JTH Tax, LLC v. Shahabuddin
| Decision Date | 20 August 2021 |
| Docket Number | CIVIL 2:20cv217 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | JTH TAX, LLC, et al., Plaintiffs, v. BABLU SHAHABUDDIN, Defendant. |
MEMORANDUM FINAL ORDER
This matter comes before the court on the Defendant's Motion for Summary Judgment, filed on March 22, 2021, ECF No. 87 and the Plaintiffs' Motion for Summary Judgment, filed on April 29, 2021, ECF No. 107. On April 15, 2021, and May 20 2021, respectively, these Motions were referred to United States Magistrate Judge Douglas E. Miller pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Federal Rule of Civil Procedure 72(b), to conduct necessary hearings and to submit to the undersigned district judge proposed findings and recommendations for the disposition of the Motions. ECF Nos. 106, 117.
The magistrate judge filed the Report and Recommendation ("R&R") on June 25, 2021. ECF No. 120. The R&R recommends granting the Defendant's Motion for Summary Judgment and denying the Plaintiffs' Motion for Summary Judgment. Id. By copy of the R&R, the parties were advised of their right to file written objections to the findings and recommendations made by the magistrate judge. Id. at 33-34. On July 9, 2021, the Plaintiffs filed their objections. ECF No. 122. The Defendant filed a response on July 23, 2021. ECF No. 123. On July 29 2021, the Plaintiff filed a reply. ECF No. 126; see ECF No. 127.
Pursuant to Rule 72(b) of the Federal Rules of Civil Procedure, the court, having reviewed the record in its entirety, must make a de novo determination of those portions of the R&R to which the parties have specifically objected. Fed.R.Civ.P. 72(b). For unchallenged portions, the court "must 'only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'" Diamond v. Colonial Life & Ace. Ins. Co., 416 F.3d 310, 315 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 Advisory Committee's Note). The court may accept, reject, or modify, in whole or in part, the recommendation of the Magistrate Judge, or recommit the matter to him with instructions. 28 U.S.C. § 636(b) (1) .
Summary judgment is appropriate when the court, viewing the record as a whole and in the light most favorable to the nonmoving party, finds there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A court should grant summary judgment if the nonmoving party has failed to establish, after adequate time for discovery, the existence of an essential element of that party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). At a minimum, the nonmoving party must present "evidence on which the [trier of fact] could reasonably find" for the nonmoving party. Anderson, 477 U.S. at 252. "When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits 'to determine whether either of the parties deserves judgment as a matter of law.'" Rossingnol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris, Inc. v. Harshburqer, 122 F.3d 58, 62 n.4 (1st Cir. 1997)).
The Plaintiffs object to the magistrate judge's recommendations that summary judgment be granted in favor of the Defendant as to (1) the Plaintiffs' breach of contract claim;[1] and (2) the Defendant's counterclaim for breach of contract. The court considers the Plaintiffs' objections in turn.
The Plaintiffs allege that the Defendant breached a Purchase and Sale Agreement ("PSA") executed by the parties on June 30, 2016. The contested provision of the PSA, paragraph 8(e), states, in relevant part:
At [the Plaintiffs' ] request, [the Defendant] shall seek the Lessor's consent to the assignment of certain office real estate leases connected with the operation of the Business to [the Plaintiffs] or its assignees as listed in Schedule C. Notwithstanding the forgoing, to the extent any leases associated with Business have not been assigned to [the Plaintiffs] and [the Plaintiffs] requests such assignment, [the Defendant] agrees to assign such leases to [the Plaintiffs] immediately.
ECF No. 99-9 at 5-6. In other words, the "Defendant agreed to sign over the leases to the properties subject to this litigation immediately upon [the] Plaintiffs' request." ECF No. 108 at 7.
