Court Opinion

ID: 9959124
Source: CourtListenerOpinion
Date Created: 2024-04-10 19:03:02.040143+00
Date Added: 2024-06-11T08:18:31.625701
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CHUMASH CAPITAL                      )
INVESTMENTS, LLC,                    )
                                     )
 Plaintiffs,                         )
                                     )
       v.                            ) C.A. No. N23C-07-209 SKR CCLD
                                     )
GRAND MESA PARTNERS, LLC             )
f/k/a CAPCO GROWTH                   )
PARTNERS, LLC, ERIC                  )
WEISSMANN, CGP HOLDINGS,             )
LLC, D. CHRISTIAN OSBORN,            )
OSBORN GENERATION FUND,              )
LLC, CORDELL BENNIGSON,              )
DIANA THOMAS, STEPHEN K.             )
WOOD, SIERRA PAPA, INC.,             )
DAVID A. GEZON, MIDWEST              )
MEZZANINE FUND V SBIC,               )
L.P., FUND V BLOCKER CORP.,          )
FUND V INTERMEDIATE, LLC,            )
STEVEN R. WILKINS, and TRUE          )
WEST CAPITAL PARTNERS                )
FUND II, LP,                         )
                                     )
 Defendants.                         )

                    Submitted: February 22, 2024
                      Decided: April 10, 2024

                 Upon Defendants’ Motion to Dismiss:
                 GRANTED in part, DENIED in part.
               MEMORANDUM OPINION AND ORDER
Kevin R. Shannon, Esquire, Christopher N. Kelly, Esquire, Justin T. Hymes, Esquire,
Potter Anderson & Corroon LLP, Wilmington, Delaware, William C. O’Neil,
Esquire, Jeffrey J. Huelskamp, Esquire, Gretchen Scavo, Esquire, Winston & Strawn
LLP, Chicago, Illinois, Marisa E. Witter, Esquire, Winston & Strawn LLP, Houston,
Texas Attorneys for Plaintiff.

Rudolf Koch, Esquire, Travis S. Hunter, Esquire, Alexander M. Krischik, Esquire,
Elizabeth J. Freud, Esquire, Griffin A. Schoenbaum, Esquire, Richards, Layton &
Finger, P.A., Wilmington, Delaware, Attorneys for Defendants Grand Mesa
Partners, LLC f/k/a Capco Growth Partners, LLC, Eric Weissmann, CGP Holdings,
LLC, Osborn Generation Fund LLC, D. Christian Osborn, Cordell Bennigson,
Diana Thomas, Stephen K. Wood, and Sierra Papa, Inc.

James G. Sawtelle, Esquire, Sherman & Howard L.L.C., Denver, Colorado, Attorney
for Defendants Cordell Bennigson and Diana Thomas.

R. Montgomery Donaldson, Esquire, Montgomery, McCracken, Walker & Rhoads,
LLP, Wilmington, Delaware, B. John Casey, Esquire, Ryan H. Tamm, Esquire, Stoel
Rives LLP, Portland, Oregon, Attorneys for Defendants David A. Gezon, Midwest
Mezzanine Fund V SBIC, L.P., Steven R. Wilkins, True West Capital Partners Fund
II, LP, Fund V SBIC Blocker Corp., and Fund V Intermediate, LLC.

RENNIE, J.
                                I. INTRODUCTION

      This controversy arises from a purportedly fraudulent equity purchase

agreement (the “Purchase Agreement”). Plaintiff, the buyer in the transaction,

claims that several of the contractual representations made by the seller were

knowingly false. Beyond seeking to hold the seller liable, Plaintiff has asserted

claims against some of the seller’s managers and owners. Plaintiff’s Complaint

brings two Counts. Count I alleges fraud against the seller and certain individuals

who helped to negotiate the Purchase Agreement. Count II alleges unjust enrichment

against each of the Defendants. Defendants responded with this Motion to Dismiss.

The Motion is largely successful.

      Plaintiff’s primary obstacle is that this Court lacks personal jurisdiction over

most of the Defendants. Only four of the fifteen Defendants are at home in

Delaware. For the rest, Plaintiff relies on the Purchase Agreement’s forum selection

clause to establish their consent to Delaware’s jurisdiction. But only the seller

expressly assented to that clause. Plaintiff says the other non-Delaware Defendants

should be bound to the forum selection clause by the doctrine of equitable estoppel.

Contrary to Plaintiff’s argument, and as explained more fully below, neither

receiving distributions related to a transaction nor participating in the negotiation of

a transaction is enough to bind an entity’s members to transaction documents signed

only by the entity. For that reason, the ten Defendants who are not at home in

                                           1
Delaware and did not sign the Purchase Agreement are outside this Court’s

jurisdiction, so the claims against them must be dismissed.

      While the personal jurisdiction analysis narrows this dispute, it does not end

it. To finish the job, Defendants claim that Plaintiff’s claims are untimely because

they were filed outside of the survival period that applies to the challenged

representations. This argument implicates an unsettled corner of Delaware law: the

extent to which a party can contractually relieve itself of fraud liability by reducing

the time the counterparty has to bring fraud claims. That question, though, need not

be decided here. Rather, based on ordinary principles of contract interpretation, the

Court finds that by excepting fraud claims from the indemnity provisions that

contain the survival clause, the Purchase Agreement did not limit fraud claims to the

survival period. Thus, Plaintiff’s claims will not be dismissed as untimely.

      Turning to the merits, Defendants urge that Plaintiff’s fraud allegations are

insufficiently pled. This argument is unpersuasive. Defendants only succeed in

raising factual disputes that do not warrant dismissing Plaintiff’s fraud claim. In

their arguments, Defendants treat Superior Court Civil Rule 9(b) as if it requires a

plaintiff to practically prove their fraud claim at the pleading stage. Rule 9(b) is not

so burdensome. The circumstances that fall under Rule 9(b)’s ambit are discrete and

simple to establish in the context of contractual fraud. So, while the seller is the only

                                           2
Defendant that can be made to litigate Count I in this jurisdiction, the claim can

nevertheless go forward.

      Defendants’ final barrage pertains to Plaintiff’s unjust enrichment Count.

While the unjust enrichment claim is not entirely deficient or barred by the Purchase

Agreement as Defendants contend, Defendants are correct that this claim can only

persist against Defendants who are alleged to have played a role in the fraud. In

brief, with regard to the Defendants who are not alleged to have knowingly

facilitated misconduct, the relationship between their enrichment and Plaintiff’s

impoverishment is insufficient to support an unjust enrichment claim. Since Plaintiff

does not allege that the four Defendants who are at home in Delaware engaged in

the alleged fraud, the unjust enrichment claim only survives as to the seller.

      For those reasons and the reasons stated below, only Plaintiff’s claims against

the seller itself are viable. Therefore, Defendants’ Motion is GRANTED in part,

DENIED in part.

                                          3
                                  II. BACKGROUND1

     A. The Parties

           Plaintiff Chumash Capital Investments, LLC (“Plaintiff”) is a Delaware

entity headquartered in California.2 Plaintiff was the buyer of non-party Capco, LLC

(the “Company”) in the now-disputed transaction.3

          Defendant Grand Mesa Partners, LLC f/k/a Capco Growth Partners, LLC

(“Seller”) is a Colorado entity headquartered in that state.4 Seller wholly owned the

Company before selling it to Plaintiff.5

          Defendant Eric Weissmann is a Florida resident.6 At the relevant times,

Weissmann was a manager and the treasurer of Seller, as well as a vice president of

the Company.7 He was also the manager of Defendant CGP Holdings, LLC.8

1
   The following facts are derived from the well-pleaded allegations in the Complaint and the
documents incorporated therein. See D.I. No. 1 (“Compl.”). These facts are presumed to be true
solely for purposes of this opinion.
2
    Compl. ¶ 8.
3
    Id. ¶ 2.
4
    Id. ¶ 9.
5
    Id.
6
    Id. ¶ 10.
7
    Id.
8
    Id. ¶ 11.

