TA
Associates, L.P., as successor to TA ASSOCIATES, INC., TA ASSOCIATES X, L.P.,
TA ATLANTIC AND PACIFIC V, L.P., TA STRATEGIC PARTNERS FUND II, L.P.,
TA STRATEGIC PARTNERS FUND II-A, L.P., TA INVESTORS II, L.P., and TA
SUBORDINATED DEBT FUND II L.P., Petitioners,
against
James Gandy, HARY GANDY, and TRENT GARMOE,
Respondents.
|
654360/2013
Eileen Bransten, J.
This petition to confirm an arbitration award comes before the Court on three
motions. In motion sequence 002, Petitioners TA Associates, L.P., as successor to TA
Associates, Inc., TA Associates X, L.P., TA Atlantic and Pacific V, L.P., TA Strategic
Partners Fund II, L.P., TA Strategic Partners Fund II-A, L.P., TA Investors II, L.P., and
TA Subordinated Debt Fund II, L.P. (collectively, "TA" or "Petitioners") seek to confirm
an arbitration award. Respondent Trent Garmoe ("Respondent") opposes and
cross-moves to vacate the award and dismiss the petition. In motion sequences 005 and
006, Petitioners move to strike Exhibits 1 and 16, respectively, to the Affirmation of
Todd A. Higgins, Esq. in Opposition to TA's Petition to Confirm. Respondent opposes
both motions.
Respondents James Gandy and Hary Gandy (together with Respondent
Garmoe, "Respondents") have not appeared in this action. For the reasons set forth
below, the petition to confirm is granted, the cross-motion to vacate is denied, and both
motions to strike are denied as moot.Background
1
Respondents were founders, early employees and stakeholders of Gandi
Innovations Holdings LLC ("Gandi Innovations"). In September 2007, TA invested $75
[*2]million into Gandi Innovations pursuant to a
Membership Purchase Agreement ("Purchase Agreement") in exchange for a 39% equity
interest (the "Transaction"). Of the $75 million investment, $25 million was a
subordinated loan and $50 million was a cash payment. TA alleges that the only
stockholder who should have received cash, according to the Purchase Agreement, was
non-party Peter Afeiche, who received $40 million.
TA alleges that Afeiche transferred $38 million to the Respondents in a
fraudulent scheme to induce TA's investment and avoid certain taxes. TA further alleges
that the Respondents induced the $75 million investment by representing that only
Afeiche, and not Respondents, would receive any cash from TA's investment. TA alleges
that Respondents' continued ownership was an indicator of Respondents' commitment to
Gandi Innovations. Garmoe contends that TA knew of the proposed cash-out of the
Respondents.
TA alleges that it learned that Respondents' received $38 million as a result
of the Transaction for the first time in December 2008. In January 2009, TA filed an
arbitration claim under the Purchase Agreement. In May 2009, Gandi Innovations filed
bankruptcy in Canada.
In August and October 2011, TA and the three Respondents participated in
an arbitration before Arbitrator Joseph McLaughlin. Arbitrator McLaughlin heard
testimony from nearly two dozen witnesses. Before issuing an award Arbitrator
McLaughlin passed away. The parties appointed the Honorable Kathleen Roberts as
Arbitrator in February 2012. Follow-up evidentiary hearings were held in December
2012, and closing arguments were heard in March 2013.
On December 4, 2013, Arbitrator Roberts issued the Modified Final Award
(the "Award"). Arbitrator Roberts found that the Respondents committed fraud and
breached their fiduciary duties to TA as a shareholder. The Award granted TA rescissory
damages, with joint and several liability against all three Respondents, in the amount of
$118,968,750, comprised of $75,000,000, plus interest, totaling $116,568,750, as well as
$2,400,000 in arbitration costs. The Award also granted TA damages for breach of
fiduciary duty, in the amount of $38 million, against the three Respondents individually:
(i) $26,500,000, plus interest, for a total of $40,399,250, assessed individually against
James Gandy; (ii) $9,500,000, plus interest, for a total of $14,482,750, assessed
individually against Hary Gandy; and (iii) $2,000,000, plus interest, for a total of
$3,049,000, assessed individually against Respondent Garmoe.
Petitioners now seek confirmation of the Award. Respondent Garmoe
opposes the confirmation and cross-moves to vacate. Respondents James Gandy and
Hary Gandy have not appeared in this action.
