IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CLP TOXICOLOGY, INC., )

)

Plaintiff, )

)

v. ) C.A. No. 2018-0783-PRW

) and

CASLA BIO HOLDINGS LLC, CASLA ) C.A. No. N18C-10-332 PRW 

BIO GP, LLC, CASLA PARTNERS, L.P., ) CCLD

CASLA PARTNERS LLC, CASLA )

PARTNERS CAPITAL FUND I, LP, )

SAMUEL HINES, JARED ROCHWERG, )

R2 INVESTMENTS, LLC a/k/a )

SAMSON INVESTMENT PARTNERS, )

HAWK CAPITAL PARTNERS, LP, )

PROVCO VENTURES I, LP, CLIFTON )

WRIGHT, ROY S. NEFF, LBCW )

HOLDINGS, LP, CASLA ABS )

INVESTORS, LP and LARRY HOLLIN, )

)

 Defendants. )

Submitted: May 12, 2020

Decided: June 29, 2020

Corrected: August 14, 2020

MEMORANDUM OPINION AND ORDER

Upon Defendants’ Motion to Dismiss,

DENIED in part; GRANTED in part.

Christopher Viceconte, Esquire, GIBBONS P.C., Wilmington, Delaware; Anthony 

J. Rospert, Esquire, Thomas M. Ritzert, Esquire, THOMPSON HINE LLP,

Cleveland, Ohio, Attorneys for Plaintiff CLP Toxicology, Inc.

Peter B. Ladig, Esquire, Elizabeth A. Powers, Esquire, BAYARD, P.A., 

Wilmington, Delaware; Jordan D. Weiss, Esquire, GOODWIN PROCTER LLP, 

New York, New York, Attorneys for Casla Bio Holdings LLC, Casla Bio GP, LLC, 
- ii -

Casla Partners, L.P., Casla Partners LLC, Casla Partners Capital Fund I, LP,

Samuel Hines, Jared Rochwerg, R2 Investments, LLC A/K/A Samson Investment 

Partners, Hawk Capital Partners, LP, Provco Ventures I, LP, Clifton Wright, Roy 

S. Neff, LBCW Holdings, LP, Casla ABS Investors, LP And Larry Hollin.

WALLACE, J.
-1-

This civil action arises out of Plaintiff CLP Toxicology, Inc.’s (“CLP”) 

purchase of all Alternative Biomedical Solutions LLC’s (“ABS” or the “Company”) 

securities (the “Transaction”) pursuant to a Securities Purchase Agreement (the 

“SPA”). CLP and Defendants Casla Bio Holdings LLC (“Casla” or “Company 

Seller”), and Casla Bio GP, LLC (“Blocker Seller” and, together with Casla, the 

“Seller Defendants”) executed the SPA and closed the Transaction on December 18, 

2017 (the “Closing” or “Closing Date”). 

CLP alleges that Samuel Hines, Jared Rochwerg (together, the “Individual 

Defendants”), and the Seller Defendants intentionally misled and induced CLP to 

purchase the assets based on omissions, concealments, and material 

misrepresentations. 

CLP also asserts that Casla Partners, LP, Casla Partners LLC, Casla Partners

Capital Fund I, LP (collectively, the “Principal Casla Defendants”), R2 Investments, 

LLC, a/k/a Samson Investment Partners (“R2”), Hawk Capital Partners, LP 

(“Hawk”), Casla ABS Investors, LP (“Casla ABS Investors” and, together with R2 

and Hawk, the “Principal Investor Defendants”), the Seller Defendants, and

Individual Defendants worked in confederation with one another to induce CLP to 

sign the SPA. CLP claims that the Seller Defendants and Individual Defendants 

acted at all relevant times as the agents of Principal Casla Defendants and the 

Principal Investor Defendants. 
- 2 -

Finally, CLP asserts that the Seller Defendants transferred the proceeds of the 

sale of ABS to Provco Ventures I, LP (“Provco”), Clifton Wright, Roy Neff, LBCW 

Holdings, LP (“LBCW”), Larry Hollin (collectively, the “Investor Defendants”) and 

the Principal Investor Defendants with intent to defraud CLP and prevent CLP from 

being able to recover the amounts owed to it as a result of the Seller Defendants’ and 

Individual Defendants’ fraudulent activities. 

CLP filed parallel actions in the Court of Chancery (the “Court of Chancery 

Action”) and the Complex Commercial Litigation Division of the Superior Court 

(the “Superior Court CCLD Action”), against the Seller Defendants, the Individual 

Defendants, the Principal Casla Defendants, the Investor Defendants and the

Principal Investor Defendants (collectively, “Defendants”). Thereafter, the Chief 

Justice designated the undersigned to sit in the Court of Chancery Action so that one 

judicial officer could resolve the parties’ overlapping and related disputes.1

In early 2019, CLP filed an amended complaint (the “Amended Complaint”)

in the Court of Chancery Action. CLP makes the following claims:

- Charges Fraudulent Inducement and seeks Damages against Seller 

Defendants and Individual Defendants (“Count I”);

- Charges Fraudulent Inducement and seeks Rescissory Damages against

Seller Defendants (“Count II”);

 

1

See Del. Const. art. IV, § 13(2). 
- 3 -

- Charges Fraud and seeks Damages against Seller Defendants and 

Individual Defendants (“Count III”);

- Seeks Declaratory Judgment that Casla is an alter ego of the Principal 

Investor Defendants and the Investor Defendants (“Count IV”);

- Seeks Declaratory Judgment that the Individual Defendants and Seller 

Defendants are agents of the Principal Investor Defendants and the 

Principal Casla Defendants (“Count V”);

- Charges Breach of Section 4.21 of the SPA and seeks Damages against 

Seller Defendants (“Count VI”);

- Charges Breach of Sections 4.6(b), 4.24, and 4.26 of the SPA and seeks 

Damages against Seller Defendants (“Count VII”);

- Charges Breach of Sections 4.8, 4.15, and 4.17 of the SPA and seeks 

Damages against Seller Defendants (“Count VIII”);

- Charges Breach of Section 9.1(c) of the SPA and seeks Damages against 

Seller Defendants (“Count IX”);

- Charges Breach Section 4.26 of SPA and seeks Damages against Seller 

Defendants (“Count X”);

- Seeks Unjust Enrichment/Disgorgement and Damages against Defendants, 

but in the alternative to Counts VI – X as to Seller Defendants Only

(“Count XI”);

- Charges Civil Conspiracy and seeks Damages against Seller Defendants, 

Individual Defendants, Principal Investor Defendants, and Principal Casla 

Defendants (“Count XII”);

- Charges Fraudulent Transfer Under 6 Del. C. § 1301 et seq. and seeks 

Damages against All Defendants (“Count XIII”);

- Seeks Constructive Trust and Damages against All Defendants (“XIV”).
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This is the Court’s ruling on the Defendants’ Rule 12(b)(6) motion to dismiss (the 

“Motion to Dismiss”) Counts I-VIII, X, and XI of the Amended Complaint.

Having considered the record and the parties’ arguments, the Court concludes 

that the Motion to Dismiss must be DENIED in part and GRANTED in part.

I. FACTUAL AND PROCEDURAL BACKGROUND2

Pursuant to the SPA, CLP purchased all of the issued and outstanding shares 

of the Company from Casla.3 The purchase price was based, in part, on the EBITDA 

generated by ABS.4

The SPA also includes a provision in which the Company Seller is deemed to 

have knowledge of facts that are within the actual knowledge of several key people. 

Under the terms of the Purchase Agreement “Company’s Knowledge” is defined as 

“the actual knowledge, and the knowledge that could have been acquired with 

respect to any fact or matter had such individual made reasonable inquiry of or 

caused reasonable investigation by the Persons who would reasonably be expected 

 

2 Unless otherwise noted, the facts recited herein are drawn from the well-pled allegations of the 

Amended Complaint, together with its attached exhibits.

3 Am. Compl. ¶ 53. 

4

Id.
- 5 -

to have knowledge of such fact or other matter, of one or more of Simon Bergeron, 

Ray Fuller, Janet McGrath or Samuel Hines.”5

A. THE SPA.

1. The Pre-Closing Representations and Warranties Concerning the 

Company.

In Article IV of the SPA, the Company made several representations and 

warranties to CLP as of the Closing.6

In Section 4.21 of the SPA, the Company represented and warranted to CLP 

that its twenty (20) largest customers were named within Section 4.21(a) of the 

Disclosure Schedule (“Material Customers”) and that “[n]o Material Customer . . . 

has within the twelve (12) months prior to the date of this Agreement ceased or 

materially altered its relationship with the Business, or, to Company’s Knowledge, 

has threatened to cease or materially adversely alter any such relationship.”7

In Section 4.24 of the SPA, the Company represented and warranted to CLP 

that its books and records were “maintained in accordance with commercially 

reasonable business practices and are complete and accurate in all material respects” 

and that Company “maintained a system of internal accounting controls sufficient to 

 

5

Id. ¶ 54.

6

Id. ¶ 55; see Am. Compl., Exhibit A (“SPA”) art. IV. 

7 Am. Compl. ¶ 56; SPA § 4.21.
- 6 -

provide reasonable assurances that (i) transactions are executed in accordance with 

management’s authorizations, (ii) transactions are recorded as necessary to permit 

preparation of financial statements in conformity with GAAP and to maintain 

accountability for assets, and (iii) access to assets is permitted only in accordance 

with management’s authorization.”8 In Section 4.6(b) of the SPA, the Company

represented and warranted to CLP that “[t]he Financials (including any notes

thereto) have been prepared in accordance with GAAP, consistently applied and 

fairly present, in all material respects, the consolidated financial position and results 

of the operations of the Group Companies in accordance with GAAP....”9

In Section 4.26 of the SPA, the Company represented and warranted to CLP 

that, other than certain accounts listed in the Section 4.26 Disclosure Schedule, “all 

of the accounts receivable” (a) “represent bona fide arm’s length sales in the 

Ordinary Course of Business” and (b) “are collectible in the Ordinary Course of 

Business, less usual allowances for doubtful accounts provided for on the face of the 

Most Recent Balance Sheet.”10

In Section 4.15(vi) of the SPA and Section 4.15 of the Disclosure Schedule, 

the Company identified “several pay or Compensation obligations . . . that would 

 

8 Am. Compl. ¶ 57; SPA §4.24.

9 Am. Compl. ¶ 58; SPA § 4.6(b).

10 Am. Compl. ¶ 59; SPA § 4.26.
- 7 -

become payable by reason of the Contemplated Transactions” and that these 

obligations were not in “material breach.”11 And in Section 4.17(b)(ii) of the SPA,

the Company represented and warranted that “no Group Company is delinquent in

any payments to any Company Employee or Contingent Worker for any wages,

salaries, commissions, bonuses, fees or other compensation due with respect to any

services performed for it to the date hereof or amounts required to be reimbursed to

such Company Employee or Contingent Worker.”12 

In Section 4.8 of the SPA, the Company represented and warranted to CLP 

that “[n]o Year 1 Earnout (as such term is defined in the Bergeron Employment 

Agreement) will be due and payable by any Group Company in accordance with, 

and subject to, the terms of the Bergeron Employment Agreement.”13

The Company represented in Section 4.17(a)(ii) of the SPA that all 

independent contractors, consultants, temporary employees, leased employees or 

other servants or agents performing services for the Company and classified as other 

than a Company Employee were disclosed on the Section 4.17(a)(ii) Disclosure 

 

11 Am. Compl. ¶ 60; SPA § 4.15(vi).

12 Am. Compl. ¶ 61; SPA § 4.17(b)(ii).

13 Am. Compl. ¶ 62; SPA § 4.8.
- 8 -

Schedule.14 The Section 4.17(a)(ii) Disclosure Schedule required the Company to 

identify each Contingent Worker’s fee or compensation arrangement.15

Section 4.32(a) of the SPA provides:

(a) NONE OF THE COMPANY, NOR OR ANY OF ITS 

REPRESENTATIVES, DIRECTORS, MANAGERS, PARTNERS, 

OFFICERS OR DIRECT OR INDIRECT EQUITYHOLDERS HAS 

MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS 

OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO 

THE COMPANY, ANY OF ITS SUBSIDIARIES OR THE 

BUSINESS OF THE COMPANY, ITS SUBSIDIARIES OR 

OTHERWISE IN CONNECTION WITH THE TRANSACTIONS 

CONTEMPLATED HEREBY (INCLUDING ANY OF THE ASSETS 

OF ANY GROUP COMPANY OR ANY PROJECTION OR 

FORECAST RELATING TO ANY OF THEIR RESPECTIVE 

BUSINESSES), OTHER THAN THOSE REPRESENTATIONS AND 

WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE IV. 

EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE 

CONDITION OF THE ASSETS OF THE GROUP COMPANIES 

SHALL BE “AS IS” AND “WHERE IS.”16

Section 4.32(b) of the SPA provides:

(b) Without limiting the generality of the foregoing, except as expressly 

set forth in this Agreement, none of the Group Companies, nor any 

Affiliate of the Group Companies, nor any of their respective 

representatives, employees, officers, directors, managers, partners or 

direct or indirect equityholders, has made, and shall not be deemed to 

have made, any representations or warranties in the materials relating 

to the Business made available to the Buyer, including due diligence 

materials, or in any presentation of the Business by management of the 

Group Companies or others in connection with the Contemplated 

 

14 Am. Compl. ¶ 63; SPA § 4.17(a)(ii).

15 Id. 

16 SPA § 4.32(a).
- 9 -

Transactions, and no statement contained in any of such materials or

made in any such presentation shall be deemed a representation or 

warranty hereunder and deemed to be relied upon by the Buyer or any 

of their Affiliates in executing, delivering and performing this 

Agreement and the Contemplated Transactions. It is understood that 

any cost estimates, projections or other predictions, any data, any 

financial information or any memoranda or offering materials or 

presentations, including any offering memorandum or similar materials 

made available by the Group Companies and their Representatives, are 

not and shall not be deemed to be or to include representations or 

warranties of any such Person, and are not and shall not be deemed to 

be relied upon by the Buyer or any of their Affiliates in executing, 

delivering and performing this Agreement and the Contemplated 

Transactions.17

2. CLP’s Disclaimer of Other Representations and Warranties. 

Article V sets forth CLP’s representations and warranties. 18 Section 5.9(a) of 

the SPA provides:

(a) NEITHER BUYER NOR ANY OF ITS REPRESENTATIVES, 

DIRECTORS, MANAGERS, PARTNERS, OFFICERS, 

EMPLOYEES OR DIRECT OR INDIRECT EQUITYHOLDERS 

HAS MADE ANY REPRESENTATIONS OR WARRANTIES, 

EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER 

RELATING TO BUYER OTHERWISE IN CONNECTION WITH 

THE CONTEMPLATED TRANSACTIONS, OTHER THAN THOSE 

REPRESENTATIONS AND WARRANTIES EXPRESSLY SET 

FORTH IN THIS ARTICLE V.19

 

17 SPA § 4.32(b).

18 SPA art. V.

19 SPA § 5.9(a).
- 10 -

Section 5.9(b) of the SPA provides:

The Buyer agrees to and acknowledges the disclaimers set forth in 

Section 4.32, Section 6.8 and Section 7.8.20

3. Seller Defendants’ Disclaimer of Other Representations and 

Warranties.

Article VI of the SPA sets forth the Sellers’ representations and warranties.21

Section 6.8(a) of the SPA provides that none of the Seller Defendants

HAS MADE ANY REPRESENTATIONS OR WARRANTIES, 

EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER 

RELATING TO SUCH SELLER, THE COMPANY, ANY OF ITS 

SUBSIDIARIES OR THE BUSINESS OF SUCH SELLER, THE 

COMPANY, ITS SUBSIDIARIES OR OTHERWISE IN 

CONNECTION WITH THE TRANSACTIONS CONTEMPLATED 

HEREBY, OTHER THAN THOSE REPRESENTATIONS AND 

WARRANTIES EXPRESSLY SET FORTH IN THIS Article VI.22

Section 6.8(b) of the SPA provides that none of the Seller Defendants

has made, and shall not be deemed to have made, any representations 

or warranties in the materials relating to the Business made available to 

the Buyer, including due diligence materials, or in any presentation of 

the Business by management of the Group Companies or others in 

connection with the Contemplated Transactions, and no statement 

contained in any of such materials or made in any such presentation 

shall be deemed a representation or warranty hereunder and deemed to 

be relied upon by the Buyer or any of their Affiliates in executing, 

delivering and performing this Agreement and the Contemplated 

Transactions. It is understood that any cost estimates, projections or 

other predictions, any data, any financial information or any 

 

20 SPA § 5.9(b).

21 SPA art. VI. 

22 SPA § 6.8(a).
- 11 -

memoranda or offering materials or presentations, including any 

offering memorandum or similar materials made available by the 

Group Companies and their Representatives, are not and shall not be 

deemed to be or to include representations or warranties of any such 

Person, and are not and shall not be deemed to be relied upon by the 

Buyer or any of their Affiliates in executing, delivering and performing 

this Agreement and the Contemplated Transactions.23

Section 6.8(c) of the SPA provides that the Seller Defendants "agree to and 

acknowledge the disclaimers set forth in Section 5.9(a).”24 Substantively 

identical language is used with respect to the representations of the Blocker 

and Blocker Seller in Section 7.8 of the SPA.

4. The Indemnification Clause.

Section 9.1(a) of the SPA provides CLP a remedy from the Seller Defendants, jointly 

and severally, for breaches of these representations and warranties: the Seller 

Defendants agreed to indemnify the Buyer Indemnified Parties, including CLP, for 

all Losses incurred, and continuing to be incurred by the Buyer Indemnified Parties 

as a result of “any breach of, or any misrepresentation with respect to, any 

representations and warranties set forth in Articles IV, VI or VII” as well as “any 

breach or violation of any covenant or agreement of such Seller contained in this 

Agreement.”25 Section 9.3(c) provides “notwithstanding anything to the contrary 

 

23 SPA § 6.8(b).

24 SPA § 6.8(c).

25 Am. Compl. ¶ 64; SPA § 9.1.
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herein, neither the Deductible nor the Cap shall apply to any Losses resulting from 

or arising out of (i) fraud...”26

5. The Integration Clause.

Section 10.5 of the SPA provides:

This Agreement, together with the other Ancillary Agreements and any 

documents, instruments and certificates explicitly referred to herein, 

constitutes the entire agreement among the Parties with respect to the 

subject matter hereof and supersedes any and all prior discussions, 

negotiations, proposals, undertakings, understandings and agreements, 

whether written or oral, with respect thereto. There are no restrictions, 

promises, warranties, covenants, or undertakings, other than those 

expressly provided for herein and therein.27

B. SELLER DEFENDANTS’ AND INDIVIDUAL DEFENDANTS’ ALLEGED PRECLOSING MISREPRESENTATIONS.

1. Loss of Material Customers.

In the Section 4.21(a) Disclosure Schedule, Defendants identified both ESA 

Laboratories (“ESA”) and Maplewood Laboratories (“Maplewood”) as Material 

Customers.28 Under Section 4.21, the Company represented that within twelve 

months prior to the Purchase Agreement, neither ESA nor Maplewood “ceased or 

 

26 SPA § 9.3(c)

27 Id. § 10.5.

28 Am. Compl. ¶ 69.
- 13 -

materially altered its relationship with the Business or, to Company’s Knowledge, 

has threatened to cease or materially adversely alter any such relationship.”29

As of December 18, 2017—the Closing Date—neither ESA nor Maplewood 

were in operation, nor has either ever been able to restart their toxicology 

laboratories and begin processing clinical samples again.30 CLP alleges that the 

Seller Defendants and the Individual Defendants were aware that ESA and 

Maplewood were not operational at the time the SPA was executed.31

As to ESA, CLP alleges in detail that in September 2017, three months before 

the false representations were made in the SPA, ABS employees became aware of 

significant issues with ESA’s operations—including that ESA was entering a twoweek shutdown as a result of a negative business inspection—and were concerned 

that ESA might never be able to reopen.32 They informed Rochwerg of their 

concerns.33

As to Maplewood, CLP alleges that in October of 2017, ABS employees 

learned of a dispute among Maplewood’s ownership that led to a shutdown of 

 

29 Id. ¶ 70.

30 Id. ¶ 112.

31 Id. ¶ 113.

32 Id. ¶¶ 75-81.

33 Id. ¶¶ 75-81, 87.
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operations and loss of employees.34 These facts too were communicated to 

Rochwerg.35

ABS employees met with Maplewood representatives in November of 2017 

to discuss the lab’s ongoing issues, the fact that Maplewood was not operational, and 

concern as to whether Maplewood would be able to pay ABS the current amount 

owing—which was in excess of $100,000.36 Maplewood represented it needed 

short-term relief to restructure, and that it had hired consultants to assist.37 These 

consultants asked ABS for a grace period and forgiveness of the amount owed, 

saying it was necessary to turn Maplewood around.

38

2. Overstated Revenue and Financial Results.

In the Summer of 2017, Rochwerg directed ABS employees to secure as many 

equipment sales as possible to boost ABS revenues for the express purpose of 

showing a higher EBITDA in connection with the planned sale to CLP.39 In August 

 

34 Id. ¶¶ 100-104.

35 Id. ¶ 103.

36 Id. ¶¶ 106-107.

37 Id. ¶ 108.

38 Id. ¶¶ 106-110.

39 Id. ¶ 143.
- 15 -

2017, Radeas agreed to purchase $750,000 worth of equipment—a substantial 

purchase as ABS annual equipment sales were approximately $3,000,000.40 But

ABS employee Ray Fuller (“Fuller”) felt it was more of a prospective deal, rather 

than an actual purchase, and so-informed Rochwerg.41

Rochwerg then instructed Fuller to invoice the Radeas sale. Because the order 

had not been fulfilled and no equipment had been shipped, the invoice was a 

violation of ABS’s accounting policies and a process not in accordance with GAAP 

that overstated and deliberately inflated ABS’s financial data.42 Specifically, ABS 

policy provided that a customer would not be invoiced until the customer’s order 

was fulfilled and the equipment shipped.43

Seller Defendants allegedly breached Sections 4.6(b), 4.24, and 4.26 through 

their invoicing of the Radeas sale.44 CLP alleges that if it had known the real facts 

concerning the Radeas “sale” it either would not have proceeded with acquiring ABS

or would have acquired it at a lower price.45 

 

40 Id. ¶¶ 145-146.

41 Id. ¶¶ 147-148.

42 Id. ¶¶ 150-154.

43 Id. ¶ 142.

44 Id. ¶ 155.

45 Id. ¶ 154.
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3. Understated Liabilities.

Seller Defendants also allegedly breached Sections 4.8, 4.15, and 4.17 of the

SPA by: (i) breaching the Company’s former Chief Executive Officer’s Employment 

Agreement that entitled him to a $375,000 earn-out bonus payment; (ii) failing to 

pay $833,332.29 in consulting fees owed under a Consulting Agreement between 

ABS and the Company’s founder, Cliff Wright—an amount in excess of what was 

specifically represented in the balance sheet as the only outstanding-balance-related 

liability; and (iii) understating the doubtful accounts receivable reserve (the 

“Accounts Receivable Reserve”) in the amount of $605,201 because several 

accounts were not collectable in the Ordinary Course of Business.46

C. SELLER DEFENDANTS’, INDIVIDUAL DEFENDANTS’, PRINCIPAL INVESTOR 

DEFENDANTS’, AND PRINCIPAL CASLA DEFENDANTS’ ALLEGED 

FRAUDULENT SCHEME.

