IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

OTTO CANDIES, LLC, et al.

Plaintiffs,

v.

KPMG, LLP, et al.

Defendants.

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C.A. No. 2018-0435-MTZ

MEMORANDUM OPINION

Date Submitted: March 22, 2019

Date Decided: April 25, 2019

David E. Ross, ROSS, ARONSTAM & MORITZ LLP, Wilmington, Delaware; 

Terry L. Wit, A. William Urquhart, Juan P. Morillo, Derek L. Shaffer, Lauren H. 

Dickie, QUINN EMANUEL URQUHART & SULLIVAN, LLP; San Francisco,

California and Washington, D.C.; Attorneys for Plaintiffs

Kevin R. Shannon, Matthew F. Davis, and Christopher N. Kelly, POTTER 

ANDERSON & CORROON LLP, Wilmington, Delaware; Gregory G. Ballard and 

Jose F. Sanchez, SIDLEY AUSTIN LLP, New York, New York; Attorneys for 

Defendant KPMG Cárdenas Dosal, S.C.

Todd Schiltz, DRINKER BIDDLE & REATH LLP, Wilmington, Delaware; Robert 

A. Scher and Jonathan H. Friedman, FOLEY & LARDNER LLP, New York, New 

York; Attorneys for Defendant KPMG, LLP

Timothy Jay Houseal, Jennifer M. Kinkus, William E. Gamgort, YOUNG 

CONAWAY STARGATT & TAYLOR LLP, Wilmington, Delaware; Ana C. 

Reyes, WILLIAMS & CONNOLLY, LLP, Washington, D.C.; Attorneys for 

Defendant KPMG International Cooperative 

ZURN, Vice Chancellor
Peculiar facts can prod the limits of otherwise routine court rules. This case 

provides one such example: namely, whether this Court’s specific rules on 

amendments apply when parties transfer a fully briefed motion from another 

Delaware court. Plaintiffs initially filed this action in the Superior Court, where the 

parties briefed and argued motions to dismiss. The Superior Court held that it lacked 

subject matter jurisdiction and plaintiffs transferred the case, along with the motions 

as briefed in the Superior Court, to this Court under 10 Del. C. § 1902. On February 

28, 2019, this Court issued a memorandum opinion dismissing plaintiffs’ complaint 

for lack of personal jurisdiction and for failure to state a claim.1 

Court of Chancery Rule 15(aaa) requires plaintiffs faced with a motion to 

dismiss for failure to state a claim to either amend their complaint instead of 

opposing the motion, or else stand firm and face a dismissal with prejudice if they

lose. The Superior Court has no corollary requirement. To inform whether 

plaintiffs’ dismissals are with or without prejudice, this Court’s opinion requested 

supplemental briefing on the applicability of Rule 15(aaa) to fully briefed dispositive 

motions transferred under Section 1902.

I conclude that Rule 15(aaa), or the policies that motivate it, apply when a 

complaint is transferred to this Court subject to a fully briefed motion seeking 

 

1 Otto Candies, LLC v. KPMG LLP, 2019 WL 994050, at *2-6 (Del. Ch. Feb. 28, 2019).
2

dismissal under Rules 12(b)(6) or 23.1. Transferring plaintiffs must either seek leave 

to amend or stand firm on their complaint and risk dismissal with prejudice under 

Rule 15(aaa). However, because the parties in this action were the first to confront 

this issue, the interests of justice require a mulligan. Extinguishing plaintiffs’ claims 

with prejudice under Rule 15(aaa) would be unduly penal under the circumstances, 

and so their claims are dismissed without prejudice under the good cause exception 

to Rule 15(aaa). Plaintiffs may move to amend. 

I. BACKGROUND 

I refer readers to the background section of the prior opinion in this case for a 

full recitation of the facts.

2

 Here, I provide only a brief overview of the procedural 

posture relevant to my decision.3 

Plaintiffs filed their complaint on February 26, 2016 in the Superior Court.

4

On June 27, 2016, Defendants separately moved to dismiss (the “Motions to 

Dismiss”). The parties stayed briefing on the Motions to Dismiss for more than a 

year as they litigated complex personal jurisdictional disputes that culminated in a 

series of protective orders, a ruling from the appointed Special Master on the scope 

 

2 Otto Candies, 2019 WL 994050, at *2-6. I also import any defined terms from that 

opinion. 

