Rummel Klepper & Kahl, LLP v. Del. River & Bay Auth.
| Decision Date | 03 January 2022 |
| Docket Number | C. A. 2020-0458-PAF |
| Court | Court of Chancery of Delaware |
| Parties | RUMMEL KLEPPER & KAHL, LLP, Plaintiff, v. DELAWARE RIVER AND BAY AUTHORITY, Defendant. |
RUMMEL KLEPPER & KAHL, LLP, Plaintiff,
v.
DELAWARE RIVER AND BAY AUTHORITY, Defendant.
C. A. No. 2020-0458-PAF
Court of Chancery of Delaware
January 3, 2022
Date Submitted: September 27, 2021
Patrick M. McGrory, TIGHE & CONTRELL, P.A., Wilmington, Delaware; Attorneys for Plaintiff.
Donna L. Culver, MORRIS, NICHOLS, ARSHT & TUNNEL LLP, Wilmington, Delaware; Richard W. Hunt and Ashley H. Buono, PARKER MCCAY P.A., Mt. Laurel, New Jersey, Attorneys for Defendant.
MEMORANDUM OPINION
FIORAVANTI, Vice Chancellor
In November 2010, the Delaware River and Bay Authority (the "DRBA") engaged Rummel Klepper & Kahl, LLP ("RK&K") to perform professional engineering design services for a reconstruction project for the Delaware Memorial Bridge. The parties' agreement contains a dispute resolution procedure that governs "[a]ll claims, disputes and other matters in question . . . arising out of or in any way relating to" the agreement. If the parties are not able to resolve any dispute, it is "subject to exclusive, final and binding resolution" under the DRBA's then-current dispute resolution procedures. The agreement provides that the DRBA's Executive Director will serve as "referee in all questions arising under the terms of the Contract . . . and the decision of the Director shall be final and binding." The agreement states that the dispute resolution procedure "is intended as a binding agreement to arbitrate under the Delaware Uniform Arbitration Act."
In November 2019, the DRBA sent a "Notice of Default" to RK&K alleging it had committed errors and omissions in performing its services under the agreement. The Notice of Default indicated the DRBA's intent to commence the dispute resolution process under the agreement. After the parties failed to resolve their disagreement, the DRBA sent a "Notice of Intent to Arbitrate" to RK&K's counsel. RK&K then filed this action to enjoin arbitration. RK&K contends the arbitration provision is unenforceable and that the DRBA's claims are either outside the scope of the agreement or otherwise time-barred. The DRBA has moved to
dismiss the complaint and to compel arbitration.[1] This opinion resolves that motion and grants the DRBA's motion to compel arbitration and to dismiss the action.
I. BACKGROUND
Unless otherwise specified, the following facts are taken from RK&K's Verified Complaint (the "Complaint" or "Compl."), documents integral thereto, and documents submitted in connection with the motion to dismiss for lack of subject matter jurisdiction.
A. The Parties
Plaintiff RK&K is a Maryland limited liability partnership that provides professional engineering design and construction consulting services. [2]
Defendant DRBA is a body politic and bistate agency formed on October 2, 1962 resulting from a compact between the State of Delaware and the State of New Jersey.[3] The DRBA owns, operates, and maintains the Delaware Memorial Bridge.[4]
B. The Project and the Agreement
In February 2010, the DRBA assembled a request for proposal ("RFP"), seeking "on-call" engineering design and construction phase services for Phase IV
of its project for reconstruction of the I-295 southbound approach roads to the Delaware Memorial Bridge (the "Project").[5] The RFP stated an anticipated final design completion date of September 2011 and construction period of March 2012 to May 2014.[6] The RFP included related proposed contract documents. RK&K responded to the RFP, and the parties entered into a Consulting Services Agreement, dated November 15, 2010 (the "Agreement").
Article 2 of the Agreement stated that compensation for RK&K's services was not to exceed $2, 100, 000, including renewals and extensions, unless approved in writing by the DRBA prior to performance of the services.[7] Article 4 specified that the Agreement would expire five years from the date of execution unless the DRBA terminated or extended the Agreement "by formal written amendment executed on behalf of the DRBA by the Executive Director or his designee and by an authorized representative of the Consultant."[8] Accordingly, the Agreement, by these terms, would expire on November 15, 2015, unless otherwise amended.