On November 9, 2018, the parties entered into another contract, the Settlement Agreement. ECF No. 99-10. Paragraph 4(a) of the Settlement Agreement states, in pertinent part:
The Plaintiffs assert that the Defendant breached the PSA when he refused to assign leases to five (5) properties. ECF No. 108 at 6-11. The Defendant admits that he did not assign the leases in question, but he maintains that the Plaintiffs never demanded assignment of the leases and, even if they did, the Plaintiffs had already both expressly and impliedly waived their right to assignment of the leases. ECF No. 88 at 14-23.
To establish a breach of contract claim, the Plaintiffs must show that (1) the Defendant had a legally enforceable obligation; (2) the Defendant materially breached that obligation; and (3) the breach caused the Plaintiffs' damage. See Filak v. George, 594 S.E.2d 610, 614 (Va. 2004) . The magistrate judge found that the Plaintiffs' claim failed on the first element because (1) the summary judgment record could not support a finding that the Plaintiffs ever requested assignment of the leases; and (2) even if the Plaintiffs did request assignment of the leases, the summary judgment record established as a matter of law that the Plaintiffs had already expressly and impliedly waived their right to assignment of the leases. R&R at 17-32. The magistrate judge found express waiver based on a series of emails between the parties in 2016 in which the Plaintiffs "repeatedly told [the Defendant] that they would not be taking [the leases] and replied affirmatively that he was free to dispose of such leases." Id. at 22. The magistrate judge found implied waiver based on the Plaintiffs' failure to request assignment of the leases until at least December of 2019, even though "the language of the PSA repeatedly reiterates that . . . the assignment of the requested leases[] was to occur soon after the execution of the PSA in 2016." Id. at 27.
After a de novo review, the court finds no error in the magistrate judge's determinations that the undisputed facts establish, as a matter of law, that the Plaintiffs expressly and implicitly waived their right to assignment of the leases prior to December of 2019. The court therefore OVERRULES the Plaintiffs' objections as to the breach of contract claim and ADOPTS AND APPROVES in full the reasoning of the magistrate judge. The court adds two observations to the magistrate judge's thorough analysis.
First, the Plaintiffs contend that they could not have expressly waived their right to assignment of the leases in 2016 because their right to demand assignment of the leases was "reinstated" in 2018 when the parties executed the Settlement Agreement. The Plaintiffs reason that the Settlement Agreement reinstated this right because the Settlement Agreement states that it supersedes all prior agreements between the parties except for certain provisions of the PSA, including the provision of the PSA regarding assignment of leases. ECF No. 122 at 14-16. The Defendant counters that the Settlement Agreement's merger clause did not create new contractual rights, but simply maintained the status quo as to the rights and obligations contained in the excepted provisions of the PSA. ECF No. 123. The Defendant therefore concludes that the Settlement Agreement does not supersede the Plaintiffs' waiver. Id.
"A contract must be construed as written . . . ." Quadros & Assocs., P.C. v. City of Hampton, 597 S.E.2d 90, 93 (Va. 2004). "When contract terms are clear and unambiguous, a court must accord those terms their plain meaning." Id. The court concludes that paragraph 4 (a) of the Settlement Agreement, by its plain terms, does not create new contractual rights and obligations. Where, as here, a merger clause in a contract contains exceptions, the purpose of the exceptions is merely "to prevent [a prior agreement] from being superseded by" the new contract. Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 351 (4th Cir. 2001). That the parties intended this, and did not intend for the merger clause to create new rights and obligations, is clear from the Settlement Agreement's plain text, which says only that certain provisions of the PSA will "survive" execution of the Settlement Agreement. ECF No. 99-10. Accordingly, the Defendant never had an obligation under the terms of the Settlement Agreement to assign the leases at issue to the Plaintiffs.[2] Furthermore, the Plaintiffs' express waiver of their right to demand assignment of the leases was completed in 2016. The court finds that the Settlement Agreement, executed in 2018, does not shed light on whether the Plaintiffs' actions several years earlier constituted an express waiver. Therefore, the court OVERRULES this objection to the R&R.
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