                                              4
           Defendant CGP Holdings, LLC (“CGP Holdings”) is a Colorado entity

headquartered in that state.9 At the relevant times, CGP Holdings held a 26.03%

ownership interest in Seller.10

           Defendant D. Christian Osborn is a Colorado resident.11 At the relevant times,

Osborn was the chairman of Seller’s Board of Managers.12 Osborn was also a vice

president and the treasurer of the Company.13 He was also the manager of Defendant

Osborn Generation Fund, LLC.14

           Defendant Osborn Generation Fund, LLC (“Osborn Generation Fund”) is a

Colorado entity headquartered in that state.15          At the relevant times, Osborn

Generation Fund held a 4.71% ownership interest in Seller.16

9
     Id.
10
     Id.
11
     Id. ¶ 12.
12
     Id.
13
     Id.
14
     Id. ¶ 13.
15
     Id.
16
     Id.

                                              5
           Defendant Cordell Bennigson is a Texas resident.17 He was the Company’s

chief executive officer.18 At the relevant times, Bennigson held a 1.56% ownership

interest in Seller and was on Seller’s Board of Managers.19

           Defendant Diana Thomas is a Colorado resident.20 She was a member of

Seller and the Company’s chief financial officer.21           Thomas also became the

Company’s secretary.22

           Defendant Stephen K. Wood is a Colorado resident.23 He was on Seller’s

Board of Managers.24 Wood was the president of Defendant Sierra Papa, Inc.25

           Defendant Sierra Papa, Inc. (“Sierra Papa”) is a Colorado entity headquartered

in that state.26 At the relevant times, it held an 18.69% ownership interest in Seller.27

17
     Id. ¶ 14.
18
     Id.
19
     Id.
20
     Id. ¶ 15.
21
     Id.
22
     Id.
23
     Id. ¶ 16.
24
     Id.
25
     Id. ¶ 17.
26
     Id.
27
     Id.

                                              6
           Defendant David A. Gezon is a resident of Illinois.28 He was one of Seller’s

managers.29 Gezon also controlled three other Defendants in this action: Midwest

Mezzanine Fund V SBIC, L.P.; Fund V SBIC Blocker Corp.; and Fund V

Intermediate LLC (together, the “Midwest Funds”).30

           Defendant Midwest Mezzanine Fund V SBIC, L.P. (“Midwest Mezzanine”) is

a Delaware entity headquartered in Illinois.31 At the relevant times, it held a 15.08%

ownership interest in Seller.32

           Defendant Fund V SBIC Blocker Corp. (“Fund V Blocker”) is a Delaware

entity headquartered in Illinois.33 At the relevant times, it held a 1.63% ownership

interest in Seller.34

           Defendant Fund V Intermediate LLC (“Fund V Intermediate”) is a Delaware

entity headquartered in Illinois.35 At the relevant times, it held a 4.32% ownership

interest in Seller.36

28
     Id. ¶ 18.
29
     Id.
30
     Id. ¶¶ 19-21.
31
     Id. ¶ 19.
32
     Id.
33
     Id. ¶ 20.
34
     Id.
35
     Id. ¶ 21.
36
     Id.

                                             7
           Defendant Steven R. Wilkins is an Oregon resident.37 He was on Seller’s

Board of Managers.38 Wilkins was a member of Defendant True West Capital

Partners Fund II, LP.39

           Defendant True West Capital Partners Fund II, LP (“True West”) is a Delaware

entity headquartered in Oregon.40 At the relevant times, it held a 13.31% ownership

interest in Seller.41

     B. The Disputed Sale

                 1. The Parties’ Negotiations

           In April 2021, Plaintiff sent Seller a letter of intent outlining its interest in

purchasing the Company.42 Plaintiff’s proposed purchase price was based upon the

Company’s 2020 EBITDA of $11 million.43 Seller responded that, as of April 2021,

the Company’s trailing twelve-month (“TTM”) EBITDA was $12.75 million.44

Seller counteroffered in May 2021 with a price based on the $12.75 million EBITDA

calculation.45

37
     Id. ¶ 22.
38
     Id.
39
     Id. ¶ 23.
40
     Id.
41
     Id.
42
     Id. ¶ 47.
43
     Id.
44
     Id. ¶ 48.
45
     Id. ¶ 49.

                                                8
          Relying on the $12.75 million figure, the parties compromised for a purchase

price of $88 million for the Company.46 In doing so, they agreed to use the TTM

EBITDA suggested by Seller but applied a lower multiplier than Plaintiff had

initially used.47

                 2. The Purchase Agreement

          Representatives from Plaintiff, Seller, and the Company signed the Purchase

Agreement on July 2, 2021.48 They agreed that Delaware law would apply to any

disputes related to the Purchase Agreement.49 The Purchase Agreement similarly

provided that any litigation related to the Purchase Agreement would be brought in

Delaware and that the parties to the Purchase Agreement would submit to the

jurisdiction of the Delaware courts.50

          In the Purchase Agreement, Seller made several representations that are

challenged by Plaintiff’s Complaint. Specifically, Section 3.4(a) of the Purchase

Agreement represented: “True, complete and correct copies of the Financial

Statements are attached to Schedule 3.4(a).”51

46
     Id. ¶ 50.
47
   Id. Plaintiff had initially proposed multiplying the 2020 EBITDA by 7.5 for a total of $82.5
million, but ultimately multiplied the TTM EBITDA by 6.9. Id. ¶¶ 49, 50.
48
     Id. ¶ 50. See generally Compl., Ex. A (hereinafter “Purchase Agreement”).
49
     Purchase Agreement § 11.13.
50
     Id. § 11.2.
51
     Id. § 3.4(a).

                                                 9
           Section 3.4(b) represented in part: “Each of the Financial Statements presents

fairly, in all material respects, the consolidated financial position of the Company

for the periods then ended, as applicable, in accordance with GAAP,” with certain

limited exceptions.52

           Section 3.4(b) continued:

           The Company maintains a system of internal accounting controls that
           is designed to provide reasonable assurance that: (i) transactions are
           recorded as necessary to permit materially correct preparation of its
           financial statements and to maintain reasonably accurate accountability
           for its assets; (ii) the reporting of its assets is compared with existing
           assets at regular intervals; and (iii) accounts, notes and other receivables
           and inventory are recorded in accordance with GAAP.53

Section 3.4(b) concluded: “During the past three (3) years, to the Seller’s

Knowledge, there has not existed any material weakness or significant deficiency in

the accounting or auditing practices, procedures, methodologies or methods of the

Company or its internal accounting controls.”

           Next, Section 3.10(b)(ii)(E) represented:

           In the last six (6) years . . . [t]he Company has maintained systems of
           internal controls, including quality control systems, cost accounting
           systems, estimating systems, purchasing systems, proposal systems,
           billing systems and material management systems, as applicable, that
           are in material compliance with all applicable requirements of the
           Current Government Contracts and of applicable Laws.54

52
     Id. § 3.4(b).
53
     Id.
54
     Id. § 3.10(b)(ii)(E).

                                               10
          The Purchase Agreement’s indemnity provisions are contained in Article 9.

With exceptions that are not implicated here, Section 9.5(a) provided: “The

representations and warranties of the parties shall survive until the date that is twelve

(12) months after the Closing Date at which point all of the representations and

warranties set forth in this Agreement shall terminate[.]”

          Section 9.7 provided in relevant part:

          Except for claims of specific performance of the terms of this
          Agreement pursuant to Section 11.3, or Actual Fraud and claims related
          to Section 1.2 of this Agreement, after the Closing the indemnification
          provision set forth in this Article 9 (and the rights to assert and recover
          for claims pursuant to the R&W Insurance Policy) will be the sole and
          exclusive remedy of the Parties with respect to any and all claims
          arising from or relating to this Agreement . . . whether arising in
          contract, tort, misrepresentation or otherwise.”55

Relatedly, Section 9.6(f)(ii) provided in part: “nothing in this Article 9 shall limit . . .

any Person’s right to seek any remedy on account of Actual Fraud.”

