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Schlosser & Dennis, LLC v. Traders Alley, LLC

Superior Court of Delaware

July 6, 2017

Schlosser & Dennis, LLC, Plaintiff/Counterclaim Defendant
v.
Traders Alley, LLC, Defendant/Counterclaim Plaintiff and Plaintiff in Court of Chancery Action under and Defendant in Court of Chancery Action under

          Submitted: June 23, 2017

         On Defendant's "Motion [for Partial Dismissal] of Plaintiff's First Amended Complaint" in the Superior Court. GRANTED.

         On Defendant's Motion to Dismiss or Stay Plaintiff's Verified Complaint in the Court of Chancery. MOTION TO DISMISS GRANTED IN PART, DENIED IN PART. MOTION TO STAY DENIED AS MOOT.

          Shawn P. Tucker, Esquire and Ryan T. Costa, Esquire, Drinker Biddle & Reath LLP, Wilmington, Delaware, Attorney for Plaintiff/Counterclaim Defendant Schlosser & Dennis, LLC.

          Richard L. Abbott, Esquire, Abbott Law Firm, Hockessin, Delaware, Attorney for Defendant/Counterclaim Plaintiff Traders Alley, LLC.

          MEMORANDUM OPINION

          Richard R. Cooch, R.J.

         I. INTRODUCTION

         Pending before the Court of Chancery and the Superior Court are Defendant Traders Alley, LLC's motions to dismiss Plaintiff Schlosser & Dennis, LLC's complaints in the respective courts. [1] The core issue in this case is whether Defendant's redevelopment plan, which has been approved by the City of Newark, constitutes a repudiation that places Defendant in breach of an easement agreement relating to parking between Plaintiff and Defendant. Plaintiff has pleaded claims for breach of contract (with the requested remedy of equitable rescission), a declaratory judgment, and a permanent injunction against Defendant. All claims (duplicative and non-duplicative) have been raised in Plaintiff's complaints filed in both the Superior Court and the Court of Chancery.

         Without needing to address the adequacy of the pleadings in the Superior Court action, the Superior Court finds that Plaintiff's claims for breach of contract and injunctive relief in its First Amended Complaint in the Superior Court request equitable remedies that the Superior Court lacks subject matter jurisdiction to afford. The equitable remedies requested by Plaintiff in the Superior Court action are also pleaded in the Court of Chancery action. Therefore, Defendant's "Motion for Partial Dismissal] of Plaintiff's First Amended Complaint" in the Superior Court is GRANTED. As Defendant's Motion to Dismiss Plaintiff's First Amended Complaint does not seek to dismiss Plaintiff's claim for a declaratory judgment, that claim remains in the Superior Court.

         The Court also finds that Plaintiff's claim for breach of contract and the accompanying remedy of equitable rescission have been adequately pleaded in the Court of Chancery action. However, this Court finds that Plaintiff's request for a declaratory judgment in the Court of Chancery is duplicative of its claim for a declaratory judgment in the Superior Court. Accordingly, Plaintiff's claim for a declaratory judgment in the Court of Chancery is moot, as an adequate remedy at law exists in the Superior Court. Additionally, this Court finds that Plaintiff's request for injunctive relief would afford, in effect, the same relief as that which would be afforded by a potential favorable outcome of the declaratory judgment claim pending in the Superior Court. As Delaware law provides that claims for a declaratory judgment and injunctive relief cannot exist simultaneously if they would afford the same remedy, Plaintiff's claim for injunctive relief must be dismissed. Accordingly, this Court GRANTS IN PART Defendant's Motion to Dismiss Plaintiff's Verified Complaint in the Court of Chancery.

         With respect to Defendant's alternative Motion to Stay the Court of Chancery Action pending a resolution of the Superior Court Action, the Court finds that this motion is now moot given that the cases were consolidated on May 30, 2017, and given that the Superior Court trial scheduling order was vacated following the consolidation. Accordingly, Defendant's Alternative Motion to Stay the Court of Chancery Action is DENIED AS MOOT.

