Aircraft Service International, Inc. v. TBI Overseas Holdings, Inc., Not Reported in Atl....

2014 WL 4101660

additional discovery on this issue. Accordingly, at this

2014 WL 4101660 juncture, Defendant's Motion to Dismiss is DENIED.
Only the Westlaw citation is currently available.

UNPUBLISHED OPINION. CHECK

1. FACTUAL BACKGROUND
COURT RULES BEFORE CITING.
On October 27, 2004, Plaintiff and Defendant entered into a
Superior Court of Delaware.
Purchase and Sale Agreement through which Defendant sold
Plaintiff all of its membership interests in its subsidiary AGI
AIRCRAFT SERVICE INTERNATIONAL,
Holdings and AGI Holdings' subsidiary AGI, LLC, for $27
INC., a Delaware corporation, Plaintiff,
million (the “Agreement”). The sold entities were engaged “in
v.
the business of providing airport services, including ground
TBI OVERSEAS HOLDINGS, INC., handing, fuel farm management and into-plane refueling, at
a Delaware corporation, Defendant.
certain airports in the United States and its territories.” 1 One
C.A. No. N13C–06–265 WCC CCLD of the airports served was the “Burbank Airport” at Glendale/
| Burbank, California, North Hollywood Operable Unit of the
Submitted: April 7, 2014 San Fernando Valley Superfund Site (the “NHOU Site”). Due
| to the nature of the sold entities' business, the Agreement
Decided: August 5, 2014 contained certain representations and warranties regarding
litigation and environmental matters at the various airports
On Defendant's Motion to Dismiss—DENIED and the parties conducted due diligence, which uncovered
a number of pending or threatened litigation matters. The
Attorneys and Law Firms Agreement provided that the sole remedy for the breach of
such representations and warranties was indemnification.
Christopher Viceconte, Esquire, Gibbons, P.C., 1000 North
West Street, Suite 1200, Wilmington, DE 19801. Louis E.
1
Dolan, Jr., Esquire, Nixon Peabody LLP, 401 9th Street, N.W., Compl. Ex. 1 at A.
Suite 900, Washington, D.C. 20004. Attorneys for Plaintiff. On March 21, 2006, Plaintiff received a statutory General
Notice letter and information request from the Environmental
Joel Friedlander, Esquire, Friedlander & Gorris, P.A., 222
Protection Agency (“EPA”), dated March 13, 2006, regarding
Delaware Avenue, Suite 1400, Wilmington, DE 19801.
potential liability at the NHOU Site. Plaintiff sent the letter
Andrew L. Morrison, Esquire and Jeffrey J. Davidson,
to Defendant on April 12, 2006, stating that the potential
Esquire, Manatt, Phelps & Phillips, LLP, 7 Times Square,
liability “may constitute a loss or litigation expense for
New York, N.Y. 10036. Attorneys for Defendant.
which [Plaintiff] is entitled to indemnification.” 2 Defendant
responded on June 16, 2006, declining to assume Plaintiff's
defense in the matter. Plaintiff received a second letter
MEMORANDUM OPINION
from the EPA on July 1, 2010, again providing notice of
CARPENTER, J. potential liability and requesting that Plaintiff participate
in negotiations to resolve the environmental issues at the
*1 Before this Court is TBI Overseas Holdings, Inc.'s NHOU site. Thereafter, it appears that Plaintiff began making
(“Defendant”) Motion to Dismiss pursuant to the statute payments to the EPA to resolve the matter.
of limitations. The Court finds that the applicable statute
of limitations for Aircraft Service International, Inc.'s 2 Compl. Ex. 6.
(“Plaintiff”) claims is two years from the date of closing.
However, because the Court finds that Plaintiff provided Plaintiff brought suit against Defendant on June 26, 2013
notice of a potentially-indemnifiable claim, the statute was for (i) Breach of Contract; (ii) Declaratory Judgment;
tolled and the claim survived until Plaintiff resolved the (iii) Mandatory Injunction; and (iv) Fraud and Fraudulent
matter. When the claim was resolved is unclear to the Inducement. Defendant moved to dismiss the original
Court and therefore it will deny the Motion and allow complaint for lack of subject matter jurisdiction due to the

