     §     of the State of Delaware
      v.                             §
                                     §     C.A. No. N21C-12-039
DONALD M. DURKIN                     §
CONTRACTING, INC.,                   §
DONALD M. DURKIN, JR.,               §
JAMES DURKIN, and                    §
MICHAEL DURKIN,                      §
                                     §
      Defendants Below,              §
      Appellees.                     §

                          Submitted: July 26, 2023
                          Decided:   August 28, 2023

Before VALIHURA, TRAYNOR, and LEGROW, Justices.

Upon appeal from the Superior Court of the State of Delaware: REVERSED.

Max B. Walton, Esquire, Shaun Michael Kelly, Esquire, Erica K. Sefton, Esquire,
CONNOLLY GALLAGHER LLP, Newark, Delaware, for Appellant City of
Newark.

Paul A. Logan, Esquire, POST & SCHELL, P.C., Wilmington, Delaware, for
Appellees Donald M. Durkin Contracting, Inc., Donald M. Durkin, Jr., James
Durkin, and Michael Durkin.

LEGROW, Justice:
      The appellant seeks review of a Superior Court Order1 resolving the appellees’

contractual indemnification obligations. The appellant sought a declaration from the

Superior Court that the appellees breached a settlement agreement between the

parties and, under the terms of that settlement agreement, the appellees must

indemnify the appellant for all its fees and costs associated with a 2019 subpoena

and a separate declaratory judgment action the appellees filed in 2019. The Superior

Court held that the appellees must indemnify the appellant for the subpoena, but not

the 2019 action.

      On appeal, the appellant contends the settlement agreement’s plain language

obligates the appellees to indemnify the appellant for the 2019 action, and the

Superior Court erred in concluding otherwise. The indemnification provision at issue

broadly required the appellees to indemnify the appellant for any fees and costs it

incurred in any proceeding related to the appellees’ separate litigation against a third

party in Pennsylvania. The appellees filed the 2019 action to clarify the appellant’s

obligation to cooperate with, and provide discovery in, that Pennsylvania litigation.

In its summary judgment decision, the Superior Court denied the appellant’s

indemnification claim without expressly addressing whether the 2019 action was

“related to” the Pennsylvania litigation.       Because the appellant is entitled to

1
 City of Newark v. Donald M. Durkin Contracting, Inc., 2023 WL 128258 (Del. Super. Jan. 6,
2023) [hereinafter “Durkin III”].
indemnification under the plain terms of the parties’ agreement, we reverse the

Superior Court’s decision.

      I.     RELEVANT FACTS AND PROCEDURAL BACKGROUND

       A.    The Federal Litigation
       On March 16, 2004, Donald Durkin Contracting, Inc., Donald M. Durkin, Jr.,

James Durkin, and Michael Durkin (collectively, “Durkin”) brought an action

against the City of Newark (the “City”) in the United States District Court for the

District of Delaware for wrongful termination of a contract to erect a reservoir and

for violation of Durkin’s civil rights (the “Federal Litigation”).2 Tighe Cottrell &

Logan (“Cottrell”) initially represented the City in the Federal Litigation.3 In 2006,

a jury awarded Durkin approximately $25 million in damages.4                 Both parties

appealed to the United States Court of Appeals for the Third Circuit and

simultaneously pursued mediation.5

       B.    The Settlement Agreement

       On June 23, 2008, while the Third Circuit appeal was pending, Durkin and

the City entered into a fully integrated settlement agreement (the “Settlement

2
  App. to Opening Br. at A12.
3
  Id.
4
  Id.; Donald M. Durkin Contracting, Inc. v. City of Newark, 2020 WL 2991778, at *2-3 (Del.
Super. June 4, 2020) [hereinafter “Durkin I”].
5
  App. to Opening Br. at A12-13.
                                            2
Agreement”).6 In Paragraph 5 of the Settlement Agreement, Durkin released the

City from claims for anything transpiring before the settlement:

       For and in consideration of the payment set forth in Section 2 above,
       Durkin and Federal agree on behalf of themselves and . . . their
       respective . . . employees, agents, principals, owners, directors,
       officers, . . . to fully, finally and completely release and discharge . . .
       the [City], from any and all claims, demands, damages, costs, expenses,
       liability, actions, causes of actions, or claims of liability or
       responsibility of any kind whatsoever (including attorneys’ fees and
       costs) which the Durkin and Federal Parties now have or may hereafter
       have on account of, or arising out of any matter or thing which has
       happened, developed or occurred prior to the signing of this Agreement,
       specifically including but not limited to, any and all claims on account
       of, arising out of or in any way related to the matters that were or could
       have been asserted in the Lawsuit, that arise from or are related to the
       facts or matters at issue in the Lawsuit . . . .7

