IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CHAPTER 7 TRUSTEE CONSTANTINO :

FLORES on behalf of the Estates of Esio :

Beverage Company, LLC, Esio Holding, :

Company, LLC, and Esio Franchising, LLC, :

:

Plaintiff, :

:

v. : C.A. No. 11141-VCS

:

STRAUSS WATER LTD., :

:

Defendant. :

MEMORANDUM OPINION

Date Submitted: June 22, 2016

Date Decided: September 22, 2016

Kathleen M. Miller, Esquire of Smith, Katzenstein & Jenkins LLP, Wilmington, 

Delaware, and Todd Kartchner, Esquire, Amy Abdo, Esquire, and Seth 

Schuknecht, Esquire of Fennemore Craig, P.C., Phoenix, Arizona, Attorneys for 

Plaintiff.

Philip A. Rovner, Esquire and Jonathan A. Choa, Esquire of Potter Anderson & 

Corroon LLP, Wilmington, Delaware, and Susan M. Freeman, Esquire and 

Justin J. Henderson, Esquire of Lewis Roca Rothgerber Christie LLP, Phoenix, 

Arizona, Attorneys for Defendant.

SLIGHTS, Vice Chancellor
1

Constantino Flores, Chapter 7 bankruptcy trustee for the estates of Esio 

Beverage Company, LLC, Esio Holding Company, LLC and Esio Franchising, 

LLC (collectively “Esio”), alleges in a Verified Amended Complaint 

(“Complaint”) that Strauss Water Ltd. masterminded a fraudulent and otherwise 

tortious scheme to drive Esio into financial ruin so that it could seize as collateral 

to certain defaulted loan covenants Esio’s valuable technology licenses, clients and 

business opportunities. It is alleged that Strauss accomplished this scheme by 

making a series of intentional misrepresentations that induced Esio to rely on 

Strauss as its sole source for the capital infusion it desperately needed, then 

declining to supply that capital infusion after Esio had reached a proverbial point 

of no return. Esio ultimately was forced to declare bankruptcy and its trustee

thereafter filed this action to recover damages incurred due to Strauss’s allegedly 

wrongful conduct. 

Flores has brought claims on behalf of the Esio bankruptcy estate against 

Strauss1for (I) fraud, (II) fraudulent inducement, (III) negligent misrepresentation, 

(IV) breach of the implied covenant of good faith and fair dealing, (V) breach of 

oral promise, (VI) promissory estoppel and (VII) estoppel. Each of these claims 

generally relate to Strauss’ alleged failure to follow through with its promises to 

 

1

For the sake of clarity and brevity, I will hereafter refer to claims brought by Flores on 

behalf of the Esio bankruptcy estate as Esio’s claims. 
2

infuse Esio with a $30 million equity investment. Esio also has alleged that 

Strauss tortiously interfered with certain of Esio’s existing contracts (VIII) and

prospective business relationships (IX) as part of its scheme to accelerate Esio’s 

demise. Finally, Esio seeks to compel Strauss to arbitrate these claims (X) per 

contractual provisions, allegedly binding upon Strauss, that mandate arbitration. 

Strauss has moved to dismiss the Complaint in its entirety for failure to state a 

claim upon which relief can be granted under Court of Chancery Rule 12(b)(6).

After carefully reviewing the Complaint, I conclude that Esio has failed to 

state claims for fraud, fraudulent inducement, negligent misrepresentation, breach 

of the implied covenant of good faith and fair dealing, “breach of oral promise,”

promissory estoppel or estoppel, as all of these claims contradict the clear and 

unambiguous terms of the written contracts between the parties. Esio also has 

failed to state a claim for tortious interference with contract as all of the alleged 

“improper” acts undertaken by Strauss were expressly permitted by the parties’ 

contracts and all of Strauss’ alleged “improper” omissions involved matters where 

Strauss was under no duty to act. 

Esio has, however, pled facts sufficient to allow a reasonably conceivable 

inference that Strauss tortiously interfered with Esio’s prospective business 

relationship with a potential licensing partner. Defendant’s alleged justifications 

for its actions with respect to this potential Esio business partner, while possibly 
3

meritorious, are fact intensive and not appropriate for disposition on a motion to 

dismiss. 

Finally, Esio’s effort to compel arbitration fails as a matter of law. Strauss 

cannot be bound to an arbitration agreement to which it is not a party and, in any 

event, the claims Esio has brought here arise under a contract that contains an 

exclusive Delaware forum selection clause. 

I. BACKGROUND

In considering this motion to dismiss, I have drawn the facts from the “wellpled allegations of the complaint, . . . the documents incorporated into the 

complaint by reference, and . . . judicially noticed facts.”2

A. The Parties and Relevant Non-Parties

Esio filed for bankruptcy protection in 2013, and Flores was appointed the 

trustee of the bankruptcy estate. Esio had been in the beverage industry offering

products that included water-based beverages and beverage dispensing machines. 

Its principal place of business was in Arizona.

Strauss is an Israeli limited company with its principal place of business in 

Tel Aviv. A portion of Strauss’ business involves the sale of drinking water in the 

worldwide market. Non-party Rami Ronen was the Chief Executive Officer of 

Strauss.

 

2 Desimone v. Barrows, 924 A.2d 908, 928 (Del. Ch. 2007) (footnotes omitted).
4

B. Esio Pursues an Infusion of Capital 

In 2005, Esio entered into a development agreement and exclusive license 

with Intelligent Coffee Company, LLC (“ICC”), an Arizona limited liability 

company that, inter alia, developed products for the beverage industry. Under the 

license agreement, ICC gave Esio an exclusive license to ICC’s beverage 

dispensing technology. 

In 2011 Esio found itself strapped for cash and began to look for an infusion 

of capital in the range of $20 million–$30 million. It had developed products and 

technology, including the ICC licensed technology, and needed additional capital 

to promote the products and exploit its technology and intellectual property. 

Esio approached Strauss in August, 2011 regarding a possible investment. 

Strauss expressed interest in partnering with Esio as a means to enter the United 

States market. It was also very interested in the beverage dispensing technology 

Esio had licensed from ICC. Esio, in turn, saw Strauss as an attractive partner both 

because it was well-resourced and because it had developed a specialized 

carbonation technology that Esio thought would fit well with its new products. 

During this time, with full disclosure to Strauss, Esio actively explored other 

sources of capital. As of September, 2011, Esio had raised over $1 million that it 

was holding in escrow for a possible reverse merger and private placement.

3

 

3

The Complaint does not disclose the identity of Esio’s potential merger partner.
5

Esio was clear that it was looking to Strauss to make an investment in Esio; 

it was not seeking and did not want debt financing. Strauss assured Esio that it 

“was not interested in being a bank that would simply lend Esio money.”4 

Throughout the balance of 2011 Esio provided Strauss with extensive due 

diligence, including information about its existing and anticipated future 

customers, its marketing strategies, partners, suppliers, and client contacts. During 

this process Esio apprised Strauss of its contract with Walmart® that would enable

Esio to place its products in more than two thousand Walmart® stores. Esio had 

planned to pay for the marketing of the Walmart® release with money invested by 

Strauss. 

C. The Parties Negotiate the Terms of their Relationship—

The Oral Promises

During a meeting in Israel in November 2011, Esio advised Strauss that it 

was looking for an equity investment of $30 million. Strauss agreed. It proposed 

that it would initially extend a $5 million dollar “bridge loan” so that Esio would 

have access to cash quickly in order to satisfy its obligations to Walmart®.

