IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

UNBOUND PARTNERS LIMITED )

PARTNERSHIP, )

 Plaintiff, )

)

 v. ) C.A. No. N20C-09-302

) PRW CCLD

 )

INVOY HOLDINGS INC., )

 Defendant. )

Submitted: February 4, 2021

Decided: March 17, 2021

Corrected: March 29, 2021

Upon Plaintiff Unbound Partners Limited Partnership’s Motion for Summary 

Judgment or, in the Alternative, Motion for Default Judgment

DENIED

Upon Defendant Invoy Holdings Inc.’s Motion to Dismiss

DENIED

OPINION AND ORDER

William M. Lafferty, Esquire (Argued), Alexandra Cumings, Esquire, Michael J. 

Slobom, Jr., Esquire, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, 

Wilmington, Delaware; Leo G. Kailas, Esquire, Paul V. LiCalsi, Esquire, REITLER 

KAILAS & ROSENBLATT LLC, New York, New York, Attorneys for Plaintiff 

Unbound Partners Limited Partnership.

Steven J. Fineman, Esquire, Travis S. Hunter, Esquire (Argued), Tyler E. Cragg, 

Esquire, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware, 

Attorneys for Defendant Invoy Holdings Inc.

WALLACE, J.
Delaware’s Rules of Civil Procedure open with a clear, but nonetheless tall, 

mandate: Courts must construe them to foster “the just, speedy and inexpensive” 

resolution of each case.1 When doing so, Delaware’s judicial officers enjoy wide 

discretion to sculpt procedural law nimbly. To do so, this Court and its siblings’ 

judges have drawn on experience, intuition and commonsense. And, in doing so, 

each court has developed its own “practices” that—though not spelled-out in code—

are customarily followed in the creative art of case-specific decision-making. It’s 

rarely, if ever, asked that one of us second-guess another’s specific casemanagement process or use another’s practice to chisel a certain rule’s and statute’s 

contours to sharp and unyielding relief that a party envisions as forming fairness for 

it alone. One party here, however, asks the Court to do just that.

In the main, this breach of promissory note action invites the Court to decide

whether some of the damages Unbound Partners Limited Partnership seeks are due 

or are instead an unenforceable penalty. But here, at the threshold, Invoy Holdings 

Inc.’s motion to dismiss just a single count of Unbound’s complaint poses a novel 

procedural question. To get to the substance of Invoy’s motion, the Court must labor 

with this issue raised by Unbound’s combined motion for summary and default 

judgment: Does a defendant named in a complaint brought via 10 Del. C. § 390l 

1 Del. Super. Ct. Civ. R. 1; Del. Ch. R. 1; Del. Fam. Ct. Civ. R. 1; Del. Ct. Com. Pl. Civ. R. 1; 

Del. J.P. Ct. Civ. R. 1.
-2-

concede or default on the allegations against it by moving to dismiss under Rule 12 

only one of the complaint’s counts without first answering the complaint, in whole 

or in part, by affidavit? Put broadly, the Court must determine whether that motion 

for partial dismissal tolls the answering period for both the challenged and 

unchallenged claims.

Title 10, Section 3901 of the Delaware Civil Code, which obliges defendants 

in note actions to answer by affidavit, does not speak of pre-answer motions. Rule 

12(a) does so speak, but not of those motions that seek only “partial” dismissal. Yet, 

Delaware courts routinely entertain motions for partial dismissal—i.e., motions 

aimed at only one or more of the defective counts in a complaint. They can be 

economizing tools that, in a suit’s early stages, hew meritless counts out of otherwise 

adequately-pleaded complaints. 

For the reasons explained more fully later, the Court holds that motions for 

partial dismissal filed under Rule 12(b) toll the period for answering the entire 

complaint. As a result, a defendant does not concede—or default on—a complaint, 

as a matter of law, when moving against only some of that complaint before 

answering any of it or the remainder. And so, when read together, § 3901’s answerby-affidavit requirement is inapplicable both to challenged and unchallenged claims

until a pre-answer Rule 12(b) motion is resolved. In short, the answer to Unbound’s 

question is no.
-3-

To be sure, simply because defendants are not required to simultaneously 

answer allegations left untouched by their partial dismissal motions does not mean

a court is powerless to so order their answer where warranted. If a court finds 

moving-and-answering to be appropriate or necessary, then it is certainly free to 

shape a matter’s schedule thusly. Indeed, many cases—whether brought under 

§ 3901 or not—might erode the just, the speedy and the inexpensive without such 

sculpting. This, though, is not one of those cases; Invoy’s motion without answer or 

affidavit is proper. Accordingly, the Court DENIES Unbound’s motion for entry of 

judgment that—without real procedural reinforcement—requests relief unwarranted 

and premature.

Success in that procedural skirmish doesn’t necessarily bring a win for Invoy 

on the merits of its dismissal motion, however. Delaware is a pro-contractarian state,

and her law is loath to deter bilateral negotiation. Though deference to sophisticated 

counterparties’ deals may not be limitless, Delaware courts will not so quickly find 

a voluntary agreement unenforceable. And this Court is certainly hesitant to do so 

upon a motion to dismiss. It may well be that the provision Invoy disputes is an 

unenforceable penalty. But the complaint supportsthe reasonable inference that it is 

not. Accordingly, the Court DENIES Invoy’s motion for partial dismissal as well. 
-4-

I. FACTUAL BACKGROUND

A. THE LOAN.

Invoy is a startup that once had been fundraising to complete its Series B 

Financing phase.2 To that end, Unbound, one of Invoy’s equity investors, offered to 

supply Invoy $2 million in capital through a short-term bridge loan.3 Invoy 

accepted.4 On March 9, 2020, these counterparties memorialized the debt in a 

promissory note agreement (the “PNA”).5 Unbound credited Invoy one day later.6

Relevant here are the following terms. The PNA defines “Principal” as $2 

million.7 “Interest” is defined as the greater of the number produced by a fixed 10% 

annual rate, and a flat fee of $300,000.8 Invoy agreed to pay Principal and applicable 

Interest on or before July 31, 2020—the debt’s “Maturity Date.”9 Failure to pay by 

the Maturity Date despite written notice and a five-day cure period constitutes an 

2 Complaint ¶¶ 2, 5, 7 (D.I. 1) (“Compl.”).

3

Id. ¶¶ 1, 6, 8-9.

4

Id. ¶ 10.

5

Id.; see generally Exhibit A, Promissory Note Agreement (D.I. 2) (hereinafter, the “PNA”).

6 Compl. ¶ 19.

7 PNA § 1(a).

8

Id. § 1(b).

9 Compl. ¶¶ 12-14, 20; PNA §§ 1(b)-(c). The original Maturity Date was June 30, 2020 before 

the parties later agreed to a 31-day extension. See Exhibit B, PNA Amendment § 1 (D.I. 2). 
-5-

“Event of Default.”10 If an Event of Default occurs, then Unbound may elect one of 

two rights: (1) acceleration combined with a multiplier that doubles Principal in lieu 

of any Interest; or (2) conversion of the outstanding balance into an equivalent 

amount of senior-preferred Invoy stock.11 Central to the parties’ motions is option 

(1): the “Double Principal Option.”

In its own words, the Double Principal Option declares –

Unbound may, at its discretion, by notice in writing to Invoy . . . 

require that Invoy immediately pay Unbound an amount equal to 

two times the outstanding Principal hereunder in lieu of accrued 

Interest.12

“For the avoidance of doubt,” the Option then continues with an example illustrative 

of this dispute:

If Unbound loans two million dollars ($2,000,000) to Invoy . . . 

and Invoy does not repay Unbound $2,000,000 plus Interest on 

or before the Maturity Date, then Invoy will owe $4,000,000 to 

Unbound.13

The Maturity Date apparently came and went.14 On August 1, 2020, Unbound 

sent Invoy written notice of default.15 In that notice, Unbound informed Invoy that 

10 Compl. ¶¶ 15, 17; PNA §§ 3(a), (f). 

11 Compl. ¶¶ 15-16; PNA §§ 3, 4(a)(i)-(ii).

12 PNA § 4(a)(i) (cleaned up).

13 Id. (cleaned up).

14 Compl. ¶ 22.

15 Id. ¶ 25; see generally Exhibit C, Notice of Breach (D.I. 2).
-6-

it would exercise the Double Principal Option unless Invoy timely repaid.16 Invoy 

allegedly didn’t repay and hasn’t remitted a cent since.17 So, Unbound sued.