Although Durkin generally released the City from all claims arising out of any

matters at issue in the Federal Litigation, Durkin expressly retained any claims it

might have against Cottrell and clarified that the release did not extend to the City’s

obligations under the Settlement Agreement:

       provided, however, that the Durkin and Federal Parties do not
       release the [City] from their obligations under this Agreement, and
       do not release any claims that they have or may have against Paul
       Cottrell, Tighe & Cottrell P.A. and individuals associated with Tighe &
       Cottrell P.A. (collectively the “Cottrell Firm”).8

       By the time the parties executed the Settlement Agreement, Durkin had

initiated litigation against Cottrell. Durkin expressly agreed to indemnify the City

6
  Id.
7
  Id. at A26-27.
8
  Id. at A27 (emphasis added).
                                            3
for any fees and costs the City incurred in any claim made against the City in the

action against Cottrell or in any proceeding related to that action.9 Specifically,

Paragraph 7 to the Settlement Agreement stated:

       If . . . the [City] become[s] a party to the Litigation, or [is a] party to
       any separate litigation or proceedings related in any way to the
       Litigation, then Durkin . . . hereby fully release[s] and discharge[s] the
       [City] from any claims or damages in the Litigation or any separate
       litigation or proceedings related to the Litigation. . . . If a claim of any
       nature and by any party . . . is brought against the [City] in the
       Litigation, or in separate litigation or proceedings related to the
       Litigation, [Durkin] agree[s] to: (1) pay all attorneys’ fees, expert
       fees, and costs incurred by the [City] in defense of the Litigation, or
       separate litigation or proceedings related to the Litigation; and (2)
       indemnify, defend, and hold the [City] harmless from all actions,
       causes of action, claims, demands, cost, liabilities, expenses and
       damages (including attorneys’ fees) arising out of, or in connection
       with any claim in the Litigation or any separate litigation or
       proceedings related to the Litigation.10

       The Settlement Agreement and associated mutual releases concluded the

Federal Litigation.11

       C.      The Pennsylvania Litigation
       On May 14, 2008, Durkin filed a separate action against Cottrell in the

Pennsylvania Court of Common Pleas (the “Pennsylvania Litigation”) asserting

claims of abuse of process, malicious prosecution, and intentional interference with

contractual relations.12 In that action, Durkin alleged Cottrell advised the City to

9
  Id. at A28. The Settlement Agreement refers to that action as the “Litigation.”
10
   Id. at A15, A28-30 (emphasis added).
11
   Durkin I, 2020 WL 2991778, at *3.
12
   App. to Opening Br. at A12.
                                                 4
pursue frivolous and baseless counterclaims against Durkin and third-party claims

against Durkin’s surety, Federal Insurance Company, based on allegations Cottrell

knew were false.13 The Pennsylvania Litigation is what the parties referred to as the

“Litigation” in the Settlement Agreement.

       Beginning in July 2012, Durkin sought discovery from Cottrell in the

Pennsylvania Litigation, and Cottrell invoked the attorney-client privilege for

discovery relating to Cottrell’s representation of the City in the Federal Litigation.14

In October 2013, Durkin asked the City to waive privilege for communications

between Cottrell and the City.15 The City refused,16 and on January 9, 2014, and

November 23, 2016, Durkin served the City with two subpoenas seeking documents

for Durkin’s use in the Pennsylvania Litigation.17 Durkin voluntarily withdrew those

subpoenas after the City moved to quash them.18 On January 15, 2019, Durkin

served its third and final subpoena demanding that the City produce in the

Pennsylvania Litigation communications between the City and Cottrell (the “2019

13
   Answering Br. at 6.
14
   App. to Opening Br. at A15.
15
   Id.
16
   Id.
17
   App. to Opening Br. at A16.
18
   Id.
                                           5
Subpoena”).19 Once again, the City moved to quash the 2019 Subpoena, and Durkin

withdrew it.20

       D.      Durkin’s 2019 Declaratory Judgment Action
       After withdrawing the 2019 Subpoena, Durkin filed a complaint in the

