Court Opinion

ID: 4122597
Source: CourtListenerOpinion
Date Created: 2017-02-02 15:05:22.971485+00
Date Added: 2024-06-11T14:35:12.575496
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

DEWEY RAY LAVENDER, and                      :
STEVEN WARREN,                               :     C.A. No: K13C-08-024 RBY
                                             :     In and For Kent County
                   Plaintiffs,               :
                                             :
      v.                                     :
                                             :
SCOTT KOENIG, individually and in his        :
official capacity as City Manager, KIM       :
HAWKINS, individually and in her official    :
capacity as Director of Human Resources,     :
the CITY OF DOVER COUNCIL, and               :
CITY OF DOVER,                               :
                                             :
                   Defendants.               :

                           Submitted: November 18, 2016
                            Decided: February 1, 2017

                 Upon Consideration of Defendant City of Dover’s
                        Motion for Summary Judgment
                                  GRANTED

                                     ORDER

Michele D. Allen, Esquire, Law Offices of Michele D. Allen, LLC, Hockessin,
Delaware for Plaintiffs.

Daniel A. Griffith, Esquire, Whiteford Taylor Preston, LLC, Wilmington,
Delaware for Defendant City of Dover.

Young, J.
Lavender, et al. v. Koenig, et al.
C.A. No. K13C-08-024 RBY
February 1, 2017

                                     SUMMARY
       Dewey Ray Lavender and Steven Warren (“Plaintiffs”) filed a Complaint
against Scott Koenig, individually and in his capacity as City Manager; Kim
Hawkins, individually and in her official capacity as Director of Human Resources;
the City of Dover Council, and the City of Dover (“Defendants”). Plaintiffs asserted
claims stemming from the manner in which they were allegedly induced to continue
working at the McKee Run Generating Station (“Power Plant”) and Defendants’
denial of their application for pension benefits under the City of Dover’s Code of
Ordinances. The statute of limitations bars Plaintiffs’ claims for breach of the implied
covenant of good faith and fair dealing. Further, Plaintiffs’ claims for breach of
contract fail because Plaintiffs’ are not eligible employees under the City of Dover’s
Code of Ordinances.
                                FACTS AND PROCEDURE
       Steven Warren started working at the Power Plant in August 1980. He retired
from the Power Plant in 2015. Dewey Ray Lavender started working at the Power
Plant in March 1981. He still works at the Power Plant. The parties do not dispute that
from 1981 until 1996 the City of Dover ran this Power Plant.
       In 1996, the City of Dover adjusted the way the Power Plant functioned. It did
this through an agreement with D/FD Operating Services LLC through its agent Louis
Dreyfus Electric Power Inc. Defendants maintain that the City of Dover privatized the
Power Plant by transferring control of the Power Plant to D/FD Operating Services
LLC. Plaintiffs assert that the City of Dover controlled the Power Plant. The parties
agree that the City of Dover reimbursed D/FD Operating Services LLC for the

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Plaintiffs’ wages and benefits under this agreement.
       The parties agree that in February 1996 Plaintiffs signed identical letters
allowing them to continue working at the Power Plant.1 The letters stated “as an
employee of the Company, you will no longer be eligible to continue receiving city
benefits.” Further, the letters asked Plaintiffs to (1) decide whether to decline
employment at the Power Plant; (2) accept employment at the Power Plant, while
withdrawing fifty percent of the cash value of their unused sick leave, as a bonus, and
remaining vested in the City of Dover’s pension plan; or (3) accept employment at the
Power Plant, while withdrawing 100 percent of the cash value of their unused sick
leave, as a bonus, and not remaining vested in the City of Dover’s pension plan.
Plaintiffs chose the second option to accept employment and remain vested in the
City of Dover’s pension plan.
       In 2006, Dover adjusted the way the Power Plant functioned again. The City
of Dover entered an agreement with North American Energy Services Company
(“NAES”). Defendants assert this agreement placed NAES in control of the Power
Plant. Plaintiffs claim the City of Dover was still in control of the Power Plant.
Plaintiffs continued working at the Power Plant. Under this agreement, the parties
agree, the City of Dover reimbursed NAES for Plaintiffs wages and benefits.
       Steven Warren testified that in 2008, he found out about an agreement that
allowed Dover paramedics to remain in Dover’s pension plan – even after they started

