Court Opinion

ID: 4449314
Source: CourtListenerOpinion
Date Created: 2019-10-23 18:02:44.555966+00
Date Added: 2024-06-11T14:45:40.491812
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PPL CORPORATION, PPL CAPITAL           )
FUNDING, INC., PPL ELECTRIC            )
UTILITIES CORPORATION, PPL ENERGY      )
FUNDING CORPORATION, PAUL A.           )
FARR, MARK F. WILTEN, PETER J.         )
SIMONICH, WILLIAM H. SPENCE,           )
RODNEY C. ADKINS, FREDERICK M.         )
BERNTHAL, JOHN W. CONWAY,              )
PHILIP G. COX, STEVEN G. ELLIOTT,      )
LOUISE K. GOESER, STUART E.            )
GRAHAM, STUART HEYDT, RAJA             )
RAJAMANNAR, CRAIG A. ROGERSON,         )
NATICA VON ALTHANN, KEITH H.           )
WILLIAMSON, and ARMANDO ZAGALO         )
DE LIMA,                               )
                                       )
                 Plaintiffs,           )
                                       )   C.A. No. 2018-0868-JRS
          v.                           )
                                       )
RIVERSTONE HOLDINGS LLC, TALEN         )
ENERGY CORPORATION, TALEN              )
ENERGY HOLDINGS, INC., TALEN           )
ENERGY SUPPLY, LLC, TALEN              )
MONTANA, LLC, RAVEN POWER              )
HOLDINGS LLC, C/R ENERGY JADE,         )
LLC, and SAPPHIRE POWER HOLDINGS       )
LLC,                                   )
                                       )
                 Defendants.           )

                  MEMORANDUM OPINION

                 Date Submitted: October 4, 2019
                 Date Decided: October 23, 2019
Paul J. Lockwood, Esquire, Robert A. Weber, Esquire and Nicole A. DiSalvo,
Esquire of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware and
George A. Zimmerman, Esquire, Jonathan Frank, Esquire, Tansy Woan, Esquire,
Andrew N. Goldman, Esquire and Charles C. Platt, Esquire of Skadden, Arps, Slate,
Meagher & Flom, New York, New York, Attorneys for Plaintiffs PPL Corporation,
PPL Capital Funding, Inc., PPL Electric Utilities Corporation, PPL Energy Funding
Corporation, Mark F. Wilten, Peter J. Simonich, William H. Spence, Rodney C.
Adkins, Frederick M. Bernthal, John W. Conway, Philip G. Cox, Steven G. Elliott,
Louise K. Goeser, Stuart E. Graham, Stuart Heydt, Raja Rajamannar, Craig A.
Rogerson, Natica von Althann, Keith H. Williamson, and Armando Zagalo de Lima.

Thomas G. Macauley, Esquire of Macauley LLC, Wilmington, Delaware and
Joshua L. Seifert, Esquire of Joshua L. Seifert PLLC, New York, New York,
Attorneys for Plaintiff Paul A. Farr.

Rolin P. Bissell, Esquire and James M. Yoch, Jr., Esquire of Young Conaway
Stargatt & Taylor, LLP, Wilmington, Delaware and Michael C. Holmes, Esquire,
Melissa L. James, Esquire and Devin L. Kerns, Esquire of Vinson & Elkins LLP,
Dallas, Texas, Attorneys for Defendants Riverstone Holdings LLC, Raven Power
Holdings LLC, C/R Energy Jade, LLC and Sapphire Power Holdings LLC.

David E. Ross, Esquire and R. Garrett Rice, Esquire of Ross Aronstam &
Moritz LLP, Wilmington, Delaware; Karl Stern, Esquire and Kate K. Shih, Esquire
of Quinn Emanuel Urquhart & Sullivan, LLP, Houston, Texas; Andrew J. Rossman,
Esquire of Quinn Emanuel Urquhart & Sullivan, LLP, New York, New York; and
Adam B. Wolfson, Esquire of Quinn Emanuel Urquhart & Sullivan, LLP,
Los Angeles, California, Attorneys for Talen Energy Corporation, Talen Energy
Holdings, Inc., Talen Energy Supply, LLC, and Talen Montana, LLC.