[*3]I.Standard on a Petition to
Confirm an Arbitration Award
The parties do not dispute that both CPLR Article 75 and the Federal
Arbitration Act ("FAA") apply to this controversy. The FAA relates to the enforcement
of arbitration agreements in contracts affecting interstate commerce. See 9 U.S.C.
§ 2 (2012); Diamond
Waterproofing Sys., Inc. v. 55 Liberty Owners Corp., 4 NY3d 247, 252 (2005);
Morgan Stanley DW Inc. v.
Afridi, 13 AD3d 248 (1st Dep't 2004). The parties do not dispute that the
transactions here affected interstate commerce.CPLR § 7510 states that "[t]he court
shall confirm an award upon application of a party made within one year after its delivery
to him, unless the award is vacated or modified upon a ground specified in section 7511.
"[An] award will not be vacated, even . . . [if the arbitrator's] interpretation . . .
misapplies substantive rules of law, unless it is violative of a strong public policy, or is
totally irrational, or exceeds a specifically enumerated limitation on [the arbitrator's]
power." Silverman v. Benmor Coats, Inc., 61 NY2d 299, 308 (1984). CPLR
section 7511 provides that a court shall vacate an arbitration award if the rights of a party
to the arbitration were prejudiced by (i) fraud or misconduct, (ii) partiality of arbitrators,
(iii) arbitrators exceeding their power, or (iv) failure to follow the procedures of CPLR
Article 75.
The grounds set forth in the FAA for vacating an award are similar to those
under CPLR 7511. See Wien
& Malkin LLP v. Helmsley—Spear, Inc., 6 NY3d 471, 480 (2006).
The FAA explicitly permits vacatur of an award due to (i) fraud or corruption, (ii)
partiality of the arbitrators, (iii) misconduct by the arbitrators depriving a party of a
fundamentally fair hearing, or (iv) the arbitrators exceeded their power. See 9
U.S.C. § 10(a) (2012); TiVo Inc. v. Goldwasser, 13-2180-CV, 2014 WL
998194, at *5 (2d Cir. Mar. 17, 2014).
"In addition, as judicial gloss on these specific grounds for vacatur [listed in
the FAA] . . . [the Second Circuit has] held that the court may set aside an arbitration
award if it was rendered in manifest disregard of the law." Schwartz v. Merrill Lynch
& Co., Inc., 665 F.3d 444, 451 (2d Cir. 2011) (internal citation omitted).
"Vacating an award for manifest disregard of the law requires a showing that the
governing law alleged to have been ignored by the arbitrators was well defined, explicit,
and clearly applicable, and that the arbitrator knew about the existence of a clearly
governing legal principle but decided to ignore it or pay no attention to it." TiVo,
2014 WL 998194, at *1 (internal quotations omitted)."It is established law that judicial
review of arbitration awards is extremely limited, and an award will be upheld so long as
there is even a barely colorable justification for the outcome." Wien & Malkin LLP v.
Helmsley—Spear, Inc., 6 NY3d 471, 479 (2006). A court should not
vacate an arbitration award for the arbitrators' factual or legal errors, or substitute its own
judgment for that of the arbitrators. Id. at 479—80. A party seeking to
vacate an award "bears the heavy burden of showing that the award falls within a very
narrow set of circumstances delineated by statute and case law." Duferco Int'l Steel
Trading v. T. Klaveness Shipping [*4]A/S, 333 F.3d
383, 388 (2d Cir. 2003).
II.TA's Petition to Confirm and Garmoe's Cross-Motion to
Vacate
Garmoe advances three arguments against confirmation of the Award. First, Garmoe
argues that the Arbitrator Roberts exceeded her power by awarding rescissory damages
when the Purchase Agreement stated that the "Arbitrator shall not have power to award
damages in excess of actually compensatory damages." Second, Garmoe alleges that
Arbitrator Roberts committed misconduct by declining to issue a subpoena to an
out-of-state, non-party witness. Finally, Garmoe argues that that Arbitrator Roberts acted
in manifest disregard of applicable law by awarding rescissory damages given the facts
before her. The Court will consider each of these arguments in turn.
Arbitrator Did Not Exceed Her Powers
Garmoe argues that the Award should be vacated because the arbitrator went
beyond the scope of her powers by awarding rescissory and disgorgement damages to
TA. Garmoe argues that the Purchase Agreement limited an award to compensatory
damages only, and that the Award effectively granted rescission to TA and required
disgorgement of monies received by Garmoe.
