Chaplake Holdings, Ltd., et al. v. Chrysler Corp.
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IN THE SUPERIOR COURT OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY CHA PLA KE H OLD ING S LT D., POR TM AN L AM BOR GH INI, L TD., and DAVID T. LAKEMAN Plaintiffs v. CHRYSLER CORPORATION Defendant ) ) ) ) ) ) ) ) ) ) CIVIL ACTION NUMBER 94C-04-164-JOH Submitted: July 25, 2003 Decided: October 30, 2003 MEMORANDUM OPINION Upon M otion of Plaintiffs for Pre-judgme nt Interest - GRANTED Laurence V. Cronin, Esquire, of Smith Katzenstein & Furlow, LLP, Wilmington, Delaware, and Michael J. Connolly, Esquire, and Kelley A. Jordan-Price, Esquire, of Hinckley, Allen & Snyder, LLP, Boston, Massachusetts, attorneys for plaintiffs John A. P arkins, Jr ., Esq uire, of R icha rds, L ayton & Finger, P.A., Wilmington, Delaware, and Robert D. Cultice, Esquire, and Michael R. Heyison, Esquire, of Hale and Dorr, LLP, Boston, Massachusetts, attorneys for defendant HERLIHY, Judge While affirming all this Court s post-trial rulings, the Supreme Court reversed and remanded the matter to determine pre-judgment and post-judgment interest amounts. Initia lly, this Court d enied the m otion for pr e-judgme nt interest sub mitted by Chaplake Holdings, Ltd. ("Chaplake") and Portman Lamborghini, Ltd. ("Portm an" collectiv ely Plaintiffs ), holding that it had not been "specifically requested" by the Plaintiffs and therefore was waived.1 However, on appeal the Supreme Cou rt rev erse d this Co urt's ruling holding that the pretrial stipulation served to amend the pleadings to include Plaintiffs' request for pre-judgmen t interest. 2 This Court concludes that Plaintiffs' pre-judgment interest on their promissory estoppel claims began to accrue on March 30, 1992, as it is an identifiable date of loss. Facts Chaplake, a United Kingdom company, was formed in 1984 by David Jolliffe ("Jolliffe") and David Lakeman ("Lakeman") as equal shareholders. Chaplake is the parent company of Vehiclise, Ltd. ("Vehiclise") and Portman, both of which are also incorporated under the laws of the United Kingdom. In 1990, Lamborghini London, Ltd. ("Lamborghini London"), which was also owned by Chaplake, transferred all of its assets and liabilities to Portm an. 1 Chaplake Holdings v. Chrysler Corp., Del. Super., C.A. No. 94C-04-164, Herlihy, J. (Jan. 10, 2002) at 96-97. 2 Id. at 1038. 2 In 1984, Vehiclise and Automobili Feruccio Lamborghini, S.p.A. ("Lamborghini") entered into an exclusive concession contract by which Vehiclise would be the exclusive automob ile dealer of Lamborghini's ultra-high end sports cars to buyers in the United Kingdom, Irela nd and th e Ch annel Islands. Po rtma n wa s app ointed by Vehiclise to be its London automobile dealer with exclusive rights to the con cession agreem ent. Portman was the largest Lam borghini d ealer in the w orld with a sales volume of approximately thirty new Lambo rghinis each year between 1984 and 198 7. During that time perio d, Lamb orghini on ly produ ced 25 0 cars p er year. In 1987, Ch rysler Internationa l, a subsidiary of C hrysler Corp. (c ollectively, "Chrysler"), purchased all outstanding shar es of Lam borg hini's stock. Thereafter, Chrysler created a plan to expand production from 250 new ca rs per year to roughly 5,000 new cars within five years ("Expansion Plan"). This plan included the increase in production of the Diablo model from 250 per year to 500 per year. This plan also included the production of a new mode l called th e P140 with a p roduct ion leve l of 2,50 0 cars p er year. Chrysler had abso lute control o ver the Ex pansion P lan. This co ntrol is evidenced by the fact that Chrysler defined the duties of Lamborghini's president, and it placed two of its top exe cutives on La mborg hini's Bo ard of D irectors. In 1987, the President of L amborghini, Emile Novaro ("Novaro"), discussed the Expansion Plan with Jolliffe. At that time, Portman was only selling thirty new cars per year and Novaro was con cerned tha t Portman w ould not be able to handle the 300 cars that were 3 allocated to Portman under the