         Thus: Defendant's Motion for Partial Dismissal (i.e., Count II-Breach of Contract and its requested remedy of equitable rescission) of Plaintiff's First Amended Complaint in the Superior Court is GRANTED. Count I in Plaintiff's Complaint in the Superior Court remains. Defendant's Motion to Dismiss Plaintiff's Verified Complaint in the Court of Chancery is GRANTED insofar as it pertains to Plaintiff's claims for a declaratory judgment (Count II) and a permanent injunction (Count III). Defendant's Motion is DENIED as it pertains to Plaintiff's claim for Breach of Contract (Count I) and its requested remedy of equitable rescission in the Court of Chancery. Defendant's alternative Motion to Stay the Court of Chancery action is DENIED AS MOOT.

         II. FACTS AND PROCEDURAL HISTORY[2]

         The instant litigation relates to a "Cross Easement Agreement" (the "Agreement") entered into by the parties on or about July 10, 2007.[3] The agreement appears to establish three related rights for the parties: (1) Defendant's right of access over Plaintiff's property to access a shared parking lot behind the properties; (2) Plaintiff's right to use parking spaces behind Defendant's property; and (3) Defendant's right to use parking spaces behind Plaintiff's property. Plaintiff alleges in its complaint that the Agreement "was entered into for the sole purpose of providing access and parking for the Properties."[4] Additionally, the Agreement provides that the easement "may not be modified, changed, or supplemented, nor may any obligations and rights be waived, except by written instrument signed by the party to be charged or by its agent duly authorized in writing and then only to the extent set forth in such instrument."[5]

         In March 2011, Defendant submitted an application to the City of Newark to redevelop its property. Plaintiff voiced its objections to the application on grounds that the redevelopment project would cause Defendant to violate its obligations under the Agreement. On March 14, 2016, Defendant received approval for its redevelopment project. Plaintiff alleges that Defendant has made no effort to amend the Agreement to accommodate its redevelopment project.

          Plaintiff contends that the redevelopment project will violate the Agreement in two ways. First, Plaintiff contends that construction activities (e.g., ―storage and ingress and egress of construction equipment, vehicles, supplies and materials[6]) will violate the terms of the Agreement. Second, Plaintiff contends that Defendant's post-construction use of the property will violate the Agreement and cause damage to Plaintiff.

         On May 19, 2016, Plaintiff filed a Complaint in the Superior Court. Plaintiff's Complaint asserted one count that requested a declaratory judgment that Defendant may not move forward with its redevelopment plan and construction intentions, that the redevelopment implementation of the plan would violate the Agreement, and that Defendant "shall not interfere with [Plaintiff's] rights to park in the Parking Lot Area, as described in the [Agreement]."[7] On November 28, 2016, Defendant filed a counterclaim in which it requests a declaratory judgment that its implementation of the redevelopment plan would not violate the parties' rights under the Agreement. This is a non-jury action.

         Plaintiff subsequently moved to amend its complaint to include a count of Breach of Contract. The Court granted Plaintiff's motion, over Defendant's opposition, and Plaintiff's First Amended Complaint was filed on December 2, 2016. Plaintiff's First Amended Complaint added one count alleging Breach of Contract, and requested in its prayer for relief that the Court find the Agreement "null and void" and to enjoin Defendant from proceeding with its construction plans.[8]

         Defendant filed its Motion to Dismiss Plaintiff's First Amended Complaint on January 9, 2017, arguing, inter alia, that the Court did not have subject matter jurisdiction over Plaintiff's claims for relief sounding in equity. Argument on Defendant's Motion to Dismiss Plaintiff's First Amended Complaint was heard on March 8, 2017.