5

Strauss committed that it would convert this initial loan into an equity investment 

when it completed the balance of its investment ($25 million). Ronen allegedly 

 

4 Verified Amended Complaint (“Compl.”) ¶ 18.

5

Id. ¶ 26.
6

represented that structuring the initial $5 million investment as a loan was a 

“formality [that allowed a] faster way to get Esio the money it needed” because 

Strauss board approval would not be required.6Esio agreed to the loan but only 

subject to the “express understanding that the loan would be converted to 

equity . . . and the second investment would follow.”7

After Esio and Strauss orally agreed to the structure and amount of Strauss’ 

investment, Strauss demanded that Esio put aside its plans to pursue a public 

offering and return the money it had raised in contemplation of “using a reverse 

merger to raise additional capital.”

8

Strauss also caused Esio to create a holding 

company structure, alter its business plan, and reserve the equity ownership units 

that were to be issued to Strauss. Esio agreed to take these steps because Strauss 

had agreed to make a sizable investment and Esio was in dire need of capital.

In December 2011, Strauss required Esio to meet with Ofra Strauss, the 

Chairwoman of Strauss’ parent company. Strauss representatives allegedly told 

Esio that if the deal was approved by Ofra, then the equity investment would be 

assured.9Less than forty-eight hours after Esio’s meeting with Ofra, Strauss 

 

6

Id. ¶ 27.

7

Id. ¶ 28.

8

Id. ¶ 34. 

9

I refer to Ms. Strauss by first name to avoid confusion; no disrespect is intended.
7

informed Esio that Ofra had approved the entire deal. In April 2012, however, 

Esio learned from Ronen, allegedly for the first time, that the $25 million equity 

investment would require approval from both Strauss and its parent company—

approvals Esio had believed were already in place.

Esio and Strauss executed a Term Sheet on January 18, 2012.

10

 The Term 

Sheet outlined the terms of a “mutual licensing of IP.”11 It further provided for 

Strauss and Esio to enter into a convertible loan whereby Strauss would loan Esio 

$5 million that would be collateralized by Esio’s intellectual property rights and 

Esio products. When discussing the loan, the Term Sheet laid out rights that 

Strauss would have “during the period until the Loan is either converted or 

repaid.”12 Strauss was to have the “option, to be exercised not later than 

December 31, 2013, to convert the Loan into shares of Esio.”13 If Esio had repaid 

any portion of the principal of the loan, then Strauss’ option to convert the full 

amount of the loan would be subject to the revised balance of the loan. 

Strauss also was to have the

option . . . to make additional equity investment in Esio of an 

additional $25 million based on a pre-money valuation of $45 million, 

 

10 Id. ¶ 41.

11 Id. Ex. 2.

12 Id.

13 Id.
8

subject to Esio meeting certain performance targets . . . . If Esio does 

not meet the performance targets . . . Strauss Water will receive 

additional shares of equity, which shall serve the purpose of reducing 

the pre-money valuation.14

The Term Sheet provided that it, along with the license agreements and convertible 

loan agreement, would be governed by Delaware law. It also contained an 

exclusive New York forum selection clause. 

Following the execution of the Term Sheet, Strauss required Esio to 

renegotiate its ICC License Agreement to allow Strauss access to the ICC 

technology. Esio alleges that it had “no choice but to agree” to renegotiate the ICC 

license because Strauss insisted that it have access to the ICC technology as a 

condition of its investment.

15

 The amended license allowed Strauss a sub-license 

to ICC’s technology and required Esio to make minimum quarterly payments to 

ICC which were greater than those required by the previous license (the “Amended 

ICC License.”) Under the Amended ICC License, Strauss positioned itself to 

receive exclusive rights to ICC’s technologies in North America should Esio 

default on the $5 million bridge loan. The Amended ICC License was further 

amended in May 2012 to give Esio an exclusive license for ICC’s technology to be 

used in beverage dispensing systems (the “Second Amended ICC License”). The 

 

14 Id.

15 Id. ¶ 48.
9

Second Amended ICC License is governed by Arizona law and provides for 

mandatory arbitration of disputes between the parties arising under the agreement 

to be conducted in Phoenix, Arizona. 

After entering into the Second Amended ICC License with Esio, ICC signed 

a Side Letter Agreement with Strauss on May 10, 2012, whereby ICC consented to 

Strauss receiving both a lien and security interest in all of Esio’s rights under the 

Second Amended ICC License. The Side Letter Agreement contains a forum 

selection clause designating New York as the exclusive forum for resolution of 

disputes arising under that agreement.

D. The Parties Memorialize Their Agreement—The Papered Promises

The loan closed on May 14, 2012. Prior to closing, Esio alleges that Strauss 

explained that even though the loan agreement would provide that conversion to 

equity was an option, “Strauss would automatically exercise the ‘option’ upon 

completion of its due diligence.”16 The loan agreement would also provide for 

what Esio characterizes as “an aggressive amortization schedule” which Strauss 

and Ronen knew Esio would not be able to meet without the additional promised 

$25 million capital infusion.17 Through the end of May 2012, Strauss continued to 

represent that the conversion of the loan as well as the exercise of a warrant to 

 

16 Id. ¶ 55.

17 Id. ¶ 53.
10

acquire the addition $25 million in equity would occur as soon Strauss’ due 

diligence was completed.

1. The Loan Agreement

The Secured Convertible Loan Agreement between Strauss and Esio (the 

“Loan Agreement”) was executed May 14, 2012, and provided for Strauss to lend 

Esio $5.25 million (the “Loan”).

18 DLA Piper LLP served as counsel to Esio. 

Under the Loan Agreement and the attached Secured Convertible Promissory Note, 

Esio was to repay the outstanding principal amount as well as all other amounts by 

December 31, 2013. Esio also had the right to prepay the Loan. 

Regarding conversion, the Loan Agreement provided that:

At any time following the Closing Date but before the Maturity Date, 

[Strauss] may, at its option, convert all, but not less than all, of its 

Note . . . into such number of duly authorized, validly issued, Class A 

Units equal to the amount . . . determined by dividing (a) the sum of 

the then outstanding principal and unpaid accrued interest on the Note 

and the Additional Convertible Amount by (b) the Conversion Price in 

effect at the time of such conversion.19

Section 9 of the Loan Agreement sets forth the parties’ rights in events of default, 

which events include Esio’s failure to repay the Loan according to schedule. 

Significantly, the Loan Agreement does not list Strauss’s failure to convert the 

 

18 The parties agreed to add $250,000 to the initial $5 million Loan amount to pay for 

legal fees incurred in connection with the closing of the Loan.

19 Id. Ex. 1.
11

Loan to equity as an event of default, nor does it prescribe any consequence should 

Strauss elect not to convert the Loan.

The Loan Agreement provides that the Loan Agreement and the rights and 

obligations of Esio and Strauss under it “SHALL BE CONSTRUED IN 

ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE 

STATE OF DELAWARE.”20 The Loan Agreement further provides that Delaware 

State courts or the United States District Court for the District of Delaware shall 

have “EXCLUSIVE JURISDICTION OVER THE PARTIES (AND THE 

SUBJECT MATTER) WITH RESPECT TO ANY DISPUTE OR 

CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS 

AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.”

21

2. The Warrant

Strauss and Esio also entered into a Warrant on May 14, 2012, whereby 

Strauss was “entitled at any time . . . to purchase from [Esio] up to 37,395.33 

Class A Units.”22 Strauss was entitled in its discretion to execute the Warrant “in 

 

20 Id.

21 Id. “Transaction documents” as defined within the Loan Agreement, include the Loan 

Agreement, the Note, the Warrant, Esio’s Limited Liability Company Agreement, and the 

Security Agreements. Id.

