Title: Leaf Invenergy Co. v. Invenergy Renewables LLC
Citation: N/A
Docket Number: 308, 2018
State: Delaware
Issuer: Delaware Supreme Court
Date: May 2, 2019

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
LEAF INVENERGY COMPANY,  
§ 
a Cayman Islands exempt limited  
§ 
liability company, 
§ No. 308, 2018 
 
 
 
§  
 
Plaintiff Below-Appellant/ 
§  Court Below—Court of Chancery 
 
Cross-Appellee, 
§ of the State of Delaware 
 
 
 
§  
 
v. 
 
§  
 
 
 
§ C.A. No. 11830-VCL 
INVENERGY RENEWABLES LLC,  
§ 
a Delaware limited liability company, 
§  
 
 
 
§ 
 
Defendant Below-Appellee/ 
§ 
 
Cross-Appellant. 
§ 
 
Submitted: February 13, 2019 
Decided: 
May 2, 2019 
 
Before STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and 
TRAYNOR, Justices, constituting the Court en Banc. 
 
Upon appeal from the Court of Chancery.  REVERSED and REMANDED. 
 
Bradley D. Sorrels, Shannon E. German, Andrew D. Berni, WILSON SONSINI 
GOODRICH & ROSATI, P.C., Wilmington, Delaware; Keith E. Eggleton, Steven 
D. Guggenheim (argued), David A. McCarthy; WILSON SONSINI GOODRICH & 
ROSATI, P.C., Palo Alto, California; Attorneys for Appellant/Cross-Appellee Leaf 
Invenergy Company. 
 
Kenneth J. Nachbar (argued), Kevin M. Coen, Zi-Xiang Shen, Coleen W. Hill, 
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Bruce 
S. Sperling, Harvey J. Barnett, Eamon P. Kelly, SPERLING & SLATER, P.C., 
Chicago, Illinois; Attorneys for Appellee/Cross-Appellant Invenergy Renewables 
LLC. 
 
 
 
2 
TRAYNOR, Justice: 
In 2008, Invenergy Wind LLC (“Invenergy”), a wind energy developer, was 
raising money for a Series B investment round, and Leaf Clean Energy Company 
(“Leaf Parent”), an investment fund, expressed interest.  After extensive 
negotiations, Leaf Parent invested $30 million in Invenergy Series B notes through 
a vehicle called Leaf Invenergy Company (“Leaf”).  The agreement governing the 
Series B notes (“Series B Note Agreement”) gave noteholders such as Leaf the right 
to convert to equity and incorporated an LLC agreement (“Series B LLCA”) that the 
noteholders and Invenergy would execute upon conversion.  
The Series B Note Agreement and the Series B LLCA also included provisions 
that prohibited Invenergy from conducting a “Material Partial Sale”—a defined 
term—without Leaf’s consent unless Invenergy paid Leaf a premium called a 
“Target Multiple”—another defined term.  Although the parties renegotiated several 
aspects of their agreements with one another over the next few years, the consent 
provisions persisted in substantially similar form into the Third Amended and 
Restated LLC Agreement (the “LLC Agreement”), which is the operative agreement 
in this dispute.  Those consent provisions form the crux of this litigation.  
Leaf filed suit after Invenergy closed a $1.8 billion asset sale—a transaction 
that Invenergy concedes was a Material Partial Sale—without first obtaining Leaf’s 
consent or redeeming Leaf’s interest for the Target Multiple.  After a trial, the Court 
 
3 
of Chancery concluded that, although Invenergy had breached the Material Partial 
Sale consent provisions, Leaf was not entitled to the Target Multiple.  The court then 
awarded only nominal damages because, according to the court, Invenergy had 
engaged in an “efficient breach.”1  The Court of Chancery directed the parties to 
complete a buyout of Leaf’s interests pursuant to another LLC Agreement provision 
that Invenergy had invoked after Leaf had filed suit. 
We disagree with the Court of Chancery’s interpretation of the consent 
provision and its award of nominal damages and therefore REVERSE.The consent 
provisions unambiguously require Invenergy to pay Leaf the Target Multiple if it 
conducts a Material Partial Sale without Leaf’s consent, and the concept of efficient 
breach does not permit Invenergy to circumvent that requirement.  Because 
Invenergy conducted a Material Partial Sale without Leaf’s consent and without 
paying Leaf the Target Multiple, Leaf is entitled to the Target Multiple as contractual 
damages.  We thus award Leaf the Target Multiple in damages on condition that it 
surrenders its membership interests in Invenergy. 
                                         
1 Leaf Invenergy Co. v. Invenergy Wind LLC (“Opinion Below” hereafter), 2018 WL 1882746 
(Del. Ch. Apr. 19, 2018). 
 
4 
I. BACKGROUND2 
Founded in 2001, Invenergy is a developer and operator of wind energy 
facilities in North America and Europe.  Leaf Parent is a publicly traded investment 
fund specializing in renewable energy and sustainable technologies. 
A. 2008: Leaf invests in Invenergy’s Series B notes 
In the summer of 2008, Invenergy sought to raise additional capital by issuing 
convertible debt.  Several investors expressed interest including Leaf Parent and 
Liberty Mutual Insurance Company (“Liberty Mutual”), the latter of which had 
invested in Invenergy during Invenergy’s earlier Series A funding round.  Ultimately, 
Leaf invested $30 million in Invenergy Series B convertible notes in two closings in 
December 2008 and February 2009.3 
The Series B Note Agreement enumerated several items that required the 
consent of the noteholders.  Among other things, Invenergy could not conduct a 
“Material Partial Sale”4 without majority noteholder consent5 unless the noteholders 
received the Target Multiple at the closing of such a sale.  The Target Multiple, in 
                                         
2 The Court of Chancery’s opinion provides a more detailed treatment of the factual background; 
we have included the most significant and relevant facts here. 
3 Bank of America Strategic Investments Corporation also invested $20 million in the Series B 
round, but those notes were purchased by an investment vehicle controlled by Invenergy’s CEO 
in December 2012. 
4 The term “Material Partial Sale” is a contractually defined term, but it suffices to say here that it 
refers to a sale of a significant portion of Invenergy’s assets. 
5 The contractual definition of how this majority is determined in various cases is somewhat 
complex, App. to Opening Br. A132 (“A__” hereafter), but those complexities are not of 
consequence here. 
 
