James v. United Medical LLC ( 2017 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
PHYLLIS P. JAMES and NEW )
CASTLE FAMILY CARE, P.A., )
)
Plaintiffs, ) C.A. No.: N16C-06-209 AML
)
v. )
)
UNITED MEDICAL LLC, UNITED ) JURY TRIAL DEMANDED
MEDICAL OF DE, LLC, UNITED )
MEDICAL OF PA, LLC, and )
UNITED MEDICAL CLINIC, LLC, )
)
Defendants. )
Submitted: December 2, 2016
Decided: March 31, 2017
MEMORANDUM OPINION
Upon Defendants’ Motion to Dismiss, Granted in part
Leroy A. Tice, Esquire, of LEROY A. TICE, ESQUIRE, P.A., Wilmington,
Delaware, and Perry F. Goldlust, of PERRY F. GOLDLUST, LLC, Wilmington,
Delaware; Attorneys for Phyllis P. James and New Castle Family Care, P.A.
Jennifer C. Jauffret, Esquire and Travis S. Hunter, Esquire, of RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for United Medical
Clinic, LLC, United Medical, LLC, United Medical Clinic of DE, LLC, and United
Medical Clinic of PA, LLC.
J. LeGROW
This action involves a related series of agreements between the plaintiffs,
who are a primary care physician and her medical practice, and the defendants,
who are an affiliated group of medical management companies. Under the
agreements, the plaintiff physician agreed to work for the defendants, who also
agreed to undertake collection efforts on her behalf for the accounts receivable for
her old practice. A second agreement at issue, at least according to the plaintiffs,
arises from a letter of intent in which the defendants agreed to pay $120,000 for the
medical practice, particularly its good will and tangible property. The plaintiffs
have asserted various breach of contract claims, along with alternative theories of
recovery, arising from both the billing agreement and the letter of intent. The
defendants have moved to dismiss the claims for a variety of reasons. The primary
question presented is whether an integration clause in one of the parties’
agreements unambiguously eliminated all other agreements between them,
including the letter of intent that forms the basis for the plaintiffs’ second breach of
contract claim. I conclude the integration clause is ambiguous in its scope and
therefore deny the defendants’ motion on that, and most other, bases. My
reasoning follows.
FACTUAL BACKGROUND
Except as otherwise noted, the following facts are drawn from the amended
complaint and the documents it incorporates by reference, drawing all reasonable
1
inferences in favor of the plaintiffs. At all relevant times, United Medical Clinic,
LLC (“United Medical Clinic”), United Medical, LLC (“United Medical”), United
Medical Clinic of DE, LLC (the “Clinic of DE”), and United Medical Clinic of PA,
LLC (the “Clinic of PA,” and collectively with United Medical Clinic, United
Medical, and the Clinic of DE, “Defendants”) operated healthcare and billing
services providers in Delaware and Pennsylvania. Kemal Erkan was the president
of United Medical and an authorized representative of the Clinic of PA. Susan
Andersen also worked for one or more of Defendants as chief operations officer.
Dr. Phyllis P. James (“Dr. James”) owned and operated New Castle Family
Care, P.A. (“Family Care,” and jointly with Dr. James, “Plaintiffs”). In April
2013, Dr. James proposed to sell Family Care to Defendants. On or about July 5,
2013, Mr. Erkan issued a letter of intent (the “LOI”) setting forth the terms under
which Defendants would acquire Family Care and employ Dr. James.
On July 9, 2013, the parties executed the LOI, which provided: “This
document serves as our Letter of Intent and outlines our discussions. The details of
this letter will be documented by [Defendants’] attorney in your Employment
Agreement and Good Will Agreement pending execution of this letter.”1 In
addition to specifying the salary and benefits Dr. James would receive under the
1
Am. Compl. Ex. 2 at 1-2 (the LOI).
2
employment agreement and the duties she would be expected to undertake, the LOI
listed the following terms:
 Furniture, Computers, Office Equipment[,] and
Medical Equipment - $120,000.00 to be paid over
three years
 Lease for computers – Balance of payments to be
assumed by UMC of DE (see computers above)[.]
Lease follows letter.