B. THE LAWSUIT.

Unbound filed its complaint with an invocation of 10 Del. C. § 3901 right up 

front.

18

 That notation states: “all allegations . . . must be answered by affidavit in 

accordance with . . . 10 Del. C. § 3901.”19 The complaint then divides the allegations 

into “two” breach-of-contract claims.20 Count I asserts $4 million plus pre-judgment 

interest in damages.21 “In the alternative,” Count II asserts $2.3 million plus preand post-judgment interest in damages.22

 The bases for each count are substantively 

identical. The only difference between them is that Count I seeks payment under 

the Double Principal Option, while Count II computes what Invoy would owe but 

for the Option.23

16 Compl. ¶ 26.

17 Id. ¶¶ 27-28.

18 See id. Caption. 

19 Id.

20 Id. ¶¶ 30-45.

21 Id. ¶¶ 30-37 & Prayer for Relief § (a).

22 Id. ¶¶ 38-45 & Prayer for Relief § (b).

23 Compare PNA § 1(c) with id. §§ 3, 4(a)(i). A simple interest calculation illustrates that the 

amount Unbound could recover at 10% interest per year by Maturity (i.e., roughly 4.5/12) is less 
-7-

Invoy did not file an answer to any of Unbound’s accusations. Instead, Invoy

moved to dismiss Count I under Rule 12(b)(6).24 According to Invoy, Count I’s 

damages are tied to an unenforceable penalty (i.e., the Double Principal Option) and 

thus cannot be recovered without violating Delaware public policy.25 Invoy noted

that it will “address” Count II after the Court thumbs Count I’s fate.26

In opposition, Unbound has moved for summary judgment, “or, in the 

alternative,” for default judgment, arguing that, under 10 Del. C. § 3901, Invoy’s 

choice not to answer the allegations before filing its motion works a complete 

concession of liability, or at least, should be deemed a failure to defend.27 Procedure 

aside, Unbound contends that the Double Principal Option requires no penalty 

analysis. But, Unbound says, if it is subjected to such an examination, the Double 

Principal Option is a valid expression of liquidated damages.28

The Court has heard argument on both parties’ motions and they are now ripe 

for decision.

than $300,000. But since the PNA provides for the greater of the two, $2.3 million is what 

Unbound would recover without the Double Principal Option.

24 Invoy Mot. (D.I. 7).

25 Id. at 4-10.

26 Id. at 10 n.4.

27 Unbound Opening Br. at 8-13, 20-24 (D.I. 9) (“Unbound Op. Br.”).

28 Id. at 13-20.
-8-

II. STANDARDS OF REVIEW

A. MOTION TO DISMISS.

A party may move to dismiss under this Court’s Civil Rule 12(b)(6).29 In 

considering a motion to dismiss, the Court (1) accepts as true all well-pleaded factual 

allegations; (2) credits vague allegations if they give the opposing party notice of the 

claim; (3) draws all reasonable inferences in favor of the non-movant; and (4) denies 

dismissal if recovery on the claim is reasonably conceivable.30 Delaware’s pleading 

standard is “minimal.”31 Dismissal is inappropriate unless “under no reasonable 

interpretation of the facts alleged could the complaint state a claim for which relief 

might be granted.”32 Put differently, a claim targeted for dismissal will survive if “a 

possibility of recovery” can be divined from it.

33

29 See Del. Super. Ct. Civ. R. 12(b)(6) (“[T]he following defense[] may at the option of the 

pleader be made by motion[:] failure to state a claim upon which relief can be granted. . . .”).

30 Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535 (Del. 2011).

31 Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 895 (Del. 2002)).

32 inVentiv Health Clinical, LLC v. Odonate Therapeutics, Inc., 2021 WL 252823, at *4 (Del. 

Super. Ct. Jan. 26, 2021) (internal quotation marks and citations omitted).

33 Firefighters’ Pension Sys. of City of Kan. City, Mo. Tr. v. Presidio, Inc., 2021 WL 298141, at 

*15 (Del. Ch. Jan. 29, 2021) (internal quotation marks and citations omitted); see Cent. Mortg., 27 

A.3d at 537 n.13 (“Our governing ‘conceivability’ standard is more akin to ‘possibility. . . .’”).
-9-

That said, the Court won’t strain to pull claim-saving interpretations from the 

complaint.

34

 Too, “the benefits of liberal construction afforded a non-movant do not 

extend to ‘conclusory allegations that lack specific supporting factual 

allegations.’”35 And so, the Court will dismiss “if the non-movant fails to plead 

specific allegations supporting an element of its claim or where no reasonable, i.e., 

unstrained, interpretation of the facts alleged reveals a remediable injury.”36

B. SUMMARY JUDGMENT.

“Summary judgment is appropriate where the record demonstrates that ‘there 

is no genuine issue as to any material fact and that the moving party is entitled to a 

judgment as a matter of law.’”37 But, summary judgment will not be granted if “a 

material fact is in dispute” or “it seems desirable to inquire thoroughly into [the facts] 

in order to clarify the application of the law to the circumstances.”38 The burden is 

34 Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001); see Price v. E.I. DuPont de Nemours 

& Co., Inc., 26 A.3d 162, 166 (Del. 2011) (The Court need not draw “unreasonable inferences in 

favor of the non-moving party.”), overruled on other grounds by Ramsey v. Ga. S. Univ. Advanced 

Dev. Ctr., 189 A.3d 1255, 1277 (Del. 2018).

35 Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, 2021 WL 117036, at *6 (Del. Super. Ct. 

Jan. 13, 2021) (quoting Ramunno v. Cawley, 705 A.2d 1029, 1034 (Del. 1998)).

36 Surf’s Up, 2021 WL 117036, at *6 (citations omitted).

37 Parexel Int’l (IRL) Ltd. v. Xynomic Pharms., Inc., 2020 WL 5202083, at *4 (Del. Super. Ct. 

Sept. 1, 2020) (quoting Del. Super. Ct. Civ. R. 56(c)).

38 Ebersole v. Lowengrub, 180 A.2d 467, 468-69 (Del. 1962).
-10-

on the movant to demonstrate its claim is supported by undisputed facts.

39

 If that 

burden is met, then the non-moving party must show “there is a genuine issue for 

trial.”40 And in determining whether there is, the Court views the facts in the light 

most favorable to the non-moving party.41

Generally, “a matter should be disposed of by summary judgment whenever . 

. . a trial is unnecessary.”42 Still, the Court has “discretion to decline to decide the 

merits of the case in a summary adjudication” where it is not “reasonably certain 

that there is no triable issue.”43 And again, the Court will deny summary judgment 

as a prudential matter if the record has not been developed thoroughly enough to 

permit correct use of the law.44 Finally, the Court may deny summary judgment—

39 Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).

40 Del. Super. Ct. Civ. R. 56(e); Parexel, 2020 WL 5202083, at *5 (“The moving party must 

establish that the undisputed facts support [its] claims or defenses, after which the burden shifts to 

the non-moving party to demonstrate that there are material issues of fact to be resolved at trial.” 

(internal quotation marks omitted)); see Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).

41 Judah v. Del. Tr. Co., 378 A.2d 624, 632 (Del. 1977).

42 Jeffries v. Kent Cty. Vocational Tech. Sch. Dist. Bd. of Educ., 743 A.2d 675, 677 (Del. Super. 

Ct. 1999).