5 
turn, was defined as multiples of the noteholders’ initial investment that grew over 
time.  Essentially, Invenergy could conduct a large asset sale with or without the 
noteholders’ consent.  But in exchange for the right to conduct a sale without the 
noteholders’ consent, the noteholders were afforded the ability to cash out with a 
handsome agreed-upon return on their investment upon Invenergy’s exercise of that 
right. 
The Series B notes matured on December 22, 2014, but Series B noteholders 
could convert their Series B notes into equity before the conversion deadline, which 
was initially set for December 22, 2011.  As a practical matter, if Invenergy did 
poorly, the Series B noteholders would stay in the notes and preserve their debt 
covenant rights.  On the other hand, if Invenergy did well, the Series B noteholders 
would convert into equity and capture an upside on their investment. 
To facilitate a conversion, the Series B Note Agreement incorporated an LLC 
agreement (“the Series B LLCA”) that would come into effect upon conversion.  The 
Series B LLCA gave the converted noteholder-members many rights similar to what 
they had as Series B noteholders.  For example, like the Series B Note Agreement, 
the Series B LLCA provided that Invenergy could not conduct a “Material Partial 
 
6 
Sale”6 without the consent of members unaffiliated with management or redeeming7 
unaffiliated members for the Target Multiple.  As the Court of Chancery found, Leaf 
and Invenergy had contemporaneous understandings that these and similar clauses 
guaranteed that the investors would receive the Target Multiple if Invenergy engaged 
in Material Partial Sale without the investors’ consent. 
The Series B LLCA also included reciprocal call and put rights that Invenergy 
and the converted noteholders could exercise between December 22, 2013 and 
December 22, 2014.  Under Section 11.09 of the Series B LLCA, converted 
noteholders could “require that [Invenergy] purchase all but not less than all” of its 
interest.8  The same section provided that Invenergy could “redeem all but not less 
than all” of the converted noteholders’ interests.9  These rights collectively ensured 
that the Series B investors would either exit or renegotiate their investment by 
December 22, 2014. 
B. 2011–13: Invenergy and its investors make minor changes, but Leaf 
preserves its Material Partial Sale consent right 
In 2011, Invenergy sought to extend the maturity date of the Series B notes 
by two years to facilitate other refinancing transactions.  The Series B noteholders, 
                                         
6 The term “Material Partial Sale” is defined differently in the Series B LLCA than in the Series B 
Note Agreement, but again it suffices to say that it also means a sale of a significant portion of 
Invenergy’s assets. 
7 The parties agree that payment of the Target Multiple redeems Leaf’s interests.  See Opening Br. 
27–28; see also Answering Br. 51. 
8 A192 (JX 38 at 59). 
9 Id. 
 
7 
including Leaf, agreed to Invenergy’s modifications and received matching 
extensions of two years on the conversion deadline and the put and call windows.  
During this process, the parties also agreed to slight modifications to the calculation 
of the Target Multiple. 
In the summer of 2013, Liberty Mutual and Invenergy explored having 
Liberty Mutual convert its Series A and Series B notes into equity, but Invenergy 
was concerned that Leaf, as the primary remaining Series B noteholder, would then 
possess outsize power to block transactions.  For its part, Leaf wished to facilitate 
the conversion because it believed that it would benefit Invenergy and consequently 
benefit Leaf as an investor.  Therefore, Leaf agreed to amendments to the Series B 
Note Agreement that limited some of its former rights, but preserved its right to 
consent to Material Partial Sales and change-of-control transactions.  With the 
amendments made, Liberty Mutual converted $12.5 million of its Series A notes and 
all of its Series B notes into equity. 
C. 2014: Leaf explores liquidation and the parties affirm that Leaf would 
receive the Target Multiple if Invenergy conducts a Material Partial Sale 
without Leaf’s consent 
In 2014, Leaf Parent began an orderly liquidation of all of its assets to return 
funds to investors, and it began to explore exit options for its Invenergy investment.  
After reviewing the relevant documents, Leaf Parent concluded that the Series B 
 
8 
LLCA provided for a higher Target Multiple than the Series B Note Agreement.10  
Fortuitously for Leaf Parent, Invenergy was also exploring recapitalization options 
around the same time.  One of the options Invenergy was exploring would have two 
of Invenergy’s existing investors increase their equity stakes and required Leaf’s 
consent. 
Leaf eventually consented to the recapitalization though not before 
negotiating some small modifications to the Series B Note Agreement and the Series 
B LLCA, which contains the central operative language in this case.  Section 8.04 
now stated: 
Without the prior written consent of . . . [Leaf],11 [Invenergy] shall not: 
. . .  
(b) participate in or permit a Material Partial Sale, unless the transaction 
giving rise to the Material Partial Sale yields cash proceeds equal to or 
greater than the amount that would provide [Leaf], as of the closing of 
such Material Partial Sale, with cash proceeds equal to or more than 
their applicable Target Multiple with such Target Multiple to be paid 
upon such closing of the Material Partial Sale.12 
                                         
10 As the Court of Chancery found, Leaf Parent understood that the Series B LLCA, as amended, 
provided for a guaranteed IRR of 23% while the Series B Note Agreement, as amended, provided 
for a guaranteed IRR of only 20.5%. 
11 The agreement reads “the Required Series B Non-Voting Investor Members” in place of “Leaf.”  
No party disputes that Leaf is the “Required Series B Non-Voting Investor Member” of concern. 
12 A420. 
 