On August 30, 2013, Dr. James and Ms. Andersen negotiated by email three
outstanding contracts: a billing agreement, an employment agreement, and a good
will agreement. In the last email exchange of record, Ms. Andersen stated:
The Billing Agreement . . . is attached. . . . [The]
Employment Agreement . . . is attached. . . . The only
Agreement we are waiting on is the Good Will
Agreement. . . . However, the letter of intent which was
signed by both parties does cover these items. The
signed letter of intent is equivalent to a written
contract.2
On September 5, 2013, Dr. James entered into an employment agreement
with the Clinic of DE,3 whereby Dr. James agreed to provide medical care to
Defendants’ patients on a full-time basis beginning October 1, 2013 (the
“Employment Agreement”). Also on September 5, 2013, Dr. James entered into
2
Id. at Ex. 3 at 1.
3
The amended complaint alleges “Dr. James was employed to provide medical services to
subscribers of [the] Clinic of PA who become patients of the Clinic.” Am. Compl. ¶ 7. I assume
this is a typo. The Employment Agreement is between Dr. James and the Clinic of DE, which is
supported by other references to “Dr. James [becoming] an employee of [the Clinic of DE]
effective October 1, 2013.” Id. at Ex. 8.
3
an agreement with United Medical whereby United Medical agreed to provide
billing services for Family Care’s existing accounts receivable beginning October
1, 2013 (the “Billing Agreement”).
In the years that followed, the parties’ relationship soured for reasons that
are neither clear nor relevant for purposes of resolving the pending motion. In
June 2016, Plaintiffs filed suit alleging claims for breach of contract, unjust
enrichment, conversion and theft, and promissory estoppel based on the Billing
Agreement and LOI. Defendants moved to dismiss Plaintiffs’ amended complaint
for failure to state a claim, and the parties briefed and argued that motion.
THE PARTIES’ CONTENTIONS
Dr. James advances two breach of contract claims in her amended
complaint: one arising from the Billing Agreement and one arising from the LOI.
She alternatively asserts claims for unjust enrichment, promissory estoppel, and
conversion and theft. In addition, Dr. James has brought a promissory estoppel
claim based on the storage of patient files at a facility owned by a third party, Iron
Mountain.
1. The Billing Agreement
Dr. James first alleges Defendants breached the Billing Agreement by failing
to “make any payments to reduce plaintiffs’ indebtedness.”4 Dr. James contends
4
Id. at ¶ 27.
4
Defendants were “contractually obligated to actively pursue the collection of
Family Care[’s] [accounts receivable]” and “use the proceeds from the collection
of the [accounts receivable] . . . to pay plaintiffs’ [accounts payable].”5 Dr. James
requests judgment against Defendants “for the full amount of the [accounts
receivable] plus accumulated interest and fees.”6
Alternatively, under a conversion and theft theory, Dr. James alleges
Defendants (acting as Family Care’s successor) collected money due to Plaintiffs
and converted it for Defendants’ own use without properly compensating Dr.
James.7 “The specific accounts and amount of funds collected are not presently
known, although Dr. James believes that they are substantial.”8 In addition,
Plaintiffs allege Defendants took Plaintiffs’ tangible assets, such as Family Care’s
patient files and computers.9
In response, Defendants contend Plaintiffs’ claim for breach of the Billing
Agreement is based on an agreement between Defendants and Family Care, rather
than any agreement with Dr. James individually.10 Defendants assert Family Care
5
Id. at ¶¶ 23-24.
6
Id. at ¶¶ 27, 29.
7
Id. at ¶ 43-44.
8
Id. at ¶ 45.
9
Id. at ¶¶ 21, 45.
10
Defs.’ Mot. Dismiss ¶ 18.
5
cannot maintain a cause of action because it had been void and inoperable for nine
years at the time the complaint was filed.11
As to Plaintiffs’ conversion and theft claim, Defendants argue Plaintiffs’
claim is governed by an express written contract, the Employment Agreement, and
Plaintiffs therefore are limited to a breach of contract claim unless they can allege
Defendants violated a legal duty independent of the contract.12 Defendants also
assert that a conversion action for money damages – such as a claim that
“Defendants converted money in the form of accounts receivable” – is unavailable
under Delaware law.13
2. The Letter of Intent
Dr. James also claims Defendants breached the terms of the LOI by failing
to pay her $120,000 in exchange for “her practice,” which included good will and
other tangible property.14 Dr. James avers that Defendants represented that the
LOI was a binding agreement, which Dr. James alleges induced her to enter into
the Employment Agreement and Billing Agreement with Defendants. 15
In the alternative, Dr. James argues that even if the Court concludes the LOI
is not a binding agreement, Plaintiffs are entitled to judgment of $120,000 because
either (1) Defendants unjustly were enriched when Dr. James transferred all
11
Id. (citing 8 Del. C. § 510).