       1
           Plaintiffs dispute whether said letters were employment offers.

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working with Kent County.2 He asserted that he discovered this information on the
City of Dover’s website. Plaintiffs assert that certain employees were allowed to
maintain their City of Dover pension in a manner similar to the paramedics.
        In January 2012, Plaintiffs started the process of applying for unreduced
pension benefits with the City of Dover. On February 14, 2012, Scott Koenig,
Dover’s then City Manager, notified Plaintiffs’ attorney that he did not agree that they
were entitled to unreduced pension benefits. On July 11, 2012, Plaintiffs sent Kim
Hawkins, Dover’s then Director of Human Resources, a letter reiterating their belief
that they were entitled to unreduced pension benefits. On August 20, 2012, Plaintiffs’
application for unreduced pension benefits was formally denied.3
        In her deposition testimony, the Controller Treasurer of the City of Dover,
Donna S. Mitchell, noted that Plaintiffs have not paid any contribution for a City of
Dover pension since, at the latest, October 2000.4 Further, she asserted that bringing
in past employees, similarly situated to Plaintiffs, would create an unfunded liability
for the City of Dover. Plaintiffs produced no evidence challenging these assertions.
        On August 21, 2013, Plaintiffs filed the Complaint for this suit. Defendants

        2
         Defendants asserted in their motion that Dewey Ray Lavender testified similarly in his
deposition. However, Defendants did not provide the page of the deposition containing such
testimony.
        3
          Defendants avow that Plaintiffs were aware that the City of Dover would deny their
application for unreduced pension benefits in 1996.
        4
          Mitchell was unsure of whether Plaintiffs contributed to the city pension plan prior to
the date on which she was hired (October 2000). Defendants assert that Plaintiffs have not
contributed to the Dover pension plan since 1996. However, they did not produce evidence
supporting this assertion.

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removed this suit to federal court on December 19, 2013. After the United States
District Court for the District of Delaware dismissed all of the federal claims asserted
in the initial suit, it remanded the remaining claims to this Court. The City of Dover
then filed the instant Motion for Summary Judgment.
                                      STANDARD OF REVIEW
         Summary judgment is appropriate where the record exhibits no genuine issue
of material fact, and the movant is entitled to judgment as a matter of law.5 This Court
shall consider the “pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any” in deciding the motion.6 The moving party
bears the initial burden of demonstrating the nonexistence of material issues of fact;
the burden then shifts to the nonmoving party to show that there are material issues
of fact in dispute.7 The Court views the record in the light most favorable to the
nonmoving party.8 When material facts are in dispute, or “it seems desirable to
inquire more thoroughly into the facts, to clarify the application of the law to the
circumstances,” summary judgment will not be appropriate.9 However, when the facts
permit a reasonable person to draw but one inference, the question becomes one for

         5
             United Vanguard Fund, Inc. v. Takecare, Inc., 693 A.2d 1076, 1079 (Del. May 22,
1997).
         6
             Del. Super. Ct. Civ. R. 56(c).
         7
             Fauconier v. USAA Cas. Ins. Co., 2010 WL 847289, at *2 (Del. Super. Mar. 1, 2010).
         8
             Moore v. Sizemore, 405 A.2d 679, 680 (Del. Aug. 6, 1979).
         9
             Sztybel v. Walgreen, 2011 WL 2623930, at *2 (Del. Super. June 29, 2011).