SLIGHTS, Vice Chancellor
      Some of the defendants in this case brought a first-filed action in Montana

state court against several of the plaintiffs here. The Montana claims share a

common nucleus of operative facts with the claims asserted in this Court. It is not

surprising, therefore, that Defendants have moved to dismiss or stay this litigation

in favor of the Montana litigation under Delaware’s well-settled McWane doctrine.1

Whether dismissed or stayed, from Defendants’ perspective, the Delaware case must

end now.

      Borrowing from Coach Lee Corso, Plaintiffs say “not so fast.”

Acknowledging that McWane may appear, at first glance, to be case dispositive,

Plaintiffs argue the parties’ disputes, and all claims arising from those disputes, trace

back to a so-called “Separation Agreement” that contains a mandatory Delaware

forum selection clause. Thus, with vigor matching Defendants’, they argue McWane

does not apply and the Delaware claims, at least, must be litigated in this Court as

agreed by the parties.

      Against this procedural curtain, the Court’s task is two-fold. First, the Court

must address the applicability and scope of the forum selection clause. This requires

a determination of whether the clause binds certain non-parties to the Separation

1
  McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng’g Co., 263 A.2d 281
(Del. 1970) (setting forth a multi-factor test to determine if Delaware action should be
dismissed or stayed in favor of first-filed litigation pending elsewhere).

                                           1
Agreement and whether it is broad enough to capture the claims asserted both in

Delaware and Montana, including extra-contractual claims. Second, the Court must

determine whether Plaintiffs have proffered a reasonable construction of the

Separation Agreement and have stated viable claims for relief.

      For reasons I explain below, I conclude McWane does not apply because all

plaintiffs in the Montana litigation, including non-parties to the Separation

Agreement, are bound by that agreement’s mandatory Delaware forum selection

clause. In addition, Plaintiffs have well-pled the Separation Agreement is either

directly implicated by the Montana claims or must be construed before the viability

of the Montana claims can be determined. Because the parties agreed that only this

Court may construe the Separation Agreement, the claims brought here, including

claims of breach of the Separation Agreement and related prayers for declaratory

judgment, must proceed apace. With that said, Plaintiffs’ attempt to plead a breach

of the implied covenant of good faith and fair dealing based on Defendants’ alleged

breach of the Separation Agreement fails as a matter of law. That count in the

operative complaint must be dismissed. Finally, Plaintiffs’ claim that a non-party to

the Separation Agreement tortiously interfered with certain parties’ performance of

that contract is well-pled and, therefore, must remain.

                                          2
                                   I. BACKGROUND

          I have drawn the facts from well-pled allegations in the operative Second

Amended Complaint2 and documents incorporated by reference or integral to that

pleading.3 For purposes of Defendants’ Rule 12(b)(6) motion, as I must, I accept

those well-pled facts as true.4 Otherwise, when addressing the venue issues under

Rule 12(b)(3), I am “not shackled to the plaintiff’s complaint” and have considered

extrinsic evidence that is properly in the record.5

      A. The Parties

          Plaintiff, PPL Corporation (“PPL”), is a publicly traded Pennsylvania

corporation with its headquarters in Allentown, Pennsylvania.6 Through its many

subsidiaries, PPL operates regulated utilities throughout the United States and the

United Kingdom, delivers natural gas to customers in Kentucky and generates

electricity from power plants in Kentucky.7

2
    Citations to the Second Amended Complaint are to “Compl. ¶ __.”
3
  Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (noting that on
a Motion to Dismiss, the Court may consider documents that are “incorporated by
reference” or “integral” to the complaint).
4
    In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006).
5
    Troy Corp. v. Schoon, 2007 WL 949441, at *2 (Del. Ch. Mar. 26, 2007).
6
    Compl. ¶ 16.
7
    Id.