Section 8.14(b) of the Purchase Agreement provides that "[t]he Arbitrator
shall not have power to award damages in excess of actual compensatory damages and
shall not multiply actual damages or award punitive damages or any other damages that
are specifically excluded under this Agreement." See Verified Petition Ex. 1 at
35.
Petitioners argue that the juxtaposition of the language "compensatory" with
"multiple" and "punitive" damages shows that only punitive or multiple damages were
excluded, and that all other types of damages are allowed. Petitioners also argue that the
award of rescissory damages was proper because both parties submitted the issue of
rescission to the arbitrator for consideration. Petitioners additionally contend that the
damages awarded were actually compensatory.
Garmoe's arguments fail because both parties submitted the issue of
rescissory damages to Arbitrator Roberts. Under the FAA, the Second Circuit has held
that the "inquiry focuses on whether the arbitrators had the power based on the parties'
submissions or the arbitration agreement, to reach a certain issue." Bank de Seguos
del Estado v. Mutual Marine Office, Inc., 344 F.3d 255, 262 (2d Cir. 2003) (internal
quotation omitted); DigiTelCom, Ltd. v. Tele2 Sverige AB, No. 12 Civ. 3082,
2012 WL 3065345, at *2-*3 (S.D.NY July 25, 2012). Courts have found arbitrators
exceeded their authority "where arbitrators went beyond alternative reasoning [not
presented by the [*5]parties] and instead awarded relief
not requested by the parties." TiVo Inc. v. Goldwasser, 13-2180-CV, 2014 WL
998194, at *5 (2d Cir. Mar. 17, 2014).
Here, the parties both submitted the issue of rescissory damages to the
arbitrator. Petitioners asserted a claim for "rescission, or in the alternative rescissory
damages," and Respondents similarly sought "rescissory damages" in their fifteenth
counterclaim. See Verified Petition Ex. 8 at 3, 19. The arbitrator therefore
properly considered the issues before her based upon the submission of the parties and
granted only relief requested by the parties.[FN1]
In addition, Garmoe failed to object to TA's request for rescissory damages at the
appropriate time. See Silverman v. Benmor Coats, Inc., 61 NY2d 299, 309
(1984) ("Generally the contention that a claim proposed to be submitted to arbitration is
in excess of the arbitrator's power is waived unless raised by an application for a
stay").
Further, "an arbitration award [will not] be vacated on the mere possibility
that it violates an express limitation on the arbitrator's power." Silverman v. Benmor
Coats, Inc., 61 NY2d 299, 308-09 (1984) (internal quotations omitted). Here, the
Purchase Agreement stated that an award could not be awarded "in excess of actual
compensatory damages." In the Court's view, this language is not a clear limitation of the
arbitrator's power to award rescissory damages, but can reasonably be interpreted as a
damages cap.
Accordingly, Arbitrator Roberts did not exceed the scope of her authority in
issuing the Award, and the Award cannot be vacated under either FAA § 10(a)(4)
or CPLR 7511(b)(1)(iii).
Arbitrator Did Not Engage in Misconduct by Refusing to Issue
Subpoena
Respondent argues that the Award should be vacated because Arbitrator
Roberts engaged in misconduct that denied Respondent a fundamentally fair hearing.
Specifically, Respondent contends that the arbitrator refused to issue a subpoena to
Matthew Murphy, Esq. of Jaffe Raitt Heuer & Weiss ("Jaffe"), and that Murphy
could have provided critical testimony. Respondent alleges that Murphy represented both
him and Gandi Innovations in the Transaction and that Murphy advised Respondent
regarding how much money Respondent would receive from a redistribution of
transaction funds. Respondent acknowledges that Murphy denied knowing about any
planned redistribution [*6]and that Murphy denied
representing Respondent in the Transaction.
Respondent alleges that on December 7, 2012, the final day of the
evidentiary hearings before Arbitrator Roberts, Respondent requested that that the
arbitrator subpoena Murphy. Respondent further alleges that on December 12, 2012,
Respondent wrote a letter to the arbitrator again requesting that the arbitrator subpoena
Murphy. The Arbitrator Roberts allegedly "agreed to take the matter under advisement,"
and then in the Award found that the Murphy and the other attorneys at Jaffe had no
knowledge of the fraudulent scheme.