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decision as a matter of law.10
                                         DISCUSSION
       Defendant City of Dover argues that the statute of limitations bars Plaintiffs’
claims for breach of the implied covenant of good faith and fair dealing and breach
of contract11 because these claims accrued more than three years before Plaintiffs filed
suit. Alternatively, Defendant City of Dover argues that Plaintiffs have not provided
evidence sufficient to support their breach of the implied covenant of good faith and
fair dealing claims. Finally, Defendant City of Dover asserts that Plaintiffs’ breach
of contract claims should fail because Plaintiffs were not eligible employees under
the City of Dover’s pension scheme.
       The parties do not dispute the material facts in this action. Thus, summary
judgment is appropriate. Plaintiffs asserted their claims for breach of the implied
covenant of good faith and fair dealing more than three years after their claims
accrued. The discovery rule did not toll the statute of limitations for these claims.
Further, Plaintiffs are not eligible employees under the City of Dover’s pension
scheme.
I. The Statute of Limitations Bars Plaintiffs’ Claims for Breach of the Implied
Covenant of Good Faith and Fair Dealing; It Does Not Bar Plaintiffs’ Breach of
Contract Claims
       The statute of limitations for breaches of contract expires three years after the

       10
            Wootten v. Kiger, 226 A.2d 238, 239 (Del. 1967).
       11
          Pension laws are a form of contract between the state and its employees. Thompson v.
State Bd. of Pension Trs., 552 A.2d 850, 852 (Del. Super. Sept. 28, 1988).

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date on which a cause of action accrues. 1 2 To determine whether the claims in the
instant suit are barred by the statute of limitations this Court must answer two
questions. First, when did the claims accrue? Second, if the claims accrued more than
three years before Plaintiffs filed their suit, was the statute of limitations tolled at any
point?
         Plaintiffs’ breach of the implied covenant of good faith and fair dealing claims
accrued more than three years before Plaintiffs filed their suit.
         Plaintiffs’ breach of contract claims accrued less than three years before
Plaintiffs filed their suit.
         The circumstances surrounding Plaintiffs’ claims for breach of the implied
covenant of good faith and fair dealing did not toll the statute of limitations. Thus, the
statute of limitations bars Plaintiffs’ claims for breach of the implied covenant of
good faith and fair dealing. The statute of limitations does not bar Plaintiffs’ claims
for breach of contract.
         A. When Did the Claims Accrue?
         In contract actions, the statute of limitations accrues “at the time the contract
is broken, not at the time when actual damage results or is ascertained.”13 In U.S.
Cellular Investment Company of Allentown v. Bell Atlantic Mobile Systems, Inc., the
appellant sued Bell Atlantic for violating an agreement not to compete with a

         12
          10 Del. C. § 8106; Connelly v. State Farm Mut. Auto. Ins. Co., 135 A.3d 1271, 1275
(Del. Mar. 4, 2016).
         13
              Worrel v. Farmers Bank of the State of Delaware, 430 A.2d 469, 472 (Del. May 5,
1981).

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partnership in a specific geographical area.14 The Delaware Supreme Court held that
the statute of limitations in this suit accrued when Bell Atlantic filed an application
with the FCC to provide cellular service in areas adjoining the specific geographic
area because this was the date on which the contract was breached.15
       Plaintiffs’ claims for breach of the implied covenant of good faith and fair
dealing accrued in February 1996, when Plaintiffs accepted employment with D/FD
Operating Services LLC, because that was the point at which Defendants allegedly
breached the implied covenant of good faith and fair dealing. In the employment
context, a cause of action arises for breach of the implied covenant of good faith and
fair dealing when an employer “induces another to enter into an employment contract
through actions, words, or withholding information, which is intentionally deceptive
in some material way to the contract.”16 Plaintiffs entered the relevant employment
contract in February 1996, when they signed their offer letters. They could not have
been induced into entering their employment contract at any point after February
1996. Thus, the action could not have accrued at any point after February 1996.
       Plaintiffs’ claims for breach of contract accrued in August 2012 when
Defendants denied their application for benefits because that was the point at which
Defendants allegedly breached their alleged obligation to pay Plaintiffs’ benefits.
With respect to their breach of contract claims, Plaintiffs maintain that they are

       14
         United States Cellular Inv. Co. of Allentown v. Bell Atlantic Mobile Sys. Inc., 677 A.2d
497, 499 (Del. May 29, 1996).
       15
            Id. at 503.
       16
            E.I. DuPont de Nemours and Co. v. Pressman, 679 A.2d 436, 440 (Del. May 2, 1996).