Superior Court for declaratory and other relief (the “2019 Declaratory Judgment

Action”).21 Durkin sought, inter alia,

       [j]udgment in its favor against the City of Newark declaring that
       pursuant to the City’s obligation to cooperate in the Settlement
       Agreement, the City shall produce, without objection or cost to
       Durkin, all requested documents and provide designees for deposition
       and at trial in connection with Durkin’s [Pennsylvania Litigation]
       against [Cottrell].22

Durkin’s theory that the City had a duty to cooperate in the Litigation was based on

Paragraph 18 of the Settlement Agreement, titled, “Continuing Cooperation.”23

Paragraph 18 states, “[t]he Parties agree to cooperate with each other and take such

additional actions as necessary to effectuate the purposes of this Agreement.”24

       The City filed a motion to dismiss and a motion for indemnification, sanctions,

and other relief. On June 4, 2020, the Superior Court dismissed Durkin’s 2019

Declaratory Judgment Action as untimely because the claim was filed six years after

19
   Id.
20
   Id. at A17.
21
   Id. at A49-62.
22
   Id. at A61-62.
23
   Id. at A61.
24
   Id. at A33.
                                          6
the City’s alleged breach of Paragraph 18.25 Durkin moved for reargument, but the

Superior Court denied that motion, holding that the terms of the Settlement

Agreement were unambiguous and observing that nothing in the Settlement

Agreement suggested that the City had an obligation to cooperate in the

Pennsylvania Litigation.26

       E.     The City’s Indemnification Requests and Declaratory Judgment
              Action
       A few months later, on November 10, 2020, the Superior Court denied the

City’s motion for indemnification, sanctions, and other relief, concluding that the

City’s indemnification claim was not ripe because the City had not yet followed the

Settlement Agreement’s procedure for seeking indemnification.27 The City then

formally demanded that Durkin indemnify the City for the attorneys’ fees and costs

it incurred defending Durkin’s 2019 Declaratory Judgment Action and 2019

Subpoena.28 Durkin refused to indemnify the City for either proceeding,29 and on

December 6, 2021, the City filed the current action seeking indemnification and

damages.30

25
   Id. at A17; Durkin I, 2020 WL 2991778, at *7-10.
26
   App. to Opening Br. at A17-18; Answering Br. at 8; Donald M. Durkin Contracting, Inc. v. City
of Newark, 2020 WL 5797622, at *10-11 (Del. Super. Sept. 29, 2020) [hereinafter “Durkin II].
27
   Donald M. Durkin Contracting, Inc. v. City of Newark, 2020 WL 6588903, at *7 (Del. Super.
Nov. 10, 2020).
28
   App. to Opening Br. at A39-41.
29
   Id. at A65-66.
30
   Id. at A9-23.
                                               7
       The City’s complaint alleged Durkin (i) breached Paragraph 5 of the

Settlement Agreement by pursuing the 2019 Subpoena and the 2019 Declaratory

Judgment Action, and (ii) breached Paragraph 7 of the Settlement Agreement by

refusing to indemnify the City for its fees and expenses incurred in each of those

proceedings.31 The parties promptly cross-moved for summary judgment.32

       On January 6, 2023, the Superior Court issued its Memorandum Opinion and

Order granting in part and denying in part each side’s motion for summary judgment.

The trial court granted the City’s motion for summary judgment with respect to its

indemnification claim for the 2019 Subpoena but denied the City’s motion with

respect to its indemnification claim for the 2019 Declaratory Judgment Action.33

The Superior Court held that Durkin’s 2019 Declaratory Judgment Action did not

breach Paragraph 5 of the Settlement Agreement because Durkin filed that action to

clarify the scope of the Settlement Agreement’s Continuing Cooperation provision.34

The Superior Court reasoned that Paragraph 5 of the Settlement Agreement did not

release, and in fact expressly preserved, the City’s obligations under the Settlement