          On April 7, 2017, Plaintiff filed its Verified Complaint in the Court of Chancery. The Court of Chancery action was originally assigned to a Vice Chancellor, but was subsequently reassigned to the undersigned after Chief Justice Strine designated him a Vice Chancellor for the Court of Chancery action on May 3, 2017. Plaintiff's complaint in the Court of Chancery alleged essentially the same substantive facts, and asserted three counts: (1) breach of contract, (2) a declaratory judgment action, and (3) a permanent injunction. Plaintiff also requested that the Court order the equitable rescission of the Agreement. Defendant filed its Motion to Dismiss or Stay Plaintiff's Verified Complaint on May 15, 2017. On May 30, 2017, the Court granted Plaintiff's Motion to consolidate the two actions and heard argument on Defendant's Motion to Dismiss or Stay Plaintiff's Verified Complaint in the Court of Chancery.[9] A trial date of April 23, 2018 has been set on all Superior Court and Court of Chancery claims and counterclaims in this consolidated case.

         III. PARTIES' CONTENTIONS

         A. Defendant's Contentions

         1. The Superior Court Action

         Defendant contends that Plaintiff's First Amended Complaint in the Superior Court should be dismissed insofar as it relates to Plaintiff's claims for breach of contract, injunctive relief, and equitable rescission. With respect to the breach of contract claim, Defendant asserts that Plaintiff's claim is not "ripe, " as "no [] development is alleged to have occurred[, ]" and "it is clear that there is no ripe claim for money damages."[10] Defendant further argues that the Superior Court lacks subject matter jurisdiction to hear Plaintiff's claims for a permanent injunction and equitable rescission, and that the claims should therefore be dismissed. Defendant has not moved to dismiss Plaintiff's plea for a declaratory judgment.

          2. The Court of Chancery Action

         Defendant has also moved to dismiss Plaintiff's Verified Complaint in the Court of Chancery in its entirety. Defendant asserts that adequate remedies at law exist for the Breach of Contract and Declaratory Judgment causes of action in the Verified Complaint, and that the Court of Chancery therefore lacks subject matter jurisdiction over those claims. Additionally, Defendant argues that ―[t]he prosecution of the Breach [of Contract claim] and the [declaratory judgment] claim in the prior filed Superior [Court] [a]ction forecloses [the Court of Chancery] from exercising jurisdiction over the exact same claims in [the Court of Chancery action].[11] In a final point on the breach of contract claim in the Court of Chancery, Defendant asserts that it should be dismissed because Plaintiff has conceded that "it may avail itself of the remedy of money damages[, which] constitutes a tacit admission that it has an adequate remedy at law, thereby divesting this Court of equitable jurisdiction."[12]

         Defendant further asserts that Plaintiff's claim for a permanent injunction should be dismissed. Arguing pursuant to Court of Chancery Civil Rule 12(b)(6), Defendant contends that "the Verified Complaint does not adequately plead the elements of Irreparable Harm or Balance of Harms." Moreover, Defendant contends that the Court of Chancery lacks subject matter jurisdiction to consider a claim for injunctive relief, as "the true relief sought by [Plaintiff] is available at law."[13] Defendant also submits that a permanent injunction "is [not] needed to enforce a judgment on the [Declaratory Judgment] Claim in the Superior [Court] [a]ction" as "[t]here is no evidence that [Defendant] would decline to abide by a Declaratory Judgment to be issued in the Superior [Court] [a]ction."[14] Accordingly, Defendant argues that Plaintiff's claim for injunctive relief should be dismissed.

         Lastly, Defendant contends that Defendant's claim for equitable rescission should also be dismissed. Defendant asserts that "it is well-settled that a claim for Equitable Rescission is founded upon Fraud, Misrepresentation, or Mistake, which must be alleged in order for such a claim to be properly pled." Defendant argues that Plaintiff's Verified Complaint does not contain any allegation related to fraud, misrepresentation, or mistake, and should therefore be dismissed for failure to state a claim upon which relief can be granted under Court of Chancery Rule 12(b)(6).

