Llp v. U.S. Bank Nat'l Ass'n

• Decision Date: 09 July 2010
• Docket Number: C.A. No. 09-680-JJF.
• Citation: 722 F.Supp.2d 496
• Parties: FESNAK AND ASSOCIATES, LLP, Plaintiff, v. U.S. BANK NATIONAL ASSOCIATION, and Citibank, N.A., Defendants.
• Court: U.S. District Court — District of Delaware

722 F.Supp.2d 496

FESNAK AND ASSOCIATES, LLP, Plaintiff,

v.U.S. BANK NATIONAL ASSOCIATION, and Citibank, N.A., Defendants.

C.A. No. 09-680-JJF.

United States District Court,D. Delaware.

July 9, 2010.

James A. Keller, Esquire of Saul Ewing, Philadelphia, PA, Whitney W. Deeney, Esquire of Saul Ewing LLP, Wilmington, DE, for Plaintiff.

Kathleen M. LaManna, Esquire, and Eric S. Goldstein, Esquire of Shipman & Goodwin LLP, Hartford, CT. Charlene Davis, Esquire, and Justin R. Alberto, Esquire of Bayard, P.A., Wilmington, DE, for Defendant U.S. Bank National Association.

Christopher H. McGrath, Esquire, and Colleen E. Huschke, Esquire of Paul, Hastings, Janofsky & Walker, San Diego, CA. Philip Trainer, Jr., Esquire, and Toni-Ann Platia, Esquire of Ashby & Geddes, Wilmington, DE, for Defendant Citibank, N.A.

MEMORANDUM OPINION

FARNAN, District Judge.

Presently before the Court are the following Motions filed by Plaintiff Fesnak and Associates, LLP: (1) Motion To Strike The Third, Eighth and Ninth Affirmative Defenses Asserted In Defendant Citibank, N.A.'s Answer (D.I. 14); (2) Motion For Summary Judgment On Count II (D.I. 17); and (3) Motion For Protective Order And To Stay All Discovery Pending Disposition Of Its Motion For Summary Judgment (D.I. 39). For the reasons discussed, the Motion To Strike will be granted in part and denied in part, the Motion For Summary Judgment will be denied, and the Motion For Protective Order And To Stay will be denied as moot.

I. Background

Plaintiff Fesnak and Associates, LLP (“Fesnak”) initiated the present action against Defendants U.S. Bank National Association (“U.S. Bank”) and Citibank, N.A. (“Citibank”) on September 14, 2009. (D.I. 1.) Plaintiff seeks an injunction compelling specific performance of U.S. Bank's obligations under an Escrow Agreement (the “Escrow Agreement”). ( Id. ¶ 1.) Alternatively, Fesnak seeks a declaratory judgment that Citibank has no valid claims against funds being held in escrow (the “Escrowed Funds”) by U.S. Bank pursuant to the Escrow Agreement. ( Id. ¶ 2.)

The parties' dispute stems from a Merger Agreement which was entered into on October 18, 2007 by Citibank, Penelope Acquisition Sub, Inc. (a Citibank entity), PayQuik.com, and Fesnak, the Stockholders' Representative for PayQuik.com. ( Id. ¶ 14; Ex. 2, Merger Agreement.) The Merger Agreement provided that Citibank would acquire PayQuik.com for approximately 40 million dollars and that ten percent was to be held in escrow. ( Id. ¶ 17; Ex. 3, Schedule 2.2 to Merger Agreement.) Accordingly, Citibank, Fesnak (as Stockholders' Representative) and U.S. Bank (as Escrow Agent) entered into the Escrow Agreement on January 9, 2008. ( Id. ¶¶ 15-18.)

Pursuant to the Merger Agreement, the stockholders agreed to indemnify Citibank from the Escrowed Funds for certain breaches of the Merger Agreement if Citibank made a timely, valid claim for indemnification. ( Id. ¶¶ 22-24.) Fesnak alleges that Citibank failed to give its written indemnity notice (the “Indemnity Notice”) by 11:59 PM Eastern Standard Time (“EST”) on July 9, 2009, the notice deadline provided in the Escrow Agreement. ( Id. ¶¶ 26-27, 35.) Specifically, Fesnak alleges that Citibank gave the Indemnity Notice via facsimile at 10:21 PM EST on July 9, 2009, but that the notice was deemed to be given on July 10, 2009 because it was sent after the close of normal business hours. ( Id. ¶¶ 31-33.) By letter dated August 6, 2009, Fesnak instructed U.S. Bank to distribute the Escrowed Funds as provided for by Section 4(d) of the Escrow Agreement because Citibank had purportedly failed to make any valid claims against the Escrowed Funds. ( Id. ¶¶ 36, 38, 40.) U.S. Bank has acknowledged that a dispute exists between Fesnak and Citibank over whether timely notice was given under the terms of the Escrow Agreement, and has refused to release the Escrowed Funds. ¹ ( Id. ¶ 45; Exs. 5 and 6.)

