IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TODD MOSCOWITZ,

Plaintiff,

v.

THEORY ENTERTAINMENT LLC,

Defendant.

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 C.A. No. 2019-0780-MTZ

MEMORANDUM OPINION

Date Submitted: July 15, 2020

Date Decided: October 28, 2020

Stephen B. Brauerman, BAYARD, P.A., Wilmington, Delaware; Stanton L. Stein 

and Ashley R. Yeargan, RUSS, AUGUST & KABAT, Los Angeles, California,

Attorneys for Plaintiff. 

Kevin G. Abrams, Michael A. Barlow, and Joseph A. Sparco, ABRAMS & 

BAYLISS LLP, Wilmington, Delaware; Scott A. Edelman and Ilissa Samplin, 

GIBSON, DUNN & CRUTCHER LLP, Los Angeles, California, Attorneys for 

Defendant.

ZURN, Vice Chancellor.
1

This is a case of contractor’s remorse. The plaintiff is a former attorney and 

sophisticated businessman who has enjoyed great success in the music industry. The 

defendant company, a Delaware limited liability company, is a music label 

cofounded by the plaintiff. As a founding member of the company, the plaintiff 

received 25% ownership in the form of common and preferred units in exchange for 

his initial investment. 

When new members invested in the company, the company and its members 

entered into a series of three agreements that bind the plaintiff. These agreements 

complement each other, as each one foreshadows the more restrictive terms of the 

next. The company’s members executed the first agreement in the series, an 

operating agreement naming the plaintiff as a co-manager. The operating agreement 

also permitted issuance of new incentive units, subject to the terms set forth in the 

issuance plan attached to and incorporated into the operating agreement. The second 

agreement in the series, the issuance plan, empowered the manager to grant those 

incentive units to management in the manager’s sole discretion. The plan mandated 

that any issuance would not issue or vest until the recipient executed a forthcoming 

award agreement and tax election. The plan foreshadowed that such an award 

agreement would impose terms and conditions on the award, including those related 

to unit forfeiture, unit repurchase, and the unitholder’s termination, as the manager 

deemed appropriate. The award agreement was the final document in the series. 
2

The new members diluted the plaintiff’s interest to 11.9%, and all agreed that 

he should maintain a 12% stake in the company to avoid an immediate tax event. 

The company and plaintiff agreed he would receive incentive units pursuant to the 

plan equal to 0.1% of the company’s equity. He executed an award agreement and 

tax election as required by the plan, both of which acknowledged that the incentive 

units issued and became effective upon execution. 

The plaintiff’s award agreement permitted the company to repurchase all of 

the plaintiff’s units—not only incentive units, but also common and preferred—upon 

his departure from the company. If the plaintiff separated from the company under 

circumstances considered “for cause” or a “forfeiture termination,” the company 

could repurchase the plaintiff’s entire equity stake for as little as $0.10 per unit. If 

the plaintiff left the company on more favorable terms, the company could

repurchase his equity for fair market value. The plain terms of the award agreement 

put the plaintiff on notice that his total equity might be cashed out, at the company’s 

discretion, when he left. He signed the award agreement and agreed to these terms, 

despite doing so in exchange for a perceivably small stake of 0.1%. 

Thereafter, the plaintiff submitted a resignation letter that stated his 

resignation was effective immediately. Such resignation, without advance written 

notice, triggers a “for cause” or “forfeiture termination” under the award agreement. 

The plaintiff drafted his resignation letter to be conditioned on retaining his equity 
3

in the company, overriding the award agreement’s terms. The company held fast to 

the agreement and sought to purchase the plaintiff’s total equity at $0.10 per unit. 

The plaintiff then attempted to rescind his resignation and resubmit it on terms that 

he believed would avoid the company’s repurchase right. The company pressed its 

repurchase right, and this action followed. 

The plaintiff presents a number of claims challenging the company’s 

repurchase and seeking to validate his attempted conditional resignation. The 

company moved to dismiss on the grounds that the terms of the agreements both 

authorize its conduct and foreclose plaintiff’s conditional resignation. To the extent 

the plaintiff’s claims question the company’s rights under the agreements, the 

motion is granted. Unfortunately for the plaintiff, “Delaware is more contractarian 

than many other states,” recognizing “that parties have a right to enter into good and 

bad contracts, the law enforces both.”1 Delaware law presumes the plaintiff is bound 

by the language of the agreements he signed, no matter how draconian. It affords 

no occasion to weigh the sufficiency of the consideration the plaintiff received (0.1% 

equity) against the company’s rights to repurchase all of his equity, or the 

consequences of the plaintiff’s resignation without written notice. The agreements 

 

1 HC Cos., Inc. v. Myers Indus., Inc., 2017 WL 6016573, at *5 (Del. Ch. Dec. 5, 2017) 

(alteration, internal quotation marks, and omission omitted) (quoting GRT, Inc. v. 

Marathon GTF Tech., Ltd., 2011 WL 2682898, at *12 (Del. Ch. July 11, 2011), and then 

quoting Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010)).
4

unambiguously grant the company the right to repurchase plaintiff’s equity and 

extinguish his status as a member. The plaintiff’s claims to that effect are dismissed, 

and the motion is granted in part. However, the company has failed to meet its 

burden on the motion with respect to the plaintiff’s claims regarding the propriety 

and effect of his resignation attempts; the motion is denied in part. 

I. BACKGROUND

On January 29, 2020, plaintiff Todd Moscowitz filed a First Amended Verified 

Complaint (the “Amended Complaint”) in the above-captioned action against 

defendant Theory Entertainment LLC, a Delaware limited liability company 

(“Theory” or the “Company”).2 Upon consideration of Theory’s February 11, 

2020, motion to dismiss (the “Motion”),3I accept the Amended Complaint’s wellpled allegations as true, draw all reasonable inferences in the plaintiff’s favor, and 

from those allegations and inferences, discern the following pertinent facts from the 

Amended Complaint and the documents integral to it.4 

 

2 Docket Item (“D.I.”) 25 [hereinafter “Am. Compl.”].

3 D.I. 28.

4 See Sheldon v. Pinto Tech. Ventures, L.P., 220 A.3d 245, 251 (Del. 2019); Horman v. 

Abney, 2017 WL 242571, at *2 n.2 (Del. Ch. Jan. 19, 2017); In re Gardner Denver, Inc. 

S’holders Litig., 2014 WL 715705, at *2–3 (Del. Ch. Feb. 21, 2014); In re Gen. Motors 

(Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006).
5

A. Moscowitz Co-Founds Theory, Receives Units As Theory’s 

Member And Manager, And Executes An LLC Agreement

And Initial Plan.

Moscowitz is a veteran music industry executive who has discovered, 

developed, and guided numerous recording artists, and has held many high-level 

managerial roles in the industry, including the role of CEO at Warner Bros. Records, 

US. Moscowitz co-founded Theory with Lyor Cohen, Roger Gold, and Kevin Liles. 

Theory does business as the imprint label 300 Entertainment (“300”), which is 

distributed by Atlantic Records.

Moscowitz and Cohen were Theory’s founders and only members under 

Theory’s June 5, 2013, Amended LLC Agreement. Moscowitz invested $500,000 

in exchange for 25% of Theory’s equity, and Cohen invested $1,500,000 for 75% of 

Theory’s equity. Thereafter, Gold, Liles, and others joined as members, after which 

Theory’s capital contributions were as follows: Moscowitz $400,000, Liles 

$400,000, and Cohen $1.2 million. 

Theory’s June 5, 2013, Amended LLC Agreement was then amended as the 

Second Amended and Restated Operating Agreement dated October 7, 2013 (the

“LLC Agreement”).5 The LLC Agreement named Moscowitz and Cohen as 

 

5 Am. Compl. ¶¶ 9, 10. Plaintiff did not attach the LLC Agreement as an exhibit to the 

Amended Complaint. Defendant provided it as an exhibit to the Motion. See D.I. 31, Ex. 

A [hereinafter “LLC Agreement”]. I consider the LLC Agreement attached as an exhibit 

to the Motion because it is incorporated into and integral to the Amended Complaint. See 
6

Theory’s “Founders” and “Common Managers” on the Company’s Board of 

Managers.6 Aside from Moscowitz’s obligations under the LLC Agreement, 

Moscowitz was not required or expected to render services to Theory, and he did not 

have an employment agreement with Theory.

The LLC Agreement reflected Moscowitz’s 11.9% total equity interest in 

Theory, consisting of 3,829,286 Common Units (25%) that Moscowitz received as 

Theory’s founder, as well as 400,000 Preferred Units (2.7%). Theory’s members 

agreed that new members would receive Incentive-1 Units to minimize tax 

consequences. Accordingly, Section 11.14 of the LLC Agreement authorized the 

issuance of Incentive Units “pursuant to this Agreement and the Initial Plan, or 

pursuant to any other option or other equity award plan of the Company properly 

approved pursuant to Section 11.12.”7 The Initial Plan (or the “Plan”), effective 

October 4, 2013, was attached as Exhibit A to the LLC Agreement.

8

 

Horman, 2017 WL 242571, at *2 n.2; In re Gardner Denver, Inc., 2014 WL 715705, at 

*2–3; In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 169.

6 Am. Compl. ¶ 10; LLC Agreement at 1, § 11.1(c). The LLC Agreement considers that 

the Founders will assume duties to the Company as designated thereunder and can be 

terminated by the Company for failure to perform those duties. See LLC Agreement § 3.1, 

“Cause.” The LLC Agreement also expressly eliminates any fiduciary duties that a 

Member, Manager, or other person might ordinarily owe Theory; waives the corporate 

opportunity doctrine; and contemplates and permits Members or Managers, including 

Moscowitz, to operate other businesses and directly compete with Theory. See id. § 11.9.

7 LLC Agreement § 11.14(a).

8 Am. Compl. ¶ 13; see LLC Agreement, Ex. A. Plaintiff did not attach the Initial Plan as 

an exhibit to the Amended Complaint. Defendant provided it as an exhibit to the Motion. 

See D.I. 31, Ex. B [hereinafter “Initial Plan”]. I consider the Initial Plan because it is 
7

The Initial Plan provides Theory’s Manager, in its sole and absolute 

discretion, the power to give Service Providers, defined as “eligible management 

personnel,” an Award of Incentive-1 Units.9 Its purpose “is to reward designated 

Service Providers for their performance in enhancing the value of the Company.”10

Pursuant to Section 3.1(b), “the Manager shall grant such Awards and may impose 

such terms and conditions on the issuance of such Awards as the Manager deems 

appropriate; provided, however, that no such terms may be inconsistent with the 

LLC Agreement.”11 The Initial Plan defines “Manager” as “Lyor Cohen, or such 

other Person as designated by the Board.”

12

 

The Initial Plan contemplates a subsequent Award Agreement for each Award 

granted under the Plan: “[e]ach Award granted to a Participant under this Plan is 

subject to the terms of the Award Agreement pursuant to which such Award was 

issued and the applicable provisions of this Plan and the LLC Agreement.”13 “In the 

event of a conflict between the provisions of this Plan and the LLC Agreement, the 

 

incorporated into and integral to the Amended Complaint. See Horman, 2017 WL 242571, 

at *2 n.2; In re Gardner Denver, Inc., 2014 WL 715705, at *2–3; In re Gen. Motors 

(Hughes) S’holder Litig., 897 A.2d at 169.

9

Initial Plan at 1.

10 Id.

11 Id. § 3.1(b) (emphasis in original).

12 Id. § 1.4.

13 Id. § 6.1.
8

provisions of the LLC Agreement shall govern.”14 A Service Provider does not 

become a “Participant” under the Initial Plan until he executes the requisite Award 

Agreement.15 And Section 3.2 mandates that every Participant receiving an Award 

under the Initial Plan execute an Award Agreement:

 

14 Id.; accord id. at 1 (stating that Incentive-1 Units granted thereunder “shall be governed 

by, and shall be subject to, the transfer and other restrictions contained in (a) this Plan, (b) 

an ‘Award Agreement’ . . . to be executed by and between the Company and each such 

Participant and (c) the [LLC Agreement], including all exhibits and schedules thereto”).

15 Id. § 1.5 (defining Participant as “any Service Provider who is selected by the Manager 

to receive an Award pursuant to the provisions of Section 3.1 who executes an Award 

Agreement pursuant to the provisions of Section 3.2.); see also id. § 3.2 (requiring Service 

Provider to execute an Award Agreement).
9

Each Award shall be issued only pursuant to an Award Agreement, and 

no such Award shall be effective until such Award Agreement, 

including any ancillary documents appended thereto, has been executed 

by the selected Service Provider, an officer or manager of the Company 

designated by the Manager on behalf of the Company and, if applicable, 

the Service Provider’s spouse. Any such Award Agreement, and any 

ancillary documents appended thereto, shall contain such terms and 

conditions as the Manager shall determine, consistent with this Plan and 

with the terms of the LLC Agreement. Upon full execution of all such 

documents, the selected Service Provider shall become a Participant 

and shall, without further action on his or her part, be deemed to be a 

party to, signatory of and bound by the LLC Agreement. In addition, 

at the Company’s request, such Participant and, if applicable, his or her 

spouse shall execute the LLC Agreement. All Awards issued under this 

Plan shall be subject to the terms of the LLC Agreement, this Plan and 

the applicable Award Agreement, which shall contain such additional 

terms, conditions or restrictions as the Manager shall determine 

(provided that such terms are not inconsistent with restrictions set forth 

in this Plan or the LLC Agreement), including restrictions concerning 

transferability, provisions regarding distributions from the Company 

and vesting conditions based on duration of employment or service with 

the Company or its subsidiaries and/or performance by the Participant 

and/or the Company and/or its subsidiaries.16

In addition to an Award Agreement, the LLC Agreement and Initial Plan 

require each Service Provider receiving an Award to “make a timely and effective 

election under Section 83(b) of the Code with respect to” the units received.17 

Section 6.4 states that “[t]he grant of such Award shall be conditioned on the 

Participant making such Section 83(b) election.”18

 

16 Id. § 3.2.

17 Id. § 6.4; see also LLC Agreement § 7.8.

18 Initial Plan § 6.4.
10

The Initial Plan details the Manager’s discretion to condition the Award of 

Incentive-1 Units on forfeiture and repurchase restrictions set forth in the 

corresponding Award Agreement.19 Section 4.1 of the Initial Plan contemplates 

“forfeiture of awards” “upon any Termination of Service of a Participant.”20 

“Termination of Service” includes resignation “with or without Cause,” and 

[t]he Manager, in its absolute discretion, shall determine the effect of 

all matters and questions relating to Termination of Service, including 

when a Termination of Service is effective, the question of whether a 

Termination of Service resulted from a discharge for Cause, and all 

questions of whether particular leaves of absence constitute 

Terminations of Service.21

“Cause” “shall have the meaning set forth in [each] Participant’s applicable Award 

Agreement.”22 And Section 4.2(a) addresses restrictions on Awards to be 

determined by the Manager: “the Incentive-1 Units shall be subject to such 

restrictions as the Manager shall determine in its sole discretion, including . . . 

repurchase rights,” which “may, in the Manager’s sole discretion, be contained in 

the applicable Award Agreement or in such other agreement as the Manager shall 

 

19 Id. §§ 4.1, 4.2(a).

20 Id. § 4.1.

21 Id. § 1.6; see also id. § 1.5 (“‘Participant’ means any Service Provider who is selected 

by the Manager to receive an Award pursuant to the provisions of Section 3.1 who executes 

an Award Agreement pursuant to the provisions of Section 3.2, and who joins the LLC 

Agreement as a Member.”).

