Cars v. Copart, Inc.

Full title: Car Auction and Reinsurance Solutions, Inc. v. Copart, Inc. and Motors…

Court: Superior Court of Delaware, New Castle County

Date published: Sep 10, 2009

C.A. No. 07C-11-163 (Del. Super. Ct. Sep. 10, 2009)

Opinion

C.A. No. 07C-11-163.

September 10, 2009.

Kristopher T. Starr, Ferry, Joseph Pearce, P.A., Wilmington, DE.

Kurt M. Heyman, Proctor Heyman, LLP, Wilmington, DE.

M. JANE BRADY, Judge.

Dear Counsel,

Defendants, Copart, Inc. ("Copart") and Motors Auction Group, Inc. ("MAG"), have moved for reargument, pursuant to Delaware Superior Court Civil Rule 59(e), in connection with the Court's decision of June 30, 2009, denying Defendants' Renewed Motion to Dismiss for Lack of Subject Matter Jurisdiction and granting Defendants' Motion to Stay. Defendants argue that the Court should have applied Nevada, rather than Delaware law, to determine whether Car Auction and Reinsurance Solutions, Inc's ("CARS") claims are subject to arbitration. Defendants argue that the Motion to Dismiss would or should have been granted had the Court followed that approach.

FACTUAL AND PROCEDURAL BACKGROUND

This dispute arises out of, or relates to, two agreements executed by CARS. The first is the Asset Purchase Agreement with MAG wherein CARS agreed to purchase certain of MAG's business assets located in Delaware. CARS operates a used automobile auction business with its principle place of business in the State of Delaware. CARS entered into a second, related agreement ("VB2 Services Agreement") with VB2. VB2 is a proprietary internet motor vehicle auction company solely-owned or operated by Copart. The VB2 Agreement provides that CARS would be able to use VB2's internet auction technology services for a defined term. Copart is not a signatory to either the Asset Purchase Agreement or the VB2 Agreement. The VB2 Agreement provides that disputes are governed by Nevada law and provides for arbitration in Nevada pursuant to the rules of the American Arbitration Association.

The Asset Purchase Agreement was signed on February 17, 2006, by Doug Powell ("Powell," President of CARS) and Paul A. Styer ("Styer," Vice President of MAG). Willis Johnson ("Johnson," CEO of Copart and MAG) was present during negotiations but did not sign the agreement. Whether Styer and Johnson were representing Copart during those discussions is disputed by the parties. At some point during the negotiations, Styer and Johnson discussed with Powell the prospect that CARS would be able to enter into an agreement with VB2 to use its internet auction capabilities. One month later, CARS and VB2 entered into the VB2 Services Agreement. Powell signed on behalf of CARS and Johnson signed on behalf of VB2. In or about August or September of 2006, Johnson contacted CARS and informed them that VB2 was terminating its VB2 Service Agreement.

CARS filed the Complaint in November of 2007, naming Copart, MAG and VB2 as parties. CARS alleged breach of contract against VB2, misrepresentation against Copart and MAG and civil conspiracy against Copart, MAG, and VB2. In January of 2008, CARS filed its First Amended Complaint, dropping VB2 as a party. In June of 2008, CARS filed a Demand for Arbitration against VB2 in Nevada pursuant to the arbitration clause in the VB2 Services Agreement.

The issue the Court decided in the Opinion was whether Copart and MAG, nonsignatories to the VB2 Agreement, may compel CARS, a signatory, to arbitrate CARS' claims in Nevada pursuant to the VB2 Agreement arbitration clause, or, in the alternative, whether the dispute between CARS, MAG and Copart did not fall within the scope of the arbitration provision in the VB2 Agreement. The Court held that CARS' fraud and civil conspiracy claims were outside the scope of the arbitration provision and not subject to arbitration under the VB2 Agreement. The Court retained subject matter jurisdiction over the matter and stayed the case pending arbitration in Nevada.

Following argument, Defendants submitted further argument in writing to which Plaintiff objected. The Court reviewed the submission, but it does not affect the result reached herein.¹

1 The Court is not satisfied that the possibility of a remedy in the Nevada courts addresses the Court's concerns, in any event.

STANDARD OF REVIEW

The Court's standard of review on a motion for reargument is well-settled:

As this Court recalled in Monsanto Co. v. Aetna Cas. Sur. Co ., reargument will usually be denied unless it is shown that the Court overlooked a precedent or legal principle that would have controlling effect, or that it has misapprehended the law or the facts such as would affect the outcome of the decision. The Delaware Supreme Court has also stated that motions for reargument should not be used merely to rehash the arguments already decided by the Court.²

2 Norfleet v. Mid-Atlantic Realty Co., Inc., 2001 WL 989085 (Del.Super. July 31, 2001) (internal quotations and citations omitted).

ANAYLSIS

The Opinion denying the Motion to Dismiss analyzed the question of arbitrability and subject matter jurisdiction exclusively under Delaware law. Defendants argue that in doing so, the Court overlooked relevant principles or authorities because the VB2 Agreement is governed by Nevada law. Defendants argue that the outcome of Defendants' Motion would have been different had the Opinion addressed Nevada law because Nevada Courts interpret arbitration clauses more broadly than Delaware. Defendants argue that they preserved this argument in their August 26, 2008, letter to the Court as well as during oral argument on the Motion to Dismiss. As Defendants previously argued, under Nevada law, it is only necessary that there be "[e]videntiary reliance upon an agreement containing an arbitration claim [to] require[] arbitration of the dispute."³ Defendants argue that Plaintiff, at the very least, relies on the VB2 Agreement as an evidentiary matter, since it acknowledges that its damage claim is based on the five-year term of the VB2 Agreement. Defendants argue that under Nevada law, therefore, this action is arbitrable.

CONCLUSION

The Court has revisited its previous decision and is satisfied that it properly applied Delaware law to the question of arbitrability. CARS' claims against the parties do not directly relate to a right in the VB2 Agreement and whether the VB2 Agreement was breached, or not, is not dispositive of CARS' claims. The focus of this litigation will not be whether VB2 breached its agreement with CARS, rather it will be what the Defendants knew about the financial and legal status of VB2 and its ability to perform when the parties entered into the Asset Purchase Agreement. Furthermore, CARS' fraud and civil conspiracy claims are outside the scope of the arbitration provision and not subject to arbitration under the VB2 Agreement. Therefore, the Court has subject matter jurisdiction over this action. The Motion for Reargument is DENIED.

IT IS SO ORDERED.