9 
As the Court of Chancery found, all parties had contemporaneous understandings 
that this clause would require Invenergy to pay the Target Multiple to Leaf if 
Invenergy chose to conduct a Material Partial Sale without Leaf’s consent. 
With Section 8.04 freshly reaffirmed, Leaf had a number of choices, including 
selling its Series B notes to a third party, having Invenergy repurchase the notes, and 
converting to equity and exercising the put right in the Series B LLCA.  Leaf’s 
exploration of those choices apparently annoyed Invenergy, but were not directly of 
consequence. 
D. 2014–2015: Invenergy conducts a Material Partial Sale and admits Leaf 
as a member 
In late 2014, Invenergy learned that wind assets were being highly valued by 
potential buyers and concluded that the timing was right for an asset sale.  For what 
appears to be a mix of financial and non-financial reasons, Invenergy did not wish 
to have to obtain Leaf’s consent or pay it the Target Multiple. 
One of the interested buyers was TerraForm Power, Inc. (“TerraForm”).  Leaf 
soon discovered that Invenergy was considering an asset sale to TerraForm and 
began planning to take advantage of that asset sale.  Among other things, Leaf’s 
executives believed that Leaf would be most likely to receive the Target Multiple if 
 
10 
Leaf converted to equity after a deal was “fully baked” but before that deal actually 
closed.13 
The TerraForm deal moved along quickly.  On June 4, 2015, TerraForm 
offered to purchase a number of Invenergy wind projects for an aggregate price of 
$2.4 billion.  On June 6, Invenergy and TerraForm entered into an exclusive 
negotiation period. 
Meanwhile, Invenergy tried to keep Leaf in the dark.  On June 16, Invenergy 
held a regularly scheduled noteholder meeting that Leaf attended.  No one mentioned 
the TerraForm deal.  Leaf’s board, growing suspicious, voted on June 18 to convert 
its notes and sent notice to Invenergy that same day.  The Series B Note Agreement 
required Invenergy to convert within three days.  Invenergy, however, did not 
complete the conversion within three days.  Instead, it decided to seek regulatory 
approval for the conversion. 
On July 1, Invenergy and TerraForm executed a purchase agreement in which 
TerraForm would buy a number of Invenergy’s assets for $1.2 billion in cash and 
the assumption of $800 million in debt.  Invenergy would use the majority of the 
cash to pay investors, retaining only $107 million for working capital.  According to 
Invenergy, the deal represented a sale of 12.5% of its assets, implying a firm value 
of approximately $16 billion.  On July 6, Invenergy publicly announced the deal. 
                                         
13 App. to Answering Br. B156 (JX 223). 
 
11 
Although Invenergy rushed to finalize the TerraForm deal, it dragged its feet 
when it came to completing Leaf’s conversion from debt to equity.  It was not until 
July 10 that Invenergy filed for regulatory approval, which it received on September 
23.  On September 24, Invenergy’s equity holders admitted Leaf as a member of 
Invenergy.  Finally, on December 15, 2015, Invenergy and TerraForm entered into 
an amended and restated purchase agreement and closed the deal the next day 
without having ever received Leaf’s consent or paying Leaf the Target Multiple.  
The final $1.8 billion deal left Invenergy with $85 million in working capital. 
E. The litigation in the Court of Chancery 
Things did not settle down after the TerraForm deal closed, and Leaf filed this 
suit on December 21, 2015.  One week later, Invenergy exercised its call right, 
proposing a price of $42.4 million for Leaf’s 2.3% stake, implying a firm value of 
just $1.8 billion.  In turn, Leaf exercised its put right the same day and proposed a 
price of $214 million for its stake.  The LLC Agreement provided for a dispute 
resolution process that would eventually result in a valuation of $50.7 million. 
While the put-call dispute resolution was ongoing, Leaf moved for partial 
judgment on the pleadings, arguing that Invenergy breached the LLC Agreement by 
closing the TerraForm transaction without Leaf’s consent and without paying Leaf 
its Target Multiple.  For its part, Invenergy claimed that the proper time to determine 
Leaf’s membership status was at the time of signing, not closing and that Leaf was 
 
12 
not a member when it signed the initial TerraForm transaction agreement.  And once 
the put-call dispute resolution process was complete, Invenergy also challenged a 
portion of that process—an appraisal conducted by XMS Capital Partners, LLC— 
as improperly influenced by Leaf. 
In what the Court of Chancery and this opinion calls the Liability Order, the 
Court of Chancery granted Leaf’s motion, finding that Invenergy breached Section 
8.04 of the LLC Agreement by not obtaining Leaf’s consent or paying the Target 
Multiple.14  It held that the operative time for determining Leaf’s status as a member 
was at closing.  It further determined that, even if the operative time was at signing 
and not at closing, then Leaf had still become an equity holder before signing 
because TerraForm and Invenergy had executed an amended deal agreement just 
before closing.  The Court of Chancery, however, reserved judgment on damages. 
Shortly after the Court of Chancery entered the Liability Order, Leaf moved 
for the entry of an order and final judgment in its favor in the amount of the Target 
Multiple, which Leaf had determined was $126,110,576.  At this point, Invenergy 
modified its argument to also claim that, despite the breach, Leaf was not entitled to 
                                         
14 Order Granting Pl’s Mot. for Partial J. on the Pleadings (“Liability Order” hereafter) ¶ 12, Leaf 
Invenergy Co. v. Invenergy Wind LLC, No. 11830 (Del. Ch. June 30, 2016) Dkt. No. 39 (“Because 
[Invenergy] did not follow either the Consent Path or the Payout Path, it breached the plain 
language of [Section 8.04].”). 
 
13 
damages because the TerraForm transaction had not harmed Leaf.15  Although the 
Court of Chancery found that Leaf correctly calculated the Target Multiple, it denied 
Leaf’s motion and held a trial on damages.16 
In its post-trial decision, the Court of Chancery agreed with Invenergy and 
held that Leaf had failed to prove actual damages despite overwhelming evidence 
that “until midway through this case, all of the parties to the LLC Agreement 
understood that Leaf would receive its Target Multiple if Invenergy engaged in a 
Material Partial Sale without Leaf’s consent.”17  The Court of Chancery then 
awarded Leaf one dollar in nominal damages and ordered the parties to complete the 
put-call sale process. 
                                         