22 Id. § 1.2.
11

determine, in each case in a form determined by the Manager in its sole discretion.”23 

“The issuance of the Incentive-1 Units shall be conditioned on the Participant’s 

consent to such restrictions or the Participant’s entering into such agreement or 

agreements.”24

Section 5.2 further solidifies the Manager’s broad discretion with respect to 

the Initial Plan and corresponding Award Agreements:

The Manager shall have the power to interpret this Plan and the Award 

Agreements pursuant to which Awards are issued, and to adopt such 

rules for the administration, interpretation, and application of this Plan 

as are consistent therewith and to interpret, amend or revoke any such 

rules. Any Award under this Plan and the determinations with respect 

to any Award under this Plan need not be the same with respect to each 

Participant. All designations, determinations, interpretations, and other 

decisions under or with respect to this Plan or any Award or any Award 

Agreements pursuant to which Awards are issued shall be within the 

sole discretion of the Manager, may be made by the Manager at any 

time and shall be final, conclusive and binding upon all parties, 

including the Company (and any of its subsidiaries), any Participant, 

any holder or beneficiary of any Award and any Member.25

Thus, the LLC Agreement and contemporaneous Initial Plan contemplated 

an issuance of Incentive-1 Units, to be effective upon the recipient’s execution of 

an Award Agreement and Section 83(b) election. The LLC Agreement and Initial 

Plan granted Theory’s Manager with the power and discretion to award units; 

 

23 Id. § 4.2(a).

24 Id.

25 Id. § 5.2.
12

condition that award; determine what constitutes termination for Cause; and 

determine the consequences of a recipient’s termination or resignation, such as 

forfeiture and repurchase by the Company.

B. Moscowitz Receives An Award Of Incentive-1 Units Under 

The Initial Plan And Executes An Award Agreement. 

In October 2013, when Theory granted Incentive-1 Units to new members, 

Theory also granted Moscowitz Incentive-1 Units under the Initial Plan to raise his 

ownership stake from 11.9% to 12%. This was done to ensure that Cohen owned 

36% of Theory and that Moscowitz and Liles each owned 12%. To facilitate this 

0.1% increase, Theory authorized the issuance of 46,429 Incentive-1 Units to 

Moscowitz, as reflected in a schedule circulated on October 8, 2013. In November 

2013, Ori Winitzer, on behalf of Theory’s investor LionTree, suggested preparing 

award agreements for those Incentive-1 Units. Accordingly, Moscowitz executed a 

Profit Interest Award Agreement dated December 17, 2013 (the “Award 

Agreement”), as contemplated and required by the Initial Plan.26

 

26 Am. Compl. ¶ 16; see also Initial Plan § 3.2. Plaintiff did not attach the Award 

Agreement as an exhibit to the Amended Complaint. Defendant provided it as an exhibit 

to the Motion. See D.I. 31, Ex. C [hereinafter “Award Agreement”]. I consider the Award 

Agreement because it is incorporated into and integral to the Amended Complaint. See 

Horman, 2017 WL 242571, at *2 n.2; In re Gardner Denver, Inc., 2014 WL 715705, at 

*2–3; In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d at 169.

In 2016, Theory asked Moscowitz to re-sign a corrected Award Agreement to 

conform the number of Incentive Units to what was reflected on the October 2013 closing 

capitalization table. At the time, Theory’s lawyer referred to the issue as a “scrivener’s 
13

The Award Agreement provides that Moscowitz, as the “Participant,” 

received the “Award” of 46,429 Incentive-1 Units (“Interests”) “for the performance 

of services to or for the benefit of the Company and/or its subsidiaries in [his] 

capacity as a Member.”27 It also provides,

This Award is made pursuant to all of the provisions of the Plan and the 

LLC Agreement, which are incorporated herein by this reference, and 

is intended, and shall be interpreted in a manner, to comply therewith. 

In the event of any conflict between the provisions of this Agreement, 

the Plan and/or the LLC Agreement, the provisions of the Plan and LLC 

Agreement shall govern.28

Consistent with the Initial Plan,29 the Award Agreement provides that “[e]ffective as 

of the Grant Date,” December 17, 2013, the Company issued 46,429 Incentive-1 

Units “under the Plan, which once the full amount of Incentive-1 Units authorized 

as of the Grant Date . . . has been issued, will represent a Percentage Interest of 

0.1%.”30 Moscowitz agreed that, subject to his continued provision of services to 

the Company, “one twenty-fourth (l/24th) of the Interests shall vest each month on 

each of the first twenty-four months following the Grant Date.”31

 

error” and stated that “after investigation, we believe that the cap table amounts are correct, 

and that the Profit Interest Agreements themselves contained errors.” Am. Compl. ¶ 16.

27 Award Agreement § 2.1.

28 Id.

29 Initial Plan §§ 1.5, 3.1, 3.2, 6.1.

30 Award Agreement § 2.1.

31 Id. § 3.1(a).
14

Section 3.3 of the Award Agreement governs the “Effect of Termination of 

Service on Interests,” and details the instances in which Moscowitz’s unvested 

Incentive-1, Common, and Preferred Units may be subject to forfeiture and in which 

the vested units of the same may be subject to repurchase.32 “Termination of 

Service,” as used in the Award Agreement is defined in the Initial Plan as 

the termination, for any reason, including death, Disability, resignation, 

retirement or termination with or without Cause, at any time, of the 

Service Provider’s employment or other service with the Company (or 

any of its subsidiaries), but excluding any termination which includes 

simultaneous continuous service of the Participant with the Company 

(or any of its subsidiaries).33

Cohen as “Manager” has “absolute discretion” to “all matters and questions relating 

to Termination of Service” under the Award Agreement, “including when a 

Termination of Service is effective” and “the question of whether a Termination of 

Service resulted from a discharge for Cause.”34

Sections 1.2 and 3.3 of the Award Agreement contemplate the consequences 

of the Participant’s Termination of Service. In Section 1.2, termination by the 

Company is for “Cause” upon “the occurrence or existence” of certain events, “as 

 

32 Id. § 3.3.

33 Initial Plan § 1.6; see also Award Agreement § 1 (“Capitalized terms used in this 

Agreement but not otherwise defined herein shall have their respective meanings set forth 

in the [LLC Agreement], including all exhibits and schedules thereto . . . and the [Initial 

Plan] included as Exhibit A of the LLC Agreement . . . , as applicable.”).

34 Initial Plan § 1.6.
15

determined in good faith by the Manager,”35 including “[a] material violation of this 

Agreement that, if curable, is not cured within 30 days after written notice describing 

such violation has been given to such person.”36 In Section 3.3, termination by the 

Participant is for Cause “in the event Participant voluntarily terminates Participant’s 

service and fails to provide the Manager with written notice at least ninety (90) days 

in advance of such Termination of Service (such ninety (90)-day period, the ‘Notice 

Period’).”37 “In the event of Participant’s Termination of Service by the Company 

for Cause,” as that term is defined in the Award Agreement, the termination is 

considered a “Forfeiture Termination.”38 

Upon a Forfeiture Termination, the Participant’s unvested Interests

shall thereupon automatically and without further action be cancelled 

and forfeited for no consideration effective as of Participant’s 

Termination of Service, and Participant shall have no further right or 

interest in or with respect to such Interests.39

A Forfeiture Termination also triggers the Company’s right to repurchase the 

Participant’s vested Interests, as well as his Common and Preferred Units, at 

predetermined prices:

 

35 Award Agreement § 1.2.

36 Id. § 1.2(a).

37 Id. § 3.3(a); see also LLC Agreement § 17.2 (requiring that all notice thereunder be 

written).

38 Award Agreement § 3.3(b).

39 Id.; see id. § 2.1 (defining “Interests”).
16

upon the occurrence of a Forfeiture Termination, the Company shall 

have the option (exercisable by the Company within the one (1)-year 

period immediately following the date of such Termination of Service) 

to repurchase the Participant’s vested Interests, as well as Participant’s 

vested Common Units and Participant’s Preferred Units, if any, 

including (in each case) Participant’s Capital Account balance that is 

attributable to such Interests, Common Units and Preferred Units, as 

applicable, at the repurchase price set forth below:

(i) in respect of vested Interests, the repurchase price shall be $0.10 

per Incentive- I Unit repurchased;

(ii) in respect of Participant’s Common Units, the repurchase price 

shall be the lesser of (1) the Fair Market Value of such Common Units 

and (2) the greater of (A) the original cost (or exercise price, as 

applicable, in the event of Common Units issued in exchange for 

Preferred Units) paid by the Participant in respect of such Common 

Units and (B) $0.10 per Common Unit; and

(iii) in respect of Participant’s Preferred Units, the repurchase price 

shall be the Fair Market Value of such Preferred Units.40

If the Participant’s termination is “other than for Cause,” under Section 3.3(a),

“subject . . . to Participant delivering and not revoking a release of claims in favor 

of the Company and its Affiliates, Participant’s vested Interests shall remain 

outstanding (subject to all terms of the LLC Agreement, including those regarding 

repurchase).”41 But unvested Incentive-1 Units

 

40 Id. § 3.3(b).

41 Id. § 3.3(a).
17

shall automatically and without further action be cancelled and 

forfeited for no consideration effective (i) in the event of Termination 

of Service for any reason other than Cause or death, as of Participant’s 

Termination of Service . . . , and Participant shall have no further right 

or interest in or with respect to such unvested Interests.42

And if termination is “for any reason other than a Forfeiture Termination,” the 

Company has a one-year “Call Right,” or the right to repurchase the Participant’s 

vested Incentive-1, Common, and Preferred Units, upon the Participant’s 

Termination of Service: 

[T]he Company or its designee, in its sole discretion, may exercise a 

right to repurchase for Fair Market Value some or all of Participant’s 

vested Interests, vested Common Units and Preferred Units (the “Call 

Right”) until the one (1)-year anniversary of the date of Participant’s 

Termination of Service. If the Company chooses to exercise the Call 

Right, in its sole discretion, the Company may either (a) pay to 

Participant in cash the Fair Market Value of the repurchased Interests, 

Common Units and Preferred Units or (b) issue to Participant a note 

bearing interest at a rate equal to the London Interbank Offered Rate at 

the time of issuance plus 200 basis points (the “Note”). . . . Upon 

exercise of the Call Right, the repurchased Interests, Common Units 

and Preferred Units shall be cancelled by the Company without any 

further action of Participant, and Participant shall have no further right 

or interest in or with respect to such Interests.43

Thus, the Award Agreement contemplates the various reasons for and manner 

in which the Participant and the Company could part ways, and stratifies the 

Participant’s ability to keep and monetize his Incentive-1, Preferred, and Common 

 

42 Id.

43 Id. § 3.4.
18

Units based on the nature of his termination. A voluntary resignation without notice, 

as a Termination for Cause, is a Forfeiture Termination that triggers the Company’s 

repurchase right at lower prices than the Call Right, which is triggered by 

termination for any reason other than a Forfeiture Termination.

When Moscowitz executed the Award Agreement, he also executed an 

Election Pursuant to Section 83(b) of the Internal Revenue Code (the “83(b) 

Election”), stating that “the date on which the above property was transferred to the 

undersigned was December 17, 2013, and the taxable year to which this election 

relates is 2013.”44 The 83(b) Election also recognizes that the Award is subject to 

 

44 Award Agreement, Ex. A ¶ 3. Over Moscowitz’s objection, I conclude the 83(b) Election 

is properly considered on Theory’s Motion because it is attached as an exhibit to the Award 

Agreement, which is integral to the Complaint. See Winshall v. Viacom Int’l, Inc., 76 A.3d 

808, 818 (Del. 2013).. Under the incorporation-by-reference doctrine, “[a] plaintiff may 

not reference certain documents outside the complaint and at the same time prevent the 

court from considering those documents’ actual terms.” Reiter v. Fairbank, 2016 WL 

6081823, at *5–6 (Del. Ch. Oct. 18, 2016) (alteration in original) (quoting Winshall, 76 

A.3d at 818); see also Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 

2016) (providing extensive summary of the incorporation-by-reference doctrine), 

abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019). 

The Amended Complaint extensively cites and refers to the Award Agreement and Initial 

Plan. The 83(b) Election is an exhibit to and part of the Award Agreement, which is 

unquestionably integral to the Amended Complaint, but which Moscowitz failed to 

provide. Moscowitz may not reference the Award Agreement “and at the same time 

prevent the court from considering [the] document[’s] actual terms” in connection with a 

motion to dismiss. Winshall, 76 A.3d at 818 (quoting Fletcher Int’l, Ltd. v. ION 

Geophysical Corp., 2011 WL 1167088, at *3 n.17 (Del. Ch. Mar. 29, 2011)). Theory has 

provided and referred to the omitted exhibit to the Award Agreement, and in “doing so 

fairly represents the selective portions the plaintiffs have submitted into the record.” In re 

Gen. Motors (Hughes) S’holder Litig., 2005 WL 1089021, at *6 (Del. Ch. May 4, 2005) 

(“Surely plaintiffs do not contend that the Court is not entitled to consider the full context 

of a document once the plaintiffs have relied on particular segments in their 

Complaint?”), aff’d, 897 A.2d 162 (Del. 2006). “The better practice would have been for 
19

certain restrictions, including “forfeiture and/or a right of repurchase by the 

Company or its designee if the undersigned ceases to provide services to the 

Company or one of its Affiliates or otherwise breaches Participant’s obligations to 

the Company” and any other restrictions set forth in the Award Agreement and LLC

Agreement.45

C. Moscowitz Resigns From Theory.

In spring 2016, Moscowitz verbally advised Cohen that he intended to leave 

Theory. Cohen retaliated in April by removing Moscowitz as a voting member of 

the Board and replacing him with Liles. Moscowitz was excluded from Company 

meetings and key decisions.

