IN THE SUPREME COURT OF THE STATE OF DELAWARE

COMPOSECURE, L.L.C., §

 § No. 177, 2018

Plaintiff/Counterclaim §

Defendant-Below, § Case Below:

Appellant, §

§

v. § Court of Chancery

§ of the State of Delaware

CARDUX, LLC f/k/a AFFLUENT §

CARD, LLC, §

§ C.A. No. 12524-VCL

Defendants/Counterclaim §

Plaintiff- Below, §

Appellee. §

Submitted: July 17, 2019

Decided: July 24, 2019

Before VALIHURA, VAUGHN, and SEITZ, Justices.

Following remand to the Court of Chancery. AFFIRMED.

Myron T. Steele, Esquire, Arthur L. Dent, Esquire, Andrew H. Sauder, Esquire, Potter 

Anderson & Corroon LLP, Wilmington, Delaware. Of Counsel: Steven M. Coren, Esquire, 

David M. DeVito, Esquire, Kaufman, Coren & Ress, P.C., Philadelphia, Pennsylvania for 

Appellants.

David J. Margules, Esquire, Elizabeth A. Sloan, Esquire, Jessica C. Watt, Esquire, Ballard 

Spahr LLP, Wilmington, Delaware; Burt M. Rublin, Esquire, Ballard Spahr LLP, 

Philadelphia, Pennsylvania for Appellees. 
2

VALIHURA, Justice:

CompoSecure, L.L.C., a manufacturer of metal credit cards, has been seeking to 

invalidate the Sales Representative Agreement (the “Sales Agreement”) it signed with

CardUX, LLC. The Court of Chancery held in a February 1, 2018 post-trial decision that 

the Sales Agreement had not been properly approved under CompoSecure’s Amended and 

Restated Limited Liability Company Agreement (the “LLC Agreement”), but that 

CompoSecure had impliedly ratified the Sales Agreement by its conduct. CompoSecure 

appealed. 

In our November 7, 2018 opinion, we agreed with the trial court’s analysis as far as 

it went, but we remanded to the trial court to answer a potentially outcome-determinative 

question that it had not answered: whether the Sales Agreement is a “Restricted Activity”

under the LLC Agreement. If it is a Restricted Activity, we noted that the Sales Agreement 

would be void and unenforceable. We retained jurisdiction. In its report on remand (the 

“Report”), the Court of Chancery held that the Sales Agreement was not a Restricted 

Activity, and thus, the Sales Agreement is not void. For the reasons below, we agree with 

the Court of Chancery’s conclusions.

I.

CardUX was co-founded by a CompoSecure director, Kevin Kleinschmidt, to 

market the metal cards that CompoSecure manufactures. The Sales Agreement, which 

CompoSecure and CardUX executed on November 9, 2015, provides CardUX with a 

fifteen percent commission of the net sales price of any order from a list of “Approved 

Prospects.” On January 19, 2016, Amazon agreed with its co-branding partner, Chase, to 
3

order CompoSecure’s metal cards. Although CardUX’s marketing efforts did not lead to 

the Amazon deal, CardUX, nonetheless, was entitled to fifteen percent of the net sales price 

because Amazon was an Approved Prospect. Without paying any commissions to 

CardUX, CompoSecure removed Kleinschmidt from the CompoSecure Board in May 2016 

and hired litigation counsel who, for the first time, asserted that CompoSecure had not 

properly authorized the Sales Agreement under its LLC Agreement.