15 See Invenergy’s Answering Br. to Leaf’s Mot. for Entry of an Order and Final J. 21, Leaf 
Invenergy Co. v. Invenergy Wind LLC, No. 11830 (Del. Ch. Aug. 12, 2016) Dkt. No. 62. 
16 The Court also rejected Invenergy’s argument that, because Leaf did not seek injunctive relief 
before the closing of the TerraForm transaction, Leaf was precluded from recovering damages. In 
a passage that presaged the dispute now before us, the Court of Chancery wrote:  
[Invenergy] was free to proceed with the TerraForm Transaction as long as 
[Invenergy] paid Leaf its Target Multiple. [Invenergy] could also choose to engage 
in the transaction if it regarded the payment of damages as a form of efficient 
breach. See E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, 445–46 
(Del. 1996). Leaf clearly communicated to [Invenergy] that it believed the 
TerraForm Transaction required its consent and that if the deal closed, then Leaf 
would be entitled to its Target Multiple. [Invenergy] chose to proceed [without 
Leaf’s consent]. Under the circumstances, Leaf was not required to seek pre-closing 
relief. Rather, it was [Invenergy] that assumed the risk of a post-closing remedy. 
Order Denying Mot. for Entry of an Order and Final J. (“Order Denying Final Judgment”) ¶ 13, 
Leaf Invenergy Co. v. Invenergy Wind LLC, No. 11830 (Del. Ch. Oct. 10, 2016) Dkt. No. 81. 
17 Opinion Below, supra note 1, at *26. 
 
14 
How did the court transform Leaf’s expectation—shared by Invenergy—that, 
based upon the bargained-for consent and payment rights in Section 8.04, it would 
receive $126 million under the circumstances that occurred here into a single dollar?  
A brief summary of the Court of Chancery’s analysis should suffice to set the stage 
for our review. 
The Court of Chancery’s damages discussion recognized the well-settled 
rule18 that damages for breach of contract are based on the non-breaching party’s—
here Leaf’s—expectation interest.  As the Court of Chancery correctly noted, 
“expectation” is a term of art.19  When determining expectation damages, courts 
determine an amount that will give the injured party “the benefit of its bargain by 
putting that party in the position it would have been but for the breach.”20  The 
primary element of expectation damages is the “the value that the performance 
would have had to the injured party,” or the “loss in value” caused by the deficient 
performance compared to what had been expected.21 
And on this point, the Court of Chancery laid out the extensive evidence 
showing beyond any shadow of a doubt that Leaf and Invenergy both harbored the 
belief—one that persisted until after the court entered its Liability Order—that Leaf 
                                         
18 Restatement (Second) of Contracts § 347 (1981). 
19 Opinion Below, supra note 1, at *30. 
20 Genecor Int’l, Inc. v. Novo Nordisk A/S, 766 A.2d 8, 11 (Del. 2000) (quoted by Opinion Below, 
supra note 1, at *30). 
21 Restatement (Second) of Contracts § 347 cmt. b (1981). 
 
15 
was entitled to payment of the Target Multiple if Invenergy engaged in Material 
Partial Sale without Leaf’s consent, as it did here.  The Court of Chancery, however, 
without citing any specific authority, disregarded the parties’ subjective expectations 
apparently finding that they were not sufficiently reasonable to form the basis of a 
damages award.  Instead, the court relied on a pair of its earlier opinions that 
addressed consent-right provisions in other contexts and the principle of efficient 
breach in support of its conclusion that Leaf could not recover damages unless it  
demonstrated “actual damages by showing that it suffered harm as a result of the 
TerraForm Transaction or that it would have secured additional consideration given 
the opportunity to negotiate for its consent.”22  The court found that Leaf could show 
neither—hence, the nominal damages award. 
Leaf now appeals to this Court, arguing that (1) the Court of Chancery 
misinterpreted the LLC Agreement when it made its damages determination; (2) 
Section 8.04 of the LLC Agreement unambiguously gave it a payment right; (3) even 
if Section 8.04 was ambiguous, the Court of Chancery erred by not adopting Leaf’s 
reasonable interpretation; and (4) the Court of Chancery misapplied the law 
regarding contractual damages.  In turn, Invenergy contests each of Leaf’s 
contentions on appeal and cross-appeals the Court of Chancery’s denial of its motion 
to strike the XMS appraisal. 
                                         
22 Opinion Below, supra note 1, at *31. 
 
16 
II. STANDARD AND SCOPE OF REVIEW 
We review questions of contract interpretation and questions of law de novo.23 
III. ANALYSIS 
The parties agree that the controlling contract is the Third Amended and 
Restated LLC Agreement, which this opinion calls the “LLC Agreement” for short.  
The parties—and the Court of Chancery—also agree that Invenergy breached 
Section 8.04 of the LLC Agreement by conducting a Material Partial Sale without 
Leaf’s consent. 
A. Principles of contract interpretation 
Because the Court of Chancery’s award of only nominal damages instead of 
the Target Multiple hinged upon its interpretation of Section 8.04, our analysis starts 
there.  When we interpret contracts, our task is to fulfill the “parties’ shared 
expectations at the time they contracted.”24  “[B]ut because Delaware adheres to an 
objective theory of contracts, the contract’s construction should be that which would 
be understood by an objective, reasonable third party.”25  Accordingly, we “interpret 
clear and unambiguous terms according to their ordinary meaning.  Contract terms 
themselves will be controlling when they establish the parties’ common meaning so 
                                         
23 Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009). 
24  Exelon Generation Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1267 (Del. 2017). 
25 Id. (internal quotations omitted). 
 
17 
that a reasonable person in the position of either party would have no expectations 
inconsistent with the contract language.”26 
B. Interpretation of Section 8.04  
Both sides contend that Section 8.04 unambiguously supports their respective 
positions.  As mentioned above, Section 8.04 states that: 
Without the prior written consent of . . . [Leaf], [Invenergy] shall not: 
. . .  
(b) participate in or permit a Material Partial Sale, unless the transaction 
giving rise to the Material Partial Sale yields cash proceeds equal to or 
greater than the amount that would provide [Leaf], as of the closing of 
such Material Partial Sale, with cash proceeds equal to or more than 
their applicable Target Multiple with such Target Multiple to be paid 
upon such closing of the Material Partial Sale.27 
i. 
The parties’ and the Court of Chancery’s interpretations 
Leaf argues that Section 8.04 is an express and unambiguous agreement that, 
“[i]f Invenergy wanted to proceed with a Material Partial Sale and Leaf did not 
consent, Invenergy had to buy Leaf out.”28  The Court of Chancery found—and, 
indeed the evidence conclusively showed—that Invenergy read Section 8.04 in the 
same way deep into this litigation.   
But Invenergy pivoted after the Court of Chancery entered its Liability Order 
in which the Court found that Invenergy had breached Section 8.04 by closing the 
                                         