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entitled to benefits under § 2-327 of the City of Dover Code of Ordinances.
Plaintiffs’ application for benefits, under this provision of the City of Dover Code of
Ordinances, was not denied until August 20, 2012. As such, the breach of contract
claims accrued on August 20, 2012.
     B. Was the Statute of Limitations Tolled for Plaintiffs’ Breach of Implied
Covenant of Good Faith and Fair Dealing Claims?
       Plaintiffs argue that any of their claims filed more than three years after the
date on which the statute of limitations accrued are still within the statute of
limitations. They assert that they did not know of any facts that would either
constitute a cause of action or put them on inquiry of the possibility that facts existed
that would constitute a cause of action until 2012. This “discovery rule,” the
application of which Plaintiffs’ claim, applies in three situations. The first situation
is one in which the defendant has fraudulently concealed key facts.17 The second is
where the injury was inherently unknowable. 1 8 The third situation is one in which a
plaintiff reasonably relies on the competence and good faith of a fiduciary who is
alleged to have engaged in wrongful self-dealing.19 Plaintiffs’ claims for breach of the
implied covenant of good faith and fair dealing do not fall under any of these
situations. Therefore, Plaintiffs’ claims for breach of the implied covenant of good
faith and fair dealing are barred by the statute of limitations.

       17
         AM General Holdings LLC v. The Renco Group, Inc., 2016 WL 4440476, at *13 (Del.
Ch. Aug. 22, 2016).
       18
            Id.
       19
            Id.

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February 1, 2017

              1. Defendants Did Not Fraudulently Conceal Key Facts Regarding
Plaintiffs’ Implied Covenant of Good Faith and Fair Dealing Claims
         Two elements must be present for this Court to find that Defendants
fraudulently concealed facts in a manner sufficient to toll the statute of limitations.
Defendants must have acted in an affirmative manner to conceal the cause of action
from Plaintiffs.20 Defendants also must have known about the alleged wrong.21 In the
instant matter, Defendants never affirmatively concealed the cause of action from
Plaintiffs.
         Inaction does not constitute concealing a fact in an affirmative manner. In
Nardo v. Guido DeAscanis & Sons, Inc., the plaintiffs contracted with the defendant
to build a building.22 The defendant improperly constructed the building’s roof
rafters.23 Defendant did not notify the plaintiff of the roof issues, nor did the
defendant take any sort of action to hide the roof issues from the plaintiff.24 The
Delaware Superior Court held that the defendant did not fraudulently conceal the
facts from the plaintiff because there was no affirmative act of concealment or
representation made to exclude suspicion.25

         20
              Wright v. Dumizo, 2002 WL 31357891, at *3 (Del. Super. Oct. 17, 2002).
         21
              Id.
         22
              Nardo v. Guido DeAscanis & Sons, Inc., 254 A.2d 254, 255 (Del. Super. May 26,
1969).
         23
              Id.
         24
              Id. at 256.
         25
              Id.

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       Similar to the defendant in Nardo, Defendants never concealed a fact in an
affirmative manner in this case. While it is true that Plaintiffs’ employment
acceptance letters did state “as a regular employee of the Company, you will no
longer be eligible to continue receiving City benefits,” this assertion falls far short of
hiding other employees’ entitlement to benefits. Even if it did not, this statement was
made by D/FD Operating Services LLC, a non-party to this suit. Additionally,
Plaintiffs failed to provide any evidence that Defendants affirmatively concealed the
City of Dover’s payment arrangements with D/FD Operating Services LLC and
NAES. Thus, Defendants did not fraudulently conceal key facts regarding Plaintiffs’
implied covenant of good faith and fair dealing claims.
           2. Plaintiffs’ Injuries Were Not Inherently Unknowable Under the
Discovery Rule
       Under the discovery rule, alleged injuries are inherently unknowable when a
plaintiff does not detect an alleged injury because of his “justifiable reliance on a
professional or expert whom [he had] no ostensible reason to suspect of deception.”26
       It is central to this application of the discovery rule that the relationship,
between the plaintiff and defendant, be characterized by a lack of ability to detect
deception. In AM General Holdings LLC v. The Renco Group, Inc., a plaintiff and
defendant entered into a joint-venture agreement.27 The joint-venture agreement
contained provisions that would make it possible for the defendant to catch the