In June, Moscowitz discussed the possibility of Theory purchasing his stock 

with LionTree’s Winitizer, stating that he wanted additional cash flow, and that if 

he did not receive it, he would need to leave. Winitzer responded that Moscowitz’s 

stock purchase proposal was “quite thoughtful,” but advised him that Theory 

 

plaintiff[] to set forth the entire contract or to attach that document to the [Amended] 

Complaint in the first place . . . .” Lewis v. Straetz, 1986 WL 2252, at *3 (Del. Ch. 

Feb. 12, 1986) (quoting Bechtel v. Local 215, Laborers’ Int. Union of N. Am., AFL-CIO,

405 F. Supp. 370, 374 n.1 (M.D. Pa. 1975), aff’d in part, rev’d in part on other grounds, 

544 F.2d 1207 (3d Cir. 1976)).

45 Award Agreement, Ex. A ¶ 4.
20

“need[ed] the capital first (the more we have, the easier for you) and then we can 

revisit.”46 No purchase plan materialized, and Moscowitz focused on his departure. 

In September, Cohen announced that he was leaving 300, and therefore 

Theory, to become YouTube’s Global Head of Music. When Cohen advised 

Theory’s Board of his departure, Moscowitz told Cohen that “the news did not 

change his own plans and, as previously indicated months before, Moscowitz still 

was planning to leave.”47 Cohen and YouTube’s owner, Google, Inc., remain two 

of Theory’s largest investors. In October, allegedly related to Cohen’s transition to 

YouTube, Theory launched a self-tender for $17,000,000 of Theory equity (the 

“Tender Offer”).

On November 7, Moscowitz sent Theory a formal notice of resignation dated 

November 1, 2016 (the “Resignation Notice”).48 The Resignation Notice states that 

in accordance with the terms of the LLC Agreement, Moscowitz “hereby gives 

notice of [his] immediate resignation as a Manager of the Company and from any 

 

46 Am. Compl. ¶ 20.

47 Id. ¶ 22.

48 Id. ¶ 23. Plaintiff did not attach the Resignation Notice as an exhibit to the Amended 

Complaint. Defendant provided it as an exhibit to the Motion. See D.I. 31, Ex. D 

[hereinafter “Resignation Notice”]. I consider the Resignation Notice because it is 

incorporated into and integral to the Amended Complaint. See Horman, 2017 WL 242571, 

at *2 n.2; In re Gardner Denver, Inc., 2014 WL 715705, at *2–3; In re Gen. Motors 

(Hughes) S’holder Litig., 897 A.2d at 169.
21

and all positions [he] hold[s] or ha[s] held with the Company, arising under the 

Agreement, or otherwise.”49 

But, even while resigning, Moscowitz strove to retain all the benefits from his 

membership in Theory. His Resignation Notice went on:

Notwithstanding the foregoing, the undersigned has in no way 

surrendered, waived or in any way modified any of my rights, benefits 

or entitlements as a Member or as an owner of a membership interest 

in the Company or any successor in interest of the Company.

If for any reason, whatsoever, a court of competent jurisdiction 

determines that the foregoing resignation shall result in the loss, 

forfeiture, diminution or waiver of the undersigned’s rights and/or 

entitlements as a Member or owner of a membership interest in the 

Company, the foregoing resignation shall be deemed void, ab initio, 

and of no force or effect.50

On November 10, Moscowitz and Universal Music Group issued a joint press release 

announcing their joint venture, Cold Heat Records, which is now known as Alamo 

Records.

On November 11, Theory’s Board of Managers notified Moscowitz via email 

that it accepted his “immediate voluntary resignation,” “consistent with the [LLC

Agreement], and the [Initial Plan]” (the “Board Notice”).51 Although the Board 

 

49 Resignation Notice at 1.

50 Id. (emphasis in original).

51 D.I. 40 at 1. Plaintiff did not attach the Board Notice as an exhibit to the Amended 

Complaint. Defendant provided it to the Court. See id. I consider the Board Notice 

because it is incorporated into and integral to the Amended Complaint. See Horman, 2017 
22

Notice did not explicitly address the conditions Moscowitz imposed on his 

resignation, it stated, “The Company hereby reserves and does not waive any rights 

it has with respect to the foregoing, including with respect to any rights it has under 

the [LLC] Agreement, the Initial Plan and the [Award Agreement] between the 

Company and you.”52

On November 18, Moscowitz accepted the Tender Offer, expressing that he 

intended to sell Theory 400,000 Preferred Units and 1,049,489 Common Units. 

Theory bought Moscowitz’s tendered shares for $1.648 per unit, totaling 

$2,388,575.87. Thereafter, Moscowitz held 2,798,797 Common Units and 46,429 

Incentive-1 Units (the “Remaining Units”).

D. Theory Exercises Its Repurchase Right Under The Award 

Agreement, And Moscowitz Reneges His Resignation. 

Two months later, Theory notified Moscowitz that it determined his 

resignation constituted Termination of Service for Cause under the Award 

Agreement. In a letter dated January 17, 2017 (the “Repurchase Letter”), Theory 

stated that Moscowitz violated the Award Agreement by failing to provide the 

Company with 90 days’ written notice of his voluntary Termination of Service.

Accordingly, Theory deemed Moscowitz’s resignation a termination for Cause, and 

 

WL 242571, at *2 n.2; In re Gardner Denver, Inc., 2014 WL 715705, at *2–3; In re Gen. 

Motors (Hughes) S’holder Litig., 897 A.2d at 169.

52 D.I. 40 at 1.
23

therefore a Forfeiture Termination, under the Award Agreement. Theory explained

it was exercising its right to repurchase Moscowitz’s Remaining Units at the 

predetermined Forfeiture Termination price of $0.10 per unit, for a total of 

$283,622.60. Theory included a check payable to Moscowitz in that amount, and 

informed Moscowitz that the repurchase extinguished his interest and membership 

in Theory.

In response to the Repurchase Letter, Moscowitz took three steps. First, in a 

letter dated February 1 (the “Revocation Letter”), Moscowitz “emphasiz[ed] that the 

[Resignation Notice] was expressly conditioned upon the premise that it would not 

cause him to surrender, waive, diminish, or modify any of his rights, benefits or 

entitlements as a member of Theory or as an owner of a membership interest in 

Theory.”53 The Revocation Letter also purported to “rescind[] and withdr[a]w” the 

Resignation Notice, and “expressed Moscowitz’s ability and willingness to return to 

work for Theory (though he disputed that such an obligation existed under the [LLC]

Agreement).”54 Moscowitz returned the $283,622.60 repurchase check with the 

Revocation Letter.

Second, after purportedly revoking his initial resignation via the Revocation 

Letter, Moscowitz tried to resign in a manner that would not trigger any repurchase 

 

53 Am. Compl. ¶ 29.

54 Id.
24

right. On February 1, Moscowitz sent Theory a letter in which he purported to resign 

from Theory on 90 days’ notice and expressly stated that such notice superseded his 

Resignation Notice (the “Second Resignation Notice”). Once again, Moscowitz 

attempted to impose conditions on his resignation, stating that nothing in the Second 

Resignation Notice “should be construed as a surrender, waiver, or modification of 

his rights, benefits or entitlements as a member or as an owner of any membership 

interest in Theory,” and that “if such resignation resulted in a loss, forfeiture, 

diminution or waiver of his rights and/or entitlements as a member or owner of a 

membership interest, then the resignation was of no force or effect.”55

Third, Moscowitz reiterated his position though counsel via a letter to Theory 

on February 3. On February 8, Theory responded via letter, maintaining that the 

Award Agreement gave the Company the right to repurchase Moscowitz’s

Remaining Units at $0.10 per share. Through new counsel, Moscowitz again 

protested Theory’s position; Theory reiterated that Moscowitz forfeited his interest 

in the Company. 

E. Moscowitz Files This Action. 

Alleging that he has not yet been paid for his Remaining Units and “does not 

know what became of them because Theory ceased treating him as a unitholder,”56

 

55 Id. ¶ 30.

56 Id. ¶ 33.
25

Moscowitz filed a Verified Complaint initiating this action on September 27, 2019.57 

Theory moved to dismiss on November 25.

58

 In response, Moscowitz filed the 

Amended Complaint on January 29, 2020.59

Count I of the Amended Complaint seeks a declaratory judgment that the 

Award Agreement is invalid for lack of consideration. Count II seeks a declaratory 

judgment that Moscowitz is a Theory member owning 2,789,797 Common and 

46,429 Incentive-1 Units; that Moscowitz’s Resignation Notice is of no force and 

effect; that Moscowitz’s Second Resignation Notice validly effected his resignation; 

and that Theory’s Forfeiture Termination is of no force and effect. Count III asserts 

an alternative claim for breach of the Award Agreement, assuming the Award 

Agreement is binding, claiming Theory breached by 

purporting to redeem Moscowitz’s membership Units; failing to give 

notice to Moscowitz of any purported breach of the Award Agreement; 

failing to provide any opportunity to cure such breach to Moscowitz; 

improperly construing the Award Agreement such that Moscowitz’s 

[Resignation Notice] gives rise to a Forfeiture Termination; improperly 

terminating Moscowitz’s membership interest in Theory; and 

converting, alienating, or otherwise dealing with Moscowitz’s Units 

and/or membership interest without Moscowitz’s consent.60

 

57 D.I. 1.

58 D.I. 17.

59 See generally Am. Compl.

60 Id. ¶ 51. 
26

Count IV asserts a claim for breach of the implied covenant of good faith and fair 

dealing, alleging that the LLC Agreement and Award Agreement are binding and 

that Theory breached the implied covenants therein for identical reasons.61 Count V 

asserts a claim for conversion, and Count VI seeks an accounting and specific 

performance.

Theory filed the Motion on February 11.

62

 On April 10, Theory submitted its 

opening brief in support.63 On June 8, Moscowitz opposed the Motion.64 Theory 

replied on June 29.65 I heard argument on July 15.66

II. ANALYSIS

This opinion addresses Theory’s Motion pursuant to Court of Chancery Rule 

12(b)(6). “The standard for dismissal pursuant to Rule 12(b)(6) for failure to state a 

claim upon which relief can be granted is well established.”

67

 The Court accepts all 

 

61 See id. ¶ 62 (“Theory has breached this implied contractual term, inter alia, by failing to 

give notice to Moscowitz of any defect in his resignation; failing to provide Moscowitz 

any opportunity to cure such breach; improperly construing the Award Agreement such 

that Moscowitz’s [Resignation Notice] gave rise to a Forfeiture Termination; improperly 

terminating Moscowitz’s membership interest in Theory; and converting, alienating, or 

otherwise dealing with Moscowitz’s Units and/or membership interest without 

Moscowitz’s consent.”).

62 D.I. 28.

63 D.I. 31.

64 D.I. 33.

65 D.I. 35; see also D.I. 40, 42.

66 D.I. 43, 46.

67 Feldman v. Cutaia, 2006 WL 920420, at *7 (Del. Ch. Apr. 5, 2006).
27

well-pled allegations as true and draws all reasonable inferences in favor of the nonmovant.68

 However, the Court “need not accept conclusory allegations as true, nor 

should inferences be drawn unless they are truly reasonable.”69 The Court will not 

grant dismissal “unless the plaintiff would not be entitled to recover under any 

reasonably conceivable set of circumstances.”70 A motion to dismiss will be granted 

only if “it appears with reasonable certainty that the plaintiff could not prevail on 

any set of facts that can be inferred from the pleading.”

71 “Under Rule 12(b)(6), a 

complaint may, despite allegations to the contrary, be dismissed where the 

unambiguous language of documents upon which the claims are based contradict the 

complaint’s allegations.”72

Theory seeks dismissal on the basis that its conduct is authorized by the plain 

language of the LLC Agreement, Initial Plan, and Award Agreement (collectively, 

the “Agreements”), precluding each theory of recovery in the Amended Complaint. 

And so the Amended Complaint and Motion turn primarily on questions of contract 

interpretation. “Under Delaware law, the proper interpretation of language in a 

 

68 Sheldon, 220 A.3d at 251.

69 Id.

70 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del. 

2011).

71 Feldman, 2006 WL 920420, at *7.

72 H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 139 (Del. Ch. 2003).
28

contract is a question of law. Accordingly, a motion to dismiss is a proper 

framework for determining the meaning of contract language.”73

The principles governing contract interpretation are well settled. 

Contracts must be construed as a whole, to give effect to the intentions 

of the parties. Where the contract language is clear and unambiguous, 

the parties’ intent is ascertained by giving the language its ordinary and 

usual meaning. Courts consider extrinsic evidence to interpret the 

agreement only if there is an ambiguity in the contract.74

Contract language is ambiguous if it is “reasonably susceptible of two or more 

interpretations or may have two or more different meanings.”75

“When interpreting a contract, a court must give effect to all of the terms of 

the instrument and read it in a way that, if possible, reconciles all of its provisions.”76 

“[A] court will prefer an interpretation that harmonizes the provisions in a contract 

as opposed to one that creates an inconsistency or surplusage.”77 “Contract terms 

themselves will be controlling when they establish the parties’ common meaning so 

that a reasonable person in the position of either party would have no expectations 

inconsistent with the contract language.”78 

 

73 Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006).

74 Nw. Nat’l Ins. Co. v. Esmark, Inc., 672 A.2d 41, 43 (Del. 1996) (citations omitted).

75 Twin City Fire Ins. Co. v. Del. Racing Ass’n, 840 A.2d 624, 628 (Del. 2003) (quoting 

Kaiser Alum. Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996)).

76 GRT, Inc. v. Marathon GTF Tech., Ltd., 2012 WL 2356489, at *4 (Del. Ch. 

June 21, 2012).

77 Id.

78 Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).
29

 Consistent with Delaware’s pro-contractarian policy, “a party may not come 

to court to enforce a contractual right that it did not obtain for itself at the negotiating 

table.”79 Delaware law presumes parties are bound by the language of the agreement 

they negotiated, especially when the parties are sophisticated entities that have 

engaged in arms-length negotiations.80 The Court “will not disturb a bargain 

because, in retrospect, it appears to have been a poor one.”81“Parties have a right to 

enter into good and bad contracts, the law enforces both.”82

A. The Award Agreement Binds Moscowitz. 

I first address Count I’s request that the Court enter a declaratory judgment 

that the Award Agreement is invalid for lack of consideration and that, therefore, 

Moscowitz is not bound by its terms. The plain contract language that the parties 

agreed upon indicates that Moscowitz’s Incentive-1 Units were consideration for 

executing the Award Agreement. Count I is dismissed.83

 

79 GRT, Inc., 2012 WL 2356489, at *7.

80 See W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 

(Del. Ch. Nov. 2, 2007) (“The presumption that the parties are bound by the language of 

the agreement they negotiated applies with even greater force when the parties are 

sophisticated entities that have engaged in arms-length negotiations.”), aff’d, 985 A.2d 391 

(Del. 2009); accord HC Cos., Inc., 2017 WL 6016573, at *5.

