Torrent Pharma, Inc. v. Priority Healthcare Distribution, Inc.

           IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

TORRENT PHARMA, INC.,                  )
                                       )
                  Plaintiff,           )
                                       )
      v.                               )     C.A. No. N18C-05-094 CEB
                                       )
PRIORITY HEALTHCARE                    )
DISTRIBUTION, INC., d/b/a              )
CURASCRIPT SD SPECIALTY                )
                                       )
      and                              )
                                       )
DENALI OHIO SOUTHPARK                  )
INDUSTRIAL LLC,                        )
                                       )
                  Defendants.          )

                               Submitted: August 13, 2020
                               Decided: October 15, 2020

                           MEMORANDUM OPINION

                 Defendant Denali Ohio Southpark Industrial LLC’s
                         Motion for Summary Judgment.
                                    DENIED.
                 Defendant Priority Healthcare Distribution, Inc’s
                   Cross-Motion for Partial Summary Judgment.
                                    DENIED.

Michael B. McCauley, Esquire, PALMER BIEZUP & HENDERSON, LLP,
Wilmington, Delaware. Attorney for Plaintiff.
Elizabeth Sloan, Esquire and Brittany M. Giusani, Esquire, BALLARD SPAHR,
Wilmington, Delaware. Attorneys for Defendant Priority Healthcare Distribution, Inc.,
d/b/a Curascript SD Specialty.
Sarah B. Cole, Esquire, MARSHALL DENNEHEY WARNER COLEMAN &
GOGGIN, Wilmington, Delaware. Attorney for Denali Ohio Southpark Industrial LLC.
BUTLER, J.
                   FACTS AND PROCEDURAL HISTORY

      There is a warehouse in Grove City, Ohio. The warehouse is owned by Denali

(“Landlord”). Denali leased the warehouse to CuraScript (“Tenant”). CuraScript

had an arrangement with Torrent Pharma, Inc. (“Subtenant”) to store Subtenant’s

pharmaceutical products in the warehouse. A sprinkler in the warehouse went

haywire, flooding the warehouse and damaging the Subtenant’s products to the tune

of approximately $265,110. Subtenant has sued both the Tenant and the Landlord

for its losses. As was probably inevitable, the Landlord and the Tenant have filed

crossclaims against each other, each claiming indemnity from the other. Motions

with respect to these crossclaims are what brings this matter before the Court for

decision.

      At the heart of the crossclaim dispute is the lease agreement between the

Landlord and the Tenant. Specifically, the maintenance and repair clause in the

Lease provides in pertinent part as follows:

      Tenant will at its sole expense maintain the Leased Premises in a first-
      class condition repair. Tenant’s maintenance obligation will extend to
      and include the repair (but not the replacement) of all structural and
      non-structural elements and mechanical systems located within the
      Leased Premises.
      Landlord will maintain … all common areas serving the Building in a
      first-class condition and order of repair and will be responsible for
      replacing (but not repairing) all structural elements and mechanical
      systems located within the Leased Premises; provided, however, that
      Tenant (and not Landlord) will be required to maintain the same if the


                                         1
      need therefore arises due to the fault or negligence of Tenant or its
      agents, employees, licensees or invitees.
      Essentially, the Tenant is responsible for routine maintenance and repairs but

not replacements; Landlord is responsible for replacing mechanical systems, but not

repairs. From what little we understand from the record thus far, the sprinkler system

failed and dumped large amounts of water on the Subtenant’s products. If the

sprinklers are a “mechanical system” that needed to be replaced, it is the Landlord’s

problem under the lease. If the sprinkler issue was a mere “routine maintenance”

and therefore a repair issue, it is the Tenant’s problem.

      The Landlord has moved for summary judgment. The Landlord’s argument

is that the repair provision relieves it of any obligations under the contractual

language above, as does as a clause in the agreement that all property stored on the

premises is at the Tenant’s “sole risk.”

      Tenant has moved for partial summary judgment.              Tenant asserts that

Landlord is simply wrong as a matter of lease/contract interpretation and that the

lease contains mutual indemnification obligations by which Landlord is required to

indemnify Tenant of any liability it may have to the Subtenant.