3 See Otto Candies, LLC v. KPMG LLP, C.A. No. N16C-02-260 PRW CCLD (Del. Super. 

Ct.) [hereinafter Superior Court Action].

4 Superior Court Action, D.I. 1. 
3

of personal jurisdiction, and a decision from the Superior Court adopting the Special 

Master’s decision in full.5 With the personal jurisdiction issues settled and 

jurisdictional discovery complete, Plaintiffs opposed the Motions to Dismiss on 

September 13, 2017.6 Defendants filed reply briefs on November 13 and 14, 2017.7 

The parties’ briefing on the Motions to Dismiss totaled 271 pages, excluding 

exhibits and affidavits. Defendants sought dismissal on a number of grounds, 

including that the Superior Court lacked subject matter jurisdiction to hear Plaintiffs’ 

claims for negligent representation, which are typically heard in the Court of 

Chancery. On December 4, 2017, the Superior Court heard argument on the Motions 

to Dismiss. On December 15, 2017, Plaintiffs filed a motion for judicial notice of 

certain materials that purportedly “would be relevant to a proposed amended 

complaint should Defendants’ motions to dismiss not be denied and Plaintiffs be 

granted leave to replead.”8 On April 25, 2018, the Superior Court ruled that it lacked 

subject matter jurisdiction to hear negligent misrepresentation claims, and permitted 

Plaintiffs the opportunity to transfer venue to this Court under Section 1902.9 

 

5 Otto Candies, 2019 WL 994050, at *3-5.

6 Superior Court Action, D.I. 99. 

7 Superior Court Action, D.I. 104-109. 

8 Superior Court Action, D.I. 113 ¶ 1. 

9 Otto Candies, LLC v. KPMG LLP, 2018 WL 1960344, at *4 (Del. Super. Ct. Apr. 25, 

2018). The Superior Court denied Plaintiffs’ motion for judicial notice as mooted by its 

jurisdictional ruling. Id. at *5.
4

On June 13, 2018, Plaintiffs re-filed their complaint in this Court with minor 

amendments to bring the complaint in line with our procedural rules. In a joint letter 

accompanying that transfer, the parties stated:

While the Superior Court held that it lacked subject matter jurisdiction 

over plaintiffs’ claims, it did not rule on other issues defendants raised 

in their pending motions to dismiss . . . . Those issues remain 

outstanding. . . . The parties respectfully request that Your Honor rule 

on the motion to dismiss issues that remain outstanding.10 

The parties also transferred the motion for judicial notice from the Superior 

Court, and Plaintiffs filed a second motion for judicial notice of materials that, as in 

the first motion, purportedly “would be relevant to any proposed amended 

complaint, should one be occasioned by this Court’s ruling on Defendants’ motions 

to dismiss.”11 Defendants’ opposition to the second motion for judicial notice raised 

the question of Rule 15(aaa)’s applicability to any amended complaint for the first 

time in this action.12

I heard argument on November 7, 2018.

13

 At argument, I denied the motions 

for judicial notice as unripe because they were framed in the context of a yet-unfiled 

amended complaint. On February 28, 2019, I granted the Motions to Dismiss and 

dismissed Plaintiffs’ claims under Rules 12(b)(2) and 12(b)(6) for lack of personal 

 

10 D.I. 2 at 2. 

11 D.I. 45 ¶ 1.

12 D.I. 56 ¶ 10 n.7.

13 I refer to the hearing transcript as the “Hearing Tr.”
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jurisdiction and failure to state a claim. However, in light of the parties’ skirmishes 

on Rule 15(aaa), I requested supplemental briefing on its application and whether 

the dismissals should be with or without prejudice. On March 22, the parties filed 

their submissions.14 

II. ANALYSIS

A. Rule 15(aaa) And Its Policies Apply, But Plaintiffs Have Shown 

Good Cause To Prevent Dismissal With Prejudice. 

Rule 15(aaa) requires parties to make a choice when faced with a motion to 

dismiss under Rules 12(b)(6) or 23.1: amend or stand firm.