81 W. Willow-Bay Ct., LLC, 2007 WL 3317551, at *9.

82 Nemec, 991 A.2d at 1126.

83 “Parties to a contract can seek declaratory judgment to determine ‘any question of 

construction or validity’ and can seek a declaration of ‘rights, status or other legal relations 

thereunder.’” Energy P’rs, Ltd. v. Stone Energy Corp., 2006 WL 2947483, at *6 (Del. Ch. 

Oct. 11, 2006) (quoting 10 Del. C. § 6502). The party seeking a declaratory judgment must 
30

Drawing all reasonable inferences that logically flow from well-pled facts in 

the plaintiff’s favor, this Court can properly determine the validity and effect of 

consideration at the motion to dismiss stage.

84

 “It is the blackest of black-letter law 

that an enforceable contract requires an offer, acceptance, and consideration.”

85 As 

the Delaware Supreme Court has explained, “it is well settled that consideration for 

a contract can consist of either a benefit to the promiser or a detriment to the 

promisee.”86 Delaware law does not “assume[] that parties to a contract must 

explicitly detail the precise consideration they are exchanging” and “makes no such 

requirement,”87 but a recital in a written agreement that a stated consideration has 

 

demonstrate that an “actual controversy” exists. See id. Theory couched its contention 

that the governing Agreements refute Moscowitz’s claim as a failure to plead the existence 

of an actual controversy. I reject Theory’s position that its accurate reading of the contracts 

means there is no actual controversy to support Count I. As demonstrated by their briefs, 

the parties have adverse legal interests and hold divergent views about the effectiveness 

and meaning of the Award Agreement; a controversy exists between Moscowitz and 

Theory. The Amended Complaint adequately identifies an actual controversy between 

Moscowitz and Theory about the validity and enforceability of the Award Agreement. See

id. at *6–9. But Theory interprets the Agreements correctly, so I proceed on that basis.

84 See Seiden v. Kaneko, 2015 WL 7289338, at *5–6 (Del. Ch. Nov. 3, 2015); Seiden v. 

Kaneko (Seiden II), 2017 WL 1093937, at *4 (Del. Ch. Mar. 22, 2017), aff’d, 177 A.3d 69 

(Del. 2017); see also Acker v. Transurgical, Inc., 2004 WL 1230945, at *3–4 (Del. Ch. 

Apr. 22, 2004) (granting dismissal under Court of Chancery Rule 12(b)(6) of claim for 

declaration that contract was void for lack of consideration).

85 Seiden II, 2017 WL 1093937, at *5 (quoting James J. Gory Mech. Contr., Inc. v. BPG 

Residential P’rs V, LLC, 2011 WL 6935279, at *2 (Del. Ch. Dec. 30, 2011)).

86 Id. (quoting First Mortg. Co. of Pa. v. Fed. Leasing Corp., 456 A.2d 794, 795–96 (Del. 

1982)).

87 Id. at *6.
31

been given facially supports a finding that the agreement is supported by 

consideration, absent facts suggesting that no such consideration was actually given 

or expected.88 “An allegation that a party has received no consideration is a 

conclusion of law and is not entitled to deference.”89 

1. The Award Agreement Applies to Moscowitz.

As an initial matter, Moscowitz argues the Award Agreement’s Termination 

of Service and Forfeiture provisions do not apply to him. He makes two arguments 

based on the Award Agreement’s language stating the Incentive-1 Units were issued 

to “eligible management personnel” “for the performance of services to or for the 

benefit of” Theory in his “capacity as a Member.”90 

First, Mosowitz theorizes that the Award Agreement’s Notice Period for 

resignation was designed to retain employees, and that because Moscowitz is not an 

employee, it does not apply to him. Moscowitz contends that “[a]s a co-founder of 

 

88 See TA Operating LLC v. Comdata, Inc., 2017 WL 3981138, at *23 (Del. Ch. 

Sept. 11, 2017) (stating that where a contract contains a recital of consideration, it suggests, 

“on its face,” that the parties exchanged valuable consideration); see also Restatement 

(Second) of Contracts § 87 cmt. c (1981) (“A recital in a written agreement that a stated

consideration has been given is evidence of that fact as against a party to the agreement, 

but such a recital may ordinarily be contradicted by evidence that no such consideration

was given or expected.”); id. § 218 cmt. b (“A recital of fact in an integrated agreement is 

evidence of the fact, and its weight depends on the circumstances. Contrary facts may be 

proved.”); id. § 218 cmt. e (“Where consideration is required, the requirement is not 

satisfied by a false recital of consideration, although in some circumstances a recital of

consideration may make a promise binding without consideration.”).

89 Acker, 2004 WL 1230945, at *4.

90 Award Agreement § 2.1; Initial Plan at 1, § 3.3.
32

Theory, he was not required to perform services to Theory, and he was not granted 

Incentive-1 Units to encourage his continued employment with the Company.”91 He 

pleads that he was not a Theory employee, was not subject to an employment 

contract, and had no “required duties or responsibilities at Theory.”92 Moscowitz 

concludes there is a question of fact as to whether he was actually a “Service 

Provider” (defined as “eligible management personnel”) under the Initial Plan, and 

“Participant” (defined as a “Service Provider who . . . executes an Award 

Agreement”) under the Award Agreement.93 

The Award Agreement is not limited in whole or in part to employees. The 

entire Award Agreement applies to any Service Provider who became a Participant 

by agreeing to accept units thereunder. The LLC Agreement contemplates that 

Incentive-1 Units “will be reserved for issuance to officers, key employees, 

consultants and other Persons who provide services to the Company” or the 

“Management Pool.”94 It further explains that all Incentive Units awarded outside 

of the context of an option “are received in exchange for the provision of services 

by such recipient to or for the benefit of the Company in a service provider capacity 

 

91 D.I. 33 at 39.

92 See id. at 36; see also id. at 34 n.7.

93 Initial Plan at 1, § 1.5; Award Agreement at 1, § 1.

94 LLC Agreement § 11.14(a).
33

or in anticipation of becoming a service provider.”95 The Award Agreement in 

whole, and its Notice Period in particular part, are not limited to employees. 

Second, Moscowitz contends the Resignation Notice submitted his 

resignation as Manager, but not as Member, and argues that because he does not 

provide services as a Member, the Award Agreement’s provisions regarding 

Termination of Service does not apply to him. But even assuming that Moscowitz 

could and did resign as a Manager but not as a Member, his resignation as Manager 

still meets the plain definition of a Termination of Service. The Initial Plan defines 

“Termination of Service” as “the termination, for any reason, including . . . 

resignation, of the Service Provider’s employment or other service with the 

Company, but excluding any termination which includes simultaneous continuous 

service of the Participant.”96 Taking as true Moscowitz’s contention that he did not 

provide services as Member, his resignation as Manager comprises a Termination of 

Service that permits the Company to repurchase his equity under the Award 

Agreement. This is a logical reading of the Award Agreement: if a Service Provider 

no longer wishes to provide any services to the Company, the Company has the 

option to make a clean break as to equity as well.97 

 

95 Id. § 11.14(b).

96 Initial Plan § 1.6.

97 See Focus Fin. P’rs, LLC, v. Holsopple, 2020 WL 6266915, at *19 (Del. Ch. 

Oct. 26,2020) (concluding that in “a manager-managed LLC in which holders of units have 

minimal rights,” where an agreement granting units contains provisions regarding or 
34

2. The Award Agreement Is Supported By 

Consideration.

Moscowitz contends that the Incentive-1 Units were not consideration for the 

Award Agreement because he already owned those Units when he executed the 

Award Agreement. He alleges that a schedule circulated on October 8, 2013 

reflected he owned 46,429 Incentive-1 Units, and asks the Court to infer therefrom 

that he acquired the Incentive-1 Units in October 2013, rather than December 2013 

when he executed the Award Agreement.98 He also alleges that the Award 

Agreement materialized upon LionTree’s mere suggestion, and argues the Court 

should infer that the Award Agreement was an “afterthought.”99 Moscowitz’s 

position is undermined by the Initial Plan and Award Agreement, and the inferences 

he asks the Court to make in considering the schedule and impetus for the Award 

Agreement are not reasonable. 

Each of the Agreements provides that it is supported by valuable 

consideration. The LLC Agreement plainly states that “in consideration of the 

mutual promises herein contained and for other good and valuable consideration, the 

 

restricting the unitholder’s provision of services, those provisions pertain not to the 

unitholder’s status as a unitholder, but rather to his status as a service provider).

98 Am. Compl. ¶ 15; D.I. 33 at 17.

99 D.I. 33 at 6; see also id. at 17–18; Am. Compl. ¶ 16.
35

receipt and sufficiency of which are hereby acknowledged,”100 Moscowitz agreed to 

be bound by its terms, including the Initial Plan.101 

The Initial Plan in turn makes clear that additional issuances would be 

effective upon, and therefore consideration for, an Award Agreement. The Initial 

Plan provides that Service Providers “may be granted” an Award of Incentive-1 

Units thereunder,102 as the Manager “may from time to time, in its sole and absolute 

discretion”103 determine in exchange “for the performance of services to or for the 

benefit of the Company or its subsidiaries . . . in the Participant’s capacity as a 

Member.”

104 It also mandates that for an eligible Service Provider to become a 

“Participant” in receipt of the Award, the Service Provider must execute an Award 

Agreement in the form to be determined by the Manager.105 And “each Award 

 

100 LLC Agreement at 1. 

101 See id. (stating the “Existing Members, by their execution hereof, hereby approve the 

amendment and restatement of the Amended LLC Agreement to this Agreement, and 

approve the rights, preferences, privileges and restrictions of the Members of the Company 

as set forth in this Agreement”); id. § 11.14 (authorizing issuance of Incentive-1 Units 

under the Initial Plan attached as Exhibit A to the LLC Agreement); see generally Initial 

Plan.

102 Initial Plan § 2.1 (emphasis added).

103 Id. § 3.1(a) (emphasis added).

104 Id. § 3.3.

105 See id. § 3.2 (“Each Award shall be issued only pursuant to an Award Agreement, and 

no such Award shall be effective until such Award Agreement, including any ancillary 

documents appended thereto, has been executed by the selected Service Provider. . . . Upon 

full execution of [any such Award Agreement, and any ancillary documents appended 

thereto], the selected Service Provider shall become a Participant . . . .” (emphasis added)); 

see also id. §§ 1.1, 1.5, 3.1, 3.4, 4.1, 4.2.
36

granted to a Participant under this Plan is subject to the terms of the Award 

Agreement pursuant to which such Award was issued and the applicable provisions 

of this Plan and the LLC Agreement.”106 Thus, while the Initial Plan empowers the 

Manager to authorize an issuance of Incentive-1 Units, and conditions that issuance 

on the Service Provider’s execution of an Award Agreement, the Initial Plan does 

not effectuate that issuance. 

The issuance is accomplished by the Award Agreement, which 

unambiguously provides the Award issues and becomes effective upon the Award 

Agreement’s execution. The Award Agreement provides that “[e]ffective as of the 

Grant Date,” December 17, 2013, the Company issued the Award “under the Plan, 

which, once the full amount of Incentive-1 Units authorized as of the Grant Date . . . 

has been issued, will represent a Percentage Interest of 0.1%,”107 and identifies a 

vesting schedule.108 Moscowitz, as the Participant, acknowledged receipt of 46,429 

Incentive-1 Units as of that date in exchange for his “performance of services to or 

for the benefit of the Company and/or its subsidiaries in [his] capacity as a 

 

106 Id. § 6.1 (emphasis added); accord id. at 1 (stating that Incentive-1 Units granted 

thereunder “shall be governed by, and shall be subject to, the transfer and other restrictions 

contained in (a) this Plan, (b) an ‘Award Agreement’ . . . to be executed by and between 

the Company and each such Participant and (c) the [LLC Agreement], including all exhibits 

and schedules thereto”).

107 Award Agreement § 2.1 (emphasis added).

108 Id. § 3.1(a).
37

Member;”

109 his vesting schedule based on his continued provision of services;110

and his agreement to the terms and restrictions.111 

The Initial Plan and Award Agreement also plainly provide that each recipient 

must execute a Section 83(b) election for the Award to issue.

112

 Moscowitz executed 

that 83(b) Election, attached as Exhibit A to the Award Agreement.113 He attested 

therein that “the date on which the above property was transferred to the undersigned 

was December 17, 2013, and the taxable year to which this election relates is 

2013.”

114

 

From the Initial Plan’s plain terms, Incentive-1 Units issue and vest only upon 

the execution of an Award Agreement and corresponding 83(b) Election. The 

Agreements and 83(b) Election unambiguously provide that Theory issued 

Moscowitz 46,429 Incentive-1 Units on December 13, 2013, as present 

consideration for the Award Agreement.115 The October schedule does not support 

 

109 Id. § 2.1.

110 Id. § 3.1(a).

111 See id. § 2.1.

112 Id. § 7; Initial Plan § 6.4.

113 See Award Agreement, Ex. A.

114 Id. ¶ 3.

115 See Seiden II, 2017 WL 1093937, at *6–7 (holding that an agreement was supported by 

present consideration where nothing in the agreement itself supported an inference that the 

consideration given was “past consideration” or nothing more than the party “was already 

entitled to receive,” and rejecting the nonmovant’s attempts to create issues of fact as to 

those points); see also James J. Gory Mech. Contr., Inc., 2011 WL 6935279, at *2 (“A 

commitment to honor a pre-existing obligation works neither benefit nor detriment; 
38

a reasonable inference that the Award issued or became effective upon the 

schedule’s distribution.116 The more reasonable inference is that the schedule 

reflected the anticipated issuance. And LionTree’s suggestion may have spurred the 

Award Agreement’s execution, but there is no basis to conclude the Award 

Agreement did not effectuate the issuance as it, and the Initial Plan, contemplated. 

Moscowitz’s allegations, in the context of the Agreements, do not state a claim that 

the Award Agreement lacked consideration. 

Moscowitz also contends the 46,429 Incentive-1 Units are inadequate 

consideration for the Award Agreement’s consequences, and that the Initial Plan and 

Award Agreement are unenforceable because he was unfairly surprised by their 

terms. Moscowitz contends that he “agreed to accept the Incentive-1 Units to 

address Theory’s math (and associated tax) problem,” but he did not foresee that he 

would risk losing his entire equity stake in Theory by accepting another 0.1% of the 

 

therefore, ‘a promise to fulfill a pre-existing duty, such as a promise to pay a debt owed, 

cannot support a binding contract’ because consideration for the promise is lacking.” 

