Hirani Engineering and Land Surveying PC v. Mehar Investment Group LLC et al

Filing 70

MEMORANDUM OPINION re 59 MOTION for Summary Judgment, and 62 Motion for Leave to Amend Complaint. Signed by Judge Richard G. Andrews on 7/17/2012. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

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HIRANI ENGINEERING AND LAND
SURVEYING, P.C.,

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Plaintiff,

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Civil Action No. 09-252-RGA

V.

MEHAR INVESTMENT GROUP, LLC,
d/b/a MIG ENVIRONMENTAL, and
HARDEEP S. GAHUNIA, P.E.,
Defendants.

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MEMORANDUM OPINION

G. Kevin Fasic, Esq., Cooch & Taylor, P.A., Wilmington, Delaware, Attorney for PlaintiffHirani
Engineering.
Kevin S. Mann, Esq., Cross & Simon, LLC, Wilmington, Delaware, Attorney for Defendant
Mehar Investment Group.

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July
2012
Wilmington, Delaware

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Hirani Engineering and Land Surveying ("Hirani") sued Mehar Investment Group d/b/a
MIG Environmental ("MIG") for breach of contract, negligence, and professional malpractice.
The claims arose out of a dispute involving an environmental remediation project in 2006, in
which Hirani was a contractor and MIG was a subcontractor. Hirani claims damages of
$352,000.
MIG 1 had an insurance policy with Indian Harbor Insurance Company, which was
supposed to have covered MIG's work in relation to this project. MIG filed a third-party
complaint against Indian Harbor, seeking a declaratory judgment that Indian Harbor had a duty to
indemnify and defend MIG in this suit. (D.I. 37). I earlier ruled that the insurance contract did
not provide coverage and dismissed the third-party complaint. (D.I. 51).
MIG has now moved for summary judgment against Hirani. (D.I. 59). The matter has
been fully briefed. (D.I. 60, 61, 64, 66). The basis for the motion is a "Settlement Agreement
and Release" that the parties, along with Westchester Fire Insurance Co., entered into on
February 27, 2009. (D.I. 61, A:l-10). The agreement, which is ten pages, is the entire agreement
between the parties and "may not be modified in any way other than in a writing executed by all
Parties ...." (Id., A:9, ~1 0).
The settlement agreement provided, in relevant parts, that one consequence of its varied
promises and conditions was that, if MIG fulfilled them, then Hirani would withdraw its state
court case against MIG, with prejudice. (Id., A:5, ~ l(e)). The only promise that is now at issue
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It is my recollection from the Rule 16 conference that MIG may be having financial
problems, which would add some context to the present dispute. Such information is not,
however, presented as a part of the present dispute.

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is the one contained in ,-r 2(b ), which states:
Insofar as Hirani alleges that the [$352,925] paid to [MPI] is the result of a design
error caused by [the co-defendant Mr. Gahunia], and insofar as Hirani alleges that
Mr. Gahunia's allegedly flawed work is the responsibility ofMIG and insofar as MIG
has reported this claim to its insurance carrier, which initially denied the claim,
Hirani reserves the right to pursue this claim against MIG, its insurance carrier,
and/or Mr. Gahunia. Hirani understands that should this claim be pursued, MIG has
a duty to provide its best efforts to assist its insurance carrier in the defense of this
action. Hirani further agrees that, if it pursues the claim based upon the alleged
design flaws of Mr. Gahunia, and is successful, that it will not attempt to collect any
amount from MIG beyond the amount that MIG's insurance carrier is compelled (or
agrees in settlement) to pay; in other words, as part of the overall settlement of
various outstanding matters between Hirani and MIG, Hirani agrees that MIG will
not have to make any out-of-pocket payment to Hirani or Westchester for the alleged
Gahunia design error beyond amounts that are paid by MIG's insurance carrier.
Hirani indemnifies MIG from any claims raised against MIG by Mr. Gahunia for
contribution or indemnification based upon the claims made by Hirani against Mr.
Gahunia. In response to any suit filed by Hirani against it, MIG shall provide notice
of such suit to any insurance carrier that may be in a position to provide coverage
with respect to Hirani's claim. In the event any insurance carrier provided with
notice by MIG declines to defend or cover said claims MIG will use its best efforts
to add said insurance carrier as a party in the suit brought by Hirani against MIG so
as to exercise MIG's contractual rights within the coverage of any applicable
insurance policy to provide insurance coverage for Hirani's claim(s) against MIG.
(ld., A6, ,-r 2(b)).

The primary dispute between the parties, at this point, is the interpretation of the contract.
MIG's argument is straightforward. MIG used its best efforts to bring its insurance carrier into
the lawsuit, which included suing the carrier. MIG therefore complied with the terms of the
agreement. The fact that MIG lost the suit is irrelevant. (D.I. 60, p. 2). Hirani's argument is
two-fold: (1) MIG did not comply with the agreement, as the agreement required that Hirani be
successful; and (2) MIG defrauded Hirani, since MIG knew that it had no insurance coverage.
(D.I. 64, pp. 5-7).
The settlement agreement provides that it is to be interpreted under Delaware law. (D.I.

