Christiana Care Health Initiatives, Inc. v. Tri-State Imaging DE Holdings, LLC.

• Court: Superior Court of Delaware
• Decided: October 10, 2014
• Docket: 14C-03-203
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

CHRISTIANA CARE HEALTH ) INITIATIVES, INC., ) ) Plaintiff, ) ) ) C. A. No. N14C-03-203 FWW v. ) ) TRI-STATE IMAGING DE HOLDINGS, ) LLC, ) ) Defendant. )

Submitted: July 29, 2014 Decided: October 10, 2014

On Plaintiff’s Motion for Judgment on the Pleadings DENIED

ORDER

This 10th day of October, 2014, upon consideration of the Plaintiff’s Motion

for Judgment on the Pleadings and the Defendant’s Response in Opposition, it

appears to the Court that:

(1) On July 15, 2014, Plaintiff filed a Complaint with the Court alleging

that Tri-State breached an Asset Purchase Agreement, executed by the parties on

March 1, 2014, by failing to pay the agreed upon purchase price of the assets and

1 that Plaintiff is entitled to a declaratory judgment for indemnification of all costs

arising from Tri-State’s failure to perform based upon a provision contained in the

Asset Purchase Agreement.

(2) On June 3, 2014, Defendant filed an Answer in which Defendant

denied all of the allegations set forth in the Complaint and asserted various

affirmative defenses. Defendant also filed an Affidavit of Defense pursuant to 10

Del. C. §3901 and attached to it a copy of the Asset Purchase Agreement and Bill

of Sale.

(3) In the Affidavit of Defense, Defendant asserts that on February 26,

2014, representatives of Tri-State inspected one of the assets, the MRI machine,

and it was not in working order and Plaintiff’s representatives agreed to restore the

machine to working order. On February 27, 2014, the MRI machine functioned

properly including the essential firmware and operating software. On March 10,

2014, after the parties executed the Asset Purchase Agreement, Tri-State tested the

machine and found that it did not function properly and that “the firmware and

operating software had been removed from the MRI machine or otherwise

damaged or corrupted so that the MRI machine became inoperable.” 1 Therefore,

Defendant asserts that Plaintiff failed to deliver the same equipment in the same

condition as when the equipment was inspected on February 27, 2014, after

1 Aff. of Defense, D.I. 5, ¶ 9. 2 Plaintiff had reason to know that Defendant executed the Asset Purchase

Agreement in reliance on the successful second inspection. Additionally, the

Affidavit states that, despite the disclaimers contained in the Agreement, “Seller

nevertheless represented and warranted to Tri-State that the Equipment that Tri-

State inspected would not be tampered with, damaged or rendered inoperable after

Closing.”2

(4) The Asset Purchase Agreement and Bill of Sale contain several

provisions including, in relevant part, the following:

Buyer is an informed and sophisticated participant in the transactions contemplated hereby and acknowledges that it has previously been given the opportunity to and has conducted such investigations and inspections of the Property as it has deemed necessary or appropriate for the execution, delivery and performance of this Agreement.

Buyer acknowledges and agrees that…it is purchasing and taking possession of the Property in its “AS IS, WHERE IS” and “WITH ALL FAULTS” CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AND IN PARTICULAR, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WITHOUT ANY IMPLIED WARRANTY OR REPRESENTATION AS TO (A) THE CONDITION, VALUE, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY SPECIFIC PURPOSE AS TO ANY OF THE PROPERTY, (B) THE USE OR OPERATION OF THE PROPERTY BY BUYER AT OR AFTER THE CLOSING DATE. 3

Additionally, the Asset Purchase Agreement contains indemnification clauses that

2 Id. at ¶ 12. 3 Id. at Ex. A, ¶ 12. 3 require each party to indemnify the other for losses and costs incurred arising out

of a failure to fulfill the agreement.

(5) On July 15, 2014, Plaintiff moved for Judgment on the Pleadings on

the grounds that Defendant acknowledged that it is a sophisticated buyer and that

“the contract’s clear and unambiguous meaning required CCHI to deliver the

Equipment, not in the condition on the date of inspection, but rather, “‘as is, where

is’ and ‘with all faults’ to Tri-State in exchange for the purchase price.” 4 Plaintiff

argues that Plaintiff performed under the contract by delivering the Property as

described in the Asset Purchase Agreement and that the fact that the machine

became inoperable after delivery is irrelevant. Additionally, Plaintiff contends that

Tri-State is liable for all costs associated with litigation including reasonable

attorneys’ fees pursuant to the indemnification clause.

(6) On July 29, 2014, Defendant responded in opposition to the Motion

for Judgment on the Pleadings and conceded that Plaintiff specifically disclaimed

any representations or warranties but argued that “inherent in that disclaimer was

Plaintiff’s promise and undertaking to Tri-State, as Buyer, that the Equipment that

Tri-State inspected would not be tampered with, damaged or rendered inoperable

after Closing.”5 Specifically, Defendant claims that during the first inspection on

February 26, 2014, the equipment did not operate and that Plaintiff “unilaterally

4 Pl. Mot., D.I. 7, pg. 3. 5 Def. Resp., D.I. 9, pg. 2-3. 4 undertook to repair the MRI machine at the Second Inspection, prior to the Closing

Date.”6 Tri-State claims that, on February 27, 2014, the MRI machine functioned

properly and that Plaintiff knew or had a reason to know that Tri-State executed

the contract in reliance on a successful inspection. Defendant asserts that, on

March 10, 2014, Defendant discovered that the MRI machine did not operate

properly. Defendant claims that “Plaintiff’s conduct raises substantial questions or

[sic] material fact including, but not limited to, whether Plaintiff’s actions outside

of the provisions of the Agreement created an obligation under promissory

estoppel to deliver the Equipment in the same condition as when inspected…and/or

whether Plaintiff’s actions breached the implied covenant of good faith and fair

dealing.” 7

(7) Pursuant to Super. Ct. Civ. R. 12(c), “[a]fter the pleadings are closed

but within such time so as not to delay the trial, any party may move for judgment

on the pleadings.”8 Upon considering such a motion, the Court must accept all

well-pled facts as true and must construe all reasonable inferences in favor of the

non-moving party. 9 The motion may only be granted where the Court is satisfied

that “no material issue of fact exists and the movant is entitled to judgment as a

6 Id. at 2. 7 Id. at 3. 8 Super. Ct. Civ. R. 12(c). 9 Silver Lake Office Plaza, LLC v. Lanard & Axilbund, Inc., 2014 WL 595378, at *6 (Del. Super. Jan. 17, 2014). 5 matter of law.”10

(8) Viewing the facts in the light most favorable to Defendant, including

Defendant’s allegation that the firmware and operating software essential to

operating the MRI machine were removed after the successful inspection on

February 27, 2014, the Court finds that material issues of fact remain with respect

to both counts in the Complaint. Therefore, Plaintiff is not entitled to judgment as

a matter of law.

NOW, THEREFORE, IT IS ORDERED that the Plaintiff’s Motion for

Judgment on the Pleadings is hereby DENIED.

s/s Ferris W. Wharton, Judge

10 Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund II, L.P., 624 A.2d 1199, 1205 (Del. 1993). 6