Opinion
C.A. No. N18C-04-313 WCC
09-26-2019
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA as Assignee and Subrogee of Kratos Defense & Security Solutions, Inc., Plaintiff, v. NEWARK RECYCLING CENTER INC., Defendant.
David W. Giattino, Esquire; McElroy, Deutsch, Mulvaney, & Carpenter, LLP, 300 Delaware Avenue, Suite 770, Wilmington, DE 19801. Attorney for Plaintiff. Monica T. Holland, Esquire; McElroy, Deutsch, Mulvaney, & Carpenter, LLP, One Perm Center - Suburban Station, 1617 John F. Kennedy Blvd., Suite 1500, Philadelphia, PA 19103-1815. Attorney for Plaintiff. Roger D. Landon, Esquire; Murphy & Landon, 1011 Centre Road, #210, Wilmington, DE 19805. Attorney for Defendant.
DEFENDANT'S RENEWED MOTION FOR SUMMARY JUDGMENT - GRANTED
MEMORANDUM OPINION
David W. Giattino, Esquire; McElroy, Deutsch, Mulvaney, & Carpenter, LLP, 300 Delaware Avenue, Suite 770, Wilmington, DE 19801. Attorney for Plaintiff. Monica T. Holland, Esquire; McElroy, Deutsch, Mulvaney, & Carpenter, LLP, One Perm Center - Suburban Station, 1617 John F. Kennedy Blvd., Suite 1500, Philadelphia, PA 19103-1815. Attorney for Plaintiff. Roger D. Landon, Esquire; Murphy & Landon, 1011 Centre Road, #210, Wilmington, DE 19805. Attorney for Defendant. CARPENTER, J.
Before the Court is Defendant's Renewed Motion for Summary Judgment. For the reasons set forth in this Opinion, Defendant's Motion is GRANTED.
I. FACTUAL & PROCEDURAL BACKGROUND
This litigation arises out of transactions that occurred between Mark Spinden ("Spinden"), his son, Ryan Spinden, and Newark Recycling Center, Inc. ("NRC" or "Defendant"). Spinden was the warehouse manager of Kratos Defense & Security Solutions, Inc. ("Kratos") and used his position as warehouse manager to purchase $529,802.72 of copper wire. He would falsify inventory records, steal the material from Kratos, and sell it to NRC as scrap metal. Spinden would arrive at NRC's facility, drive a company truck, and represent himself as the "purchasing MGR" for Kratos.
Compl. ¶ 5.
See Pl.'s Objection to Def.'s Renewed Mot. Summ. J., [hereinafter Pl.'s Obj.], Ex. A, at 22.
See Def.'s Renewed Mot. Summ. J., [hereinafter Def.'s Mot.], Ex. B, at 35, Ex. C, at 16-17.
Pl.'s Obj., Ex. L, at 1.
NRC recorded fifty-three transactions with Mark Spinden and five transactions with his son, Ryan Spinden, between June 11, 2012 and July 24, 2014. Each recorded transaction identifies the date and time of the purchase, the purchase number, the item description, and the amount NRC paid for the material. As mandated by law, NRC records this information any time they purchase a precious metal, including copper.
See Pl.'s Obj., Ex. D, E, F.
See id.
See Pl.'s Obj., Ex. G, at 10-11.
Mark and Ryan Spinden pled guilty to criminal charges related to the theft on July 7, 2016, and January 20, 2016, respectively. On April 30, 2018, National Union Fire Insurance Company of Pittsburgh, PA ("Plaintiff") filed a subrogation suit for conversion and unjust enrichment against NRC.
State v. Mark Spinden, ID No. 1507000202 (Del. Super. Ct. July 7, 2016); State v. Ryan Spinden, ID No. 1507004037 (Del. Super. Ct. January 20, 2016).
Recognizing the three year statute of limitations to file their litigation, the Plaintiff asserts that Spinden picked up 30,000 feet of copper wire purchased by Kratos on April 28, 2015 and opines that because there are other instances of Spinden picking up wire and then selling that wire to NRC within several days, it is a fair inference for the jury to conclude that he sold the wire to NRC within several days of the 2015 purchase. If so, this would bring the action within the statute of limitations. Despite Plaintiff's assertion that Spinden sold the copper wire to NRC shortly after the 2015 purchase, there are no records connecting NRC to the purchase, and Plaintiff has not offered any evidence to support this allegation. At a hearing held on January 3, 2019 on Defendant's initial Motion for Summary Judgment, the Court denied the Motion to provide Plaintiff additional time to discover such evidence. This is the Court's decision on the Defendant's Renewed Motion for Summary Judgment.
