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KFC Corp v. Iron Horse of Metairie Road, LLC

United States District Court, E.D. Louisiana

May 8, 2018

KFC CORPORATION
v.
IRON HORSE OF METAIRIE ROAD, LLC AND IRON ROOSTER, LLC .

         SECTION "N" (5)

          ORDER AND REASONS

          KURT D. ENGELHARDT UNITED STATES DISTRICT JUDGE

         Presently before the Court is a motion for summary judgment filed by plaintiff and defendant-in-counterclaim, KFC Corporation ("KFC"). (Rec. Doc. 13). Defendants, Iron Horse of Metairie Road, LLC and Iron Rooster, LLC ("Defendants"), oppose the motion. (Rec. Doc. 23). KFC filed a reply memorandum in response to Defendants' opposition. (Rec. Doc. 27). Having carefully reviewed the parties' submissions, the record, and applicable law, the Court, on the present showing made, is not in a position to find Plaintiff to have demonstrated, as required by Rule 56, that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." See Fed. R. Civ. P. 56. Thus, IT IS ORDERED that the motion is DENIED.

         I. BACKGROUND

         The present case involves alleged breach of contract claims in connection with Defendants' purchase of immovable property from KFC. In 1991, Kentucky Fried Chicken of California ("KFC California")[1] purchased immovable property located at 700 Metairie Road in Metairie, Louisiana (the "Property"). (Rec. Doc. 13-1 at p. 2). After purchasing the Property, KFC California claims that it discovered that the Property and adjoining property, located at 800 Metairie Road (the "adjoining property"), were contaminated with perchloroethylene and its metabolites, dichloroethylene, and trichloroethylene (the "PERC Contamination"), allegedly caused by the operation of a former dry-cleaning facility. (Id.). A lawsuit ensued regarding the PERC Contamination, in which KFC California was a named defendant. Ultimately, KFC alleges that the parties reached a settlement, and that a Stipulated Consent Decree was entered on September 9, 2002, wherein KFC California "voluntarily agreed with the Louisiana Department of Environmental Quality (the "DEQ") to remediate the PERC Contamination on the Property and on the Adjoining Property." (Id. at pp. 2-3).

         In 2013, allegedly while "remediation was still in progress, " KFC U.S. Properties, Inc. ("KFC U.S."), entered into a purchase agreement with defendant herein, Iron Horse of Metairie Road, LLC (Id. at p. 3). KFC contends that the Purchase Agreement included "specific references to and disclosures of" the PERC Contamination, the PERC Plume, the remediation, the voluntary remedial action plan, the environmental litigation, the settlement documents, the contract between KFC California and its environmental consultant, Professional Service Industries, Inc. ("PSI"), and the DEQ proceedings, "all of which Iron Horse had an opportunity to inquire about, study, and review prior to signing the Purchase Agreement." (Id.). Iron Horse subsequently assigned the Purchase Agreement to Iron Rooster, LLC, defendant herein, allegedly resulting in Iron Horse and Iron Rooster becoming "jointly, severally, and solidarily liable under the Purchase Agreement." (Id.).

         On February 14, 2014, KFC Corporation, successor to KFC U.S., sold the Property to Iron Rooster. (Id. at. p. 4). On that same date, KFC Corporation, Iron Horse, and Iron Rooster signed an Assignment, Assumption, and Indemnification Agreement (the "Indemnification Agreement"). KFC alleges that pursuant to the Indemnification Agreement:

[1] KFC Corporation assigned its rights under the Settlement Documents, the PSI Contract, [2] and the VRAP[3] to Iron Rooster. [2] Both defendants assumed all of the obligations of KFC California, Tricon, Yum, KFC U.S., KFC Corporation, and all of their respective related or affiliated companies, as well as their respective predecessors, successors, and assigns (collectively, the "KFC Companies"), relating to the PERC Contamination, the Environmental Litigation, the Settlement Documents, the PSI Contract, the Remediation, and the VRAP, and [3] both defendants agreed to use their best efforts to complete the Remediation in a diligent and expeditious manner at their sole cost and expense, and to also fulfill all of the KFC Companies' remaining obligations relating to the PERC Contamination, the Environmental Litigation, the Settlement Documents, the PSI Contract, and the VRAP.