          The Purchase Agreement defined “Actual Fraud” to mean: “actual common

law fraud as determined under the laws of the State of Delaware regarding the terms

and conditions of this Agreement.”56

          Section 9.8 contained a comprehensive non-reliance clause in which Plaintiff

disclaimed reliance on any information not contained in Article 3 of the Purchase

55
     Id. § 9.7.
56
     Id. § 11.1(b)(i).

                                              11
Agreement and the corresponding Disclosure Schedules.57 And Section 11.11

contained a broad integration clause.58

     C. The Alleged Fraud

          The fraud that Plaintiff complains of predominantly relates to the Company’s

purportedly improper pre-closing accounting practices. Plaintiff investigated the

Company’s pre-closing financials after the Company began missing its budget

immediately after closing.59 Two of the key alleged improprieties raised by Plaintiff

are (1) the inflation of the Company’s product margins, and (2) the improper

capitalization and amortization of project costs.60

          Regarding the inflated margins, Plaintiff alleges that several of the contracts

that the Company was fulfilling were mispriced, causing the Company to lose money

on them.61 According to Plaintiff, prior to closing, the Company had an inaccurate

accounting system that essentially hid costs that were associated with fulfilling

contracts.62 As an example, Plaintiff claims that no costs were recorded in the

“Direct Labor at Standard” account until April 2021—around the same time Plaintiff

57
     Id. § 9.8.
58
     Id. § 11.11.
59
     Compl. ¶ 57.
60
     Id. ¶ 60.
61
     Id. ¶ 61.
62
     Id. ¶ 62.

                                             12
sent its letter of intent to Seller.63 When the Company—still controlled by Seller—

first recorded Direct Labor costs in April 2021, it only recorded $53,402 of those

costs.64 When Plaintiff took over and implemented a new accounting system,

“almost $2.6 million of costs were recorded to the Direct Labor account.”65

           As for the improper capitalization of costs, Plaintiff alleges that the Company

had been treating operating expenses as project costs.66 That allegedly incorrect

categorization allowed the Company to amortize costs that should not have been

amortized.67 Plaintiff argues that the Company was not properly delineating between

preproduction and production costs.68 According to Plaintiff, only preproduction

costs may be amortized under GAAP.69 By improperly amortizing production costs,

the Company was able to reduce its expenses and thereby inflate its EBITDA.70

Plaintiff alleges, “had the Company correctly accounted for Project Costs, the

Financial Statements would have shown [Plaintiff] that [the Company]’s EBITDA

was approximately half of that represented by Seller.”71

63
     Id. ¶¶ 47, 65.
64
     Id. ¶ 65.
65
     Id.
66
     Id. ¶ 67.
67
     Id. ¶ 69.
68
     Id.
69
     Id. ¶ 44.
70
     Id. ¶ 46.
71
     Id. ¶ 73.

                                              13
         Relatedly, Plaintiff alleges that the Company’s pre-closing accounting

practices and internal controls were insufficient.72 The core of this allegation is that

the Company’s pre-closing management knew that the Company had serious

accounting deficiencies and was not effectively “tracking costs, inventory and other

criteria critical to maintaining accurate accounting and financial reports.”73 Plaintiff

also alleges that the Company’s accounting system had not been audited for

compliance with applicable Federal Acquisition Regulation (“FAR”) standards.74

         Based on all of those alleged deficiencies, which Plaintiff argues were known

to the Company’s management prior to closing, Plaintiff claims the “Financial

Statement Representations” in Section 3.4, as well as the “Government Contract

Representations” in Section 3.10, were fraudulent.75

         In addition to the accounting issues that comprise the bulk of Plaintiff’s

allegations, Plaintiff says the Top Customer representation in Section 3.14 was

fraudulent.76 Specifically, Seller disclosed “a change to the product pricing” in its

contract with Axon, a Top Customer, but it allegedly failed to disclose the full extent

of the expected changes to the Axon relationship.77 Apparently, Axon told the

72
     Id. ¶¶ 76, 78, 80, 82.
73
     Id. ¶ 78.
74
     Id. ¶¶ 80, 82.
75
     Id. ¶¶ 74-82.
76
     Id. ¶¶ 83-84.
77
     Id. ¶ 84.

                                           14
Company in February 2021 that it “was ‘slashing [its] Q2 forecast, [would] only

order about $450K in Q2, not be ordering any more [that] year, and [planned] on

taking run rate down to $1M/yr going forward.’”78 Plaintiff thus claims that Axon

“threatened to” “significantly negatively modif[y] the volume or amount of . . . its

business with the Company,” in contrast with the representation in Section 3.14.79

     D. Procedural History

          Plaintiff initiated this litigation by filing its Complaint on August 8, 2023.80

The Complaint brings two Counts. Count I asserts fraud against Seller, Weissmann,

Osborn, Bennignson, and Thomas (the “Fraud Defendants”).81 Count II asserts

unjust enrichment against all of the Defendants.82 Plaintiff seeks compensatory

damages of a yet undetermined amount.83

          Defendants, acting in unison, moved to dismiss Plaintiff’s Complaint on

October 16, 2023.84 Plaintiff opposed Defendants’ Motion on November 21, 2023.85

78
     Id. (alterations in original).
79
     Id. ¶ 83; Purchase Agreement § 3.14(a).
80
     Compl.
81
     Id. ¶¶ 113-24.
82
     Id. ¶¶ 125-29.
83
     Compl., Prayer for Relief ¶ D.
84
     D.I. No. 18 (“Defs.’ Mot.”).
85
     D.I. No. 24 (“Pl.’s Opp’n”).

                                               15
And Defendants replied on December 13, 2023.86 The Court heard argument on

February 22, 2024.

                                III. STANDARD OF REVIEW

         When reviewing a motion to dismiss under Rule 12(b)(6), the Court (i) accepts

all well-pled factual allegations as true, (ii) accepts even vague allegations as well-

pled if they give the opposing party notice of the claim, (iii) draws all reasonable

inferences in favor of the non-moving party, and (iv) only dismisses a case where

the plaintiff would not be entitled to recover under any reasonably conceivable set

of circumstances.87 The Court will not, however, accept “conclusory allegations that

lack specific supporting factual allegations.”88

         Motions to dismiss under Rule 12(b)(2) are evaluated under a different

standard. Under that Rule, “the plaintiff bears the burden of showing a basis for the

trial court’s exercise of jurisdiction over a nonresident defendant.”89 At the pleading

stage, the plaintiff need only “make a prima facie showing” that the Court has

jurisdiction over the nonresident defendant.90 And the plaintiff is still entitled to

have its well-pled allegations taken as true and have all reasonable inferences drawn

86
     D.I. No. 27 (“Defs.’ Reply”).
87
   See ET Aggregator, LLC v. PFJE AssetCo Hldgs. LLC, 2023 WL 8535181, at *6 (Del. Super.
Ct. Dec. 8, 2023).
88
     Id. (quoting Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998)).
89
     Taylor v. Killen, 2023 WL 7490068, at *3 (Del. Super. Ct. Nov. 13, 2023) (citations omitted).
90
     Id. (citations omitted).

                                                 16
in its favor.91 Unlike a Rule 12(b)(6) motion, however, the plaintiff’s factual

allegations can be “contradicted by affidavit,” and the Court may look outside the

Complaint to resolve the motion.92

                             IV. PARTIES’ CONTENTIONS

     A. Defendants

           Defendants’ Motion launches a volley of attacks at Plaintiff’s Complaint. It

challenges this Court’s jurisdiction over most of the Defendants, asserts that

Plaintiff’s action is untimely, and contends that neither Plaintiff’s fraud nor unjust

enrichment claims are adequately pled.

           Beginning with its Rule 12(b)(2) argument, Defendants’ Motion seeks

dismissal of Weissmann, Osborn, Bennigson, Thomas, Osborn Generation Fund,

CGP Holdings, Wood, Gezon, Wilkins, and Sierra Papa (the “Non-Delaware

Defendants”).93 That would leave only Seller, True West, and the tripartite Midwest

Funds as defendants. Defendants argue that the Non-Delaware Defendants can only

be subjected to Delaware’s jurisdiction via the Purchase Agreement’s forum

91
     Id.
92
   BACO Hldgs., Inc. v. Arria Data2Text, Ltd., 2023 WL 2199871, at *2 (Del. Super. Ct. Feb. 24,
2023) (citing Green Am. Recycling v. Clean Earth, Inc., 2021 WL 2211696, at *3 (Del. Super. Ct.
June 1, 2021)).
93
    Defs.’ Mot. at 6, 21. Seller is not a Delaware entity but, as a signatory to the Purchase
Agreement’s forum selection clause, Seller does not contest this Court’s jurisdiction over it. Id. at
21.

                                                 17
selection clause if they are “closely related” to the Purchase Agreement.94

Defendants conclude that the Non-Delaware Defendants are not closely related to

the Purchase Agreement and so are not within this Court’s jurisdiction.95

            Defendants next contest the timeliness of the Complaint. They say the

Purchase Agreement’s representations’ one-year survival period bar Plaintiff’s

claims.96 According to Defendants, one year was enough time for Plaintiff to

discover and allege any fraud contained in the Purchase Agreement.97 Because

Plaintiff did not do so within the survival period, Defendants say Plaintiff is now

barred from doing so.98

            Defendants also argue that Plaintiff failed to allege fraud with the requisite

particularity under Rule 9(b).99 Defendants relatedly assert that Plaintiff’s fraud

claim is belied by the truth of the Purchase Agreement’s representations and the

adequacy of the disclosures Seller made during due diligence.100

94
      Id. at 21-23.
95
      Id. at 23-26.
96
      Id. at 26-29.
97
      Id. at 29.
98
      Id.
99
      Id. at 29-37.
100
      Id. at 32-37.