43 Parexel, 2020 WL 5202083, at *4 (citing Cross v. Hair, 258 A.2d 277, 278 (Del. 1969)).

44 Ebersole, 180 A.2d at 270; see Cont’l Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1227-28 

(Del. Ch. 2000) (“[T]he Court also maintains the discretion to deny summary judgment if it decides 

that a more thorough development of the record would clarify the law or its application.” (citing 

Alexander Indus., Inc. v. Hill, 211 A.2d 917, 918-19 (Del. 1965))).
-11-

even if its requirements seem to be met—where “a trial record is necessary in the 

interests of justice.”45 For, indeed, “[t]here is no ‘right’ to summary judgment.”46 

III. DISCUSSION

If Invoy’s motion isn’t procedurally proper, the Court can’t reach its merits.47 

The Court must, then, start with § 3901. In its combined motion, Unbound contends 

two things: (1) that § 3901 renders Rule 12 pre-answer motions improper; and, 

(2) even if § 3901 doesn’t make all Rule 12 pre-answer motions improper, it does 

make Rule 12 pre-answer motions for only partial dismissal improper. Neither is 

right.

A. INVOY’S PARTIAL MOTION TO DISMISS IS PROCEDURALLY PROPER.

1. Section 3901 Governs Answers, Not Pre-Answer Motions.

Title 10, Section 3901 of the Delaware Civil Code imposes technical 

demands on defendants to promissory note lawsuits. Among those obligations is

that the defendant must answer by affidavit. The statute provides:

In all actions upon notes . . . the plaintiff may specifically require 

the defendant . . . to answer any or all of the complaint by an 

45 Williams Cos., Inc. v. Energy Transfer LP, 2020 WL 3581095, at *2 (Del. Ch. July 2, 2020) 

(citing Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002)).

46 Brechner v. Phoenix Network Sols. LLC, 2017 WL 5953517, at *4 (Del. Super. Ct. Dec. 4, 

2017) (citing Cross, 258 A.2d at 278).

47 See, e.g., Cent. Laborers Pension Fund v. News Corp., 45 A.3d 139, 141 (Del. 2012) 

(instructing that a trial court should first decide whether statutory and procedural requirements are 

satisfied before reaching the substance of a dispute).
-12-

affidavit setting forth the specific nature of any defense . . . by 

the specific notation on the face of the complaint that those 

allegations must be answered by affidavits.48

The purpose of § 3901’s answer-by-affidavit requirement “is to dispose of legally 

uncontested matters quickly.”

49

 That is so because creditors’ time-sensitive 

repayment interests or rights in collateral may be further impaired by trifling 

litigation invoking frivolous or invalid defenses.50 As a result, the statute empowers 

the Court to deem allegations admitted, and relatedly, to enter a default judgment, if 

a defendant fails to comply strictly with the statute’s terms.

51

But, though “legally uncontested matters” should be disposed quickly, the 

Court can’t know if a matter is “legally uncontested” until the legal contest is 

actually joined—e.g., by an answer admitting, denying or defending the allegations. 

So, by its own terms, the logic that animates § 3901’s answer-by-affidavit 

requirement plainly does not obtain until the moment the defendant “responds to the 

designated allegations by affidavit filed with [its] answer or answers[.]”52 Indeed, 

48 DEL. CODE ANN., tit 10, § 3901(a) (2020) (emphasis added).

49 Wilmington Tr. Co. v. Thielemann, 2002 WL 31814946, at *2 n.2 (Del. Super. Ct. Nov. 27, 

2002) (citation omitted).

50 See First Fed. Sav. & Loan Ass’n of Phila. v. Damnco Corp., 310 A.2d 880, 882 (Del. Super. 

Ct. 1973) (“An object of [§ 3901] is to assure speedy disposition of claims of the type specified . . 

. by permitting defenses only in those instances where a defendant states under oath that he believes 

he has a valid defense[.]” (citation omitted)).

51 DEL. CODE ANN., tit 10, § 3901(d).

52

 Id. (emphasis added).
-13-

the statutory text does not contemplate judicial action, waiver or forfeiture unless 

the defendant (1) fails to meet the answering deadline or (2) does meet the deadline, 

but deficiently.

53

 That answering deadline, though, isn’t found in § 3901. And, 

while § 3901 mentions complaints and answers, it says nothing of pre-answer 

motions. It is Civil Rule 12 that provides guidance on these.

Under Rule 12(a), the deadline for answering a complaint ordinarily is 

measured by reference to either the complaint’s service or to a Rule 12 pre-answer 

motion’s outcome.

54 And where, as here, a defendant has submitted a Rule 12(b) 

pre-answer motion, the answering deadline is tolled until, and subsequently clocked

from, that motion’s resolution.

55

 This is equally so in § 3901 actions, which Rule 

12(a) expressly incorporates:

If the plaintiff has made a specific notation under Rule 3(b) [i.e., 

our rule addressing § 3901 actions] requiring the defendant to

53 Id. (If “the defendant . . . fails to respond to the designated allegations by affidavit filed with 

the answer or answers, the designated allegations will be deemed admitted, and default judgment 

may be entered thereon, in the discretion of the court and upon motion by the plaintiff.”); see, e.g., 

Gillette v. Wilmington Sav. Fund Soc’y, FSB, 2020 WL 7861341, at *2 (Del. Dec. 31, 2020) 

(deeming answer in a § 3901 action that “contained general denials” and “[n]either set forth the 

specific nature or character of any defense” deficient and affirming grant of summary judgment); 

Bank of Am., N.A. v. Yarborough, 2020 WL 2511430, at *2-3 (Del. Super. Ct. May 15, 2020) 

(granting default judgment in a § 3901 action to mortgagee when mortgagor “did not answer the 

complaint despite personal service” and the time for doing so expired).

54 Del. Super. Ct. Civ. R. 12(a).

55 See id. R. 12(a)(1) (“The service of a motion permitted under [Rule 12(b)] alters [answering] 

periods as follows. . . . If the Court denies the motion . . . the responsive pleading [i.e., the answer] 

shall be served within 10 days after notice of the Court’s action.”).
-14-

answer any or all allegations . . . by affidavit . . . the defendant 

shall, not later than the time for serving an answer, serve either 

an affidavit of defense in conformity with [§ 3901] or a motion 

that judgment be refused notwithstanding the plaintiff’s 

complaint[.]

56

Together, a defendant’s duty to “answer . . . the complaint by an affidavit”57 is not 

triggered under § 3901 until “the time for serving an answer”58 arrives under Rule 

12(a). Accordingly, Invoy has not yet shirked its answer-by-affidavit duties. 

Section 3901 itself is unambiguously inapplicable until Invoy’s motion is resolved. 

Each of the cases on which Unbound relies confirms that § 3901 monitors the 

sufficiency of answers, not the propriety of pre-answer motions. In those cases, 

summary judgment was granted or a default judgment entered because the defendant 

either did not answer and did not file a pre-answer motion, or failed to answer 

specifically enough to satisfy the statute.59 Unbound hasn’t identified a single case 

56 Id. R. 12(a).

57 DEL. CODE ANN., tit 10, § 3901(a).

58 Id.

59 See Gillette, 2020 WL 7861341, at *2-3 (affirming summary judgment because general denial 

lacked statutory specificity); Yarborough, 2020 WL 2511430, at *2, *5 (entering default judgment 

because defendant did not answer or motion against the complaint at all); JPMorgan Chase Bank 

v. Smith, 2014 WL 7466729, at *2-3 (Del. Super. Ct. Dec. 15, 2014) (entering default judgment 

because defendant “failed to defend by failing to answer or file an appropriate motion”); Coppedge 

v. U.S. Bank Nat’l Ass’n, 2014 WL 5784006, at *1 (Del. Dec. 19, 2011) (affirming summary 

judgment because “unintelligible” counterclaim did not meet statutory specificity); Teeven v. 

Kearns, 1993 WL 1626514, at *2, *4 (Del. Super. Ct. Dec. 3, 1993) (treating motion for judgment 

on the pleadings as a summary judgment motion and granting that motion because the defendant’s 

flat denial of default did not “fulfill the purpose of an affidavit of defense, which is to set forth a 

legally meritorious defense to the claim” (internal quotation marks omitted)). 
-15-

in which summary judgment or a default judgment was obtained because a defendant 

filed a pre-answer motion to dismiss instead of answering by affidavit.