       26
            AM General Holdings LLC, 2016 WL 4440476 at *14.
       27
            Id. at *2.

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plaintiff in the event that the plaintiff breached the agreement.28 The Court of
Chancery held that the plaintiff’s alleged injuries were not inherently unknowable,
because the plaintiff had mechanisms at its disposal through which it could discover
a breach of the joint-venture agreement.29
        Courts require that a situation, in which a fact is inherently unknowable,
involve a relationship between layperson and an expert or professional.30 In Rudginski
v. Pullella, the plaintiffs asserted that a plumbing company negligently installed their
septic system.31 The Superior Court held that the discovery rule applied to that case
because the situation was similar to previously decided cases, stating that facts were
inherently unknowable, involving the hidden errors of accountants, lawyers, and
doctors.32
        The instant case is not one in which Plaintiffs lacked the ability to detect
deception. It is true that Plaintiffs did not have the resources that the plaintiff in AM
General Holdings LLC had. However, Steven Warren admitted in his deposition to
knowing that some paramedics were allowed to maintain their status as city

        28
             Id.
        29
             Id. at *14.
        30
           See also Krahmer v. Christie’s Inc., 903 A.2d 773, 783 (Del. Ch. June 2, 2006)
(holding facts were not inherently unknowable in a situation where a person purchased an
allegedly fake piece of art because the defendant was not the plaintiff’s agent and plaintiff could
have hired an appraiser prior to purchasing the artwork).
        31
             Rudginski v. Pullella, 378 A.2d 646, 646-47 (Del. Super. Sept. 6, 1977).
        32
             Id. at 649.

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employees while working for Kent County as early as 2008. Further, this case is not
a situation in which an alleged breach is only within the knowledge of the
Defendants. Steven Warren said he made his discovery on the City of Dover’s
website. Moreover, the work arrangements were within the knowledge of Plaintiffs
fellow employees at the Power Plant and the paramedics.
          Further, the relationship between the Plaintiffs and Defendants is not similar
to the relationship between a layperson and an expert or professional. While in
Pullella, the plaintiffs paid the plumber to provide a service, within the plumber’s
expertise, Plaintiffs in this case accepted an employment agreement from an
employer. There was less reason for Plaintiffs in the instant case blindly to trust
Defendants than there was in earlier determinations that facts were inherently
unknowable. Therefore, Plaintiffs’ alleged injuries were not inherently unknowable.
             3. Plaintiffs Did Not Reasonably Rely on the Competence and Good
Faith of a Fiduciary
          The instant action is not one which involves fiduciaries. Thus, Plaintiffs did not
reasonably rely on the competence and good faith of a fiduciary in this cause of
action.
          The discovery rule does not apply in the instant action, because Defendants did
not fraudulently conceal key facts, Plaintiffs’ injuries were not inherently
unknowable, and Plaintiffs did not reasonably rely on the competence and good faith
of a fiduciary. Since Plaintiffs did not file their cause of action until August 21, 2013,
their breach of the implied covenant of good faith and fair dealing claims accrued in
1996, and the statute of limitations was never tolled on these claims, the statute of

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February 1, 2017

limitations bars Plaintiffs’ implied covenant of good faith and fair dealing claims.
II. Plaintiffs Are Not Eligible Employees Under the City of Dover’s Pension
Scheme
       Plaintiffs assert that Defendants breached their pension agreement when they
denied Plaintiffs application for benefits in August 2012. Defendants must have owed
Plaintiffs a contractual obligation in order for Plaintiffs to assert successfully a breach
of contract claim.33 Plaintiffs argue that there was either an express or implied
contract in place through which they were entitled to unreduced pension benefits.
Since the Plaintiffs do not qualify under the pension plan definition of eligible
employees, there is no express contractual obligation. There is no implied contractual
obligation to provide Plaintiffs with unreduced pension benefits, because Dover’s
pension scheme already expressly addresses the definition of eligible employees.
      A. Defendants Do Not Have an Express Contractual Obligation to Provide
Plaintiffs With an Unreduced Pension
       As noted above, the City of Dover pension scheme provides unreduced pension
benefits, at any time before the normal retirement date, “for eligible employees hired
before May 1, 1994, who have completed twenty-five years of continuous service, or
who have attained the age of fifty years and have completed twenty years of
continuous service.”34 Under this scheme, an eligible employee is “any person
regularly employed in rendering service to the city on a full-time, permanent basis,
who is not participating in any other retirement plan, to which the city contributes for

       33
            H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. May 27, 2003).
       34
            Dover, Del., Ordinance § 2-327.

