Free Reply Brief - District Court of Delaware - Delaware

Case 1 :07-cv—OO207-GIVIS Document 58 Filed O9/O2/2008 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE
BCG, INC., a Delaware corporation, :
CHESAPEAKE PRODUCTS & : C.A. No. O7—cv—207 (GMS)
SERVICES, INC., a Delaware corporation :
: TRIAL BY JURY
Plaintiffs, : OF TWELVE DEMANDED
. v. :
GLES, INC., a Delaware corporation,
d/b/a SWEET OIL COMPANY, :
Defendant/Third-Party Plaintiff
v. :
Sunoco, Inc.
Thi1·d~Party Defendant
1 REPLY BRIEF OF GLES, INC. d/b/a SWEET OIL COMPANY
A IN SUPPORT OF ITS MOTION IN LIMINE TO PRECLUDE THE ADMISSION
OF EVIDENCE AND TESTIMONY OF ALLEGED DAMAGES SUFFERED BY
CHESAPEAKE PRODUCTS & SERVICES
Plaintiffs’ response to Defendant’s Motion in Limine is that although BCG is the
formal party to the Agency Agreement with Sweet Oil, everyone knew that Chesapeake
was the operating entity at the Laurel Oasis and therefore Chesapeake should be deemed
to have acquired direct and enforceable rights in the Agreement.
BCG essentially argues that Chesapeake and BCG were one and the same, and
that BCG simply operated through Chesapeake. The argument ignores the fact that BCG
and Chesapeake are separate corporate entities. Chesapeake was not a party to the
contract between BCG and Sweet Oil; Chesapeake was not a third-party beneficiary; and
Chesapeake cannot succeed to any rights or entitlement to damages allegedly suffered as
a result of any dealings between BCG and Sweet Oil. The Plaintiffs are merely
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attempting to play a shell game to optimize their damages and obtain a windfall that was
never contemplated by the Agreement.
Chesapeake was not a party to the contract, and a nonparty to a contract has no
legal right to enforce it. See Insituform of N. Am., Inc. v. Chandler, 534 A.2d 257, 268
(Del. Ch. 1987) ("[T]he general rule [is] that strangers to a contract ordinarily acquire no
rights under it .... ”) Chesapeake was an existing corporate entity in 1994. lf the parties so
intended, it could have been made a party to the Agreement. The parties did exactly that
with respect to the travel plaza located in Delmar, MD. (See Plaintiffs’ Exhibit M to its
Opposition) Having deliberately excluded Chesapeake from the Agreement, Plaintiffs
cannot now assert a claim based on a relationship that was specifically rejected.
Plaintiffs argue that Chesapeake was the party directly dealing with Sweet Oil.
` The argument is irrelevant. BCG has a right to determine how B_C§_ will perform BGG;
i obligations under the agreement. Apparently, BCG essentially subcontracted its
obligations Chesapeake. A subcontract entered by BCG for BCG’s own convenience
does not elevate the subcontractor to a position having separate enforceable rights under
the Agreement. By complying with BCG’s instruction to communicate directly with its
subsidiary/designee/subcontractor, Sweet Oil did not cloak Chesapeake with rights and
obligations under the Agreement.
The fortuitous circumstance that Chesapeake happens to operate a series of non-
fuel related businesses does not suddenly impose upon Sweet Oil an obligation to support
Chesapeake’s interests in those unrelated businesses. Sweet Oil is in the business of
supplying motor fuel products, not servicing convenience stores, Hardees’ or other
restaurants. Any benefit which was allegedly conferred on Chesapeake’s non-fuel related
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businesses was wholly incidental to the 1994 Agreement between BCG and Sweet Oil. If
a third party benefits from the performance of a promise it does not gain an enforceable
right if it was not the promisee's intention to confer direct benefits upon that third person.
Insituform ofN. Am., Inc., 534 A.2d at 269.
To create the rights of a third party beneficiary, the conferring of a beneficial
effect on such third party should be a material part of the contract's purpose. Insituform
of N. Am., Inc., 534 A.2d 257; Madison Realty Partners 7, LLC v. AG ISA, LLC, 2001
VVL 406268, at *5 (Del. Ch. April 17, 2001).
Chesapeake relies on the authority of Shared Communications Services, Inc. v.
Goldenberg Resenthal, LLP, 2004 S.D.N.Y. WL 2609546 (S.D.N.Y. Nov. 16, 2004). The
case is clearly distinguishable. Unlike this case, the contract at issue in @r_e_d
Communications was a contract between the defendant and a subsidiary. The court held
` that when the subsidiary was damaged as a result of a breach of its contract, the parent
— corporation has suffered actual damages. The finding is irrelevant where the breach
involves the contract of the parent. A parent corporation reporting financials on a
consolidated basis necessarily includes the profits and losses (or damages) of a
subsidiary. However, the financial condition of the parent does not similarly directly
impact the financial condition of a subsidiary. Plaintiffs’ have ignored that distinguishing
fact when citing the authority of Shared Communications. The authority is irrelevant as
Chesapeake was not a party to the Agreement that was allegedly breached in this case.
Defendant respectfully requests that Plaintiffs be precluded from offering any
testimony, evidence or argument regarding damages allegedly suffered by Chesapeake in
relation to the Laurel Oasis Station.
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Respectfully submitted,
Hugh J. Hutchison, Esquire Seth J. Reidenberg, Esquire (No. 3657)
Leonard, Sciolla, Hutchison, Young, Conaway, Stargatt, & Taylor, LLP
Leonard & Tinari, LLP The Brandywine Building
1515 Market Street, 18th Floor 1000 West Street, 17th 19801
Philadelphia, PA P.O. Box 391
(215) 567-1530 Wilmington, DE 19899-0391
(215) 564-4611 (fax) (302) 571-6600
Attorneys for Defendant GLES, Inc.,
A Delaware Corporation,
Dated: September 2, 2008 d/b/a Sweet Oil Company
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