22 Id. Ex. 5.
12

whole or in part.”23 The Warrant contains a merger clause,24 as well as an 

expiration date and remedies for breach. It states that the Warrant is to be 

construed under Delaware laws but does not contain a forum selection clause.25

E. The Parties’ Relationship Breaks Down

By the end of May 2012, Strauss began telling Esio that it would need to 

conduct additional due diligence before it could convert the Loan. This came as a 

surprise to Esio as it believed Strauss had already conducted exhaustive due 

diligence prior to entering the Loan Agreement. The following month, during a 

meeting with key players of Esio and Walmart® involved in Esio’s scheduled 

product launch at Walmart®, Strauss representatives were “disruptive and 

disrespectful” towards the Esio representatives and “denigrated the [Esio] business 

plan that Strauss had already explicitly approved.”26 Strauss advised Esio that it

might not make the $25 million equity investment even though Strauss knew Esio 

 

23 Id.

24 Section 10.4 provides: “Entire Agreement. This Warrant, together with the applicable 

provisions of the Operating Agreement, constitute the entire agreement between the 

parties with respect to the specific subject matter hereof. Each provision hereof is 

severable for every other provision when determining legal enforceability. The terms and 

conditions hereof will inure to the benefit of and be binding upon the parties’ respective 

successors and assigns, except as expressly provided otherwise herein.” Id.

25 Id. Section 10.7 of the Loan Agreement, however, provides that the forum selection 

clause designating Delaware courts applies to all “transaction documents,” which 

includes the Warrant. Id. Ex. 1.

26 Id. ¶ 67.
13

was counting on the investment and Esio was following the business plan that 

Strauss had directed and approved.

At some point after the Loan closed, Esio learned that Strauss’ carbonation 

technology did not work. This rendered Strauss’ promise of a strategic partnership 

illusory since Strauss’ carbonation technology had been factored into Esio’s 

business plan. To make matters worse, the launch of Esio products at Walmart® 

failed because Esio did not have the promised funds from Strauss to market the 

launch properly. 

Esio also learned that Strauss had been meeting with Esio’s customers

without Esio’s knowledge or permission. At a meeting with one such customer, 

PepsiCo, Strauss allegedly gave a demonstration of an Esio preproduction 

prototype of a carbonated beverage dispenser. The prototype malfunctioned. 

According to Esio, this episode “subverted Esio’s chances of working with 

PepsiCo due to Strauss’ use of a faulty product.”27

In early 2013 Ronen began to make disparaging statements about Esio and 

its product to other Esio customers and licensors of Esio’s technology, including

ICC. He also announced to third parties and eventually to Esio that Strauss never 

intended to invest in Esio and had only provided the Loan in order to get Esio’s

technology. In February 2013, Ronen said that it would seize the Esio intellectual 

 

27 Id. ¶ 74.
14

property used to secure the Loan unless Esio was able to repay the Loan according 

to the agreed-upon schedule.

On February 13, 2013, Esio and Strauss met with Euro-Pro Operating, LLC, 

an appliance company interested in licensing manufacturing rights to Esio’s 

beverage dispenser products. At the meeting, Esio hoped to discuss measures to 

reduce manufacturing costs, which would reduce Esio’s need for a large capital 

infusion and help it stay viable. Ronen seized control of the meeting and advised 

Euro-Pro that Strauss controlled Esio’s technology and the ICC License. Euro-Pro 

thereafter refused to deal with Esio. 

During this same period, Ronen met with the Chief Executive Officer of ICC 

and the two discussed a potential business deal between Strauss and ICC that 

would exclude Esio and “secure Esio’s demise.”28 Strauss sent Esio a formal 

notice of default under the Loan on February 17, 2013, and Esio’s bankruptcy 

followed.

II. PROCEDURAL STANDARD

“[T]he governing pleading standard in Delaware to survive a motion to dismiss 

is reasonable ‘conceivability.’”29 Under this standard, Delaware courts will

 

28 Id. ¶ 82.

29 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 

(Del. 2011).
15

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 favor of the plaintiff, and deny the motion unless the 

plaintiff could not recover under any reasonably conceivable set of 

circumstances susceptible of proof.30

The Court will not, however, “accept conclusory allegations unsupported by 

specific facts . . . or draw unreasonable inferences in favor of the non-moving 

party.”31

III. ANALYSIS

To address Strauss’ motion to dismiss I have divided Esio’s claims into three 

parts. First, I examine whether Esio has stated viable claims for fraud, fraudulent 

inducement, negligent misrepresentation, breach of the implied covenant of good 

faith and fair dealing, “breach of oral promise,”32 promissory estoppel and 

estoppel. It is appropriate to group these claims together since the motion to 

dismiss challenges whether any of them are well-pled given that they rest on facts 

and alleged promises that contradict the clear terms of the parties’ written 

contracts. Second, I examine the viability of Esio’s claims for tortious interference 

with contract and tortious interference with prospective business relations. Finally, 

 

30 Id.

31 Price v. E.I. DuPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011).

32 I am unaware of any cause of action cognizable under Delaware law for “breach of oral 

promise.” I will assume Esio intends to prosecute a claim for breach of an oral contract.
16

I consider Esio’s claim that Strauss should be compelled to arbitrate these claims in 

Arizona. 

A. Esio’s Claims That it Justifiably Relied Upon Extra-Contractual 

Promises and Representations and that Strauss Breached the Implied 

Covenant of Good Faith and Fair Dealing Are Belied by the Clear 

Terms of the Loan Agreement and Warrant

The disposition of Esio’s fraud, estoppel, oral contract and implied covenant 

claims turns on a single factual fulcrum: the contracts between Esio and Strauss 

clearly set forth the parties’ rights and obligations and patently contradict the 

claims Esio has attempted to plead in its Complaint. Under these circumstances, 

there can be no reasonable reliance and there can be no actionable extra-contractual 

covenants.

Delaware is a contractarian state.

33 As such, a party who enters into a 

contract governed by Delaware law will be charged with knowledge of the 

 

33 GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 WL 2682898, at *12 (Del. Ch. July 11, 

2011) (noting that Delaware law “is more contractarian than that of many other states”). 

See also Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010) (“[W]e must . . . not rewrite 

the contract to appease a party who later wishes to rewrite a contract he now believes to 

have been a bad deal. Parties have a right to enter into good and bad contracts, the law 

enforces both.”) (emphasis added); Libeau v. Fox, 880 A.2d 1049, 1056–57 (Del. Ch.

2005), aff’d in pertinent part, 892 A.2d 1068 (Del. 2006) (“When parties have ordered 

their affairs voluntarily through a binding contract, Delaware law is strongly inclined to 

respect their agreement, and will only interfere upon a strong showing that dishonoring 

the contract is required to vindicate a public policy interest even stronger than freedom of 

contract. Such public policy interests are not to be lightly found, as the wealth-creating 

and peace-inducing effects of civil contracts are undercut if citizens cannot rely on the 

law to enforce their voluntarily-undertaken mutual obligations.”); Asten, Inc. v. Wangner 

Sys. Corp., 1999 WL 803965, at *6 (Del. Ch. Sept. 23, 1999) (“Equity respects the 

freedom to contract. . . .”).
17

contents of the instrument and will be deemed to have knowingly agreed to the 

plain terms of the instrument absent some well-pled reason to infer otherwise. And 

this same party will face an uphill climb when it seeks to prosecute claims that it 

relied on promises that are explicitly contradicted by its own clear and 

unambiguous written contract. These bedrocks of Delaware law apply in full force

here.