                                              18
         Finally, Defendants say Plaintiff’s unjust enrichment Count is untenable for

several reasons.101 For one, Defendants argue that since the unjust enrichment claim

is based upon a deficient fraud claim, the absence of fraud precludes unjust

enrichment.102 Defendants next contend that the Purchase Agreement’s exclusive

remedy provision prohibits any quasi-contractual relief.103 Defendants also say that

Plaintiff cannot simultaneously bring fraud and unjust enrichment claims against the

same entities because the fraud claim is a tacit admission that the Purchase

Agreement governs their relationship.104 Last, Defendants argue that the claims

against Defendants who are not accused of fraud must be dismissed because those

Defendants were too far removed from any alleged wrongdoing to be liable to

Plaintiff.105

      B. Plaintiff

         Plaintiff responds to each of Defendants’ challenges. Starting with personal

jurisdiction, Plaintiff acknowledges that its only jurisdictional hook over the Non-

Delaware Defendants is equitable estoppel; but Plaintiff urges that the elements of

that doctrine are met.106 Plaintiff says that the Non-Delaware Defendants directly

101
      Id. at 37-49.
102
      Id. at 38-39.
103
      Id. at 39-42.
104
      Id. at 42-45.
105
      Id. at 45-49.
106
      Pl.’s Opp’n at 18-28.

                                          19
benefitted from the Purchase Agreement by receiving portions of the consideration

in the form of distributions.107           Plaintiff continues that the Non-Delaware

Defendants’ involvement in putting the Purchase Agreement together made it

foreseeable that they would be sued in Delaware.108 Plaintiff suggests that either of

those two theories suffices to bind the Non-Delaware Defendants to the Purchase

Agreement’s forum selection provision.109 In a footnote, Plaintiff alternatively

requests limited jurisdictional discovery.110

            Plaintiff next defends the timeliness of its Complaint. Specifically, Plaintiff

argues that under ABRY Partners v. F&W Acquisition111 and its progeny, a fraudster

cannot immunize itself from liability by relying on the terms of an agreement that

was the product of fraud.112 Plaintiff therefore claims that the Purchase Agreement’s

survival period for representations has no bearing on the time in which Plaintiff may

bring fraud claims.113 As a second argument, Plaintiff contends that since the

Purchase Agreement’s exclusive remedy provision carves out fraud claims, such

107
      Id. at 20-24.
108
      Id. at 26-28.
109
      Id.
110
      Id. at 26 n.13.
111
      891 A.2d 1032 (Del. Ch. 2006).
112
      Pl.’s Opp’n at 28-31.
113
      Id.

                                               20
claims are not limited by the Purchase Agreement’s indemnity provisions, including

the survival period.114

          Plaintiff then delves into the merits of its Complaint, explaining how it pled

the elements of fraud with the requisite particularity.115 Plaintiff also challenges

Defendants’ attempts to factually disprove the alleged fraud, saying those arguments

are procedurally improper and substantively incorrect.116

          Plaintiff’s opposition concludes with its defense of its unjust enrichment

claim.         Like Defendants, Plaintiff begins by reiterating its fraud-related

arguments.117 Plaintiff then argues that the Purchase Agreement’s exclusive remedy

provision does not bar the unjust enrichment Count because, here, unjust enrichment

is functionally a remedy for fraud, which is an exception to the exclusive remedy

provision.118 Third, Plaintiff contends that it can bring both fraud and unjust

enrichment claims against the same Defendants because Delaware courts allow

unjust enrichment to be pled in the alternative.119 Last, Plaintiff argues that its

114
      Id. at 31-33
115
      Id. at 33-40.
116
      Id. at 40-45.
117
      Id. at 46.
118
      Id. at 46-48.
119
      Id. at 48-50.

                                            21
invocation of fraud enables it to assert unjust enrichment against entities that would

be not be liable if the underlying wrongdoing were merely breach of contract.120

                                       V. ANALYSIS

      A. The Court Lacks Personal Jurisdiction over the Non-Delaware
         Defendants

         Of the fifteen Defendants named in this suit, only four are at home in

Delaware.121          Plaintiff relies exclusively on the Purchase Agreement’s forum

selection provision to establish personal jurisdiction over the Non-Delaware

Defendants.122 Seller—the lone Defendant that signed the Purchase Agreement—

acknowledges that it consented to this state’s jurisdiction.123 The rest of the Non-

Delaware Defendants, however, argue that they cannot be made to litigate here

because they are not bound to the Purchase Agreement.124 They are correct.

         A non-signatory can be bound to a contract’s forum selection clause under the

doctrine of equitable estoppel.125 Whether that doctrine applies depends on three

inquiries: “First, is the forum selection clause valid? Second, are the defendants

third-party beneficiaries, or closely related to, the contract? Third, does the claim

120
      Id. at 50-52.
121
     Compl. ¶¶ 9-23. The four Delaware entities are True West and the three Midwest Funds. See
id. ¶¶ 19-21, 23.
122
      Pl.’s Opp’n at 17-28.
123
      Defs.’ Mot. at 21.
124
      Id. at 20-26.
125
      CFGI, LLC v. Common C Hldgs. LP, 2024 WL 325567, at *8 (Del. Super. Ct. Jan. 29, 2024).

                                              22
arise from their standing relating to the . . . agreement?”126 All three questions must

be answered in the affirmative to bind the non-signatory to the forum selection

provision.127

            Here, the parties agree that the first and third prong are met. Their dispute lies

in the second prong. Plaintiff acknowledges that the Non-Delaware Defendants are

not third-party beneficiaries,128 so the question is further narrowed to whether the

Non-Delaware Defendants are “closely related” to the Purchase Agreement. An

entity is closely related to a contract under Delaware law only if it “receives a direct

benefit” from the contract or if “it was foreseeable” that the entity would be bound

by the contract.129 Plaintiff makes arguments under both alternatives, but neither

convinces.

               1. Direct Benefit

            Plaintiff’s primary basis for personal jurisdiction over the Non-Delaware

Defendants is that they accepted a direct benefit from the Purchase Agreement.130

Plaintiff contends that Seller received the purchase price and then distributed large

126
    Sustainability Partners LLC v. Jacobs, 2020 WL 3119034, at *5 (Del. Ch. June 11, 2020)
(omission in original) (quoting Cap. Grp. Cos. v. Armour, 2004 WL 2521295, at *5 (Del. Ch. Oct.
9, 2004)).
127
      Id.
128
      Pl.’s Opp’n at 18.
129
   Sustainability Partners, 2020 WL 3119034, at *6 (quoting Neurvana Med., LLC v. Balt USA,
LLC, 2019 WL 4464268, at *4 (Del. Ch. Sept. 18, 2019)).
130
      Pl.’s Opp’n at 20-26.

                                                23
portions of those proceeds to its members.131 Plaintiff argues that those distributions

were direct benefits of the Purchase Agreement that bind Seller’s members to the

Purchase Agreement and the forum selection clause therein. The Court disagrees.

           A direct benefit can be either pecuniary or non-pecuniary, but it cannot be

indirect.132 Nor is the “mere contemplation” of a benefit is enough.133 A benefit that

depends upon the discretionary acts of others in order to be realized is indirect.134

Similarly, a benefit that “would only materialize through a separate agreement” is

indirect.135 In contradiction of those principles, Plaintiff rests its argument on a

benefit that depended on Seller’s managers separately agreeing to distribute the

proceeds of the Purchase Agreement.

          The Court is guided by the result in CLP Toxicology.                  There, certain

defendants were equity owners of the seller in a purportedly fraudulent

transaction.136       The plaintiff alleged that after the fraudulent sale, the seller

distributed all of the proceeds in an effort to hinder the plaintiff’s ability to recover

131
      Id. at 20.
132
      Neurvana Med., 2019 WL 4464268, at *4.
133
      Id. (internal quotation marks omitted).
134
    See CLP Toxicology, Inc. v. Casla Bio Hldgs. LLC, 2020 WL 3564622, at *13 n.100 (Del. Ch.
June 29, 2020); Cf. Weygandt v. Weco, LLC, 2009 WL 1351808, at *5 (Del. Ch. May 14, 2009)
(holding a non-signatory lessor was bound to an asset purchase agreement’s jurisdictional consent
provision via equitable estoppel because the asset purchase agreement expressly required the buyer
to sign a lease with that lessor).
135
      Neurvana Med., 2019 WL 4464268, at *4.
136
      CLP Toxicology, 2020 WL 3564622, at *1, 15.

