Bobcat N. Am., LLC v. Inland Waste Holdings, LLC
| Decision Date | 26 April 2019 |
| Docket Number | C.A. No. N17C-06-170 PRW CCLD |
| Parties | BOBCAT NORTH AMERICA, LLC, Plaintiff, v. INLAND WASTE HOLDINGS, LLC; RSMDBB HOLDINGS, LLC; BART A. BEGLEY; MONTGOMERY M. DAVISON; and ROBERT A. SMITH, Defendants. INLAND WASTE HOLDINGS, LLC; RSMDBB HOLDINGS, LLC; BART A. BEGLEY; MONTGOMERY M. DAVISON; ROBERT A. SMITH; INLAND SERVICE CORPORATION, LLC; and INLAND SERVICE OF FLORIDA, LLC, Counterclaim Plaintiffs and Intervenors, v. BOBCAT NORTH AMERICA, LLC, Counterclaim Defendant. |
| Court | Delaware Superior Court |
Upon Plaintiff/Counterclaim Defendant Bobcat North America, LLC's Motion for Partial Summary Judgment, GRANTED in part; DENIED in part.
MEMORANDUM OPINION AND ORDERJoel Friedlander, Esquire, Christopher M. Foulds, Esquire, Christopher P. Quinn, Esquire, Friedlander & Goris, P.A., Wilmington, Delaware, Andrew J. Wronski, Esquire (pro hac vice) (argued), Max B. Chester, Esquire (pro hac vice), Andrew M. Meerkins, Esquire (pro hac vice), Foley & Lardner LLP, Milwaukee, Wisconsin, Attorneys for Plaintiff/Counterclaim Defendant.
David S. Eagle, Esquire, Sean M. Brennecke, Esquire, Klehr Harrison Harvey Branzburg LLP, Wilmington, Delaware, William T. Hill, Esquire (pro hac vice) (argued), Gregory R. Sellers, Esquire (pro hac vice), Klehr Harrison Harvey Branzburg LLP, Philadelphia, Pennsylvania, Attorneys for Defendants/Counterclaim Plaintiffs.
Plaintiff Bobcat North America, LLC ("Bobcat") brings this action against Defendants Inland Waste Holdings, LLC ("Inland Holdings"), RSMDBB Holdings, LLC ("RSMDBB"), Bart A. Begley ("Begley"), Montgomery M. Davison ("Davison"), and Robert A. Smith ("Smith", together with Begley and Davison, the "Sellers") (Sellers, together with Inland Holdings and RSMDBB, "Inland") for claims arising out of Bobcat's acquisition from Inland of a waste management business consisting of Inland Waste Solutions, LLC ("Inland Solutions"), ABC Leasing Company, LLC ("ABC"), and Inland Service Corporation, LLC ("Inland Service") (together with Inland Solutions and ABC, the "Company"). Bobcat's Complaint is based on Inland's alleged misrepresentation of the Company's financial statement, customer relationships, and assets to inflate the acquisition price. Bobcat brings one count each of fraud, negligent misrepresentation, and breach of contract through which it seeks, inter alia, declaratory judgment and indemnification.
Inland answered the Complaint and, together with intervenors Inland Service and Inland Service of Florida, LLC ("Inland Florida") (where necessary, the reference to Inland also includes "Inland Service" and "Inland Florida"1) bringagainst Bobcat counterclaims via two counts of tortious interference, one count of defamation, a breach-of-contract count, and an indemnification claim.
Now before the Court is Bobcat's Motion for Partial Summary Judgment.2 For the reasons stated below, the Court GRANTS Bobcat's Motion, in part, and DENIES it, in part.
The Court summarizes here only the factual background pertinent to this motion. The Court extracts this background from the undisputed facts found in Bobcat's complaint (and its amendments), Inland's counterclaims (and their amendments), and the parties' motion submissions of affidavits and exhibits.