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61, A:10,

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13). The three briefs submitted in connection with the motion are noteworthy for not

citing a single Delaware case for any principle of contract law. (D.I. 60, 64, 66).
A settlement agreement is a contract. See Parker-Hannifin Corp. v. Schlegel Elec.
Materials, Inc., 589 F. Supp. 2d 457,461 (D. Del. 2008). The interpretation of a contract is a

matter oflaw. See Hudson v. State Farm Mut. Ins. Co., 569 A.2d 1168, 1170 (Del. 1990). The
Court believes there is no ambiguity in the contract, and thus resolution of its meaning at the
summary judgment stage is appropriate. See Rhone-Poulenc Basic Chemicals Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1195-96 (Del. 1992) (contract not ambiguous simply because

parties disagree on its construction).
The settlement agreement contemplates that MIG might not be successful in its efforts to
bring in its insurance carrier. The settlement agreement recites that MIG's insurance carrier had
already "initially denied the [very] claim [that is in issue in this lawsuit]." (D.I. 61, A:9, ~ 2(b)).
The settlement agreement recites that MIG is to provide notice of the present lawsuit "to any
carrier that may be in a position to provide coverage with respect to Hirani's claim." Id. Further,
if an insurance carrier "declines to defend or cover said claims MIG will use its best efforts to
add said insurance carrier as a party in the suit brought by Hirani against MIG .... " Id. It seems
clear that everyone knew that insurance carriers do not always agree that they have a duty to
defend or indemnify, and that when they are sued, one possible outcome is that their position
would be sustained.
Hirani points to the language that states:
if [Hirani] pursues the claim based upon the alleged design flaws of Mr. Gahunia,
and is successful, that it will not attempt to collect any amount from MIG beyond the
amount that MIG's insurance carrier is compelled (or agrees in settlement) to pay;
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in other words, ... Hirani agrees that MIG will not have to make any out-of-pocket
payment to Hirani or Westchester for the alleged Gahunia design error beyond
amounts that are paid by MIG's insurance carrier.

!d. Hirani particularly emphasizes the "is successful" portion. (D.I. 64, pp. 3, 6). Hirani says
that Hirani has not been successful, and thus MIG can not enforce the settlement agreement. In
my opinion, the "claim ... is successful" language is to be contrasted with the possibility that the
claim would be "unsuccessful." The "claim" is that "Mr. Gahunia's allegedly flawed work is the
responsibility of MIG." If the claim "is successful," then MIG would be responsible, and ifMIG
had insurance coverage, then the insurance company would pay Hirani. If the claim is
unsuccessful, then MIG would not be responsible, and whether it had insurance coverage would
be unimportant, because neither MIG nor the insurance company would owe Hirani anything.
Thus, the only reasonable interpretation of the settlement agreement provision is that as long as
MIG did what it promised to do (that is, try its best to bring in its insurance carrier), MIG had
fulfilled its responsibilities under this provision. 2
Hirani's other argument is premised on the proposition that MIG represented that it had
appropriate insurance coverage. Hirani provided a 2007 certificate of liability insurance, which
appears to have been submitted to Hirani on MIG's behalf by an insurance broker to show MIG's
coverages. (D.I. 64-1, AH:l). There is no sworn or documentary evidence in the record to
suggest that MIG knew its insurance coverage was not appropriate. Both MIG and Hirani knew,
at the time of the settlement agreement, that the insurance company had denied coverage. The
suit by MIG against the insurance company is evidence of MIG's good faith. Simply because the

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Hirani does not contest that MIG "complied with the requirement to attempt to add
[MIG's] carrier as a party to this action .... " (D.I. 64, p. 6).
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insurance company's position was ultimately upheld after litigation does not provide any factual
basis for alleging that MIG entered into the settlement agreement fraudulently or concealed some
material fact from Hirani at some relevant time.
Hirani has filed a motion for leave to amend the complaint to allege a count of common
law fraud. (D.I. 62). The motion is timely. The motion, however, will be denied. The count of
common law fraud is, to put it charitably, conclusory. It adds seven new paragraphs. (D.I. 62-1,
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30-36). The person who "represented to Hirani that MIG had secured insurance coverage" is

identified by name. (Id.,

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31). The date that MIG's insurance carrier had denied coverage is

identified as October 2007. (Id.,

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33). It thus alleges that MIG knew that its insurance carrier

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had denied coverage before the settlement agreement and before bringing the third-party suit
against the insurance carrier. (Id. ). More importantly, the only fact alleged for the proposition
that MIG's managing member knew that the representation was false was that the insurance
carrier had denied coverage, which was a fact disclosed to Hirani. Further, there is no allegation,
and certainly no allegation with any specificity, that MIG's managing member knew that the
insurance company's position was correct or would be determined by a court to be correct.
To state a claim for fraud under Delaware law, the Plaintiff must allege: "(1) defendant
made a false representation; (2) with knowledge or belief of its falsity or with reckless disregard
for the truth; (3) with an intent to induce the plaintiff into acting or refraining from acting; (4)
plaintiff reasonably relied upon the misrepresentation; and (5) plaintiff was damaged as a result
ofthe reliance." Segovia v. Equities First Holdings, LLC, 2008 WL 2251218, *21 (Del. Super.
May 30, 2008). MIG concedes that "Hirani accurately recites the technical elements of a fraud
claim." (D.I. 68, p. 4). MIG, however, also asserts that Hirani has not stated "with particularity

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the circumstances constituting fraud .... " Fed. R. Civ. P. 9(b).
The stringent pleading restrictions of Rule 9(b), Fed. R. Civ. P., apply to such a
claim: "In all averments offraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity. Malice, intent, knowledge and other
conditions of mind of a person may be averred generally." Pursuant to Rule 9(b ), a
plaintiff alleging fraud must state the circumstances of the alleged fraud with
sufficient particularity to place the defendant on notice of the "precise misconduct
with which [it is] charged." To satisfy this standard, the plaintiff must plead or allege
the date, time and place of the alleged fraud or otherwise inject precision or some
measure of substantiation into a fraud allegation.

Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (citations omitted).
MIG's argument clearly has merit. The fraud count does not allege the "date, time and
place," and no one reading it could possibly think it alleges the "precise misconduct" that is
supposed to have occurred. Thus, Hirani' s fraud count fails to state a claim as required by Rule
9(b).
An appropriate order will issue.

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