Judge Wallace Denies Both Motion for Reargument and Motion for Stay or Enlargement of Time in Acquisition Dispute Involving a Timeshare Business

September 14, 2021

Publication| Commercial Litigation

In CRE Niagara Holdings, LLC, et al. v. Resorts Group, Inc., C.A. No. N20C-05-157 PRW CCLD, Judge Wallace denied the defendant’s motion for reargument of its motion to dismiss, and also denied the defendant’s separate motion for stay or enlargement of time.  The underlying dispute arose from Resorts Group, Inc.’s (“RGI”) 2017 sale of a resort and timeshare business to CRE Niagara Holdings, LLC (“CRE”).  In May 2020, CRE brought the instant action charging RGI with fraud and breach of contract for alleged false representations made to induce CRE to execute a unit asset purchase agreement (“UAPA”) and two ancillary agreements.  CRE alleged that, prior to closing, RGI had “dramatically relaxed its underwriting standards” and began selling timeshare interests to purchasers who were less creditworthy than past buyers. 

In August 2020, RGI initiated a New York action against CRE asserting claims of breach of contract, indemnification, fraudulent inducement and tortious interference.  RGI then moved to dismiss the Delaware action.  That motion was denied. RGI moved for reargument.    

In its motion, RGI offered three reasons in support of the motion for reargument: (1) the Court overlooked two supplemental agreements between the parties when it found the UAPA’s Delaware forum selection clause to apply; (2) the UAPA’s forum selection clause was “far from crystalline,” so the waiver-of-venue objections shouldn’t bar forum non conveniens arguments; and (3) overripeness is a threshold jurisdictional issue that the Court had a “positive duty to raise.”  In reviewing each of RGI’s three reasons for reargument, Judge Wallace found that (1) the Court did not overlook or ignore the supplemental agreements when deciding that the UAPA was the contract at issue; (2) there was no ambiguity in the UAPA’s controlling forum selection clause and the forum non conveniens arguments were waived; and (3) RGI had waived the overripeness argument and could not, in the motion to dismiss, revive the previously abandoned argument.

In denying RGI’s motion for reargument, Judge Wallace emphasized that Delaware law places a heavy burden on a party moving for reargument under Superior Court Civil Rule 59.  The movant “has the burden to demonstrate that the Court must correct an error of law or prevent manifest injustice occasioned by its judgment.”  A motion for reargument “will be denied unless the Court has overlooked a controlling precedent or legal principles, or has misapprehended the law or facts.”  Judge Wallace found that the Court did not misinterpret or overlook any facts or law when deciding to deny the underlying motion to dismiss. 

Judge Wallace was also presented with a separate motion for stay or enlargement of time.  In the underlying motion to dismiss, RGI had asked for a stay of the Delaware action until the resolution of the New York action.  Similarly, in the motion for stay or enlargement of time, RGI sought a stay until the New York court ruled on a pending motion to dismiss.  Judge Wallace opined that the motion for stay or enlargement of time was simply a “mislabeled motion for reargument” of RGI’s earlier denied request for a stay.  Because the Court had already denied RGI’s motion to stay, Judge Wallace ruled that “no deep exploration of RGI’s reconstituted arguments” was required.  The motion for stay failed to meet the Rule 59 burden and was, accordingly, denied.

Analysis: The CCLD has become a favored venue for litigating post-closing acquisition disputes.  Here, the underlying action was based on fraud and contract claims stemming from an acquisition.  This case serves as a reminder that the proper scope of motions for reargument under Rule 59 is narrow and that attempts to simply re-litigate decisions by the Court are not well received.  Judge Wallace emphasized in this case that “the motion for reargument is not a tool for rehashing previously made arguments,” and “[t]he only issue on a motion for reargument under Rule 59(e) is whether the Court overlooked something that would have changed its earlier decision.”

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