12
Defs.’ Mot. Dismiss ¶ 15.
13
Id. at ¶ 16.
14
Am. Compl. ¶¶ 32-33.
15
Id. at ¶ 31.
6
Family Care’s patient files to Defendants and Defendants “announced to all of Dr.
James’ patients as well as its own subscribers that is was the successor to Dr.
James’ practice;”16 or (2) under a promissory estoppel theory, Defendants induced
Dr. James to dissolve her medical practice and took the assets Plaintiffs provided.17
Defendants contend the parties did not intend for the LOI to serve as a
binding agreement, but merely as an outline of the parties’ discussions, the details
of which were to be documented in a good will agreement authored by Defendants’
attorney. Defendants also contend that the Employment Agreement, containing an
integration clause, superseded the LOI.18 As to Plaintiffs’ unjust enrichment and
promissory estoppel claims, Defendants assert both claims fail because the subject
of those claims “are the subject of an express contract” – either the Employment
Agreement or the LOI – and therefore any claim must be brought under contract
law.19
3. Iron Mountain
Finally, Plaintiffs seek “the total amount of fees due to Iron Mountain for the
storage fees of patient records.”20 Plaintiffs allege Defendants assumed custody
and control of Plaintiffs’ records and “undertook the responsibility for the storage”
16
Id. at ¶¶ 38-39.
17
Id. at ¶ 48.
18
Defs.’ Mot. Dismiss ¶ 9.
19
Id. at ¶¶ 13-14 (citing TrueBlue, Inc. v. Leeds Equity P’rs IV, LP, 2015 WL 5968726, at *5
(Del. Super. Sept. 25, 2015)).
20
Am. Compl. 10.
7
of those records.21 Plaintiffs argue Defendants “engaged, for their own account, the
services of Iron Mountain for the safe storage of [P]laintiffs’ patient records.”22
According to Dr. James, “Iron Mountain has not been paid storage charges . . .
from August 31, 2013 through and including May 30, 2015.”23
Defendants assert any claim based on Plaintiffs’ allegations belongs to Iron
Mountain.24 Defendants argue Plaintiffs have not alleged that Plaintiffs paid Iron
Mountain on Defendants’ behalf, and therefore Plaintiffs have suffered no injury
that arguably would confer standing.25 Defendants further argue that Plaintiffs
have failed to allege: (1) a promise between Plaintiffs and Defendants related to the
Iron Mountain storage fees, (2) that Defendants reasonably expected to induce
Plaintiffs’ action or forbearance, or (3) that Plaintiffs reasonably relied on a
promise and acted to their detriment.
STANDARD
On a motion to dismiss, the Court must determine whether the “plaintiff may
recover under any reasonably conceivable set of circumstances susceptible of
proof.”26 “If [the plaintiff] may recover, the motion must be denied.”27 A court
21
Id. at ¶¶ 57, 61.
22
Id. at ¶ 62.
23
Id. at ¶ 63.
24
Defs.’ Mot. Dismiss ¶ 19.
25
Id.
26
Holmes v. D'Elia, 129 A.3d 881 (Del. 2015) (citing Spence v. Funk, 396 A.2d 967, 968 (Del.
1978)).
8
may grant the motion if “it appears to a reasonable certainty that under no state of
facts which could be proved to support the claim asserted would plaintiff be
entitled to relief.”28 When applying this standard, the Court will accept as true all
non-conclusory, well-pleaded allegations. 29 In addition, “a trial court must draw
all reasonable factual inferences in favor of the party opposing the motion.”30
ANALYSIS
A. The breach of contract claim based on the Billing Agreement is
dismissed only as to Family Care.
Defendants move to dismiss Count I of the amended complaint on the basis
that Family Care, who was party to the contract, is a void entity without standing to
bring suit.31 To establish standing, a plaintiff must show that he or she sustained
27
Deuley v. DynCorp Int'l, Inc., 2010 WL 704895, at *3 (Del. Super. Feb. 26, 2010) (citing
Parlin v. DynCorp Int’l. Inc., 2009 WL 3636756, at *1 (Del. Super. Sept. 30, 2009) (quoting
Spence, 396 A.2d at 968)), aff'd, 8 A.3d 1156 (Del. 2010).