CompoSecure then sought a declaratory judgment in the Court of Chancery that the 

Sales Agreement was invalid based on two provisions in the LLC Agreement, namely,

Section 5.4 (the “Related Party Provision”) and Section 4.1(p)(ix)(A) (the “Restricted 

Activities Provision”).1 The Related Party Provision states that, in a conflicted transaction

such as the Sales Agreement, the transaction must be approved by the CompoSecure Board, 

the Investors, and the Class A Majority.2 The Restricted Activities Provision prohibits

CompoSecure from entering into “any contract, agreement, arrangement or understanding 

requiring the Company or any of its Subsidiaries to make expenditures in excess of 

$500,000 during any fiscal year, other than in the ordinary course of business consistent 

with past practice,” without prior approval by the Board, the Investors, and, during the 

“Earnout Period,” the Class A Majority.3 But the Restricted Activities Provision also 

 

1 CardUX counterclaimed, alleging that CompoSecure breached the Sales Agreement. 

2 App. to Opening Br. at A143 (LLC Agreement § 5.4).

3

Id. at A139–40 (LLC Agreement § 4.1(p)(ix)(A)).
4

provides that “any action taken in contravention of the foregoing shall be void and of no 

force or effect whatsoever.”4 

In its February 1, 2018 post-trial decision,5the Court of Chancery held that 

CompoSecure had failed to obtain the required approvals under the Related Party 

Provision. But the court also held that CompoSecure had impliedly ratified the Sales 

Agreement because a majority of the Board supported the Sales Agreement—including 

Michelle Logan, who controlled the Class A Majority vote, and Mitchell Hollin, who 

represented the Investors—and because CompoSecure had treated the Sales Agreement as 

a valid and binding contract for months following its execution. As a result, the court

awarded nearly $17 million to CardUX for past-due commissions, legal fees and expenses, 

contractual damages, and prejudgment interest. The court did not separately consider 

whether the Restricted Activities Provision applied to the Sales Agreement, and, if so,

whether the Sales Agreement is void or merely voidable. Rather, the court only assumed 

that the Restricted Activities Provision applied, and the court held that it was “cumulative” 

of the Related Party Provision.6

CompoSecure appealed. It argued that the trial court failed to consider the “void” 

language in the Restricted Activities Provision. Specifically, it argued that the “void” 

language trumped the common law rule that voidable acts—those falling within the power 

of a corporation but not properly authorized—are subject to equitable defenses such as 

 

4

Id. at A139 (emphasis added).

5

See CompoSecure, L.L.C. v. CardUX, LLC, 2018 WL 660178 (Del. Ch. Feb. 1, 2018).

6

See id. at *12 n.162.
5

implied ratification. Thus, CompoSecure argued, the Sales Agreement is void and 

incapable of being ratified.

In a November 7, 2018 opinion,7this Court affirmed the Court of Chancery’s 

decision that CompoSecure’s failure to comply with the Related Party Provision was a 

voidable act subject to implied ratification, and, based on the unchallenged factual findings 

by the trial court, we found no error with the court’s conclusion that CompoSecure had 

impliedly ratified the Sales Agreement. We agreed with CompoSecure, however, that the 

trial court overlooked the “void” language in the Restricted Activities Provision. We held 

that, if it is a Restricted Activity, the Sales Agreement is void and incapable of being 

ratified. Accordingly, we reversed the Court of Chancery on that issue. But because the 

parties disputed whether the Sales Agreement qualified as a Restricted Activity, and 

because that determination “require[d] factual findings that the Vice Chancellor is better 

equipped to make,” we remanded the case to the trial court and asked the court “to 

determine whether the Sales Agreement is a Restricted Activity and to make any necessary 

related determinations.”8 We retained jurisdiction.

The Court of Chancery issued its Report on June 5, 2019.9 The court began its 

analysis by noting that the “operative term in the Restricted Activities Provision is 

‘requiring.’”10 The court held that the term “requiring” is “a commonly used word with a 

 

7

See CompoSecure, L.L.C. v. CardUX, LLC, 206 A.3d 807 (Del. 2018).

8

Id. at 810–11.

9 CompoSecure, L.L.C. v. CardUX, LLC, 2019 WL 2371954 (Del. Ch. June 5, 2019) [hereinafter 

Report].

