Bamdad Mechanic Co. v. United Technologies Corp.

• Decision Date: 02 May 1984
• Docket Number: Civ. A. No. 83-182 MMS.
• Citation: 586 F. Supp. 551
• Parties: BAMDAD MECHANIC CO., LTD., et al., Plaintiffs, v. UNITED TECHNOLOGIES CORP., et al., Defendants.
• Court: U.S. District Court — District of Delaware

586 F. Supp. 551

BAMDAD MECHANIC CO., LTD., et al., Plaintiffs, v. UNITED TECHNOLOGIES CORP., et al., Defendants.

Civ. A. No. 83-182 MMS.

United States District Court, D. Delaware.

May 2, 1984.

Irving Morris, and Kevin Gross, Morris & Rosenthal, P.A., Wilmington, Del., of counsel: John H. Boone, Geoffrey P. Knudsen, and Michael R. Davisson, Boone, Knudsen & Martin, P.C., San Francisco, Cal., for plaintiffs.

William H. Sudell, Jr., Morris, Nichols, Arsht & Tunnell, Wilmington, Del., James J. Garrett, Rochelle D. Alpert, and Richard G. Seeborg, Morrison & Foerster, San Francisco, Cal., for defendants.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This contract dispute arose out of logistical difficulties generated by the 1978 revolution in Iran. The individual plaintiffs, Khosro Y. Jobrani and Parviz Jobrani, are both Iranian citizens who currently reside in California. The Jobrani brothers are the sole shareholders and directors of Bamdad Mechanic Co., Ltd. ("Bamdad"), an Iranian corporation and the corporate plaintiff in this action. Plaintiffs have named as defendants United Technologies Corp. ("UTC") and two UTC subsidiaries, United Technologies International, Inc. and United Technologies International Operations, Inc. All three defendants are incorporated in Delaware and maintain their principal places of business in Hartford, Connecticut.

Defendants moved to dismiss plaintiffs' complaint on four grounds. During oral argument it became apparent that, in light of plaintiffs' amendment of their complaint, only two grounds for dismissal remained viable.¹ The remaining issues are 1) whether plaintiffs' cause of action is barred by the applicable statute of limitations and 2) whether plaintiffs' claims against defendant UTC are barred on the ground of res judicata.² Affidavits were submitted by both sides on the statute of limitations issue and the Court advised counsel at oral argument that it would treat defendants' motion as one for summary judgment. See Fed.R.Civ.P. 12(b). Because the Court holds that all claims are barred by the statute of limitations, it will not address the res judicata question.

The facts underlying the contract dispute are unimportant for purposes of the present motion. In brief summary, according to plaintiffs' allegations, defendants engaged plaintiffs to construct an electric generating plant in Isfahan, Iran. Plaintiffs pledged money and assets worth $1.16 million as a performance guarantee which, upon completion of the project, were to be released by the defendants. Plaintiffs allege that after the construction was substantially completed defendants refused to pay for the completed work and failed to release the pledged assets. The assets were ultimately seized by the Iranian government. In a four count complaint plaintiffs allege: 1) breach of contract, 2) breach of covenant of good faith and fair dealing, 3) breach of an implied contract that defendants would assist plaintiffs to liquidate their assets and leave Iran if the political situation deteriorated, and 4) intentional and negligent misrepresentation that defendants would pay plaintiffs if they continued to work on the project.

The parties agree that this action is governed by Delaware's three-year statute of limitation for actions based on contract or misrepresentation, 10 Del.C. § 8106. (See Dkt. 6 at 11; Dkt. 13 at 15; Dkt. 18 at 60). Although the parties disagree about when plaintiffs' cause of action accrued, plaintiffs concede that the latest possible date was in September, 1979. (Dkt. 18 at 60). Suit was filed on March 31, 1983, past the three-year limitation period. Plaintiffs argue, however, that defendants waived their statute of limitations defense by agreement. They rely on two letters, dated December 1, 1982, and February 25, 1983, sent by W. Harmon Leete, counsel for UTC's Power Systems Division, to John H. Boone, counsel for plaintiffs, in which Leete apparently agreed to temporarily extend certain statutes of limitations.³

Defendants recognize that if these letters, as plaintiffs contend, constitute valid extensions of the Delaware three-year statute of limitations, then the present action was timely filed. Defendants argue, however, that the letters do not evidence an intent to extend the Delaware statute of limitations. They argue further that even had the defendants agreed to extend the Delaware statute, such an agreement would not act as a waiver or estoppel because by December 1, 1982, the date of the first letter, the Delaware statute had already run.

As explained below, the Court disagrees with defendants that a party may not, by agreement, waive his statute of limitations defense after the statute has already run. The Court agrees with defendants, however, that in this case the parties intended to extend only those statutes of limitations that had not yet run.