         Alternatively, Defendant requests that the Court stay Plaintiff's action pending in the Court of Chancery pending a resolution of the Superior Court action. Defendant contends that

if [Defendant] prevails in the Superior [Court] [a]ction, then there will be no need to litigate [the Court of Chancery] action at all-the Plaintiff would not be able to prove Actual Success on the Merits, which is the first element of a Permanent Injunction claim. An[d] even if [Plaintiff] prevails in the Superior [Court] [a]ction, an enforceable judgment will be entered so as to obviate the need for injunctive relief.[15]

         B. Plaintiff's Contentions

         1. The Superior Court Action

         In opposition to Defendant's Motion to Dismiss Plaintiff's First Amended Complaint, Plaintiff contends that its breach of contract claim is ripe for judicial action. Plaintiff argues that, under Delaware law, "a dispute will be deemed ripe if litigation sooner or later appears to be unavoidable and where the material facts are static."[16] Moreover, Plaintiff contends that "[b]y not first amending the easement [to permit implementation of Defendant's redevelopment plan], [Defendant's] redevelopment efforts breached the easement."[17] Accordingly, Plaintiff contends that Defendant has repudiated the easement through its decision to formulate and receive approval of a redevelopment plan, and that Plaintiff is therefore entitled to treat such repudiation as a breach of the Agreement, making the action ripe for judicial action.[18]

          2. The Court of Chancery Action

         Plaintiff contends that Defendant's Motion to Dismiss Plaintiff's Verified Complaint should be denied. With respect to Defendant's claim that Plaintiff's equitable rescission claim should be dismissed, Plaintiff asserts that "equitable rescission, or cancellation, is a form of remedy that provides equitable relief beyond a judicial declaration of contract invalidity or award of money or property and seeks to restore the plaintiff to his original condition."[19] Accordingly, Plaintiff asserts that, as equitable rescission is therefore a remedy for breach of contract, its prayer for equitable rescission as a remedy is appropriately pleaded given its claim for breach of contract.

         Plaintiff also contends that its claim for injunctive relief should not be dismissed. First, Plaintiff argues that "[s]ince the Declaratory Judgment Act's adoption, [the Court of Chancery] has regularly considered simultaneous claims for declaratory and injunctive relief."[20] Second, Plaintiff asserts that it has properly pleaded the elements of injunctive relief, and that adequate remedy at law does not exist despite its claim for monetary damages in the Superior Court action. Plaintiff submits that although "Plaintiff has also sought money damages, which may not amount to more than a nominal award, [that] is in no way an admission that money damages constitutes an adequate remedy or [is] the sole remedy."[21] With respect to the "balance of the equities" element of injunctive relief, Plaintiff contends that the "Complaint reveals pled facts that more than satisf[y] the minimal notice pleading standard."[22] Accordingly, Plaintiff contends that its claims for equitable rescission and injunctive relief in the Verified Complaint should not be dismissed.

         Finally, Plaintiff contends that the Court of Chancery has jurisdiction to hear Plaintiff's claim for breach of contract. Plaintiff asserts that a remedy at law on the breach of contract claim would not afford "full, fair and complete relief, " and argues that the remedy of equitable rescission would afford them "complete, fair, and adequate relief."[23] Moreover, Plaintiff contends that the Court of Chancery has authority to award money damages under the clean-up doctrine if they were to be requested by Plaintiff.

         Plaintiff also opposes Defendant's alternative motion to stay the Court of Chancery Action pending resolution of the Superior Court action. Plaintiff contends that although the Court of Chancery action ―may be mooted by resolution of the Superior Court action[, ] . . . "it also is true that it may not be mooted" if the Superior Court action is resolved in favor of Plaintiff. Plaintiff suggests that a bifurcation of the "two related actions that are contested by the same parties and pending before the same judicial officer" would not promote judicial economy.[24]

         Finally, Plaintiff has asserted that it "has no intent or desire to pursue duplicative claims in separate Courts." Accordingly, the Court will dismiss duplicative claims, and will leave one of the duplicative claims in whichever Court has proper subject matter jurisdiction.

         IV. DISCUSSION

         A. Standard of Review

         The standards of review on a motion to dismiss in the Superior Court and in the Court of Chancery are very similar. In the Superior Court, "the Court must assume all well-pleaded facts in the complaint to be ...


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