26 GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012). 
27 A420. 
28 Opening Br. 30. 
 
18 
TerraForm transaction without having secured Leaf’s consent or paying the Target 
Multiple.  According to Invenergy’s belatedly gained understanding of “the plain 
structure”29 of Section 8.04, payment of the Target Multiple in the absence of Leaf’s 
consent was not a contractual obligation but merely an “exception” to Invenergy’s 
need to obtain Leaf’s consent.  Although neither Invenergy nor the Court of 
Chancery offer a particularly satisfying explanation of how this exception to the 
consent right—a right that apparently vanishes upon Invenergy’s election to ignore 
it—operates, we understand their understanding to work like this: 
If Invenergy chooses to engage in a Material Partial Sale:  
 
It may do so by securing Leaf’s consent.  If it does not wish to or cannot 
secure Leaf’s consent, it may—but is not required to— invoke the 
payment “exception” by delivering the Target Multiple to Leaf at 
closing. 
 
OR 
 
It may do so by ignoring Leaf’s consent right and without invoking the 
payment exception. (This option is also characterized as a “bypass” to 
the consent right.)  If this is Invenergy’s choice, Leaf’s remedy will 
only account for Invenergy’s failure to obtain Leaf’s consent and not 
Invenergy’s failure to pay the Target Multiple.   
 
Under the latter scenario, which is what occurred here, Invenergy contends that the 
only contractual obligation breached is the obligation to secure Leaf’s consent 
because Section 8.04 imposes no obligation on Invenergy to pay the Target Multiple 
                                         
29 Answering Br. 31. 
 
19 
upon conducting a Material Partial Sale.  In Invenergy’s view, the payment provision 
is Invenergy’s way around Leaf’s consent right and does not entitle Leaf to payment 
when Invenergy ignores that right altogether. 
In its damages analysis, the Court of Chancery adopted Invenergy’s 
interpretation: 
[T]he evidentiary record developed at trial showed that the parties 
believed subjectively that there were only two possibilities under the 
Series B Consent Right:  Either Leaf would consent, or Leaf would not 
consent and receive its Target Multiple.  Their expectation regarding 
Leaf’s receipt of its Target Multiple stemmed from the exception to the 
Series B Consent Right and the misimpression that it created a right to 
receive the Target Multiple in the event of breach . . . . Properly 
understood, the exception was only an exception.30 
 
Accordingly, despite its determination in the Liability Order that the plain language 
of Section 8.04 obligated Invenergy to follow one of two paths (secure Leaf’s 
consent or pay the Target Multiple) if it engaged in a Material Partial Sale, the Court 
of Chancery used this “exception theory” to support the clearing of a new path that 
imposed no obligation on Invenergy to pay the Target Multiple and consequently 
awarded only nominal damages in this suit. 
ii. 
Our analysis 
Our reading of Section 8.04 leads us to conclude that Section 8.04 
unambiguously requires Invenergy to pay Leaf the Target Multiple if it conducts a 
                                         
30 Opinion Below, supra note 1, at *31 (emphasis added). 
 
20 
Material Partial Sale without Leaf’s consent.  As Section 8.04 is written, it is 
logically equivalent to a clause that provides that, if Invenergy conducted a Material 
Partial Sale without Leaf’s consent, then Invenergy must pay Leaf the Target 
Multiple.  And such a clause warrants an award of damages in the amount of the 
Target Multiple in the event of a nonconsensual Material Partial Sale without 
payment.  This plain and logical reading is consistent with the parties’ shared 
understanding of Section 8.04 until Invenergy saw a new light after the Court of 
Chancery’s pre-trial breach ruling.   
The Court of Chancery appears to have originally adopted the view we are 
expressing when it concluded in its Liability Order that  “[t]o engage in a Material 
Partial Sale in compliance with the plain language of [Section 8.04, Invenergy] was 
obligated to follow one of two paths”31—secure Leaf’s consent or redeem its interest 
for the Target Multiple.32  But the Court of Chancery erred when it—contrary to the 
plain meaning of Section 8.04—adopted Invenergy’s “exception” theory and then 
decided that the doctrine of efficient breach (more about that later) allowed 
Invenergy to neither obtain consent nor pay Leaf the Target Multiple. 
                                         
31  Liability Order, supra note 14, at ¶ 9. 
32  See infra note 41 and accompanying text. 
 
21 
iii. 
Ford Holdings/GoodCents Holdings  
To support its interpretation that Section 8.04 does not give Leaf a right to the 
Target Multiple when Invenergy conducts a Material Partial Sale without Leaf’s 
consent, the Court of Chancery cited two previous Court of Chancery opinions: In 
re Appraisal of Ford Holdings, Inc. Preferred Stock33 and In re Appraisal of 
GoodCents Holdings, Inc.34  In our view, neither of these opinions justify the Court 
of Chancery’s departure from the plain meaning of Section 8.04, as mutually 
understood by the parties at the time of contracting and thereafter.   
In Ford Holdings, the Court of Chancery interpreted the rights of two groups 
of preferred shareholders in a cash-out merger under the following clause: 
Without the affirmative vote of the holders of a majority of the 
[preferred] shares . . . , [the company] may not . . . merge with or into 
any other corporation unless . . . each holder of [preferred] shares . . . 
shall receive, upon such . . . merger, an amount in cash equal to the 
liquid [sic] preference, Merger Premium, if any, and accumulated and 
unpaid dividends.35 
Chancellor Allen concluded that this clause—which, like Section 8.04, conditions a 
transaction upon shareholder consent—did not waive the shareholders’ statutory 
appraisal rights under 8 Del. C. § 262.  
                                         
33 698 A.2d 973 (Del. Ch. 1997). 
34 2017 WL 2463665 (Del. Ch. June 7, 2017). 
35 Ford Holdings, 698 A.2d at 978–79. 
 