(alteration omitted) (quoting First State Staffing Plus, Inc. v. Montgomery Mut. Ins. Co.,

2005 WL 2173993, at *9 (Del. Ch. Sept. 6, 2005))).

116 See Seiden II, 2017 WL 1093937, at *6–7 (looking to the terms of the agreement at issue 

to determine whether it was supported by consideration); Acker, 2004 WL 1230945, at *3–

4 (rejecting argument that an agreement was unsupported by consideration where the 

complaint and documents integral to it “plead[] . . . out a viable claim that the [agreements] 

were without consideration”); H-M Wexford LLC, 832 A.2d at 139 (stating a claim is 

dismissed “where the unambiguous language of documents upon which the claims are 

based contradict the complaint’s allegations”).
39

company.

117

 He argues that “[w]hen [he] agreed to receive an additional 0.1% of 

equity in the form of Incentive-1 Units, he had not seen the Award Agreement or 

any of its terms (including the clause purportedly regarding 90 days’ written notice 

of resignation, and the overbroad ‘Forfeiture Termination’ provision that are at issue 

in this case)”118 and that “all he had seen related to the Incentive-1 Units was the 

‘Initial Plan,’ which did not contain a written resignation notice provision, and which 

solely contemplated the limited forfeiture of unvested Incentive-1 Units upon 

‘Termination of Service of a Participant.’”119 Moscowitz argues that he agreed to 

accept the Incentive-1 Units “[b]ased on the information available to him at the 

time.”120

While Moscowitz’s characterization of the balance between consideration and 

consequence as “draconian” is understandable,121 three principles foreclose relief. 

 

117 D.I. 33 at 17; see also id. at 33–34 (contending dismissal “would be improper as there 

are numerous questions of fact and matters for discovery regarding the purpose of the 

Award Agreement [and] the parties’ intent with respect to Paragraph 3.3 and the Award 

Agreement as a whole”); id. at 38 (“The Court should deny the motion and reject Theory’s 

attempt to use the Award Agreement, which the Amended Complaint alleges to conflict 

with the Operating Agreement, to eliminate all of Moscowitz’s equity, when its sole 

purpose was to round out Moscowitz’s holdings, in a tax efficient manner, by granting him 

less than one percent of his equity. No reasonable person, including initially Theory, would 

have expected that a rounding device could be used to deprive Moscowitz of all of his 

equity in the Company.”).

118 Id. at 17.

119 Id. at 18 (emphasis in original).

120 Id. at 17.

121 Id. at 37, 49.
40

First, even if the parties intended for Moscowitz to receive the Incentive-1 Units and 

execute the Award Agreement only to correct a “math problem,” where the contract 

language is clear and unambiguous, as it is here, the Court must ascertain the parties’ 

intent by looking to the Agreements’ plain terms.122 Those terms do not reflect a 

purpose of curing a rounding error, and they do not reflect Moscowitz’s concern that 

the 0.1% stake was inadequate consideration for the significant enumerated 

consequences. Instead, the Initial Plan predicted that the parties intended for 

Incentive-1 issuances to carry forfeiture and repurchase terms as determined in the 

Manager’s sole discretion and enumerated in the Award Agreement.

123

 The Award 

Agreement reflects the parties’ intent that in exchange for the Incentive-1 Units, the 

Company could cash Moscowitz out if he and the Company parted ways, whether 

or not for Cause.124

Second, Moscowitz is a sophisticated party who was on notice of the 

Agreements’ terms. Delaware law presumes that sophisticated parties like 

Moscowitz have read and are aware of the terms of the agreements they sign. “A 

party to a contract cannot silently accept its benefits, and then object to its perceived 

 

122 See Nw. Nat’l Ins. Co., 672 A.2d at 43.

123 See Initial Plan §§ 1.1, 1.2, 1.6, 2.2, 3.1, 3.2, 4.1, 4.2.

124 See Award Agreement §§ 3.3, 3.4.
41

disadvantages, nor can a party’s failure to read a contract justify its avoidance.”125 

Moscowitz is no exception. He was aware of the consequences imposed by the 

Award Agreement, as foretold by the Operating Agreement and Initial Plan. The 

Initial Plan explicitly states that any Award is subject to the terms and restrictions 

set forth in the Award Agreement; that the Award Agreement “shall contain such 

additional terms, conditions or restrictions as the Manager shall determine;”126 and 

that such restrictions may include “forfeiture of awards” “upon any Termination of 

Service of a Participant.”127 And the Initial Plan vested the Manager with sole 

discretion to “determine the effect of all matters and questions relating to 

Termination of Service, including when a Termination of Service is effective” and 

“the question of whether a Termination of Service resulted from a discharge for 

Cause.” 128 The Initial Plan also put Moscowitz on notice that “the Incentive-1 Units 

shall be subject to such restrictions as the Manager shall determine in its sole 

discretion, including . . . repurchase rights,” which “may, in the Manager’s sole 

 

125 Pellaton v. Bank of N.Y., 592 A.2d 473, 477 (Del. 1991) (alteration omitted) (quoting 

Graham v. State Farm Mut. Auto. Ins. Co., 565 A.2d 908, 913 (Del. 1989)). 

126 Initial Plan § 3.1; see also id. §§ 3.1(b), 4.1, 4.2(a), 5.2.

127 Id. § 4.1.

128 Id. § 1.6; see also id. §§ 1.2, 1.5.
42

discretion, be contained in the applicable Award Agreement or in such other 

agreement as the Manager shall determine.”129 

Despite this notice and the plain terms of the Award Agreement, Moscowitz 

signed the Award Agreement in exchange for the Incentive-1 Units, no matter how 

few. By executing the LLC Agreement and approving the Initial Plan, Moscowitz 

attested to his understanding and agreement that any “issuance of the Incentive-1 

Units shall be conditioned on [his] consent to such restrictions or [his] entering into 

such agreement or agreements.”130 Moscowitz did not bargain for more favorable 

terms or more valuable consideration. If he failed to read the Agreements he signed, 

“he alone is responsible for his omission.”131 And because he had no interest in or 

entitlement to the Incentive-1 Units until he executed the Award Agreement, he 

could have declined the Award and freed himself of the notice, forfeiture, and 

repurchase provisions he now complains of. But Moscowitz affirmatively elected 

to bind himself to the Award Agreement’s terms by accepting 46,429 Incentive-1 

Units from Theory in December 2013. Moscowitz is bound by the language of the 

 

129 Id. § 4.2(a).

130 Id.

131 Pellaton, 592 A.2d at 477 (quoting Upton v. Tribilcock, 91 U.S. 45, 50 (1875)).
43

unambiguous Agreements he signed, even if in retrospect he believes it to be a raw 

deal that did not play out as he expected.132 

Finally, this Court will not weigh the sufficiency of the Award Agreement’s 

consideration. “Even if the consideration exchanged is grossly unequal or of 

dubious value, the parties to a contract are free to make their bargain. Absent fraud 

or unconscionability, the adequacy of consideration is not a proper subject for 

judicial scrutiny.”133 Moscowitz does not plead fraud or seek rescission due to 

unconscionability. Moscowitz’s belief that 46,429 Incentive-1 Units was 

insufficient consideration for the Company’s rights under the Award Agreement is 

of no moment before this Court. 

The Amended Complaint and the Agreements integral thereto fail to state a 

claim that the Award Agreement is unenforceable due to lack of consideration.134

Moscowitz received 46,429 Incentive-1 Units in exchange for his services to Theory 

 

132 See HC Cos., Inc., 2017 WL 6016573, at *5; GRT, Inc., 2012 WL 2356489, at *7; 

W. Willow-Bay Ct., LLC, 2007 WL 3317551, at *9.

133 Acker, 2004 WL 1230945, at *4 (alteration and internal quotation marks omitted) 

(quoting Apfel v. Prudential-Bache Sec., Inc., 616 N.E.2d 1095, 1097 (N.Y.1993)).

134 See id. (stating that “[a]n allegation that a party has received no consideration is a 

conclusion of law and is not entitled to deference” and finding that “the complaint pleads 

itself out of a viable claim that the [agreements] were without consideration”); H-M 

Wexford LLC, 832 A.2d at 139 (stating a claim is dismissed “where the unambiguous 

language of documents upon which the claims are based contradict the complaint’s 

allegations”).
44

and his consent to the restrictions set forth in the Award Agreement. Accordingly, 

Count I is dismissed.

B. The Agreements Permit Theory To Repurchase A 

Participant’s Equity Upon His Resignation, And To Do So At 

A Lower Price If He Resigned Without Notice.

Having concluded the Award Agreement is valid and supported by 

consideration, I turn to whether Moscowitz has stated claims under that Agreement. 

Count II seeks a declaratory judgment that Theory acted improperly under the Award 

Agreement by concluding Moscowitz’s resignation was a Forfeiture Termination 

and accordingly electing to repurchase the Remaining Units. Count III claims that 

Theory breached the Award Agreement, and Count IV asserts Theory breached its 

implied covenant of good faith and fair dealing. Count V alleges conversion, and 

Count VI seeks the remedies of accounting and specific performance.

To the extent these claims depend on whether the Award Agreement permitted 

Theory to repurchase Moscowitz’s units after his resignation, I dismiss them today. 

The Award Agreement is unambiguous; none of its terms are “reasonably 

susceptible of two or more interpretations or may have two or more different 

meanings.”135 The Court therefore ascertains the parties’ intent with respect to the 

 

135 Twin City Fire Ins. Co., 840 A.2d at 628 (quoting Kaiser Alum. Corp., 681 A.2d at 395).

Moscowitz asserts that the Agreements are ambiguous, pointing to supposed 

“conflicts” between the Agreements “that cannot be resolved on a motion to dismiss.” D.I. 

33 at 35; accord id. at 36–37. He contends that because the terms of the Agreements with 

respect to certain issues are not identical, they are in conflict. First, he argues the Initial 
45

 

Plan and Operating Agreement did not address resignation, and that “this concept first 

appears . . . in the Award Agreement.” Id. at 36. Moscowitz is wrong: the Initial Plan 

states that the “Manager, in its absolute discretion, shall determine the effect of all matters 

and questions relating to Termination of Service,” Initial Plan § 1.6, and that conditions 

regarding forfeiture of Awards upon Termination of Service, other than those stated in the 

Initial Plan, shall be determined at the Manager’s discretion and detailed in the Award 

Agreement, see id. §§ 1.2, 1.6, 3.1(b), 4.1, 4.2. 

He then argues that the Agreements address Forfeiture of Awards in conflicting 

ways. Recognizing for this argument that Section 4 of the Initial Plan contemplates 

forfeiture and repurchase, he states that “the later prepared Award Agreement contemplates 

broad forfeiture of not only just the Incentive-1 Units that it granted, but also ‘Participant’s 

vested Common Units and Participant’s Preferred Units.’” D.I. 33 at 37 (quoting Award 

Agreement § 3.3(b)). But the Initial Plan provides for a forthcoming Award Agreement 

“contain[ing] such terms and conditions as the Manager shall determine,” Initial Plan § 3.2, 

including for forfeiture and repurchase, id. §§ 4.1, 4.2. The Award Agreement is more 

specific than the Initial Plan by design: its terms are complementary, not conflicting.

Finally, Moscowitz contends the Award Agreement’s parameters on a signatory’s 

relationship with the Company conflict with the LLC Agreement. Without much 

explanation, Moscowitz concludes that the definitions of “Cause” provided in the Award 

Agreement conflict with the LLC Agreement, and asserts he is bound only by clauses in 

the LLC Agreement addressing a Founder’s performance. See D.I. 33 at 36, 39. No such 

conflict exists. 

As Founder, the LLC Agreement defines instances in which the Company could 

take action against Moscowitz for “Cause,” including “a Founder’s continuing failure to 

perform such Founder’s assigned duties or responsibilities as an employee of the Company, 

consistent with the Founder’s position with the Company, as directed or assigned by the 

Board . . . after written notice thereof.” LLC Agreement § 3.1, “Cause” (a). This definition

has limited import: it addresses a Founder’s Common and Preferred Units in the event of 

a change of control, in his capacity as Founder. See id. § 7.2(c)(ii) (stating that “Upon any 

Change in Control of the Company . . . any remaining unvested Units owned by a Founder 

at such time shall vest upon such Founder’s termination without Cause”). And “Cause” 

under the LLC Agreement includes

a Founder’s material breach of the terms of any agreement between the 

Founder and the Company (or any subsidiary of the Company), unless the 

Founder has cured such breach (to the extent that such breach is curable) 

within thirty (30) days following the Founder’s receipt of written notice from 

the Board specifying with particularity the alleged breach.

Id. § 3.1, “Cause” (e). This definition contemplates that Moscowitz would enter into 

agreements with the Company that are separate and distinct from the LLC Agreement, 

including the Award Agreement. The consequences of breaching those agreements would 
46

Award Agreement “by giving the language its ordinary and usual meaning.”136 

Looking to the Award Agreement’s plain language, I determine that Theory enjoys 

a repurchase right, whether or not Moscowitz’s resignation is considered a Forfeiture 

Termination. 

But to the extent these claims require consideration of the propriety and effect 

of the Resignation and Second Resignation Notices, the Motion is denied, as 

explained infra. Accordingly, for the reasons I will explain, Count IV is dismissed, 

and Counts II and III are dismissed in part; the Motion is denied with respect to the 

remaining portions of Counts II and III, as well as Counts V and VI. 

 

redound to his role as a Founder. The LLC Agreement’s definition of Cause in his role as 

Founder does not conflict with the definition in Section 3.3(a) in his role as a Participant. 

Compare id., and id. § 3.3, “Cause” (a), with Award Agreement § 3.3(a). In fact, it is 

consistent with the Award Agreement’s definition of Cause in Section 1.2(a), which as 

explained in Section II.B.1 infra, is separate and distinct from the Award Agreement’s 

second definition of Cause in Section 3.3(a). Compare LLC Agreement § 3.1, “Cause” 

(e), with Award Agreement § 1.2(a). 

Ultimately, the Agreements subject Moscowitz to three complementary definitions 

of Cause: (1) breach of the LLC Agreement’s duties and responsibilities as Founder and 

Manager; (2) breach of the Award Agreement’s obligations imposed in exchange for 

Incentine-1 Units; and (3) Termination of Service without 90 days’ written notice. These 

definitions do not conflict.

136 Nw. Nat’l Ins. Co., 672 A.2d at 43.
47

1. Voluntary Resignation Without 90 Days’ 

Written Notice Is A Termination Of Service For 

Cause Without An Opportunity To Cure.