In the event a party fails to timely file an amended complaint or motion 

to amend . . . and the Court thereafter concludes that the complaint 

should be dismissed under Rule 12(b)(6) or 23.1, such dismissal shall 

be with prejudice . . . unless the Court, for good cause shown, shall find 

that dismissal with prejudice would not be just under all the 

circumstances.15 

“The purpose of Rule 15(aaa) was to curtail the number of times that the Court 

of Chancery was required to adjudicate multiple motions to dismiss the same 

action.”16 Accordingly, “[t]he rule is intended to conserve litigants’ and judicial 

 

14 D.I. 77 (Defendants), 78 (Plaintiffs). 

15 Ct. Ch. R. 15(aaa).

16 Braddock v. Zimmerman, 906 A.2d 776, 783 (Del. 2006).
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resources by discouraging a party from briefing a dispositive motion before filing an 

amended complaint.”

17

Plaintiffs initially filed their complaint in the Delaware Superior Court, which 

has no corollary to Rule 15(aaa). When the Superior Court agreed with Defendants 

that it lacked subject matter jurisdiction, it did so without reaching any other

substantive arguments in the Motions to Dismiss. Under Section 1902, Plaintiffs 

elected to transport the Motions to Dismiss and their briefing whole-cloth from 

Superior Court to this Court. The parties understood that transferring to this Court 

required compliance with this Court’s Rules.18 

Had Plaintiffs filed in this Court to begin with, Rule 15(aaa) would have 

required them to either stand on their complaint or amend in response to the Motions 

to Dismiss. The question now is whether Rule 15(aaa) applies where (i) a fully 

briefed motion to dismiss under Rule 12(b)(6) is transferred from Superior Court to 

this Court, and (ii) plaintiffs elect to stand on that briefing and their complaint rather 

than seek leave to amend promptly upon transfer. I hold that it does. 

 

17 E. Sussex Assocs., LLC v. W. Sussex Assocs., LLC, 2013 WL 2389868, at *1 (Del. Ch. 

June 3, 2013).

18 See generally D.I. 1 (modifying complaint to comply with Court Rules); D.I. 2 (joint 

letter from the parties requesting that the Court “rule on the motion to dismiss issues that 

remain outstanding”); 10 Del. C. § 1902.
7

Plaintiffs argue that Rule 15(aaa) cannot apply because it demands that parties 

make their choice to amend or stand firm “no later than the time such party’s 

answering brief in response to [a relevant motion] is due to be filed,” and that 

deadline was never triggered in this Court because the parties transferred the fully 

briefed dispute from the Superior Court.19 While I recognize that Rule 15(aaa) does 

not squarely map on to a motion transferred under Section 1902, this Court has 

discretion to conform the transferred case “to law and to the rules and practice of 

[this] court, and may by rule or special order provide for amendments in pleadings 

and for all other matters concerning the course of procedure for hearing and 

determining the cause as justice may require.”20 Even if Rule 15(aaa)’s procedures 

were not triggered, in my view, its underlying policies should apply on these facts 

to “curtail the number of times that the Court of Chancery [is] required to adjudicate 

multiple motions to dismiss the same action.”21 The spirit of Rule 15(aaa) demands 

that parties transferring to this Court with a fully briefed motion to dismiss must 

either promptly move to amend, or else stand on their papers and risk a dismissal 

with prejudice. Requiring an amendment after transfer does not penalize parties for 

 

19 D.I. 78 at 3. 

20 10 Del. C. § 1902.

21 Braddock, 906 A.2d at 783; see also E. Sussex Assocs., 2013 WL 2389868, at *1.
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beginning their case in a different Delaware court. But it does oblige them to timely 

conform to this Court’s rules and policies once they arrive.

