306 A.3d 529
Del.2023Background
- Liborio III, L.P. (developer) and Artesian Water Co. entered a 2002 Service Territory Agreement promising a 20‑year refund of certain mains/hydrant costs and anticipating phase‑specific water service agreements (WSAs).
- The Delaware Public Service Commission issued Order No. 6873 (2006), defining CIAC, requiring CIAC for facilities extensions, and (subject to an applicability clause) eliminating refunds for on‑site facilities going forward.
- Liborio and Artesian executed a Phase II Water Services Agreement (May 2020) that: (a) references PSC Order No. 6873 and obligates Liborio to pay CIAC for future phases, and (b) contains an integration/supersession clause.
- A factual dispute exists over when the Phase I WSA was executed (Superior Court believed 2004; Liborio contends 2007). If Phase I was 2007 and refunds were paid after Order 6873, Liborio argues a course of dealing could make Phase II ambiguous.
- Liborio sued in 2022 for breach of contract (seeking refunds/contesting CIAC charges) and fraud (alleging Artesian concealed intent not to pay refunds). The Superior Court dismissed both claims; on appeal the Supreme Court affirmed dismissal of fraud but remanded the breach claim to resolve the Phase I timing discrepancy.
Issues
| Issue | Liborio's Argument | Artesian's Argument | Held |
|---|---|---|---|
| Whether the Phase II WSA is an addendum to the 2002 Service Territory Agreement or a separate integrated contract | Phase II is merely an addendum implementing preexisting 2002 terms | Phase II is a separate, fully integrated agreement that supersedes prior understandings | Phase II is a separate, integrated contract (integration clause and recital show supersession) |
| Whether PSC Order No. 6873 bars refunds / requires CIAC for Phase II and later phases | Order 6873 is prospective and does not abrogate prior agreements; thus refunds promised in 2002 should persist | Order 6873 applies to Phase II and later WSAs and authorizes Artesian to require CIAC and withhold refunds | Court agrees generally that Order 6873 controls post‑promulgation WSAs, but resolution depends on Phase I timing; remand to resolve factual timing issue |
| Whether the Phase I WSA’s execution date and subsequent payments create a course of dealing that makes Phase II ambiguous | Phase I was executed in 2007 (post‑Order 6873) and Artesian nevertheless paid refunds, supporting a course‑of‑dealing argument to interpret Phase II against Artesian | Phase I is not at issue; integration clause and express reference to Order 6873 in Phase II foreclose reliance on prior course | Remanded: the court cannot resolve the breach question without the factual determination of the Phase I date; if Phase I was 2007 and refunds were paid, course of dealing may permit extrinsic evidence |
| Whether Liborio pleaded fraud with particularity under Court of Chancery / Super. Ct. Civ. R. 9(b) | Artesian misled or concealed that it would not pay refunds and thus fraudulently induced Liborio to sign subsequent WSAs | Liborio failed to identify time/place/contents/actor with particularity and unreasonably relied without reading the referenced PSC order | Affirmed: fraud dismissal upheld; Liborio failed Rule 9(b) particularity and justifiable reliance (Liborio knew of and referenced the PSC order but did not read it) |
Key Cases Cited
- First Solar, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 274 A.3d 1006 (Del. 2022) (motion to dismiss standard of review; de novo review of dismissal)
- Gatz v. Ponsoldt, 925 A.2d 1265 (Del. 2007) (pleading inferences and plaintiff’s entitlement to reasonable inferences at motion to dismiss stage)
- McElrath v. Kalanick, 224 A.3d 982 (Del. 2020) (courts must not draw unreasonable inferences for plaintiffs)
- Valley Joist BD Holdings, LLC v. EBSCO Indus., Inc., 269 A.3d 984 (Del. 2021) (elements of fraud and heightened pleading requirements)
- Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) (in construing ambiguous contracts courts may consider course of dealing and prior agreements)
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (basic principles for existence and elements of a valid contract)