Bobcat is a limited liability company with its principle place of business in Sarasota, Florida.3 George W. Dietrich is Bobcat's Chief Executive Officer. His son, William "Billy" Dietrich, is the President.4
The Company, founded in 1953, specializes in residential and commercial waste management systems and services.5 On December 31, 2012, Begley and Davison each acquired 37.5% of the Company's outstanding equity from Smith, who retained 25% of the equity interest.6 Begley and Davison financed their combined purchase price of $25,000,000 through a loan from Union Bank, N.A., to be repaidin installments of approximately $400,000 per month from the Company's post-acquisition revenues.7
At the time of this 2012 purchase, the Company ran a waste management business in Fort Hood, Texas ("Ft. Hood Business").8 In 2014, the Company was chosen by Memphis, Tennessee as its waste management contractor.9 Also in 2014, the Company executed an asset swap agreement with a competitor to obtain the right to service the City of Germantown, Tennessee—a Memphis suburb.10
In the Summer of 2015, Inland contemplated the sale of the Company and retained an investment banking firm, Livingstone Partners LLC ("Livingstone"), to help the Company.11 Later that year, Livingstone complied and Inland issued an Information Memorandum to prospective buyers, including Bobcat.12 In that Information Memorandum, Inland represented, among other things, that: (1) the Company's model was superior in generating Earnings Before Interest, Tax,Depreciation, and Amortization ("EBITDA"); and (2) the Company had EBITDA margins of 35% from 2011 through 2015.13
After receiving the Information Memorandum, Bobcat contacted Inland, and in January 2016, the parties signed a formal letter of intent and commenced negotiations.14 The acquisition was finalized on May 18, 2016, when Bobcat and Inland entered into a Unit Purchase Agreement ("UPA"). Through the UPA, Bobcat purchased, at a price of $64,900,000: (a) 100% interest in Inland Solutions from the Sellers; and (b) 100% interest in ABC and Inland Service from Inland Holdings (exclusively owned by the Sellers) (the "Transaction").15
At the time of the Transaction, the Company maintained operations in ten states: Arkansas, Delaware, Georgia, Kansas, Mississippi, Missouri, Oklahoma, Tennessee, Texas, and Wisconsin.16
As part of the Transaction, the Sellers collectively received 11.9% equity ownership interest (the "Rollover Equity") of Bobcat through RSMDBB. RSMDBBwas formed specifically to hold this Rollover Equity.17 The Rollover Equity was subject to redemption by Bobcat after Closing if Inland failed to meet certain financial performance targets tied to proposed expanded service contracts with Memphis ("Memphis Expansion").18
Under the UPA, Bobcat and Inland were bound by covenants to the other concerning their post-closing arrangements19 including, at issue here, Inland's obligation of confidentiality and non-disparagement.20
Shortly after the closing of the Transaction, Bobcat says it discovered Inland's misconduct, misrepresentation, fraud, and mismanagement of the Company.21 Among other things, Bobcat learned that: (1) the Memphis service contracts operated at a loss of over $1 million;22 (2) numerous claims had been filed against the Company resulting in liquidated damages of $406,000 for uncured violations thatoccurred in 2016 alone;23 and, (3) the Company failed to properly maintain its trucks and equipment.24 Bobcat found too that the Company was faced with liquidated damages in Delaware and had already lost certain Delaware business via reassignment to a competitor.25 Further, Bobcat discovered what appeared to be intentional irregularities in the Company's pre-closing booking of ordinary expenses.26
In September 2016, while Bobcat was investigating the Company's suspected non-compliance with the UPA, Begley and Davison formed Inland Florida in contemplation of bidding for a waste management contract with the Board of County Commissioners for Okaloosa County, Florida.27 The Okaloosa Board had earlier published a request for proposals.28 And, on November 10, 2016, Inland Florida, with Begley and Davison as its founders, submitted a proposal to the Okaloosa Board.29 Among other complained-of misconduct, Begley and Davison allegedlyused UPA-protected confidential information—e.g. pricing, names, addresses, and contract terms and conditions of the Company's customers—to boost Inland Florida's credentials.30
Before the Okaloosa Board made its final decision, Billy Dietrich sent its members an email objecting to Inland Florida's use of Bobcat's confidential information.31 The Okaloosa Board ultimately selected another contractor in February 2017.32 Four months later, this action ensued. And before the Court now is Bobcat's Motion for Partial Summary Judgment through which seeks to knock out some of Inland's counterclaims.
"The standard of review on a motion for summary judgment is well-settled."33 A motion for summary judgment is reviewed by this Court under Superior Court Civil Rule 56(c), which states:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuineissue as to any material fact and that the moving party is entitled to a judgment as a matter of law.34
The burden is on the moving party to demonstrate its prayer for summary judgment is supported by undisputed facts or an otherwise adequate factual record to support a legal judgment.35 "If the motion is properly supported, then the burden shifts to the non-moving party to demonstrate that there are material issues of fact for resolution by the ultimate fact-finder."36
The Court may grant a motion for summary judgment when: "(1) the record establishes that, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact, and (2) in light of the relevant law and those facts, the moving party is legally entitled to judgment."37 But the Court cannot grant a motion for summary judgment "[i]f . . . the record reveals that material facts are in dispute, or if the factual record has not been developed thoroughly enough to allow the Court to apply the law to the factual record . . . ."38
A fact is material if it might affect the outcome of...
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