22 
We agree with that conclusion.  The preferred shareholders were entitled to 
either (1) a vote on the merger or (2) a certain amount of cash proceeds.  The 
company decided to bypass the shareholder vote by offering shareholders the cash 
proceeds.  We agree that the clause in question and the company’s decision to offer 
a liquidation preference in lieu of a vote in accordance with the shareholder 
agreement had no apparent impact on the shareholders’ statutory appraisal rights. 
We do not see, however, how Ford Holdings—where there was no breach of 
contract and where the final holding related to appraisal rights—can be read to 
support a decision that a party injured by a contractual breach cannot recover a 
contractually specified premium.  By choosing one of two contractually permissible 
options, the company in Ford Holdings did not breach its contract with the preferred 
shareholders.  In this case, Leaf and Invenergy agreed at the time of contracting that 
there would be two contractually permissible alternative paths to a Material Partial 
Sale: either Invenergy would secure Leaf’s consent or Invenergy would pay the 
Target Multiple.  Invenergy took neither road, however, and that has made all the 
difference. 
In the 2017 GoodCents case, the Court of Chancery examined a provision 
similar to Section 8.04 but in a different context.  In GoodCents, the preferred 
shareholders of GoodCents Holdings controlled over 80% of the voting power of the 
corporation.  In 2015, in what was seemingly a surprise to the common 
 
23 
shareholders,36 GoodCents was sold for less than the liquidation preference of the 
preferred shares.  Under GoodCents’ certificate of incorporation, the preferred 
shareholders ordinarily could not receive a larger per-share payout than the common 
shareholders on an as-converted basis.  There were a few exceptions, however, and 
the Court of Chancery was asked to interpret the following clause: 
Without the affirmative vote of the holders of a majority of the . . . 
Preferred Stock, the corporation shall not . . . effect any merger or 
consolidation . . . unless the agreement or plan of merger . . . shall 
provide that the consideration payable to the stockholders of the 
corporation . . . shall be distributed to the holders of capital stock of the 
corporation in accordance with [the preference clauses, which gave 
preferred shareholders additional rights over common shareholders]. 
According to the preferred shareholders, they were entitled to senior claims 
equal to the liquidation preference on the merger consideration because they had not 
waived the preference clauses.37  But because the merger consideration was less than 
the amount of the liquidation preference, this would have left the common 
shareholders with nothing.  The Court of Chancery disagreed with the preferred 
shareholders’ interpretation.  Relying upon Ford Holdings, it held instead that the 
voting clause “grants the Preferred Stockholders the right to a class vote but not a 
right to the Liquidation Preference in the case of a merger.”38  Consequently, Court 
                                         
36 See GoodCents, 2017 WL 2463665, at *2, Pet’r Opening Br. in Support of Mot. for Partial 
Summ. J. 4, GoodCents, No. 11723 (Del. Ch. Jan. 19, 2017) Dkt. No. 47, Montejo Aff., Exhibit 6 
at 2, GoodCents, No. 11723 (Del. Ch. Jan. 19, 2017) Dkt. No. 49. 
37 See Respondent’s Opening Br. in Support of Mot. for Partial Summ. J. 23, GoodCents, No. 
11723 (Del. Ch. Jan. 19, 2017) Dkt. No. 44. 
38 GoodCents, 2017 WL 2463665, at *6. 
 
24 
of Chancery ordered the merger consideration to be distributed pro rata to all 
common and preferred shareholders. 
While we think GoodCents reached the right result, we are not persuaded by 
its logic.  As mentioned above, Ford Holdings did not pass on whether the 
shareholders in question had a right to a liquidation premium in the absence of an 
affirmative vote.  Moreover, the preferred shareholders in GoodCents held 80% of 
the voting power and appear to have voted to approve the merger.39  By the terms of 
the consent-right clause in question and by virtue of the preferred shareholders’ 
“affirmative vote,” the corporation could conduct a merger without making a 
preferential distribution to the preferred shareholders.40  Thus, the result—if not the 
reasoning—in GoodCents is supported by the facts in that case.  But in this case, 
Invenergy’s failure to obtain Leaf’s “affirmative vote,” i.e., Leaf’s consent, is among 
the fundamental causes of its breach.  To the extent that GoodCents turns on an 
interpretation that the above-quoted provision cannot yield damages in the amount 
of the liquidation preference even in the absence of consent, we reject it. 
                                         
39 Montejo Aff., Exhibit 6 at 2, GoodCents, No. 11723 (Del. Ch. Jan. 19, 2017) Dkt. No. 49 
(“certain stockholders holding less than all of the outstanding shares . . . of GoodCents . . . entitled 
to vote on such matters acted by written consent pursuant to Section 228(a) of the DGCL to 
authorize and approve the [attached merger agreement]”). 
40 The preferred shareholders’ contention that the “affirmative vote” required them to approve not 
only the merger but a waiver of the preference clauses, see supra note 37 and accompanying text, 
is not a reasonable reading of the contract clause in question.  Their selective omissions when 
paraphrasing the contract clause in their brief substantively changed the meaning of the clause. 
Compare Respondent’s Opening Br., supra note 37, at 14 with id. at 23. 
 
25 
C. Damages 
Because we have concluded that the text of Section 8.04 unambiguously 
requires Invenergy to pay Leaf the Target Multiple if it conducts a Material Partial 
Sale without Leaf’s consent, and because Invenergy conducted just such a 
nonconsensual sale, the calculation of Leaf’s damages is simple: it is entitled to the 
Target Multiple. 
The Court of Chancery, however, took a different logical tack and came to a 
different result.  As previously mentioned, the Court of Chancery determined in its 
Liability Order that “[t]o engage in a Material Partial Sale . . . , [Invenergy] was 
obligated to follow one of two paths.”41  The two paths were: (1) obtain Leaf’s 
written consent before closing or (2) pay Leaf the Target Multiple at closing.  It also 
found that, because Invenergy engaged in a Material Partial Sale without following 
either path, Invenergy had breached the plain language of Section 8.04.  But in its 
ultimate damages decision, the Court of Chancery concluded that although 
Invenergy breached Section 8.04, nominal damages of $1 sufficed to put Leaf in as 
good of a position as it would have been in had Invenergy not breached. 
The Court of Chancery reasoned that Invenergy likely would not have agreed 
to undertake a TerraForm deal structured to pay Leaf the Target Multiple at closing 
and that the TerraForm deal as it was actually structured did not make Leaf worse 
                                         
