Court Opinion

ID: 9915263
Source: CourtListenerOpinion
Date Created: 2024-01-04 22:02:31.514486+00
Date Added: 2024-06-11T13:08:59.964448
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

TIMOTHY BURKE,                                   )
                                                 )
                       Plaintiff,                )
                                                 )
           v.                                    )           C.A. No. N23C-05-012 JRJ
                                                 )
COMMUNITY BRANDS                                 )
HOLDCO, LLC and COMMUNITY                        )
BRANDS PARENTCO, LLC,                            )
                                                 )
                       Defendants.               )
                                                 )

                            Date Submitted: September 6, 2023
                             Date Decided: October 26, 2023
                             Date Corrected: January 4, 20241

                               MEMORANDUM OPINION

                    Upon Defendants’ Motion to Dismiss: DENIED

Daniel C. Herr Esq., Daniel C. Herr, LLC, 1225 N. King Street, Suite 1000,
Wilmington, DE 19801. Attorney for Plaintiff.

Jody C. Barillare, Esq., Morgan, Lewis & Bockius LLP, 1201 N. Market Street,
Suite 2201, Wilmington, DE 19801. Attorney for Defendants.

Jurden, P.J.

1
 This cover page has been corrected to reflect correct counsel for the defense at the time of this
decision.
                                I.     INTRODUCTION

       This is an action for declaratory judgment and breach of contract. Plaintiff

Timothy Burke (“Plaintiff” or “Burke”), claims Community Brands Holdco, LLC

and Community Brands Parentco, LLC (collectively “Defendants” or “Community

Brands”) failed to remit payment owed to Burke from the alleged sale of Community

Brands. Community Brands moves to dismiss Burke’s Complaint, arguing there

was no breach of contract and Burke is not entitled to the compensation sought. For

the reasons that follow, Community Brands’ Motion to Dismiss is DENIED.

                                 II.    BACKGROUND

A.     Allegations

       Burke began working for Community Brands in May 2018.2 On November

27, 2018, Community Brands offered Burke a “Community Brands Award

Agreement” (“Award”) which he accepted and signed.3 Contained within the Award

is a “Management Incentive Award” which details the awarded compensation.4 The

Award contains the following provisions relevant to this dispute:

       [t]he Award is intended to entitle the Participant to gain additional
       income from the Company sale expected within a future date. . . the
       Participation Level Award shall be based on the established market
       value price for the business. You are granted an equity opportunity
2
  Pl.’s Compl. ¶ 4, Trans. ID 69926981 (May 1, 2023).
3
  Pl.’s Compl., Ex. A, Trans. ID 69926981 (May 1, 2023). The Award was not a part of any offer
letter or any other document describing the terms and conditions of Burke’s employment. Pl.’s
Ans. Br. in Opp’n to Defs.’ Mot. to Dismiss at 3, Trans. ID 70658495 (Aug. 17, 2023).
4
  Pl.’s Compl. ¶¶ 5-6. Collectively, the Community Brands Award and the Management Incentive
Award constitute the “Award.”
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       with an earning potential of $75,000.00 at 2.25x exit value or $150,000
       x exit 2.50. . . 2.50 or greater is the maximum opportunity. . . Participant
       shall immediately forfeit any opportunity for payment upon voluntary
       resignation of Participant’s active status as Employee. Termination for
       Cause. In the event of termination of Participant’s Employment for
       Cause, Participant shall immediately forfeit any payment opportunity. .
       . The Company will make such a provision for the withholding of taxes
       as it deems necessary. The participant is responsible for making the
       IRS aware of this award.5

       Up until the Fall of 2021, Ministry Brands was the parent company of

Community Brands.6 Burke alleges that Community Brands spun-off Ministry

Brands as a subsidiary sometime in the Fall of 2021.7 This spin-off purportedly

resulted in the sale of Community Brands, making Community Brands the parent

organization to a number of subsidiaries.8 According to Burke, as a result of the

sale, he is owed compensation.9

       On December 21, 2021, Community Brands sent a letter to Burke at his

residence, offering to promote him to Senior Director of Alliances,10 increase his

annual salary to $150,000, and invite him to “participate in a variable compensation

plan equal to $150,000 annually” (“Offer Letter”).11 The Offer Letter was signed by