                                                24
in litigation.137 The plaintiff raised a variety of theories to establish personal

jurisdiction over the defendants, one of which was equitable estoppel based on a

direct benefit.138 None of those arguments succeeded with regard to the “Non-

Delaware Defendants.”139 As for equitable estoppel, the court concluded, “any

benefits these non-Delaware Defendants received were indirect because they

depended upon the acts of the managers of the respective entities to further distribute

funds from the sale.”140 So too here.

          Plaintiff tries to distinguish CLP Toxicology by pointing out that, here, Seller’s

managers specifically agreed to the distributions related to the Purchase Agreement

as part of their pre-closing approval of the Purchase Agreement.141 Plaintiff argues

that those predetermined distributions were more closely tied to the Purchase

Agreement than the post-closing distributions in CLP Toxicology.142 Plaintiff’s

argument remains unavailing.

          Most basically, Plaintiff’s theory eschews the core requirement of a direct

benefit—i.e., that it is direct. The Purchase Agreement’s consideration was paid only

to Seller. The benefits realized by the other Defendants necessarily had to pass

137
      Id. at *7.
138
      Id. at *8, 13.
139
      Id. at *13-16.
140
      Id. at *13 n.100.
141
      See Pl.’s Opp’n, Ex. 2.
142
      Pl.’s Opp’n at 26.

                                              25
through Seller, subject to Seller’s discretion, in order to reach the rest of the

Defendants. Stated differently, the Non-Delaware Defendants did not benefit from

the Purchase Agreement itself, they benefitted from the related distribution decision.

The indirectness of the benefit is even more stark with regard to the Defendants who

only had an interest in one of Seller’s members, and whose alleged benefits therefore

had to be distributed twice before reaching them.143

       The timing of Seller’s approval of the distribution—shortly before the

Purchase Agreement was signed—might intuitively make the Non-Delaware

Defendants’ benefits seem more direct. But it is not the timing of Seller’s approval

of the distribution that matters; it is the underlying fact that the Non-Delaware

Defendants’ benefits were contingent on Seller’s discretion in the first instance that

makes them indirect.144

       Moreover, haling the Non-Delaware Defendants into Delaware’s courts based

solely on distributions they received as members of an entity that signed a forum

selection clause raises special concerns. The foundation of equitable estoppel is that

a person who chooses to accept the benefits of a contract must also accept its

143
     These Defendants are Weissmann, Osborn, Gezon, Wood, and Wilkins, who only had an
interest in separate entities that were members of Seller.
144
    The Court agrees with Plaintiff that the Non-Delaware Defendants received more than the
“mere contemplation of benefits.” See Pl.’s Opp’n at 26. But that only means they received an
actual benefit, not a direct one.

                                             26
burdens.145 But, in the context of a signatory entity’s members, passive members

could theoretically receive distributions derived from a contract without even

knowing about, let alone embracing, that contract. In that case, if the Court accepted

Plaintiff’s position that distributions are a direct benefit, members of the signatory

could be bound to a forum selection provision without having taken any action with

respect to the relevant contract. The Court cannot abide a result so clearly in tension

with the due process concerns associated with personal jurisdiction.146

       The Court is cognizant that, for the most part, the Non-Delaware Defendants

are not alleged to have been mere passive investors unfamiliar with the Purchase

Agreement. But the direct benefit analysis is a discrete inquiry. The Court will not

diverge from the established “closely related” test by cobbling together an indirect

benefit with alleged knowledge of the contract to fashion a novel path to personal

jurisdiction in this state.147 Hence, Plaintiff’s argument under the direct benefit

prong fails.

145
    Neurvana Med., 2019 WL 4464268, at *3 (“Equitable estoppel exists ‘to prevent someone
from accepting the benefits of a contract without accepting its obligations.’” (quoting Plaze, Inc.
v. Callas, 2019 WL 1028110, at *8 (Del. Ch. Feb. 28, 2019))).
146
     See Genuine Parts Co. v. Cepec, 137 A.3d 123, 127 n.12 (Del. 2016) (“[T]he Due Process
Clause . . . gives a degree of predictability to the legal system that allows potential defendants to
structure their primary conduct with some minimum assurance as to where that conduct will and
will not render them liable to suit.” (omission in original) (quoting World-Wide Volkswagen Corp.
v. Woodson, 444 U.S. 286, 297 (1980))).
147
    The Court of Chancery has explained how expanding the foreseeability prong of the “closely
related” test imperils important principles of corporate separateness. See Neurvana Med., 2019
WL 4464268, at *6. The same concern is present here. Adopting Plaintiff’s argument would
effectively require the Court to look past Seller’s existence as a distinct entity and view the Non-
                                                 27
            2. Foreseeability

         Although foreseeability is an independent basis for an entity to be “closely

related” to a contract, it often takes a “subordinate role” in this analysis.148

“Foreseeability” is also something of a misnomer here. As opposed to the broad,

fact-intensive assessment that typically accompanies foreseeability analyses in other

legal settings, only two specific scenarios suffice in this context. The first is where

a non-signatory defendant seeks to enforce a forum selection provision against a

signatory plaintiff.149 The second is where a non-signatory is controlled by a

signatory and the non-signatory “bears a ‘clear and significant connection to the

subject matter of the agreement.’”150 Delaware courts have declined to expand this

“narrowly constrained” doctrine any further than that.151

Delaware Defendants as personally negotiating the Purchase Agreement for their own benefit.
This Court does not favor such arguments. See Surf’s Up Legacy Partners, LLC v. Virgin Fest,
LLC, 2021 WL 117036, at *7 (Del. Super. Ct. Jan. 13, 2021) (“Delaware courts do not lightly . . .
disregard entity separateness. Rather, they expect that counterparties will do so bilaterally if they
wish.” (citations omitted)).
148
      See Neurvana Med., 2019 WL 4464268, at *5.
149
   Sustainability Partners, 2020 WL 3119034, at *7 (first citing Ashall Homes Ltd. v. ROK Entm’t
Grp., Inc., 992 A.2d 1239, 1249 (Del. Ch. 2010); and then citing Lexington Servs. Ltd. v. U.S.
Patent No. 8019807 Delegate, LLC, 2018 WL 5310261, at *5-6 (Del. Ch. Oct. 26, 2018)).
150
   Id. (quoting iModules Software, Inc. v. Essenza Software, Inc., 2017 WL 6596880, at *3 (Del.
Ch. Dec. 22, 2017)).
151
    See id. (“[T]he foreseeability analysis is best narrowly constrained to these two contexts;
expanded too far, it ‘requires rejecting principles of corporate separateness’ by broadly haling into
Delaware courts those who neither joined an agreement nor received any benefit from it.” (quoting
Nuervana Med., 2019 WL 4464268, at *6)).

                                                 28
         Plaintiff does not confine its foreseeability analysis to those recognized

contexts—indeed, Plaintiff makes no mention of them. Instead, Plaintiff reiterates

its direct benefit argument and claims those distributions made it foreseeable that the

Non-Delaware Defendants would be bound to the Purchase Agreement. 152 Plaintiff

adds that certain Non-Delaware Defendants were integrally involved in the

negotiation and approval of the Purchase Agreement.153 Neither of those arguments

is a viable avenue for establishing the foreseeability prong. Accordingly, equitable

estoppel does not apply in this case, so the Court lacks personal jurisdiction over the

Non-Delaware Defendants.

             3. There is No Basis for Jurisdictional Discovery

         In a one-sentence footnote, Plaintiff requested jurisdictional discovery in the

event the Court did not agree with Plaintiff’s personal jurisdiction argument as it

pertains to Weissmann, Osborn, Wood, Gezon, and Wilkins—i.e., the Defendants

who are not members of Seller.154 To obtain jurisdictional discovery, a plaintiff must

152
      Pl.’s Opp’n at 26-28.
153
    Id. This type of argument has been labelled the “active-involvement theory” and has been
expressly rejected as a jurisdictionally significant connection to a forum selection clause.
Sustainability Partners, 2020 WL 3119034, at *7 (citing Nuervana Med., 2019 WL 4464268, at
*7-8); see also Partners & Simons, Inc. v. Sandbox Acquisitions, LLC, 2021 WL 3161651, at *8
(Del. Ch. July 26, 2021) (ORDER).
154
      Pl.’s Opp’n at 26 n.13.

                                            29
articulate a good-faith reason for it that is neither futile nor the launch of a “dragnet

‘fishing expedition.’”155 No such reason is present here.

         Plaintiff did not indicate what discovery it seeks to obtain or how such

discovery would aid its jurisdictional argument. Based on context, the Court infers

that Plaintiff hopes to prove these five Defendants eventually received a portion of

the Purchase Agreement’s consideration through their respective affiliated entities.