CLP contends Seller Defendants, Individual Defendants, Principal Investor

Defendants, and Principal Casla Defendants engaged in a fraudulent scheme to 

misrepresent and conceal the fact that two of the Company’s Material Customers 

were not in business, operating, and processing customer samples at the time of the 

Closing Date.47

 

46 Id. ¶ 10.

47 Id. 
- 17 -

Specifically, CLP alleges the Seller Defendants and the Individual Defendants 

actively discussed the true state of affairs with ABS’s customer base.48 Internal 

emails and discussions between the Individual Defendants and ABS employees 

openly acknowledged the loss of two Material Customers.49 

CLP alleges that Rochwerg directed Fuller to orchestrate the execution of a 

new contract with ESA, despite the fact that it was not operational, because any 

issues with the ESA account would be a potential issue for closing the transaction 

with CLP.50 Fuller did so, arranging for what appeared to be a 12-month renewal 

that, in fact, would likely be cancelled after just 90 days given the state of ESA’s 

business.51 This contract was executed just seven days before the Closing of the 

transaction with CLP.52 Rochwerg, on behalf of Seller Defendants and Individual 

Defendants, designed a scheme to conceal the reality of ESA’s and Maplewood’s 

statuses, and directed ABS employees to take steps to prevent CLP from learning 

the true status of these accounts.53 For example, Rochwerg allegedly directed that a 

 

48 Id. ¶ 7. 

49 Id. 

50 Id. ¶¶ 88-99.

51 Id. ¶ 94.

52 Id. ¶ 97.

53 See id. ¶¶ 114-136.
- 18 -

summary of ABS contracts be manipulated in a deceptive way to show a single startand-end date range for all contracts, rather than the true specific start-and-end 

dates.54

In another incident, in advance of a meeting with lenders and CLP to discuss 

the status of certain accounts, Rochwerg instructed Fuller and another ABS 

employee not to volunteer information about ESA or Maplewood.55 To the contrary, 

these employees were told to “stick to the script” that ESA and Maplewood were 

“still under contract” even though those labs were not operational. The employees 

were also told to deflect any questions seeking more specifics for contract dates 

beyond those listed in the manipulated, misleading summary.56

The Principal Investor Defendants and the Principal Casla Defendants are 

alleged to have acted as part of this scheme through their agents.57 The Principal 

Investor Defendants collectively owned over 69% of the membership interest in 

Casla, and, according to CLP, at all relevant times, both dominated Casla and had 

the right to control the conduct of Seller Defendants, Hines, and Rochwerg.58 

 

54 Id. ¶¶ 119-123.

55 Id. ¶¶ 123-125.

56 Id. ¶ 127.

57 Id. ¶ 13.

58 Id.
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R2 and Hawk each controlled at least one seat on Casla’s board of directors.59 The 

Principal Casla Defendants participated in this controlling block through Casla ABS 

Investors. And, it is alleged, Hines and Rochwerg: are each members, principals or 

officers of each of the Principal Casla Defendants; are each members of Casla’s 

board of directors; and each actively participated in the management of Casla.60

D. SELLER DEFENDANTS’ TRANSFER OF SALE PROCEEDS TO THE PRINCIPAL 

INVESTOR DEFENDANTS AND INVESTOR DEFENDANTS.

CLP also brings claims for unjust enrichment, fraudulent transfer, and 

constructive trust.61 These claims arise from Seller Defendants alleged transfer of

the ABS sales proceeds to the Principal Investor Defendants and the Investor 

Defendants with intent to defraud CLP and prevent CLP from being able to recover 

the amounts owed to it as a result of the Seller Defendants’ and Individual 

Defendants’ fraudulent activities.62 Specifically, CLP alleges Casla: (i) transferred 

the ABS sale proceeds to the Principal Investor Defendants and the Investor 

Defendants who own, operate, and control Casla such that they are insiders under 

the Delaware Uniform Fraudulent Transfer Act (“DUFTA”); (ii) transferred ABS 

 

59 Id.

60

 Id.

61 Id. ¶ 15.

62 Id.
- 20 -

sale proceeds to the Principal Investor Defendants and the Investor Defendants 

despite knowing that its statements in the Purchase Agreement’s representations and 

warranties were false so as to decapitalize itself and avoid paying the judgment that 

would ultimately be issued against it; and (iii) transferred substantially all of Casla’s 

assets to the Principal Investor Defendants and the Investor Defendants, which 

rendered Casla severely undercapitalized in relation to its business, likely unable to 

pay CLP the amounts, and insolvent under the DUFTA.63

II. PARTIES’ CONTENTIONS

A. CLP’S CLAIMS.

CLP sets forth fourteen counts in its Amended Complaint, twelve of which 

are disputed in the Motion to Dismiss.

64 In summary, Counts I, II, and III relate to 

the Seller Defendants’ and Individual Defendants’ omissions and misrepresentations 

of material facts in negotiations with CLP leading up to the Closing and in the Article 

IV representations and warranties. Count I seeks monetary damages for fraudulent 

inducement against Seller Defendants and Individual Defendants. Count II seeks 

rescissory damages for fraudulent inducement against Seller Defendants. Count III 

 

63 Id. ¶ 276. 

64 Defendants do not dispute the merits of Counts IX and XII. Still, Count XII for Civil 

Conspiracy depends on the survival of at least one of the fraud claims. 
- 21 -

seeks monetary damages for fraud against Seller Defendants and Individual 

Defendants. 

Counts IV and V seek declaratory judgement. Count IV seeks a declaration 

that Casla is merely an alter ego of the Principal Investor Defendants and Investor 

Defendants and therefore the corporate veil of Casla should be pierced. Count V 

seeks a declaration that Casla, Hines, and Rochwerg were acting as the agents of the 

Principal Investor Defendants and the Principal Casla Defendants and therefore the 

Principal Investor Defendants are jointly and severally liable for Casla, Hines, and 

Rochwerg’s misconduct. 

Counts VI, VII, VIII, and X seek damages from Seller Defendants for breach 

of contract. Count VI seeks monetary damages from Seller Defendants for failing 

to disclose the true status of the ESA and Maplewood accounts in violation of 

Section 4.21 of the SPA. Count VII seeks monetary damages for Seller Defendants’

failure to disclose the true nature of the Radeas “sale” in violation of Sections 4.6(b), 

4.24, and 4.26 of the SPA. Count VIII seeks monetary damages from Seller 

Defendants for failing to disclose the Bergeron earn-out bonus and the Cliff Right 

consulting fees in violation of Sections 4.8, 4.15. and 4.17 of the SPA. Count X 

seeks monetary damages for Seller Defendants’ failure to disclose the true status of 

the Company’s accounts receivable and the proper accounting thereof in violation 

of Section 4.26. 
- 22 -

Count XI seeks monetary damages, disgorgement, and equitable relief for the 

unjust enrichment of all Defendants. In the alternative, CLP seeks monetary 

damages, disgorgement, and equitable relief for unjust enrichment of the Seller 

Defendants only. 

Count XIII seeks monetary damages against all Defendants via DUFTA for 

fraudulent transfer of the proceeds realized from the Transaction to the Principal 

Investor Defendants and Investor Defendants. Finally, Count XIV seeks damages 

and equitable relief in the form of an order imposing a constructive trust over the 

proceeds of the transaction held by Defendants, including disgorgement of all 

proceeds readily traceable therefrom.

In their answering brief to Defendants’ Motion to Dismiss, CLP argues that 

all Defendants are equitably estopped from challenging jurisdiction. Even so, CLP 

contends, there is jurisdiction over the Investor Defendants, Casla Partners LLC 

(collectively, “Non-Delaware Defendants”) and the Individual Defendants and the 

exercise of such jurisdiction comports with due process. CLP says that the long-arm 

statute provides jurisdiction over the Non-Delaware Defendants and jurisdiction 

over the Individual Defendants is conferred by the Manager Consent Statute. 

Finally, CLP suggests it is entitled to jurisdictional discovery at a minimum. 
- 23 -

B. DEFENDANTS’ MOTION TO DISMISS.

Defendants contend (1) there is a lack of personal jurisdiction over the NonDelaware Defendants and the Individual Defendants; and (2) Counts I-VIII, X, and 

XI fail to state cognizable causes of action.

Defendants first argue that the Non-Delaware Defendants are not equitably 

estopped from challenging jurisdiction. Defendants next argue that the NonDelaware Defendants have taken no actions in Delaware sufficient to confer 

jurisdiction under the long arm statute and that the exercise of personal jurisdiction 

over the Non-Delaware Defendants does not comport with due process. 

As for the Individual Defendants, Defendants contend that the Individual 

Defendants are not subject to jurisdiction under the Manager Consent Statute and 

that CLP did not serve the Individual Defendants under Delaware’s Long-Arm 

Statute. Defendants further argue that CLP’s conspiracy theory does not provide a 

basis for personal jurisdiction over the Individual Defendants.

With respect to Counts I, II, and III, Defendants allege that the anti-reliance 

language in the SPA bars CLP’s fraud claims based on statements outside the four 

corners of the SPA. Defendants argue further that the fraud claims are duplicative 

of the breach-of-contract claims and should be dismissed. Defendants contend too 

that CLP has not pled sufficient facts to establish any fraudulent representation 

within the four corners of the SPA. 
- 24 -

Defendants next argue that Count IV should be dismissed because CLP has

not stated a claim for veil piercing against the Principal Investor Defendants and 

Investor Defendants. Defendants argue that Count V should be dismissed because 

CLP has not stated a claim under agency theory against the Principal Investor 

Defendants or the Principal Casla Defendants. 

With respect to the breach claims in Counts VI, VII, VIII and X, Defendants 

argue that CLP cannot maintain a claim for breach of the SPA by the Seller 

Defendants. First, Defendants contend that the SPA bars any claims based on the 

Accounts Receivable Reserve and Mr. Wright’s Consultancy Agreement. Second, 

Defendants argue that CLP’s claim regarding the Bergeron Earnout are insufficient 

where CLP has not even alleged that Mr. Bergeron achieved it. 

With respect to Count XI, Defendants claim that CLP’s unjust 

enrichment/disgorgement claim should be dismissed on the merits. Defendants 

further suggest that CLP cannot assert unjust enrichment against non-parties to the 

SPA. Finally, Defendants contend that Counts XIII and XIV should also be 

dismissed on the merits.
- 25 -

III. STANDARD OF REVIEW65

The Defendants’ motion seeks to dismiss the Amended Complaint for failing 

to state a claim on which relief can be granted.66 In Delaware, the pleading standards 

for purposes of a Rule 12(b)(6) motion “are minimal.”67 When considering a 

defendant’s motion to dismiss, the Court should accept all well-pleaded factual 

allegations in the Complaint as true, accept even vague allegations in the Complaint 

as “well-pleaded” if they provide the defendant notice of the claim, draw all 

reasonable inferences in the plaintiff’s favor, and deny the motion unless the plaintiff 

 

65 While CLP—the party that decided to file simultaneous parallel suits in two of our trial 

courts—quibbles over whether the Court should apply the Court of Chancery Rules or the Superior 

Court Civil Rules here, it is mute as to whether there is any substantive difference between the two 

Court’s rules or any operative difference in the analyses thereunder that must be engaged to decide 

this motion to dismiss. That’s because there is nothing to say—there is no difference. See Ct. Ch. 

R. 12(b)(2), 12(b)(6); Del. Super. Ct. Civ. R. 12(b)(2),12(b)(6). Compare Ryan v. Gifford, 935 

A.2d 258, 265 (Del. Ch. 2007) (explicating standard applied under Chancery Rule 12(b)(2)), with 

Economical Steel Building Technologies, LLC, v. E. West Construction, Inc., 2020 WL 1866869, 

at *2 (Del. Super. Ct. Apr. 14, 2020) (explicating that same standard as applied under Superior 

Court Civil Rule 12(b)(2)). Compare also Matthew v. Laudamiel, 2012 WL 605589, at *12 (Del. 