Petitioners argue that Respondent had the burden to show that the Arbitrator
Roberts's failure to subpoena Murphy resulted in a fundamentally unfair hearing.
Petitioners allege that Respondent did not have Murphy on his pre-hearing witness list
and did not attempt to call Murphy as a witness at any point during the hearing with
Arbitrator McLaughlin. Petitioners further contend that Respondent only sought the
testimony of Murphy on the final day of the evidentiary hearing with Arbitrator Roberts.
Petitioners argue that Respondent was not denied a fair hearing because Respondent
waited until sixteen months after the start of arbitration hearings and three weeks after
evidentiary hearings to make the request for Murphy's testimony.
"If ground for the arbitrator's decision can be inferred from the facts of the
case, the award should be confirmed. . . . In short, only the most egregious errors or
instances of extreme misconduct cited in the statute that would materially prejudice the
rights of a party warrant vacating an arbitral award." Fairchild Corp. v. Alcoa,
Inc., 510 F. Supp. 2d 280, 286 (S.D.NY 2007) (internal quotations omitted).
"Although arbitrators must have before them enough evidence to make an informed
decision, they need not compromise the speed and efficiency that are the goals of
arbitration by allowing the parties to present every piece of relevant evidence."
Areca, Inc. v. Oppenheimer & Co., Inc., 960 F. Supp. 52, 55 (S.D.NY 1997)
(emphasis in original) (internal quotations omitted).
The facts in this case are akin to Kaminsky v. Segura, 26 AD3d 188, 189 (1st Dep't 2006).
In Kaminsky, the First Department held that an arbitrator did not engage in
misconduct by refusing to allow testimony from a rebuttal witness where there had
already been twenty-four days of evidentiary hearings over fifteen months. Id.
The Kaminsky Court held that the "Petitioners failed to meet their burden of
showing, with clear and convincing proof," that they had been deprived of a
fundamentally fair hearing because Petitioners could have called the witness earlier.
Id.
Here, as in Kaminsky, Respondent did not demonstrate the critical
nature of the Murphy's testimony, either procedurally or substantively. Not only did
Respondent fail to include Murphy on his proposed witness list, but Respondent waited
until the final evidentiary hearing date to request Murphy's testimony. Respondent also
failed to demonstrate how the substance of Murphy's testimony would have been
decisive, or even [*7]important. At most, Murphy may
have illuminated the credibility of other witnesses who testified on TA's knowledge and
Respondent's fraudulent intent. See Schwimmer v. Malines, 38 Misc 3d 1220(A)
(Sup. Ct. Kings Cnty. Jan. 30, 2014) ("This court will not consider the credibility
findings presented by the Panel. It is well settled that a court may not re-weigh the
evidence or question the credibility findings of the arbitrator'") (quoting Beth Israel
Med. Ctr. v. Local 814, Int'l Bhd. of Teamsters, 99 CIV. 9828, 2000 WL 1364367, at
*6 (S.D.NY Sept. 20, 2000)).
On these facts, Respondent has failed to demonstrate, by clear and
convincing evidence, that the failure to subpoena Murphy was a most egregious error or
an instance of extreme misconduct. See Fairchild Corp. v. Alcoa, Inc., 510 F.
Supp. 2d 280, 286 (S.D.NY 2007); Kaminsky v. Segura, 26 AD3d 188, 189 (1st Dep't
2006).
Accordingly, Arbitrator Roberts did not engage in misconduct in refusing to
subpoena a witness, and the Award cannot be vacated under either FAA § 10(a)(3)
or CPLR 7511(b)(1)(iii).
Arbitrator Did Not Manifestly Disregard Applicable Law
Respondent's third and final argument in favor of vacating the Award is
based upon Arbitrator Roberts's alleged manifest disregard of applicable law.
Respondent argues that Arbitrator Roberts disregarded Delaware law in several ways.
First, Respondent argues that Petitioners failed to establish it was entitled to rescission
and so could not receive rescissory damages. Respondent contends that Petitioners
continued to perform under the contract after the alleged contractual breaches were
revealed and so elected to receive compensatory damages. Respondent also contends that
Delaware law requires that Petitioners causally connect the fraud with any damages
sought, and that they failed to do so. Finally, Respondent argues that Petitioners received
$11 million through a claim in Gandi Innovations's Canadian bankruptcy proceedings,
and that the Award should have reflected that recovery.