1. Esio Has Failed to State Claims for Fraud, Misrepresentation,

Estoppel or Breach of Oral Contract

The gravamen of Esio’s Complaint is that Strauss made promises in advance 

of entering into the Loan Agreement and Warrant that it would convert the $5 

million Loan into an equity investment and that it would invest an additional $25

million in Esio in short order after the Loan closed. Esio alleges that it relied on 

these promises when it agreed, inter alia, to commit its intellectual property to 

Strauss as security for the Loan and to amend its license with ICC. Now that it is 

clear Strauss never intended to invest in Esio, it is alleged that the pre-contract 

promises were either fraudulent or negligent misrepresentations and that Strauss 

should be estopped from denying its pre-contract commitments. 

Claims for fraud, fraudulent inducement, negligent misrepresentation,

promissory estoppel and estoppel all require a plaintiff to plead that he justifiably
18

or reasonably relied on the defendant’s promise.34 Esio has failed to plead facts 

upon which I can reasonably infer that it justifiably relied on Strauss’ promises 

made prior to the execution of the parties’ written contracts since the alleged 

promises are expressly contradicted by those same contracts. Indeed, “[i]t is 

 

34 “In order to state a claim for fraud or fraudulent inducement, plaintiff must plead with 

particularity the following elements: (1) a false representation of material fact; (2) the 

defendant’s knowledge of or belief as to the falsity of the representation or the 

defendant’s reckless indifference to the truth of the representation; (3) the defendant’s 

intent to induce the plaintiff to act or refrain from acting; (4) the plaintiff’s action or 

inaction taken in justifiable reliance upon the representation; and (5) damage to the 

plaintiff as a result of such reliance.” Duffield Assocs., Inc. v. Meridian Architects & 

Eng’rs, LLC, 2010 WL 2802409, at *4 (Del. Super. July 12, 2010) (emphasis added). To 

state a claim for negligent representation, a plaintiff must ”plead that (1) the defendant 

had a pecuniary duty to provide accurate information, (2) the defendant supplied false 

information, (3) the defendant failed to exercise reasonable care in obtaining or 

communicating the information, and (4) the plaintiff suffered a pecuniary loss caused 

by justifiable reliance upon the false information.” Corporate Prop. Assocs. 14 Inc. v. 

CHR Hldg. Corp., 2008 WL 963048, at *8 (Del. Ch. Apr. 10, 2008) (emphasis added). 

“Negligent representation is essentially a species of common law fraud with a lesser state 

of mind requirement.” Vichi v. Koninkklijke Philips Elec., NV., 85 A.3d 725, 762 (Del. 

Ch. 2014). To state a claim for promissory estoppel, “a plaintiff must show by clear and 

convincing evidence that: (i) a promise was made; (ii) it was the reasonable expectation 

of the promisor to induce action or forbearance on the part of the promise; (iii) the 

promisee reasonably relied on the promise and took action to his detriment; and 

(iv) such promise is binding because injustice can be avoided only by enforcement of the 

promise.” Black Horse Capital, LP v. Xstelos Hldgs., Inc., 2014 WL 5025926, at *21 

(Del. Ch. Sept. 30, 2014) (emphasis added) (internal quotation marks omitted). “To 

prevail on a claim of equitable estoppel, a plaintiff must show (1) conduct by the party to 

be stopped that amounts to a false representation, concealment of material facts, or that is 

calculated to convey an impression different from, and inconsistent with that which the 

party subsequently attempts to assert, (2) knowledge, actual or constructive, of the real 

facts and the other party’s lack of knowledge and the means of discovering the truth, 

(3) the intention or expectation that the conduct shall be acted upon by, or influence, the 

other party and good faith reliance by the other, and (4) action or forbearance by the 

other party amounting to a change of status to his detriment.” Olson v. Halvorsen, 2009 

WL 1317148, at *11 (Del. Ch. May 13, 2009), aff’d, 986 A.2d 1150 (Del. 2009) 

(emphasis added) (internal quotation marks omitted).
19

unreasonable to rely on oral representations when they are expressly contradicted 

by the parties’ written agreement.”35 Given that the parties’ written agreements are 

so clear, it is not surpising that Esio has not cited any authority that would support 

its argument that reliance upon contrary oral promises would be reasonable. 36

As stated, the extra-contractual promises and representations that Strauss is 

alleged to have made are variations on a theme: that Strauss would invest in and 

cooperate with Esio as Esio’s long-term business partner. Esio alleges that Strauss 

promised that it would share its technology with Esio, that it would work with Esio 

to implement Esio’s long-term business plan and that it would provide Esio with 

$30 million in equity financing. These alleged promises are expressly contradicted 

by the several transactional documents that Strauss and Esio entered into—

negotiated at arm’s-length by sophisticated parties with the guidance of 

sophisticated counsel. Each of these contracts—the Term Sheet, Loan Agreement 

 

35 Carrow v. Arnold, 2006 WL 3289582, at *11 (Del. Ch. Oct. 31, 2006), aff’d, 933 A.2d 

1249 (Del. 2007). While in Carrow the Court addressed a claim for fraudulent 

inducement, this principle also applies to the balance of Esio’s misrepresentation and 

estoppel claims. See MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at 

*14 (Del. Ch. Dec. 30, 2010) (rejecting a fraud claim based on three oral statements that 

were expressly contradicted by a later contract); Olson, 2009 WL 1317148, at *12 

(“Olson’s [promissory and equitable] estoppel claims fail for the additional reasons that 

the alleged promises on which he bases his claims are inconsistent with the terms of the 

[contracts]”).

36 See Carrow, 2006 WL 3289582, at *11 (holding that one cannot claim fraudulent 

inducement “when one had the opportunity to read the contract and by doing so could 

have discovered the misrepresentation” (quoting 17A Am.Jur.2d Contracts § 214 (2006)). 
20

and Warrant—structures Strauss’ “investment” as either debt with the option to be 

converted to equity or as an option to acquire equity.37 Specifically, the documents 

clearly and unambiguously characterize Strauss’ commitment as a loan with an 

“option” that Strauss “may” exercise to convert the Loan to an equity investment

(the Loan Agreement) and as an “option” that Strauss “may” exercise to acquire 

additional Esio units (the Warrant).

38

 The contracts do not even hint much less 

 

37 “[T]he parties shall enter into the Convertible Loan Agreement, pursuant to which 

Strauss Water shall provide a loan of $5 million to Esio.” Compl. Ex. 2 (the “Term 

Sheet”). “During the period until the Loan is either converted or repaid [describing rights 

Strauss will be given].” Id. “Strauss Water will have the option, to be exercised not later 

than December 31, 2013, to convert the Loan into shares of Esio.” Id. “The Lender 

agrees . . . to make a loan (the “Loan”) to the Borrower in an amount of up to five 

million two-hundred fifty thousand dollars.” Id. Ex. 1 (the “Loan Agreement”). “The 

Borrower’s obligation to pay the principal of, and interest on, the Loan shall be evidenced 

by a secured convertible promissory note . . . (the “Note”). Id. “[T]he Lender may, at its 

option, convert all, but not less than all, of its Note.” Id. “Strauss Water shall have the 

option, to be exercised not later than March 31, 2013, to make an additional equity 

investment in Esio of an additional $25 million based on a pre-money valuation of 

$45 million, subject to Esio meeting certain performance targets as described below.” 

Id. Term Sheet. “This Warrant certifies that, for value received, Strauss Water Ltd. . . . 

is entitled at any time . . . to purchase from Company up to 37,395.33 Class A Units 

(“Warrant Units”) at a price per Class A Unit equal to $668.53.” Id. Ex. 5 (the 

“Warrant”). “Holder may exercise this Warrant, in whole or in part . . . at any time 

before the Expiration Date.” Id.

38 Esio has suggested in its papers and at oral argument that the term “option” may be 

ambiguous. Pl.’s Answering Br. in Opp’n to Def.’s Mot. to Dismiss Pl.’s Verified Am. 