60

 Perhaps 

recognizing this, Unbound tries to suggest that pre-answer motions themselves are 

“defenses” for § 3901 purposes and thus deficient if not sworn by an affidavit.61 Not 

so. Section 3901 “defenses” are those that typically would be enumerated in Rule 

12(a) answers.62 More important, if the Court accepted Unbound’s interpretation, 

then a defendant never could file a pre-answer motion against a § 3901 complaint—

the defendant would always be required to answer in some way. No doubt, if the 

General Assembly intended to except § 3901 complaints from early dismissal, it 

would have plainly said so. It didn’t.63 And the Court will not import an irrational

60 Contrary to Unbound’s suggestion (Unbound Op. Br. at 13), Bayer-Highland Fam. P’ship, 

Ltd. v. RF Cap. Holdings, LLC, 2018 WL 3129317 (Del. Ch. June 25, 2018), was not such a case. 

There, the Court of Chancery merely denied a motion to stay. Id. at *1. The court admonished 

the plaintiffs for citing “the pleadings-stage motions as a basis for declining to answer allegations 

in the defendant’s pleadings” because the case involved an expedited corporate control dispute. 

Id. at *2. In short, the case didn’t concern § 3901 at all. 

61 See, e.g., Unbound Reply Br. at 10-11 n.5, Jan. 20, 2021 (D.I. 13) (citing DEL. CODE ANN. 

§ 3901(b)).

62 DEL. CODE ANN. § 3901(a) (Defendant must “answer . . . by an affidavit setting forth the 

specific nature and character of any defense[.]”).

63 See id. § 3901(i) (directing Delaware courts to follow their Civil Rules when taking action 

under the statute).
-16-

design into a statute where “one among possible interpretations . . . would produce 

a reasonable result.”64

2. Pre-Answer Motions for Partial Dismissal Toll the Period for 

Answering the Whole Complaint without Default; But, a Court 

Certainly Has the Discretion to Order an Answer to Any 

Unchallenged Claims.

Invoy’s dismissal motion is proper under § 3901’s plain language. So, 

Unbound tries to delimit Rule 12’s interplay with that statute. In Unbound’s view,

even if Rule 12 pre-answer motions seeking complete dismissal are proper in § 3901 

actions, motions seeking only partial dismissal aren’t. 

According to Unbound, a motion for partial dismissal, by definition, leaves 

the hanging aspects of a § 3901 complaint unchallenged. Because of that, the 

defendant who moves partially against a § 3901 action simultaneously fails to 

answer by affidavit the unchallenged counts. Unbound asserts this procedural 

default as to the unanswered claims infects the defendant’s motion against the 

challenged (but still “unanswered”) claims as well. The net effect, Unbound reasons, 

is that Invoy’s partial motion to dismiss failed to toll the time for answering its entire 

complaint, which, for Invoy, has now long elapsed. Thus, in Unbound’s view, 

Invoy’s pre-answer motion for partial dismissal effectively has done nothing but 

64 Coastal Barge Corp. v. Coastal Zone Indus. Control Bd., 492 A.2d 1242, 1247 (Del. 1985) 

(citation omitted); see Moore v. Wilmington Hous. Auth., 619 A.2d 1166, 1173 (Del. 1993) 

(presuming that a statute’s natural construction will not foment “mischievous or absurd results”).
-17-

delay its suit’s prosecution—hence its request that the Court find a full admission of 

liability or a default on the defense. 

Unbound’s flailing assault on pre-answer motions for partial dismissal here 

might lay damage to not just those brought in § 3901 actions. So the Court here 

must precisely address whether Rule 12 permits a pre-answer motion for partial 

dismissal to toll the period for answering an entire complaint. It does.

a. A Rule 12(b)(6) Motion for Partial Dismissal Tolls the Period for

Answering the Whole Complaint without a Consequent Default on 

Those Counts or Claims Untouched By the Motion.

Rule 12 requires defendants to answer the complaint no later than 20 days 

after being served with it.

65

 The Rule also states that filing a pre-answer motion 

“alters [that] period” and defers it until the Court resolves “the motion.”66 But, Rule 

12 speaks of motions—not of those that are “partial.” Delaware courts, though, do 

allow 12(b)(6) motions for partial dismissal so long as they do not seek to just trim 

down theories within a single claim.67 Indeed, as a matter of practice, motions for 

partial dismissal are commonplace. Still, this Court’s research reveals no Delaware 

65 Del. Super. Ct. Civ. R. 12(a).

66 Id. R. 12(a)(1). The Rule grants the Court discretion to modify that timeframe. Id. R. 12(a).

67 See inVentiv, 2021 WL 252823, at *6 (“Rule 12(b)(6) doesn’t permit . . . dismissals of parts

of claims;” a Rule 12(b)(6) motion must assail an entire claim to be cognizable. (emphasis in 

original) (internal quotation marks omitted)); id. at *5-6 (collecting authority).
-18-

case that expressly passes on whether they too freeze a defendant’s answering duties 

while pending.

Also common are Delaware courts’ references to federal precedent 

interpreting analogue federal rules of civil procedure when speaking on our own.68 

Though there is some divergence of opinion,69 the majority view of federal courts is 

that a pre-answer motion for partial dismissal tolls the period for answering the 

whole complaint and does not occasion default on claims unchallenged by such 

motion.

70

 Proceeding thusly streamlines later filings and proceedings and spares 

68 See Appriva S’holder Litig. Co, LLC v. EV3, Inc., 937 A.2d 1275, 1286 (Del. 2007) (“Where, 

as here, the Superior Court’s Civil Rules of Procedure closely track the Federal Rules of Procedure, 

cases interpreting the federal rules are persuasive authority[.]” (citing Hoffman v. Cohen, 528 A.2d 

1096 (Del. 1988))); Plummer v. Sherman, 861 A.2d 1238, 1242 (Del. 2004) (“We note at the outset 

that the Delaware Rules of Civil Procedure are patterned after the Federal Rules of Civil Procedure. 

We therefore find certain federal cases appropriate for determining the proper interpretation of the 

Delaware Rules of Civil Procedure.”); Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1191 n.11 

(Del. 1988) (“Decisions interpreting the Federal Rules of Civil Procedure are usually of great 

persuasive weight in the construction of parallel Delaware rules; however, such decisions are not 

actually binding upon Delaware courts.” (citations omitted)). 

69 See Gerlach v. Mich. Bell Tel. Co., 448 F. Supp. 1168, 1174 (E.D. Mich. 1978) (“Separate 

counts are, by definition, independent bases for a lawsuit and the parties are responsible to proceed 

with litigation on those counts which are not challenged by a motion under [Rule] 12(b).”); see 

also Andrea G. Lisenbee & Michael D. Moberly, To Plead or Not to Plead?: Assessing the Effect 

of a Partial Motion to Dismiss on the Duty to Answer, 13 SUFFOLK J. TRIAL & APP. ADVOC. 45, 

62 (2008) (“Precisely because Rule 12(b) motions do interrupt discovery in many cases . . . a 

defendant’s submission of a partial motion to dismiss occasionally accomplishes little except to 

delay the real commencement of litigation.” (internal quotation marks omitted)).

70 See Jackson v. Carter, 2017 WL 2426862, at *2 (D.N.J. June 5, 2017) (denying summary 

judgment motion as “premature” because defendants’ “partial motion to dismiss [had] suspended 

the time to answer” (citation omitted)); In re Vaughan Co., Realtors, 477 B.R. 206, 226 (Bankr. 

D.N.M. 2012) (“The large majority of courts addressing this [tolling] issue have held that when a 

defendant timely files a motion to dismiss . . . [time is extended] to file an answer as to all claims, 

including those not addressed by the motion to dismiss. . . . This Court agrees with that holding.” 

(citations omitted)); Cir. City Stores, Inc. v. Citgo Petroleum Corp., 1994 WL 483463, at *4 (E.D. 
-19-

parties the expense of “exploring the factual predicate for claims that have no legal 

merit.”71 Whereas, if “[a] partial motion[] to dismiss did not suspend a party’s 

obligation to reply to additional claims, the result would be a procedural thicket of 

piecemeal answers that would poorly serve judicial economy.”72 Having a defendant 

answer unchallenged counts and then file a second answer should her motion for 

partial dismissal be denied might compel the Court to evaluate redundant 

Pa. Sept. 7, 1994) (denying motion for default judgment because “a partial 12(b) motion enlarges 

the time to file an answer”); accord Dotson v. DISH Network, L.L.C., 2019 WL 3483806, at *3 

(S.D. Ga. July 31, 2019) (same); Iraheta v. Equifax Info. Servs., LLC, 2018 WL 3381419, at *2-3 

(W.D. La. July 10, 2018) (same); Neal v. Neal, 2018 WL 1335985, at *2 (D. Ariz. Mar. 15, 2018) 

(same), aff’d, 745 F. App’x 683 (9th Cir. 2018), cert. denied, 140 S. Ct. 66 (2019); Fed. 