Ch. Feb. 21, 2012) (explicating standard applied under Chancery Rule 12(b)(6)), with Khushaim 

v. Tullow Inc., 2016 WL 3594752, at *2 (Del. Super. Ct. June 27, 2016) (explicating that same 

standard as applied under Superior Court Civil Rule 12(b)(6)). And compare Savor, Inc. v. FMR 

Corp., 812 A.2d 894, 896-97 (Del. 2002) (setting forth Supreme Court’s standard of review and 

spelling out the “well-settled” standards governing a motion to dismiss for failure to state a claim 

under Chancery Rule 12(b)(6)), with Beck v. Brady, 2004 WL 2154284, at *1 (Del. Sept. 20, 2004) 

(setting forth the Supreme Court’s standard of review and spelling out those same “well-settled” 

standards governing a motion to dismiss for failure to state a claim under Superior Court Civil 

Rule 12(b)(6)). And so, the Court will wait until the point in this litigation when there is a 

meaningful distinction and when a decision to be made between the two courts’ sets of rules is of 

moment. 

66 See Ch. Ct. R. 12(b)(6).

67 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).
- 26 -

could not recover under any reasonably conceivable set of circumstances susceptible 

of proof.68 The operative test here is one of “reasonable conceivability.”69 This 

standard asks whether there is a “possibility” of recovery.70 And Delaware’s test is 

more lenient than the federal “plausibility” pleading standard, which invites judges 

to “‘determin[e] whether a complaint states a plausible claim for relief’ and ‘draw 

on . . . judicial experience and common sense.’”71 So this Court does not assess a 

claim’s plausibility.72

When a defendant invokes Rule 12(b)(2) to seek a complaint’s dismissal for 

lack of personal jurisdiction, “[t]he plaintiff has the burden to show a basis for the 

Court’s jurisdiction over the nonresident defendant.”73 In determining whether a 

plaintiff has met its burden, the Court engages in a two-pronged inquiry: first, it 

must determine that service of process is authorized by statute, and “then [it] must 

determine that the exercise of jurisdiction over the nonresident defendant comports 

 

68 Id. (footnote omitted).

69 Id. at 537 (footnote and internal quotation marks omitted).

70 Id. at 537 n.13.

71 Id. (alteration in original).

72 See Cambium Ltd. v. Trilantic Capital Partners III L.P., 2012 WL 172844, at *2 (Del. Jan. 20, 

2012) (“The Court of Chancery erred by applying the federal ‘plausibility’ standard in dismissing 

the amended complaint.”).

73 Terramar Retail Centers, LLC v. Marion #2-Seaport Trust U/A/D/ June 21, 2002, 2017 WL 

3575712, at *4 (Del. Ch. Aug. 18, 2017) (citation omitted).
- 27 -

with traditional due process notions of fair play and substantial justice.”74 “The 

plaintiff has the burden to offer affirmative proof that these two steps are satisfied 

as to each defendant.”75

IV. DISCUSSION

A. PERSONAL JURISDICTION.

1. There is Personal Jurisdiction Over the Individual Defendants.

Defendants argue that there is a lack of personal jurisdiction over the 

Individual Defendants, including under Section 18-109 of the Delaware Limited 

Liability Company Act, (the “LLC Manager Consent Statute”).

76 The LLC Manager 

Consent Statute authorizes personal jurisdiction over persons serving as managers 

of Delaware limited liability companies “in all civil actions or proceedings brought 

in the State of Delaware involving or relating to the business of the limited liability 

company, or a violation by the manager . . . of a duty to the limited liability company 

or any member of the limited liability company, whether or not the manager . . . is a 

manager . . . at the time suit is commenced.”

77

 

74 Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).

75 Hartsel v. Vanguard Group, Inc., 2011 WL 2421003, at *7 (Del. Ch. June 15, 2011), aff’d, 38 

A.3d 1254 (Del. 2012).

76 DEL. CODE ANN. tit. 6, § 18-109 (2018).

77 Id. at § 18-109(a).
- 28 -

So what is the scope of “involving or relating to the business of the limited 

liability company”? 

Defendants contend this Court’s Hartsel v. Vanguard Group decision answers 

that question. In Hartsel, the Court observed that an action involves or relates to the 

business of an LLC if: 

(1) the allegations against [the manager] focus centrally on his rights, 

duties and obligations as a manager of a Delaware LLC; (2) the 

resolution of this matter is inextricably bound up in Delaware law; and 

(3) Delaware has a strong interest in providing a forum for disputes 

relating to the ability of managers of an LLC formed under its law to 

properly discharge their respective managerial functions.78

And, the Court explained, “Delaware courts interpret the ‘rights, duties and 

obligations as a manager of a Delaware LLC’ to refer to rights, duties, and 

obligations a manager owes to his organization.”79 

CLP counters with our Supreme Court’s more recent Hazout v. Tsang Mun 

Ting decision. In Hazout, the Supreme Court held that it may exercise personal 

jurisdiction over a non-resident officer or director of a Delaware corporation in any

civil action in which the corporation is a party and the officer or director is a 

“necessary or proper party” under 10 Del. C. § 3114 (the “Corporate Director and 

 

78 Hartsel, 2011 WL 2421003, at *8 (citations omitted).

79 Id. (quoting Vichi v. Koninklijke Philips Elecs. N.V., 2009 WL 4345724 (Del. Ch. Dec. 1, 

2009)).
- 29 -

Officer Consent Statute”).

80

 The Supreme Court overturned longstanding precedent 

that limited § 3114 personal jurisdiction over corporate directors and officers to 

actions involving alleged breaches of a fiduciary or statutory duty owed to the 

corporation or its stockholders by the non-resident officer or director.81 The 

Supreme Court—relying on § 3114’s plain language—abrogated this Court’s Hana 

Ranch, Inc. v. Lent82 (and its progeny) and conducted a de novo review of the 

Superior Court’s interpretation of § 3114:

In its analysis, the Superior Court acknowledged the effect Hana Ranch

had of limiting the application of § 3114 to suits that involve claims of 

breach of a corporate fiduciary’s duty. Being mindful of that constraint, 

the Superior Court strained to find jurisdiction over Hazout under the 

Internal Affairs Claim Provision. Even though the trial court 

acknowledged that Tsang did not allege that Hazout breached a duty 

that he owed in his official capacity, it determined that “the alleged 

misconduct would be adverse to Hazout’s fiduciary duty to Silver 

Dragon.” The Superior Court also observed that “Hazout acted in his 

corporate capacity as Silver Dragon’s Director, President, CEO and 

Principal Financial and Accounting Officer when he transferred the 

money to his company, Travellers.” On those grounds, the trial court 

determined that the Internal Affairs Claim Provision could be used to 

exercise jurisdiction over Hazout.83

 

80 Hazout v. Tsang Mun Ting, 134 A.3d 274, 288-94 (Del. 2016).

81 Id.

82

 424 A.2d 28 (Del. Ch. 1980). 

83 Hazout, 134 A.3d at 283.
- 30 -

The Supreme Court said of the Superior Court’s analysis: 

To our minds, it is counterproductive to embrace Hana Ranch and then 

create an incentive to read the Internal Affairs Claim Provision 

overbroadly. Rather, the historical view of the Court of Chancery that 

the Internal Affairs Claim Provision addressed only claims against 

nonresident fiduciaries of Delaware corporations for internal affairs 

claims involving an argument that they breached statutory or fiduciary 

duties they owed to the corporation or its stockholders is the correct one 

dictated by the language of that provision. In this case, Hazout is not 

being sued for having breached any duty he owed to Silver Dragon or 

its stockholders. He is being sued by Tsang for torts he allegedly 

committed against Tsang and the Investor Group in the course of 

negotiating on behalf of Silver Dragon and by using his powers at Silver 

Dragon to divert their funds to his affiliate.84

In short, the Supreme Court opted for a plain-language approach.85 And 

thereunder, the Supreme Court found the Corporate and Officer Consent Statute 

conferred jurisdiction over Hazout to Delaware state courts.

86

 It’s noteworthy that 

the Hartsel test originates from Hana Ranch’s reasoning,

87 the Hazout Court closely 

examined Hana Ranch’s reasoning, and the Hazout Court then decidedly moved

away from Hana Ranch’s narrow approach.

 

84 Id. at 292. 

85 Id. at 293-94.

86 Id.

87 Hartsel, 2011 WL 2421003, at *9 n.56 (citing Assist Stock Management L.L.C. v. Rosheim, 

753 A.2d 974 (Del. Ch. 2000)); Assist Stock Management, 753 A.2d at 979-81 (citing Hana 

Ranch).
- 31 -

Although Hazout concerned the Corporate Director and Officer Consent 

Statute, this Court’s decision last year in Metro Storage International v. Harron 

applied Hazout in the LLC context.

88

 

In Metro Storage, this Court found the LLC Manager Consent Statute and the 

Corporate Director and Officer Consent Statute at issue in Hazout to be “comparable 

jurisdictional” statutes.89 And so, Metro Storage convincingly explains, the history 

of the corporate director and officer consent statute equally supports allowing 

Delaware courts to exercise personal jurisdiction over key individuals who take 

action on behalf of an LLC.90 

The Corporate Director and Officer Consent Statute originally applied only to 

directors, and provided Delaware courts no ability to exercise personal jurisdiction 

over senior officers.91 Because this omission was problematic, the General 

Assembly eventually expressly extended § 3114 to senior officers.92 But, as this 

Court observed in Metro Storage, the LLC Manager Consent Statute has avoided a 

 

88 Metro Storage Int’l LLC v. Harron, 2019 WL 3282613, at *11 (Del. Ch. July 19, 2019).

89 Id.

90 Id. at *21.

91 See In re American International Group, Inc., 965 A.2d 763, 778 (Del. Ch. 2009); Metro 

Storage, 2019 WL 3282613, at *21.

92 See DEL. CODE ANN. tit. 10, § 3114(b) (2019).
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similar problem by always enabling a Delaware court to exercise personal 

jurisdiction over one who “participates materially” in the business of an LLC—

regardless of that individual’s title—for claims relating to his or her actions.93 

It follows, therefore, that this Court should look beyond any individual’s title

and consider whether the alleged actions underlying the claims fall within the scope 

of the LLC Manager Consent Statute. Defendants argue here that Hazout should be 

limited only to corporate directors and officers. Defendants say “both pre- and postHazout, Delaware courts have consistently applied Hartsel’s three-pronged due 

process analysis.”94 But the cases Defendants cite hardly support the broad 

propositions Defendants wish the Court to adopt—that Hazout must be limited only 

to corporate directors and officers and that in the LLC context a Delaware court must 

apply Hartsel’s three-pronged due process analysis. Rather, those cases are 

examples of where Hartsel’s due process analysis was applied to tort or contract 

claims unconnected to the internal affairs or corporate governance issues that 

Delaware law is concerned with.95 The situation here is different and most akin to 

 

93

 Metro Storage Int’l LLC v. Harron, 2019 WL 3282613, at *21 (Del. Ch. July 19, 2019).

94 Moving Defs.’ Reply Br. in Further Supp. of Their Mot. to Dismiss (“Defs. Reply”) at 6.

95 See, e.g., CelestialRX Investments, LLC v. Krivulka, 2019 WL 1396764, at *20 (Del. Ch. Mar. 

27, 2019) (“The Plaintiffs’ claims against Mazur during that time period deal with his duties and 

obligations as a director and manager of Akrimax.”); Baier v. Upper New York Investment Co. 

LLC, 2018 WL 1791996, at *9 (Del. Ch. Apr. 16, 2018) (“[T]he alleged fraudulent scheme was 

commenced and completed prior to the existence of the LLC Defendants. It is inconceivable how 

Johny’s alleged wrongdoing, which occurred prior to the formation of the LLC Defendants, arose 
- 33 -

Hazout—that is, the specific claims against the Individual Defendants involve

“actions in [their] official capacity of negotiating contracts that involved that change 

of control of a Delaware[-formed entity].”