5
  Id.
6
  Pl.’s Compl. ¶ 8.
7
  Pl.’s Compl. ¶ 7.
8
  Id.
9
  Id. ¶ 9.
10
   Defs.’ Mot. to Dismiss at 2, Trans. ID 70295563 (June 30, 2023); see also Pl.’s Compl., Ex. B,
Trans. ID 69926981 (May 1, 2023).
11
   Id.
                                               3
Community Brands on December 21, 2021 and by Burke on January 4, 2022.12 The

Offer Letter contains a clause which states in pertinent part:

       this offer letter sets forth the terms and conditions of your employment
       with the Company and supersedes any and all prior representations and
       agreements, whether written or oral . . . This offer letter is governed by
       Delaware law.13

       On January 13, 2023, Community Brands terminated Burke’s employment as

a result of restructuring.14 On February 14, 2023, Burke contacted Community

Brands requesting payment allegedly owed to him under the Award.15 On March

14, 2023, Community Brands’ General Counsel responded to Burke via letter stating

that Community Brands “did not validly issue Burke any Award” and, even if it did,

the Offer Letter superseded all prior agreements.16

B.     Procedural History

       On May 1, 2023, Burke filed his Complaint requesting a declaratory judgment

against Community Brands and alleging, in the alternative, a breach of contract

claim.17 Burke alleges that Community Brands breached the terms of the Award

12
   Pl.’s Compl., Ex. B.
13
   Pl.’s Compl., Ex. B.
14
   Pl.’s Compl. ¶ 10.
15
   Defs.’ Mot. to Dismiss at 3.
16
   Pl.’s Compl. ¶ 11; see also Pl.’s Compl., Ex. B.
17
   See Pl.’s Compl. Should the merger clause not apply to the Award and Community Brands was
not sold, Plaintiff is requesting a declaratory judgment rendered in his favor and seeks relief on
that basis. Alternatively, if the merger clause does not apply to the Award and Community Brands
was sold in Fall 2021, then the requested relief falls under a breach of contract claim. Pl.’s Ans.
Br. in Opp’n to Defs.’ Mot. to Dismiss at 9.

                                                4
because it: (1) failed to provide Burke with payment from its Fall 2021 sale of

Community Brands, and (2) continuously failed to recognize the Award as a valid,

binding contract.18 On June 30, 2023, Community Brands filed a Motion to Dismiss

the Complaint (“Motion”) pursuant to Rule 12(b)(6),19 arguing that the Offer Letter

contains a merger clause which supersedes the Award.20 On August 17, 2023, Burke

filed an Answering Brief in Opposition to Defendants’ Motion to Dismiss,21 arguing

the Award and the Offer Letter are two separate agreements and the latter is not

superseded by the former.22 Additionally, Burke alleges the parties did not intend to

contract away Burke’s Award by offering him a promotion.23 On September 6,

2023, Community Brands submitted to the Court Defendants’ Reply Brief,

reiterating its argument that the Offer Letter supersedes the Award and that Burke

has no right to any further compensation.24

                            III.   STANDARD OF REVIEW

18
   Pl.’s Compl.
19
   Super. Ct. Civ. R. 12(b)(6). Failure to state a claim.
20
   Defs.’ Mot. to Dismiss at 1. Although Community Brands argues in two sentences in its Motion
to Dismiss that the Award is invalid, it provides no caselaw to support this argument and does not
mention it again in any supplemental filing beyond using the word “unverified” once in its Reply
Brief. Defs.’ Mot. to Dismiss at 5; Defs.’ Reply Br. in Supp. of Their Mot. to Dismiss the Compl.
at 6, Trans. ID 70805834 (Sept. 6, 2023). Further, Community Brands’ Reply Brief appears to
concede the Award was a prior agreement when it argues, “[t]he 2018 Agreement is just that – a
prior written agreement,” and “the 2018 Agreement no longer controls. . .” seemingly admitting
that the Award controlled at one time. Def’s Reply Brief at 4- 5.
21
   Pl.’s Ans. Br. in Opp’n to Defs.’ Mot. to Dismiss.
22
   Id. at 1.
23
   Id. at 5.
24
   Defs.’ Reply Br. in Supp. of Their Mot. to Dismiss the Compl. at 2, Trans. ID 70805834 (Sept.
6, 2023).
                                                5
       Pursuant to Superior Court Rule 12(b)(6), the Court may dismiss an action for