41 Liability Order, supra note 14, at ¶ 9. 
 
26 
off.  Rather than examine the issue of damages in terms of whether Invenergy was 
contractually obligated—as the Court said in its Liability Order—to pay Leaf the 
Target Multiple, the Court of Chancery approached the issue of damages by focusing 
on the loss of value to Leaf from Invenergy’s participation in a Material Partial Sale 
without Leaf’s consent.  In our view, the Court of Chancery’s application of that 
approach—like its interpretation of Section 8.04 in which it adopted Invenergy’s 
“exception theory” to excuse Invenergy from paying the Target Multiple—also 
missed the mark.  
i. 
Expectations and the proper frame of reference 
After finding that Invenergy breached Section 8.04, the Court of Chancery 
correctly observed that the proper measure of damages should give Leaf the benefit 
of the bargain it struck with Invenergy and should be based on Leaf’s expected 
position but for Invenergy’s breach.  But then the Court of Chancery examined the 
wrong “but-for-the-breach” position—or frame of reference—when conducting that 
damages analysis.   
Before trial, the Court of Chancery correctly observed: 
A more developed record may show that although the Payment Path 
was drafted as an exception to the requirement to obtain Leaf’s consent, 
and although it was not drafted as a liquidated damages provision, it 
nevertheless operated to create a clear set of contractual obligations for 
Leaf.  Those expectations envisioned two possible outcomes.  One 
resulted from the Consent Path, where Leaf either would consent to the 
Material Partial Sale, or the transaction would not happen.  The other 
resulted from the Payment Path, where the Company could proceed 
 
27 
with a Material Partial Sale and Leaf would receive its Target 
Multiple. . . . If Leaf proved [sic] that its expectancy was that it would 
receive its Target Multiple, th[e]n the Target Multiple could provide the 
proper measure of damages.42 
Yet despite the Court of Chancery’s explicit and numerous findings that Leaf 
and Invenergy both read Section 8.04 to give Leaf an expectation upon a Material 
Partial Sale without its consent that it would receive the Target Multiple, the court 
ignored that expectation.  Instead of examining the frame of reference in which 
Invenergy paid the Target Multiple as both parties expected in a nonconsensual 
Material Partial Sale, the Court of Chancery decided that a proper analysis of 
expectancy required—and only required—the construction of a hypothetical 
negotiation in which Invenergy sought and obtained Leaf’s consent43 and an 
assessment of whether the TerraForm transaction reduced the value of Leaf’s 
investment in Invenergy. 
That analysis failed to consider the entirety of Invenergy’s breach.  The 
correct “but-for-the-breach” frame of reference is not what might have happened had 
Invenergy asked Leaf for its consent because Invenergy’s contractual obligations 
and the means of performing them were not so narrowly drawn.    Invenergy’s breach 
was only complete when it failed to obtain Leaf’s consent and when it failed to pay 
                                         
42 Order Denying Final Judgment, supra note 16, at ¶ 11. 
43 Under that hypothetical, it is not unlikely that Leaf would have consented perhaps after seeking 
to extract some consideration from Invenergy. 
 
28 
the Target Multiple at closing.  After all, if Invenergy had structured the TerraForm 
deal to redeem Leaf for the Target Multiple, there would have been no breach.   
Because it is only the combination of the TerraForm deal plus the failure to 
obtain consent plus the failure to pay the Target Multiple that constituted the breach, 
the Court of Chancery should have considered the combination of all of those things 
when assessing what injury Leaf suffered from Invenergy’s breach and thus what 
amount of damages will return Leaf to the position it would have been in had 
Invenergy not breached Section 8.04.  That objective of returning Leaf to a but-for-
the-breach position is not met when Leaf’s damages are limited to what it might have 
obtained through a hypothetical negotiation for consent or the financial impact of 
the TerraForm transaction on Leaf’s investment.  Instead, when considering the 
breach as a whole, what would most aptly repair that breach is Invenergy’s 
payment—now in satisfaction of a damages award—of the amount it agreed it would 
pay for the right to engage in a Material Partial Sale without Leaf’s consent.  The 
Court of Chancery’s conclusion to the contrary was erroneous. 
Finally, contrary to the Court of Chancery’s apparent assertion,44 remedial 
provisions and liquidated damages clauses are not the only ways for a contract to 
                                         
44 Opinion Below, supra note 1, at *30 (“[T]he parties’ subjective beliefs about the likely remedy 
are not controlling unless memorialized in a remedial provision . . . such as a liquidated damages 
clause.”). 
 
29 
specify the damages flowing from a breach.  For example, in a sales contract in 
which the seller fully performs and the buyer does not pay at all, the seller is entitled 
to the sales price specified in the contract.45  Although the sales price might not be 
under a liquidated damages section or clause, it nonetheless acts as a contractually 
specified—and controlling—index for damages.46  Likewise, a liquidated damages 
clause in this instance would be superfluous given Invenergy’s contractual 
obligation to pay the Target Multiple.  Simply put, having agreed that Invenergy 
would have to pay Leaf the Target Multiple if it engaged in a Material Partial Sale 
without Leaf’s consent, the parties need not have stipulated that the Target Multiple 
would be recoverable as damages if Invenergy engaged in just such a sale. 
ii. 
Efficient breach and the Court of Chancery’s hypothetical negotiation 
exercise 
The Court of Chancery invoked the principle of efficient breach to relieve 
Invenergy from paying the Target Multiple.  In particular, having found that Section 
8.04 gave Invenergy two options to consummate a Material Partial Sale (securing 
Leaf’s consent or paying it the Target Multiple), the Court of Chancery devised a 
third option—efficient breach—which it found Invenergy elected, albeit 
unwittingly.  This election, according to the court, leads to “[t]he result . . . that Leaf 
                                         