Agreement, so Durkin’s action to enforce the Settlement Agreement did not

contravene the release.35

31
   Id. at A19-22.
32
   Id. at A42-48; A67-73. While the cross-motions were pending, the assigned judge retired and a
new judge was assigned to the case.
33
   Durkin III, 2023 WL 128258, at *7.
34
   Id. at *5-6.
35
   Id. at *6.
                                               8
       The Superior Court further held that the City was not entitled to

indemnification for the 2019 Declaratory Judgment Action.36 The Superior Court

did not, however, analyze the scope of the indemnification provision or its

application to the 2019 Declaratory Judgment Action. The trial court separately held

that the City was entitled to indemnification for the 2019 Subpoena because it was a

“claim” as that term was used in the Settlement Agreement, and the attorneys’ fees

and costs the City incurred in moving to quash the 2019 Subpoena were incurred in

a proceeding related to the Pennsylvania Litigation.37 On January 27, 2023, the City

filed its notice of appeal challenging only the Superior Court’s holding that the City

was not entitled to indemnification for Durkin’s 2019 Declaratory Judgment

Action.38

                          II.    STANDARD OF REVIEW

       A trial court’s decision resolving a motion for summary judgment is reviewed

de novo, applying the same standard as the trial court.39 Similarly, questions of

contractual interpretation are subject to de novo review.40

36
   Id.
37
   Id.
38
   Opening Br. at 2.
39
   AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 443 (Del. 2005); Paul v.
Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009).
40
   CompoSecure, L.L.C. v. CardUX, LLC, 206 A.3d 807, 816 (Del. 2018).
                                             9
                                   III.   ANALYSIS

      The City argued to the Superior Court that the 2019 Declaratory Judgment

Action sought a specific declaration that the City was obligated to assist Durkin with

its discovery and trial efforts in the Pennsylvania Litigation, the actions therefore

were related, and the City was entitled to indemnification under the Settlement

Agreement. The City raises similar arguments on appeal. First, the City contends

that the plain language of Paragraph 7 requires indemnification because the actions

are related. Second, it asserts that the Superior Court’s other rulings support the

City’s position regarding relatedness. Third, it argues the parties’ intent is consistent

with the City’s indemnification claim.41

      A.     The Settlement Agreement’s plain language requires Durkin to
             indemnify the City for the 2019 Declaratory Judgment Action.

      The City first contends Durkin’s 2019 Declaratory Judgment Action was

related to the Pennsylvania Litigation because it specifically referred to and sought

relief compelling the City to assist with Durkin’s discovery efforts in the

Pennsylvania Litigation.42 According to this argument, the two actions are “related,”

and Paragraph 7 requires Durkin to indemnify the City.43

41
   Because neither side contends Paragraph 7 is ambiguous, we have not relied on the City’s
argument regarding the extrinsic evidence of the parties’ intent.
42
   Opening Br. at 14.
43
   Id.
                                            10
       Delaware follows the objective theory of contracts, meaning “a contract’s

construction should be that which would be understood by an objective, reasonable

third party.”44    Further, the Court will interpret clear and unambiguous terms

according to their ordinary meaning45 and will not “torture contractual terms to create

ambiguity.”46

       The terms of the Settlement Agreement are unambiguous. The relevant

section of Paragraph 7 of the Settlement Agreement states:

       If a claim of any nature and by any party, including but not limited
       to a claim for indemnification or contribution, is brought against the
       [City] in the Litigation, or in separate litigation or proceedings
       related to the Litigation, [Durkin] agree[s] to: (1) pay all attorneys’
       fees, expert fees, and costs incurred by the [City] in defense of the
       Litigation, or separate litigation or proceedings related to the Litigation;
       and (2) indemnify, defend, and hold the [City] harmless from all
       actions, causes of action, claims, demands, costs, liabilities,
       expenses and damages (including attorneys’ fees) arising out of, or
       in connection with any claim in the Litigation or any separate
       litigation or any separate proceedings related to the Litigation.47

       Paragraph 7 makes it clear that Durkin agreed to indemnify the City for any

claim brought against it “related to” the Pennsylvania Litigation or “arising out of”

or “in connection with” any claim in the Pennsylvania Litigation. That language

44
   Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting Osborn ex rel. Osborn v.
Kemp, 991 A.2d 1153, 1159 (Del. 2010)).
45
   GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012).
46
   Amtower v. Hercules Inc., 1999 WL 167740, at *12 (Del. Super. Feb. 26, 1999), aff’d sub nom.
Rowland v. Amtower, 748 A.2d 407 (Del. 2000).
47
   App. to Opening Br. at A29-30 (emphasis added).
                                              11
sweeps broadly, and Delaware courts recognize the phrases “relating to” and “arising