(Rec. Doc. 13-1 at p. 4). Next, KFC alleges that on June 6, 2016, it was notified by the DEQ that "Since acquisition of the property by Iron Rooster, on-site remediation and monitoring of site conditions have ceased." (Id. at p. 5). In response to the letter, KFC claims it hired PSI to prepare a work plan with respect to the remaining remediation, which was approved by the DEQ on October 19, 2016. (Id. at p. 6). KFC subsequently filed this lawsuit seeking specific performance and indemnity for Defendants' alleged failure to satisfy obligations that they allegedly assumed with the purchase of the Property from KFC. (Rec. Doc. 1). In response, Iron Rooster filed an answer denying KFC's entitlement to the relief sought and asserting a counterclaim for damages due to KFC's failure to disclose the extent of the contamination at issue. (Rec. Doc. 7).

         KFC filed the instant motion for summary judgment, arguing that there are no genuine issues of material fact, and that it is entitled to summary judgment on both its main demand and Defendants' counterclaim, claiming: "it is undisputed that defendants have failed to complete and fulfill, in a diligent and expeditious manner, or at all, the Remediation of the PERC Contamination and KFC Companies' remaining obligations relating to the PERC Contamination, the Environmental Litigation, the Settlement Documents, the PSI Contract, and the VRAP, including payment of the Post-Closing DEQ Costs, all of which defendants became liable and obligated pursuant to the Purchase Agreement and/or the Indemnification Agreement." (Rec. Doc. 13-1 at p. 6). In support of its contention, Plaintiff claims that Defendants admitted to signing the Purchase and Indemnification Agreements, admitted that they had access to the Property and to relevant documents during the due diligence period, and admitted that they had not completed the remediation. (Id. at p. 7). KFC alleges that Defendants contractually assumed KFC's PERC Contamination-related obligations and agreed to defend, hold harmless, and indemnify KFC, citing to language in the signed agreements that KFC claims is "clear, explicit, [and] enforceable." (Id. at pp. 9-14). Thus, KFC contends that Defendants breached the Purchase Agreement and the Indemnification Agreement by failing to satisfy those contractually assumed obligations, "which defendants have admitted or not denied." (Id. at p. 14).

         Additionally, KFC contends that "there is no genuine issue of material fact with respect to defendants' Counterclaim, and plaintiff is entitled to judgment in its favor...as a matter of law, dismissing defendants' Counterclaim, with prejudice, at defendants' sole cost and expense." (Rec. Doc. 13-1 at p. 18). KFC rejects Defendants' asserted defenses and counterclaims as lacking merit. (Id. at p. 15). Specifically, KFC attacks Defendants' claim that had Defendants known of the off-site remediation obligations, they would not have purchased the Property or would have paid a lower price, claiming that "their admissions clearly show that defendants knew or should have known, and certainly could have learned from an examination of the record" that the assumed obligations "also included remediation of the PERC Contamination that extended onto the Adjoining Property." (Id. at p. 16). Finally, KFC argues that "contrary to defendants' [] allegation in their Counterclaim that plaintiff's refusal to agree to an amended VRAP constituted an abuse of rights, plaintiff prudently rejected the [proposed] amended VRAP because...[it] would have left KFC exposed to penalties and fines by the DEQ for failing to remediate contamination on the Adjoining Property." (Id. at p. 17-18).

         In opposition, Defendants contend that summary judgment is inappropriate due to remaining issues of material fact. (Rec. Doc. 23). Defendants claim, inter alia, that KFC should be estopped from enforcing the Agreements because KFC and PSI "flagrantly" misrepresented the status of the remediation, and failed to disclose that KFC had abandoned remediation, which Iron Rooster relied upon to its detriment. (Id. at pp. 2-3, 14). Citing the affidavits of Fernando Iturralde, a Geology Supervisor/Hrydrogeologist for the LDEQ; Jacqueline McPherson, attorney representing Defendants in sale; and Joseph Caldarero, the sole member of the Defendant LLCs, Defendants claim:

Prior to the 2014 Sale and throughout the due diligence period, KFC repeatedly assured Iron Rooster that no further remediation remained offsite and that only minimal remediation remained onsite. Neither representation was true. Among other things, the multiphase extraction system ("MPE") - the principal form of remediation adopted for the KFC Property - had been abandoned more than two years before the sale. Iron Rooster could not have discovered from the public record the fact that KFC had abandoned the MPE and KFC did not disclose its abandonment of the MPE system. In fact, KFC and its consultant repeatedly and expressly represented just the opposite.

(Id. at pp. 2-3). Further, Defendants claim that KFC misrepresented and failed to disclose the fact that KFC had abandoned remediation of the Property in the ...


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