Contracting, Inc. v. United States, 128 Fed. Cl. 788, 797-98 (2016); Talbot v. Sentinel Ins. Co., 

Ltd., 2012 WL 1068763, at *4 (D. Nev. Mar. 29, 2012) (same); Thermolife Int’l LLC v. Gaspari 

Nutrition Inc., 2011 WL 6296833, at *5 (D. Ariz. Dec. 16, 2011) (same); Gortat v. Capala Bros.,

Inc., 257 F.R.D. 353, 366 (E.D.N.Y. 2009) (same); Kent v. Geren, 2008 WL 150060, at *1 (D. 

Colo. Jan. 11, 2008) (same); Beaulieu v. Bd. of Trs. of Univ. of W. Fla., 2007 WL 2020161, at *2 

(N.D. Fla. Jul. 9, 2007) (same); Shah v. KIK Int’l LLC, 2007 WL 1876449, at *1 (N.D. Ind. June 

26, 2007) (same); Ideal Instruments, Inc. v. Rivard Instruments, Inc., 434 F. Supp. 2d 598, 638-39 

(N.D. Iowa 2006) (same); Bertaut v. Par. of Jefferson, 2002 WL 31528468, at *1 (E.D. La. Nov. 

8, 2002) (same); Batdorf v. Trans Union, 2000 WL 635455, at *5 (N.D. Cal. May 8, 2000) (same); 

Finnegan v. Univ. of Rochester Med. Ctr., 180 F.R.D. 247, 249-50 (W.D.N.Y. 1998) (same); Oil 

Express Nat’l, Inc. v. D’Alessandro, 173 F.R.D. 219, 220-21 (N.D. Ill. 1997) (same); Brocksopp 

Eng’g, Inc. v. Bach-Simpson Ltd., 136 F.R.D. 485, 486-87 (E.D. Wis. 1991) (same); Bus. 

Incentives Co. v. Sony Corp. of Am., 397 F. Supp. 63, 64-65 (S.D.N.Y. 1975) (same); see also 5B 

CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1346 & n.18 (3d ed. 2020) 

(characterizing these cases as the “majority” and explaining their reasoning).

71 Lisenbee & Mobley, supra note 71, at 61-62; see Fed. Contracting, 128 Fed. Cl. at 788 (For 

this reason, and those others mentioned, “[n]o other court has adopted the [minority’s] reasoning 

. . .; indeed, every court to consider [the minority view] on this point has disagreed with and 

declined to follow it.” (internal quotation marks and citations omitted)).

72 Gortat, 257 F.R.D. at 366 (internal quotation marks omitted); accord Compton v. City of 

Harrodsburg, Ky., 287 F.R.D. 401, 401-02 (E.D. Ky. 2012).
-20-

pleadings.73 It could also muddle “the proper scope of discovery during the motion’s 

pendency.”

74

 And entering a “default” on the unchallenged count would ignore the 

defendant’s otherwise active appearance and undermine Delaware’s strong 

preference for trials on the merits.75 Here, imposing Unbound’s posited move-andalso-answer rule likely would do all this. 

But for the damages sought, Unbound’s breach-of-contract claims are mirror 

images. Yet, the course Unbound suggests would command Invoy to deny Count I

by answer—despite its properly-filed Rule 12(b)(6) pre-answer motion against it—

or risk its default. Too, Unbound would extract an answer to Count II—discovery 

on which would then advance while Count I lags behind unresolved—or risk 

default.

76

 The Civil Rules plainly were not intended to enclose litigants in such a 

73 Gortat, 257 F.R.D. at 366.; see, e.g., Ideal Instruments, 434 F. Supp. 2d at 639.

74 WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1346.

75 But see, e.g., Del. Super. Ct. Civ. R. 55(b)(2) (authorizing default judgment when a party “has 

failed to appear, plead or otherwise defend”); In re Asbestos Litig., 228 A.3d 676, 685 (Del. 2020) 

(“A court . . . should be especially mindful of one overarching consideration—Delaware’s strong 

judicial policy that courts should decide cases on their merits.” (citations omitted)); Beckett v. 

Beebe Med. Ctr., Inc., 897 A.2d 753, 757-58 (Del. 2006) (“In Delaware, public policy favors 

permitting a litigant a right to a day in court. Courts should apply [the Civil Rules] with a liberal 

construction because of the underlying policy that favors a trial on the merits, as distinguished 

from a judgment based on a default.” (internal quotation marks and citations omitted)).

76 And, Unbound says, because this is an action governed by § 3901, both answers and the 

dismissal motion would have to be by or accompanied by an affidavit meeting the specifics of 

§ 3901(a)—or default is again risked. Or. Arg. Tr., Feb. 4, 2021, at 28-29 (D.I. 18). 
-21-

maze.

77

 Accordingly, this Court adopts the majority view. The answering period 

was tolled until now. Invoy’s choice not to answer any part of the complaint before 

moving against Count I constitutes neither an admission of its allegations’ truth, nor

a default, under § 3901 and Rule 12.

b. Delaware Courts Retain Discretion to Require an Answer.

To be clear, the Court has determined only that our rules of procedure allow, 

as an initial matter, that a pre-answer motion for partial dismissal tolls the period for 

answering the whole complaint and that summary or default judgment is 

unwarranted where that motion’s opponent premises its judgment request on the bare 

fact that the motion was filed before answering. Simply put, a defendant will not 

risk default or concession when she does not simultaneously answer any allegations

left unchallenged by her partial motion to dismiss. That said, a court can—as a 

matter of its own discretion and for expediency’s sake—order the filing of an answer

to the complaint’s unchallenged claims as that motion pends. And, no doubt, there 

are instances (or even whole species of actions) where our courts as a matter of 

practice and sound case management do precisely that. Where Unbound goes too 

far is in its attempt to elevate such discretion-based practice and process to a 

requirement under penalty of rule or statute. 

77 See Del. Super. Ct. Civ. R. 1 (instructing this Court to construe the Rules in a manner that 

secures “just, speedy and inexpensive” results).
-22-

It is beyond debate that Delaware courts enjoy wide discretion to manage their 

affairs in a manner that “promote[s] economies of time and effort for the court, 

litigants, and counsel.”78 Indeed, “Delaware trial courts have inherent power to 

control their dockets”

79 and to “maintain orderly adjudication of claims.”80

 As a 

result, Delaware courts have ordered some defendants to answer claims 

unchallenged by their instant motions.

81

 In fact, the parties have represented to the 

Court that the “prevailing practice” in the Court of Chancery is to answer the 

allegations at which a partial dismissal motion is not aimed.82 That practice—

78 Brenner v. Albrecht, 2012 WL 252286, at *4 (Del. Ch. Jan. 27, 2012) (internal quotation marks 

omitted); accord In re Montes-Galindez, 2020 WL 2393357, at *1 (Del. May 11, 2020) (“In the 

absence of a clear showing of an arbitrary refusal or failure to act, this Court . . . will not . . . 

compel a trial court to perform a particular judicial function, to decide a matter in a particular way, 

or to dictate the control of its docket.” (cleaned up)); In re Bordley, 545 A.2d 619, 620 (Del. 1988).

79 Solow v. Aspect Res., LLC, 46 A.3d 1074, 1075 (Del. 2012).

80 Avve, Inc. v. Upstack Techs., Inc., 2019 WL 1643752, at *8 (Del. Super. Ct. Apr. 12, 2019) 

(citation omitted).

81 See, e.g., Bayer-Highland, 2018 WL 3129317, at *1-2. And even when a defendant has failed 

to timely answer, Delaware courts still may exercise their discretion not to enter a default 

judgment. See, e.g., Pinkett ex rel. Britt v. Nationwide Mut. Ins. Co., 832 A.2d 747, 750 (Del. 