The Court of Appeals has considered the judicially-created doctrine of
"manifest disregard," stating:
The Second Circuit has [] indicated that the doctrine requires more than a
simple error in law or a failure by the arbitrators to understand or apply it; and, it is more
than an erroneous interpretation of the law.' We agree with that premise. To modify or
vacate an award on the ground of manifest disregard of the law, a court must find both
that (1) the arbitrators knew of a governing legal principle yet refused to apply it or
ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit,
and clearly applicable to the case.'
Wien &
Malkin LLP v. Helmsley-Spear, Inc., 6 NY3d 471, 481 (2006) (quoting
Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d
Cir. 2003)) (internal citations omitted).
In Wien & Malkin, the Court of Appeals held that there was no
"manifest disregard" of the law by the arbitrators. 6 NY3d at 484. The Court found that
"there was no showing that the arbitrators knew they were disregarding the law."
Id. at 484. The Court noted that "[t]here is no explicit evidence in the record that
any of the arbitrators believed that . . . [the specific law at issue] applied. Id. at
484.
Here, as in Wien & Malkin, the Respondent has failed to
demonstrate that there was some explicit recognition and rejection of governing law.
Respondent has not shown that there were any controlling legal principles or cases cited
that were specifically raised in the arbitration or considered by arbitrator, and rejected.
This alone shows that there was no manifest disregard of the law and warrants
confirmation of the award. See Wien & Malkin, 6 NY3d at 484.
Further, "an arbitration award must be upheld when the arbitrator offers
even a barely colorable justification for the outcome reached.'" Wien &
Malkin, 6 NY3d at 480 (quoting Matter of Andros Compania Maritima, S.A.
(Marc Rich & Co., A.G.), 579 F.2d 691, 704 (2d Cir. 1978)). As Petitioners
persuasively argue, the cases cited by Respondent are factually distinct from the instant
action and do not support the proposition that the "law ignored by the arbitrators was
well defined, explicit, and clearly applicable to the case." Wien & Malkin, 6
NY3d at 481.
In In re Southern Peru Copper Corp. Shareholder Derivative
Litigation, 52 A.3d 761, 815 (Del. Ch. 2011), the court concluded that a six-year
delay in prosecuting the case could be viewed as the plaintiffs taking an option on
whether to seek rescission or contractual damages. The court stated that the plaintiffs
could not base their decision on whether to seek compensatory or rescissory damages on
the whether the contract's value went up or down after six years of litigation. The court
stated that "[i]nstead of entering a rescission-based remedy, I will craft [a remedy] from
the panoply of equitable remedies' within this court's discretion." Id. Beyond the
much shorter time period at issue here and the intervening bankruptcy, the Southern
Peru Copper court stated that it was exercising its discretion to craft an equitable
remedy. Factual distinctions and the exercise of equitable discretion render the
Southern Peru Copper case less than "well defined, explicit, and clearly
applicable" to the facts here.[FN2]
Accordingly, the arbitrator did not know of and refuse to apply clearly
applicable law, and the Award cannot be vacated under the doctrine of manifest
disregard of the law.
The Court has considered Respondent Garmoe's remaining arguments and
finds them unpersuasive, and Petitioners' remaining arguments are rendered moot.
[*8]III.TA's Motions to
Strike
After review, the Court finds that the exhibits at issue on the motions to
strike are irrelevant to the outcome of the Motion to Confirm the Petition. Therefore,
both motions to strike are denied as moot.