Moscowitz resigned from Theory voluntarily. That resignation constituted a 

Termination of Service under the Award Agreement.137 His Resignation Notice 

gave “notice of [his] immediate resignation as a Manager of the Company,”138 rather 

than 90 days’ written notice. Moscowitz claims Theory improperly deemed his 

resignation without notice to be a Termination of Service for Cause, and therefore a 

Forfeiture Termination resulting in repurchase of the Remaining Units under Section 

3.3(b). He also contends Theory deprived him of a right to notice and opportunity 

to cure. Theory seeks dismissal on the grounds that it followed the Award 

Agreement in responding to Moscowitz’s voluntary resignation. For purposes of 

construing the Award Agreement, I assume Moscowitz voluntarily resigned without 

90 days’ notice via the Resignation Notice; as explained below, this assumption is 

disputed and not resolved by this opinion.

Some consequences of Moscowitz’s Termination of Service depend on 

whether it is considered “for Cause” or “other than for Cause.”139 Section 3.3(b) 

 

137 See Initial Plan § 1.6 (defining “Termination of Service” to include “resignation” of the 

“Service Provider’s employment or other service with the Company . . . , but excluding 

any termination which includes simultaneous continuous service of the Participant with the 

Company”); Award Agreement § 1 (incorporating the Initial Plan’s defined terms). 

138 Resignation Notice at 1 (emphasis added). 

139 See Award Agreement §§ 3.3(a), 3.3(b), 3.4.
48

addresses Termination for Cause.140 The Award Agreement defines “Cause” in two 

ways, depending on who is severing the relationship. First, Section 1.2 sets forth six 

occurrences that justify Theory terminating a Participant’s service for “Cause” “as 

determined in good faith by the Manager.”141 Under Section 1.2(a), in the event the 

Manager perceives the Participant has committed a “material violation” of the 

Award Agreement, termination will be for Cause under Section 3.3(b).142 In view 

of the Manager’s broad discretion to determine whether a material violation has 

occurred, Section 1.2(a) affords a Participant the right to notice of the perceived 

breach and an opportunity to cure.143 

Second, Section 3.3(a) identifies Termination of Service for Cause by the 

Participant: “in the event Participant voluntarily terminates Participant’s service and 

fails to provide the Manager with written notice” during the 90-day Notice Period in 

advance of such Termination of Service (the “For Cause Provision”).

144

 If the 

Participant resigns with 90 days’ written notice, then the voluntary Termination of 

 

140 As explained below, this Section addresses both termination “by the Company” and 

voluntary termination by the Participant. See infra Section II.B.3.

141 Award Agreement § 1.2.

142 Id. § 1.2(a); see also id. § 3.3(b).

143 See id. § 1.2(a).

144 Id. § 3.3(a). The LLC Agreement also mandates that notice be written: “Any notice or 

other communication required by this Agreement must be in writing. Notices and other 

communications will be deemed to have been given when delivered by hand or dispatched 

. . . .” LLC Agreement § 17.2.
49

Service is not for Cause. That Section does not include the right to notice and an 

opportunity to cure. The parties could have elected to include such a right, but 

explicitly did not. Rather, the parties agreed that a Participant voluntarily 

terminating service must provide 90 days’ written notice for that termination to be 

deemed “other than for Cause.”145 If the Participant provides such notice, affording 

Theory an opportunity to off-ramp that person, then the Participant enjoys more 

favorable terms. But if the Participant resigns without 90 days’ written notice, the 

Participant triggers a Termination of Service for Cause.146 

Moscowitz argues that his Termination of Service could not be for Cause 

unless his conduct triggered an event listed in Section 1.2.147 He also argues “Theory 

was required to evaluate Moscowitz’s action in good faith and to give Moscowitz 

notice and an opportunity to cure” under Section 1.2(a).148 

But Section 1.2’s triggers for Cause are separate and distinct from, and in 

addition to, Section 3.3(a)’s trigger. While there are many grounds for which Theory 

 

145 Award Agreement § 3.3(b).

146 I note that in view of the broad discretion vested in the Manager under the Initial Plan 

and Award Agreement with respect to Terminations of Service, it is possible that the 

Manager could afford a Participant who has voluntarily resigned without notice and 

therefore triggered Section 3.3(a)’s For Cause Provision notice and an opportunity to cure. 

That did not happen here: Theory’s Manager held Moscowitz to the terms of the Award 

Agreement.

147 See D.I. 33 at 41–42.

148 Id. at 43 (internal quotation marks omitted) (citing Award Agreement § 1.2(a)).
50

could terminate a Participant for Cause, a Participant may also effectuate his own 

termination for Cause by resigning without sufficient notice. Moscowitz’s 

termination would be for Cause if the Company decided he triggered the conditions 

in Section 1.2, or if he decided to resign without notice under Section 3.3(a)’s For 

Cause Provision. Moscowitz’s voluntary resignation without written notice 

triggered not Section 1.2(a), but rather Section 3.3(a)’s For Cause Provision, which 

does not afford him notice or an opportunity to cure.

In an attempt to avail himself of Section 1.2(a)’s right to notice and 

opportunity to cure, Moscowitz argues that by electing to forego the Notice Period 

under Section 3.3(a), he was “violating the contract” and triggered Section 1.2(a).149 

For Moscowitz to prevail, the Court would have to transmogrify his voluntary 

resignation into a Manager-discerned violation of the Award Agreement. But as 

explained, Section 3.3 deems a Participant’s voluntary resignation to be for Cause 

separately from the additional Cause triggers in Section 1.2. 

In order for resignation without written notice to be a violation of the Award 

Agreement, the Court would also have to read into the For Cause Provision an 

obligation or duty requiring Moscowitz to provide 90 days’ written notice before 

resigning.

150

 The For Cause Provision contemplates the “event” that the Participant 

 

149 Id. at 44.

150 See GRT, Inc., 2012 WL 2356489, at *7 (“For a court to read into an agreement a 

contract term that was expressly considered and rejected by the parties in the course of 
51

does not give written notice, but does not require such notice. It does not state that 

the Participant “shall provide” or “is required to provide” 90 days’ written notice 

prior to a voluntary termination, nor does it command that the Participant give notice 

in any particular way. Rather, the For Cause Provision’s only mandate is that 

voluntary Termination of Service without notice “shall be considered for ‘Cause’ 

for purposes of the Agreement.”151 It obliges the Manager to categorize a voluntary 

Termination of Service without notice as for Cause; it imposes no obligation on the 

Participant. 

Under Section 3.3’s plain terms, resignation without 90 days’ written notice 

“shall be considered for Cause.”152 Moscowitz was not contractually obligated to 

give notice under Section 3.3(a); he did not breach the Award Agreement by 

resigning without notice; and he is not entitled to notice and an opportunity to cure 

his own resignation. If Moscowitz opted to resign effective immediately, he 

effectuated a Termination of Service for Cause, and he must endure the contractual 

consequences of his decision.

 

negotiations would be to create new contract rights, liabilities and duties to which the 

parties had not assented in contravention of that settled role.” (internal quotation marks 

omitted) (quoting Allied Cap. Corp., 910 A.2d at 1030)).

151 Award Agreement § 3.3(a) (emphasis added).

152 Id. (internal quotation marks omitted).
52

2. Termination Of Service For Cause Triggers 

Section 3.3(b)’s Forfeiture And Repurchase 

Provisions.

A Termination of Service for Cause under Section 3.3(a) results in a Forfeiture 

Termination under Section 3.3(b).153 Theory repurchased Moscowitz’s Remaining 

Units on the grounds that his resignation triggered a Forfeiture Termination and the 

cheaper repurchase price Theory enjoys as a result.154 Moscowitz contends his 

resignation cannot constitute a Forfeiture Termination because the contractual 

provision describing Forfeiture Terminations addresses termination “by the 

Company,” not voluntary resignations.155 Theory asserts that Moscowitz 

misconstrues the contract. In considering the effect of a voluntary Termination of 

Service for Cause, I again put aside for now the issues associated with Moscowitz’s 

“conditional” resignation and the effect of his Second Resignation Notice, and 

assume Moscowitz’s immediate Resignation Notice, which did not give 90 days’ 

written notice, is effective. 

When determining whether a Participant’s voluntary termination can 

constitute a Forfeiture Termination under Section 3.3(b), I must construe the Award 

Agreement “as a whole,”

156 “giv[ing] effect to all of the terms of the instrument and 

 

153 See id. §§ 3.3(a), 3.3(b).

154 See id. § 3.3(b); Am. Compl. ¶ 27.

155 See D.I. 33 at 41–42.

156 See Nw. Nat’l Ins. Co., 672 A.2d at 43.
53

read[ing] it in a way that, if possible, reconciles all of its provisions,” “as opposed 

to one that creates an inconsistency or surplusage.”157 While Section 3.3 presents 

some obstacles to a fully reconciled reading, I conclude reading Forfeiture 

Terminations to exclude voluntary Terminations of Service for Cause would do 

untoward violence to the contract. 

Section 3.3 is titled “Effect of Termination of Service on Interests.”158 Section 

3.3(a), entitled “Termination other than for Cause,” begins by explaining what 

happens to a Participant’s Interests if the Company terminates the Participant’s 

service “for any reason other than Cause.”

159

 It goes on to address voluntary 

Termination of Service by the Participant and, in the For Cause Provision, identifies 

the circumstances under which a Participant subjects himself to the consequences in 

Section 3.3(b).160 Thus, while Section 3.3(a) begins with the phrase “[i]n the event 

of Participant’s Termination of Service by the Company,” that language refers to 

Company terminations other than for Cause, but does not apply to its subsequent 

discussion of voluntary terminations or the For Cause Provision.161

 

157 GRT, Inc., 2012 WL 2356489, at *4.

158 Award Agreement § 3.3.

159 Id. § 3.3(a).

160 Id.

161 Id. (emphasis added).
54

Section 3.3(b), titled “Termination by the Company for Cause,” defines a 

Forfeiture Termination as “Participant’s Termination of service by the Company 

and/or its subsidiaries for Cause.”162 In a vacuum, the phrase “by the Company” in 

the definition of Forfeiture Termination would exclude voluntary terminations. But 

limiting Forfeiture Terminations to Terminations of Service “by the Company” 

would effectively read out the For Cause Provision and render it surplusage. Section 

3.3(a) goes to the trouble of identifying voluntary terminations “for Cause;” Section 

3.3(b) is the only provision that can give meaning to that identification. Section 

3.3(b) must be interpreted to give effect to the For Cause Provision. While this 

interpretation reads out the phrase “by the Company” from the definition of a 

Forfeiture Termination, this does less violence to the contract than reading out the 

For Cause Provision. I construe Section 3.3 to first categorize voluntary resignations 

without sufficient notice as for Cause, and then to categorize all terminations for 

Cause, either by the Company or by the Participant, as Forfeiture Terminations. 

Assuming Moscowitz’s Resignation Notice effected his immediate 

resignation, his Remaining Units are subject to Section 3.3(b)’s consequences: the 

Company’s option to repurchase them at a predetermined cost per unit.163 Theory 

 

162 Id. § 3.3(b) (emphasis added).

163 Id. § 3.3(b)(i)–(iii). The parties do not dispute that Moscowitz’s Remaining Units vested 

or the timeliness of Theory’s Repurchase Letter.
55

sought to exercise that option by delivering its Repurchase Letter on January 17, 

2017.164 Again assuming Moscowitz resigned without 90 days’ written notice,

Theory’s Repurchase Letter was authorized by the Award Agreement’s plain terms. 

Beyond the contractual language justifying it, Moscowitz raises two concerns 

regarding the Repurchase Letter. First, he contends that Theory somehow acted 

wrongfully by exercising its repurchase right after Moscowitz accepted the Tender 

Offer:165 “Had Theory believed the position that it has taken now in this litigation, 

it should have refused to buy Moscowitz’s shares and [] advised him that it would 

be purchasing them for $0.10 per share (or $144,948.90). Instead, Theory performed 

on the tender offer and paid Moscowitz $2,388,757.87 for his equity.”166 He argues 

that under Theory’s reading of the Award Agreement, Theory should have 

“require[d] the forfeiture of all of Moscowitz’s Theory Units,” rather than 

“permitt[ing] Moscowitz to participate in the tender offer.”167

Moscowitz misreads the plain language of Section 3.3(b), which provides that 

“the Company shall have the option” within a one-year period to repurchase his units 

 

164 Am. Compl. ¶ 27.

165 See id. ¶¶ 27, 58; D.I. 33 at 27, 29. Moscowitz primarily uses the Tender Offer as 

support for his conditional resignation. As discussed below, I do not address this issue 

today, as the Motion is denied to that effect.

166 D.I. 33 at 27.

167 Id. at 48 (emphasis in original). 
56

at fixed prices.168 An “option” is “[a] contract by which a property owner agrees 

with another party that the latter may buy the property at a fixed price within a 

specified time; the right or privilege to buy property at the election of the purchaser” 

or “[t]he right (but not the obligation) to buy or sell a given quantity of securities, 

commodities, or other assets at a fixed price within a specified time.”169 Theory 

could exercise its repurchase option at any time before December 1, 2017, regardless 

of whether it purchased some of Moscowitz’s units in the Tender Offer. The 

Company had the “right to choose” when and if it purchased all or some of the 

Remaining Units as circumscribed by the Award Agreement.170 Theory’s business 

decision to buy some of Moscowitz’s units in the Tender Offer does not make the 

Award Agreement inapplicable to his Remaining Units.171

 

168 Award Agreement § 3.3(b) (emphasis added).

169 Option, Black’s Law Dictionary (11th ed. 2019) (emphasis added); accord Option, 

Merriam-Webster Online Dictionary, https://www.merriamwebster.com/dictionary/option (last visited October 27, 2020) (defining “option” as “the 

power or right to choose” or “freedom of choice,” “a privilege of demanding fulfillment of 

a contract on any day within a specified time,” and “a contract conveying a right to buy or 

sell designated securities, commodities, or property interest at a specified price during a 

stipulated period”).

170 Option, Merriam-Webster Online Dictionary, https://www.merriamwebster.com/dictionary/option (last visited October 27, 2020).

