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Lummus Corp. v. TFII Legacy, LLC

United States District Court, D. Delaware

December 19, 2019

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

          REPORT AND RECOMMENDATION

          Sherry R. Fallon United States Magistrate Judge

         I. INTRODUCTION

         Presently before the court in this breach of contract action is plaintiff Lummus Corporation's ("Lummus") renewed motion for judgment on the pleadings.[1] (D.I. 59) For the following reasons, the court recommends DENYING Lummus' renewed motion for judgment on the pleadings.[2]

         II. BACKGROUND

         a. Procedural History

         On October 12, 2018, Lummus originally filed this action against defendant TFII Legacy, LLC ("Legacy"), alleging breach of contract.[3] (D.I. 1, Ex. A) On November 6, 2018, Legacy removed the case 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 May 24, 2019, Lummus filed a motion for judgment on the pleadings. (D.I. 32) On October 17, 2019, Legacy filed a second amended counterclaim (the "Second Amended Counterclaim"). (D.I. 51) On November 26, 2019, Lummus filed a renewed motion for judgment on the pleadings. (D.I. 59)

         b. Parties

         Lummus is a Delaware corporation with its principal place of business in Savannah, Georgia. (D.I. 1, Ex. A at ¶ 2) Legacy is a Delaware limited liability company with its principal place of business in Houston, Texas. (Id. at ¶ 3) Legacy is the successor-in-interest to Carter Control Systems, L.L.C. ("Carter Control"), a holding company which held all of the issued and outstanding shares of Carter Control Systems, Inc. ("the Company"). (Id.)

         c. Facts[4]

         On May 21, 2018, Lummus and Carter Control entered into a Stock Purchase Agreement (the "SPA"), wherein Carter Control agreed to sell all issued and outstanding shares of the Company to Lummus.[5] (Id. at ¶ 9; D.I. 33, Ex. A) Lummus and Carter Control amended the SPA and held a closing on June 7, 2018. (D.I. 1, Ex. A at ¶ 9; D.I. 33, Ex. B) The parties agreed that the purchase price would be subject to a post-closing adjustment (the "Post-Closing Adjustment"). (D.I. 1, Ex. A at ¶ 9)

         On June 29, 2018, Lummus provided Carter Control notice that its preliminary analysis showed a Post-Closing Adjustment in the amount of $1, 040, 832. (D.I. 1, Ex. A at ¶ 20; D.I. 33, Ex. C) On July 24, 2018, Lummus provided Carter Control its closing working capital statement (the "Closing Working Capital Statement"), as required under the SPA, which confirmed that the Post-Closing Adjustment was $1, 040, 832. (D.I. 1, Ex. A at ¶ 21; D.I. 33, Ex. D) As a result, pursuant to the SPA, Carter Control's Statement of Objections became due on or before August 23, 2018. (D.I. 1, Ex. A at ¶ 22)

         On August 6, 2018, Carter Control requested additional information regarding Lummus' calculation of the Closing Working Capital Statement.[6] (Id. at ¶ 23; D.I. 33, Ex. E) Lummus provided its calculations on August 7, 2018 in a table labeled "Exhibit D" (the "Exhibit D table"). (D.I. 1, Ex. A at ¶ 24; D.I. 33, Ex. F) On August 13, 2018, Carter Control submitted a letter, which sought answers to additional questions regarding the calculation of the Closing Working Capital Statement. (D.I. 1, Ex. A at ¶ 25, D.I. 33, Ex. G) On August 14, 2018, Lummus responded to Carter Control's additional questions and reduced the amount of the Post-Closing Adjustment to $985, 970. (D.I. 1, Ex. A at ¶ 26; D.I. 33, Ex. H)

         On August 23, 2018, Carter Control submitted a letter, which it identified as its statement of objections (the "Statement of Objections"). (D.I. 1, Ex. A at ¶ 27; D.I. 33, Ex. I) The Statement of Objections included a cover letter that stated that "[e]ach item in the Closing Working Capital Statement that is disputed by [Carter Control] is highlighted in yellow on Exhibit A." (D.I. 33, Ex. I) The attached "Exhibit A" is a highlighted version of the Exhibit D table, wherein all line items are highlighted in yellow, except the "Target Working Capital," which is defined as $937, 333 in the SPA. (D.I. 1, Ex. A at ¶ 29; D.I. 33, Ex. A at art. 1; Ex. I) The Statement of Objections asserts that the Post-Closing Adjustment (representing the amount owed by Legacy to Lummus) should instead total $360, 827.27. (D.I. 1, Ex. A at ¶ 28; D.I. 33, Ex. I)

         On August 27, 2018, Lummus responded to Carter Control's Statement of Objections, and asserted that the Statement of Objections failed to include the requisite reasonable detail setting forth each disputed item or amount, and the basis for Carter Control's objections. (D.I. 1, Ex. A at ¶ 33; D.I. 33, Ex. J) On October 3, 2018, Lummus delivered a letter to Legacy, wherein Lummus noted that it was offsetting the Post-Closing Adjustment by $103, 328.46, the amount collected post-closing from a customer of the Company. (D.I. 1, Ex. A at ¶ 35; D.I. 33, Ex. K) To date, Carter Control has not paid the Post-Closing Adjustment. (D.I. 1, Ex. A at ¶ 35) Lummus seeks net damages in the amount of $882, 641.54. (Id. at ¶ 1 n.1)

         d. The Stock ...


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