                                             3
           Plaintiff, PPL Capital Funding, Inc., is a Delaware corporation.8 It is a

subsidiary of PPL that provides financing for other PPL entities.9

           Plaintiff, PPL Electric Utilities Corporation, is a Pennsylvania corporation.10

It is a subsidiary of PPL that distributes electricity in Pennsylvania.11

           Plaintiff, PPL Energy Funding Corporation, is a Pennsylvania corporation.12

It is a subsidiary of PPL and a former indirect parent of PPL Montana LLC

(“PPL Montana”).13

           Plaintiffs, Paul A. Farr, Mark F. Wilten and Peter J. Simonich are former

members of PPL Montana’s Board of Managers. Plaintiffs, Frederick M. Bernthal,

Philip G. Cox, Louise K. Goeser, Stuart E. Graham, Steven G. Elliott, William H.

Spence, Rodney C. Adkins, John W. Conway, Stuart Heydt, Raja Rajamannar,

Craig A. Rogerson, Natica von Althann, Keith H. Williamson and Armando Zagalo

de Lima, are current or former members of PPL’s Board of Directors.14

8
    Compl. ¶ 17.
9
    Id.
10
     Compl. ¶ 18.
11
     Id.
12
     Compl. ¶ 19.
13
     Id.
14
     Compl. ¶¶ 20–23.

                                              4
           Defendant, Riverstone Holdings LLC (“Riverstone”), is a Delaware limited

liability company.15       Riverstone is a private equity firm with an $80 billion

investment portfolio.16 It has “deep expertise” in the energy industry, with particular

experience in managing “large-scale coal mines, power stations and associated

infrastructure.”17

           Defendant, Talen Energy Corporation (“Talen”), is a Delaware corporation.18

Talen is wholly owned and controlled by Riverstone.19

           Defendant, Talen Energy Holdings, is a Delaware corporation and is a wholly

owned subsidiary of Talen.20

           Defendant, Talen Energy Supply, LLC (“Talen Energy Supply”), is a

Delaware LLC and is a wholly owned subsidiary of Talen.21 Talen Energy Supply

was formerly known as PPL Energy Supply.22

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

                                            5
           Defendant, Talen Montana, LLC (“Talen Montana”), is a Delaware LLC and

is a wholly owned subsidiary of Talen Energy Supply. 23 Talen Montana was

formerly known as PPL Montana.24

           Defendant, Raven Power Holdings LLC (“Raven”), is a Delaware LLC.25

Raven is controlled by Riverstone.26

           Defendant, C/R Energy Jade, LLC (“Jade”), is a Delaware LLC.27 Jade is

controlled by Riverstone.28

           Defendant, Sapphire Power Holdings LLC (“Sapphire”), is a Delaware LLC.29

Sapphire is also controlled by Riverstone.30

      B. The Essence of the Dispute

           The disputes between the parties arise from two transactions. In 2014,

PPL Montana sold certain of its hydroelectric assets to an unrelated third-party for

23
     Compl. ¶ 28.
24
     Id.
25
     Compl. ¶ 29.
26
     Id.
27
     Compl. ¶ 30.
28
     Id.
29
     Compl. ¶ 31.
30
     Id.

                                           6
$904 million.31 The proceeds from that sale were then distributed upstream to

various PPL-affiliated entities (the “Distribution”).32 Defendants have alleged in

Montana that the Distribution rendered PPL Montana insolvent.33

         In 2015, PPL spun off certain of its assets to Talen (the “Spin”).34 Talen

Montana was one of the assets included in the Spin.35 Riverstone contributed assets

to the Spin, took a 35% interest in the newly created Talen and subsequently acquired

the 65% it did not own by taking Talen private in 2016.36

         Talen Montana currently owns and operates two coal-fired power plants in

Montana.37 By all accounts, it is in deep financial distress.38 Specifically, its

environmental and pension liabilities likely exceed the value of its assets.39 Why

Talen Montana is in this predicament is hotly contested. Plaintiffs allege Riverstone

is to blame for Talen Montana’s distress after taking Talen private, raiding its cash

31
     Compl. ¶ 72.
32
     Compl. ¶ 73.
33
     Compl. ¶ 4.
34
     Compl. ¶ 1.
35
     Compl. ¶ 3.
36
     Id.; Compl. ¶ 5.
37
     Compl. ¶ 42.
38
     Compl. ¶¶ 3–7.
39
     Compl. ¶¶ 112–15.

