United States District Court, District of Delaware
GREENSTAR, LLC and GREENSTAR ALLENTOWN, LLC f/k/a PENN ACQUISITION SUB, LLC, Plaintiffs,
TODD A. HELLER and TODD HELLER, INC., Defendants. TODD A. HELLER, TODD HELLER, INC., and TODD HELLER, INC. LIQUIDATING TRUST, Counterclaim-Plaintiffs,
GREENSTAR, LLC and GREENSTAR ALLENTOWN, LLC f/k/a PENN ACQUISITION SUB, LLC, Counterclaim-Defendants.
At Wilmington this 14th day of February, 2014, having previously determined that Heller must pay Greenstar's attorney fees in connection with Heller's breach of contract (D.I. 87), and having considered the materials submitted in connection with Greenstar's motion for attorney fees (D.I. 88); the court concludes that Heller must reimburse Greenstar's fees in the amount of $14,476.38 in connection with the present motion; and Heller shall be paid interest on the remaining balance of the promissory note, for the reasons that follow:
Plaintiffs/counterclaim-defendants Greenstar, LLC and Greenstar Allentown, LLC f/k/a Penn Acquisition Sub, LLC (collectively, "Greenstar") filed the instant case against defendants/counterclaim-plaintiffs Todd A. Heller and Todd Heller, Inc. (collectively, "Heller") alleging multiple breaches of Heller's representations and warranties contained in the Asset Purchase Agreement ("APA") and demanding indemnification for any expenses incurred in remediating and/or removing certain broken glass stockpiles. (D.I. 1) Greenstar originally claimed damages in excess of $11,410,000, the amount of a Promissory Note (the "Note") secured by a letter of credit, and sought injunctive relief to prevent Heller from presenting and drawing on the letter of credit. (Id.) Pursuant to the terms of the Note, interest accrues on the principal amount due at the Note rate of 3.25%. (See D.I. 6, ex. 2) Prior to the judgment, the court ordered the release, by Greenstar to Heller, of all but $3 million of the Note. (See D.I. 72, 75) Greenstar also sought recovery of attorney fees, costs, and expenses incurred in the litigation, under Section 7.12 of the APA.
2. On March 28, 2013, following a bench trial held September 24-26, 2012 and post-trial briefing, the court issued an opinion holding that: (1) Heller breached several representations and warranties contained in the APA; (2) the stockpiles were "Excluded Liabilities" under the terms of the APA; and (3) as a result, Greenstar should be awarded indemnification in the amount of $401,345.28, to be offset against the Note in Greenstar's possession. (D.I. 85) Finding that Greenstar was the "prevailing party" within the meaning of Section 7.12 of the APA, the court awarded Greenstar reasonable attorney fees and costs. (Id. at 44)
3. Following the court's judgment, Greenstar moved for reasonable attorney fees, costs, and expenses in the amount of $1,136,559.61. (D.I. 88 at 3) Heller did not oppose Greenstar's request for attorney fees, nor did it raise an objection as to the reasonableness of Greenstar's claimed fees. (D.I. 93 at 2) Instead, Heller asserted that, subsequent to Greenstar's motion, Heller learned that Greenstar intended to (a) assert and maintain an unreasonable and unsupported view of the APA and the court's judgment in dividing the interest on the Note owed to each party, and (b) to supplement its fee request. (D.I. 93 at 2) Specifically, Heller disputed Greenstar's attempt to: (a) subtract the compensatory damages from the remaining $3 million prior to the calculation of interest; (b) subtract attorney fees from the remaining $3 million prior to the calculation of interest; and (c) supplement attorney fees, costs, and expenses to include fees and costs allegedly incurred in connection with the present motion. (Id. at 2-3)
4. On October 1, 2013, the court granted a stipulation and order regarding the release of the letter of credit. (D.I. 98) Included in the stipulation was the parties' agreement that Greenstar's attorney fees, costs, and expenses prior to March 31, 2013 (in the amount of $1,136,559.61) were reasonable, and should be awarded to Greenstar pursuant to the APA. (Id. at 2) Heller was also to be paid $1,447,618.73 from the Note, as well as interest on that amount at the Note rate of 3.25% from September 4, 2010 to the date that the funds were released to Heller. (Id.) The remaining disputes include: (a) whether Greenstar should recover $14,476.38 in attorney fees, costs, and expenses incurred in this litigation between March 31, 2013 and May 22, 2013; and (b) whether Heller should be paid interest on the entire $3 million of principal in the Note and, if so, to what extent. (Id.)
"In general interest on deposited funds follows the principal, and when the entitlement to the principal is in dispute the one who is determined to be the [owner of the] principal is also entitled to the interest thereon." State ex. rel Secretary of Dept. Of Transp. v. Hudak, 1985 WL 189311, at *2 (Del. Super. Ct. Nov. 13, 1985) (citing Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980)); see also Pepsi-Cola Bottling Co. of Cincinnati v. Woodlawn Canners, Inc., 1983 WL 18021, at *2 (Del. Ch. Oct. 11, 1983) (holding that income earned on escrowed funds follows the principal).
Heller argues that the judgment does not require or authorize Greenstar to first subtract out its damages from the remaining amount and then calculate interest. (D.I. 93 at 3) The court's judgment states:
Plaintiffs are awarded $401,345.28 in damages, to be offset against the promissory note that constituted part of the underlying asset purchase agreement's purchase price. Plaintiffs shall be awarded reasonable attorney fees and costs. The remaining balance of the promissory note, if any, shall thereafter be released to defendants.
(D.I. 87) (emphasis added) Heller further argues that the APA does not provide support for Greenstar's argument, and Heller should collect interest due on the $3 million up to the date of the judgment because no amount was "due and owing" by Heller until the entry of judgment. (D.I. 93 at 3) Relevant portions of the APA are reproduced below.
Article VI Indemnification