Super. Ct. 2003).

82 See Tr. Ruling at 11, 17-18, Visionaid, Inc. v. Miller, C.A. No. 7083-VCN (Del. Ch. May 22, 

2012). The Court summons this bench ruling—the import of which the parties have vigorously 

briefed and argued—to substantiate the parties’ representations of Chancery practice, not as 

influential precedent on interpretation of Chancery Rule 12. The Court of Chancery itself strongly 

cautions against such citation to and reliance on its own bench rulings. See Focus Fin. Partners, 

LLC v. Holsopple, 2020 WL 6390038, at *14 (Del. Ch. Nov. 2, 2020) (“[A] bench ruling typically 

reflects a case-specific determination that is intended for the parties, and by virtue of being spoken 

rather than written, its language and implications may be less clear. Compared to written decisions 

. . . the [bench] ruling starts at a disadvantage.” (citations omitted)); Day v. Diligence, Inc., 2020 

WL 2214377, at *1 (Del. Ch. May 7, 2020) (“Transcript Rulings generally have no precedential 

value in this Court and they should ordinarily not be relied on as precedent. . . . Rulings from the 
-23-

whether targeted or applied broadly—isn’t wrong.83 And it certainly is not this 

Court’s place to cast any doubt on it. Neither § 3901 nor Rule 12 coerces courts to 

cede discretionary territory to a single course that may or may not be workable for

every factual circumstance a litigant might allege.

84

 

So, it is clear that moving for partial dismissal before answering is not a 

procedural error necessitating a default or analogous repercussions. And, as 

critically, it is clear that this Court and its sisters are free under our rules to make 

case-specific judgments about the timing, nature and prudence of pleadings.

B. COUNT I—WHICH SEEKS DAMAGES UNDER THE DOUBLE PRINCIPAL 

OPTION—SURVIVES DISMISSAL.

Having overcome procedural barriers, the Court may now reach the merits. 

In moving to dismiss, Invoy argues that the Double Principal Option is an 

bench . . . [do] not advance the common law.” (emphasis in original) (citation omitted)); High 

River Ltd. P’ship v. Occidental Petroleum Corp., 2019 WL 6040285, *7 n.77 (Del. Ch. Nov. 14, 

2019) (same). This Court takes the very same view of its own transcript or bench rulings—they 

are typically case-specific determinations intended for the parties and have little to no precedential 

value thereafter. 

83 But see Invoy Reply Br. at 21-22 & n.10 (D.I. 11) (suggesting that a judicial officer errs by 

ordering an answer to unchallenged claims while a partial dismissal motions pends). At oral 

argument, Invoy also contended that the Court of Chancery’s prevailing practice on this point is 

just incorrect. Or. Arg. Tr. at 8, 11. It isn’t. Delaware courts have broad discretion to control 

their dockets, limited only by arbitrariness or abdication. In re Montes-Galindez, 2020 WL 

2393357, at *1.

84 See DEL. CODE ANN. tit. 10, § 3901(i) (“The Court, in its discretion, may extend time in which 

the defendant or defendants has to answer or otherwise do anything authorized by its Rules of Civil 

Procedure.” (emphasis added)); Del. Super. Ct. Civ. R. 12(a) (authorizing the Court to select “a 

different time” than that provided in the Rule for answering a complaint and to generally dictate 

responsive pleadings).
-24-

unenforceable penalty because (1) damages for breach of the PNA were certain; and 

(2) the Option is not rationally related to Unbound’s actual damages. The Court

cannot agree given the very limited record before it. The complaint supports the 

reasonable inference that the Double Principal Option might well express an 

enforceable liquidated damages provision.

1. The Double Principal Option Implicates a Penalty Analysis.

Delaware enables sophisticated counterparties to contract as they wish and her

courts are loath to disturb bilaterally-negotiated terms.85 Pro-contractarian, 

“Delaware law in general recognizes that the value of contracts is maximized by 

enforcing them as written [and that] little value can come of a promise that can be 

avoided upon the remorse of the maker thereof.”86 Indeed, Delaware law promotes 

voluntary business arrangements “as a matter of fundamental public policy.”87 

85 Sycamore Partners Mgmt., L.P. v. Endurance Am. Ins. Co., 2021 WL 761639, at *5 (Del. 

Super. Ct. Feb. 26, 2021); see Change Cap. Partners Fund I, LLC v. Volt Elec. Sys., LLC, 2018 

WL 1635006, at *4 (Del. Super. Ct. Apr. 3, 2018) (“Delaware ‘courts will enforce the contractual 

scheme that the parties have arrived at through their own self-ordering, both in recognition of a 

right to self-order and to promote certainty of obligations.’” (quoting Ascension Ins. Holdings, 

LLC v. Underwood, 2015 WL 356002, at *4 (Del. Ch. Jan. 28, 2015))); NACCO Indus., Inc. v. 

Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009) (“Delaware law generally elevates contract law . . . 

to allow parties to order their affairs and bargain for specific results. . . .”); Abry Partners V, L.P.

v. F & W Acquisition LLC, 891 A.2d 1032, 1059-61 (Del. Ch. 2006) (same).

86 Lyons Ins. Agency, Inc. v. Wark, 2020 WL 429114, at *1 (Del. Ch. Jan. 28, 2020).

87 NACCO, 997 A.2d at 35.
-25-

Still, Delaware’s fundamental public policy of contractual enforcement is not 

absolute and will kneel to competing public policies of overriding concern.88 When 

the fruits of a bargain are tainted by unsavory objectives, “our courts will decline to 

enforce [them], no matter how clear or sincerely intended when entered.”89 The 

inclusion of penalties disguised as liquidated damages provisions presents one such 

constraint on the freedom of contract.90 This is so because “[c]ontract law allows 

parties to establish only a good faith estimation of actual damages sustained as a 

result of a contract’s termination.”91 That the line separating good and bad faith 

recompense is often thin makes close scrutiny appropriate.92 After all, “[t]he 

distinction between a penalty and liquidated damages clause is significant—if a 

provision is . . . a penalty, it is void as against public policy . . .; if the provision is a 

true liquidated damages provision, it will be enforced according to its own terms.”93

88

 See Sycamore, 2021 WL 761639, at *9-10 (collecting and analyzing authority in which 

Delaware’s pro-contractarianism was supplanted by even more fundamental values).

89 Wark, 2020 WL 429114, at *1.

90 Id. at *4.

91 Del. Bay Surgical Servs., P.C. v. Swier, 900 A.2d 646, 650 (Del. 2006) (emphasis added); see 

DEL. CODE ANN., tit. 6, § 2-718(1) (2020) (“Damages for breach by either party may be liquidated 

. . . but only at an amount which is reasonable[.]”).

92 See Wark, 2020 WL 429114, at *4 (“Delaware imposes limits on liquidated damages clauses . 

. . and will not enforce them if they function as coercive penalties.” (citing Swier, 900 A.2d at 

650)).

93 Swier, 900 A.2d at 650 (internal quotation marks omitted).
-26-

Liquidated damages provisions embody “the parties’ best guess of the amount 

of injury that would be sustained in a contractual breach” and serve to make “certain 

and definite damages which would otherwise be uncertain and not susceptible of 

proof.”94 In contrast, a penalty is a “punishment for default, rather than a measure 

of compensation for . . . breach,” that inserts with blunt instruments “a stipulated 

sum . . . irrespective of the damage sustained.”95 To ascertain the difference, the 

Court conducts a two-prong analysis that probes the “intent of the parties”—“a 

mixed question of law and fact.”96 First, the Court must determine whether damages 

were certain, i.e., capable of “accurate calculation,” at the time of contracting.97 If 

damages were calculable with a fair amount of precision, then a clause that concocts 

an aggravated total is a penalty. And second, if damages were uncertain or at least 

could not be forecasted reliably, then the Court must determine whether the amount 

selected is reasonable.98 At this step, the Court will not strike that number merely 

94 Id. (internal quotation marks omitted).

95 Id.

96 Id.

97 Id. at 651 (citing Lee Builders v. Wells, 103 A.2d 918, 919 (Del. Ch. 1954)) (internal quotation 

marks omitted); Brazen v. Bell Atl. Corp., 695 A.2d 43, 48 (Del. 1997); cf. Kold, LLC v. Croman, 

2014 WL 7008431, at *4 (Del. Super. Ct. Nov. 25, 2014) (The Court “will not construe a liquidated 

damages provision to be a penalty if . . . at the time of contracting, the damages the parties might 

reasonably anticipate were difficult or impossible to ascertain[.]” (citation omitted)).