But, as explained above, even the affiliated entities—which are members of Seller—

were not directly benefitted by the Purchase Agreement. That being so, and without

further elucidation from Plaintiff, the Court views Plaintiff’s request for

jurisdictional discovery as futile.

      B. Plaintiff’s Claims are Timely

         Along with the personal jurisdiction question answered above, another

threshold issue in this case is the timeliness of Plaintiff’s claims.         Plaintiff’s

Complaint, which was filed in August 2023, falls within the three-year statute of

limitations that ordinarily applies to claims of fraud and unjust enrichment.156 But

the Purchase Agreement’s at-issue representations were subject to a one-year

survival period.157 As a general matter, survival periods operate to contractually

155
   See Green Am. Recycling, 2021 WL 2211696, at *8 (quoting CLP Toxicology, 2020 WL
3564622, at *15).
156
      See 10 Del. C. § 8106(a).
157
      Purchase Agreement § 9.5.

                                           30
shorten the applicable statute of limitations.158 In reliance on that general rule,

Defendants argue that Plaintiff’s claims came too late under the Purchase Agreement

and are thus barred.159 The analysis is not so simple, however.

          “Delaware courts have [a] distaste for immunizing fraud.”160 As a result, one

of the rare instances in which a Delaware court will override the plain language of a

contract is where doing so is necessary to properly redress intentional fraud.161 That

raises the question of whether contractually imposed limits on the time a party has

to bring fraud claims are enforceable.

          It appeared that question was answered in Sterling Network Exchange, LLC v.

Digital Phoenix Van Buren, LLC.162 There, an aggrieved party’s fraud claim was

putatively time-barred by two contractual time limitations—one sixty days, the other

six months—which applied to different components of the parties’ agreement.163 In

a succinct analysis, this Court distinguished the seminal case in this field, ABRY

Partners, by saying the at-issue contract provided “a reasonable period of

158
      See GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 WL 2682898, at *3 (Del. Ch. July 11, 2011).
159
      Defs.’ Mot. at 26-29.
160
      ABRY Partners, 891 A.2d at 1061.
161
    Id. at 1059-64; see also Surf’s Up, 2021 WL 117036, at *11 n.143 (collecting cases in which
“Delaware courts refuse[d] to enforce contracts purporting to condone—or at least insulate—
intentional fraud”).
162
      2008 WL 2582920, at *5 (Del. Super. Ct. Mar. 28, 2008).
163
      Id. at *5 n.30.

                                                31
opportunity to unearth possible misrepresentations.”164 For that reason, this Court

enforced the contractual time limitation despite the fraud allegations.165 According

to Defendants, that ends the inquiry because the one-year survival period here is

reasonable.166

            Sterling Network, however, does not have a sterling reputation as precedent.

Instead, the only Delaware case that has previously discussed Sterling Network in

any significant detail explicitly and sharply called into doubt Sterling Network’s

analysis of ABRY Partners.167 The details of Vice Chancellor Slight’s forceful

critique of Sterling Network in Online HealthNow need not be recited here. For

present purposes, it is enough to note his conclusion that “the basis for Sterling’s

rationale is questionable, and reflexive application of a ‘reasonableness’ standard to

survival clauses in the context of contractual fraud is likely not warranted.”168

164
      Id. at *5.
165
      Id.
166
      Defs.’ Mot. at 28-29.
167
    Online HealthNow, Inc. v. CIP OCL Invs., LLC, 2021 WL 3557857, at *15-16 (Del. Ch. Aug.
12, 2021). Sterling Network has been cited in other cases for the standard applicable to a motion
to dismiss and as an example of a contractual time limitation in cases that did not reference its
analysis of ABRY Partners. See Wind Point Partners VII-A, L.P. v. Insight Equity A.P. X Co., LLC,
2020 WL 5054791, at *8 (Del. Super. Ct. Aug. 17, 2020); AssuredPartners of Va., LLC v. Sheehan,
2020 WL 2789706, at *14 (Del. Super. Ct. May 29, 2020); ENI Hldgs., LLC v. KBR Grp. Hldgs.,
LLC, 2013 WL 6186326, at *4 (Del. Ch. Nov. 27, 2013); GRT, Inc., 2011 WL 2682898, at *3;
Janeve Co., Inc. v. City of Wilmington, 2009 WL 1482230, at *1 (Del. Super. Ct. May 7, 2009).
168
      Online HealthNow, 2021 WL 3557857, at *16.

                                               32
          Despite Vice Chancellor Slight’s misgivings about Sterling Network and his

indication that survival clauses do not apply to claims of intentional fraud, he did

not have occasion to conclusively reject Sterling Network.                 Instead, the Vice

Chancellor relied on factual distinctions to hold that even if a reasonableness test

applied to survival clauses in fraud cases, the fraud claim in Online HealthNow was

not time-barred.169 That leaves Sterling Network’s holding endangered, but not quite

extinct.

          This opinion will neither reinvigorate Sterling Network nor put the final nail

in its coffin. That is because before looking to public policy to decide whether the

Purchase Agreement’s survival clause applies to fraud claims, the Court must start

with ordinary principles of contract interpretation.170 In this regard, the Court is

guided by ENI Holdings.171 There, like here, the relevant survival period was

contained in the contract’s indemnity provisions, and the indemnity provisions were

slated to be the exclusive remedy available to the parties.172 But, also like this case,

169
      Id. at *17-18.
170
   See, e.g., ABRY Partners, 891 A.2d at 1051-55 (determining the plain language of the at-issue
Stock Purchase Agreement limited the plaintiff’s fraud remedies before applying public policy).
171
      2013 WL 6186326, at *15-16.
172
      Id. at *15.

                                              33
the exclusive remedy provision in ENI Holdings explicitly “carve[d] out fraud from

the strictures of the indemnification-remedy provision.”173

            Faced with that combination of clauses, Vice Chancellor Glasscock opined:

“The SPA, by providing that the indemnification provisions do not constitute the

‘sole and exclusive remedy’ for fraud, contemplates that at least some actions

grounded in fraud can be brought outside the SPA’s indemnification provisions, and

thus, can be timely brought within the statutory—rather than contractual—

limitations period.”174 He continued that the absence of an explicit fraud exclusion

from the survival clause itself created “at best” an ambiguity that could not result in

dismissal.175 That reasoning has been followed in other cases,176 and the Court is

persuaded to do the same here.

            In an attempt to circumvent that precedent, Defendants argue that the Purchase

Agreement’s exclusive remedy provision only carved out fraud claims “related to

Section 1.2” of the Purchase Agreement.177 That interpretation is unreasonable. The

relevant carve-out in Section 9.7 reads: “Except for claims of specific performance

173
     Id. at *16; Purchase Agreement § 9.7 (“Except for claims of . . . Actual Fraud . . . the
indemnification provision set forth in this Article 9 . . . will be the sole and exclusive remedy of
the Parties with respect to any and all claims arising from or relating to this Agreement . . . .”).
174
      ENI Hldgs., 2013 WL 6186326, at *16.
175
      Id.
176
   See Spay, Inc. v. Stack Media Inc., 2021 WL 6053869, at *7 (Del. Ch. Dec. 21, 2021); In re
Swervepay Acquisition, LLC, 2022 WL 3701723, at *25 (Del. Ch. Aug. 26, 2022).
177
      Defs.’ Reply at 19-20 (citing Purchase Agreement § 9.7).

                                                34
of the terms of this Agreement pursuant to Section 11.3, or Actual Fraud and claims

related to Section 1.2 of this Agreement . . . .”178 Defendants rely on an esoteric

interplay of grammar and formal logic to aver that the “or” which precedes “Actual

Fraud” is disjunctive while the “and” that follows “Actual Fraud” is conjunctive.179

Such a nuanced approach is not necessary in this instance.

         If Defendants’ construction of Section 9.7 were correct, the term “Actual

Fraud” would be a pointless appendage in an otherwise meticulously crafted clause.

That is so because “claims related to Section 1.2” necessarily encompasses fraud

claims related to Section 1.2. Delaware courts are disinclined to find that parties

included meaningless language in a contract, especially when that contract was

carefully drafted by sophisticated parties.180 Were there any doubt about the scope

of Section 9.7’s fraud exception, Section 9.6(f)(ii) settles the matter by stating,

“nothing in this Article 9 shall limit . . . any Person’s right to seek any remedy on

178
      Purchase Agreement § 9.7.
179
    Defs.’ Reply at 19-20 (citing Weinberg v. Waystar, Inc., 2022 WL 2452141, at *3-4 (Del. Ch.
July 6, 2022), aff’d, 294 A.3d 1039 (Del. 2023)).
180
    Weinberg v. Waystar, Inc., 294 A.3d 1039, 1043 (Del. 2023) (explaining that courts interpreting
contracts “endeavor ‘to give each provision and term effect’ and not render any terms ‘meaningless
or illusory’” (quoting Manti Hldgs., LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1208
(Del. 2021))); see also NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419
(Del. Ch. 2007) (“Contractual interpretation operates under the assumption that the parties never
include superfluous verbiage in their agreement, and that each word should be given meaning and
effect by the court.” (citing Majkowski v. Am. Imaging Mgmt. Serv., 913 A.2d 572, 588 (Del. Ch.
2006))).

