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U.S. District Court Examines Statute of Limitations in Fraud and Misrepresentation Context
TL of Florida, Inc. v. Terex Corporation
In TL of Florida, Inc. v. Terex Corporation, a case involving a motion for summary judgment in a fraudulent non-disclosure and negligent misrepresentation action, the United States District Court for the District of Delaware concluded that some of Plaintiff’s claims were barred by Delaware’s three (3) year statute of limitations, while others were timely. Thus, Chief Judge Leonard P. Stark denied in part, and granted in part, Defendant’s motion for summary judgment.
By way of factual background, in 2008, Terex, a Delaware corporation, approached Plaintiff TL of Florida, Inc. ("TL" or "Plaintiff”), a Florida corporation, about becoming a Terex distributor. In presenting the opportunity, Terex represented that there was a market for Terex’s heavy equipment in Southern Florida and provided TL a Distributorship Agreement. During the discussions preceding the signing of the Distributorship Agreement, Terex allegedly misrepresented or failed to disclose two (2) sets of facts that TL alleged would have been material to TL's decision to enter into the Distributorship Agreement.
First was the "Equipment Market Representation," whereby Terex misrepresented that there was a market for Terex heavy equipment in Southern Florida. Second were the “Dealership Selection Representations" whereby Terex failed to disclose that it “did not select distributors on the basis of demand in the marketplace or quality of the distributor, but instead, it would give a distributorship agreement to any person who asked for it and had the financial ability to purchase whole goods,” and further that Terex “was in financial distress and had embarked upon a practice of signing up distributors and obligating them to purchase whole goods without regard to the demand in the marketplace or the ability of the distributor to market the products.”
TL alleged that if it had known these facts, it would not have entered into the Distributorship Agreement. TL further alleged that it did not discover that Terex had misrepresented or failed to disclose these facts until May 2012, based on an interaction with the President of a third-party company. On December 9, 2013, TL filed suit against Terex for fraudulent non-disclosure and negligent misrepresentation. On July 3, 2014, the Court granted TL leave to amend the complaint, and TL filed its amended complaint on July 11, 2014. On February 11, 2015, Terex filed a Motion for Summary Judgment, arguing that all of TL’s causes of action based on the Equipment Market Representation and Dealership Selection Representations were barred by the statute of limitations.
The Court began its analysis by explaining that Delaware's three (3) year statute of limitations applied, such that the claims were time-barred if they accrued three (3) years prior to the filing of the complaint, i.e., before December 9, 2010. See Krahmer v. Christie's Inc., 903 A.2d 773 (Del. Ch. 2006). The Court noted that an exception may apply due to the "discovery rule" and/or fraudulent concealment, under which the statute of limitations will begin to run "upon the discovery of facts constituting the basis of the cause of action or the existence of facts sufficient to put a person of ordinary intelligence and prudence on inquiry which, if pursued, would lead to the discovery of such facts." Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 219 (Del. 2004).
Terex argued that TL's claims based on the Equipment Market Representation and Dealership Selection Representations were barred because of interrogatory answers, in which TL explained when it first became aware that the market would not support the number of purchases required by the Distributorship Agreement. That interrogatory answer stated:
The Court noted that in its briefing, TL had not contended that its claims based on the Equipment Market Representation were timely, but instead focused on the Dealership Selection Representations. Thus, based on the parties' arguments, the Court concluded that it was undisputed that TL's claims based on the Equipment Market Representation were untimely.
The remaining disputed issue was whether the claims based on the Dealership Selection Representations were barred by the statute of limitations. In deciding that issue, the Court noted that the statement from Mr. Ferguson described in the interrogatory answer did not discuss Terex's distributor selection criteria, Terex's alleged financial distress, or how that financial distress affected Terex's selection of distributors. Terex argued that these allegations were just a repackaging of the Equipment Market Representation; however, the Court was not persuaded.
The Court explained that the Equipment Market Representation related to the market for Terex equipment, whereas the Dealership Selection Representations related to Terex's financial situation and how Terex selected dealers for its equipment. Although they may be related, to the Court they did not overlap to such an extent that the bar on the claims based on the Equipment Market Representation should also apply to the claims based on the Dealership Selection Representations.
Accordingly, the Court concluded that TL’s interrogatory answer did not bar TL's claims based on the Dealership Selection Representations; and thus, the Court denied Terex's motion for summary judgment on TL's claims except to the extent those claims were based on the time-barred Equipment Market Representation.
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