                                          7
and then refusing to support Talen Montana with intercompany financing.40

Defendants claim Talen Montana’s financial distress followed the pre-Spin

Distribution, a transaction Defendants characterize in the Montana litigation as a

fraudulent transfer.41

      C. PPL’s Pre-Spin Operations

           PPL is a utility holding company and, prior to the Spin, it operated (through

PPL Energy Supply’s subsidiaries) competitive power generation facilities.42

PPL Montana was formed by a subsidiary of PPL Energy Supply in 1998 to operate

PPL’s power generating assets in Montana.43 PPL Montana’s primary assets were

eleven hydroelectric facilities, a storage dam and interests in two coal power plants,

known as Colstrip and Corette.44

           After operating these facilities for over ten years, PPL made a business

decision to exit the unregulated power business and began exploring a sale of its

Montana assets.45 As a first step, on September 26, 2013, PPL agreed to sell its

40
     Id.
41
     Compl. ¶¶ 8–9.
42
     Compl. ¶ 36.
43
     Compl. ¶ 41.
44
     Compl. ¶ 42.
45
     Compl. ¶ 43.

                                             8
Montana        hydroelectric   assets   to   non-party   NorthWestern   Corporation

(“NorthWestern”).46 This agreement required PPL Montana to terminate a sale-and-

leaseback arrangement for Colstrip, a move that, in turn, required PPL Montana to

borrow approximately $270 million from PPL affiliates to fund the termination

fees.47

          As the sale of PPL Montana’s hydroelectric assets awaited regulatory

approval, PPL began to explore a spin-off of its competitive power generation

business (the “Energy Supply Business”), consisting of PPL Energy Supply and its

subsidiaries, including PPL Montana.48 Riverstone played a key role in these

negotiations.49

      D. The Spin and the Distribution

          The Spin involved three basic steps. First, PPL created two new entities,

Talen and Talen Energy Holdings.50 Second, PPL transferred all of PPL Energy

Supply’s assets to Talen. Third, Riverstone transferred power generating assets held

46
     Compl. ¶ 44.
47
     Compl. ¶ 45.
48
     Compl. ¶ 47.
49
     Compl. ¶ 48.
50
     Compl. ¶ 49.

                                             9
by Raven, Jade and Sapphire to Talen.51 As consideration for these asset transfers,

PPL stockholders received 65% of Talen’s stock while Riverstone took the other

35%, making Riverstone Talen’s largest individual stockholder.52 PPL Montana

was one of approximately 50 PPL entities transferred to Talen in the Spin.53

         PPL, PPL Energy Supply, Talen, Talen Energy Holdings, Raven, Jade and

Sapphire memorialized the terms of the Spin in a Transaction Agreement and

Separation Agreement, both dated June 9, 2014.54 The transaction did not close until

nearly a year later, on June 1, 2015.55 Riverstone obtained three seats on Talen’s

eight-seat board of directors, and Plaintiffs, Farr, Bernthal, Cox, Goeser and

Graham, left their jobs at PPL to fill the other five seats.56 It is not disputed that

Talen was solvent when the Spin was completed.57

         PPL Montana’s sale of its hydroelectric assets to NorthWestern closed on

November 17, 2014, after the Spin-related documents were executed but before the

51
     Compl. ¶ 50.
52
     Id.; Compl. ¶ 76.
53
     Compl. ¶ 56.
54
     Compl. ¶ 54.
55
     Compl. ¶ 76.
56
     Compl. ¶¶ 77, 79.
57
     Compl. ¶ 85.