96

And so due process, in the context of the LLC Manager Consent Statute, is 

satisfied. The Hazout Court explained that, “[b]y becoming a director and officer of 

a Delaware corporation, Hazout purposefully availed himself of certain duties and 

protections under our law.”97 And, the Court found, “the claims against Hazout

involve his actions in his official capacity of negotiating contracts that involved the 

change of control of a Delaware public corporation.”98 Here, the parties to the SPA

 

out of his rights, duties and obligations as manager of limited liability companies that were not yet 

in existence when the wrongdoing occurred. Moreover, the Complaint acknowledges that the LLC 

Defendants ‘have no offices, no employees, and conduct no business.’ Thus the claims at issue 

cannot possibly focus on Johny’s rights, duties and obligations as manager of the LLC Defendants 

where, by Danny’s own admission, there is nothing for Johny to do (or not do) as relates to these 

entities.”) (citations omitted); Republic Business Credit, LLC v. Metro Design USA, LLC, 2016 

WL 3640349, at *10 (Del. Super. Ct. June 29, 2016) (“[T]his case involves tort claims unconnected 

with the internal affairs of DE Metro Design.”); Wiggins v. Physiologic Assessment Services, LLC, 

138 A.3d 1160, 1165 (Del. Super. Ct. 2016) (finding employee failed to meet burden that claims 

concerning the nonresident CEO’s duty to ensure employer compliance with employment laws 

were centrally focused on CEO’s rights, duties, and obligations as manager); Schweitzer v. LCR 

Capital Partners, LLC, 2020 WL 1131716, at *6 (Del. Super. Ct. Mar. 9, 2020) (concerning a 

violation of a Connecticut wage laws between two Connecticut residents). 

96 Hazout, 134 A.3d at 293.

97 Id. at 292; see also LVI Group Investments, LLC v. NCM Group Holding, LLC, 2018 WL 

1559936, at *10 (Del. Ch. Mar. 28, 2018) (Exercising personal jurisdiction over individual 

defendant directors and officers of a Delaware corporation who had purposefully availed 

themselves of certain duties and protections under Delaware law by agreeing to serve as directors 

and officers of a Delaware corporation was “consistent with due process.”).

98 Hazout, 134 A.3d at 293.
- 34 -

agreed that Delaware law would govern and that any action arising out of the SPA

would be brought in Delaware. So not one of the Individual Defendants can credibly 

suggest that he never foresaw that he would be subject to litigation in Delaware over 

his conduct.99 The Court finds that there is jurisdiction over the Individual 

Defendants because they are alleged to have used their capacity as managers of Casla 

to commit the well-pled wrongs when negotiating contracts involving the change of 

control of ABS.

2. There is No Personal Jurisdiction Over the Non-Delaware Defendants.

CLP asserts Delaware’s Long-Arm Statute, the alter ego theory of 

jurisdiction, the agency theory of jurisdiction, and the conspiracy theory of 

jurisdiction allow for this Court’s exercise of personal jurisdiction over the NonDelaware Defendants.100

 Defendants argue that CLP cannot obtain jurisdiction over 

the Non-Delaware Defendants under any theory. 

 

99 See Hazout, 134 A.3d at 293-94.

100 CLP’s argument that Defendants are equitably estopped from challenging jurisdiction fails. As 

alleged, Non-Delaware Defendants’ held positions as unit holders or limited parties and any 

benefits these non-Delaware Defendants received were indirect because they depended upon the 

acts of the managers of the respective entities to further distribute funds from the sale of ABS. 

And the mere contemplation of benefits is not sufficient to constitute a direct benefit. See

Neurvana Med., LLC v. Balt USA, LLC, 2019 WL 4464268, at *4 (Del. Ch. Sept. 18, 2019), 

reargument denied, 2019 WL 5092894 (Del. Ch. Oct. 10, 2019).
- 35 -

All of these theories require CLP to plead an act within the state of Delaware 

sufficient to confer jurisdiction over the Non-Delaware Defendants.101 In its 

answering brief, CLP provides a summary of the acts allegedly conferring 

jurisdiction: 

[t]hese acts, and their effects, involved no less than eight Delaware 

entities: two Delaware entities (Seller Defendants) made knowingly 

false representations in the Purchase Agreement to a third Delaware 

entity (CLP), who through the Purchase Agreement, governed by 

Delaware law with a Delaware forum selection clause, acquired a fourth 

Delaware entity (ABS). (See generally FAC). These fraudulent 

representations harmed a Delaware entity (CLP), yet benefited each of 

the co-conspirators, including six Delaware entities (Seller Defendants, 

Casla Partners, LP, Casla Partners Fund I, LP, and Principal Investor 

Defendants).102

Specifically, CLP alleges all Defendants “received substantial direct benefits from 

the Purchase Agreement and should reasonably have anticipated defending against 

lawsuits related to the Purchase Agreement in Delaware”103 and “perpetuated and 

 

101 See Mobile Diagnostic Grp. Holdings, LLC v. Suer, 972 A.2d 799, 804 (Del. Ch. 2009) 

(“Under Delaware’s long-arm statute, Delaware courts can exercise personal jurisdiction over a

defendant for a claim that ‘arises from’ a ‘jurisdictional act’ enumerated in the statute.”); EBG 

Holdings LLC v. Vredezicht’s Gravenhage 109 B.V., 2008 WL 4057745, at *11 (Del. Ch. Sept. 2, 

2008) (“The second common factor is that a successful showing of alter ego or agency does not 

necessarily mean that the principal or parent is subject to jurisdiction. As theories of indirect 

jurisdiction, the underlying question on both theories is whether the subsidiary’s actions satisfy § 

3104 of the long-arm statute.”); Istituto Bancario Italiano, SpA v. Hunter Eng’g Co., Inc., 449 

A.2d 210 (Del. 1982) (The third part of the five-part test for jurisdiction under the conspiracy 

theory requires a plaintiff to show “a substantial act or substantial effect in furtherance of the 

conspiracy occurred in the forum state.”).

102 CLP Ans. Br. at 23-24.

103 Am. Compl. ¶ 38.
- 36 -

carried out the fraud and other misconduct alleged herein, which had effects in 

Delaware on CLP, which is a Delaware corporation.”104 CLP alleged that these 

Defendants transacted business in Delaware through their involvement with the 

Purchase Agreement, Casla, and ABS, out of which arise CLP’s claims. 

Additionally, with respect to Casla Partners LLC, CLP alleged that it holds an equity 

interest in Casla ABS Investors and controls that entity.105

These alleged acts do not suffice to confer specific jurisdiction under either 

Section 3104(c)(1) of Delaware’s Long Arm Statute or any of CLP’s other alleged 

theories. Section 3104(c)(1) permits a Court to exercise jurisdiction over a nonresident Defendant that “[t]ransacts any business or performs any character of work 

or service in the State.”106 But “[b]ecause Section 3104(c)(1) constitutes a specific 

jurisdiction provision, it only allows jurisdiction over causes of action that are 

closely intertwined with the jurisdictional contact.”107 And none of the jurisdictional 

contacts suggested by CLP are so closely intertwined. 

 

104 Id. ¶ 40.

105 Am. Compl. ¶ 46.

106 DEL. CODE ANN. tit. 10, § 3104(c)(1) (2018).

107 In re Mobilactive Media, LLC, 2013 WL 297950, at *28 (Del. Ch. Jan. 25, 2013).
- 37 -

First, the holding of an interest in a Delaware entity is not an act in Delaware 

sufficient to confer specific jurisdiction.108 Second, a choice of law provision in a 

contract selecting Delaware law is not an act in the State of Delaware for purposes 

of conferring jurisdiction.109 Third, in Delaware, “[i]t is well established law that 

merely contracting with an entity that is incorporated within a forum state does not 

provide necessary connections between the contract and the forum to support a 

finding of jurisdiction.”110 And lastly, “the passive receipt of income by defendants 

from debt and equity securities of Delaware companies does not constitute sufficient 

contacts with the state to support a finding of minimum contacts.”

111

 

CLP also alleges that there is jurisdiction because the “entire transaction 

revolved around Delaware and its corporate law.”

112 Relying on Crescent/Mach I 

 

108 AeroGlobal Capital Management, LLC v. Cirrus Industries, Inc., 871 A.2d 428, 439 (Del. 

2005) (“We acknowledge that the ownership of a Delaware subsidiary does not, without more, 

amount to the transaction of business under Delaware’s Long Arm Statute.”).

109 Mobile Diagnostic, 972 A.2d at 805.

110 Abajian v. Kennedy, 1992 WL 8794, at *10 (Del. Ch. Jan. 17, 1992).

111 Hart Holding Co. Inc. v. Drexel Burnham Lambert Inc., 1992 WL 127567, at *5 (Del. Ch. May 

28, 1992) (“The isolated act of investing in the shares of a Delaware corporation creates a 

foreseeable relationship with this state in only one respect: the law of Delaware will determine the 

nature of the rights thereby acquired. While that relationship is sufficient alone to support in 

personam jurisdiction in a narrow class of cases . . . it surely cannot support in personam

jurisdiction for a general conspiracy and fraud claim.”).

112 CLP Ans. Br. at 24.
- 38 -

Partners, L.P. v. Turner,

113 CLP contends that with the transaction’s focus on 

Delaware law and the transfer of a Delaware entity between Delaware entities, “a 

substantial act in furtherance of the plan . . . occurred in Delaware.”114 

Crescent/Mach, however, centered on a merger that involved the formation of a 

Delaware entity and a filing with Secretary of State.115 This Court has held “[t]he

formation of a Delaware entity or the filing of a corporate instrument in Delaware to

facilitate the challenged transaction satisfies this element.”116 But none of that’s 

alleged here. CLP has not said the SPA required a specific filing with Delaware’s 

Secretary of State, nor that a Delaware entity was formed as a result of the SPA. So 

the required close nexus is lacking in CLP’s claims.117

CLP also argues that there is general jurisdiction over the Non-Delaware 

Defendants under Section 3104(c)(4) of Delaware’s Long Arm Statute. Section 

3104(c)(4) provides for personal jurisdiction over non-resident defendants if the 

defendant causes tortious injury within or outside Delaware from an act or omission 

 

113 846 A.2d 963, 977 (Del. Ch. 2000) (merger between Delaware corporations under Delaware 

corporate law was a substantial act in furtherance of the conspiracy).

114 CLP Ans. Br. at 24.

115 Crescent/Mach, 846 A.2d at 977. 

116 Hamilton Partners, L.P. v. Englard, 11 A.3d 1180, 1198 (Del. Ch. 2010).

117 See LVI Grp. Invs., LLC v. NCM Group Holdings, LLC, 2017 WL 3912632, at *5 (Del. Ch. 

Sept. 7, 2017) (“To confer jurisdiction, the transaction of business must have a ‘tight nexus’ to the 

cause of action and must ‘form a source of the claim.’”).
- 39 -

outside of the State if the defendant “regularly does or solicits business, engages in 

any other persistent course of conduct in the State or derives substantial revenue 

from services, or things used or consumed in the State[.]”118 “Specifically, 

subsection (c)(4) jurisdiction arises only ‘when a defendant has had contacts with 

this state that are so extensive and continuing that it is fair and consistent with state 

policy to require that the defendant appear here and defend a claim.’”119 CLP claims 

this element is satisfied because (1) each of the Investor Defendants holds an equity 

interest in Casla;

120 (2) Casla Partners LLC’s sole member is Hines, whom Plaintiffs 

have alleged controlled and dominated ABS;

121 (3) Casla entities are closely related 

and share overlapping management and ownership;

122 (4) Casla Partners LLC had 

an advisory services agreement with ABS;

123 and (5) CLP’s injury arises out of the 

 

118 DEL. CODE ANN. tit. 10 § 3104(c)(4) (2018).

119 Comput. People, Inc. v. Best Int’l Grp., Inc., 1999 WL 288119, at *7 (Del. Ch. Apr. 27, 1999); 

see also HMG/Courtland Props., Inc. v. Gray, 729 A.2d 300, 310 (Del. Ch. 1999) (“The[] 

conditions [of Section 3104(c)(4)] are rigorous and require a showing of substantial and continuous 

activity in Delaware.”).

