Southeastern Chester County Refuse Authority v. BFI Waste Services of Pennsylvania, LLC
K14C-06-016 JJC
Del. Super. Ct.Jun 27, 2017Background
- BFI purchased Signature Waste LLC in 2011 under a Purchase Agreement that excluded Signature’s preclosing liability for landfill "tipping fees." After closing, SECCRA claimed unpaid tipping fees and sued Signature and its sole member, Brian Lockhart.
- The parties executed a November 29, 2011 modification creating $50,000 in "Retained Funds" that BFI could hold as security for any "Losses" from the SECCRA Claim; remaining funds were to be paid to Seller upon satisfaction of specified conditions.
- SECCRA obtained a Pennsylvania judgment against Lockhart (not Signature) and then, on March 1, 2014, Signature and Lockhart assigned their interests in the Retained Funds to SECCRA in exchange for SECCRA releasing them from claims and the judgment.
- SECCRA demanded the full $50,000; BFI refused and offset $6,637.50 for legal fees it incurred defending garnishment/discovery and asserted a contractual right to offset any "Losses" (broadly defined) from the Retained Funds.
- Cross-motions for summary judgment addressed (1) whether the assignment to SECCRA was valid/enforceable and (2) whether BFI may deduct contractual losses from the Retained Funds before payment to SECCRA.
Issues
| Issue | Plaintiff's Argument (SECCRA) | Defendant's Argument (BFI) | Held |
|---|---|---|---|
| Validity of assignment / consideration | SECCRA gave a release of claims against Signature and Lockhart in exchange for the assignment, providing valid consideration. | Assignment lacked consideration because SECCRA had no claim against Signature (judgment was only against Lockhart); thus release was illusory. | Assignment valid: SECCRA’s forbearance/release was valid consideration and Lockhart (as sole member) had an assignable interest. |
| Effect of Purchase Agreement anti-assignment clause | Assignment should be enforceable; anti-assignment clause does not void assignments absent explicit "void" language. | Clause prohibits assignment; assignment is unenforceable. | Anti-assignment clause restricted the right, not the power, to assign; assignment breached the contract but was not void and is enforceable against BFI. |
| Champerty / standing to hold Retained Funds | SECCRA had an independent legal interest (judgment against Lockhart) and could obtain assigned rights—assignment not champertous. | Assignment was champertous because SECCRA had no direct interest in the Purchase Agreement/Retained Funds. | Not champertous: SECCRA’s judgment against Lockhart gave it an independent interest sufficient to avoid champerty concerns. |
| Entitlement to Retained Funds and offsets (unjust enrichment) | SECCRA entitled to full $50,000 in Retained Funds; BFI’s retention is unjust enrichment. | Even if SECCRA holds the Retained Funds, BFI may offset any contractually defined "Losses" (including attorneys’ fees) up to $50,000. | SECCRA holds the assigned interest in the Retained Funds, but BFI may offset any and all contractual "Losses" (broadly defined) against the $50,000; BFI must submit verified proof of losses and may deduct up to the full $50,000. |
Key Cases Cited
- Burkhart v. Davies, 602 A.2d 56 (Del. 1991) (summary judgment standard referenced)
- Hensel v. U.S. Elecs. Corp., 262 A.2d 648 (Del. 1970) (forbearance as consideration)
- Equitable Tr. Co. v. Hollingsworth, 49 A.2d 325 (Del. 1946) (forbearance valid even if claim doubtful if in good faith)
- Paul v. Chromalytics Corp., 343 A.2d 622 (Del. Super. Ct. 1975) (anti-assignment clause containing "void" language voided assignment)
- Bel-Ray Co. v. Chemrite (Pty.) Ltd., 181 F.3d 435 (3d Cir. 1999) (distinguishing power-to-assign vs. right-to-assign; Restatement approach)
- Rhone-Poulenc Basic Chems. Co. v. Am. Motorist Ins. Co., 616 A.2d 1192 (Del. 1992) (plain-meaning rule for contract interpretation)