Compl. (“Answering Br.”) 16–18. To the extent Esio still intends to press that argument, 

I summarily reject it. I will not embrace a construction of the term “option” that suggests 

it might reasonably be read as “mandatory option.” I am aware of no such creature in the 

realm of corporate finance or the broader realm of life. The terms “mandatory” and 

“option” present the classic binary opposition. 
21

expressly reveal that the parties understood, as a matter of contract or otherwise, 

that Strauss was somehow obliged to invest in Esio.39 

Esio’s attempt to alter the construction of the Loan Agreement’s and 

Warrant’s otherwise unambiguous provisions regarding the terms of Strauss’ Loan 

to Esio and its possible investment in Esio, respectively, cannot be countenanced 

for another reason that also is embedded in Delaware law. Delaware’s “parol 

evidence rule bars the admission of evidence extrinsic to an unambiguous, 

integrated written contract for the purpose of varying or contradicting the terms of 

the contract.”40 Thus, even if a provision is “mistakenly” left out of a document, 

“the parole evidence rule precludes the Court from considering the alleged oral 

promises made before the execution of [a written contract].”41 The Court, instead, 

must be guided by what the parties say in their written contracts; it cannot be 

 

39 See MicroStrategy Inc., 2010 WL 5550455, at *14 (granting motion to dismiss claim of 

reasonable reliance that was “contradicted by several express terms in the Agreement”); 

Black Horse Capital, LP, 2014 WL 5025926, at *21–22 (same).

40 Phillips v. Wilks, Lukoff & Bracegirdle, LLC, 2014 WL 4930693, at * 3 (Del. Oct. 1, 

2014), as corrected (Oct. 7, 2014) (citations omitted).

41 TrueBlue, Inc. v. Leeds Equity Partners IV, LP, 2015 WL 5968726, at *4 (Del. Super. 

Ct. Sept. 25, 2015) (further stating that while the agreement at issue “may not set forth 

everything in hindsight that TrueBlue intended to include, . . . that does not create an 

ambiguity”).
22

distracted by misguided allegations of fraud or estoppel, however passionately they 

might be pled.42

Esio also misses the mark by arguing that the express terms of the contracts 

it negotiated and agreed to with Strauss cannot defeat its claim of justifiable 

reliance on prior oral promises because the Loan Agreement contains no 

integration clause and the integration clause within the Warrant is ineffective

because it lacks an anti-reliance clause.43 Strauss’ arguments that Esio has failed to 

plead facts that would justify departing from the express terms of the parties’ 

written agreements do not rest on the presence, or not, of integration or antireliance clauses. Instead, Strauss correctly argues that Esio cannot proffer alleged 

oral promises or representations to alter or contradict unambiguous provisions 

clearly expressed within the parties’ written contracts. Yet that is precisely what 

Esio seeks to do here with respect to its fraud, negligent misrepresentation,

44

estoppel and oral contract claims. 

 

42 Black Horse Capital, LP, 2014 WL 5025926, at *24 (“By attempting to plead around 

the plain language of their written agreements with allegations of ‘fraud,’ Plaintiffs seek 

to shirk the bargain evidenced by the written agreement in favor of a ‘but we did rely on 

those other representations” claim).

43 Answering Br. 22–24.

44 The negligent misrepresentation claim also fails because it is barred by the economic 

loss doctrine, which allows a party to recover in negligence only “if losses are 

accompanied by bodily harm or property damages.” J.C. Trading Ltd. v. Wal-Mart 

Stores, Inc., 947 F.Supp. 2d 449, 459 (D. Del. 2013) (internal quotation marks omitted). 

It does not permit recovery “for losses that are solely economic in nature.” Id. (internal 
23

Even where certain of the alleged oral promises are not expressly 

contradicted by the written contracts, such as Esio’s contention that Strauss 

promised it would share its working carbonation technology when, in fact, it did 

not work, Esio still has failed to plead facts that allow a reasonable inference of 

justifiable reliance as a matter of law. The Term Sheet provided that Strauss and 

Esio would enter into an agreement regarding Esio’s use of Strauss’ carbonation 

technology, and the subsequent License and Distribution Agreement between Esio 

and Strauss expressly addresses the parties’ rights to cross license.45 Yet Esio 

pleads neither that Strauss breached that agreement nor that Strauss somehow 

prevented Esio from exercising its bargained-for right under that agreement to 

conduct due diligence with respect to Strauss’ carbonation technology.46 Once 

again, Esio seeks to avoid the deal it made in favor of the deal it now wishes it 

 

quotation marks omitted). Here, Esio is claiming only economic damages and does not 

allege damage to its intellectual property or to Esio’s rights as a licensee to ICC’s 

intellectual property. While Esio alleges that it lost its technology and licensing rights, 

Compl. ¶ 121, it does not allege that there was any damage to the technology or its rights 

as a licensee, except that it was unable to pay the Loan and therefore defaulted under the 

Second Amended ICC License.

45 Transmittal Aff. of Phillip A. Rovner, Esq. in Supp. of Strauss Water, Ltd.’s Mot. to 

Dismiss (“Transmittal Aff.”) Ex. 8. The Court may consider this agreement as it is 

integral to the Plaintiff’s Complaint. See Compl. ¶¶ 73, 85(viii). See also Allen v. 

Encore Energy P’rs, L.P., 72 A.3d 93, 96 n.2 (Del. 2013).

46 Transmittal Aff. Ex. 8 § 6.4.1(a). See Interim Healthcare, Inc. v. Spherion Corp., 884 

A.2d 513, 551 n.305 (Del. Super. Ct.) (“Delaware courts do not rescue disappointed 

buyers from circumstances that could have been guarded against through normal due 

diligence and [the exercise of] contractual protections”), aff’d, 886 A.2d 1278 (Del. 2005) 

(TABLE). 
24

made. Delaware law does not permit Esio or the Court to rewrite history when that 

history is expressed in clear and unambiguous written contracts.

Esio’s fraud, misrepresentation and estoppel claims require well-pled facts 

to support a reasonably conceivable inference that Esio justifiably relied upon 

Strauss’ extra-contractual promises or representations. Esio’s written contracts 

with Strauss allow no such inference. Nor can the Court enforce alleged oral 

promises that directly contradict commitments made in subsequent written 

contracts. Strauss’ motion to dismiss these claims must be granted. 

2. Esio Has Failed to State a Claim for Breach of the Implied Covenant

Esio alleges that even though Strauss may have complied with written 

contracts that directly address the terms of Strauss’ Loan and possible equity 

investment, Esio may still hold Strauss liable for breaching the implied covenant of 

good faith and fair dealing. I disagree. The implied duty of good faith and fair 

dealing applies only when “it is clear from the underlying contract that the 

contracting parties would have agreed to proscribe the act later complained of . . . 

had they thought to negotiate with respect to that matter.”47 It follows, then, that 

the implied covenant of good faith and fair dealing does not apply when the 

contract speaks directly to the alleged gap in the contract the implied covenant has 

 

47 Winshall v. Viacom Intern., Inc., 55 A.3d 629, 637 (Del. Ch. 2011) (internal quotation 

marks omitted).
25

been proffered to fill.

48

 Esio’s claim for breach of the implied covenant of good 

faith and fair dealing fails since the contracts speak directly to the contested

issue—that the Loan may but need not be converted to equity and that any future

investments are optional, not mandatory.