Waiver After Action is Barred

A statute of limitations defense is a personal one which may be waived by a defendant. See Leavy v. Saunders, 319 A.2d 44, 47 (Del.Super.1974); Developments in the Law — Statutes of Limitations, 63 Harv.L.Rev. 1177, 1222-24 (1950) (hereinafter cited as "Developments"). Thus, if a party fails properly to plead the statute as a defense he will be unable later to assert it. Van Sant v. American Express Co., 169 F.2d 355, 372 (3d Cir.1948); Leavy v. Saunders, 319 A.2d at 47. Furthermore, if a defendant by his words or actions induces a plaintiff to forego bringing suit within the proper time, he will be estopped from pleading, or will be deemed to have waived, the statute of limitations defense.⁴ See Developments at 1222-24.

While recognizing this general rule, defendants argue that once an action is already barred by the passage of time, a defendant's promise to waive the statute will not preclude his assertion of the statute as a defense.

The Court cannot agree with so broad a rule. Many courts have stated, generally, that once the time to bring suit has run a defendant's promise not to assert his limitations defense will not create a waiver or estoppel. See e.g. Monarch Industrial Corp. v. American Motorists Insurance Co., 276 F.Supp. 972, 979 (S.D.N.Y.1967); Cardente v. Travelers Insurance Co., 112 R.I. 713, 315 A.2d 63, 65-66 (1974); Wilkinson v. Bennett, 442 S.W.2d 166, 170 (Mo. App.1969); Trask v. Weeks, 81 Me. 325, 17 A. 162, 163 (1889); see generally Developments, supra p. 4, at 1224; Annot., 43 A.L.R.3d 756, 760, 766-67 (1972); but see Union Bank of Switzerland v. HS Equities, Inc., 457 F.Supp. 515, 520-21 (S.D.N. Y.1978) (discussed infra at 554 n. 6). The general statements in these cases do not, however, erect a per se rule against the validity of waiver agreements entered into after the running of a statute. These cases, instead, can be explained as involving a particular failure of consideration or lack of detrimental reliance. For example, in Trask v. Weeks, 81 Me. 325, 17 A. 163 (1889), an agreement to waive the statute of limitations was made after the statute had run. The court held that this agreement could not "operate as an estoppel, for, having been entered into after the statute of limitations had taken effect, there is no evidence in the case that the plaintiff, in consequence of it, has been induced to change his position, so as to lose any legal rights by delay or otherwise." Id., 17 A. at 163 (emphasis added). The Trask court explained further that the defendant's promise not to assert the statute lacked consideration and was therefore unenforceable as a contract. Id. The Trask court thus apparently assumed that if a plaintiff provided independent consideration for a promise not to assert the statute, or if he detrimentally relied on such a promise, the defendant could not raise the statute as a defense even though the statute had run at the time of the promise.

Other courts have recited in dictum the rule that, to be effective as an estoppel or waiver, a promise not to plead a statute of limitations must occur before the statute has run. See Monarch Industrial Corp. v. American Motorists Insurance Co., 276 F.Supp. at 979; Mann v. Cooper, 2 App. D.C. 226, 238 (1894); Warren v. Walker, 23 Me. 453, 458-59 (1844); Gaylord v. Van Loan, 15 Wend. 308, 310 (N.Y.1836).⁵ These courts, however, addressed only the ordinary circumstance in which a party has delayed institution of his lawsuit in return for a promise not to assert a particular statute of limitation. Once that particular statute has run, there can be no detrimental reliance, and no benefit conferred on the defendant, by the plaintiff's delay of suit.

In this case, however, the plaintiffs allege that in return for a promise to waive all possible statutes of limitations — those that might have run and those that had not run — plaintiffs agreed to delay filing suit in all jurisdictions on all claims. Thus, according to plaintiffs' theory, plaintiffs did give consideration by delaying suit in return for defendants' alleged promise not to assert any statute of limitations defenses. Although no Delaware cases were found which address the question, the Court believes that the Delaware Supreme Court would bar a defendant from pleading a statute of limitations defense if he promised, in return for consideration, not to raise the statute even though the statute had already run.⁶

Parties Intent

Although the Court has held that a promise by defendants to extend the statute of limitations could have barred their assertion of the defense in this case, the Court finds that defendants made no such promise. The December 1, 1982, letter reads:

Mr. John H. Boone Boone, Knudsen & Martin Russ Building, Suite 420 235 Montgomery Street San Francisco, California 94104

SUBJECT: Claim of Bamdad Mechanic Company

Dear John,

Inasmuch as: (1) we are presently engaged in a joint effort to obtain information from Iran which may lead to an amicable settlement of the above claim; (2) this effort may not be completed until after the expiration of

...