28
Fish Eng’g Corp. v. Hutchinson, 162 A.2d 722, 724 (Del. 1960) (citing Danby v. Osteopathic
Hosp. Ass'n of Del., 101 A.2d 308, 315 (Del. Ch. 1953), aff’d, 104 A.2d 903 (Del. 1954)); Nero
v. Littleton, 1998 WL 229526, at *3 (Del. Ch. Apr. 30, 1998).
29
Pfeffer v. Redstone, 965 A.2d 676, 683 (Del. 2009).
30
Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (citing Ramunno, 705 A.2d 1029, 1034 (Del.
1998) (citing Solomon v. Pathe Commc’ns Corp., 672 A.2d 35, 38 (Del. 1996)) (other citations
omitted)).
31
Defendants' motion to dismiss was accompanied by a copy of a certificate from the Delaware
Secretary of State declaring Family Care inoperative and void (the “Certificate of Corporate
Standing”). Defendants assert “the Court is free to take judicial notice” of this filing because it is
“publicly available information that is not subject to reasonable dispute.” Defs.’ Mot. Dismiss 2
n. 5. Under Delaware law, the Court may take judicial notice of publicly filed documents, such
as a Delaware corporation’s certification of incorporation, because: (1) “[b]y law it is filed with,
and is obtainable by resort to, the office of the Secretary of [the] State of Delaware”; and (2)
“[t]hat office is located within the territorial jurisdiction of Delaware and is a source whose
accuracy cannot reasonably be questioned.” In re Wheelabrator Techs. Inc. S‘holders Litig.,
1992 WL 212595, at *11 (Del. Ch. Sept. 1, 1992) (citing D.R.E. 201(b)). Because the Certificate
of Corporate Standing is a public document filed with the Secretary of the State of Delaware
9
an injury-in-fact and the interest that he or she seeks to protect is within the zone of
interests to be protected.32 Under Delaware law, if a corporation is declared void
under 8 Del. C. § 510, “all powers conferred by law upon the corporation are
declared inoperative.”33 Because the record establishes Family Care was “void” as
of March 1, 2007,34 any statutory period allowing Family Care to bring a suit has
expired,35 and there is no allegation that Family Care received an extension of that
period, Count I is dismissed, without prejudice, as to Family Care.36
That conclusion does not end the Court’s inquiry as to Count I because Dr.
James also is named as a party to that claim. The breach of contract claim based
on the Billing Agreement sufficiently is pleaded both on behalf of Family Care, as
the signatory, and Dr. James, as a third-party beneficiary.37 Accordingly,
Defendants’ motion to dismiss Count I as to Dr. James is denied.
whose accuracy cannot reasonably be questioned, the Court may consider it without converting
the motion to dismiss to a motion for summary judgment.
32
Chantz Enters., LLC v. JHL Brighton Design/Décor Ctr., LLC, 2010 WL 2642885, at *3 (Del.
Super. June 30, 2010) (citing Dover Historical Soc’y v. City of Dover Planning Comm’n, 838
A.2d 1103, 1110 (Del. 2003)).
33
8 Del. C. 510.
34
Hunter Aff. Ex. C.
35
See, e.g., 8 Del. C. 278.
36
See id. The dismissal is without prejudice because Plaintiffs have suggested they may be able
to revive Family Care’s corporate standing. If Plaintiffs do so in a timely manner, they may file
a motion to amend the complaint to reassert this claim.
37
Id. at Ex. 4 at ¶ 22 (“All of the terms and provisions of this Agreement shall inure to the
benefit of and be enforceable by the successors and assigns of the parties.”). At a minimum, Dr.
James is a third-party beneficiary. See Am. Compl. Ex. 4 at 2 (the Billing Agreement) (“The net
revenues collected by [Plaintiffs] under this Agreement are to be distributed for payment . . . to
the existing debts in the name of . . . Phyllis James, M.D.”). It may well be that Dr. James is a
party to the agreement, as she, along with Family Care, is named as the “Client” in the agreement
10
B. The integration clause in the Employment Agreement does not
unambiguously supersede the LOI.