B. Tortious Interference

As is typical of Esio’s complaint, many of its allegations regarding tortious 

interference attempt to reach outside the four corners of its contracts with Strauss 

and impose upon Strauss additional obligations or alternatively limit Strauss’ 

bargained-for rights. As discussed below, Esio’s claim for tortious interference 

with contract is not well-pled because Esio again seeks to vary the terms of its 

written contracts with Strauss in order to state an extra-contractual claim. 

However, a single subset of its claim for tortious interference with prospective 

business relations (that does not attempt to alter the parties’ contracts) does survive 

as Esio has well-pled that Strauss interfered with Esio’s prospective business 

relationship with Euro-Pro. 

 

48 Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146 (Del. Ch. 2009) (“The 

implied covenant does not apply when the subject at issue is expressly covered by the 

contract” and “[c]ourts should be most chary about implying a contractual protection 

when the contract easily could have been drafted to expressly provide for it.” (internal 

quotation marks omitted)).
26

1. Esio has Failed to State a Claim for Tortious Interference with 

Contract

Esio alleges that Strauss tortiously interfered with the Second Amended ICC 

License by (a) forcing Esio to renegotiate the ICC License and then putting Esio in 

a financial position where it was unable to make its payments to ICC and (b) 

colluding with ICC in a manner that caused ICC to breach the implied covenant of 

good faith and fair dealing by refusing to modify the ICC license.

49

 Because 

Strauss acted within its contractual rights, Esio’s allegations of tortious 

interference fail to state a claim.

The typical claim for tortious interference arises when the defendant 

wrongfully prevents a third party from performing a contract. This cause of action 

follows the Restatement (Second) of Torts, § 766, and requires “(1) a valid 

contract, (2) about which the defendants have knowledge, (3) an intentional act by 

the defendants that is a significant factor in causing the breach of the contract, 

(4) without justification and (5) which causes injury.”50

 

49 Esio’s only claim for tortious interference with contract relates to the Second Amended 

ICC License. While Esio also alleges that Strauss tortiously interfered with its 

relationship with Walmart®, it classifies this claim as tortious interference with 

prospective business relations and does not allege that Strauss caused Walmart® to 

breach an existing contract. Compl. ¶¶ 160, 165–66, 150–57.

50 Irwin & Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983, 992 (Del. Ch. 1987) 

(citing RESTATEMENT (SECOND) OF TORTS § 766 (1979)).
27

Section 766A of the Restatement (Second) of Torts extends the cause of 

action to instances where the defendant is alleged to have tortiously interfered with 

the plaintiff’s performance of a contract, providing that “[o]ne who intentionally 

and improperly interferes with the performance of a contract . . . between another 

and a third person, by preventing the other from performing the contract or causing 

his performance to be more expensive or burdensome, is subject to liability to the 

other for the pecuniary loss resulting to him.”51 The cause of action outlined in

Section 766A is less widely adopted,52 and has never formally been recognized by 

Delaware courts.53

As discussed below, whether the claim is brought under Section 766 or 

Section 766A, a plaintiff cannot prevail on a tortious interference with contract 

claim if the essence of his complaint is that the defendant refused to deal when he 

had no obligation to deal,54 or that the defendant’s alleged tortious conduct 

 

51 RESTATEMENT (SECOND) OF TORTS § 766A (1979).

52 See, e.g., Price v. Sorrell, 784 P.2d 614 (Wyo. 1989) (rejecting Section 766A as a 

viable cause of action due largely to the potential for abuse and citing cases in accord). 

53 Esio cites Allen Family Foods, Inc. v. Capitol Carbonic Corp., 2011 WL 1205138 

(Del. Super. Ct. 2011), for the proposition that Delaware has formally adopted 

Section 766A as a cause of action. This reads too much into the Allen court’s treatment 

of Section 766A. Allen merely determined that “Delaware would not reject 

Section 766A” on the bases proffered by the defendant there before going on to hold that 

the plaintiff had not stated a viable claim under Section 766A in any event. Id. at *6. 

The same holds true here; Esio has failed to plead a claim under Section 766A.

54 RESTATEMENT (SECOND) OF TORTS § 766 cmt. b (1979). 
28

amounted to nothing more than the defendant acting within its contractual rights.

55

 

Both of Esio’s theories of tortious interference with contract, as pled, rest on these 

unactionable premises. 

a. Esio Has Not Stated a Claim Under Section 766A.

I have already determined that the contracts between Esio and Strauss 

merely provided Strauss with the option to convert the Loan to equity and to make 

further equity investments. Therefore, Strauss’s decisions to enforce its Loan 

covenants with Esio when Esio defaulted on the Loan, including its seizure of the 

pledged collateral, and not to invest further in Esio cannot constitute tortious 

interference with Esio’s performance of the Second Amended ICC License or any 

other contract since Strauss’ refusal to deal was justified. Since Esio has failed to 

plead that Strauss’ conduct was tortious, I need not decide whether vel non 

Section 766A should be adopted as Delaware law. 

 

55 See, e.g., Debakey Corp. v. Raytheon Service Co., 2000 WL 1273317, at *18 (Del. Ch. 

Aug. 25, 2000) (refusing to find a party liable for breaching its implied covenant of good 

faith and fair dealing when it failed to make a further investment where the contract 

provided that once investments had exceeded $2 million, further investments were 

subject to the party’s “sole discretion”). See also Crivelli v. General Motors Corp., 

215 F.3d 386, 395 (3d Cir. 2000) (applying Pennsylvania law and noting that many 

courts have “held that a company’s exercise of a right of first refusal [granted to them in 

contract] cannot ordinarily give rise to a claim of intentional interference with a 

contract”). 
29

b. Esio Cannot Claim that Strauss Tortiously Caused ICC to Breach 

the Implied Covenant of Good Faith and Fair Dealing 

A party cannot claim a tortious interference with contract when there has 

been no breach of that contract.56 To get around this fundamental premise, Esio 

seeks once again to invoke the implied covenant of good faith and fair dealing to 

achieve what its express contracts (in this instance, the Second Amended ICC 

License) will not support—a basis to impose liability upon Strauss for ICC’s 

refusal to modify the Second Amended ICC License so that Esio could continue to 

exploit it. The implied covenant will not impose on ICC an obligation that Esio 

did not bargain for in the Second Amended ICC License. 

While it is true that the implied covenant of good faith and fair dealing 

inheres to every Delaware contract, it cannot be employed to rewrite an otherwise 

comprehensive written contract between the parties.57 Rather, the implied 

covenant requires parties to a contract only to “refrain from arbitrary or 

unreasonable conduct which has the effect of preventing the other party to the 

contract from receiving the fruits of the bargain.”58 The court will not impose the 

 

56 Aspen Advisors LLC v. United Artists Theatre Co., 843 A.2d 697, 713 (Del. Ch.), aff’d, 

861 A.2d 1251 (Del. 2004).

57 Nemec v. Shrader, 991 A.2d 1120, 1125–26 (Del. 2010).

58 Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005) (internal 

quotation marks omitted).
30

implied duty of good faith and fair dealing on a party to require that the party 

actually improve the deal the plaintiff struck in the first instance.

59

Once again, Esio would have the Court ignore the contract it negotiated with 

ICC by injecting it with provisions that would require ICC to modify the license in 

the event Esio committed an act of default under either the Second Amended ICC 

License or the Loan Agreement. This Court will not engage in that kind of 

“judicially compelled charity.”

60 Esio could have negotiated for a provision that 

expanded its rights to compel a modification of the Second Amended ICC License 

in certain instances of default. It did not. Therefore, because ICC was not required 

to modify the Second Amended ICC License, Strauss cannot be held liable for 

tortiously interfering with the Second Amended ICC License by causing ICC to 

breach the implied covenant when it refused to modify that contract.