                                                35
account of Actual Fraud.”181 Section 9.6(f)(ii) makes no mention of Section 1.2 or

any other qualifier. Accordingly, Section 9.5’s survival clause and Section 9.7’s

exclusive remedy provision do not limit Plaintiff’s ability to seek a remedy on

account of fraud, so Plaintiff’s claims are timely.182

      C. Plaintiff’s Fraud Allegations are Reasonably Conceivable

            With that, the Court can focus on the merits. A common law fraud claim

consists of five elements: (1) a false representation; (2) the defendant’s knowledge

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

intent to induce action or inaction by the plaintiff; (4) the plaintiff’s justifiable

reliance on the false representation; and (5) the plaintiff being damaged by such

reliance.183 Additionally, Rule 9(b) requires “the circumstances of the fraud” to be

pled with particularity.184

            Defendants sort Plaintiff’s fraud allegations into three categories and contest

each one: (1) the Company’s treatment of Project Costs; (2) the Company’s internal

accounting systems; and (3) the Company’s Top Customer disclosures.185

181
      Purchase Agreement § 9.6(f)(ii).
182
    The exclusive remedy provision’s effect on Plaintiff’s unjust enrichment claim is addressed
below. See infra Section V.D.1.
183
   See ABRY Partners, 891 A.2d at 1050 (citing DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954,
958 (Del. 2005)).
184
      Id.
185
      Defs.’ Mot. at 32.

                                               36
Defendants’ arguments take the form of factual challenges to the Complaint and are

therefore unavailing at this stage.      Specifically, Defendants say the Purchase

Agreement’s representations were true and, to the extent they were not, Seller made

adequate disclosures in due diligence.         The Court will briefly summarize the

arguments, but the upshot is that discovery is warranted before these disputes are

resolved.

         Regarding the Project Costs, Defendants contend that Plaintiff had access to

a “Quality of Earnings Report” that adequately disclosed the Company’s pre-closing

capitalization practices.186 Plaintiff responds that the Quality of Earnings Report

only disclosed capitalization of “pre-production” costs, while Plaintiff’s allegations

pertain to the capitalization of “production” costs, which are treated differently under

GAAP.187 Plaintiff reiterates that the Company allegedly designed its accounting

practices “to alter its financials in ways that were not easily detected by auditors or

purchasers and are not readily discernable through reasonable due diligence.”188 The

extent to which Plaintiff reasonably could have uncovered the Company’s treatment

of production costs based on the Quality of Earnings Report is a fact question for

another time.

186
      Id. at 32-34.
187
      Pl.’s Opp’n at 41.
188
      Id. (quoting Compl. ¶ 37).

                                          37
         The conclusion is the same regarding the adequacy of the Company’s internal

accounting systems. Defendants argue, in essence, that nothing was inherently

wrong with the Company’s pre-closing accounting system and that Plaintiff merely

“disagrees” with the Company’s practices.189 Plaintiff retorts that Seller knew that

the Company’s accounting mechanisms were below the standard represented in the

Purchase Agreement.190 Again, this is a quintessential factual dispute that will not

be resolved in a factual vacuum.

         The same is true with respect to the Top Customer disclosure. Defendants say

that they adequately disclosed adverse changes to the Axon relationship.191 Plaintiff

says the relevant disclosure only pertained to price changes, not a broad reduction in

Axon’s business.192 Resolution of this dispute turns on questions of fact, not law,

and therefore would be premature at this point in the litigation.

         Relatedly, Defendants overemphasize the burden imposed by Rule 9(b) when

the fraud claim is based on a written contract.193 To satisfy Rule 9(b), a plaintiff

need only specifically allege “(1) the time, place, and contents of the false

189
      Defs.’ Mot. at 35-36.
190
      Pl.’s Opp’n at 42-43.
191
      Defs.’ Mot. at 36-37.
192
      Pl.’s Mot. at 43-44.
193
    See Prairie Cap. III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 62 (Del. Ch. 2015) (“When a
party sues based on a written representation in a contract . . . it is relatively easy to plead a
particularized claim of fraud.”).

                                               38
representation; (2) the identity of the person making the representation; and (3) what

the person intended to gain by making the representations.”194 Here, Seller allegedly

made the false representations in the Purchase Agreement to obtain an unduly

favorable purchase price. That satisfies Rule 9(b). In sum, Plaintiff’s Complaint is

enough to put Defendants on notice of a reasonably conceivable claim of fraud, so

it survives dismissal under Rule 12(b)(6).

      D. Adequacy of Plaintiff’s Unjust Enrichment Allegations

        “Unjust enrichment is the unjust retention of a benefit to the loss of another,

or the retention of money or property of another against the fundamental principles

of justice or equity and good conscience.”195 To plead unjust enrichment, a plaintiff

must show: “(1) an enrichment, (2) an impoverishment, (3) a relation between the

enrichment and the impoverishment, [and] (4) the absence of justification.”196 If the

parties’ relationship is “comprehensively governed by contract” an unjust

194
   ABRY Partners, 891 A.2d at 1050 (citing H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129,145
(Del. Ch. 2003)).
195
   CFGI, 2024 WL 325567, at *6 (internal quotation marks omitted) (quoting Nemec v. Shrader,
991 A.2d 1120, 1130 (Del. 2010)).
196
    Id. (quoting Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863, 875 (Del. 2020)).
The Delaware Supreme Court recently clarified that while “absence of a remedy provided by law”
has traditionally been enumerated as an element of unjust enrichment, that element is only required
to obtain the Court of Chancery’s equitable jurisdiction. State ex. rel. Jennings v. Monsanto Co.,
299 A.3d 372, 390-91 (Del. 2023) (citing Garfield ex rel. ODP Corp. v. Allen, 277 A.3d 296, 351
(Del. Ch. 2022)).

                                                39
enrichment claim will be dismissed, unless the enforceability of the contract is in

doubt.197

         For their arguments regarding a lack of justification, the parties rely on their

respective fraud-related arguments to either defeat or establish that element. As

explained above, Plaintiff’s fraud claim is tenable at this stage. The Court need not

repeat that discussion and will, instead, focus on the parties’ other contentions.

         1. The Exclusive Remedy Provision does not Bar Plaintiff’s Unjust
            Enrichment Claim

         Defendants contend that the Purchase Agreement’s exclusive remedy

provision bars Plaintiff’s unjust enrichment claim. Defendants first argue that fraud-

based claims are only excluded from the exclusive remedy provision if they relate

to Section 1.2 of the Purchase Agreement.198 As explained above, that position is

incorrect.199 Defendants raise a different theory in their Reply Brief, but it is no

more availing.

         Defendants claim that if the unjust enrichment claim is only a remedy for the

fraud claim, it cannot be pled as a separate Count.200 In support, Defendants cite

Quadrant Structured Products Co., Ltd. v. Vertin201 and iBio, Inc. v. Fraunhofer USA,

197
      CFGI, 2024 WL 325567, at *6 (citations omitted).
198
      Defs.’ Mot. at 40.
199
      See supra Section V.B.
200
      Defs.’ Reply at 24-25.
201
      102 A.3d 155 (Del. Ch. 2014).

                                               40
Inc.,202 where the Court of Chancery dismissed counts that sought specific remedies

for alleged misconduct—such as requests for injunctive relief, establishment of a

constructive trust, and partial recission. The court dismissed those counts “[a]s a

technical matter,” but acknowledged the plaintiff could still obtain the requested

relief.203    Defendants also cite cases where the Court of Chancery dismissed

“redundant” claims.204

         Those cases are inapposite here. Plaintiff’s unjust enrichment claim, though

linked to its fraud claim, is neither duplicative nor superfluous. Count II of the

Complaint seeks relief on a theory that is legally distinct from, albeit related to, the

fraud claim. For that reason, Plaintiff’s unjust enrichment claim is unlike the

toothless claims that were dismissed in the cases Defendants rely upon.