                                           ANALYSIS

      First, we should establish that the lease provides that it is to be governed by

Ohio law, a provision this Court is bound to honor. The warehouse, the parties, the

lease and the damage are all located in Ohio.

                                            2
      Under Ohio law, when interpreting a contract, the Court presumes that the

intent of the parties is reflected in the plain language of the contract. 1 When the

language is plain and unambiguous, the court enforces the terms as written. 2 The

Court will presume that words are used for a specific purpose and will avoid

interpretations that render portions meaningless or unnecessary. 3

      Here, Landlord asks the Court to read only that portion of the lease requiring

Tenant to repair elements of the premises, and to ignore the adjoining clause that

requires Landlord to replace mechanical systems that require replacement. Put

differently, if we only read the Tenants obligations without reading the Landlord’s

obligations, the Landlord must prevail.4 Ohio law will not permit such contract

interpretations, and neither will the Court. At a minimum, there is a genuine issue

of material fact as to whether the mishap with the sprinkler was a “mechanical




1
  Hamilton Ins. Serv., Inc. v. Nationwide Ins. Co., 714 N.E.2d 898, 900-01 (Ohio
Sup. Ct. 1999); Mark-it Place Foods, Inc. v. New Plan Excel Realty Tr., 804 N.E.2d
979, 992 (Ohio Ct. App. 2004).
2
  Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261 (Ohio Sup. Ct. 2003); Lang
v. Piersol Outdoor Advert. Co., 115 N.E.3d 667, 674 (Ohio Ct. App. 2018).
3
  Wohl v. Swinney, 888 N.E.2d 1062, 1066 (Ohio Sup. Ct. 2008).
4
  Landlord’s argument evokes then Vice President Al Gore’s quip: “If you look at
that seal and close your left eye and hold your head just right, it says, ‘President of
the United States.’” The Court cannot read only selected provisions of the lease to
reach a desired result. See Al Gore, Vice President, Galveston Campaign Speech for
1996 Election (October 31, 1996); see also Kirk Johnson, On Stump, Gore Shows a
New Touch in Connecting With Crowds, N.Y. Times, Nov. 2, 1996, at Section 1,
Page 11.
                                          3
system” that needed replacement or a simple matter of routine maintenance, ignored

by the Tenant.

        The mutual indemnification obligations in Section 15 of the lease provide that

“Landlord will not be liable for and Tenant will indemnify and hold Landlord

harmless from any liability or expense associated with any damage or injury to any

person or property (including any person or property of Tenant or any one claiming

under Tenant) which arises directly from Tenant’s . . . use or occupancy of the

Leased Premises.”5      On the other hand, the Tenant’s right to indemnification

provides that “Tenant will not be obligated to indemnify Landlord and Landlord will

indemnify Tenant as to any liability or expense occasioned by the fault or negligence

of Landlord, its agents or employees.”6

        Did the sprinkler’s malfunction “arise directly from” the Tenant’s use or

occupancy?       Or was the sprinkler’s malfunction “occasioned by the fault or

negligence of Landlord?” It is easy enough to see the issue that lies ahead, but it

does just that: it lies ahead. Tenant was well aware there was a problem, having

called for servicing of the sprinkler on multiple occasions and notifying the Landlord

that there was a problem with the sprinkler system. While a jury could find that the

sprinkler is a “mechanical system” whose “replacement” was not tended to in a



5
    Def.’s Cross-Mot. Partial Summ. J. Ex. A § 15.
6
    Id.
                                           4
prompt fashion by the Landlord and its failure was the fault of the Landlord, that is

a factual question that the parties deserve a day in Court to prove or disprove. The

Court is not the fact finder and will not find facts in order to grant judgment for either

party. Thus, the indemnification clauses bring the parties no closer to a judgment

without trial than the plain language of the maintenance and repair clauses. Barring

stipulations or agreements by the parties, a jury will have to decide whether the

calamity caused by the sprinkler malfunction was the responsibility of the Landlord

or the Tenant under the lease. The path spelled out by the parties’ agreement is

clear—the facts are not.

                                       CONCLUSION

      The motion of Landlord for summary judgment is DENIED. The motion of

Tenant for partial summary judgment is DENIED.

       IT IS SO ORDERED.




                                                       Judge Charles E. Butler




                                            5

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