2. Esio Has Stated a Claim for Tortious Interference with Prospective 

Business Relations

To plead a claim for tortious interference with prospective business 

relations, Esio was required to allege facts that demonstrate “(a) the reasonable 

probability of a business opportunity, (b) the intentional interference by defendant 

 

59 Winshall, 55 A.3d at 641 (holding that Delaware law does not interpret the implied 

covenant to a require that the defendant “not simply refrain from upsetting the 

fundamental expectations of the other party, as implied by the explicit terms of the deal, 

but actually improve that deal by expanding its contractual counterparty’s expectancy as 

a matter of judicially compelled charity.”). 

60 Id.
31

with that opportunity, (c) proximate causation and (d) damages.”61 In addition, 

Esio was required to plead that Strauss’ alleged interference was somehow 

improper.62 As discussed above, there can be no improper interference where the 

defendant acted either (1) affirmatively within its contractual rights or (2) by 

omission where it had no contractual obligation to deal. Thus, having determined 

that Strauss was within its contractual rights to enforce its Loan covenants and 

decline to invest in Esio, any claim that Strauss tortiously interfered with Esio’s 

prospective business relations with Walmart® or any other retailer or supplier by 

failing to infuse Esio with more capital is not well-pled.63

What remains of Esio’s tortious interference with prospective business 

relations claim are Esio’s allegations that Strauss: (1) intentionally sabotaged the 

Euro-Pro meeting and thereby interfered with Esio’s prospects of developing a 

business relationship with Euro-Pro, and (2) improperly met with PepsiCo without 

Esio’s knowledge or permission and thwarted any possible business relationship 

 

61 DeBonaventura v. Nationwide Mut. Ins. Co., 428 A.2d 1151, 1153 (Del. 1981). 

See also RESTATEMENT (SECOND) OF TORTS § 766B (1979).

62 See Lipson v. Anesthesia Servs., P.A., 790 A.2d 1261, 1287 (Del. Super. Ct. 2001) 

(“Plaintiffs bear the burden of proof with respect to all elements of the claim of 

intentional interference, including that the interference was improper”).

63 Compl. ¶¶ 160, 163, 165–66. 
32

with PepsiCo by claiming the Esio’s products belonged to Strauss and 

demonstrating a faulty product prototype.64 

While the plaintiff must ultimately prove the reasonable probability of a 

business opportunity, the “existence of such a business expectancy is a question of 

fact not suitable for resolution [on a motion to dismiss].”65 Esio has pled 

prospective business opportunities with Euro-Pro and PepsiCo and those well-pled 

facts are presumed to be true at this stage of the proceedings.

Esio has also pled that Strauss engaged in conduct with respect to PepsiCo 

and Euro-Pro that interfered with Esio’s prospects of developing business 

relationships with these two fixtures of the beverage industry. Strauss counters 

that any conduct in which it might have engaged at meetings with PepsiCo and 

Euro-Pro was justified under Sections 76966 and 77367 of the Restatement (Second) 

 

64 Compl. ¶¶ 74, 161, 163(vi).

65 Gill v. Del. Park, LLC, 294 F.Supp. 2d 638, 646 (D. Del. 2003). 

66 “One who, having a financial interest in the business of a third person intentionally 

causes that person not to enter into a prospective contractual relation with another, does 

not interfere improperly with the other’s relation if he (a) does not employ wrongful 

means and (b) acts to protect his interest from being prejudiced by the relation.” 

RESTATEMENT (SECOND) OF TORTS § 769 (1979).

67 “One who, by asserting in good faith a legally protected interest of his own or 

threatening in good faith to protect the interest by appropriate means, intentionally causes 

a third person not to perform an existing contract or enter into a prospective contractual 

relation with another does not interfere improperly with the other’s relation if the actor 

believes that his interest may otherwise be impaired or destroyed by the performance of 

the contract or transaction.” RESTATEMENT (SECOND) OF TORTS § 773 (1979).
33

of Torts because it was protecting its legally protected or financial interests.

68

 

Strauss points to no particular provision in any of its contracts with Esio that would 

authorize Strauss to represent to potential business partners that Esio’s products 

and technology actually belonged to Strauss or would permit Strauss to make 

disparaging comments about the efficacy or quality of Esio’s technology or

product line.69 Instead, Strauss argues generally that it took steps it believed were 

necessary under the circumstances to protect its Loan collateral.70 While this may 

ultimately prove true, justification defenses under Sections 769 and 773 present 

fact-intensive inquiries that are typically not appropriate for disposition on a 

motion to dismiss.71 

 

68 The “burden of showing privilege rests upon the [alleged] interferor. . . .” Bowl-Mor 

Co., Inc. v. Brunswick Corp., 297 A.2d 61, 66 (Del. Ch. 1972) (addressing a defense 

raised under Section 769). See also Matter of L.B. Trucking, Inc., 163 B.R. 709, 725 

(Bankr. D. Del. 1994) (in discussing Section 773 the court stated that “[i]f these 

circumstances exist, the defendant has a meritorious defense to the alleged tort of 

intentional interference with the performance of a contract by a third person.”).

69 These allegations must be accepted as true at this stage of the proceedings.

70 Def. Strauss Water Ltd.’s Opening Br. in Supp. of its Mot. to Dismiss the Am. 

Compl. 44–48. 

71 For instance, according to the Complaint, the meetings with PepsiCo and Euro-Pro 

where Strauss is alleged to have engaged in tortious interference occurred prior to Strauss 

declaring a default of the Loan. Compl. ¶¶ 74–81 (Strauss meets with customers after the 

Loan closed through early February, 2013); Id. ¶ 83 (Strauss sends notice of default on 

February 17, 2013). The extent to which Strauss was justified in taking actions with 

respect to PepsiCo and Euro-Pro to protect its collateral prior to declaring a default of the 

Loan is, at least in part, a question of fact. Section 769 requires Strauss to demonstrate it 

did “not employ wrongful means;” Section 773 requires Strauss to demonstrate that it 
34

 

Esio also must plead that Strauss’ alleged tortious interference was the 

proximate cause of its damages. Delaware embraces a “but for” causation

paradigm where proximate cause exists when an act or omission “in natural and 

continuous sequence, unbroken by any efficient intervening cause, produces the 

injury and without which the result would not have occurred.”72 

Esio alleges that Strauss’ statements to PepsiCo representatives that Strauss, 

not Esio, controlled Esio’s products and technology, and its demonstration to 

PepsiCo of a faulty prototype, tortiously interfered with any prospect that Esio 

might form a business relationship with PepsiCo.73 What Esio has failed to plead, 

however, is that a business relationship with PepsiCo might have saved Esio from 

the harm it alleges to have suffered as a proximate result of the wrong. The 

Complaint contains no allegations of what a business relationship with PepsiCo 

might have brought to Esio or how it might have saved Esio from its financial 

demise. In the absence of such allegations, it is not reasonably conceivable that 

 

acted in “good faith” using “appropriate means.” RESTATEMENT (SECOND) OF TORTS

§§ 669, 773 (1979). These are fact-intensive inquiries that must be undertaken with the 

benefit of a factual record. See Bowl-Mor Co. Inc., 297 A.2d at 66 (holding that 

justification defense could not be determined “as a matter of law”).

72 Duphily v. Del. Elec. Co-op., Inc., 662 A.2d 821, 828–29 (Del. 1995) (internal 

quotation marks and alterations omitted).

