United States District Court, D. Delaware
before the Court is Defendant's Motion to Dismiss
Plaintiffs Complaint. (D.I. 11). The Parties have fully
briefed the motion. (D.I. 12, 16, 18). For the reasons set
forth below, Defendant's motion is
Shield Restraint Systems, Inc. ("Shield")
contracted to purchase Beam's Industries, Inc.
("Beam's") from Plaintiff The Ark Group, Inc.
("Ark Group") on January 30, 2013. (D.I. 12 at 1).
The Parties' final deal is embodied in the Stock Purchase
Agreement ("Agreement"). (D.I. 4). At the time of
the sale, Beam's was involved in the seatbelt and
restraint devices business. (D.I. 12 at 1). The Agreement
includes indemnification provisions in Article VII. (D.I. 4).
The Section entitled "Indemnification for Buyer's
Benefit" states that Ark Group will indemnify Shield for
damages related to "any injury to individuals or
property resulting from or arising out of the ownership,
possession or use of any product manufactured, sold, leased
or delivered by [Beam's] on or prior to the Closing Date
. . . ." (Id. at § 7.2(e)). That Section
also provides that Ark Group will indemnify, inter alia,
"breach of any representation or warranty."
(Id. at § 7.2(a)). Section 7.1 limits Ark
Group's liability, stating, "All of the
representations and warranties herein will survive the
Closing and continue in full force and effect for a period of
two years thereafter . . . ." (Id. at §
7.1). Section 7.7(a) further limits the amount Shield might
recover by placing a $100, 000 deductible and a $2, 000, 000
cap on the damages indemnified under Sections 7.2(a) and
7.2(e). (Id. at § 7.7(a)).
present controversy stems from an indemnification claim
brought to Ark Group by Shield on October 9, 2015. (D.I. 12
at 4). The parties agree that the claim falls within the
subject matter of Section 7.2(e) (product liability), but
they disagree whether the claim is time-barred under the
Group filed the present suit seeking declaratory judgment
that the claim is time-barred on May 17, 2018. (D.I. 2). On
July 5, 2018, Shield filed this Motion seeking dismissal of
the action. (D.I. 11).
12(b)(6) LEGAL STANDARD
reviewing a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6), the Court must accept the
complaint's factual allegations as true. See Bell
Ail. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Rule
8(a) requires "a short and plain statement of the claim
showing that the pleader is entitled to relief."
Id. at 555. The factual allegations do not have to
be detailed, but they must provide more than labels,
conclusions, or a "formulaic recitation" of the
claim elements. Id. ("Factual allegations must
be enough to raise a right to relief above the speculative
level... on the assumption that all the allegations in the
complaint are true (even if doubtful in fact).").
Moreover, there must be sufficient factual matter to state a
facially plausible claim to relief. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). The facial plausibility
standard is satisfied when the complaint's factual
content "allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Id. ("Where a complaint pleads
facts that are merely consistent with a defendant's
liability, it stops short of the line between possibility and
plausibility of entitlement to relief." (internal
quotation marks omitted)). In ruling on a motion to dismiss,
"courts must consider the complaint in its entirety, as
well as other sources . . ., in particular, documents
incorporated into the complaint by reference, and matters of
which a court may take judicial notice." Tellabs,
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,
terms themselves will be controlling when they establish the
parties' common meaning so that a reasonable person in
the position of either party would have no expectations
inconsistent with the contract language." Eagle
Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d
1228, 1232 (Del. 1997). When a court is interpreting a
contract, it "must give effect to all terms of the
instrument, must read the instrument as a whole, and, if
possible, reconcile all the provisions of the
instrument." Elliott Assocs., L.P. v. Avatex
Corp., 715 A.2d 843, 854 (Del. 1998). Under Delaware
law, contract terms are ambiguous "when the provisions
in controversy are reasonably or fairly susceptible of
different interpretations or may have two or more different
meanings." Rhone-Poulenc Basic Chems. Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
"The court may grant a motion to dismiss when
unambiguous language of a contract contradicts
plaintiffs' allegations in a complaint."
Phunware, Inc. v. Excelmind Grp. Ltd., 117 F.Supp.3d
613, 625 (D. Del. 2015).
argues that the Agreement's two-year limitations period
does not extend to product liability indemnification. Rather,
Shield advocates that the Agreement's limitations period
refers only to representations and warranties indemnification
as described in Section 7.2(a). (D.I. 12 at 7). Thus, Shield
argues that the indemnification described in Sections
7.2(b)-(e) is unaffected by Section 7.1. (Id.).
Group avers that the terms of the agreement are ambiguous.
Ark Group supports its position by arguing that the last
sentence of Section 7.2 contradicts Shield's reading.
(D.I. 16 at 5). That sentence states, "The foregoing
obligations shall be subject to the limitations set forth in
Sections 7.1 and 7.7, except in the case of
fraud." (D.I. 4 at § 7.2 (emphasis in original)).
Ark Group further argues that Section 7.4(a) supports its
conclusion. (D.I. 16 at 6). That provision, dealing with
notice of potential indemnification claims to Ark Group,
"Such notice shall (i) be in writing, (ii) be given
prior to the applicable date set forth in Section
7.1, (iii) specifically identify the matters that have
given rise to such indemnity claims in reasonable detail, and
(iv) set forth the amount of the Damage suffered, or that may
be suffered, by the Indemnitee."
(D.I. 4 at § 7.4(a) (emphasis in original)). In view of
these two provisions, Ark Group argues that Shield's
interpretation of the Agreement is an improper construction,
based on a single sentence, and taken out of context. (D.I.
16 at 5).
structure of the Agreement is fatal to Ark Group's theory
of ambiguity. The Agreement clearly lists the provisions that
constitute "Representations and Warranties" in
Articles IV ("Representations and Warranties of
Buyer") and V ("Representations and Warranties of
Stockholder"). (D.I. 4). Covenants are in Article VI.