Defendants’ motion to dismiss Count II largely depends on whether the
Employment Agreement supersedes and subsumes the LOI. Defendants argue the
integration clause in the Employment Agreement unambiguously supersedes all
other agreements between the parties. The integration clause in the Employment
Agreement reads, in pertinent part:
This Agreement, between the parties, constitutes the
entire agreement between the parties hereto with respect
to all matters; provided, however, that the terms of
employment set forth in any Employment Handbook or
other policy of Employer shall remain in effect and be in
addition to the terms of this Agreement except to the
extent inconsistent herewith in which case the terms of
this Agreement shall govern, supersede and prevail.38
The issue Defendants raise is one of contractual interpretation. The proper
construction of a contract is a question of law for the Court.39 When interpreting a
contract, the Court gives priority to the parties' intentions as reflected in the four
corners of the agreement.40 If the contractual language at issue is clear and
and she is listed as a signatory to the agreement, both in her individual capacity and as a
representative of Family Care. Id. at Ex. 4 at 1, 13.
38
Id. at Ex. 6 at 12 (e) (the Employment Agreement).
39
Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992).
40
Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009) (citing E.I. du Pont de
Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del. 1985) (citing Radio Corp. of Am. v.
Phila. Storage Battery Co., 6 A.2d 329 (Del. 1939))); Nw. Nat'l Ins. Co. v. Esmark, Inc., 672
A.2d 41, 43 (Del. 1996)).
11
unambiguous, it must be accorded its plain meaning.41 Ambiguity exists “when the
provisions in controversy are reasonably or fairly susceptible of different
interpretations.”42 A contract is not ambiguous merely because the parties disagree
about its proper construction.43 Extrinsic evidence “may not be used to interpret
the intent of the parties, to vary the terms of the contract[,] or to create an
ambiguity,” if a contract is unambiguous.44 On a motion to dismiss, “a trial court
cannot choose between two differing reasonable interpretations of ambiguous
documents.”45 Where ambiguity exists, “[d]ismissal is proper only if the
defendants' interpretation is the only reasonable construction as a matter of law.”46
Plaintiffs dispute Defendants’ proffered interpretation of the integration
clause, arguing its scope is limited to matters of employment and that it was not
intended to apply to the parties’ non-employment related agreements. Clauses
indicating that the contract is an expression of the parties' final intentions generally
41
Phillips Home Builders v. Travelers Ins. Co., 700 A.2d 127, 129 (Del. 1997).
42
Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996).
43
Rhone-Poulenc, 616 A.2d at 1196.
44
Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).
45
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996) (citing Barsky v. Flaherty, C.A. No. 9132 (Del. Ch. Sept. 9, 1987), reprinted in
1987 WL 17047 (1988)).
46
Vanderbilt, 691 A.2d at 613 (emphasis in original) (citing Barsky, 1987 WL 17047; Solomon,
672 A.2d at 38-39); see also Eisenmann Corp. v. Gen. Motors Corp., 2000 WL 140781, at *21
(Del. Super. Jan. 28, 2000) (citing Norfolk S. Bus Corp. v. Va. Dare Transp. Co., 159 F.2d 306,
309 (4th Cir. 1947) (“This Court, in the context of a Motion to Dismiss, will not foreclose the
way for the light that reveals the true intention of the transaction, especially if the instrument
does not appear to contain the entire agreement between the parties.”)).
12
create a presumption of integration.47 An integration clause is not irrebuttable,
however, because the parties’ intent always controls.48 A court therefore must
“consider the facts and circumstances surrounding the execution of the instrument”
to discern whether the contract is fully integrated, as Defendants contend, or
partially integrated, as Plaintiffs contend.49 Factors relevant to that consideration
include: (i) the parties’ intent, to the extent it is discernible, (ii) the language of the
contract, including any integration clause, (iii) whether the contract carefully and
formally was drafted, (iv) the time the parties had to consider the contract’s terms,
(v) whether the parties bargained over specific terms, and (vi) whether the contract
“addresses questions that naturally arise out of the subject matter.”50 “A contract is
47
Addy v. Piedmonte, 2009 WL 707641, at *9 (Del. Ch. Mar. 18, 2009) (citing Carrow v.
Arnold, 2006 WL 3289582, at *5 (Del. Ch. Oct. 31, 2006), aff'd, 933 A.2d 1249 (Del. 2007)).
48
MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at *13 (Del. Ch. Dec. 30,
2010) (citing Carlson v. Hallinan, 925 A.2d 506, 522-23 (Del. Ch. 2006)).
