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Buhl Building, L.L.C. v. Commonwealth Land Title Insurance Co.

Superior Court of Delaware

August 19, 2019

BUHL BUILDING, L.L.C., Plaintiff,
v.
COMMONWEALTH LAND TITLE INSURANCE COMPANY, and FIDELITY NATIONAL FINANCIAL, INC., Defendants.

          Submitted: May 28, 2019

         Upon Defendants' Motion to Establish Michigan as the Choice-of-Law and Partial Motion to Dismiss GRANTED

          Kenneth J. Nachbar, Esquire, Alexandra M. Cumings, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware, Bruce S. Sperling, Esquire, Robert D. Cheifetz, Sperling & Slater, P.C., Chicago, Illinois, Attorneys for Plaintiff Buhl Building, L.L.C.

          Scott T. Earle, Esquire, Zarwin Baum DeVito Kaplan Schaer Toddy, P.C., Wilmington, Delaware, Attorneys for Defendants Commonwealth Land Title Insurance Company and Fidelity National Financial, Inc.

          ERIC M. DAVIS, JUDGE.

         I. INTRODUCTION

         This insurance coverage dispute is assigned to the Complex Commercial Litigation Division of the Court. Plaintiff Buhl Building, LLC ("Buhl") brings this action against Defendants Commonwealth Land Title Insurance Company ("Commonwealth") and Fidelity National Financial, Inc. ("FNF") (collectively, the "Defendants"). Buhl purchased a title insurance policy (the "Contract") from Commonwealth. FNF is Commonwealth's parent corporation. The Court has reviewed the Contract and notes that FNF is not a signatory to that agreement.

         Buhl initiated this civil action by filing a complaint (the "Complaint"). In the Complaint, Buhl alleges that Commonwealth and FNF, working together, failed to provide clean title to a potential buyer of the Buhl's building and failed to indemnify Buhl. As a result, Buhl contends that Commonwealth and FNF (i) breached the Contract, [1] and (ii) acted in bad faith.

         The Defendants filed their Motion to Establish Michigan as the Choice-of-Law and Partial Motion to Dismiss (the "Motion"). Through the Motion, the Defendants request that the Court should: (i) apply Michigan law to all counts of the Complaint, (ii) dismiss FNF from the case, and (iii) dismiss Buhl's claims for bad faith and punitive damages against Commonwealth. Buhl opposes the Motion. The Court held a hearing on the Motion on May 28, 2019.

         For the reasons set forth below, the Court will GRANT the Motion.

         I. BACKGROUND

         A. Factual Background[2]

         Buhl is a Delaware limited liability company.[3] Commonwealth was a Pennsylvania corporation at the time the Contract was negotiated, and now is incorporated in Nebraska.[4]Commonwealth's principal place of business is Jacksonville, Florida.[5] FNF is a Delaware corporation with its principal place of business in Jacksonville, Florida.[6] Commonwealth is an indirect subsidiary of FNF.[7]

         Commonwealth issued the Contract to Buhl on March 11, 1998. The Contract provides $34, 450, 000 of coverage to insure:

against loss or damage . . . sustained or incurred by the insured by reason of:
1. Title to the estate or interest described in Schedule A being bested otherwise than as stated therein;
2. Any defect in or lien or encumbrance on such title;
3. Lack of a right of access to and from the land; or
4. Unmarketability of such title. [8]

         The estate described in Schedule A is Buhl's building, which is a skyscraper located in downtown Detroit, Michigan and an accompanying garage (the "Property").

         The Contract does not contain a choice-of-law provision.

         On May 12, 2016, Buhl entered into a real estate purchase agreement to sell the Property for $43 million to Weslan Properties, Inc. ("Weslan").[9] Weslan's title insurer, First American, issued a title commitment to insure the Property, but raised certain exceptions to the coverage.[10]One of the exceptions related to a discrepancy between the legal description of the Property in the records of the Wayne County Register of Deeds, which corresponds to the legal description insured under the Policy, compared to the legal description of the Property in the Wayne County tax records (the "Discrepancy"). Commonwealth and FNF tried to resolve the Discrepancy with First American, but First American would not insure the Property with the Discrepancy. Weslan subsequently refused to purchase the Property.