Expansion Plan once it was implemented. Novaro assured Jolliffe that Portma n's exclusive concessio n agreem ent with Lambo rghini wo uld be honored as long as Portman expanded its dealership and storage capacity to handle the influx of the additional 270 cars per year. Chrysler exe cutives reiterate d Nova ro's promise to Jolliffe that Portman would re tain its exclusiv e right to sell L amborg hinis in the United Kingdom market as long as it exp anded . Jolliffe and Lakeman met with bankers from Credit Suisse and the accou nting firm of Buzzac ott & Co . to create and develop a feasibility and business plan to accomm odate Portman's expansion ("Portman Plan"). The Plan called for tripling Portman's staff, the construction of new showro oms arou nd the cou ntry, the purcha se of com puter equip ment and software, and the acquisition of real property for a new headquarters. These capital acquisitions and improvements would allow Portman to increase its volume of new cars and mainta in its exc lusive rig ht to sell L ambo rghinis i n the U nited K ingdom . In 1987, C redit Suisse agreed to extend P ortman an increase in its o verdraft fa cility in order to pay for the Portman Plan. As part of the agreement, Lakem an was re quired to provide a cash guaranty in the amount of £448,568.62 to secure the increased overdraft facility. Credit Suisse further requested that Portman hire Howard Mitchinson ("Mitchinson") as an accou ntant. Mitchinson met with representatives of Lamborghini who confirmed the progre ss and d etails of the Ex pansio n Plan. In 1990, Chrysler representatives visited P ortman and confirmed that the Portman Plan 4 was consistent with the Expansion Plan. At this point, Portman h ad acquired the nece ssary financing for its Plan from Credit Suisse, hired additional staff, acquired additional facilities and purchased a large tract of land on which to build a new distribution center. Portman developed architectural a nd land us e plans for the new f acility. Also, interna l docume nts from Chrysler revealed its commitment to honoring Portman's exclusivity agreement by stating that the introduction of the P140 model would lead to the creation of new dealerships in every European country except the United Kingdom and Ireland. Howeve r, unknown to Plaintiffs, by 1990 Chrysler's commitment to the Expansion Plan began to wan e. The eco nomic recession in the early 1990's in the United States caused Chrysler to lose confidence in the development and production of the Lamborghini P140 model and the manufacturing of the P140 stalled. In the end, Chrysler spent app roximately one-th ird of w hat it exp ected to spend in the de velopm ent and produ ction of the P14 0. By August of 1991, Portman had borrowed and spent £569,321.45 on the Portman Plan. Also in 19 91, Jolliffe so ld sixty percent of his ownership interest in Chapla ke to Sheik Mohammed Fahkry for £500,000, and reinvested £462,686.47 of the proceeds into Chaplake. Chap lake the n loane d the m oney to P ortman . The delays in production of the P140 due to Chrysler's lost confidence caused the rapid decline of Portman's profitability and success. Between June 1990 and June 1991, Lamborghini sent no right-hand drive Diablos, nor any P140s to Portman.3 Beginnin g in 3 Right-hand drive cars have the steering wheel on the right hand side of the driver's compartment. 5 February 1992, Portman's custom ers demanded refunds of their deposits from Portman due to the lengthy delays in delivery of their vehicles. However, Portman could not refund the deposits because o f their lack of income d ue to the production d elay at Lamb orghini. Portman, therefore, requested refunds of their customers' deposits from Lambo rghini. However, Lamborghini refused to refund these deposits that Portman had paid to them becau se Chr ysler had u sed tha t mone y to pay for i ts Expa nsion P lan. As a result of its loss of income due to refunding their customers' deposits and lack of cars to sell, Portman was unable to service its debt to Credit Suisse. On March 30, 1992, Credit Suisse called in Portman's loan.4 