(Order of the Court appears on the following page.)Conclusion
For the reasons set forth above, it is hereby
ADJUDGED that the Petition is granted and the Modified Final Award entered on
December 4, 2013, in favor of Petitioners and against Respondents is confirmed; and it is
further
ADJUDGED that petitioners (i) TA Associates, L.P., (ii) TA Associates X,
L.P., (iii) TA Atlantic and Pacific V, L.P., (iv) TA Strategic Partners Fund II, L.P., (v)
TA Strategic Partners Fund II-A, L.P., (vi) TA Investors II, L.P., and (vi) TA
Subordinated Debt Fund II, L.P., each having and sharing an address at 200 Clarendon
Street, Boston, MA 02116, do jointly and severally recover from (i) respondent James
Gandy, having an address at 108 Larry Lee Drive, Kerrville, TX 78028 (ii) respondent
Hary Gandy, having an address at 201 Burr Road, San Antonio, TX 78209, and (iii)
respondent Trent Garmoe, having an address at 18417 Danforth Cove, San Antonio TX
78258, the amount of $118,968,750, plus interest at the rate of 9% per annum from the
date of the Modified Final Award, December 4, 2013, as computed by the Clerk in the
amount of $ _________, together with costs and disbursements in the amount of $
_______________ as taxed by the Clerk, for the total amount of $__________, and that
the petitioners have execution therefor; and it is further
ADJUDGED that petitioners (i) TA Associates, L.P., (ii) TA Associates X,
L.P., (iii) TA Atlantic and Pacific V, L.P., (iv) TA Strategic Partners Fund II, L.P., (v)
TA Strategic Partners Fund II-A, L.P., (vi) TA Investors II, L.P., and (vi) TA
Subordinated Debt Fund II, L.P., each having and sharing an address at 200 Clarendon
Street, Boston, MA 02116, do recover from respondent James Gandy, having an address
at 108 Larry Lee Drive, Kerrville, TX 78028, the amount of $40,399,250, plus interest at
the rate of 9% per annum from the date of the Modified Final Award, December 4, 2013,
as computed by the Clerk in the amount of $ _________, for the total amount of
$__________, and that the petitioners have execution therefor; and it is further
ADJUDGED that petitioners (i) TA Associates, L.P., (ii) TA Associates X,
L.P., (iii) TA Atlantic and Pacific V, L.P., (iv) TA Strategic Partners Fund II, L.P., (v)
TA Strategic Partners Fund II-A, L.P., (vi) TA Investors II, L.P., and (vi) TA
Subordinated Debt Fund II, L.P., each having and sharing an address at 200 Clarendon
Street, Boston, MA 02116, do recover from respondent Hary Gandy, having an address
at 201 Burr Road, San Antonio, TX 78209, the amount of $14,482,750, plus interest at
the rate of 9% per annum from the date of the Modified Final Award, December 4, 2013,
as computed by the Clerk in the amount of $ _________, for the total amount of
$__________, and [*9]that the petitioners have execution
therefor; and it is further
ADJUDGED that petitioners (i) TA Associates, L.P., (ii) TA Associates X,
L.P., (iii) TA Atlantic and Pacific V, L.P., (iv) TA Strategic Partners Fund II, L.P., (v)
TA Strategic Partners Fund II-A, L.P., (vi) TA Investors II, L.P., and (vi) TA
Subordinated Debt Fund II, L.P., each having and sharing an address at 200 Clarendon
Street, Boston, MA 02116, do recover from respondent Trent Garmoe, having an address
at 18417 Danforth Cove, San Antonio TX 78258, the amount of $3,049,000, plus
interest at the rate of 9% per annum from the date of the Modified Final Award,
December 4, 2013, as computed by the Clerk in the amount of $ _________, for the total
amount of $__________, and that the petitioners have execution therefor; and it is
further
ORDERED that Respondent Garmoe's cross-motion to vacate the Award is denied;
and it is further
ORDERED that Petitioners' motion to strike Exhibit 1 is denied as moot; and it is
further
ORDERED that Petitioners' motion to strike Exhibit 16 is denied as moot.
This constitutes the decision and order of the Court.
Dated: New York, New York
June _9_, 2014
ENTER:
/s/
_______________________________
Hon. Eileen Bransten, J.S.C.
Footnotes
Footnote 1:The analysis is the same
under CPLR Article 75. "The question of whether the panel exceeded its authority
focuses on whether the arbitrators had the power, based on the parties' submissions or the
arbitration agreement, to reach a certain issue, not whether the arbitrators correctly
decided that issue." Frankel v.
Sardis, 76 AD3d 136, 193 (1st Dep't 2010) (internal quotation omitted).
Footnote 2:Respondent also cites
In re Construction Materials Corp., 18 F. Supp. 509 (D. Del. 1936). This 1936
bankruptcy case is also inapposite because the debtor continued to perform, and require
performance, under the contract, and only sought rescission after the creditor filed a
bankruptcy claim based on the debtor's breach of contract. In re Construction
Materials Corp., 18 F. Supp. at 520.