II. Motion For Summary Judgment On Count II (D.I. 17) A. Parties' Contentions

Fesnak contends that it is entitled to summary judgment on Count II because no genuine issues of material fact exist as to the deadline or process for giving the Indemnity Notice under the Escrow Agreement. (D.I. 18, at 8.) Fesnak argues that Section 8(a) of the Escrow Agreement unambiguously provides that if the Indemnity Notice was made by facsimile and not transmitted during normal business hours, then it was deemed to be given on the next business day. ( Id. at 9.) According to Fesnak, Section 4(b) sets forth the deadline for the Indemnity Notice to be given and is consistent with Section 8(a), which provides the methods of delivery and the time when notice through each delivery method is deemed given. ( Id.) Further, Fesnak contends that interpreting the Escrow Agreement to mean that the Indemnity Notice was given at 10:21 PM (i.e., the time when it was sent via facsimile) would render Section 8(a) meaningless. ( Id. at 10.) Thus, under Fesnak's interpretation, the Indemnity Notice was sent on the night of July 9, 2009, but was deemed given on July 10, 2009, after Citibank's right to indemnification terminated. ( Id.)

Citibank opposes summary judgment as premature under Rule 56 of the Federal Rules of Civil Procedure and the Court's January 8, 2010 Scheduling Order, and contends that this Motion can be denied solely on these grounds. (D.I. 27, at 1.) Citibank also opposes summary judgment on the merits, and contends that the Indemnity Notice was timely under the unambiguous terms of the Escrow Agreement. ( Id. at 2.) Citibank argues that the Merger and Escrow Agreements both expressly allow for the Indemnity Notice to be submitted until 11:59 PM EST on July 9, 2009. ( Id. at 8-9.) Further, Citibank contends that its interpretation does not ignore Section 8(a), but rather, falls in line with the explicit carve-out in the introductory clause of Section 8(a), which states, “unless expressly specified otherwise herein ...” ( Id. at 10-11.) Therefore, the specific terms of Section 4(b) are consistent with Section 8(a)'s carve-out, according to Citibank. ( Id. at 11.) In addition, Citibank contends that applying Section 8(a)'s general notice provision to Section 4(b)'s more specific provision governing the Indemnity Notice, as Fesnak advocates, would render numerous provisions of the Merger and Escrow Agreements meaningless. ( Id. at 12-13.)

Fesnak replies that Sections 4(b) and 8(a) complement each other and must be read together, as Section 4(b) lacks the necessary direction of how the notice must be delivered. (D.I. 30, at 5.) Fesnak further contends that there is no conflict between the plain language of the Merger and Escrow Agreements. ( Id. at 6-8.) In turn, Citibank contends that Fesnak improperly reserved this argument for its Reply Brief in violation of Local Rule 7.1.3(c)(2). (D.I. 34.)

B. Legal Standard

Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law,” then the court should grant summary judgment. Fed.R.Civ.P. 56(c). When considering whether a genuine issue of material fact exists, the court must view the evidence in the light most favorable to the non-movant, and resolve all reasonable inferences in the non-movant's favor. Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir.2007). However, a court should not make credibility determinations or weigh the evidence. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). “Facts that could alter the outcome are ‘material,’ and disputes are ‘genuine’ if evidence exists from which a rational person would conclude that the position of the person with the burden of proof on the disputed issue is correct.” Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (internal citations omitted).

The movant bears the burden of proving the absence of a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Once the movant offers such proof, the non-movant “must come forward with ‘specific facts showing [a] genuine issue for trial.’ ” Id. (quoting Fed.R.Civ.P. 56(e)). The mere existence of some evidence in support of the non-movant will not be sufficient to survive a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the non-movant on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, in ruling on a summary judgment motion, the court must perform the “threshold inquiry of determining whether ... there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Id. at 250, 106 S.Ct. 2505.

C. Discussion

As an initial matter, the Court concludes that Fesnak did not improperly reserve material for its Reply Brief which should have been included in its Opening Brief. Further, the Court rejects Citibank's contention that Fesnak's Motion For Summary Judgment should be denied solely because it is premature under the January 8, 2010 Scheduling Order. ²

Rule 56(c) of the Federal Rules of Civil Procedure provides that a party may move for summary judgment at any time until 30 days after the close of all discovery, “unless a different time is set by local rule or the court order otherwise.” Fed.R.Civ.P. 56(c)(1). “Pursuant to Federal Rule of Civil Procedure 16(c), the Court has broad discretion to take appropriate action to identify the litigable issues so as to simplify an action for trial and promote efficiency and the conservation of judicial resources.” In re Intel Corp. Microprocessor Antitrust Litig., MDL No. 05-1717-JJF, 2009 WL 1885666, at *1 (D.Del. June 25,...