120 See Am. Compl. ¶¶ 22, 24, 30-34.

121 See id.

122 CLP Ans. at 20.

123 Id.
- 40 -

Investor Defendants’ and Casla Partners LLC’s fraud, which is related to their 

investments in Delaware.124

A non-resident’s ownership interest in a Delaware entity, without more, does 

not provide a basis for the “persistent course of conduct in [Delaware]” required for 

general jurisdiction.125 The Altech Indus., Inc. v. Al Tech Specialty Steel Corp. case 

that CLP cites is inapposite.126 In Altech the federal district court recognized general 

jurisdiction where: the defendant corporation acquired the stock of a Delaware codefendant as a result of a merger under Delaware law; the majority of defendant’s 

subsidiaries were Delaware corporations; the defendant corporation regularly filed 

and recorded corporate documents with Delaware’s Secretary of State; the defendant 

corporation used a Delaware-based corporation trust company as its agent; and the 

defendant corporation regularly employed Delaware corporation law to merge its 

subsidiaries.127 CLP has alleged neither the formation of a company in Delaware 

nor any filing with the Secretary of State as the result of the Transaction. 

Because CLP has not even made a prima facie case for personal jurisdiction

over the Non-Delaware Defendants, jurisdictional discovery is also denied. “If a 

 

124 Am. Compl. ¶ 40.

125 Conn. Gen. Life Ins. Co. v. Pinkas, 2011 WL 5222796, at *3 (Del. Ch. Oct. 28, 2011).

126 542 F. Supp. 53 (D. Del. 1982).

127

 Id. at 55.
- 41 -

plaintiff presents factual allegations that suggest ‘with reasonable particularity’ the 

possible existence of the requisite ‘contacts between [the parties] and the forum 

state,’ the plaintiff’s right to conduct jurisdictional discovery should be

sustained.”128 But jurisdictional discovery is not appropriate until there is 

demonstration of a non-frivolous ground for jurisdiction.

129

Given the dearth of factual allegations, CLP cannot use jurisdictional 

discovery to simply “fish for a possible basis for this court’s jurisdiction.”130 No, 

the Court must determine whether certain discovery avenues, “if explored, might 

provide the ‘something more’ needed” to establish personal jurisdiction.131 To merit 

jurisdictional discovery, plaintiffs show that their factual allegations establish with 

reasonable particularity the possible existence of requisite contacts. Yet, CLP does 

not explain how discovery would provide the “something more” needed to establish 

personal jurisdiction. And CLP has failed to establish with requisite particularity 

any act in Delaware sufficient to confer jurisdiction. 

 

128 Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003) (quoting Mellon Bank 

(East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1223 (3d Cir. 1992)).

129 In re Am. Int’l Gp., 965 A.2d at 831 n.195 (Del. 2011).

130 Id.

131 Toys “R” Us, 318 F.3d at 456.
- 42 -

Jurisdictional discovery will not change the documents governing the 

Transaction nor will it create new contacts sufficient to confer jurisdiction over the 

Non-Delaware Defendants. Accordingly, all claims against the Non-Delaware 

Defendants must be dismissed. 

B. CLP’S FRAUD CLAIM SURVIVES.

Defendants argue that the Court should dismiss the fraud claim because it is 

barred by the SPA’s anti-reliance language and integration provision. According to 

Defendants these provisions bar CLP from claiming it reasonably relied on any 

alleged misrepresentations or omissions outside of those representations and 

warranties specified in the SPA.

1. The non-reliance provision limits fraud claims to written 

representations in the SPA.

Article IV of the SPA sets forth the Company’s representations and 

warranties. Defendants rely on the non-reliance and integration provisions in 

Sections 4.32, 5.9, 6.8, 7.8 and 10.1 of the SPA to make its argument. Section 4.32 

provides:

Without limiting the generality of the foregoing, except as expressly set 

forth in this Agreement, none of the Group Companies, nor any 

Affiliate of the Group Companies, nor any of their respective 

representatives, employees, officers, directors, managers, partners or 

direct or indirect equity holders, has made, and shall not be deemed to 

have made, any representations or warranties in the materials relating 

to the Business made available to the Buyer, including due diligence 

materials, or in any presentation of the Business by management of the 

Group Companies or others in connection with the Contemplated 
- 43 -

Transactions, and no statement contained in any of such materials or 

made in any such presentation shall be deemed a representation or 

warranty hereunder and deemed to be relied upon by the Buyer or any 

of their Affiliates in executing, delivering and performing this 

Agreement and the Contemplated Transactions. It is understood that 

any cost estimates, projections or other predictions, any data, any 

financial information or any memoranda or offering materials or 

presentations, including any offering memorandum or similar 

materials made available by the Group Companies and their 

Representatives, are not and shall not be deemed to be or to include 

representations or warranties of any such Person, and are not and shall 

not be deemed to be relied upon by the Buyer or any of their Affiliates 

in executing, delivering and performing this Agreement and the 

Contemplated Transactions.

132

Substantively identical language is used with respect to the representations of the 

Company Seller and Blocker Seller in Section 6.8133 and the Blocker and Blocker 

Seller in Section 7.8.

134 In Section 5.9(b) of the SPA, CLP represented that “[t]he 

Buyer agrees to and acknowledges the disclaimers set forth in Section 4.32, Section 

6.8 and Section 7.8.”135 Section 10.1 is a standard integration clause that should not 

be considered a non-reliance provision.136

 

132 SPA § 4.32(b) (emphasis added).

133 See id. § 6.8.

134 See id. § 7.8.

135 Id. § 5.9(b). 

136 See Novipax Holdings LLC v. Sealed Air Corp., 2017 WL 5713307, at *12 (Del. Super. Ct. 

Nov. 28, 2017).
- 44 -

CLP claims Defendants’ argument ignores the fact that CLP’s fraud claims 

(Counts I, II, and III) are based on fraudulent statements in the SPA’s representations 

and warranties and that a fraud claim can be based on a purchase agreement’s 

representations and warranties. Additionally, CLP claims that even if CLP were 

relying on extra-contractual statements, the SPA “specifically preserved the right to 

pursue a legal remedy for fraud,” which demonstrates that the parties did not intend 

to wholly disclaim reliance on intentional fraud made outside the parameters of the 

SPA’s representations and warranties.137 CLP cites Section 9.3(c) to show that the 

parties expressly preserved CLP’s right to seek relief outside of the provisions set 

forth in the Purchase Agreement for claims of fraud.138

CLP relies on Anvil Holding Corp. v. Iron Acquisition Co. Inc. to argue that 

its fraud claim is cognizable in spite of the non-reliance provisions.139 In Anvil, this 

Court refused, for two reasons, to dismiss a fraud claim when the defendant resorted 

to the non-reliance provisions of the subject agreement.140 First, the Anvil court 

found that the non-reliance provisions did not unambiguously demonstrate that both 

 

137 See CLP Ans. Br. at 38 (quoting Anvil Holding Corp. v. Iron Acquisition Co. Inc, 2013 WL 

2249655, at *1 (Del. Ch. May 17, 2013)).

138 CLP Ans. Br. at 39; see § 9.3(c) (“Notwithstanding anything to the contrary herein, neither the 

Deductible nor the Cap shall apply to any Losses resulting from or arising out of (i) fraud . . .”).

139 2013 WL 2249655.

140 Id. at *8.
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parties disclaimed reliance on extra-contractual statements. Second, the Anvil court 

found that the “exclusive remedies” clause, in which the parties agreed to reserve all 

rights to claims based on fraud, preserved the fraud claim.141 The exclusive remedies 

provision thus provided further evidence that the parties intended that fraud claims 

could be based on extra-contractual representations.142

Similar to Anvil, the parties included an exclusive remedies provision and 

expressly provided that fraud claims were reserved. Unlike Anvil, the Company, the 

Seller Defendants, and CLP expressly represented in Sections 4.32, 5.9, 6.8, and 7.8

that they were not relying on any extra-contractual representations. Still, the fraud 

claims may proceed based on the written representations in the SPA. As in Novipax 

Holdings v. Sealed Air Corp., both parties had disclaimed reliance and also included 

an exclusive remedies provision that expressly reserved fraud claims.143 The 

Superior Court there explained “the non-reliance provision likely places a limit on 

the types of fraud claims that can be brought to those based on written 

representations in the APA . . . when drafters specifically preserve the right to assert 

 

141 Id. 

142 Id.

143 2017 WL 5713307, at *12.
- 46 -

fraud claims, they must say so if they intend to limit that right to claims based on 

written representations in the contract.”144

While Defendants read otherwise, the language in the SPA does not warrant 

dismissal of CLP’s fraud claim. At this stage of the proceedings, the Court finds 

that the parties preserved a fraud claim in Section 9.1(c), but limited that fraud claim 

through the non-reliance provisions in Section 4.20 and 5.7 to written 

representations in the SPA. As alleged, the representations relied upon are intracontractual. Throughout paragraphs 69-155 of the Amended Complaint, however,

CLP appears to be relying on extra-contractual misrepresentations and omissions.145 

To the extent that CLP is relying on extra-contractual misrepresentations and 

omissions, those are barred by the non-reliance provisions.

2. The fraud claim is pled with the requisite particularity. 

Defendants also attack the fraud claim with suggestions that it (1) is not 

pleaded with particularity and (2) alleges no damages separate from the breach-ofcontract damages. As to the first argument, it is abundantly clear that the Amended 

Complaint pleads fraud with the requisite particularity. In general, the Amended 

Complaint alleges that: Defendants made material misrepresentations, CLP 

 

144 Id.

145 See Am. Compl. ¶¶ 69-155.
- 47 -

justifiably relied on those misrepresentations, Defendants knew the representations 

were false or made them recklessly and with the intent to deceive CLP, CLP was 

fraudulently induced into the transaction, and CLP suffered damages as a result. 

As to the second argument, CLP asserts separate claims for fraud that are not 

duplicative of its breach-of-contract claims. For example, the Individual 

Defendants—who actively engaged in the fraud alleged in the Amended 

Complaint—are not parties to the SPA and therefore the damages for fraud asserted 

against them are not duplicative of any breach-of-contract claim. Counts I and III,

therefore, cannot be dismissed as against the Individual Defendants. 

“Delaware courts have consistently held that to successfully plead a fraud 

claim, the allegedly defrauded plaintiff must have sustained damages as a result of a 

defendant’s action.”

146

 The damages allegations, however, may not simply rehash 

the damages allegedly caused by breach of contract.147 Moreover, plaintiff cannot 

“bootstrap a claim of breach of contract into a claim for fraud by alleging that a 

contracting party never intended to perform its obligations.”148

 

146 Cornell Glasgow, LLC v. La Grange Props. LLC, 2012 WL 2106945, at *8 (Del. Super. Ct. 

June 6, 2012) (quoting Dalton v. Ford Motor Co., 2002 WL 338081, at *6 (Del. Super. Ct. Feb. 

28, 2002)).

147 Id. at *8-9 (dismissing a fraud claim because the plaintiffs’ damages allegation was nothing 

more than a “rehash” of the allegations in its breach of contract claims).

148 Id. at *8.
- 48 -

It appears that the principal claim in the Amended Complaint is for fraud and 

fraudulent inducement, which would render the SPA void. And the breach-ofcontract claim, on the facts presented here, is a valid alternative pleading for 

remedy.149 CLP alleges that it obtained contractual representations and covenants to 

ensure that the Business, including stability of customers, still existed at the Closing. 

CLP, however, purportedly misrepresented and concealed information regarding 

Material Customers and its Radeas equipment sales, in order to induce CLP into the 

SPA. These allegations, if true, go beyond a mere intention not to comply with the 

terms of the Agreement. As such, at this juncture, the fraud claim is sufficiently 

different from the breach-of-contract claim.150

While the two claims are different, Defendants are correct that CLP pleads 

damages that on their face are similar for both claims. But CLP prays for rescission 

of the transaction or rescissory damages, which is a remedy for fraud. This Court 

has held that a claim for rescission or rescissory damages separates a fraudulent 

 

149 See The Anschutz Corp. v. Brown Robin Capital, LLC, 2020 WL 3096744, at *15 (Del. Ch. 

June 11, 2020) (Noting that “[a]s a general rule, the bootstrapping bar makes perfect sense. When 

a party claims he was fraudulently induced into entering a contract by promises that were then 

included in the negotiated language of that very contract, his remedy should be in contract, not tort 

. . . . [But w]hile our courts do not hesitate to dismiss bootstrapped fraud claims, our courts also 

recognize that the bootstrap rule is not absolute.”).