As of this date, the amount owed on the debt was £2,105,183.62. Add ition ally, Credit Suisse inv oked La kem an's guarantee of £448,568.62. By the time that Lamborghini shipped the right-hand drive Diablos, Portman was in an irretrieva ble State and it en tered re ceivers hip in A pril of 1 992. In April 199 4, Chapla ke, Portma n and La keman f iled a lawsu it against Ch rysler in this Court seeking recovery for damages incurred by each of them for alleged breach of implied contract and fraud. In a 1999 ruling, this Court denied Chrysler's motion for summary judgment and allowed the Plaintiffs to add a claim of negligent misrepresentation.5 Also in a 1999 ru ling, this Cou rt allowed th e Plaintiffs to add a claim of prom issory estoppel. 6 4 Plaintiffs Exhibit No. 171. 5 Chaplake Holdings, Ltd. v. Chrysler Corp., Del. Super., C.A. No. 94C-04-164, Herlihy, J. (Jan. 13, 1999). 6 Chaplake Holdings, Ltd. v. Chrysler Corp., Del. Super., C.A. No. 94C-04-164, Herlihy, J. (June 16, 1999). 6 On June 22, 2001, the jury found, through a special verdict, that C hrysler was liab le under the doctrine of promissory estoppel. But, the jury found that Chrysler was not liable for fraud, negligent misrepresentation or breach of implied contract. The jury awarded Portman £569,321.45 for costs it sustained in implementing the Portman Plan. The jury also awarded Chaplake £462,686.47 for the amount that it had invested in Portman to fund th e expan sion. 7 Following the verdict, both parties filed a flurry of motions. Among Plaintiffs motions was one seeking pre-jud gmen t interest. This Court denied all the parties motions, including P laintiffs mo tion seeking pre-judgm ent interest. 8 In denying that motion, this Court relied upon Collins v. Throckmorton 9 which bars an award of such interest unless it is specifically pled. None of Plaintiffs complaints, original or amended, pled it. When presenting this post-trial motion, they sought, through additional briefin g, to argue th at their certificate of value that their claim was worth over $100,000 was the equivalent of such a pleading. Plaintiffs appealed this Court s post-trial ruling, including the denial of their claim for pre-judgment interest. Chrysler a lso appeale d this Court s denial of its post-trial motions. In arguing for reversal of this C ourt s ruling on pre-judgment interest, Plaintiffs, on appeal, raised an argument not raised before this Court. On appeal they referred to the May 2001 7 10 Del. C. § 5207 requires that a judgment on a foreign money claim is payable in that money. 8 Chaplake Holdings, Ltd. v. Chrysler Corp., Del. Super., C.A. No. 94C-04-164, Herlihy, J. (January 10, 2002) at p. 98. 9 425 A.2d 146 (Del. 1980). 7 pretrial stipulation. In that stipulation, they listed as an issue of fact to be resolved th e question of how much pre-judgment interest they were owed. This argument persuaded the Supreme Court that their pleading had been amended and that, therefore, Plaintiffs had pled pre-judgm ent interest. 10 The Suprem e Court af firmed all o f this Cou rt s post-trial rulings except Plaintiffs pre-judgment interest claim. The Supreme Court rem anded the case to this C ourt to determine the pre-judgment and post-judgment interest amounts.11 Discussion Under Delaware law, pre-judgment and post-judgment interest on a debt is awarded as a matter of right and not of judicial discretion.12 Courts aw ard pre-jud gment an d postjudgment interest to the prevailing injured party for the "detention of dam ages." 13 Delaware courts look to the " date of Pla intiff's loss" to determine the date when pre-judgment interest begins to accrue.14 Delaware courts also compute pre-judgment interest from the date of 10 11 Chrysler Corp., 822 A.2d at 1037-38. Chrysler Corp., 822 A.2d 1034. 12 Moskowitz v. Mayor and Council of Wilmington, 391 A.2d 209, 210 (Del. 1978). Rollins Environmental Services, Inc. v. WSMW Industries, 426 A.2d 1363, 1366 (Del. Super. Ct. 1980) (citing E.M. Fleischman Lumber Corp. v. Resources Corp. International, 114 F. Supp. 843, 844 (D. Del. 1953)). 