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Aircraft Service International, Inc. v. TBI Overseas Holdings, Inc., Not Reported in Atl....
2014 WL 4101660

equitable relief sought in the Complaint. After considering dismiss the complaint if filed after
the motion, the Court provided Plaintiff an opportunity expiration of the limitations period. 8
to decide whether they wanted equitable relief from the
Court of Chancery or law relief from the Superior Court.
Thereafter, Plaintiff filed the First Amended Complaint
(the “Complaint”), dropping the mandatory injunction and 3 Super. Civ. R. 12(b)(6).
fraud claims and instead asserts: (i) Breach of Contract;
4
(ii) Indemnity; and (iii) Declaratory Judgment. All of See Solomon v. Pathe Commc'ns Corp., 672 A.2d
Plaintiff's claims arise out of Defendant's alleged breach of 35, 38–39 (Del.1996).
the Agreement by failing to indemnify Plaintiff for losses 5
See Precision Air v. Standard Chlorine of Del., 654
Plaintiff incurred, allegedly due to Defendant's breaches of
A.2d 403, 406 (Del.1995).
the representations and warranties relating to the NHOU Site's
environmental liability. Defendant now moves to dismiss 6
Diamond State Tel. Co. v. Univ. of Del., 269 A.2d
arguing that Plaintiff's claims are barred by the statute of 52, 58 (Del.1970). 600 A.2d 43, 47 (Del. Ch.1991).
limitations.
7
In re USACafes, L.P. Litig.,
8
Cent. Mortgage Co. v. Morgan Stanley Mortgage
2. STANDARD OF REVIEW Capital Holdings LLC, 2012 WL 3201139, at *15
(Del. Ch. Aug. 7, 2012).
*2 Under Delaware Superior Court Civil Rule 12(b)(6), the
Court may dismiss a plaintiff's claim for “failure to state a
claim upon which relief can be granted.” 3 When analyzing 3. DISCUSSION
a motion to dismiss under Rule 12(b)(6), the Court must
proceed without the benefit of a factual record and assume The Court is tasked with determining the applicable statute
of limitations to Plaintiff's action, when such statute was
as true the well-pleaded allegations in the complaint. 4 A
triggered, and whether the action has been timely filed.
complaint is “well-plead” if it puts the opposing party on
Defendant first argues that, generally, Delaware law should
notice of the claim being brought against it. 5 Therefore, the determine both the applicable statute of limitations and the
Court may dismiss a complaint under Rule 12(b)(6) only accrual of Plaintiff's action. However, Defendant highlights
where the Court determines with “reasonable certainty” that that the parties have shortened the statute of limitations in
no set of facts can be inferred from the pleadings upon which the Agreement, as allowed by Delaware law, and argues that
the plaintiff could prevail. 6 Additionally, although the Court such shortened period applies to Plaintiff's action. Plaintiff
need not blindly accept as true all allegations nor draw all disagrees that the shortened time frames apply to this action;
inferences in the plaintiff's favor, “it is appropriate ... to give however, Plaintiff does agree that the three-year Delaware
the pleader the benefit of all reasonable inferences that can be statute of limitations applies. Although both parties agree to
drawn from its pleading.” 7 Further: Delaware's three-year statute of limitations, Plaintiff argues
that New York law, the choice of law made by the Agreement,
determines when the statute is triggered and begins to
run. Therefore, this Court must determine first whether the
A claim may be dismissed for failure to contract's statute of limitations applies to this action and
comply with the statute of limitations second when the statute of limitations began to run. Then, the
if the facts pled in the complaint, and Court can calculate whether this action was timely filed.
the documents incorporated within the
complaint, demonstrate that the claims
are untimely. The plaintiff bears the I. Contractual Statute of Limitations
burden to plead facts that demonstrate The Contract provides that indemnification is the sole and
the applicability of an exception to the exclusive remedy for breaches of the representations and
statute of limitations. Otherwise, when warranties. 9 The indemnification provision states:
that burden is not met, the court must

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Aircraft Service International, Inc. v. TBI Overseas Holdings, Inc., Not Reported in Atl....
2014 WL 4101660

(inapplicable here), section 10.1, and section 10.11

(b) Subject to the provisions of this Section 10.1, the Seller (inapplicable here)).
shall indemnify and save harmless the Buyer, the Affiliates
of the Buyer and their respective successors and assigns 10
Id.
(a “Buyer Indemnified Party”) from, against, for and in
11
respect of: Compl. Ex. 1 § 10.1(g).
12
(i) any Loss incurred or required to be paid because of the Bonanza Rest. Co. v. Wink, 2012 WL 1415512, at
breach of any representations or warranty of the Seller in *1 (Del.Super. Apr. 17, 2012).

