Opinion
C.A. No. 2017-0036-TMR
03-28-2018
In re Morrow Park Holding LLC
ORDER DISMISSING THIRD-PARTY CLAIMS
WHEREAS, on February 1, 2016, Defendant and Counterclaim and Third-Party Plaintiff CCI Historic, Inc. ("CCI Historic"), Plaintiff and Counterclaim Defendant Village Green Residential Properties LLC ("Village Green Residential"), Third-Party Defendant VGM Clearing, LLC ("VGM Clearing"), Third-Party Defendant Jonathan Holtzman, and Village Green Holding LLC entered into a Redemption Agreement (the "Redemption Agreement");
WHEREAS, on January 17, 2017, Village Green Residential filed a complaint against CCI Historic, Compatriot Capital Inc., VG ECU Holdings LLC, and Morrow Park Holding LLC;
WHEREAS, on April 20, 2017, CCI Historic filed the First Amended Verified Counterclaims and Third-Party Claims against Village Green Residential, VGM Clearing, and Holtzman;
WHEREAS, on May 10, 2017, VGM Clearing and Holtzman moved to dismiss the third-party claims against them under Court of Chancery Rule 12(b)(6) or, in the alternative, to dismiss or transfer Counts II and III of the third-party claims under Court of Chancery Rule 12(b)(1);
WHEREAS, on December 13, 2017, the Court heard oral argument on the motion;
NOW, THEREFORE, THE COURT HEREBY FINDS AND ORDERS AS FOLLOWS:
1. The Court has reviewed the parties' briefs, supporting submissions, and the applicable law.
2. The Motion to Dismiss is GRANTED.
3. The claims against VGM Clearing and Holtzman must be dismissed because CCI Historic has not pled any facts alleging that either VGM Clearing or Holtzman is or may be liable to the CCI Historic for all or part of Village Green Residential's claims against CCI Historic. Court of Chancery Rule 14 states, in relevant part: "[A] defending party, as a third-party plaintiff, may cause process and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff." Del. Ch. Ct. R. 14. Therefore, to be properly joined under Rule 14, "the third party defendant must be one who is or may be liable to defendant-third party plaintiff for all or part of the plaintiff's claim against defendant. A separate and independent cause of action cannot be maintained against a third party even though arising from the same factual situation.'" State v. Dineen, 1980 WL 6409, at *2 (Del. Ch. Apr. 17, 1980) (quoting Nesmith v. Lynn, 377 A.2d 352, 353 (Del. 1977)).
4. CCI Historic does not allege or argue that VGM Clearing or Holtzman may be liable to CCI Historic for all or part of Village Green Residential's claims against CCI Historic. Instead, CCI Historic points to Quereguan v. New Castle County, 2006 WL 2522214 (Del. Ch. Aug. 18, 2006), to argue that an exception exists to Rule 14 based on judicial efficiency and that the exception applies here. Third-Party Pl.'s Opening Br. 40. Quereguan, however, is distinguishable from this case because, in Quereguan, the third-party plaintiff had pled that the third-party defendant was liable for part or all of the plaintiff's claim. 2006 WL 2522214, at *2. Because CCI Historic has failed to plead that VGM Clearing or Holtzman is or may be liable to it for Village Green Residential's claims against it, the third-party claims against VGM Clearing and Holtzman are DISMISSED for failure to state a claim.
5. This ruling does not affect the claims brought by Village Green Holding LLC against VGM Clearing and Holtzman in the complaint filed on April 20, 2017, which was subsequently consolidated into this case.
/s/ Tamika Montgomery-Reeves
Vice Chancellor
Dated: March 28, 2018