Column Form Technology, Inc., a California corporation, formerly a division of Advanced Concrete Enhancement, Inc. dba Column Form Technology, and Blayde Penza, Plaintiffs,
Caraustar Industries, Inc., a Delaware corporation, Defendant.
Submitted: March 10, 2014
Upon Plaintiffs' Motion for Partial Summary Judgment: GRANTED, in part, and DENIED, in part
Upon Defendant's Motion for Partial Summary Judgment: GRANTED, in part, and DEFERRED, in part
John G. Harris, Esquire, (argued), Suzanne H. Holly, Esquire, Berger Harris LLP, 1105 North Market Street, 11th Floor, Wilmington, Delaware, 19801. Attorneys for Plaintiff.
Blake Rohrbacher, Esquire (argued), Katharine C. Lester, Esquire, Richards, Layton & Finger, P.A., One Rodney Square, Wilmington, Delaware, 19801. Attorneys for Defendant.
Jan R. Jurden Jan R. Jurden, Judge
On September 10, 2012, plaintiffs Column Form Technology, Inc. ("CFT") and Blayde Penza ("Mr. Penza"), then CFT's president and sole shareholder (together, the "Plaintiffs"), filed this action for breach of contract against defendant Caraustar Industries, Inc. ("Caraustar"). The Plaintiffs' complaint alleges that Caraustar breached an agreement called the Exclusive Agency and Distribution Agreement (the "Distribution Agreement").
Before the Court are two motions for partial summary judgment. On September 30, 2013, Caraustar filed a Motion for Partial Summary Judgment seeking a declaration that pursuant to the Distribution Agreement's liability limitation section, Caraustar may be liable for no more than $75, 000 for the alleged breach of the Distribution Agreement. On November 4, 2013, Plaintiffs filed a Motion for Partial Summary Judgment seeking an order declaring the following: (1) that Caraustar breached the Distribution Agreement; (2) that the indemnification provision in the Distribution Agreement controls the question of the damages to which Plaintiffs are entitled; and (3) that the indemnification provision in the Distribution Agreement entitles Plaintiffs to damages for Caraustar's breach of the Distribution Agreement, without limitation, thereby rendering Caraustar's Motion for Partial Summary Judgment moot. In the alternative to denying Caraustar's Motion for Partial Summary Judgment, Plaintiffs move for leave pursuant to Superior Court Civil Rule 56(f) ("Rule 56(f)") to take discovery pertaining to the proper interpretation and enforceability of the liability limitation section.
On December 4, 2013, Caraustar filed its Answering Brief, wherein Caraustar asks the Court to declare that Caraustar is entitled to summary judgment on the indemnification issues contained in Plaintiffs' Motion for Partial Summary Judgment.
The Court heard argument on these motions on March 10, 2014. For the following reasons, Caraustar's motion is GRANTED, in part, and DEFERRED, in part, and Plaintiffs' motion is GRANTED, in part, and DENIED, in part.
Mr. Penza, at all relevant times, was the president and sole shareholder of CFT. Mr. Penza invented a system called the Column Cast System (the "CCS"), which is used to construct decorative concrete columns. The CCS uses a vinyl jacket with two metal bars, latches that attach to the bars and hold the jacket together, and foam insets, all of which create a form into which reinforcing steel can be placed and concrete poured to produce decorative columns.
Caraustar is one of North America's largest integrated manufacturers of 100% recycled and converted paper products. Among Caraustar's products are cardboard forming tubes used to construct concrete columns.
In February 2009, CFT operated a booth at the World of Concrete Exhibition in Las Vegas, Nevada. At this exhibition, the CCS won the "Most Innovative Product Award." Also at this exhibition, Mr. Penza met John Lea ("Mr. Lea"), who was the Vice President and Division Manager at Caraustar Industrial and Consumer Products Group, Inc. ("CICPG"), a subsidiary of Caraustar. Mr. Penza and Mr. Lea had discussions about Caraustar distributing the CCS. The two remained in contact throughout 2009 and upon Caraustar's exit from bankruptcy in November 2009, Mr. Lea sent Mr. Penza a proposal of initial terms for the parties' future relationship. On December 4, 2009, Mr. Penza sent Mr. Lea revisions to this proposal.Later that day, Mr. Lea sent Mr. Penza a formal proposal of initial terms on behalf of Caraustar. Mr. Penza responded to Mr. Lea, "approved as revised." Caraustar subsequently wired $75, 000 to CFT. The parties continued to discuss the specific structure and terms of what would become formal agreements. Caraustar would be the party to draft the agreements.
On February 26, 2010, CFT and Mr. Penza executed both the Distribution Agreement and an agreement called the Consulting Agreement. On March 2, 2010, Caraustar executed the same agreements. The Distribution Agreement provided that Caraustar would have the exclusive right to distribute the CCS in North America for an initial term of three years. The Consulting Agreement provided that Caraustar would pay CFT for CFT's help in developing and promoting the CCS.
In December 2010, the Consulting Agreement expired and Mr. Lea informed Mr. Penza that Caraustar would not extend its term. CFT tried to persuade Caraustar to continue their business relationship, however, Caraustar did not agree. On December 15, 2010, Caraustar sent a "Notice of Expiration and Termination" (the "Notice") to Mr. Penza which confirmed that Caraustar would not extend the Consulting Agreement. In the Notice, Caraustar offered to make additional payments in exchange for CFT and Mr. Penza's waiving any breach of contract claims as a result of Caraustar's termination of ...