13 14 See Metropolitan Fire & Insurance Company v. Carmen Holding Company, 220 A.2d 778, 782 (Del. 1966); Hercules, Inc. v. AIU Insurance Company, 784 A.2d 481, 508 (Del. 2001); Smith v. Thomas, Del. Super., C.A. No. 01A-06-004, Ridgely, President J. (Dec. 10, 2001). 8 defe ndant's breach of contra ct/promise.15 If the court is unable to determine the date of Plaintiff's loss, the court will resort to the date that the original complaint was filed.16 Based on the facts of this case, the "date of the Plaintiff's loss" is March 30, 1992. This is the date that Cr edit Suisse c alled in Portm an's debt. 17 The Supreme Court described Plaintiffs situation around that date: As a result of the delays, Portman s customers became impatient and demanded refunds o n their depo sits. Because of its loss of income, how ever, Portman was unable to repay the deposits. Lambo rghini wa s also unw illing to refund the deposits that Portman had paid to the manufacturer because Chrysler used that money to pay for the E xpansio n Pla n. Additiona lly, Portman was unable to service its debt to Credit Suisse, which the bank eventually called in March of 1992. At that time, the amount owed totaled £2,105,183.62.18 Also, beginning in February 1992, Po rtman's custo mers dem anded ref unds of th eir deposits from Portman due to Lamborghini's excessive delay in shipping new cars to the dealership. Portman could not refund the deposits for two reasons: (1) Portman's lack of income due to the production delay; and (2) Lamborghini's refusal to refund the deposits that Portman had paid to them because Chrysler had used that money to pay for the Expansion Plan. Therefore, the totality of the evidence and circumstances of this case impels the 15 Citadel Holding Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992); see also U.S. for use of Endicott Ent., Inc. v. Star Brite Construction Co., Inc., 848 F. Supp. 1161, 1169 (1994) ("Under Delaware law, a party is entitled to pre-judgment interest when the amount of damage is calculable, and such interest has been awarded in breach of contract cases."). 16 F.E. Myers Company v. Pipe Maintenance Services, Inc., 599 F. Supp. 697, 705 (D. Del. 17 Plaintiffs Exhibit No. 171. Chrysler Corp., 822 A.2d at 1030. 1984). 18 9 conclusion that March 30, 1992 is the date at which pre-judgment interest began to accrue as a result of a ll the reasons th e jury found C hrysler liable for p romissory esto ppel. Plaintiffs, however, argue that pre-judgment interest should run from the various dates that they incurred their expenditures in reliance upon Chrysler's promises, starting in 1989.19 Plaintiff 's attempt, therefore, to define "date of loss" as "date of expenditure." However, no Delaware courts have defined "date of loss" as such. To the contrary, this Court has specifically ruled out awarding pre-judgment interest based on serial events: Interest is genera lly vie wed as on e con tinuing liabil ity which merely accumulates with the passage of time. 47 C.J.S. Interest §§ 6 3-5, p. 72. If it is to be viewed as a series of increments running from successive intervals of time, it should be described with reference to commencement and terminal dates. The use of the language time from which inte rest is due ap pears to refer to the commencement of the running of interest and appears to treat interest as a continuing liability from its time of commencement and not as a series of increments. I do not find that the statute contemplates that interest be segmented. Accordingly, the rate of interest is calculated according to the Federal Reserve discount rate as of the date of commencement of interest liability and it remains fixed at that rate.20 Chrysler argues that the award of pre-judgment interest should commence on the date Plaintiffs amende d their origina l complain t to add their claims fo r promisso ry estoppel. Because, it contends, that the Plaintiffs have not established the date on w hich Chrysler's promise was broken, that amendment was accomplished on July 16, 1999. However, the 19 Portman states that the jury awarded it the exact amount of their out-of-pocket expenses spent in reliance upon Chrysler's promises over the three-year period, starting December 6, 1989 to October 9, 1991. Chaplake states that the jury awarded it the exact amount if its out-of-pocket losses incurred on April 29, 1991 and on August 5, 1991. 