49
Carrow, 2006 WL 3289582, at *4 (citing Restatement (Second) § 210 cmt. b (“[A] writing
cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into
circumstances bearing on the intention of the parties”); Johnson v. Reno, 1996 WL 33658687(D.D.C. Apr. 17, 1996) (in assessing the intent of the parties, the Court will consider the conduct
and language of the parties and the surrounding circumstances); Nysingh v. Warren, 488 P.2d
355, 385 (Idaho 1971) (“Whether a particular subject of negotiation is embodied in the writing
depends on the intent of the parties, revealed by their conduct and language, and by the
surrounding circumstances. Mere existence of a document does not establish integration.”)); see
also Addy, 2009 WL 707641, at *9 (citing E. Allan Farnsworth, II Farnsworth on Contracts § 7.3
at 231 (3d ed. 2004) (internal citations and quotation marks omitted) (“According to Corbin,
account should always be taken of all circumstances, including evidence of prior negotiations,
since the completeness and exclusivity of the writing cannot be determined except in the light of
those circumstances. The writing cannot prove its own completeness and accuracy. The trend
clearly favors Corbin. The Restatement Second commentary agrees that a writing cannot of itself
prove its own completeness, and wide latitude must be allowed for inquiry into circumstances
bearing on the intention of the parties.”)).
50
Carrow, 2006 WL 3289582, at *4 (citing Taylor v. Jones, 2002 WL 31926612, at *3 (Del. Ch.
Dec. 17, 2002) (discussing several of the factors used to determine whether a contract is totally
13
completely integrated if on its face it is clear that the parties intended the writing to
be a final and total expression of their agreement.”51 Conversely, “[i]f a written
agreement is final and incomplete, it is a partially integrated contract.”52
Defendants’ interpretation of the integration clause is reasonable. If, as
Plaintiffs contend, the parties intended the clause’s scope to be limited to a
particular subject matter, it is reasonable to expect that they would have used
limiting language, as they did in the integration clause in the Billing Agreement.53
Here, the integration clause refers to “all matters.” In addition, the Employment
Agreement’s integration clause expressly excludes certain agreements the parties
intended to preserve, including the Employment Handbook and other of
Defendants’ employment policies, which arguably54 suggests an intent to exclude
any non-enumerated agreements.
Defendants’ interpretation, however, is not the only reasonable one.
Defendants concede that the parties’ Billing Agreement, executed on the same day
integrated)); see also Addy, 2009 WL 707641, at *9 (citing Hynansky v. Vietri, 2003 WL
21976031, at *3 (Del. Ch. Aug. 7, 2003) (citation omitted)).
51
Taylor, 2002 WL 31926612, at *3 (emphasis added) (citing McGrew v. Vanguard Corp., 1979
WL 4635, at *3 (Del. Ch. Sept. 25, 1979)).
52
Id.53
Am. Compl. Ex. 4 at 20 (the Billing Agreement) (emphasis added):
This Agreement supersedes all prior agreements and sets forth the entire
understanding among the parties hereto with respect to the subject matter hereof
and cannot be changed, modified extended or terminated except upon written
amendment executed by both parties.
54
As will be seen, this language also may be read to support Plaintiffs’ position.
14
as the Employment Agreement, remains a binding agreement between the parties.55
Under Defendants’ broad interpretation of the Employment Agreement’s
integration clause, however, the Billing Agreement also would be superseded.56
That, coupled with the language in the Employment Agreement’s integration
clause preserving certain employment-related policies, supports Plaintiffs’
argument that the parties intended to limit the scope of the integration clause to
employment matters.
These discrepancies and internal inconsistencies contradict the notion that
the Employment Agreement carefully was drafted.57 Moreover, I reasonably can
infer the parties intended to have separate agreements governing various parts of
the transaction. The other facts and circumstances relevant to determining whether
the Employment Agreement is fully or partially integrated require further
development of the record. For all the foregoing reasons, I conclude the scope of
the Employment Agreement’s integration clause is ambiguous and the LOI
55
The parties agree the Billing Agreement is not extrinsic evidence, as it forms part of the
agreement between the parties.
56
Defendants argue that the Employment Agreement has an effective date that is later than the
date the agreements were signed and that the Billing Agreement has no such “effective date,”
and, therefore, any ambiguity created by the existence of the Billing Agreement is eliminated. I
do not find this argument persuasive. Both the Employment Agreement and the Services
Agreement were signed on the same day, September 5, 2013. The Billing Agreement has an
“Effective Date” of October 1, 2013, and the Employment Agreement has a “Commencement
Date” of October 1, 2013.