failure to state a claim upon which relief can be granted.25 In reviewing a motion to

dismiss, the Court will accept all well-pled allegations as true and draw every

reasonable factual inference in favor of the non-moving party.26 To survive a motion

to dismiss, the non-moving party must show there is a reasonable conceivability for

his contentions.27 The Court will dismiss a complaint only if it appears “with

reasonable certainty that, under any set of facts that could be proven to support the

claims asserted, the plaintiff would not be entitled to relief.”28

                                     IV.     DISCUSSION

       The issue raised is one of pure contractual interpretation—whether the merger

clause in the Offer Letter is limited to matters of employment or includes previously

agreed-to management incentive awards. In interpreting the scope of a merger

clause, the Court gives “priority to the parties’ intentions as reflected in the four

corners of the agreement.”29 A merger clause is interpreted “according to [its] plain

meaning when its terms are unambiguous.”30 A clause breeds ambiguity when “the

provisions in controversy are reasonably or fairly susceptible of different

25
   Super. Ct. Civ. R. 12(b)(6).
26
   Id.
27
   Cent. Mort. Co. v. Morgan Stanley Mort. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).
28
   Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009).
29
   James v. United Medical, LLC, 2017 WL 1224513 at *5 (Del. Super. Mar. 31, 2017) (citing
Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009)).
30
   Focus Fin. Partners, LLC v. Holsopple, 241 A.3d 784, 822 (Del. Ch. 2020) (internal citations
omitted).
                                               6
interpretations.”31 When determining whether a merger clause extends to a prior

agreement, the parties’ intent controls.32 This determination requires consideration

of “facts and circumstances surrounding the execution”33 of the clause. Dismissal

may only occur when the “defendant’s interpretation is the only reasonable

construction as a matter of law.”34

       Accepting the well-pled allegations as true and drawing all reasonable factual

inferences in favor of the non-movants, the Court cannot conclude as a matter of law

that Community Brands’ interpretation is the only reasonable construction. Burke’s

interpretation that the Offer Letter’s merger clause does not extend to the Award is

a reasonable construction. Further, Community Brands fails to provide the Court

with any law supporting its contention that an Offer Letter merger clause supersedes

a prior agreement for a portion of company sale profits offered by the same company.

Burke compares the award of company sale profits to that of “earned restricted stock

units that result in a later cash payment” and that Burke would have earned it when

he executed the Award.35 This would operate like an already vested bonus.36 This

makes sense. It then follows that the Offer Letter merger clause could be reasonably

31
   Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996).
32
   MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at *13 (Del. Ch. Dec. 30,
2010).
33
   Carrow v. Arnold, 2006 WL 3289582 at *4 (Del. Ch. Oct. 31, 2006).
34
   Vanderbilt Income and Growth Associates, LLC v. Arvida/JMB Managers, Inc., 691 A.2d 609,
613 (Del. 1996).
35
   Pl.’s Opp’n to Defs.’ Mot. to Dismiss at 6.
36
   Id.
                                             7
interpreted to pertain solely to other employment agreements discussing salary,

bonus eligibility, and specifications of the position; but not previously paid out

bonuses or allocated stock. Because there are multiple reasonable constructions of

the merger clause, the Court finds the merger clause ambiguous. Accordingly,

Community Brands’ Motion to Dismiss must be DENIED.

                             V.    CONCLUSION

      For the reasons stated above, the Court finds the merger clause in the Offer

Letter is ambiguous and Community Brands’ Motion to Dismiss is DENIED.

      IT IS SO ORDERED.

                                                  /s/ Jan R. Jurden
                                            Jan R. Jurden, President Judge

cc: Prothonotary

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