this agreement ...;” 10 Defendant argues that Plaintiff's claims arise out of the
representations and warranties on environmental matters,
Within the indemnification section, the parties have shortened Section 2.15, and, as such, are subject to the two-year
the statute of limitations of certain indemnifiable claims. The contractual limitations period set forth above. Plaintiff argues
contract states as follows: that the above provision is not applicable because the alleged
breach is Defendant's failure to indemnify, not Defendant's
(g) Except as otherwise provide in this Section 10.1(g), all
breach of the representations and warranties. The Court finds,
covenants and agreements of the parties contained herein
however, that Defendant's duty to indemnify does not arise
shall survive the execution, delivery and consummation
unless there is an underlying breach of the representations
of this Agreement until the expiration of the applicable
and warranties. The only action through which Plaintiff can
statute of limitations. All representations and warranties
recover for breaches of the representations and warranties
of the parties contained herein shall survive the execution,
is through indemnity; therefore, the contractual limitations
delivery and consummation of this Agreement until the
period set for such breaches must apply to the indemnity
eighteen (18) month anniversary of the Closing Date,
action. To hold otherwise would render the provisions setting
except for:
forth the truncated timelines superfluous, a holding at odds
*3 with the tenants of contract interpretation which state: “A
... court must interpret contractual provisions in a way that gives
effect to every term of the instrument, and that, if possible,
(iii) the representations and warranties of the Seller reconciles all of the provisions of the instrument when read
contained in Section 2.15 hereof shall survive until the as a whole.” 13
second anniversary of the Closing Date.
13
In addition, if written notice of a violation or breach of any Council of Dorset Condo. Apartments v. Gordon,
specified representation, warranty, covenant or agreement 801 A.2d 1, 7 (Del.2002).
is given to the party charged with such violation or breach Therefore, the Court finds that the contractual limitations
during the period provided for in this Section 10.1(g), periods set forth in Section 10.1(g) are applicable to Plaintiff's
such representation, warranty, covenant or agreement shall claims. Reading the Agreement in a light most favorable to
continue to survive until such matter has been resolved by Plaintiff, the underlying claims are most akin to breaches of
settlement, litigation (including all appeals related thereto) the representations and warranties contained in Section 2.15
or otherwise. 11 (environmental concerns) and, thus, are subject to the two-
year contractual limitations period.
Delaware courts will enforce contractual limitations periods
that are reasonable and “[a] contractual provision that
reasonably abbreviates the time for filing a claim is II. The Breach
enforceable because it enhances public policy in favor of Having found that the two-year contractual limitations period
resolving claims.” 12 The Court finds that 18–month and two- applies to Plaintiff's claims, the Court must now determine
year provisions are reasonable and enforceable. when the statute began to run. Generally, breaches of the
representations and warranties occur at closing. 14 Here,
9 closing occurred on October 27, 2004. Working off of this
See Compl. Ex. 1 § 10.1(i) (setting forth that the
date, Plaintiff had until October 27, 2006, two years later, to
sole remedies under the contract are sections 1.2
bring suit. However, the Agreement provides that:

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Aircraft Service International, Inc. v. TBI Overseas Holdings, Inc., Not Reported in Atl....
2014 WL 4101660

