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Discovery Group LLC v. Chapel Development

July 27, 2009

DISCOVERY GROUP LLC; EXPLORER INVESTMENTS 1 LLC, THIRD PARTY PLAINTIFFS - APPELLANTS,
v.
CHAPEL DEVELOPMENT, LLC, THIRD PARTY DEFENDANT - APPELLEE,
JERRY CAMPBELL; COHEN ESREY REAL ESTATE SERVICES, INC.; MICHAEL ATCHESON; LARRY HAAS, THIRD PARTY DEFENDANTS.



Appeal from the United States District Court for the Western District of Missouri.

The opinion of the court was delivered by: Colloton, Circuit Judge.

Submitted: January 16, 2009

Before BYE, COLLOTON, and GRUENDER, Circuit Judges.

Discovery Group LLC and Explorer Investments 1 LLC ("Explorer") sought indemnification from Chapel Development, LLC ("Chapel"), for losses incurred as defendants in a suit by Lafarge North America, Inc. ("Lafarge"). The district court concluded that the indemnification claim brought by Discovery Group and Explorer (collectively, "appellants") was barred by the statute of limitations, and granted summary judgment for Chapel. We reverse and remand for further proceedings.

I.

In August 1999, Lafarge, a supplier of building and construction materials, hired Discovery Group, a real estate company, to help secure a new location for Lafarge's divisional headquarters. Based on Discovery Group's advice, Lafarge selected a site in the Chapel Ridge development in Lee's Summit, Missouri.

In December 1999, Discovery Group entered into an agreement with Chapel to purchase the site. The agreement contained several representations by Chapel. One stated that Chapel "has not heretofore received any notice, and has no knowledge that any . . . assessment or similar proceeding or charge affecting the Property or any portion thereof exists or any such proceeding or charge is contemplated." Another provided:

There will not be any action, suit or proceeding pending, or to the knowledge of [Chapel] threatened against or affecting the Property or any portion thereof, or relating to or arising out of the ownership, management or operation of the Property, in any court or before or by any federal, state, county or municipal department, commission, board, bureau or agency or other governmental instrumentality, except for any claims that may be hereafter asserted which will be disclosed in writing to [Discovery Group] and which must be approved by [Discovery Group] prior to Closing or [Discovery Group] shall have the right to terminate this Agreement.

The agreement also contained an indemnity clause, which required each party to "indemnify and hold the other party and any assignee of the other party harmless from any loss, cost, expense (including attorneys' fees), or damages sustained by reason of a breach of any representation, warranty, covenant, agreement or indemnity by such party, whether or not suit is brought."

After the agreement was executed, employees of Discovery Group learned that Chapel had filed a petition in state court for the formation of a transportation development district ("TDD") encompassing the Chapel Ridge site. The petition stated that the proposed TDD would seek to institute a district-wide sales tax of one-half percent to fund the construction of a new highway interchange. In January 2000, the petition was granted, and the TDD was formed. Soon thereafter, the TDD imposed the sales tax. Discovery Group assigned its rights as purchaser of the Chapel Ridge site to Explorer, and in May 2000, Chapel and Explorer closed on the sale of the site.

Explorer agreed to lease to Lafarge a building on the site for use as Lafarge's divisional headquarters. In March 2001, Lafarge was informed that business conducted from the site could be subject to the TDD's sales tax. After the Missouri Department of Revenue confirmed that sales by employees who worked at the site were subject to the tax, Lafarge sued appellants for failing to disclose that the site was located in the TDD. See Lafarge N. Am., Inc. v. Discovery Group LLC, No. 08-2210 (8th Cir. July 27, 2009).

In June 2006, appellants filed a third-party complaint against Chapel. The complaint alleged that Chapel breached representations and warranties in the agreement for the sale of the Chapel Ridge site by failing to disclose the formation of the TDD. The complaint also alleged that Chapel made fraudulent and negligent misrepresentations in the sale by denying knowledge of any proceeding or charge, as well as any pending action or suit, affecting the property. Finally, appellants sought indemnification under the agreement for any damages, expenses, or attorneys' fees incurred in defending against Lafarge's suit, on the ground that any failure of theirs to inform Lafarge of the additional sales tax in the TDD resulted from Chapel's breach of representations and warranties in the agreement. The district court concluded that all of appellants' claims were barred by Missouri's statutes of limitations, and granted summary judgment for Chapel.

II.

Appellants challenge only the district court's grant of summary judgment in favor of Chapel on the indemnification claim. We review the grant of summary judgment de novo. See Am. Family Mut. Ins. Co. v. Van Gerpen, 151 F.3d 886, 887 (8th Cir. 1998). The material facts are undisputed, and the question on appeal is ...


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