out of” as “paradigmatically broad terms.”48

      The trial court’s decision does not apply this language to the 2019 Declaratory

Judgment Action. The Superior Court correctly concluded the 2019 Declaratory

Judgment Action did not breach Paragraph 5 of the Settlement Agreement. The City

does not appeal this conclusion. But, without analyzing whether the 2019

Declaratory Judgment Action was related to or arose out of the Litigation, the

Superior Court concluded, “[t]he City is also not entitled to indemnification for its

costs and attorneys’ fees under Paragraph 7.”49 The City’s indemnification claim,

however, was distinct from its breach claim under Paragraph 5, and the conclusion

that the 2019 Declaratory Judgment Action did not breach Paragraph 5 does not lead

inexorably to the conclusion that the City is not entitled to indemnification under

Paragraph 7. Paragraph 7 requires indemnification for proceedings “related to” and

“arising out of” the Pennsylvania Litigation. The relief Durkin sought in the 2019

Declaratory Judgment Action was the City’s cooperation in the Pennsylvania

Litigation, including an order requiring the City to produce documents and provide

a witness for deposition and at trial. That relief relates to and arises out of the

Pennsylvania Litigation.

48
   Lillis v. AT & T Corp., 904 A.2d 325, 331 (Del. Ch. 2006); see Snow Phipps Grp. v. KCAKE
Acquisition, Inc., 2021 WL 1714202, at *35 (Del. Ch. Apr. 30, 2021).
49
   Durkin III, 2023 WL 128258, at *6.
                                            12
       B.     The Superior Court’s other rulings recognize the relationship
              between the Pennsylvania Litigation and the 2019 Declaratory
              Judgment Action.

       The conclusion that the Pennsylvania Litigation and the 2019 Declaratory

Judgment Action are related is consistent with the Superior Court’s prior rulings in

the 2019 action. In its dismissal of Durkin’s 2019 Declaratory Judgment Action, the

Superior Court stated: “[a]fter reviewing the Complaint, Response, and

Supplemental Briefs, it is apparent that [Durkin] requests this Court to interpret the

terms of the Settlement Agreement and declare that [the City] is henceforward

obligated to provide [Durkin] with requested documents for use in the Pennsylvania

[L]itigation.”50   And in its September 2020 Opinion denying reargument, the

Superior Court again observed: “[Durkin] seeks a declaration that the Settlement

Agreement obligates [the City] to assist [Durkin] in its case against Cottrell (the

Pennsylvania Litigation).”51

       The Superior Court’s analysis in this case regarding the 2019 Subpoena also

underscores the relatedness between the 2019 Declaratory Judgment Action and the

Pennsylvania Litigation. The Superior Court considered the plain language of

Paragraph 7 when it awarded the City indemnification for the 2019 Subpoena.52 In

that portion of its analysis, the Superior Court focused on the plain meaning of the

50
   Durkin I, 2020 WL 2991778, at *7.
51
   Durkin II, 2020 WL 5797622, at *3.
52
   Durkin III, 2023 WL 128258, at *6.
                                         13
word “claim” and held that “the attorneys’ fees and costs incurred by the City in

moving to quash the 2019 Subpoena were incurred in a proceeding related to the

Pennsylvania Litigation, as required by Paragraph 7.”53 That holding, which neither

party appealed, aligns with the City’s position that Durkin’s 2019 Declaratory

Judgment Action also is related to the Pennsylvania Litigation. After all, the 2019

Declaratory Judgment Action and the 2019 Subpoena sought the same relief from

the City: production of documents and witnesses in the Pennsylvania Litigation.

           Accordingly, because indemnification was required under both the plain

language of the Settlement Agreement and the Superior Court’s other holdings

regarding the scope of the proceedings between the parties, the Superior Court

should have entered judgment in the City’s favor for its indemnification claim

relating to the 2019 Declaratory Judgment Action.

                                  IV.   CONCLUSION

           For the foregoing reasons, we reverse the portion of the Superior Court’s

January 6, 2023 Memorandum Opinion and Order awarding summary judgment to

Durkin for the City’s claim for indemnification for the 2019 Declaratory Judgment

Action. This case is remanded to the Superior Court for further proceedings

consistent with this opinion. Jurisdiction is not retained.

53
     Id.
                                           14