73 Compl. ¶¶ 74, 161, 163(vi).
35

Strauss’ alleged tortious interference with Esio’s prospective business relationship 

with PepsiCo was a proximate cause of Esio’s alleged harm.74 

Esio’s allegations with respect to the lost business opportunity with EuroPro are more substantive. As noted, Esio alleges that Strauss hijacked its meeting 

with Euro-Pro and told Euro-Pro that it would have to deal with Strauss because 

Strauss now controlled Esio’s technology.75 The purpose of this meeting, at least 

from Esio’s perspective, was to enlist Euro-Pro as a partner who might offer 

“measures that would help Esio reduce manufacturing costs to remain financially 

viable and reduce the need for a larger financial investment.”76 The allegations are 

thin but do present a reasonably conceivable basis upon which Esio might 

demonstrate that a business relationship with Euro-Pro, had Strauss not interfered 

with it, would have lowered Esio’s manufacturing costs in a manner that would 

have allowed it to service its debt with Strauss and remain viable. Therefore, Esio 

has adequately pled that Strauss’ actions during the Euro-Pro meeting were a 

proximate cause of its damages.

 

74 See Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (affirming dismissal of tortious 

interference claim on motion to dismiss because it was not reasonably conceivable based 

on the complaint that the alleged interference proximately caused the harm alleged).

75 Compl. ¶¶ 80–81, 163(ii).

76 Id. ¶ 79.
36

C. Esio Has Pled No Basis to Compel Arbitration

Esio seeks a declaration that Strauss must arbitrate the claims Esio has 

brought in this Court because they are connected to claims that are the subject of 

arbitration proceedings pending between Esio and ICC in Arizona. Once again, 

Esio would have the Court vary the terms of its contracts with Strauss to compel a 

result for which it did not bargain.

Esio and Strauss disagree about whether Arizona or Delaware law governs 

the determination of whether the arbitration clause in the Second Amended ICC 

Agreement is binding upon Strauss. When determining which sovereign’s laws to 

apply when laws potentially conflict, Delaware courts use a two-part test: 

[F]irst, the court determines whether there is an actual conflict of law 

between the proposed jurisdictions. If there is a conflict, the court 

determines which jurisdiction has the ‘most significant relationship to 

the occurrence and the parties’ based on the factors (termed 

“contacts”) listed in the Restatement (Second) of Conflict of Laws.77

Where the result would be the same under both sovereign’s laws, there is a “false 

conflict” and “the Court should avoid the choice-of-law analysis altogether.”78

Here, both parties agree in their briefs that the there is no real conflict between 

 

77 Bell Helicopter Textron, Inc. v. Arteaga, 113 A.3d 1045, 1050 (Del. 2015).

78 Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1161 (Del. 2010). 
37

Delaware and Arizona with regard to the arbitration issue.

79 I will apply Delaware 

law.

It is “well settled law in Delaware that choice of forum provisions are 

enforceable.”80 The Loan Agreement contains a Delaware forum selection 

provision that governs both that contract and the Warrant. Absent some 

compelling reason to disregard this provision, it should be enforced. The Side 

Letter that Strauss entered into with ICC, which incorporates the Second Amended 

ICC License, contains its own forum selection clause selecting New York State 

courts or federal courts that sit in the Borough of Manhattan. None of these 

agreements to which Strauss is a party require Strauss to submit to arbitration with 

Esio.

As a general rule, this Court will compel parties to submit to arbitration only 

where they have agreed to arbitrate as a matter of contract.81 A non-signatory will 

be bound by an arbitration clause within a contract only if “traditional principles of 

contract and agency law equitably confer upon that party signatory status with 

 

79 See Answering Br. 51, n.13 (“Even if Delaware law applied to this analysis, the result 

would be the same”); Def. Strauss Water Ltd.’s Reply Br. in Further Supp. of its Mot. to 

Dismiss the Compl. 32 (“The result is the same, however, even if Arizona law applies”). 

80 Flintkote Co. v. Aviva PLC, 769 F.3d 215 (3d Cir. 2014) (applying Delaware law).

81 James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 78–79 (Del. 2006).
38

regard to the underlying agreement.”

82 A non-signatory may be found to have 

“embraced” a contract “(1) where the non-signatory direct[ly], rather than 

indirect[ly] benefit[ted] from the [agreement] during the course of the agreement’s 

performance[,]; (2) where the non-signatory consistently maintain[s] that other 

provisions of the same contract should be enforced to benefit him[,]; or (3) where 

the non-signatory sue[s] to enforce the provisions of a contract that it likes, while 

simultaneously disclaiming the provisions that it does not.”83

Under the third-party beneficiary theory, the third-party must directly benefit 

from the agreement. While Esio renegotiated with ICC to allow Strauss access to 

the ICC technology, Strauss’ rights to this technology did not flow directly from 

the Second Amended ICC License. Rather, Strauss’ benefit from the Second

Amended ICC License was indirect and was dependent upon the Side Letter where 

ICC approved Strauss’ security interest in Esio’s license to ICC technology, the 

pledge of the Second Amended ICC License as collateral for the Loan and the 

cross-licensing agreement between Strauss and Esio. Since Strauss did not directly 

benefit from the Second Amended ICC License, the third-party beneficiary theory 

cannot be used to compel Strauss to join the Arizona arbitration.84

 

82NAMA Hldgs., LLC v. Related World Mkt. Ctr., 922 A.2d 417, 430 (Del. Ch. 2007).

83 Flintkote, 769 F.3d at 221 (alteration in original) (internal quotation marks omitted).

84 I note that the third-party beneficiary theory is typically cited as a basis to bind a nonsignatory to arbitration when the non-signatory seeks to prosecute claims outside of
39

The doctrine of equitable estoppel may also bind a party to an arbitration 

agreement even where it is a non-signatory if the non-signatory “by his conduct 

intentionally or unintentionally leads another, in reliance upon that conduct, to 

change position to its detriment.”85 The party who claims that another is bound to 

an arbitration clause by estoppel must demonstrate that “(i) [it] lacked knowledge 

or the means of obtaining knowledge of the truth of the facts in question; (ii) [it]

reasonably relied on the conduct of the party against whom estoppel is claimed; 

and (iii) [it] suffered a prejudicial change of position as a result of their reliance.”86

The estoppel theory breaks down when the party seeking to compel arbitration is a

party to another agreement with the party whom it seeks to compel to arbitrate, that 

other agreement is central to the dispute and it contains an express forum selection

provision.

87

 Under these circumstances, the moving party will be precluded from 

claiming that it reasonably expected it would be able to compel arbitration

notwithstanding the contrary forum selection provision to which it agreed.

88

 

arbitration. Esio has failed to cite any cases where this theory has been applied by a court 

to bind a non-signatory defendant to arbitrate claims brought against it.

85 Wilson v. Am. Ins. Co., 209 A.2d 902, 903–04 (Del. 1965).

86 Nevins v. Bryan, 885 A.2d 233, 249 (Del. Ch.), aff’d, 884 A.2d 512 (Del. 2005).

87 Flintkote, 769 F.3d at 223.

88 See id. (finding that the defendant was not required to arbitrate where it was party to an 

agreement with the plaintiff that contained an express forum selection provision).
40

Here, Strauss expressly maintained its right to litigate claims arising under 

the Loan Agreement, Warrant and Side Letter in the fora agreed to by the parties to 

those contracts. Therefore, Esio cannot be heard to argue that Strauss is estopped 

from refusing to submit to arbitration under the Second Amended ICC License or 

that it should be compelled to do so. 

IV. CONCLUSION

For the foregoing reasons, the Complaint fails to state a claim upon which 

relief can be granted under Court of Chancery Rule 12(b)(6). Defendants’ motion 

to dismiss is GRANTED as to Counts I, II, III, IV, V, VI, VII, VIII and X with 

prejudice, and DENIED as to Count IX (only with respect to the alleged tortious 

interference with Esio’s prospective business relations with Euro-Pro).

IT IS SO ORDERED.