                                         10
transaction closed.58 The final price paid by NorthWestern was $904 million.59

PPL used $170 million of the sale proceeds to repay the loan that funded the

termination of the Colstrip sale-and-leaseback arrangement.60           The remaining

$734 million of the proceeds were distributed to other PPL entities.61 This left

PPL Montana with Colstrip and Corette as its primary assets.62

      E. The Separation Agreement

           The Separation Agreement addressed the distribution of assets and liabilities

between PPL and the newly created Talen.63 By its terms, the Separation Agreement

split the Spin-related assets and liabilities into two categories: “Energy Supply

Assets and Liabilities” and “Excluded Assets and Liabilities.”64 Talen was to receive

all Energy Supply Assets and was responsible for all Energy Supply Liabilities.65

58
     Compl. ¶ 72.
59
     Id.
60
     Compl. ¶ 73.
61
     Id.
62
     Compl. ¶ 42.
63
     Compl. ¶ 59; see Compl. Ex. A.
64
     Compl. Ex. A, at §§ 2.02–2.03.
65
     Compl. ¶ 57.

                                             11
PPL was to keep all Excluded Assets and was responsible for all Excluded

Liabilities.66

           The Energy Supply Assets and Liabilities include the assets and liabilities of

PPL Montana.67 These consist of, among other things, Colstrip and Corette as assets,

and pension and environmental obligations as liabilities.68 The Excluded Assets and

Liabilities relevant to the parties’ dispute are the proceeds of the hydroelectric sale

to NorthWestern that funded the Distribution.69

           The Separation Agreement is a complex document with multiple references

to schedules, the Transaction Agreement and cross-references to other sections of

the Separation Agreement. Without playing the song’s every note, in relevant part,

the Separation Agreement provides that PPL will keep the proceeds of the asset sale

to NorthWestern and, if for some reason that transaction did not close, the

hydroelectric assets were to be retained by PPL.70 Consequently, PPL also retained

any liabilities arising from the sale.71          The parties also agreed to mutual

66
     Compl. ¶ 62.
67
     Compl. ¶ 60.
68
     Compl. ¶¶ 60–61.
69
     Compl. ¶ 64.
70
     Id.
71
     Compl. ¶ 62.

                                             12
indemnification.72 Specifically, Talen agreed to indemnify PPL, PPL’s subsidiaries

and all of PPL’s past and present directors and officers for “any and all Losses that

result from, relate to or arise out of . . . any Energy Supply Liability.”73 PPL, in turn,

agreed to indemnify Talen for “any and all Losses that result from, relate to or arise

out of . . . any Excluded Liability.”74 Relatedly, the parties agreed to a release of

claims and a covenant not to sue.75 Finally, the parties agreed to a provision that

allowed Talen to request additional Energy Supply Assets from PPL, within 18

months of closing, if Talen believed additional assets would be necessary to support

post-Spin operations.76

         Of particular relevance here, the Separation Agreement contains a forum

selection clause choosing the Delaware Court of Chancery as the exclusive forum

for disputes arising under the Agreement:

         [E]ach of the Parties irrevocably and unconditionally agrees that any
         Action with respect to this Agreement and the rights and obligations
         arising hereunder . . . brought by any Party or Parties or their respective
         successors or assigns, shall be brought and determined exclusively in
         the Delaware Court of Chancery and any state appellate court therefrom
         within the State of Delaware . . . . Each of the Parties hereby

72
     Compl. Ex. A, at §§ 5.01–5.02
73
     Compl. ¶ 65.
74
     Compl. Ex. A, at § 5.02.
75
     Compl. ¶¶ 181–82.
76
     Compl. ¶ 58.