57
Addy, 2009 WL 707641, at *9 (“[D]iscrepancies and internal inconsistences contradict the
notion that the [agreement was] carefully drafted.”).
15
therefore may remain an enforceable agreement between the parties. Accordingly,
Defendants’ motion to dismiss Count II is denied.
C. The Plaintiffs may plead alternative, quasi-contract claims.
“Courts developed unjust enrichment, or quasi-contract, as a theory of
recovery to remedy the absence of a formal contract, and, similar to promissory
estoppel, [a] claim for unjust enrichment is not available if there is a contract that
governs the relationship between parties that gives rise to the unjust enrichment
claim.”58 Thus, “[w]hen the complaint alleges an express, enforceable contract that
controls the parties' relationship . . . , a claim for unjust enrichment will be
dismissed.”59
Defendants argue that a contract governs all aspects of their relationship
with Plaintiffs, and therefore, the claim for unjust enrichment must be dismissed.
Defendants also, however, dispute whether the LOI is an enforceable contract. If
this Court ultimately adopts Defendants’ argument that the Employment
Agreement and Billing Agreement constitute the complete agreement between the
parties, it reasonably is conceivable that the facts alleged in the amended complaint
would support a finding of unjust enrichment based on the relationships among
58
Alltrista Plastics, LLC v. Rockline Indus., Inc., 2013 WL 5210255, at *11 (Del. Super. Sept. 4,
2013) (citing Kuroda v. SPJS Hldgs. L.L.C., 971 A.2d 872, 891 (Del. Ch. Apr. 15, 2009); ID
Biomedical Corp., 1995 WL 130743, at *15 (Del. Ch. Mar. 16, 1995)); see also Wood v. Coastal
States Gas Corp., 401 A.2d 932, 942 (Del. 1979) (“Because the contract is the measure of
plaintiffs' right, there can be no recovery under an unjust enrichment theory independent of it.”).
59
Bakerman v. Sidney Frank Importing Co., Inc., 2006 WL 3927242, at *18 (Del. Ch. Oct. 10,
2006).
16
Defendants and their various interactions with Dr. James. For example, Dr. James
alleges Defendants improperly acted as the successor to Dr. James’ practice
without paying the agreed-upon purchase price. If this occurred, and the parties’
relationship was not governed by an express contract, Defendants could be
susceptible to a claim for unjust enrichment.60 Thus, Dr. James properly has stated
a claim, in the alternative, for unjust enrichment, and Defendants’ motion to
dismiss Count III is denied.
A party likewise may plead promissory estoppel in the alternative to a
contract claim. A plaintiff asserting a claim for promissory estoppel must plead
facts alleging: (1) a promise was made; (2) the promisor reasonably expected to
induce action or forbearance by the promisee; (3) the promisee reasonably relied
on the promise and took action to his detriment; and (4) the promise binds the
parties because injustice can be avoided only by its enforcement.61 Promissory
60
See Addy, 2009 WL 707641, at *22 (“The reason is that the interrelatedness of the Moving
Defendants with the other Defendants and of the several agreements different Defendants had
with [the plaintiff] makes it impossible in the context of a Rule 12(b)(6) motion to dismiss to say
that [the plaintiff] could not conceivably be entitled to some form of quasi-contractual or other
equitable relief.”).
61
Chrysler Corp. (Del.) v. Chaplake Hldgs., Ltd., 822 A.2d 1024, 1032 (Del. 2003).
17
estoppel requires a “real promise,” that is “reasonably definite and certain,”62 not
just mere expressions of expectation, opinion, or assumption.63
Plaintiffs have alleged sufficient facts to overcome a motion to dismiss the
promissory estoppel claim. Based on the record before me, and drawing all
inferences in Plaintiffs’ favor, I find that Dr. James could show the existence of a
promise or promises made by one or more of Defendants upon which she
reasonably relied.64 “Determining whether the other elements for promissory
estoppel are met will require a fact intensive inquiry into the details of the parties'
dealings.”65 “Those issues cannot be resolved on a motion to dismiss.”66
Defendants’ motion to dismiss Count V therefore is denied.
