Gas Station Seller on the Hook for Breach of Contract Damages, But No Fraud

Gas Station (SHANS)On Monday, July 1, 2013, Vice Chancellor Laster of the Delaware Court of Chancery resolved a fraud dispute involving the sale of 19 gas stations located in Delaware and Maryland that had been ongoing for 6 years. V.C. Laster held that the buyer, Universal Enterprise Group, was entitled to breach of contract (remediation) damages in the amount of $1.5 million from the seller, Duncan Petroleum Group; but damages for fraud were not warranted.

While Duncan made false statements regarding both the environmental compliance status of the properties and the existence of environmental actions, litigations and investigations relating to the properties, Universal did not solely rely on these false statements when consummating the sale. Universal specifically negotiated for provisions in the agreement of sale that permitted it to engage its own environmental experts to review and analyze the environmental history and state of the properties. Prior to closing the sale, Universal’s experts discovered contamination at 17 of the properties and “data gaps” as a result of Duncan’s allegedly shoddy environmental record-keeping.

Despite these concerns, Universal proceeded with the sale, which closed in November 2007. Post-sale, Universal’s experts continued to inspect the properties and discovered more environmental issues. These discoveries and the associated remediation costs eventually prompted Universal to sue Duncan for $1.5 million for breach of contract and $12 million for fraud in the Delaware Court of Chancery.

The case is Universal Enterprise Group LP, et al. v. Duncan Petroleum Corporation, et at., Case No. 4948.

Universal is represented by John V. Fiorella and Jennifer Dering of Archer & Greiner PC, as well as Allan S. Fellheimer, John J. Jacko III and Susan Moon of Fellheimer & Eichen.

Duncan is represented by Daniel F. Wolcott, Jr., Ryan M. Murphy, and Janine L. Hochberg of Potter Anderson & Corroon LLP.

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