See Pl.'s Obj. ¶ 1.
II. STANDARD OF REVIEW
In reviewing a motion for summary judgment pursuant to Superior Court Civil Rule 56, the Court must determine whether any genuine issues of material fact exist. The moving party bears the burden of showing that there are no genuine issues of material fact, such that he or she is entitled to judgment as a matter of law. In reviewing a motion for summary judgment, the Court must view all factual inferences in a light most favorable to the non-moving party. Where it appears that there is a material fact in dispute or that further inquiry into the facts would be appropriate, summary judgment will not be granted.
Super. Ct. Civ. R. 56(c); see also Wilm. Tru. Co. v. Aetna, 690 A.2d 914, 916 (Del. 1996).
See Moore v. Sizemore, 405 A.2d 679 (Del. 1979).
See Alabi v. DHL Airways, Inc., 583 A.2d 1358, 1361 (Del. 1990).
See Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. Super. Ct. 1962), rev'd in part on procedural grounds and aff'd in part, 208 A.2d 495 (Del. 1965).
III. DISCUSSION
A. The Statute of Limitations Bars Plaintiff's Claims
The statute of limitations for a conversion claim expires three years from when the cause of action accrued. The cause of action accrues at the time the injury occurs, "even if the plaintiff is ignorant of the cause of action." This statute applies to Plaintiff's unjust enrichment claim, as well. Kratos, and therefore Plaintiff, had three years from the last transaction between Spinden and NRC to bring the litigation.
In re Dean Witter P'ship Litig., 1998 WL 442456, at *4 (Del. Ch.), aff'd, 725 A.2d 441 (Del. 1999).
See Kraft v. WisdomTree Investments, Inc., 145 A.3d 969, 983 (Del. Ch. 2016) ("When an equitable claim seeks legal relief . . . the Court also will apply the statute of limitations by analogy . . . and will bar claims outside the limitations period absent tolling or extraordinary circumstances.").
There are limited exceptions in which the statute of limitations may be tolled: (1) fraudulent concealment, (2) inherently unknowable injury, and (3) equitable tolling. The party asserting that tolling applies bears the "burden of pleading specific facts to demonstrate that the statute of limitations was, in fact, tolled." These exceptions permit tolling "where the facts underlying a claim were so hidden that a reasonable plaintiff could not timely discover them." None of these exceptions is applicable to the instant case.
See Krahmer v. Christie's Inc., 903 A.2d 773, 778 (Del. Ch. 2006).
In re Dean Witter, 1998 WL 442456, at *6.
Id. at *5.
B. Fraudulent Concealment
The statute of limitations will be tolled if a defendant fraudulently concealed facts that would have put plaintiff on notice of the cause of action. This requires "an affirmative act of concealment by a defendant . . . that prevents a plaintiff from gaining knowledge of the facts" or an act of "misrepresentation that is intended to put a plaintiff off the trail of inquiry."
See id.
Id. ("Mere ignorance of the facts by a plaintiff, where there has been no such concealment, is no obstacle to operation of the statute [of limitations]").
In the instant matter, there is nothing to suggest that the Defendant engaged in any affirmative act of concealment. NRC complied with all statutory reporting procedures and requirements for scrap metal businesses and entered all required information into Rapid, the state police system. Additionally, there is no evidence that NRC had knowledge of Spinden's theft from Kratos. NRC was "[n]ot at all suspicious" that Mark Spinden was selling thousands of pounds of copper because NRC has "numerous accounts that sell thousands of pounds all of the time." Furthermore, Spinden altered the metal so that it did not appear new and instead "looked like scrap." While NRC paid Mark Spinden in cash, per his request, this too was within normal business practices, as approximately ninety percent of their customers request to be paid in cash.
24 Del. C. § 2302. See Pl.'s Obj., Ex. G, at 10-11.
See Pl.'s Obj., Ex. G, at 61.
Id.
Id. at 62.
See Pl.'s Obj., Ex. H, at 26, Ex. G, at 64.
Despite allegations that "Defendant conspired with the Spindens," Plaintiff has offered no evidence to support this position. The fact that Kratos continues to maintain a business relationship selling excess wire to the Defendant strongly suggests that Kratos does not believe NRC was involved with Spinden's theft. Accordingly, the Court finds no merit in the argument that the Defendant participated in fraudulently concealing the conversion.