D. Plaintiffs adequately allege a claim for conversion and theft.
Defendants also moved to dismiss Count IV of the amended complaint
alleging conversion and theft. Defendants argue that since Plaintiffs’ claim is the
subject of an express contract, Plaintiffs must sue in contract. Defendants also
argue there is no conversion action for money damages available in Delaware.
62
Cont'l Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1233 (Del. Ch. 2000) (citing State v.
Simpson, 1990 WL 143837, at *7 (Del. Ch. Sept. 24, 1990) (“An essential element of promissory
estoppel is that the promisor's representation must be reasonably definite and certain so that the
intentions of the parties can be ascertained.”)).
63
Addy, 2009 WL 707641, at *22-23 (citing Metro. Convoy Corp. v. Chrysler Corp., 208 A.2d
519, 521 (Del. 1965)).
64
Addy, 2009 WL 707641, at *22-23.
65
Id.; Alltrista Plastics, 2013 WL 5210255, at *10.
66
Addy, 2009 WL 707641, at *22-23 (citing Arcadian Phosphates, Inc. v. Arcadian Corp., 884
F.2d 69, 74 (2d Cir. 1989)).
18
Conversion is “any distinct act of dominion wrongfully exerted over the
property of another, in denial of [the plaintiff's] right, or inconsistent with it.”67
“Under Delaware law, a plaintiff bringing a claim based entirely upon a breach of
the terms of a contract generally must sue in contract, and not in tort.”68 To assert
a conversion claim alongside a contract claim, the plaintiff must “allege[] the
defendant breached a tort duty independent of any obligations imposed by the
contract.”69
Any claim for conversion related to accounts receivable arises out of the
Billing Agreement, and Plaintiffs therefore are limited to a contract claim for those
damages. The motion to dismiss Count IV as to the alleged conversion of the
accounts receivable therefore is granted. Based on a fair reading of the amended
complaint, Plaintiffs’ conversion and theft claim may extend beyond accounts
67
Drug, Inc. v. Hunt, 168 A. 87, 93 (Del. 1933).
68
Data Mgmt. Internationale, Inc. v. Saraga, 2007 WL 2142848, at *3 (Del. Super. July 25,
2007) (citing Pinkert v. John J. Olivieri, P.A., 2001 WL 641737, at *5 (D. Del. May 21,
2001); Midland Red Oak Realty, Inc. v. Friedman, Billings & Ramsey & Co., 2005 WL 445710,
at *3 (Del. Super. Feb. 23, 2005); Garber v. Whittaker, 174 A. 34, 36 (Del. Super. 1934) ( “As a
general rule . . . where the action is based entirely on a breach of the terms of a contract between
the parties . . . an action on the case will not lie, and the plaintiff must sue, if at all, in contract.”))
69
Saraga, 2007 WL 2142848, at *3 (citing Textainer Equip. Mgmt. Ltd. v. TRS Inc., 2007 WL
1795695, at *2-3 (N.D. Cal. June 20, 2007) (finding the plaintiff stated claims for breach of
contract and conversion where the plaintiff alleged the defendant violated both contractual
obligation and an independent duty to refrain from converting the plaintiff's property); H.J. Keith
Co. v. Booth Fisheries Co., 87 A. 715, 718-19 (Del. Super. 1913); 18 Am. Jur. 2d Conversion §
67); see also Kuroda, 971 A.2d at 889.
19
receivable to include alleged conversion of Family Care’s tangible assets.70 As to a
claim related to those assets, Defendants’ motion to dismiss is denied.
E. Plaintiffs’ Iron Mountain claim does not survive.
Plaintiffs’ promissory estoppel claim as to the Iron Mountain storage fees
apparently arises out of Iron Mountain threatening litigation against Dr. James.71
Plaintiffs acknowledged during oral argument, however, that nothing in the
amended complaint alleges that Plaintiffs are parties to the Iron Mountain
agreement, that Iron Mountain is threatening litigation, that Plaintiffs owe fees to
Iron Mountain, or that Plaintiffs suffered any injury. Plaintiffs also have failed to
allege that Defendants made any promise relating to the Iron Mountain storage
fees, or that Plaintiffs relied on such a promise. Defendants’ motion to dismiss
Count VI therefore is granted.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is GRANTED in
part and without prejudice as to Count I; is DENIED as to Counts II, III, and V;
is GRANTED in part as to Count IV; and is GRANTED as to Count VI.
70
Am. Compl. ¶¶ 21, 45.
71
This argument was raised for the first time at oral argument.
20