10 Id. at *2.
6

clear meaning.”11 Something that is “required” is “necessary or essential, and a 

requirement is something that must take place.”12 Thus, a Restricted Activity “is a contract 

that mandates spending in [excess of $500,000 during any fiscal year], without any 

contingencies, conditions, or optionality.”13

CompoSecure argued below that the Sales Agreement is a Restricted Activity 

because commissions for the Amazon order exceeded $500,000 in a fiscal year. But the 

court held that commissions from the Amazon sale—and any other commissions—were 

“doubly conditional.”14 That is, to clear the $500,000 hurdle, an Approved Prospect would 

have to place an order and CompoSecure would have to accept that order. “The first 

condition—receipt of an order from an Approved Prospect—meant that neither CardUX 

nor CompoSecure could unilaterally cause any commission payment to be required.”15 The 

second condition, provided for in Sections 5.1 and 5.2 of the Sales Agreement,16 “gave 

CompoSecure the ability to determine unilaterally whether it would ever be required to pay 

 

11 Id.

12 Id.

13 Id.

14 Id.

15 Id.

16 Id. (“Section 5.1 of the Sales Agreement specified that ‘[a]ll purchase orders solicited by 

[CardUX] from Approved Prospects are subject to approval, rejection or modification by 

CompoSecure pursuant to Section 5.2.’ Section 5.2 stated: ‘CompoSecure reserves the right, in 

its sole discretion, to: (a) accept, or decline to accept, any purchase order for Products received 

from any Person . . . .’ CompoSecure undertook only to ‘review proposed projects and purchase 

orders submitted through [CardUX] consistent with the manner in which it conducts its business 

in the ordinary course.’ CardUX acknowledged in the same provision that ‘CompoSecure’s 

exercise of discretion may result in no Commission owed, or a reduction or delay in the payment 

of Commission owed, to [CardUX] under this Agreement.’” (quoting App. to Opening Br. at 

A200–01 (Sales Agreement §§ 5.1–5.2))).
7

a commission.”17 Thus, the court concluded, “[b]ecause of the second condition, 

CompoSecure could never be required to pay a commission unless CompoSecure 

determined that the order from an Approved Prospect provided sufficient value to 

CompoSecure to warrant accepting the order and making the commission payment.”

18

The trial court also rejected CompoSecure’s arguments concerning initial 

projections of commissions from the Sales Agreement, made by CardUX principals, and 

its reliance on ThoughtWorks, Inc. v. SV Investment Partners.

19

 As to the initial 

projections, the court held that they were “preliminary, speculative, and remote from the 

final Sales Agreement, both temporally and conceptually.”20 Further, it held that those 

projections “at most represented one side’s expectations during an early phase of the 

negotiations,” and that “[p]rojections are predictions, not requirements.”21 As to 

ThoughtWorks—which involved a $10 million line of credit in the context of an

expenditure-based restricted activities provision—the court concluded that it was 

distinguishable for three reasons: the narrower language in the Restricted Activities 

Provision; the structural differences between the Sales Agreement and the line of credit in 

 

17 Id.

18 Id. at *3 (emphasis added). The court noted that “CompoSecure might decline an order for 

myriad potential business reasons,” for example, “[a]n order might seek discounts that would not 

be sufficiently profitable,” or “an order might require product changes or increased capacity that 

would necessitate additional investment by CompoSecure and distract from other opportunities.” 

Id.

19 902 A.2d 745 (Del. Ch. 2006).

20 Report, 2019 WL 2371954, at *3.

21 Id. 
8

ThoughtWorks; and, unlike here, the management in ThoughtWorks attempted to act 

contrary to the interests of the preferred stockholders whom the restricted activities 

provision was meant to protect. 