Section 2.15. Second, Defendant's public-policy argument

also fails. Although Delaware courts have held that parties to
a contract may not circumvent the law by extending statutes
*4 if written notice of a violation or of limitations, 18 this is not what the Agreement does. The
breach of any specified representation, Agreement, instead, contains a bargained-for provision that
warranty, covenant or agreement is tolls the truncated statute of limitations through a notice
given to the party charged with procedure. Contrary to Defendant's claims, survival under
such violation or breach during the the contract is not indefinite and only lasts until the precise
period provided for in this Section claim is “resolved.” This practice of tolling the statute of
10.1(g), such representation, warranty, limitations until losses are defined has been consistently
covenant or agreement shall continue upheld in Delaware consistent with the principles of common-
to survive until such matter has
law indemnity. 19
been resolved by settlement, litigation
(including all appeals related thereto)
17
or otherwise. 15 Id. at Ex. 1 § 10.1(g).
18
See, e.g., Shaw v. Aetna Life Ins. Co., 395 A.2d 384,
386–87 (Del.Super.1978).
On April 12, 2006, within the original two year period,
19
Plaintiff sent Defendant a notice that certain issues at the See, e.g., Certainteed Corporation v. Celotex,
NHOU site “may constitute a loss or litigation expense for 2005 WL 217032, at *14 (Del. Ch. Jan. 24,
which [Plaintiff] is entitled to indemnification.” 16 Defendant 2005). The Court finds that the Agreement is a
argues that the letter from Plaintiff was not specific enough to hybrid of both indemnification claims in Celotex.
qualify as notice under the contract or, alternatively, the clause Although Plaintiff's claim is for breach of the
allowing for survival once notice is given impermissibly Agreement, a contractual indemnification claim,
extends the statute of limitations, contrary to Delaware law. the Agreement provides for a mechanism which
The Court disagrees. alters the accrual of the contractual limitations
period to be more like third-party indemnification
14 claims. Specifically, the Agreement provides
See, e.g., GRT, Inc. v. Marathon GTF Tech., Ltd.,
that if notice is given during the applicable
2001 WL 2682898, at *6 (Del. Ch. July 11, 2001)
contractual limitations period, the claim survives
(“Because representations and warranties about
until the matter is “resolved.” Conversely, the
facts pre-existing, or contemporaneous with, a
contract in Celotex specified that contractual
contract's closing are to be true and accurate when
indemnification claims survived “subject to the
made, a breach occurs on the date of the contract's
‘applicable statute of limitations,’ making clear
closing and hence the cause of action accrues on
that the timeliness of any claim will be measured
that date.”).
by the statute of limitations normally applicable
15 to such claim.” Id. at *5. There is no such
Comp l. Ex. 1 § 10.1(g).
qualification in the Agreement's survival statute
16 and the Court, therefore, finds the holding in
Id. at Ex. 6.
Celotex, as to the contractual indemnification
First, given the context of Plaintiff's April 12, 2006 letter,
claims, distinguishable.
the Court finds it was sufficient notice as required in
Section 10.1(g) of the Agreement. The Agreement only *5 Here, the contractual limitations period for the breach
requires that the notice be (1) written, (2) given within the of representations and warranties began to run at closing.
contractual limitations period, and (3) related to a “specified Within the subsequent two year period, Plaintiff gave notice
representation, warranty, covenant or agreement[.]” 17 Here, to Defendant that there were potential upcoming losses
the notice was written, made within the contractual limitations to be incurred due to Defendant's alleged breach of the
period, and, through the attachment of the EPA notice, representations and warranties. This worked to toll the
clearly referenced the representations and warranties in contractual limitations period until the matter was “resolved.”
Thereafter, Plaintiff had the two-year contractual limitations

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Aircraft Service International, Inc. v. TBI Overseas Holdings, Inc., Not Reported in Atl....
2014 WL 4101660

period in which to bring suit. The Court finds that this

contractual provision is in accordance with Delaware law 20 Pl. Ans. Br. at 11.
and was the product of extensive negotiations between
21
sophisticated parties. Thus, as provided for under the Plaintiff argued that, although Delaware law would
Agreement, Plaintiff's written notice to Defendant during the determine the applicable statute of limitations,
contractual limitations period allowed Plaintiff's claims to New York law should govern this Court's accrual
survive until the matter was resolved. analysis as such is a substantive issue and New
York law was the choice of law in the Agreement.
However, as Plaintiff admits, Delaware and New
III. Resolution of the Claim York law are in accord with regard to accrual of an
The Complaint states that Plaintiff began making payments indemnification claim: “that a claim for indemnity
to the EPA in July, 2010. Further, in Plaintiff's Answering does not arise at least until the underlying payments
Brief, Plaintiff has an entire section entitled: “ASII's Cause for which recoupment is sought have been made
of Action for Indemnification Accrued in July, 2010 When and the issues resolved.” See Pl. Ans. Br. at 11.
ASII Commenced Making Payments for which it is Entitled Therefore, the Court finds it unnecessary to address
to Indemnity.” 20 If true, the Complaint is untimely filed and the choice of laws issue at this time.
would be dismissed. However, in fairness to Plaintiff, such
argument was made in the context of a three-year statute of
CONCLUSION
limitation and the New York law of accrual. 21 Plaintiff did
not address the survival clause of the Agreement, nor did Therefore, at this juncture, Defendant's Motion to Dismiss
Plaintiff address when, under the contract, such matter would is hereby DENIED, pending discovery into the precise date
be considered “resolved.” Therefore, the factual underpinning when the losses for which Plaintiff seeks indemnification
of how and when the dispute with the EPA was resolved and were “resolved.”
whether the payment in July, 2010, “resolved” the matter and,
thus, began the Agreement's two-year statute of limitations is IT IS SO ORDERED.
simply unclear to the Court. As a result, the Court finds that
it is appropriate to allow discovery for the parties to gather
additional facts and then in supplemental pleadings to the All Citations
Court provide argument in a factual context as to the date
Not Reported in Atl. Rptr., 2014 WL 4101660
they believe “resolution” occurred. Once presented with such
arguments, the Court can decide if the action was timely filed.

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