98 Swier, 900 A.2d at 651; cf. Kold, 2014 WL 7008431, at *4 (A liquidated damages provision is 

not a penalty if “the stipulated amount reasonably estimates the damages that would likely be 
-27-

because the cost “has become financially inconvenient for [a counterparty] to 

honor[.]”99 Instead, to be unreasonable, “the amount at issue must be 

unconscionable or not rationally related to any measure of damages a party might 

conceivably sustain.”100

Despite all this, Unbound contends that a penalty analysis is unnecessary 

because the Double Principal Option “is not a liquidated damages provision[;] [it] is 

a valid and enforceable agreed-upon amount that is triggered when Invoy 

defaults.”101 In other words, Unbound tries here to split two hairs: that a default is 

somehow distinguishable from a breach, and a provision that governs only one of 

two party’s dereliction cannot be a liquidated damages clause. Not so. A liquidated 

damages provision may be best described as any “contract provision that requires 

payment in the event of a termination.”102 Here, the Double Principal Option cannot 

caused by a breach, or is reasonably proportionate to the damages [that] have actually been caused 

by the breach.” (citation omitted)).

99 Change Cap., 2018 WL 1635006, at *9 (internal quotation marks omitted).

100 Swier, 900 A.2d at 651 (emphasis in original) (internal quotation marks and citations omitted).

101 Unbound Op. Br. at 13.

102 Swier, 900 A.2d at 651; Alltrista Plastics, LLC v. Rockline Indus., Inc., 2017 WL 237625, at 

*2 (Del. Super. Ct. Jan. 18, 2017) (“[T]he Supreme Court [has] affirmed that liquidated damages, 

by definition, are damages paid in the event of a breach of contract.” (citing RESTATEMENT 

(SECOND) OF CONTRACTS § 356 (1981)) (internal quotation marks omitted)).
-28-

be exercised unless there is an Event of Default.103 That might be enough to reveal

its role as a liquidated damages provision.

Unbound’s hair-splitting also would rend the PNA’s plain language. The

Double Principal Option too remedies “defaults” unrelated to timely repayment. 

Indeed, Unbound may collect Principal twice its size if Invoy or one of its 

subsidiaries (1) experiences a change in corporate control; (2) cross-defaults by 

incurring inordinate indebtedness to someone else; (3) securitizes any of its assets; 

(4) declares bankruptcy; or (5) reneges on a warranty.104 The parties understood that 

any of these Events could terminate the PNA. And so, even if there were a difference 

of commercial magnitude between a payment default on a note and a generic

contractual breach,105 the parties unambiguously agreed that it would not matter.106

In a last gasp, Unbound says that the Double Principal Option is not a 

liquidated damages provision because it really is just a charge of additional 

103 PNA §§ 3, 4(a).

104 Id. at §§ 3(b)-(f).

105 But see Default, BLACK’S LAW DICTIONARY (11th ed. 2019) (“The omission or failure to 

perform a legal or contractual duty[.]” (emphasis added)); id. Breach (“A violation or infraction 

of a law, obligation or agreement[.]” (emphasis added)).

106 See Surf’s Up, 2021 WL 117036, at *10 (“When the contract is clear and unambiguous, the 

Court gives full effect to the plain-meaning of the contract’s provisions.” (cleaned up)); see also 

Unbound Reply Br. at 4 (“Neither party argues that the contract language is ambiguous and it is 

not.”).
-29-

Interest.107 Unbound’s reasoning here devolves a discussion of usury in which 

Unbound insists Invoy cannot bemoan a high interest rate in a state that does not cap 

it.

108

 True, but inapt. The Double Principal Option itself can be read to remove

Interest from the equation.109 Given the reticulated terms the parties devised for

tabulating Interest, it appears that the Option was meant to disregard the normal rates 

in favor of something else.110 Accordingly, at this point, the Court must say that the 

Double Principal Option implicates a penalty analysis.

2. Count I’s Damages are Reasonably Conceivable.

For Count I to withstand dismissal, Unbound must have pled specific 

allegations supporting its actual damages—an element of a breach-of-contract

claim.111 Where, as here, liquidated damages are resisted as penal, the burden is on 

the party seeking elimination of the purported penalty to establish both penaltyanalysis prongs.112

 So, on its dismissal motion, Invoy must show it is not reasonably 

107 Unbound Op. Br. at 13-15.

108 See DEL. CODE ANN. tit. 6, §§ 2301(c), 2304(a), 2306.

109 PNA § 4(a)(i).

110 Compare id. § 1(b) (expressly defining Interest and providing calculation methodology) with

id. § 4(a)(i) (requiring payment “in lieu of accrued Interest”).

111 See Buck v. Viking Holding Mgmt. Co. LLC, 2021 WL 673459, at *3 (Del. Super. Ct. Feb. 22, 

2021) (citing VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003)).

112 See CRS Proppants LLC v. Preferred Resin Holding Co., LLC, 2016 WL 6094167, at *3 (Del. 

Super. Ct. Sept. 27, 2016) (citing S.H. Deliveries, Inc. v. TriState Courier & Carriage, Inc., 1997 

WL 817883, at *2 (Del. Super. Ct. May 21, 1997)).
-30-

conceivable that Count I’s damages derive from any other source but a penalty.113 

The Court, though, will presume a liquidated damages provision is valid.114 And the 

Court will not dismiss Count I unless Invoy’s interpretation of the Double Principal

Option’s purpose at the time of contracting is the only reasonable one.115 This, the 

Court cannot say. 

a. Damages May Have Been Uncertain.

Invoy contends that damages were capable of accurate calculation because the 

parties agreed to a specific Principal-Interest scheme. But, at this stage, the Court 

can’t say why the parties opted to fix Interest at 10% per year or $300,000 at the 

time of contracting.116 Why not 20%? Why not $500,000? Why not a floating rate? 

Why not attach a security interest? Those queries are why Delaware law is reluctant 

to find damages certain on a barebones record; a counterparty would be deprived of 

113 See inVentiv, 2021 WL 252823, at *4 (Court cannot dismiss if “any reasonable conception [of 

an element] can be formulated to allow . . . recovery.” (internal quotation marks and citations 

omitted)).

114 Kold, 2014 WL 7008431, at *4 (“In Delaware, liquidated damages [provisions] are 

presumptively valid and enforceable[.]” (citation omitted)). 

115 See Vinton v. Grayson, 189 A.3d 695, 699-700 (Del. Super. Ct. 2018) (“In Delaware, the 

interpretation of a contract is a question of law suitable for determination on a motion to dismiss. 

But, on a motion to dismiss, dismissal is proper only if the defendants’ interpretation is the only 

reasonable construction as a matter of law.” (cleaned up)).

116 See Swier, 900 A.2d at 650-51; S.H. Deliveries, 1997 WL 817883, at *2.
-31-

a meaningful opportunity to litigate mutual intent.117 Indeed, in the absence of a 

fortuitous (but unusual) term admitting that damages are uncertain,118 courts 

interpreting such provisions need considerable information surrounding the 

circumstances under which the parties chose the disputed amount.119 But here, “[a]t 

the moment, the Court has nothing more than the arguments of [Invoy’s] counsel to 

support a finding” that the PNA conclusively settled with certainty and precision 

amounts due on the note.120 That, though, is not enough to negate the reasonable 

inference that the parties picked these numbers because they were unsure about what 

damages otherwise might be owing and appropriate.

121

 Accordingly, because

117 See Olsen v. T.A. Tyre Gen. Contractor, Inc., 2006 WL 2661140, at *2 (Del. Aug. 24, 2006) 

(summarily reversing grant of dismissal motion on liquidated damages because “the validity of the 

liquidated damages clause was never fully litigated”).