         In March 2017, Commonwealth and FNF offered "to insure a subsequent sale without exception for the [Discrepancy] shown on the First American title commitment."[11]

         In the Complaint, Buhl contends that Commonwealth and FNF functioned as a single entity. As evidence, Buhl cites the following: (i) FNF and Commonwealth share an address, (ii) both Commonwealth and addressed the title exceptions, (iii) Commonwealth originally acknowledged receipt of Buhl's claim, then Commonwealth advised Buhl that Commonwealth had been assigned to FNF personnel for "investigation and administration" and finally FNF communicated with Buhl.[12]

         B. Procedural Background

         Buhl filed the Complaint on March 6, 2017. The Complaint has three counts. Count I is a claim for Breach of Insurance Contract - Money Damages For Lost Sale. In Count I, Buhl alleges that the Defendants breached the Contract by failing to timely address and resolve the Discrepancy. Buhl also claims that the Defendants breached the Contract because the Defendants failed to indemnify Buhl for (i) the decrease in the value of the Property after Weslan refused to purchase the Property; and (ii) Buhl's costs in finding another buyer and trying to resolve the Discrepancy. Count II is another claim regarding breach of the Contract -Breach of Insurance Contract-Declaratory Relief.

         Count III is for Bad Faith. In Count III, Buhl asserts that the Defendants breached the implied covenant of good faith and fair dealing by refusing Buhl's request for indemnification without a reasonable justification. In addition, Buhl contends that the Defendants acted in bad faith because the Defendants delayed in addressing the Discrepancy and refused to indemnify Buhl. Buhl seeks an award of punitive damages for this bad faith claim. [13]

         On February 28, 2019, Defendants filed their Opening Brief in Support of the Motion to Establish Michigan as the Choice-of-Law and Partial Motion to Dismiss. Buhl filed Plaintiff's Response to Defendants' Motion to Establish Michigan as the Choice-of-Law and Partial Motion to Dismiss (the "Opposition") on March 28, 2019. In the Opposition, Buhl noted that Count II is moot because Buhl found another buyer for the Property. Finally, Defendants filed Commonwealth Land Title Insurance Company's and Fidelity National Financial, Inc.'s Reply Brief in Further Support of Their Motion to Dismiss the Bad Faith Claim (Count III), Striking the Request for Punitive Damages, and Dismissing All Claims Against Fidelity National Financial, Inc., (Counts I-III) Asserted in the Complaint Filed by Buhl Building, LLC on April 11, 2019.

         C. PARTIES' CONTENTIONS

         A. The Defendants' Contentions

         The Defendants argue that the Court should apply Michigan law to this insurance coverage dispute. The Defendants also claim that the Court dismiss FNF because FNF is not a party to the Contract. Finally, the Defendants request that the Court dismiss Count III for bad faith and Buhl's claim for punitive damages because both of these are barred by Michigan law.

         B. Buhl's Contentions

         In response, Buhl argues that Michigan law should not apply because Michigan does not have the most significant relationship to the Contract. Instead, Buhl claims that either Pennsylvania or Delaware law should apply. Moreover, Buhl contends that Buhl's claims for bad faith and punitive damages are not barred by Michigan law. Lastly, Buhl alleges that FNF should not be dismissed because FNF directly participated in the breach of contract and bad faith claims.

         D. STANDARD OF REVIEW

         Upon a motion to dismiss, the Court (i) accepts all well-pleaded factual allegations as true, (ii) accepts even vague allegations as well-pleaded if they give the opposing party notice of the claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only dismisses a case where the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances.[14] ...


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