Pl.'s Objection to Def.'s Mot. For Summ. J., ¶ 3.
See id. at 19.
C. Inherently Unknowable Injury
The doctrine of inherently unknowable injuries applies only in limited situations with "no observable or objective factors to put a party on notice of an injury" and when plaintiffs can "show that they were blamelessly ignorant" of the injury. The Delaware Supreme Court established the inherently unknowable doctrine in a case wherein a surgical instrument was left inside a patient after an operation. There, the plaintiff was blamelessly ignorant of the injury because there was no reasonable way for her to discover it. However, where "an exercise of reasonable due diligence" would lead to the discovery of the injury, a failure to exercise such due diligence cannot support a tolling of the statute.
In re Dean Witter, 1998 WL 442456, at *5.
See Layton v. Allen, 246 A.2d 794, 795 (Del. 1968); see also Krahmer, 903 A.2d at 780 ("After the Layton decision was rendered, the Delaware General Assembly enacted 18 Del. C. § 6856, which restricted the court's holding in medical malpractice cases. However, Layton remained good law as applied in other contexts.").
See Layton, 246 A.2d at 796-97 ("It is undisputed that the plaintiff's first onset of pain occurred in 1965 and that reasonable care and diligence on her part would not have led to the discovery [of the injury] . . . prior to that date.").
Krahmer, 903 A.2d at 782.
Here, Kratos could have discovered its employee's theft by exercising reasonable due diligence. Because of Kratos' limited oversight procedures, Spinden was able to purchase $529,802.72 worth of copper wire without authorization, which he then converted. Former Regional Accounting Manager of Kratos explained:
[Spinden's] approval limit for purchase orders was $10,000. So, he was able to enter a purchase order, approve it himself. He could do the receiving for that purchase order. He did the inventory count for it. So . . . he was able to do all this and no one was really checking what was going on.
Def.'s Mot., Ex. B, at 35.
Although Plaintiff asserts that Kratos had "no way of knowing" of its employee's theft, it was not inherently unknowable. Spinden's broad authority to purchase, approve, receive and account for inventory without meaningful review suggests a lack of due diligence. As such, Kratos, and therefore Plaintiff, is not blamelessly ignorant and the doctrine of inherently unknowable injuries does not toll the statute.
Pl.'s Obj. ¶ 6.
See id.
D. Equitable Tolling
Delaware courts have consistently recognized three situations in which equitable tolling may be appropriate: "(1) where the defendant misled the plaintiff, (2) where the plaintiff was prevented from asserting his rights in some extraordinary way, and (3) where the plaintiff has timely asserted his rights mistakenly in the wrong forum." Courts have also tolled the statute "where a plaintiff reasonably relies on the competence and good faith of a fiduciary."
Owens v. Carman Ford, Inc., 2013 WL 5496821, at *3 (Del. Super. Ct.); see also Granger v. Rauch, 388 F. App'x 537, 542 (7th Cir. 2010).
In re Dean Witter, 1998 WL 442456, at *6; see also Laventhol, Krekstein, Horwath & Horwath v. Tuckman, 372 A.2d 168, 170 (Del. 1976) ("[T]he benefit of the statute of limitations will be denied to a corporate fiduciary who has engaged in fraudulent self-dealing.").
As discussed above, the Court is satisfied that the Defendant was unaware of Spinden's illegal activities and did not mislead or prevent the Plaintiff from asserting his case within the statute of limitations. Additionally, there is no claim that the Plaintiff initially asserted their claim in the wrong forum delaying their litigation in this Court.
Finally, Mark Spinden cannot be considered a fiduciary of Kratos. He was a warehouse manager, not a director, officer, or high level employee of the company. This doctrine has been applied to toll the statute in cases of self-dealing corporate fiduciaries who conspired with an outside party to defraud unknowing shareholders. That is not analogous to the facts presented here. Mark Spinden, while a trusted employee, simply used his access as warehouse manager to steal from his employer. He did not hold a fiduciary position in which he could make corporate decisions without reasonable management oversight. As such, this is not an appropriate situation to apply equitable tolling.
See Laventhol, 372 A.2d at 170 (tolling statute of limitations as applied to "certified public accountants who allegedly conspired with corporate fiduciaries to defraud the shareholders . . . .").
IV. CONCLUSION
For the foregoing reasons, Defendant's Renewed Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.
/s/_________
Judge William C. Carpenter, Jr.