118 See Piccotti’s Rest. v. Gracie’s, Inc., 1988 WL 15338, at *1 (Del. Super. Ct. Feb. 23, 1988) 

(analyzing liquidated damages provision that stated “Sellers and Buyers agree . . . it is 

exceptionally difficult to assess damages in the event that the Buyers violate all or part of this 

agreement”).

119 See, e.g., CRS Proppants, 2016 WL 6094167, at *3-4 (analyzing a liquidated damages 

provision on a full summary judgment record and concluding market conditions at the time of 

contracting made damages uncertain); Swier, 900 A.2d at 651 (reviewing a liquidated damages 

provision on a full trial record and affirming damages as uncertain).

120 DecisivEdge, LLC v. VNU Grp., LLC, 2018 WL 1448755, at *7 (Del. Super. Ct. Mar. 19, 

2018); see id. (denying motion to dismiss in liquidated damages case to allow for “additional 

discovery”).

121 See Swier, 900 A.2d at 650 (characterizing issue of liquidated damages provision vel non as a 

“mixed question of law and fact”); Cent. Mortg., 27 A.3d at 536-37 (discussing conceivability 

standard).
-32-

liquidated damages must be “incapable of accurate estimation to be valid,”122 and 

Invoy has not carried its burden on this question,

123 the Court cannot conclude that 

Unbound’s recovery under Count I isn’t reasonably conceivable.124

b. The Double Principal Option May Have a Rational Basis.

Assuming damages were certain, the Court still must reject Invoy’s attack on 

the Double Principal Option’s rationality.

125

 That is because Invoy’s PrincipalInterest arguments, repeated here, suffer from the same factual defects as before.

Delaware courts are inclined to find no rational basis where the recourse

chosen is totally outside the breach’s natural dimensions, is inconsistent with the 

parties’ relationship, or grants a secured lender the power to break the law.

126

 But 

122 Wark, 2020 WL 429114, at *7 (citing Faw, Casson & Co., L.L.P. v. Halpen, 2001 WL 985104, 

at *2 n.1 (Del. Super. Ct. Aug. 7, 2001)).

123 See CRS Proppants, 2016 WL 6094167, at *3 (observing that burden is on party claiming 

penalty to demonstrate both penalty-analysis prongs)

124 Cent. Mortg., 27 A.3d at 535; Vinton, 189 A.3d at 700.

125 Swier, 900 A.2d at 651.

126 Wark, 2020 WL 429114, at *7-8 (finding a penalty where the provision was “unreasonable to 

the extent it purport[ed] to impose fixed damages untethered from any act or behavior . . . beyond 

that of choosing to work for a competitor”); Halpen, 2001 WL 985104, at *3 n.7 (finding a penalty 

where the provision failed to “connect[] defendant’s conduct in some fashion with a resulting 

business loss”); Tropical Nursing, Inc. v. Arbors at New Castle Subacute & Rehab. Ctr., 2005 WL 

8135148, at *6 (Del. Super. Ct. Apr. 4, 2005) (finding a penalty where the provision sought to 

disincentivize the defendant from “hiring away” an employee from plaintiff where there was no 

evidence “hiring away” had any bearing on the parties’ business relationship); Am. Energy Sys. of 

Wash., Inc. v. Galeano, Inc., 1991 WL 166117, at *3 (Del. Super. Ct. July 19, 1991) (finding a 

penalty where the provision granted a lessor the right both to repossess the collateral and seek full 

payment of its value from the lessee in violation of positive commercial law).
-33-

here, the complaint supports the reasonable inference that Unbound was relatively 

overexposed in extending a volatile, short-term and uncollateralized credit line to a 

startup that was unable to fundraise during a pivotal equity financing period. It is 

therefore reasonably conceivable that doubling Principal in lieu of Interest was 

rationally related to protecting Unbound from the possibility that it never would 

recoup Interest from a firm that had been struggling to attract capital in the first 

place. As a result, Invoy can’t rest on the fact that Unbound’s “liquidated damages 

are substantially larger than its actual damages” because it is reasonably conceivable 

that the Double Principal Option was a “reasonable estimate of the damages which 

could be caused.”127 Discovery—given this exceedingly thin record—would be 

helpful in fleshing this out.128

Finally, Invoy objects to the suggestion that, because it is a sophisticated entity 

and was represented by counsel, a penalty cannot lie. It is true that Delaware courts 

have not grafted a superior-bargaining-position element onto the penalty analysis. 

And, to be sure, there is no corporate exemption from the penalty analysis that frees

firms to draft agreements forbidden to individuals. But—though not dispositive—

degree of sophistication, arsenal of resources, and presence of counsel at the 

127 DecisivEdge, 2018 WL 1448755, at *6 (internal quotation marks omitted); S.H. Deliveries, 

1997 WL 817883, at *2 (same); see Cent. Mortg., 27 A.3d at 535 (requiring courts to draw 

inferences in favor of the non-movant).

128 See DecisivEdge, 2018 WL 1448755, at *7.
-34-

negotiation table, may be relevant factors when assessing whether a provision is 

unconscionable or actually had a rational basis at the time of contracting.129 That 

the PNA was executed by entities with attorneys130 may not carry the day for 

Unbound. At this point, however, the PNA’s formation does further support the 

reasonable inference that an investment fund and its portfolio company knew the 

stakes when contemplating loss on an expensive instrument. Accordingly, the Court 

is not prepared to hold—on a motion to dismiss—that any bridge loan containing a 

term enlarging a matured or liquidated debt twofold is commercially unreasonable, 

and thus, unenforceable at law.

131

 

Count I’s damages are reasonably conceivable. It survives dismissal.

C. SUMMARY JUDGMENT AND RELATED RELIEF ARE UNWARRANTED.

The Court returns, briefly, to Unbound’s motion. As explained, Invoy’s 

motion is procedurally proper. Accordingly, a default judgment cannot be entered. 

With its procedural weapons disarmed, Unbound is left to argue that Invoy’s

129 See, e.g., Swier, 900 A.2d at 653 (observing that “both parties were sophisticated and 

represented by counsel” “[a]t the time of the contract” in concluding the liquidated damages 

provision was not a penalty); CRS Proppants, 2016 WL 6094167, at *2 (observing that the subject 

agreement was “heavily negotiated by sophisticated parties” at the outset of the penalty analysis 

and concluding the provision was not a penalty).

130 See PNA § 12 (“The Parties, each of which has been represented by counsel in connection 

herewith, have had ample opportunity to review this Agreement.”).

131 See DecisivEdge, 2018 WL 1448755, at *7 (denying motion to dismiss even though the 

disputed provision was “suspect” and gave the court the “impression” that it was a penalty because 

the record was too underdeveloped on the parties’ mutual intent).
-35-

unabashed and unjustified breach entitles it to summary judgment. Just as with 

Invoy’s motion, though, the record simply is too undeveloped to accord Unbound 

that relief or to jump to those conclusions.

132

 Its answering duties now triggered, 

Invoy may register legitimate denials or defenses that might undercut or excuse 

Unbound’s allegations. We’ll see. But a more thorough inquiry is the prudent 

course.

133

 Summary judgment for Unbound now is premature—and denied.

IV. CONCLUSION

For the reasons explained above, Unbound’s motion for default and/or 

summary judgment is DENIED; there has been no cognizable default under 

Delaware’s note action statute and it is simply too early to find the facts so clear as 

to warrant judgment due as a matter of law. Invoy’s motion for partial dismissal, 

too, is DENIED; it would be equally premature to find the PNA’s Double Principal 

Option an illegal penalty as a matter of law.

IT IS SO ORDERED.

 

Paul R. Wallace, Judge

132 See Rutledge, 750 A.2d at 1227-28 (observing that courts have discretion to deny summary 

judgment where factual clarity is warranted); Moore, 405 A.2d at 680 (placing burden on the 

movant to demonstrate its claim is supported by undisputed facts); Williams Cos., 2020 WL 

3581095, at *2 (observing that a court should deny summary judgment where a record is necessary 

for equitable purposes); Judah, 378 A.2d at 632 (instructing courts to view the facts in the light 

most favorable to the non-movant). 

133 See Ebersole, 180 A.2d at 468-69.