45 See 6 Del. C. § 2-709. 
46 Id. 
 
30 
must demonstrate actual damages”47 outside of the injury it suffered as a result of 
Invenergy’s failure to redeem it for the Target Multiple as contractually mandated.  
This application of the concept of efficient breach finds no support in our case law.48 
Efficient breach is a concept that recognizes that “properly calculated 
expectation damages increase economic efficiency by giving the other party an 
incentive to break the contract if, but only if, he gains enough from the breach that 
he can compensate the injured party for his losses and still retain some of the benefits 
from the breach.”49  In other words, efficient breach is based on the idea that a party 
might find it economically worthwhile to breach a contract because that breach 
yields economic benefits that exceed the value of the damages it must pay to the 
non-breaching party. 
                                         
47 Opinion Below, supra note 1, at *31. 
48 Neither of the opinions cited by the Court of Chancery in its discussion of efficient breach 
touches upon the relationship of an efficient breach to the non-breaching party’s expectation 
damages.  In Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 446 (Del. 2013), in which we reversed 
a tortious-interference determination and an award of punitive—not compensatory—damages, we 
merely recognized that the underlying breach was a “so-called ‘efficient breach,’” a 
characterization that was not integral to our decision.  And in E.I. DuPont de Nemours and Co. v. 
Pressman, 679 A.2d 436, 445–46 (Del. 1996), our reference to the “theory of efficient breach” 
was confined to our discussion of the unavailability of punitive damages for breach of the 
employment contract in issue.  See also NACCO Indus. v. Applica, Inc. 997 A.2d 1, 35 (Del. Ch. 
2009) (noting that “Delaware also recognizes the concept of efficient breach” and observing that 
allowing “[a] claim for conspiracy to commit tortious interference against a party to the contract 
would undercut [the concept and other principles] and preplace the predictability of the parties’ 
agreement with a far less certain, after-the-fact, judicially-fashioned tort remedy.” (citing Allied 
Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020 (Del. Ch. 2006)). 
49 Bhole, 67 A.3d at 453 (emphasis added) (quoting DuPont v. Pressman, 679 A.2d at 445–46). 
 
31 
The Court of Chancery misapplied the efficient breach concept by 
reconsidering its damages calculation in response to perceived “efficiency.”  Courts 
award contract damages corresponding to the degree of the injury suffered and do 
not increase or decrease those damages because of “efficiency” or lack thereof.50  
Contrary to the Court of Chancery’s application of the principle, efficient breach 
does not bar recovery51 or modify damages calculations in any way.  Rather, 
efficient-breach theory recognizes that “a party may find it advantageous to refuse 
to perform a contract if he will still have a net gain after he has fully compensated 
the injured party for the resulting loss.”52  To use the Court of Chancery’s parlance, 
efficient breach provides two “paths” for a contractual promisor: perform the 
contract or fully compensate the promisee for non-performance.  But efficient breach 
does not allow the breaching party to bypass the usual method of calculating 
damages.  The Court of Chancery’s statement that efficient breach itself results in 
an alternative method for the determination of damages thus was error. 
The Court of Chancery’s rejection of the binary options presented by Section 
8.04 (secure consent or pay the Target Multiple) in favor of a “third option” 
(“efficient breach” without payment of the Target Multiple) was followed by a 
hypothetical negotiation exercise in which Leaf was required to show that it would 
                                         
50 See DuPont v. Pressman, 679 A.2d at 446 (quoting Farnsworth on Contracts § 12.3). 
51 Supra note 49. 
52 Restatement (Second) of Contracts, Chapter 16 Introductory Note (1981) (emphasis added). 
 
32 
have secured additional consideration given the opportunity to negotiate for its 
consent.  The Court claimed to find support for this in its prior decision in Fletcher 
International, Ltd. v. ION Geophysical Corp.53  In that case, the Court of Chancery 
faced the question of how to calculate damages where the injured party held a 
consent right that the breaching party had ignored, but there was no contractually 
provided workaround to the consent right.  Fletcher then imagined a hypothetical 
negotiation between the parties for consent to determine the appropriate amount of 
contractual damages.  
But Fletcher—and its hypothetical negotiation—is inapposite here.  In 
Fletcher, there was no practical, contractually specified way for the breaching party 
to cure its breach.  Unlike in this case, the only way Fletcher’s breaching party could 
close the transaction in substantial conformity with the contract was by obtaining the 
injured party’s consent, which was impractical given the fact of litigation.  But 
Section 8.04 does specify how Invenergy can avoid obtaining Leaf’s consent to a 
Material Partial Sale and yet perform the contract: Invenergy must simply arrange a 
Material Partial Sale that redeems Leaf’s interest for the Target Multiple.  Except 
for the relatively small matter of timing (Section 8.04 requires the Target Multiple 
to be distributed at the time of closing), it is still possible for Invenergy to 
substantially perform the contract as written by redeeming Leaf for the Target 
                                         
53 2013 WL 6327997, at *14, *18, (Del. Ch. Dec. 4, 2013). 
 
33 
Multiple.  Thus, in order to examine what substantial performance would look like—
and thus calculate damages—there is no need for the court to imagine a negotiation 
as the Court of Chancery needed to do in Fletcher. 
IV. CONCLUSION 
The Court of Chancery erred in its interpretation of Section 8.04, its award of 
only nominal damages, and in its application of the concept of efficient breach.  Leaf 
is entitled to damages in the amount of the Target Multiple on the condition that Leaf 
surrenders its membership interest in Invenergy.54  We accordingly REVERSE and 
REMAND for proceedings consistent with this opinion.55 
                                         
54 We agree with the Court of Chancery’s conclusion that the fact that Section 15.11 of the LLC 
Agreement gave Leaf injunctive relief rights does not preclude Leaf from seeking damages.  
Nothing in Section 15.11 provides that it was the sole or exclusive remedy.  In fact, Section 15.12 
of the LLC Agreement expressly provides that the remedies in the contract are nonexclusive. A596 
(“Remedies Cumulative. All remedies hereunder are cumulative and are not exclusive of any other 
remedies provided by law.”). 
55 We need not pass upon the merits of Invenergy’s cross-appeal, which argued that the Court of 
Chancery erred by declining to strike XMS’s appraisal.  Because we conclude that Leaf was 
entitled to be redeemed for the Target Multiple and award damages for Invenergy’s failure to do 
so, any issues relating to the put-call dispute resolution process are moot. Finally, we conclude that 
Invenergy’s post-oral-argument motion to correct the record is without merit, and we therefore 
deny it.