20 Rollins, 426 A.2d at 1367-68. 10 "date of Plaintiffs loss" is the proper d ate from which pre-judgment interest accrues and based o n the tota lity of the e videnc e, that da te is Ma rch 30, 1 992. Chrysler raises several alternative contentions about when the pre-judgment interest clock should run or how it should be calculated. First, it argues that Plaintiffs caused various dela ys after initially filing their action in 1994. Am ong them, they refer to various d iscovery problems it had with Plaintiffs and other events.21 Plaintiffs, ho wever, w ere not the so le cause of delay. Chrysler, for instance, filed a motion to dismiss on the grounds of forum non conveniens. That motion was denied.22 It later filed a motion for summ ary judgment which this Court denied.23 In short, the Co urt sees no b asis to invoke any rule of delay to start the pre-judgment interest clock other than on March 30, 1992. Chrysler also argues that the pre-judgment interest should not start until this Court ruled on all the post-trial motions. The Court s decision was rendered January 10, 2002. Chrysler cites no authority for this and it runs contrary to established law. In that same regard, Chrysler says the rate of pre-judgment interest should change either as of the date of the verdict or as of this Court s post-trial decision. In making that 21 The Court notes that Chrysler asks this Court to address an issue of costs, page 10 of its brief in opposition to plaintiffs current motion, but says no more. In any event, the Court sees no reason to take any action. 22 Chaplake Holdings, Ltd. v. Chrysler Corp., Del. Super. C.A. No. 94C-04-164, Herlihy, J. (January 31, 1996). 23 Chaplake Holdings, Ltd. v. Chrysler Corp., Del. Super. C.A. No. 94C-04-164, Herlihy, J. (January 13, 1999). 11 argument Chrysler relies u pon seve ral Delaware District Court opinions.24 But these opinions rely upon a sp ecific fede ral statute wh ich explicitly provides for pre-judgment interest, and which states that post-judgment interest starts or is recalculated to start when the judgement is entered.25 Delaware s statute, does not divide the dates for the calculation of interest as the federal statute does. As this Court said in Rollins: This language indicates that a calculation would be made based upon the Federal Reserve discount rate on a certain date and the interest rate produced by that calculation would be the interest rate applicable to the claim until paid. The statute refers only to the time from which interest is due and makes no reference to subsequent variations in the Federal Reserve discount rate. This is consistent w ith an objective of these amendments to establish a continuing interest rate applicab le thereafter to a particular claim witho ut regard to whether the claim is fo rmalized b y entry of judgem ent. 26 Under Delaware law, the interest rate for pre-judgment and post-judgment interest claims is governed by 6 Del. C . § 2301(a ). This section states, in relevan t part, "[w]here there is no expressed contract rate, the legal rate of interest shall be 5% over the Federal Reserve discount rate including any surcharge as of the time fro m wh ich inter est is due ¦." 27 Conclusion Based on the foregoing, Chaplake is awarded pre-judgment interest on the sum of £462,686.47 computed in accordance with 6 Del. C . § 2301(a) from March 30, 1992 until the 24 See, e.g., F.E. Meyers, 599 F. Supp 697. 28 U.S.C. § 1961 (1982). 26 Rollins, 426 A.2d at 1367. 27 6 Del. C. § 2301(a). 25 12 claim is paid. Portman is awarded pre-judgment interest on the sum of £569,321.45 computed in accordance with 6 Del. C . § 2301 (a) from Marc h 30, 19 92 unti l the claim is paid. Counsel for plaintiffs shall submit an order to carry out this decision. IT IS SO ORDERED. J. 13
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