Given those facts, the court found that the Sales Agreement required only two 

expenditures: an annual expense reimbursement capped at $20,000 and a commission 

advance of $10,000 per month during the first fifteen months. Combined, those two 

required expenditures fell short of the $500,000 hurdle. Thus, the court held that the Sales 

Agreement was not subject to the Restricted Activities Provision, and, as such, “the LLC 

Agreement did not require any additional approvals, and it was not void because of a failure 

to obtain them.”22 Rather, the court held that “CompoSecure’s management team and its 

owners are now invoking the Restricted Activities Provision in an effort to enable their 

current selves to escape the consequences of actions taken by their former selves.”23

II.

On June 7, 2019, CompoSecure submitted a letter to this Court requesting that we 

allow supplemental briefing or memoranda “[g]iven the important nature of the issues 

addressed on remand.”24 CardUX objected to CompoSecure’s request the same day.25 This 

Court wrote to the parties on June 11, 2019, granting CompoSecure’s request and directing 

the parties to file simultaneous supplemental memoranda on July 17, 2019.

 

22 Id. at *5.

23 Id.

24 Dkt. No. 31 (CompoSecure’s June 7, 2019 Letter to the Court).

25 Dkt. No. 32 (CardUX’s June 7, 2019 Letter to the Court).
9

In its supplemental memorandum, CompoSecure raises three challenges to the 

Report. First, CompoSecure argues that the trial court effectively added language to the 

Restricted Activities Provision; namely, that Restricted Activities are those “requiring 

payment above $500,000 in any fiscal year ‘without any contingencies, conditions, or 

optionality.’”26 Because the parties could have written the Restricted Activities Provision 

to exclude contracts with conditional requirements, but did not, CompoSecure contends 

that the court impermissibly rewrote that provision. Second, CompoSecure argues that the 

trial court incorrectly determined that a contract with conditions imposes no 

“requirements.” Third, CompoSecure argues that ThoughtWorks is not distinguishable in 

any significant way, and that the trial court’s decision “eviscerates” the purpose of the 

Restricted Activities Provision and “provides a playbook for management of any Delaware 

company to use.”27 CardUX argues in its supplemental memorandum that the Report is 

correct.

Upon consideration of the record before us, we agree with the Vice Chancellor’s 

well-reasoned Report. The trial court did not “rewrite” the Restricted Activities 

Provision—rather, it interpreted the plain meaning of “requiring.” Citing numerous 

definitions from several dictionaries, the court determined that “requiring” is a common 

word that means “necessary or essential,” or “something that must take place.”

28

 Focusing 

 

26 CompoSecure Suppl. Mem. at 6 (quoting Report, 2019 WL 2371954, at *2) (emphasis added).

27 Id. at 13, 14.

28 Report, 2019 WL 2371954, at *2.
10

on the context of these specific business arrangements, the trial court explained why the 

Sales Agreement is not subject to the Restricted Activities Provision:

When the parties entered into the Sales Agreement, CompoSecure was not 

required to pay any commissions to CardUX, and it certainly was not 

required to pay a commission for the Amazon Sale. To reiterate, 

CompoSecure did not have any obligation to pay commissions to CardUX 

unless two conditions were met: first, an order from an Approved Prospect, 

and second, a decision by CompoSecure to accept that order. Both 

conditions were beyond CardUX’s control. The first was a third-party 

decision; the second rested in CompoSecure’s sole discretion. For the 

Amazon Sale, the first contingency was not satisfied until CompoSecure 

received the order for the Amazon Sale. The second contingency was not 

satisfied until CompoSecure decided to accept the order.29

CompoSecure argues that conditions in the Sales Agreement do not change the 

mandatory nature of CompoSecure’s payment obligation once those conditions are met. 

