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Alltrista Plastics, LLC v. Rockline Industries Inc.

Superior Court of Delaware, New Castle

January 18, 2017

Alltrista Plastics, LLC d/b/a Jarden Plastic Solutions
v.
Rockline Industries, Inc.,

          Peggy L. Ableman, Esq. Daniel J. Brown, Esq. McCarter & English, LLP.

          Joseph J. Bellew, Esq. Cozen O' Connor.

         Dear Counsel:

         Defendant Rockline Industries, Inc. ("Rockline") has moved for relief from the Court's April 8, 2016 oral ruling on the issue of whether the "Termination Fee" in the Supply Agreement is a liquidated damages provision that caps Plaintiff Alltrista Plastics, LLC d/b/a Jarden Plastic Solutions' ("Jarden") potential recovery for its breach of contract claim to $1.5 million. For the following reasons, the Court finds that relief is warranted based on the Court's "plenary power to 'vacate, modify or set aside judgments or orders' where 'reasonably necessary to ensure the proper administration of justice.'"[1]

         I. Background

         In its Motion for Partial Summary Judgment, Rockline argued, inter alia, that the Termination Fee is a liquidated damages clause that applies to Rockline's alleged breach of the Supply Agreement. During a teleconference on April 8, 2016,, the Court ruled on numerous outstanding motions, including Rockline's Motion for Partial Summary Judgment.[2] On the Termination Fee issue, the Court held that the Termination Fee had not been triggered and, therefore, was not applicable to this case. This determination was based upon the inclusion of the Termination Fee schedule in Section 9(b)(iii) of the Supply Agreement, the parties' submissions, and an October 12, 2012 Letter from Rockline to Jarden specifically invoking the Section (9)(b)(i)(2) "for cause" termination provision.[3]

         Rockline did not move for reargument under Superior Court Civil Rule 59(e), and on April 11, 2016, the Court continued the trial based on the parties' representation that settlement negotiations were ongoing.[4]

         Over five months later, on October 12, 2016, Rockline filed a Motion for Reconsideration asking the Court to reconsider its April 8, 2016 oral ruling on the applicability of the Termination Fee.[5] Rockline argued that the Court did not take into account the significance of the Supply Agreement language providing that the Termination Fee "shall serve as and for liquidated damages for Rockline's breach of the Agreement." In support of its argument that the quoted language mandates a different result, Rockline-for the first time-cited the Delaware Supreme Court's Brazen v. Bell Atlantic Corp. decision.[6]

         On October 21, 2016, the Court held a teleconference on Rockline's Motion for Reconsideration.[7] Rockline admitted that it knew of the Brazen decision at the time it filed and argued its Motion for Partial Summary Judgment, but failed to present Brazen to the Court.[8] The Court directed Rockline to re-file its Motion for Reconsideration under Superior Court Civil Rule 60(b). Rockline complied; Jarden responded; and the Court heard oral argument on November 16, 2016.

         II. Discussion

         As an initial matter, the Court finds it unnecessary to decide whether relief is available to Rockline under Rule 60(b) because the Court bases the instant ruling upon its "plenary power to 'vacate, modify or set aside judgments or orders' where 'reasonably necessary to ensure the proper administration of justice.'"[9]

         The language at issue appears in Section 9(b) of the Supply Agreement: "The Termination Fee shall not be a penalty but shall serve as and for liquidated damages for Rockline's breach of the Agreement." The Supply Agreement defines "Termination Fee" in Section (b)(iii): "If Rockline terminates the agreement without cause, it shall pay to Jarden a fee within thirty (30) days of termination (the 'Termination Fee') based upon when the termination occurs, as follows: (A) Prior to the end of year one of this Agreement $1, 500, 000 .. .."

         In Brazen, the Court of Chancery did not analyze the termination fee provision at issue as a liquidated damages provision because "notwithstanding section 9.2(e) of the merger agreement, which states that the $550 million fee constitutes liquidated damages, 'the event which triggers payment of the fees is not a breach but a termination.", [10] The Supreme Court disagreed with the Court of Chancery's conclusion and found that the provision at issue should be analyzed as a liquidated damages clause because "the express language of section 9.2(e) of the agreement unambiguously states that the termination fee provisions 'constitute liquidated damages and not a penalty.'"[11] Further, the Supreme Court affirmed that liquidated damages, "by definition, are damages paid in the event of a breach of contract."[12]

         In its April 8, 2016 oral ruling, as the Court of Chancery did in Brazen, the Court found that payment was triggered by a termination-not by a breach. However, viewing the Supply Agreement in light of Brazen, the Court finds the Supply Agreement-although clumsily structured-provides that the Termination Fee should be treated as liquidated damages for Rockline's breach of the Supply Agreement: "The Termination Fee shall not be a penalty but shall serve as and for liquidated damages for Rockline's breach of the Agreement."[13] As such, the exercise of the ...


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