Rule 15(aaa) only permits a dismissal without prejudice where “the Court, for 

good cause shown, [finds] that dismissal with prejudice would not be just under all 

the circumstances.”22 Plaintiffs attempt to show good cause by arguing a lack of 

notice that the Rule 9(b) pleading standard might apply to their claims.23 But 

Defendants repeatedly pressed to apply Rule 9(b) in their motions to dismiss before 

the Superior Court, so Plaintiffs were aware of those arguments even before 

transferring. Plaintiffs could have sought leave to amend to address any concerns 

regarding Rule 9(b) either in the Superior Court or upon transfer to this Court. Nor 

is Rule 15(aaa) rendered unjust by Plaintiffs’ proffered bevy of amendments to shore 

up the complaint’s deficiencies.24 Nearly every plaintiff who receives a decision 

dismissing their complaint will have a better idea of how to improve their pleading. 

Rule 15(aaa) exists to avoid that scenario and force plaintiffs to make their call: 

amend or stand.25 

 

22 Ct. Ch. R. 15(aaa); see also TVI Corp. v. Gallagher, 2013 WL 5809271, at *22-23 (Del. 

Ch. Oct. 28, 2013) (applying Rule 15(aaa) good cause exception where plaintiffs 

mistakenly filed wrong pleading).

23 D.I. 78 at 4. 

24 D.I. 78 at 4-5.

25 Braddock, 906 A.2d at 783; E. Sussex Assocs., 2013 WL 2389868, at *1. 
9

Nonetheless, I find that dismissal of the claims in this case with prejudice 

would be unjust for a different reason. Rule 15(aaa)’s application to a fully briefed 

motion to dismiss transferred to this Court under Section 1902 is an issue that has 

yet to be resolved—or apparently even raised—in a written Delaware decision.

26

 

Although Plaintiffs would have been wise to seek clarification on the application of 

Rule 15(aaa), or even seek leave to amend out of caution in light of their multiple 

motions for judicial notice contemplating stronger pleadings, I recognize that the 

parties were in uncharted waters. On these unique facts, the policies underlying Rule 

15(aaa) yield to the Court’s broader policy of liberal amendments.27 

I conclude dismissal with prejudice is unduly penal where Plaintiffs failed to 

predict the answer to this undecided procedural question. This Court has applied 

Rule 15(aaa)’s good cause exception where, for instance, it found that plaintiffs had 

made a good faith error in filing an incorrect complaint.28 I believe Plaintiffs 

likewise operated in good faith while in the shadow of a murky and dispositive legal 

issue. I apply the good cause exception to dismiss Plaintiffs’ claims without 

 

26 The parties have not identified a case resolving this scenario, nor have I found one. The 

closest instance appears to be Reed v. Withers, where Vice Chancellor Glasscock required 

a motion to amend from a plaintiff who added new substantive allegations to a complaint 

that was transferred from the Superior Court and subject to a fully briefed motion to dismiss 

in that Court. See C.A. No. 8395-VCG (Del. Ch. Apr. 25, 2013).

27 See Ct. Ch. R. 15(a) (requiring that “leave shall be freely given when justice so 

requires”). 

28 TVI Corp., 2013 WL 5809271, at *22-23.
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prejudice. But now that the issue has been sorted out, I would not give the same 

latitude to future parties in similar situations.

B. Dismissal Under Rule 12(b)(2) Is Without Prejudice.

The opinion also dismissed claims against certain foreign parties for lack of 

personal jurisdiction under Rule 12(b)(2). Those dismissals are not subject to Rule 

15(aaa), which applies only against motions under Rules 12(b)(6) and 23.1. 

Plaintiffs represent that they do not currently intend to renew their claims against 

those foreign parties, but seek dismissal without prejudice in the event they learn 

additional facts that would support personal jurisdiction.29 Defendants assert that 

Plaintiffs have already had the opportunity for jurisdictional discovery and cannot 

cure their defects by repleading.30 I err on the side of caution and hereby dismiss the 

claims under Rule 12(b)(2) without prejudice.31 

III. CONCLUSION

Plaintiffs’ claims are dismissed under Rules 9(b), 12(b)(2), and 12(b)(6)

without prejudice. Plaintiffs may seek leave to amend. 

 

29 D.I. 78 at 6 n.3. 

30 D.I. 77 at 5. 

31 Additionally, Plaintiffs renew their prior motions for judicial notice, which this Court 

previously found unripe because they were in the context of an amended complaint. I 

hereby deny those motions without prejudice as still unripe until a relevant amended

complaint is filed.