150 Id. 
- 49 -

inducement claim from breach-of-contract damages.151 Nonetheless, if discovery 

demonstrates that CLP’s damage claims for breach of contract and fraud are the 

same, the Court can revisit the issue prior to a trial.

C. FRAUDULENT INDUCEMENT.

A fraud claim can be based on representations found in a contract.152 But the 

allegations of fraud must be separate from the breach-of-contract claim.153 And 

“[a]llegations that are focused on inducement to contract are ‘separate and distinct’

conduct.”

154

CLP’s allegations rely on the representations, warranties, and covenants 

contained in Sections 4.6(b), 4.21, 4.22, and 4.24. Under these sections, the 

Individual Defendants and Seller Defendants represented, warranted, and 

covenanted to make certain disclosures regarding its Business prior to the Closing. 

For example, In Section 4.21(a), the Company represented that “[n]o Material 

 

151 See Abry, 891 A.2d at 1064; see also 3M Co. v. Neology, Inc., 2019 WL 2714832, at *14 (Del. 

Super. Ct. June 28, 2019) (holding that fraud claim was not impermissibly bootstrapped where 

plaintiff was seeking rescissory damages, “which are a remedy for fraud, not breach of contract”); 

Firmenich Incorporated v. Natural Flavors, Inc., 2020 WL 1816191, at *10 (Del. Super. Ct. Apr. 

7, 2020).

152 ITW Global Investments. Inc. v. Am. Indus. Partners Cap. Fund IV, L.P., 2015 WL 3970908, 

at *6 (Del. Super. Ct. June 24, 2015) (quoting Furnari v. Wallpang, Inc., 2014 WL 1678419, at *4 

(Del. Super. Ct. Apr. 16, 2014)).

153 Id. 

154 Id.
- 50 -

Customer . . . has within the twelve (12) months prior to the date of this Agreement 

ceased or materially altered its relationship with the Business, or, to Company’s 

Knowledge, has threatened to cease or materially alter any such relationship.”155 

Despite this representation and warranty, Seller Defendants and Individual 

Defendants actively and intentionally concealed that two of the customers they 

identified as a Material Customers, ESA and Maplewood, were no longer 

operational, and had therefore “ceased or materially altered [their] relationship with 

the Business or, to Company’s Knowledge, ha[d] threatened to cease or materially 

adversely alter any such relationship.”

156

 Seller Defendants therefore fraudulently 

represented in the representations and warranties of the SPA that ESA and 

Maplewood had not altered their relationship with ABS in the twelve months 

preceding the date of the Agreement. These are not extra-contractual statements on 

which CLP disclaimed reliance. 

The same is true with the fraud concerning the Radeas transaction. The 

Company represented and warranted that its book and records were “maintained in 

accordance with commercially reasonable business practices and are complete and 

accurate in all material respects,” that the Company “maintained a system of internal 

 

155 Am. Compl. ¶ 56 & SPA § 4.21(a).

156 Id. ¶¶ 69-137.
- 51 -

accounting controls . . . ” and that its Financials were prepared in accordance with 

GAAP.157 Nonetheless, Seller Defendants and Individual Defendants directed ABS 

employees to improperly book sham equipment sales to Radeas in order to inflate 

ABS’s EBITDA and inflate the amount CLP paid for ABS.158 This fraud is based 

on CLP’s reliance on the representations and warranties expressly set forth in the 

SPA.

The facts of this case are similar to both Novipax159 and Abry.

160

 In Novipax, 

the plaintiff, the buyer of the company, relied on representations in the subject asset 

purchase agreement about how the defendant was to conduct the business and about 

the financial viability of the business before the closing, including the business’s 

major customers.161 However, after the parties closed the transaction, the plaintiff 

learned that those representations were false, and that defendant did not correct the 

misrepresentations before the closing in an attempt to induce the plaintiff into 

closing the transaction.162 The Superior Court found this sufficient to support a claim 

 

157 Id. ¶¶ 57-58.

158 Id. ¶¶ 138-155.

159 2017 WL 5713307, at *13 (Del. Super. Ct. Nov. 28, 2017).

160 891 A.2d 1032.

161 Novipax, 2017 WL 5713307, at *13. 

162 Id.
- 52 -

for fraudulent inducement at the initial pleading/motion to dismiss stage of the 

litigation.163 Similarly, CLP alleges that after the transaction closed, it learned of 

Defendants’ misrepresentation concerning the operational state of two material 

customers—a misrepresentation that Defendants never sought to correct before the 

Closing—and a misrepresentation made and continued in an attempt to induce CLP 

into closing the transaction.164

In Abry, the parties entered into a purchase agreement for the buyer’s purchase 

of a portfolio company.165 The purchase agreement contained several 

representations and warranties about the company’s financial statements.166 After 

the parties entered into the purchase agreement, the buyer discovered that the 

financial statements prior to the purchase agreement were fraudulently manipulated 

by the seller.

167 This Court refused to dismiss the fraudulent inducement claim, 

finding that the “financial statements were represented and warranted in the 

Agreement and were therefore intended to induce the Buyer to sign the Agreement 

and close the sale to purchase the Company.”168 Similarly, CLP claims Defendants 

 

163 Id.

164 Am. Compl. ¶¶ 70-74, 189, 198.

165 Abry, 981 A.2d at 1034-35.

166 Id.

167 Id. at 1038-40.
- 53 -

improperly booked sham equipment sales to Radeas to inflate ABS’s EBITDA and 

the amount CLP paid for ABS. Accordingly, CLP has pled facts sufficient to support 

a claim for fraudulent inducement at this stage in the litigation. 

D. BREACH OF CONTRACT.

Defendants next seek to dismiss the breach-of-contract claims. CLP has 

alleged that Seller Defendants breached Sections 4.6(b), 4.8, 4.15, 4.17, 4.21, 4.22, 

and 4.24. Defendants first argue that all of the Article IV representations and 

warranties alleged to be breached are only representations by the Company, not the 

Seller Defendants. Second, Defendants contend that CLP has not alleged any facts 

that demonstrate that Seller Defendants breached any provision of the SPA. 

Defendants’ first argument is a technical one. Defendants are correct that the 

Company is the only party specifically named to make the representations and 

warranties concerning the group of companies in Article IV.169 Before analyzing the 

particular language of the SPA, is important to look at the SPA in context. In Abry, 

the Court analyzed the stock purchase agreement’s terms in light of the seller’s 

relationship with the company that was sold:

Both the Seller and the Buyer are private equity firms. The Company 

was a portfolio company of the Seller. That meant that the Seller had 

an intense interest in its value and in keeping with that, the Seller had 

 

168 Id. at 1051.

169 See SPA art. 4.
- 54 -

assigned key personnel, specifically Dominguez, to monitor the 

performance of the Company and interact with the Company’s 

management during the sale. But that did not necessarily mean that the 

Seller knew the Company in the same intimate manner that the 

Company's managers did. The managers had no prior affiliation with

the Seller, and like any other private equity firm, the Seller was as much 

a monitor of, as a partner with, the Company’s management.

In view of this common context, it is not surprising that the Stock 

Purchase Agreement’s terms recognized a distinction between the 

Seller and the Company and gave this distinction importance in 

addressing questions relating to liability. The Agreement did not 

conflate the Seller with the Company and make it responsible for 

everything the Company and the Company’s management did or said. 

Rather, the Seller only accepted responsibility for the Company’s 

actions and words to the extent set forth in the Agreement and the 

required Officer’s Certificate. Nothing about that arrangement is novel 

to anyone with any rudimentary familiarity with negotiated acquisition 

agreements, particularly those involving private equity firms.170

The business context of Abry is significantly different from the circumstances

of this case. CLP claims that the Company made the representations under the 

control and direction of the Seller Defendants and the Individual Defendants. 

Specifically, CLP alleges Sellers should be liable because: (1) Rochwerg signed the 

Purchase Agreement on behalf of ABS and the Seller Defendants; (2) Rochwerg, 

who held the same assortment of titles of VP, Secretary, and or Treasurer for ABS 

and the Seller Defendants,

171 controlled the disclosures, representations and 

 

170 Abry, 981 A.2d at 1040-41.

171 See Am. Compl., Ex. A at signature pages.
- 55 -

warranties made by ABS in connection with CLP’s acquisition; and (3) Seller 

Defendants expressly agreed to indemnify CLP for any breaches of Article IV 

regardless of which party actually made the representations.172 Under the well-pled 

standard of a motion to dismiss, even vague allegations in the Complaint are wellpled if Defendants were provided notice of the claim.173 Even if the Seller 

Defendants are liable only for indemnification of the Company’s violations of 

Article IV, the Court will not dismiss CLP’s claims merely because the Amended 

Complaint “does not invoke the word ‘indemnification.’”174 CLP’s breach-ofcontract claims provide notice of the claim, even if it does not explicitly state it seeks 

indemnification under Section 9.1.175 These allegations are sufficient to show that 

the Seller Defendants should be liable for violations of Article IV.

As for the second argument, this Court need not address whether there was a 

breach of the SPA. CLP’s claim against the Seller Defendants is based on their 

violations of Sections 4.6(b), 4.8, 4.15, 4.17, 4.21, 4.22 and 4.24.176 For the present 

 

172 CLP Ans. Br. at 52.

173 See Eurofins Panlabs, Inc. v. Ricerca Biosciences, LLC, 2014 WL 2457515, at *5 (Del. Ch. 

May 30, 2014).

174 Id.

175 Id; see also Anvil, 2013 WL 2249655, at *9 (finding buyer had stated a claim against sellers 

for the company’s breaches of the purchase agreement because the sellers had agreed to indemnify 

the buyer for the company’s breach).

176 See Am. Compl. ¶¶ 160-161, 164-178, 239-244, 249-253.
- 56 -

motion, the Court must accept all well-pleaded allegations as true. The Court must 

construe these allegations and the inferences to be drawn therefrom in the light most 

favorable to CLP. In doing so, the Court finds that the allegations, if true, support a 

claim for breach of contract, specifically. Therefore, the Court will not dismiss the 

breach-of-contract claims.

E. FRAUDULENT TRANSFER.

CLP asserts fraudulent transfer claims against all of the defendants except the 

Seller Defendants because they allegedly are the transferees of the proceeds that 

were fraudulently transferred to them with the debtor’s actual intent to hinder, delay, 

or defraud. Defendants argue that CLP must prove that each defendant alleged to 

have fraudulently transferred proceeds of the fraudulent transaction is a debtor under 

DUFTA and that each transferred proceeds with the intent to hinder, delay, or 

defraud CLP. 

But under DUFTA’s plain language, a plaintiff may bring an action to avoid 

a transfer or attach the “asset transferred or other property of the transferee.”177 And

CLP does not need a judgment against the Seller Defendants in order to pursue 

claims for fraudulent transfer against transferees. Because under DUFTA, a

 

177 DEL. CODE ANN. tit. 6, § 1307(a)(1) & (2) (2018) (emphasis added).
- 57 -

“debtor” is one who is “liable on a claim.”

