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TFII Legacy, LLC v. Lummus Corp.

United States District Court, D. Delaware

December 18, 2019

TFII LEGACY, LLC, Plaintiff,
v.
LUMMUS CORPORATION, Defendant.

          REPORT AND RECOMMENDATION

          Sherry R. Fallon, United States Magistrate Judge.

         I. INTRODUCTION

         Presently before the court in this breach of contract action is a motion filed by defendant Lummus Corporation ("Lummus") to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).[1] (D.I. 6) For the following reasons, the court recommends GRANTING Lummus' motion to dismiss.

         II. BACKGROUND

         a. Procedural History

         On October 12, 2018, Lummus filed an action against TFII Legacy, LLC ("Legacy") in Delaware Court of Chancery, alleging breach of contract (the "original action").[2] (C. A. No. 18-1745, D.I. 1, Ex. A) On November 6, 2018, Legacy removed the original action to this court pursuant to 28 U.S.C. §§ 1441 and 1446. (D.I. 1) On November 13, 2018, Legacy filed a motion to dismiss and compel arbitration, which it subsequently withdrew on December 20, 2018. (D.I. 3; D.I. 8) On December 20, 2018, Legacy filed a counterclaim against Lummus. (D.I. 9) On May 1, 2019, Legacy filed an amended counterclaim (the "First Amended Counterclaim"). (D.I. 29) On October 17, 2019, Legacy filed a second amended counterclaim (the "Second Amended Counterclaim"). (D.I. 51) On July 15, 2019, Legacy separately filed this related action, alleging breach of contract. (C. A. No. 19-1309, D.I. 1) On August 5, 2019, Lummus filed the present motion to dismiss. (D.I. 6)

         b. Parties

         Lummus is a Delaware corporation with its principal place of business in Georgia. (D.I. 1 at ¶ 2) Legacy is a Delaware limited liability company with its principal place of business in Texas.[3] (Id. at ¶ 1)

         c. Facts[4]

         On May 21, 2018, Lummus and Legacy entered into a Stock Purchase Agreement (the "SPA"), wherein Legacy agreed to sell all issued and outstanding shares of Carter Control Systems, Inc. ("Carter Control") to Lummus. (Id. at ¶¶ 6-7) The SPA was amended on June 7, 2018. (Id. at ¶¶ 7-8) The parties agreed that the purchase price would be subject to a post-closing adjustment (the "Post-Closing Adjustment"). (Id. at ¶¶ 9, 11)

         The SPA outlines procedures for calculating the Post-Closing Adjustment in section 2.04(b), which states:

(i) Within sixty (60) days after the Closing Date (but in no event earlier than forty-five (45) days after the Closing Date), [Lummus] shall prepare and deliver to [Legacy] a statement setting forth its calculation of Closing Working Capital, [5]which statement shall contain a reviewed balance sheet of [Carter Control] as of the Closing Date (without giving effect to the transactions contemplated herein) and a calculation of Closing Working Capital (the "Closing Working Capital Statement") and a certificate of the Chief Financial Officer of [Lummus] that the Closing Working Capital Statement was prepared in accordance with previous [Carter Control] management practices under GAAP applied using the same accounting methods, practices, principles, policies and procedures that were used in the preparation of the Reviewed Financial Statements.
(ii) The post-closing adjustment shall be an amount equal to the Closing Working Capital minus the Target Working Capital[6] (the "Post-Closing Adjustment"). If the Post-Closing Adjustment is a positive number, [Lummus] shall pay to [Legacy] an amount equal to the Post-Closing Adjustment. If the Post-Closing Adjustment is a negative number, [Legacy] shall pay to [Lummus] an amount equal to the Post-Closing Adjustment. The parties agree that Exhibit D sets forth the agreed upon example and calculation methodology for the Post-Closing Adjustment using the Interim Balance Sheet.

(C. A. No. 18-1745, D.I. 33, Ex. A at ยง 2.04(b)(i)-(ii)) (emphasis in original) The SPA obliged Lummus to use commercially reasonable efforts to collect all Legacy sales taxes that were uncollected as of the closing, and to pay all collected sales taxes to Legacy. (C. ...


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