The trial court carefully considered the language of the contract as well as the factual 

record. It specifically found that “[t]he Sales Agreement only required CompoSecure to 

make two expenditures: (i) an annual expense reimbursement capped at $20,000 and (ii) a 

commission advance of $10,000 per month during the first fifteen months.”30 Further, 

based on the record, the court found that CardUX’s projected commissions were mere 

“predictions, not requirements,” that were “preliminary, speculative, and remote from the 

final Sales Agreement, both temporally and conceptually.”31 Although the Sales 

Agreement contemplated commissions, “any payment obligation was doubly 

 

29 Id. at *3.

30 Id. at *2.

31 Id. at *3. CompoSecure challenges this finding. See CompoSecure Suppl. Mem. at 9 n.9. 

However, we see no compelling reason to depart from the Vice Chancellor’s findings based on his 

thorough review of the record. 
11

conditional.”32 Thus, the trial court concluded that the Sales Agreement “required total 

expenditures falling well below the threshold in the Restricted Activities Provision,” and 

that, “[w]hen the parties entered into the Sales Agreement, CompoSecure was not required 

to pay any commissions to CardUX, and it certainly was not required to pay a commission 

for the Amazon Sale.”33 

In rejecting CompoSecure’s argument that ThoughtWorks suggests that the 

Restricted Activities Provision should apply since the Sales Agreement contemplated 

future commission payments if the conditions were met, the trial court noted a difference 

between the two provisions. The restricted activities provision in ThoughtWorks contained 

the phrase, “any contractual arrangement providing for the payment of $500,000 or more 

per year,”34 which is broader than the language at issue here, which applies to “any contract, 

agreement, arrangement or understanding requiring the Company or any of its 

subsidiaries to make expenditures in excess of $500,000 or more.”35 

CompoSecure argues that this distinction is insignificant. Instead, it argues that the 

contracts here and in ThoughtWorks are structurally similar in that, if approvals need not 

be obtained before entering into the contract, and approvals need not be obtained when 

later accepting an order that requires a commission under the contract, then management 

is free to commit the company to expenditures far in excess of $500,000 without ever 

 

32 Report, 2019 WL 2371954, at *2.

33 Id. at *2–3. 

34 ThoughtWorks, 902 A.2d at 748 (emphasis added).

35 App. to Opening Br. at A139–40 (LLC Agreement § 4.1(p)(ix)(A)) (emphasis added).
12

obtaining any approvals. Although there is some logic to this argument, we decline to find 

fault with the trial court’s ruling, which, in addition to the difference in language in the two 

provisions, was also based upon an important factual difference. 

Unlike in ThoughtWorks, where the company management’s interests conflicted 

with the preferred stockholders’ interests protected by the restricted activities provision in 

that case, the trial court here found that “every one of those constituencies” protected by 

the Restricted Activities Provision—the Investors, the Class A Majority, and the Board—

had been “involved in the negotiation of the Sales Agreement and wanted to go forward 

with the contract.”36 Further, the court also found that CompoSecure’s management team 

and its owners were aligned on, and uniformly supported, the decision to enter into the 

Sales Agreement. These findings are not clearly erroneous, and the trial court, based upon 

the well-developed record before it, grounded its ruling on its well-supported view that 

CompoSecure’s management team and owners are now invoking the Restricted Activities 

Provision in an effort to avoid their decision to enter into the Sales Agreement.37 For this 

reason, we reject CompoSecure’s contention that the trial court’s interpretation provides a 

“playbook” for the management of other Delaware entities to evade the requirements of 

 

36 Report, 2019 WL 2371954, at *5.

37 See id. at *5 (“Having chosen to go forward with the Sales Agreement, and having chosen to go 

forward with the Amazon Sale, CompoSecure’s management team and its owners are now 

invoking the Restricted Activities Provision in an effort to enable their current selves to escape the 

consequences of actions taken by their former selves.”); see also CompoSecure, 206 A.3d at 811 

(“CompoSecure admitted at oral argument that the Sales Agreement was a ‘bad contract’ . . . .”).
13

similar provisions. Thus, like the trial court, we find CompoSecure’s arguments 

unpersuasive.

III.

For the reasons set forth above, we AFFIRM the Court of Chancery’s Report.