         The remaining question is whether the fact that unjust enrichment is not a

“remedy” for fraud in the procedural sense—i.e., not simply a form of relief like a

constructive trust or an injunction—means that unjust enrichment is not

encompassed in Section 9.7’s fraud exception. Section 9.7, which provides for

exclusive remedies, carves out “claims of . . . Actual Fraud.”205 Section 9.6(f)(ii)

202
      2020 WL 5745541 (Del. Ch. Sept. 25, 2020).
203
      See id. at *12; Quadrant, 102 A.3d at 203.
204
   Defs.’ Reply at 25 (first citing Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL
6199554, at *6 (Del. Ch. Nov. 19, 2013); and then citing Metro. Life Ins. Co. v. Tremont Grp.
Hldgs., Inc., 2012 WL 6632681, at *18 (Del. Ch. Dec. 20, 2012)).
205
      Purchase Agreement § 9.7.

                                                   41
effectively adds to that exclusion by providing, “nothing in this Article 9 shall limit

. . . any Person’s right to seek any remedy on account of Actual Fraud.”206 Here,

Plaintiff’s unjust enrichment claim seeks a remedy “on account of” fraud and is

therefore not barred by Section 9.7.

         Merriam-Webster207 defines the phrase “on account of” to mean “because

of.”208 In this instance, the unjust enrichment claim only exists “because of” the

alleged fraud. Stated differently, Defendants’ enrichment was allegedly unjust

because it was procured by fraud. The parties to the Purchase Agreement chose not

to limit the ability to seek “any remedy on account of Actual Fraud.” That being so,

the Court will not defeat the parties’ expressed intent by limiting the remedies

Plaintiff can seek in response to Defendants’ alleged fraud.

         2. Unjust Enrichment Against Seller

         Defendants argue that Plaintiff cannot maintain an unjust enrichment claim

against Seller209 because the Purchase Agreement governs and preempts any quasi-

206
      Purchase Agreement § 9.6(f)(ii) (emphasis added).
207
    “Under well-settled case law, Delaware courts look to dictionaries for assistance in determining
the plain meaning of terms which are not defined in a contract.” Chordia v. Lee, 2024 WL 49850,
at *25 n.287 (Del. Ch. Jan. 4, 2024) (quoting Thermo Fisher Sci. PSG Corp. v. Arranta Bio MA,
LLC, 2023 WL 2771509, at *17 (Del. Ch. Apr. 4, 2023)).
208
      Account, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/account (last
visited Apr. 10, 2024).
209
    This argument originally pertained to each Defendant against whom Plaintiff pled fraud—i.e.,
Seller, Weissmann, Osborn, Bennigson, and Thomas. But since Weissmann, Osborn, Bennigson,
and Thomas are without this Court’s jurisdiction, there is no need to analyze this issue as to them.

                                                42
contractual claims.210 Though that is the general rule,211 an exception applies in this

instance.

            As stated in Kuroda, “A claim for unjust enrichment is not available if there

is a contract that governs the relationship between parties that gives rise to the unjust

enrichment claim.”212         Stated differently, “if ‘the contract is the measure of [the

plaintiff’s] right, there can be no recovery under an unjust enrichment theory

independent of it.’”213 But, “[t]he contract itself is not necessarily the measure of

[the] plaintiff's right where the claim is premised on an allegation that the contract

arose from wrongdoing (such as . . . fraud) or mistake and the [defendant] has been

unjustly enriched by the benefits flowing from the contract.”214

            In LVI Group, the defendants enriched themselves through a contract that was

allegedly obtained through their fraud.215 Although a contract seemed to govern the

parties’ relationship, the Court of Chancery nevertheless permitted an unjust

enrichment claim.216 The Court reasoned, “because the Complaint adequately

210
      Defs.’ Mot. at 42-44.
211
    See River Valley Ingredients, LLC v. Am. Proteins, Inc., 2021 WL 598539, at *6 (Del. Super
Ct. Feb. 4, 2021); Kuroda v. SPSJ Hldgs., L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009).
212
      Kuroda, 971 A.2d at 891.
213
      Id. (quoting Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del. 1979)).
214
   LVI Grp. Invs., LLC v. NCM Grp. Hldgs., LLC, 2018 WL 1559936, at *16 (Del. Ch. Mar. 28,
2018) (alterations in original) (citations omitted).
215
      Id. at *17.
216
      Id.

                                                43
alleges that the Contribution Agreement itself arose from the Defendants’ fraud, the

existence of that contract does not bar the unjust enrichment claim.”217 Delaware

courts have consistently applied this principle.218 It applies again here.

            Plaintiff adequately alleges that the Purchase Agreement itself arose from

Seller’s fraud. It follows that the Purchase Agreement does not comprise “the

measure of [the] plaintiff's right.”219 Plaintiff can thus maintain its unjust enrichment

claim along with the fraud claim and, if it prevails on both, “plaintiff then will have

to elect [its] remedies.”220

            3. Unjust Enrichment Against the Non-Fraud Defendants

            Defendants also claim that Midwest Mezzanine, Fund V Blocker, Fund V

Intermediate, and True West (together, the “Non-Fraud Defendants”)221 are immune

to Plaintiff’s unjust enrichment claim because their enrichment is insufficiently

related to Plaintiff’s impoverishment.222 That is correct.

217
      Id.
218
    See, e.g., Adviser Invs., LLC v. Powell, 2023 WL 6383242, at *8 (Del. Ch. Sept. 29, 2023);
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980, at *28
(Del. Ch. Aug. 13, 2014); McPadden v. Sidhu, 964 A.2d 1262, 1276 (Del. Ch. Aug. 29, 2008).
219
      LVI Grp. Invs., 2018 WL 1559936, at *16.
220
      McPadden, 964 A.2d at 1276.
221
    Again, this argument initially applied to several Defendants without this Court’s jurisdiction.
To avoid confusion, the Court limits its analysis to only those Defendants as to whom the issue is
not moot. See supra note 209.
222
      Defs.’ Mot. at 45-48.

                                                 44
            “The general rule is that the plaintiff must show that there is some direct

relationship between a defendant's enrichment and a plaintiff's impoverishment. In

other words, there must be a showing that the defendant was enriched unjustly by

the plaintiff who acted for the defendant’s benefit.”223 A “simple relationship

between the plaintiff’s impoverishment and defendants’ enrichment” is only enough

where “a nonparty to a contract knowingly facilitates prohibited activities.”224

            Plaintiff does not allege that the Non-Fraud Defendants knowingly facilitated

the alleged fraud. Hence, the more stringent standard applies, and Plaintiff must

show that it acted for the Non-Fraud Defendants’ benefit.225 Plaintiff does not do so.

Instead, as in CoreTel, Plaintiff simply “alleges [Defendants] should not be allowed

to keep the proceeds from the [fraudulent] sale.”226 That is not enough to support an

unjust enrichment claim.227

            Plaintiff makes no attempt to distinguish CoreTel or Wind Energy. Nor does

Plaintiff seek to satisfy the test recited therein. Instead, Plaintiff focuses solely on

223
    CoreTel Am., Inc. v. Oak Point Partners, LLC, 2022 WL 2903104, at *11 (Del. Super. Ct. July
21, 2022) (emphasis added) (cleaned up) (quoting Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d
26, 59-60 (Del. Ch. 2012)).
224
    Id. (quoting Lyons Ins. Agency v. Kirtley, 2019 WL 1244605, at *3 (Del. Super. Ct. Mar. 18,
2019)); see also Stein v. Wind Energy Hldgs., Inc., 2022 WL 17590862, at *9 (Del. Super. Ct. Dec.
13, 2022).
225
      See CoreTel Am., 2022 WL 2903104, at *11.
226
      Id. *12.
227
      Id.

                                               45
the fact that a contract procured by fraud does not stand in the way of an unjust

enrichment claim.228 Be that as it may, Plaintiff has still failed to plead an adequate

connection between its impoverishment and the Non-Fraud Defendants’ enrichment.

Accordingly, Count II is dismissed as to the Non-Fraud Defendants.

                                 VI. CONCLUSION

         This Court lacks personal jurisdiction over each Defendant except for Seller,

True West, Midwest Mezzanine, Fund V Blocker, and Fund V Intermediate. The

lone claim against True West, Midwest Mezzanine, Fund V Blocker, and Fund V

Intermediate is deficient. Accordingly, all of Plaintiff’s claims, except those against

Seller, are dismissed. Therefore, Defendant’s Motion to Dismiss is GRANTED in

part, DENIED in part.

         IT IS SO ORDERED.

                                                      _________________________
                                                          Sheldon K. Rennie, Judge

228
      Pl.’s Opp’n at 50-52.

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