171 Moscowitz does not assert estoppel, waiver, or any other doctrinal grounds for 

modifying the terms of the Award Agreement based on the parties’ participation in the 

Tender Offer.
57

Next, Moscowitz argues that Theory breached Section 3.3(b)(iii)’s pricing 

structure by stating in its Repurchase Letter that it was acquiring the Remaining 

Units at $0.10 per unit.172 Sections 3.3(b)(i)–(iii) fix the prices for Theory’s 

repurchase option in the event of a Forfeiture Termination. Those prices vary based 

on the type of unit Theory elects to repurchase.173 Section 3.3(b)(i) allows Theory 

to purchase vested Incentive-1 Units at $0.10 per unit.174 Section 3.3(b)(ii) allows 

Theory to purchase vested Common Units at “the lesser of (1) the Fair Market Value 

of such Common Units and (2) the greater of (A) the original cost . . . paid by the

Participant in respect of such Common Units and (B) $0.10 per Common Unit.”175 

Moscowitz alleges that the Repurchase Letter asserted a $0.10 repurchase 

price for both Common and Incentive-1 Units.176 But he contends this price was a 

breach for the first time in briefing, not in his Amended Complaint. “Briefs relating 

to a motion to dismiss are not part of the record and any attempt contained within 

such documents to plead new facts or expand those contained in the complaint will 

 

172 D.I. 33 at 45–46.

173 Compare Award Agreement § 3.3(b)(i), with id. § 3.3(b)(ii), and id. § 3.3(b)(iii).

174 Id. § 3.3(b)(i).

175 Id. § 3.3(b)(ii) (emphasis added).

176 Am. Compl. ¶ 28 (“Theory also claimed that a Forfeiture Termination allowed Theory 

to repurchase Moscowitz’s Incentive-1 Units and Common Units—which Theory counted 

as 2,789,797 Common Units and 46,429 Incentive-1 Units—at $0.10 per Unit.”).
58

not be considered.”177 And a plaintiff “cannot defeat an argument raised in a motion 

to dismiss by proffering an after-the fact theory for this first time in his answering 

brief.”178 I need not consider this new allegation on the Motion.179 

Under the plain terms of the Award Agreement, resigning without 90 days’ 

written notice triggers a Forfeiture Termination under Section 3.3(b). A Forfeiture 

 

177 Orman v. Cullman, 794 A.2d 5, 28 n.59 (Del. Ch. 2002).

178 In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *23 (Del. Ch. 

Mar. 31, 2017) (citing Dolphin Ltd. P’ship I, L.P. v. Gupta, 2007 WL 315864, at *1 (Del. 

Ch. Jan. 22, 2007) (refusing to consider an allegation not found in the complaint when 

addressing plaintiff's response to a motion to dismiss), and OLL Ventures, Inc. v. Woodland 

Mills Assocs., L.P., 2001 WL 312452, at *1–2 (Del. Ch. Mar. 8, 2001) (same)).

179 See Gerber v. EPE Hldgs., LLC, 2013 WL 209658, at *10 (Del. Ch. Jan. 18, 2013)

(concluding where the plaintiff made an argument for the first time in briefing that “the 

Court . . . need to consider only the claims fairly asserted in the [complaint],” but choosing 

to “briefly address” plaintiff’s arguments anyway). In reply, Theory explains that even if 

the Court were to consider this allegation, Moscowitz’s claim would fail because Theory 

reached the $0.10 per unit repurchase price for the Common Units based on the formula 

set forth in Section 3.3(b)(ii). See D.I. 35 at 22–24. Moscowitz alleges that his capital 

contribution to Theory was $400,000, and that in return he received 3,829,286 Common 

Units and 400,000 Preferred Units. Am. Compl. ¶¶ 9, 12; see also LLC Agreement sched. 

A. If no Preferred Units issued at all, dividing his total contribution by the total number of 

Common Units issued indicates Moscowitz would have paid approximately 

$0.1044581156 per Common Unit. See Am. Compl. ¶¶ 9, 12. Because Moscowitz also 

purchased 400,000 Preferred Units with his initial capital contribution, it is reasonable to 

infer that the purchase price paid per Common Unit was less than $0.10 per unit. And 

Moscowitz concedes that the Fair Market Value of his Common Units is greater than the 

exercise price of Theory’s option under the Award Agreement. See D.I. 33 at 30 

(“Moscowitz went from being a co-founder of Theory with an interest worth at least $1.648 

per share (using the tender offer price) (or $4,674,100.45) to just $0.10 per share (or

$283,622.60). The disparity in those figures is much greater today given Theory’s 

increased value.”). Based on that explanation, Theory’s conclusion that it reached the 

$0.10 price stated in the Repurchase Letter based on Section 3.3(b)(ii)’s formula is

reasonable. (Nothing in the Award Agreement required Theory to explain its reasoning 

behind the repurchase price.) At bottom, Moscowitz failed to allege his belief that Theory 

used the wrong original price or fair market value in his Amended Complaint.
59

Termination gives Theory the option, or right, to repurchase some or all of the 

Participant’s vested units at fixed prices for one year following the resignation. 

Moscowitz fails to state a claim for breach of the Award Agreement. 

3. Even If Moscowitz’s Resignation Is Not 

Considered A Forfeiture Termination, Theory 

Has A Call Option Under Section 3.4.

Moscowitz spilled a great deal of ink trying to avoid labeling his resignation 

as a Forfeiture Termination, claiming Theory has no right, at any price, to repurchase 

his Remaining Units. But even if Moscowitz resigned with 90 days’ written notice 

(as he purports to have done in his Second Resignation Notice), his resignation 

would still trigger a repurchase right—just at a better price for him. Any dispute 

about the fate of Moscowitz’s Remaining Units is limited to the price at which they 

were repurchased. 

Section 3.4 addresses the “Company’s Repurchase Right” “[i]n the event of 

Participant’s Termination of Service for any reason other than a Forfeiture 

Termination.”180 A voluntary Termination of Service that is not a Forfeiture 

Termination initiates the Company’s Repurchase Right, and the Company “in its 

sole discretion, may exercise a right to repurchase for Fair Market Value some or all 

of Participant’s vested” units.181 This “Call Right” allows Theory to repurchase such 

 

180 Award Agreement § 3.4 (emphasis added).

181 Id.
60

units for one year following the Participant’s Termination of Service at Fair Market 

Value.182 If Theory chooses to exercise its Call Right, then the repurchased units 

“shall be cancelled by the Company without any further action of Participant, and 

Participant shall have no further right or interest in or with respect to such 

Interests.”183

Thus, even if Moscowitz is correct that his was not a Forfeiture Termination, 

Theory had the right to purchase some or all of the Remaining Units for one year 

following his resignation.184 The only distinction in that case would be the 

repurchase price. Rather than paying $0.10 per unit, Section 3.4 would compel 

Theory to pay Moscowitz Fair Market Value. 

4. Counts II And III Are Dismissed In Part.

As explained, Theory had the right to repurchase all of the Remaining Units 

under either Section 3.3(b) or Section 3.4 of the Award Agreement. Thus, to the 

extent Count II seeks a declaratory judgment that Theory was not contractually 

entitled to repurchase those units, Count II is dismissed in part. 

 

182 Id.

183 Id.

184 This would also be the case assuming Moscowitz was correct that his was not a 

Termination of Service for Cause “by the Company” that triggered a Forfeiture 

Termination under Section 3.3(b). And it is the case regardless of which of Moscowitz’s 

resignation notices was effective.
61

Similarly, Count III is dismissed in part.185 Count III alleges Theory breached 

the Award Agreement by 

purporting to redeem Moscowitz’s membership Units; failing to give 

notice to Moscowitz of any purported breach of the Award Agreement; 

failing to provide any opportunity to cure such breach to Moscowitz;

improperly construing the Award Agreement such that Moscowitz’s 

[Resignation Notice] gives rise to a Forfeiture Termination; improperly 

terminating Moscowitz’s membership interest in Theory; and 

converting, alienating, or otherwise dealing with Moscowitz’s Units 

and/or membership interest without Moscowitz’s consent.186

Assuming Moscowitz resigned via the Resignation Notice, Theory had the express 

right under Section 3.3 to redeem the Remaining Units. Even if Moscowitz had 

given adequate written notice of his resignation, Theory could still repurchase the 

Remaining Units, and the dispute would be limited to the price. Theory had the right 

to redeem Moscowitz’s units and terminate his membership interest. 

I have also concluded that the Award Agreement did not impose on 

Moscowitz an obligation to give 90 days’ written notice of his resignation that he 

breached, nor did it give Moscowitz the right to notice and an opportunity to cure. 

Count III is dismissed in part. 

 

185 See Sparton Corp. v. O’Neil, 2017 WL 3421076, at *5 (Del. Ch. Aug. 9, 2017) (“In 

order to allege a breach of contract, a plaintiff must show the existence of a contract, a 

breach of the contractual obligations, and damages to the plaintiff as a result of the 

breach.”).

186 Am. Compl. ¶ 51.
62

However, the Motion is denied with respect to Count II’s request that the 

Court determine the validity and effect of the Resignation and Second Resignation 

Notices and Count III’s contention that Theory improperly construed the 

Resignation Notice for the reasons explained in Section II.C below. 

5. Count IV Fails To State A Claim For Breach Of 

The Implied Covenant Of Good Faith And Fair 

Dealing.

Count IV is also dismissed because Moscowitz has failed to state a claim for 

breach of the implied covenant of good faith and fair dealing. “The implied covenant 

of good faith and fair dealing inheres in every contract.”187 It “involves a cautious

enterprise, inferring contractual terms to handle developments or contractual gaps 

that the asserting party pleads neither party anticipated.”188 The doctrine “cannot be 

used to circumvent the parties’ bargain, or to create a free-floating duty unattached 

to the underlying legal documents.”189

 

187 Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009).

188 Nemec, 991 A.2d at 1125 (internal quotation marks omitted) (quoting Dunlap v. State 

Farm Fire & Cas. Co., 878 A.2d 434, 445 (Del. 2005)); see also Allen v. El Paso Pipeline 

GP, Co., L.L.C., 113 A.3d 167, 182 (Del. Ch. 2014) (referring to the implied covenant as

“the doctrine by which Delaware law cautiously supplies terms to fill gaps in the express 

provisions of a specific agreement”). 

189 Lonergan v. EPE Hldgs., LLC, 5 A.3d 1008, 1017 (Del. Ch. 2010) (quoting Dunlap,

878 A.2d at 441).
63

We will only imply contract terms when the party asserting the implied

covenant proves that the other party has acted arbitrarily or 

unreasonably, thereby frustrating the fruits of the bargain that the 

asserting party reasonably expected. When conducting this analysis, 

we must assess the parties’ reasonable expectations at the time of 

contracting and not rewrite the contract to appease a party who later 

wishes to rewrite a contract he now believes to have been a bad deal. 

Parties have a right to enter into good and bad contracts, the law 

enforces both.190

Determining whether the implied covenant applies turns on the language of the 

contract itself.191 A claim for breach of the implied covenant cannot be based “on 

conduct authorized by the terms of the agreement.”192 The Court relies on the 

implied covenant “only in that narrow band of cases where the contract as a whole 

speaks sufficiently to suggest an obligation and point to a result, but does not speak 

directly enough to provide an explicit answer.”193 “It must be clear from what was 

expressly agreed upon that the parties who negotiated the express terms of the 

contract would have agreed to proscribe the act later complained of . . . had they 

thought to negotiate with respect to that matter.”194 

 

190 Nemec, 991 A.2d at 1126 (footnotes omitted).

191 Allen, 113 A.3d at 183.

192 Dunlap, 878 A.2d at 441; see also Nemec, 991 A.2d at 1127 (stating the implied 

covenant cannot be used to “contradict[] a clear exercise of an express contractual right”).

193 Lonergan, 5 A.3d at 1018 (quoting Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 

126, 146 (Del. Ch. 2009)).

194 Id. (omission in original) (internal quotation marks omitted) (quoting Katz v. Oak Indus. 

Inc., 508 A.2d 873, 880 (Del. Ch. 1986)).
64

Moscowitz looks to the implied covenant to nullify his immediate resignation 

via the Resignation Notice, or to give him the opportunity to revisit or cure it. The 

Amended Complaint alleges that “[t]o the extent it does not expressly address it, the 

Award Agreement would have implied the opportunity to cure any defective 

resignation—especially where Moscowitz clearly attempted to resign without 

forfeiting his Units—before a Forfeiture Termination could occur.”195 According to 

Moscowitz, “[t]he Award Agreement does not expressly address how any alleged 

deficiencies in a notice of resignation may be addressed,”196 but does “include a 

notice and opportunity to cure provision that suggests the parties did not intend to 

allow any technical deficit in a notice of resignation to result in the unjust result of 

the loss . . . all equity units.”197 Moscowitz theorizes that “[h]ad the parties 

considered it, they would not have agreed that Moscowitz’s attempted, but technical 

non-compliance, with the notice period set forth in Award Agreement, could result 

in the forfeiture of all of Moscowitz’s Theory Units.”198 

Count IV is the type of implied covenant claim this Court routinely rejects: 

the precise conduct Moscowitz complains of is “authorized by the terms of the 

 

195 Am. Compl. ¶ 59.

196 Id. ¶ 56.

197 Id. ¶ 57.

198 Id. ¶ 59 (emphasis in original) (footnote omitted).
65

agreement,” so there is no gap for the implied covenant to fill.199 Contrary to his 

claim, the parties addressed Moscowitz’s perceived “deficiencies” in his resignation, 

namely failure to provide 90 days’ written notice. Section 3.3(a) strictly mandates 

that failure to provide such notice results in a Termination of Service for Cause and 

associated forfeiture and repurchase consequences. Likewise, as explained above, 

Section 3.3 intentionally does not provide Moscowitz with the right to notice and an 

opportunity to cure. And to the extent Moscowitz contends that the parties would 

have agreed that verbal notice or his attempt to resign in compliance with Section 

3.3(a) would avoid loss of all Remaining Units, Section 3.4 squarely addresses that 

concern: any resignation permits repurchase, just at a higher price. 

The parties set firm parameters for voluntary Terminations of Service, and 

clear consequences for resigning without sufficient notice. The parties could have 

bargained for more lenient circumstances for voluntary Terminations of Service, as 

Moscowitz suggests, but opted not to. The Court declines to provide Moscowitz 

with contractual protections he failed to secure for himself at the bargaining table.200 

Count IV is dismissed. 

 

199 Dunlap, 878 A.2d at 441.

200 See Winshall v. Viacom Int’l, Inc., 55 A.3d 629, 636–37 (Del. Ch. 2011) (“[T]he implied

covenant of good faith and fair dealing should not be applied to give plaintiffs contractual 

protections that they failed to secure for themselves at the bargaining table. In other words,

the implied covenant is not a license to rewrite contractual language just because the 

plaintiff failed to negotiate for protections that, in hindsight, would have made the contract 

a better deal. Rather, a party may only invoke the protections of the covenant when it is 
66

C. The Motion Is Denied In Part As To Counts II, III, V, And 

VI Regarding The Effect Of Moscowitz’s Resignation 

Efforts.