178 And a claim “means a right to payment, 

whether or not the right is reduced to judgment.”179

Defendants also argue CLP must show that Seller Defendants transferred their 

assets to the remaining Defendants with “actual intent to hinder, delay or defraud 

any creditor.”180 CLP has asserted allegations sufficient to state a claim for 

fraudulent transfer. Specifically, CLP alleges the following: (1) Seller Defendants 

transferred their assets “[w]ithout receiving a reasonably equivalent value in 

exchange for the transfer or obligation, and the debtor . . . believed or reasonably 

should have believed that the debtor would incur, debts beyond the debtor’s ability 

to pay as they became due”;

181 (2) Seller Defendants transferred assets “without 

receiving a reasonably equivalent value in exchange for the transfer or obligation” 

and were “insolvent at that time or the debtor became insolvent as a result of the 

transfer”;

182 and (3) Seller Defendants’ “transfer was made to an insider for an 

antecedent debt, the debtor was insolvent at that time and the insider had reasonable 

 

178 Id. at § 1301(6).

179 Id. at § 1301(3) (emphasis added).

180 Id. at § 1304(a)(1).

 

181 Id. at § 1304(a)(2); Am. Compl. ¶¶ 276, 278-279.

182 DEL. CODE ANN. tit. 6, § 1305(a) (2018); Am. Compl. ¶¶ 276, 278-279.
- 58 -

cause to believe the debtor was insolvent.”183 CLP’s allegations are sufficient to 

survive Defendants’ motion to dismiss.184

F. UNJUST ENRICHMENT.

Defendants argue that CLP has failed to state a claim for unjust enrichment 

against all Defendants. As to the Seller Defendants, Defendants argue that CLP 

cannot recover for disgorgement based upon unjust enrichment because CLP does 

not allege anywhere that there was not a valid and enforceable agreement governing 

the subject of this dispute. Defendants are correct in arguing that CLP cannot 

maintain both a cause of action for breach of contract and unjust enrichment. 

However, breach of contract and an unjust enrichment claim may survive a motion 

to dismiss when pled as alternative theories of recovery.185 CLP has adequately 

alleged unjust enrichment as an alternative theory of recovery here. If the principal

claim in this case is for fraud and fraudulent inducement and the fraudulent 

inducement renders the SPA void, then a claim for unjust enrichment may thus 

 

183 DEL. CODE ANN. tit. 6, § 1305(b) (2018); Am. Compl. ¶¶ 276, 278-279.

184 See Am. Compl. ¶¶ 276-280. 

185 BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL 264088, at 

*8 (Del. Ch. Feb. 3, 2009) (“In some instances, both a breach of contract and an unjust enrichment 

claim may survive a motion to dismiss when pled as alternative theories for recovery.”) (emphasis 

in original); Yu v. GSM Nation, LLC, 2018 WL 2272708, at *21 (Del. Super. Ct. Apr. 24, 2018) 

(“In some cases, however, both a breach of contract and an unjust enrichment claim may survive 

a motion to dismiss when pled as alternative theories of recovery.”) (emphasis in original). 
- 59 -

proceed under the theory that no valid contract exists. Therefore, the Court will not 

dismiss the unjust enrichment claim, but CLP must eventually decide under what 

theory it wishes to proceed—fraud and unjust enrichment or breach of contract.

As to the remaining moving defendants, Defendants argue that CLP does not 

state a claim for unjust enrichment because only the Seller Defendants signed the

SPA. Although non-signatories generally cannot be bound by the terms of a 

contract,

186 CLP has alleged that the non-parties to the contract owed a duty arising 

out of tort rather than contract.187 Specifically, CLP has alleged that the nonsignatory related parties engaged in scheme to defraud CLP and received benefits 

resulting from that fraud.188 These allegations are separate and independent from 

the fact that the Seller Defendants breached the SPA and are thus sufficient to 

survive Defendants’ motion to dismiss.

G. DECLARATORY JUDGMENT.

CLP seeks the Court’s declaratory judgment that: (1) Casla, Hines, and 

Rochwerg were agents of the Principal Investor Defendants and the Principal Casla 

Defendants; and (2) Casla is an alter ego of the Principal Investor Defendants. 

 

186 NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 430 (Del. Ch. 2007).

187 See Am. Compl. ¶¶ 184, 254-263.

188 See id.; Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 

6703980, at *27-28 (Del. Ch. Nov. 26, 2014) (“If the Plaintiffs can implicate these defendants in 

a fraud, they obviously have a remedy at law in damages.”).
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1. CLP Has Adequately Alleged Its Agency Theory.

Defendants argue that CLP fails to allege a basis to hold the Principal Investor 

Defendants and the Principal Casla Defendants liable for Hines, Rochwerg, and 

Casla’s purported misconduct under an agency theory. In evaluating a claim under 

an agency theory the factual inquiry includes whether: “(1) the agent ha[s] the power 

to act on behalf of the principal with respect to third parties; (2) the agent do[es] 

something at the behest of the principal and for his benefit; and (3) the principal 

ha[s] the right to control the conduct of the agent.”189

Due to the fact-intensive nature of the claim, whether a party was acting as an 

agent should not be decided on a motion to dismiss.190 “The standard in Delaware 

is notice pleading.”191 And CLP has met this standard. 

As outlined in the Amended Complaint, Casla, Rochwerg, and Hines were 

acting as the agents of the Principal Casla Defendants and Principal Investor 

Defendants because of the control exercised by the Principal Casla Defendants and 

the Principal Investor Defendants over Casla and ABS.192 Principal Casla 

 

189 EBG Holdings LLC v. Vredezicht’s Gravenhage 109 B.V., 2008 WL 4057745, at *11 (Del. Ch. 

Sept. 2, 2008) (alterations in original) (quoting Fasciana v. Elec. Data Sys. Corp., 829 A.2d 160, 

169 n.30 (Del. Ch. 2003)).

190 EBG Holdings LLC, 2008 WL 4057745, at *11 (Del. Ch. Sept. 2, 2008).

191 Carlyle Investment Mgmt. L.L.C. v. Moonmouth Co. S.A., 2015 WL 5278913, at *14 n.75 (Del. 

Ch. Sept. 10, 2015) (citing Cent. Mortg. Co., 27 A.3d at 536)).

192 Am. Compl. ¶¶ 13, 21-29, 50.
- 61 -

Defendants and Principal Investor Defendants all owned a significant controlling 

interest in Casla, the entity that owned ABS, and/or were members or representatives

on Casla’s board of directors. So, they controlled the operation of both Casla and 

ABS.193

CLP has sufficiently alleged that the Principal Casla Defendants and Principal 

Investor Defendants, therefore, had the right to control Casla, ABS, and ABS’s 

management. This management included Rochwerg and Hines who were working 

out of ABS’s offices and managing ABS on a day-to-day basis.194

Further, CLP alleges Casla, Rochwerg, and Hines had the power to act, and 

in fact did act, both on behalf of the Principal Casla Defendants and Principal 

Investor Defendants and at those Defendants’ direction when managing ABS and 

when defrauding CLP.195 CLP claims the Principal Investor Defendants and Casla 

Partners, L.P., are liable based on their fraudulent conduct, rather than solely by 

reason of their being a member or manager of Casla. 

CLP has adequately alleged its agency theory. However, as stated before,

Casla Partners LLC is dismissed from this claim for lack of personal jurisdiction.

 

193 Id.

194 Am. Compl. ¶¶ 24-25, 50.

195 Id. ¶¶ 24-25, 50.
- 62 -

2. CLP’s Alter Ego Theory May Be Viable.

Defendants argue that CLP has not plead specific facts supporting its 

suggestion that the Principal Investor Defendants and the Principal Casla Defendants 

should be liable under an alter ego theory. This alter ego theory of liability “allows 

courts to permit contractual [and tort] creditors to reach the assets of the owners of 

the entity based on a multi-factor test.”196 Appropriate circumstances for piercing 

the corporate veil are not limited to fraud, and include using the corporate form to 

contravene the law or commit a public wrong.197

Whether to pierce the corporate veil is a fact-intensive inquiry that requires 

the court to evaluate whether the owners of the entity unjustly misused the corporate 

form.198 Some of the factors to be considered include: “(1) whether the company 

was adequately capitalized for the undertaking; (2) whether the company was 

solvent; (3) whether corporate formalities were observed; (4) whether the dominant 

 

196 Feeley v. NHAOCG, LLC, 62 A.3d 649, 667 (Del. Ch. 2012).

197 David v. Mast, 1999 WL 135244, at *1-2 (Del. Ch. Mar. 2, 1999) (piercing the corporate veil 

where the defendant advertised that “an undercapitalized, massively indebted corporation that . . . 

had been ‘winding down’ for years and that had been ‘discounted two years before August 1997’ 

could guarantee its work for up to 10 years”).

198 Id. at *2-3. 
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shareholder siphoned company funds; and (5) whether, in general, the company 

simply functioned as a facade for the dominant shareholder.”199

CLP has alleged that the Principal Investor Defendants have an equity interest 

that totals more than 69% of the total equity interest in Casla, heavily participated in 

Casla’s management as directors or representatives on Casla’s board, worked closely 

with Casla in managing ABS, and directed themselves to be paid significant 

compensation from Casla’s coffers.200 CLP alleges that the Principal Investor 

Defendants ignored all corporate formalities with respect to Casla in their 

management of Casla and ABS.201 

CLP also contends the Principal Investor Defendants used Casla solely as a 

risk-free investment vehicle with no regard for corporate formalities. For instance, 

CLP explained at length how Casla and the Individual Defendants defrauded CLP 

into paying an inflated price for ABS.202 Then, immediately after this transaction, 

the Principal Investor Defendants decided to decapitalize Casla and transfer 

 

199 See, e.g., U.S. Bank N.A. v. U.S. Timberlands Klamath Falls, L.L.C., 2005 WL 2093694, at *1 

(Del. Ch. Mar. 30, 2005).

200 Am. Compl. ¶¶ 26-29, 45.

201 Id. ¶ 49.

202 Id. ¶¶ 53-209.
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essentially all of Casla’s assets to themselves, knowingly leaving Casla unable to 

pay a judgment for Casla’s fraud.203

Defendants argue that CLP fails to state a claim because the parties 

specifically agreed to what portion of the sale proceeds would be distributed and 

what portion would remain with the Seller Defendants to fund post-Closing 

obligations under Section 8.11 of the SPA. It is conceivable, however, that SPA 

Section 8.11 could be construed only as a representation from Sellers, and not a 

provision that CLP expressly acknowledged and accepted. Under the facts alleged 

in the Amended Complaint and allowing for the reasonable inferences drawn from 

those facts, the Court simply cannot say there is no reasonable conceivability that 

CLP might be able to obtain recovery on their claim for fraudulent transfer.

H. CONSTRUCTIVE TRUST IS A POTENTIAL REMEDY.

“The doctrine of a constructive trust is based on the equitable principle that 

‘one who would be unjustly enriched, if permitted to retain property, is under an 

equitable duty to convey it to the rightful owner.’”

204

 A constructive trust is not 

 

203 Id. ¶¶ 13-16, 43, 49, 184, 213-214.

204 Ciappa Constr., Inc. v. Innovative Property Resources, LLC, 2007 WL 914640, at *1 (Del. 

Super. Ct. Mar. 2, 2007) (quoting Hogg v. Walker, 622 A.2d 648, 652 (Del. 1993)). 
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itself a cause of action but is instead an equitable remedy.205 It is often a remedy for 

unjust enrichment, however it also can be a remedy for fraudulent transfers.206 

CLP has alleged that Defendants: (1) are “wrongfully in possession of 

specifically identifiable property, namely the proceeds of the transaction, which in 

equity belongs to CLP”; (2) “knew its actions in obtaining this properly were 

wrongful, fraudulent, unfair, and unconscionable”; and (3) would be unjustly 

enriched at CLP’s expense if Defendants are “permitted to retain the proceeds of the 

transaction.”

207

 In sum, CLP has pled sufficient facts in its fraudulent transfer and 

unjust enrichment claims to support the potential remedy of a constructive trust.

V. CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss is hereby 

GRANTED as to all claims against the Non-Delaware Defendants for lack of 

personal jurisdiction and DENIED as to all other claims. 

IT IS SO ORDERED.

/s/ Paul R. Wallace

_______________________

Paul R. Wallace, Judge

Original to Prothonotary

cc: All Counsel via File and Serve

 

205 VTB Bank v. Navitron Projects Corp., 2014 WL 1691250, at *6 n.60 (Del. Ch. Apr. 28, 2014).

206 See Duffield Assocs., Inc. v. Lockwood Bros., LLC, 2017 WL 2954618, at *4 (Del. Ch. July 

11, 2017).

207 Am. Compl. ¶¶ 282-285.