204 F.Supp.3d 731
D. Del.2016Background
- In March 2007 Weyerhaeuser sold its fine paper business to Domtar under a Contribution Agreement and Transaction Agreement; dispute later arose over allocation of workers' compensation liabilities.
- Court previously construed §2.03(a) of the Contribution Agreement to obligate Domtar to pay workers' compensation claims for employees who retired or never became Domtar employees ("Retired/Non-Transferred Employees").
- Post-closing exchanges (2007–2009) included Domtar objections to large WC liabilities, Weyerhaeuser invoicing Domtar (including for Retired Employees), and multiple communications culminating in a Sept. 11, 2008 Montreal meeting where Weyerhaeuser representatives expressed agreement with Domtar's narrower reading.
- On Nov. 26, 2008 Weyerhaeuser counsel (Giardini) sent a letter (marked "without prejudice") confirming internal agreement that US WC liability went only to employees who became able to work at Domtar; Weyerhaeuser revised its accounting and for ~3 years invoiced/pursued only Transferred Employees' claims (Domtar paid).
- In Jan. 2012 Weyerhaeuser resumed invoicing Domtar for Retired Employees' claims, prompting litigation in 2014; Domtar raised equitable defenses of waiver and acquiescence and moved for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) May Domtar litigate acquiescence though not pled in the answer (Fed. R. Civ. P. 8(c))? | Weyerhaeuser argued affirmative defenses must be pled and late assertion prejudices it. | Domtar argued acquiescence was raised timely enough and plaintiff suffered no prejudice. | Court: Domtar may assert acquiescence on summary judgment; no prejudice shown. |
| 2) Does §9.10's writing requirement bar oral waiver/acquiescence? | Weyerhaeuser: §9.10 requires written waivers; it applies to acquiescence. | Domtar: Delaware law permits oral waiver of no-oral-waiver clauses; §9.10 can be waived by conduct or oral statements. | Court: Writing requirement can be waived; oral waiver/acquiescence is cognizable. |
| 3) Did Weyerhaeuser waive or acquiesce to Domtar's narrower interpretation of §2.03(a)? | Weyerhaeuser: any agreement was a mistaken contract interpretation and its Nov. 26 "without prejudice" letter prevented reliance; it did not intend to waive rights. | Domtar: Weyerhaeuser knew the contractual arguments, repeatedly acted consistent with Domtar's position (oral agreement, accounting changes, revised invoices/payments), and thus voluntarily relinquished/rightfully acquiesced. | Court: Weyerhaeuser knowingly and intentionally waived or acquiesced to Domtar's position based on undisputed conduct; waiver proven by clear and convincing evidence. |
| 4) If waiver occurred, was it retracted in Jan. 2012? | Weyerhaeuser: it retracted its prior position and resumed invoicing in 2012. | Domtar: Weyerhaeuser delayed years before attempting retraction; retraction requires reasonable notice before prejudice. | Court: No effective retraction; delay was unjustified and Domtar prejudiced as a matter of law. |
Key Cases Cited
- AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428 (Del. 2005) (defines waiver as voluntary, intentional relinquishment of a known right; elements and heightened proof standard)
- Klaassen v. Allegro Development Corp., 106 A.3d 1035 (Del. 2014) (sets Delaware standard for acquiescence and its elements)
- Eureka VIII LLC v. Niagara Falls Holdings LLC, 899 A.2d 95 (Del. Ch. 2006) (no-oral-modification/waiver clauses can be waived by oral statements or conduct)
- Amirsaleh v. Board of Trade of New York, Inc., 27 A.3d 522 (Del. 2011) (describes retraction of waiver must be reasonable notice before prejudice)
- Pepsi-Cola Bottling Co. of Asbury Park v. PepsiCo, Inc., 297 A.2d 28 (Del. 1972) (acceptance of nonconforming performance can constitute acquiescence)
- Liggon-Redding v. Estate of Sugarman, 659 F.3d 258 (3d Cir. 2011) (federal diversity courts apply state substantive law)