Although I have determined the Award Agreement is binding on Moscowitz 

and Theory has the right to repurchase its preferred amount of Moscowitz’s 

Remaining Units, that does not end the inquiry. Each of the remaining counts 

depends in part on the effect and validity of the Resignation Notice, Board Notice, 

Repurchase Letter, Revocation Letter, and Second Resignation Notice. Moscowitz 

contends the Resignation Notice constituted a conditional resignation; that Theory 

accepted his resignation; that after Theory labeled his resignation a Forfeiture 

Termination, he revoked that resignation via the Revocation Letter; and that his 

resignation was effective, but still conditional, under the Second Resignation Notice. 

Theory moved to dismiss Moscowitz’s claims based on his resignation 

narrative by seeking to hold him to the Resignation Notice and contending it was not 

conditional. Theory points out the Award Agreement does not contemplate a 

conditional resignation, could not be modified except by a bilateral instrument in 

writing, and grants Theory’s Manager the “absolute discretion” to “determine the 

effect of all matters and questions relating to Termination of Service, including when 

 

clear from the underlying contract that the contracting parties would have agreed to 

proscribe the act later complained of had they thought to negotiate with respect to that 

matter.” (alteration, footnotes, and internal quotation marks omitted)), aff’d, 76 A.3d 808 

(Del. 2013).
67

a Termination of Service is effective.”201 Theory also needles Moscowitz’s 

purported conditions, contending the events that would nullify his resignation have 

not come to pass. 

Theory’s Motion falls short of demonstrating, as it must, that Moscowitz 

cannot “recover under any reasonably conceivable set of circumstances.”202 In 

simply comparing the Resignation Notice to the Award Agreement, Theory fails to 

consider the subsequent dance between the parties. Moscowitz sought to make his 

resignation conditional, as the Resignation Notice states, 

If for any reason, whatsoever, a court of competent jurisdiction 

determines that the foregoing resignation shall result in the loss, 

forfeiture, diminution or waiver of the undersigned’s rights and/or 

entitlements as a Member or owner of a membership interest in the 

Company, the foregoing resignation shall be deemed void, ab initio, 

and of no force or effect.203

The Board Notice in response to the Resignation Notice states that “[t]he Company 

hereby reserves and does not waive any rights it has with respect to the foregoing, 

including with respect to any rights it has under the [LLC] Agreement, the Initial 

Plan and [Award Agreement].”204 After Theory indicated its intent to repurchase 

Moscowitz’s Remaining Units under the Forfeiture Termination framework, 

 

201 Initial Plan § 1.6.

202 Cent. Mortg. Co., 27 A.3d at 535.

203 Resignation Notice at 1 (emphasis in original).

204 Board Notice at 1.
68

Moscowitz purported to retract his resignation in the Revocation Letter; he then 

resubmitted his resignation, purporting to provide 90 days’ written notice under 

Section 3.3(a), via the Second Resignation Notice. Theory’s Motion does not 

consider or accommodate these additional steps.

Theory contends Moscowitz’s “conditional resignation” is foreclosed by the 

LLC Agreement, but that Agreement is silent on Manager resignation. Nothing 

therein prohibits Moscowitz from resigning subject to certain conditions. The 

Delaware Limited Liability Company Act provides that “[a] manager may resign as 

a manager of a limited liability company at the time or upon the happening of events 

specified in a limited liability company agreement and in accordance with the limited 

liability company agreement.”205 This Court has recognized conditional 

resignations.206 Theory has not foreclosed Moscowitz’s ability to submit a 

conditional resignation.

The next question is whether Moscowitz’s purported conditions could be 

effective. Again, the LLC Agreement does not address Manager resignation. 

Theory, as an LLC, deserves this Court’s commitment “to give the maximum effect 

 

205 6 Del. C. § 18-602.

206 See, e.g., Bouchard v. Braidy Indus., Inc., 2020 WL 2036601, at *15 (Del. Ch. 

Apr. 28, 2020) (assessing a corporate director’s conditional resignation in view of a voting 

agreement); Martin v. Med-Dev Corp., 2015 WL 6472597, at *10 (Del. Ch. Oct. 27, 2015) 

(assessing a conditional resignation in the corporate context under 8 Del. C. § 141); In re 

Peierls Family Inter Vivos Trs., 59 A.3d 471, 476 (Del. Ch. 2012) (assessing a conditional 

resignation in the trust context), aff’d, 77 A.3d 249 (Del. 2013).
69

to the principle of freedom of contract,”207 including the provisions regarding 

Termination of Service in the Initial Plan and Award Agreement. But Theory is also 

a manager-managed LLC with a board of managers, such that it should expect this 

Court to draw on analogies to corporate law.208 The parties did not brief whether 

this Court should consider Manager resignation under contract principles, or 

principles of corporate law.209

 

207 6 Del. C. § 18-1101(b). 

208 Obeid v. Hogan, 2016 WL 3356851, at *6 (Del. Ch. June 10, 2016) (“Using the 

contractual freedom that the LLC Act bestows, the drafters of an LLC agreement can create 

an LLC with bespoke governance features or design an LLC that mimics the governance 

features of another familiar type of entity. The choices that the drafters make have 

consequences. . . . If the drafters have opted for a manager-managed entity, created a board 

of directors, and adopted other corporate features, then the parties to the agreement should 

expect a court to draw on analogies to corporate law. Depending on the terms of the 

agreement, analogies to other legal relationships may also be informative. . . . It is 

important not to embrace analogies to other entities or legal structures too broadly or 

without close analysis, because the flexibility inherent in the limited liability company form 

complicates the task of fixing such labels or making such comparisons. (citations, 

footnotes, and internal quotation marks omitted)); see LLC Agreement § 11.1(a) (“The 

business of the Company shall be managed by a Board of Managers . . . . A Member, in its 

capacity as such, shall not participate in the day-to-day operation of the business affairs of 

the Company.”); id. § 11.2 (granting the Board “the general powers and duties of 

management typically vested in the board of directors of a corporation” subject to other 

provisions of the LLC Agreement).

209 See Llamas v. Titus, 2019 WL 2505374, at *17-18 (Del. Ch. June 18, 2019) 

(contemplating corporate parallels that logically apply to removal of a manager from a 

manager-managed LLC); see also, e.g., Martin, 2015 WL 6472597, at *11 (holding that 

general contract principles did not apply when assessing enforceability of a corporate 

director’s conditional resignation because “resignations pursuant to 8 Del. C. § 141(b) are 

creatures of statute, not contract” and therefore “director resignations a[re] statutory, rather 

than contractual, instruments”); id. at *14 (considering a director’s conditional resignation 

in unilateral terms); compare 6 Del. C. § 18-1101(b) (stating that “[i]t is the policy of this 

chapter to give the maximum effect to the principle of freedom of contract”), and id. § 18-

602 (“A limited liability company agreement may provide that a manager shall not have 
70

Moscowitz’s conditions do not appear to alter the foundational terms of the 

LLC Agreement, but rather terms in subsequent contracts between himself and 

Theory, namely the Initial Plan and Award Agreement. Considering those 

conditions under general contract principles, in order for his conditions to be 

binding, there must be a meeting of the minds as to that point.210 In making such a 

determination, Delaware “has adopted the mirror-image rule.”211 

 

the right to resign as a manager of a limited liability company. Notwithstanding that a 

limited liability company agreement provides that a manager does not have the right to 

resign as a manager of a limited liability company, a manager may resign as a manager of 

a limited liability company at any time by giving written notice to the members and other 

managers. If the resignation of a manager violates a limited liability company agreement, 

in addition to any remedies otherwise available under applicable law, a limited liability 

company may recover from the resigning manager damages for breach of the limited 

liability company agreement and offset the damages against the amount otherwise 

distributable to the resigning manager.”), with 8 Del. C. § 141(b) (“Each director shall hold 

office until such director’s successor is elected and qualified or until such director’s earlier 

resignation or removal. Any director may resign at any time upon notice given in writing 

or by electronic transmission to the corporation. A resignation is effective when the 

resignation is delivered unless the resignation specifies a later effective date or an effective 

date determined upon the happening of an event or events. A resignation which is 

conditioned upon the director failing to receive a specified vote for reelection as a director 

may provide that it is irrevocable.”).

210 Cf. Martin, 2015 WL 6472597, at *11 (suggesting that “want of essential elements of 

a contract, including the intent to be bound” would be relevant if the conditional resignation 

was not handled under 8 Del. C. § 141(b) and was instead governed by “general contract 

principles”).

211 Ramone v. Lang, 2006 WL 4762877, at *10 (Del. Ch. Apr. 3, 2006) (citing Friel v. 

Jones, 206 A.2d 232, 233–34 (Del. Ch. 1964), aff’d, 212 A.2d 609 (Del. 1965), and also 

citing PAMI-LEMB I Inc. v. EMB-NHC, L.L.C., 857 A.2d 998, 1015 (Del. Ch. 2004)). 
71

In order to constitute an “acceptance,” a response to an offer must be 

on identical terms as the offer and must be unconditional. A response 

to an offer that is not on the terms set forth by the offeror constitutes a 

rejection of the original offer and a counteroffer. The words and 

conduct of the response are to be interpreted in light of all the 

circumstances.212

The parties did not thoroughly brief how the Resignation Notice conditions fared 

under this framework, and Theory has not shown they could not have survived. 

And the dance between the parties may be even more elaborate. Moscowitz’s 

conditions seem to line out parts of the Award Agreement, including Sections 3.3 

and 3.4, in connection with the resignation. It reads as a statement of Moscowitz’s 

intention not to abide by the Award Agreement’s plain terms, which may be not a 

condition, but a repudiation. “Under Delaware law, repudiation is an outright refusal 

by a party to perform a contract or its conditions entitling the other contracting party 

to treat the contract as rescinded. A statement not to perform unless terms different 

from the original contract are met also constitutes a repudiation.”213 “A party 

repudiates a contract when it takes an action that constitutes a significant and 

 

212 PAMI-LEMB I Inc., 857 A.2d at 1015 (footnotes omitted). 

213 CitiSteel USA, Inc. v. Connell Ltd. P’ship, 758 A.2d 928, 931 (Del. 2000) (internal 

quotation marks and footnotes omitted) (quoting Sheehan v. Hepburn, 138 A.2d 810, 812 

(Del. Ch. 1958)).
72

substantial alteration of both the present and the reasonably anticipated future 

relations created by the agreement.”214 

Considering the Resignation Notice as a repudiation may give some doctrinal 

context to the Board Notice and Revocation Letter. Once the repudiation is final, 

the non-repudiating party “may respond by (i) electing to treat the contract as 

terminated by breach, (ii) by lobbying the repudiating party to perform, or (iii) by 

ignoring the repudiation.”215 Depending on how the non-repudiating party responds, 

the would-be repudiator may retract his repudiation:

A repudiation is, of course, the reverse of positive and clear where the 

promisor before the time of performance retracts the repudiation and 

announces himself prepared to perform his promise. Thus, when 

effective, a retraction has the effect of nullifying a repudiation and 

placing the matter in its original position. There are, however, 

circumstances that will remove the possibility of retraction. This 

limitation on the power to retract a repudiation reflects a concern for 

the awkward situation in which ambiguity concerning performance 

may place the promisee. . . . Indeed, the law’s concern with the 

uncertainty faced by a promisee to whom a repudiation has been made 

is such that it, in effect, gives such a promisee the election to withdraw 

the promisor’s power to retract his repudiation simply by notifying the 

promisor that he considers the repudiation to be final.216

 

214 PAMI-LEMB I Inc., 857 A.2d at 1014 (alteration and internal quotation marks omitted)

(quoting Bali v. Christiana Care Health Servs., 1998 WL 685380, at *1 (Del. Ch. 

Sept. 22, 1998)).

215 Henkel Corp. v. Innovative Brands Hldgs., LLC, 2013 WL 396245, at *7 (Del. Ch. 

Jan. 31, 2013); accord Mumford v. Long, 1986 WL 2249, at *3 (Del. Ch. Feb. 21, 1986) 

(“Where a contracting party repudiates a contract, the non-breaching party is entitled to 

treat the contract as terminated, i.e., as being at an end.”).

216 Carteret Bancorp, Inc. v. Home Gp., Inc., 1988 WL 3010, at *6 (Del. Ch. Jan. 13, 1988).
73

Thus, “[o]nce the promisee relies on the repudiation—e.g., by filing suit for damages 

or by engaging in a substitute transaction—or notifies the promisor it regards the 

repudiation as final, effective retraction is no longer possible.”217 

The doctrines of offer and acceptance, and of repudiation and retraction, mean 

that the analysis of Moscowitz’s Resignation Notice is more complicated than 

simply comparing it to the Award Agreement as Theory asserts. It remains to be 

seen how these doctrines may apply in this case, considering in particular whether 

there was a meeting of the minds on Moscowitz’s offered conditions; whether the 

conditions imposed in both the Resignation and Second Resignation Notices 

constituted a repudiation of the Award Agreement; whether Moscowitz was able to 

retract any repudiation after receiving the Board Notice; whether in view of the 

foregoing, the Second Resignation Notice has any effect; and whether the Second 

Resignation Notice’s conditions were effective. This inquiry is also informed by 

today’s determinations that Moscowitz was not entitled to notice and an opportunity 

to cure and of the Manager’s broad discretion under the Initial Plan and Award 

Agreement to determine all matters with respect to Terminations of Service. 

These open issues preclude me from dismissing Count II’s request for a 

declaratory judgment that the Resignation Notice is of no force and effect and that 

 

217 Henkel Corp., 2013 WL 396245, at *7 (quoting W. Willow-Bay Ct., LLC v. Robino-Bay 

Ct. Plaza, LLC, 2009 WL 458779, at *5 (Del. Ch. Feb. 23, 2009)).
74

Moscowitz’s Second Resignation Notice validly effected his resignation, and Count 

III’s claim that Theory breached the Award Agreement by processing a Forfeiture 

Termination based on a Resignation Notice stripped of its conditions. Counts V and 

VI remain viable as well, to accommodate the possibility that Moscowitz resigned 

in a manner that is not properly a Forfeiture Termination. 

III. CONCLUSION

The Award Agreement is binding on Moscowitz, supported by valid 

determination, would provide for a Forfeiture Termination if Moscowitz in fact 

resigned without giving 90 days’ notice, and does not provide Moscowitz with the 

rights of notice and an opportunity to cure. The Award Agreement gave the 

Company the option to repurchase Moscowitz’s shares, either because his 

resignation was a Forfeiture Termination or pursuant to the Call Right. But the terms 

by which Moscowitz actually resigned remain unadjudicated.

The Motion is GRANTED with respect to Counts I and IV. Counts II and III 

are GRANTED IN PART. The Motion is DENIED with respect to the remaining 

portions of Counts II and III, as well as Counts V and VI. The parties shall submit 

an implementing order within twenty days of this decision.