Article 12(a) of the Agreement contained a "Dispute Resolution Procedure" which incorporated the DBRA's Standard Specifications for Road and Bridge Construction (January 1981 edition, as amended through the date of the Agreement) (the "Dispute Resolution Provision").[9] Article 14(n) of the Agreement contained a survival clause, stating that "the obligation of [RK&K] to follow the dispute resolution procedures set forth in Section 12(a) shall remain fully enforceable following termination."[10]
C. RK&K and the DRBA Broaden the Scope of RK&K's Services
On several occasions during the term of the Agreement, the parties modified the scope of both RK&K's services and fees under the Agreement. These modifications were documented through letters and purchase orders expressly linked to the Agreement using the DRBA's contract number, CS-09-03, which is also reflected on the cover page of the Agreement.[11] On January 31, 2013, Gregory Pawlowski, a DRBA Project Engineer, wrote to Michael Krupsaw, RK&K's Project Engineer, to "modify the [GEC Agreement No. CS-09-03] to include the following scope of work," and included a list of three additional services that RK&K would
provide on the Project.[12] On March 6, 2013, Pawlowski sent another letter to Krupsaw to approve RK&K's request for additional consulting fees, thus revising the budget of the Agreement.[13] In this letter, the DRBA referenced the Agreement and expressly linked the correlating purchase order to the Agreement.[14] On July 2, 2015, Krupsaw, on behalf of RK&K, sent a letter to Pawlowski "requesting the approval of the Delaware River and Bay Authority of [RK&K's] scope and fee proposal to provide additional engineering services related to [the Project]."[15] This letter from RK&K also directly referenced the Agreement by Contract No. CS-09-03.[16] In a letter dated August 12, 2015, the DRBA approved RK&K's proposal to extend the scope of the Agreement.[17]
Ultimately, the project was significantly delayed, such that it did not achieve substantial completion until about five years after the anticipated completion date stated in the RFP.[18] According to RK&K, the initial maximum compensation
amount pursuant to the original scope of the Agreement had been paid to RK&K by the end of 2013.[19] RK&K admits, however, the DRBA's last payment to RK&K for services tied to the Project was on or around March 22, 2017, [20] which is also reflected in the DRBA's records.[21] RK&K's invoices also reflect it was billing for services performed between the time it claims to have been paid in full under the Agreement and before the Agreement's stated expiration date of November 15, 2015.[22] The invoices also reflect that RK&K was billing for services after November 2015.[23] RK&K's invoices all referenced the Agreement by contract number CS-09-03. Indeed, RK&K admits that it continued to provide services to the DRBA into 2020.[24]
D. The DRBA Initiates the Dispute Resolution Procedure
On November 15, 2019, the DRBA sent a "Notice of Default" to RK&K alleging errors and omissions in RK&K's performance of its services under the
Agreement. The Notice of Default indicated the DRBA's intent to commence the dispute resolution process under the terms of the Agreement.[25] The DRBA's Notice of Default included a "Draft Expert Report" prepared by a consulting firm which detailed RK&K's alleged errors and omissions.[26] Counsel for RK&K acknowledged the Notice of Default and agreed to participate in good faith negotiations.[27] RK&K's counsel also noted that RK&K "has continued working out of scope to address these and other matters for a considerable amount of time" and had an unpaid balance of over $400, 000, "which will need to be part of the negotiations."[28] On February 26, 2020, the parties met to attempt to resolve the dispute, but were unsuccessful.[29]
On May 15, 2020, the DRBA sent a Notice of Intent to Arbitrate by both regular mail and certified mail (return receipt requested) to RK&K's Delaware counsel, referencing the "aforementioned breaches of the contract outlined and discussed in [the Notice of Default]" as the claims it was seeking to arbitrate.[30] The Notice of Intent to Arbitrate specified that the DRBA intended to commence
arbitration with the Executive Director of the DRBA serving as the arbitrator.[31]RK&K's counsel responded by email stating: "Service on me of a demand is not good enough."[32]
E. Procedural History
On June 11, 2020, RK&K filed its Complaint seeking to enjoin arbitration. The Complaint contests the DRBA's invocation of the arbitration process, the enforceability of the arbitration clause itself, and the timeliness of the underlying claims.[33] On July 31, 2020, the DRBA moved to compel arbitration and to dismiss, or, in the alternative, stay the claims asserted in the Complaint pending arbitration.[34]After the parties engaged in an unsuccessful attempt at mediation, the court heard oral argument on the DRBA's motion on September 13, 2021 and requested supplemental briefing from the parties.[35] The court took the matter under submission on September 28, 2021.
II. ANALYSIS
The DRBA seeks dismissal of RK&K's claims in favor of arbitration pursuant to the Agreement's Dispute Resolution Provision.[36] "A motion to dismiss based on an arbitration clause goes to the court's subject matter jurisdiction over a dispute and is properly reviewed under Court of Chancery Rule 12(b)(1)." Legend Natural Gas II Hldgs., LP v. Hargis, 2012 WL 4481303, at *4 (Del. Ch. Sept. 28, 2012) (citing Ishimaru v. Fung, 2005 WL 2899680, at *13 (Del. Ch. Oct. 26, 2005), and Acierno v. New Castle Cty., 2006 WL 1668370, at *1 n.8 (Del. Ch. June 8...
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