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them, and whose compensation is paid directly by the city.”35
       Even though D/FD Operating Services LLC and NAES have paid Plaintiffs
since 1996, Plaintiffs contend that Dover has directly paid them since 1996 because
Dover reimbursed D/FD Operating Services LLC and NAES for Plaintiffs’ salaries.
Defendant disagrees, noting that such an interpretation of the term “paid directly” is
contravened by the fact that neither Dover on Plaintiffs’ behalf nor Plaintiffs have
contributed to the pension fund in twenty years.
       Interpretations of public pension statutes must be in harmony with their
purpose: “to encourage individuals to enter and remain in public service by arranging
for a pension which, by fulfillment of specified eligibility requirements, may become
the property of the individual as a matter of right upon termination of public
service.”36 Thus, an interpretation of a public pension statute that requires a city to
provide benefits to persons who do not contribute to the city’s pension fund is
invalid.37 In Twilley v. Board of Pension Trustees, a man held a state position for four
years that did not have any requirements with respect to the hours the man was
expected to work.38 Delaware’s State Employees’ Pension Plan had a minimum hours
requirement for any person to be considered a full time employee.39 The man worked

       35
            Dover, Del., Ordinance § 2-321.
       36
            Twilley v. Bd. of Pension Trs., 1996 WL 191473, at *3 (Del. Super. Feb. 21, 1996).
       37
            Id. at *4.
       38
            Id. at *1.
       39
            Id. at *2.

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the amount of hours necessary for Delaware to recognize him as a full time employee,
for pension purposes, under Delaware’s State Employees’ Pension Plan, for those
years.40 However, the man did not contribute towards a future pension during his
contested years of employment.41 Thus, the Delaware Superior Court was tasked with
deciding whether, under Delaware’s State Employees’ Pension Plan, it should count
hours worked ex-ante or ex-post.42 The Delaware Superior Court held that it should
count hours worked ex-ante, for the purposes of Twilley, because the man never
contributed to the state pension plan.43
       While Twilley dealt with a different statutory definition of employee, its
reasoning still stands. If this Court were to define “paid directly” as Plaintiffs desire,
its definition would run counter to the statute’s purpose, because Plaintiffs have not
contributed to the city’s pension plan since 2000. Allowing Plaintiffs, and those
similarly situated to Plaintiffs, to draw an unreduced pension would create an
unfunded liability for the City of Dover. Thus, this Court must hold that the Plaintiffs’
are not eligible for the benefits they claim.
     B. There Is No Implied Contractual Obligation to Provide Plaintiffs With
Unreduced Pension Benefits
       Plaintiffs also argue that they were eligible employees under an implied

       40
            Id.
       41
            Id.
       42
            Id. at *3-4
       43
            Id.

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contractual obligation. “A contractual obligation cannot be implied where an express
obligation exists.”44 Dover’s pension scheme already expressly addresses the
definition of the term “eligible employee.” As such, there is no implied contractual
obligation that alters the city’s existing definition.
                                       CONCLUSION
       The statute of limitations bars Plaintiffs’ claims for breach of the implied
covenant of good faith and fair dealing. Further, Plaintiffs are not eligible employees
under the City of Dover’s pension scheme. Therefore, City of Dover’s Motion for
Summary Judgment is GRANTED.
       IT IS SO ORDERED.

                                                    /s/ Robert B. Young
                                                             J.

RBY/lmc
Via File & ServeXpress
cc: Counsel of Record
      Opinion Distribution

       44
            Good v. Moyer, 2012 WL 4857367, *5 (Del Super. Oct. 10, 2012).

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