                                             13
         irrevocably submits with regard to any such Action for itself and in
         respect of its property, generally and unconditionally, to the personal
         jurisdiction of the aforesaid courts and agrees that it will not bring any
         Action relating to this Agreement or any of the transactions
         contemplated by this Agreement in any court other than the aforesaid
         courts . . .77

The parties also chose Delaware law to govern the “construction, validity,

enforcement and interpretation” of the Separation Agreement.78

      F. Riverstone Takes Talen Private

         On December 3, 2015, Michael Hoffman, a Riverstone partner and member

of Talen’s Board, contacted Graham, then the Chairman of Talen’s Board, to express

Riverstone’s interest in acquiring the 65% of Talen it did not already own.79

Riverstone engaged advisors and hired counsel to assist in the sale process and, on

June 2, 2016, the parties executed an agreement in principle to take Talen private.80

There was no mention of financial distress at any of Talen’s subsidiaries in the

documents executed or filed in connection with the transaction, in Riverstone’s

public statements regarding the transaction or in communications between Talen and

77
     Compl. ¶ 71.
78
     Compl. Ex. A, at § 10.03.
79
     Compl. ¶ 89.
80
     Compl. ¶¶ 90–91.

                                            14
PPL about the transaction.81 In fact, PPL cooperated with Riverstone throughout the

sales process.82 Riverstone completed the take private transaction in December

2016, ending Farr, Bernthal, Cox, Goeser and Graham’s affiliations with Talen.83

Approximately a year after the take-private transaction closed, Riverstone declared

a “special cash dividend” for itself and sent $500 million from Talen Energy Supply

and its subsidiaries upstream to Riverstone.84       In 2018, Riverstone publicly

represented that Talen had the capacity to provide it with an additional $1 billion in

dividends.85

      G. The Montana Actions

         In June 2018, at Talen’s request, PPL’s CEO and General Counsel met with

their counterparts at Talen along with Ralph Alexander, a Riverstone board

designee.86 The Talen executives informed PPL that Riverstone intended to remove

an additional $500 million from Talen and then seek to hold PPL liable for the

81
     Compl. ¶¶ 92–98.
82
     Compl. ¶ 98.
83
     Compl. ¶ 99.
84
     Compl. ¶ 102.
85
     Compl. ¶ 104.
86
     Compl. ¶ 107.

                                         15
Distribution.87 This was the first time Riverstone or Talen had informed PPL there

were potential legal issues arising from the Distribution.88 While claiming that Talen

Montana was (and had for some time been) insolvent, Talen never sought to exercise

its right under the Separation Agreement to demand that PPL contribute additional

assets to Talen.89

           Three months later, in October 2018, PPL was named as a defendant in two

lawsuits in Montana.90 The first was filed in Rosebud County by a putative class of

Talen Montana creditors (the “Rosebud Action”);91 the second was filed in Lewis

and Clark County by Talen Montana (“the L&C Action”).92 The Rosebud Action

asserts eight claims against PPL, certain of its subsidiaries and certain present and

former PPL directors; the L&C Action asserts eleven claims against the same

87
     Id.
88
     Id.
89
     Compl. ¶ 108.
90
     Compl. ¶ 109.
91
     Compl. ¶ 120.

 Compl. ¶ 118. I refer to the Rosebud Action and L&C Action together as “the Montana
92

Actions.”

                                          16
parties.93 While not named as a plaintiff in either of the Montana Actions, Plaintiffs

allege Riverstone caused its controlled entities to file both actions.94

         The gravamen of the Montana Actions is that the Distribution caused

PPL Montana to become insolvent and, as such, was a fraudulent transfer.95

Plaintiffs here allege the Montana Actions are nothing more than an attempt by

Riverstone to hold PPL responsible for liabilities expressly assumed by Talen in the

Spin, and that the focus on the Distribution in Montana is simply a smoke screen

intended to distract attention from the clear allocation of assets and liabilities

memorialized in the Separation Agreement.96

         The Rosebud Action has been removed to federal court and is currently

pending in the United States District Court for the District of Montana. 97 Plaintiffs

here have moved to dismiss that action, and will move to dismiss the L&C Action

shortly for lack of personal jurisdiction and forum non conveniens.98

93
     Compl. ¶¶ 118–22.
94
     Compl. ¶ 109.
95
     Compl. ¶¶ 118–22.
96
     Compl. ¶¶ 114–24.
97
     Compl. ¶ 120.
98
     Compl. ¶ 125.

                                           17
   H. Procedural History

      Plaintiffs filed their Verified Complaint on November 30, 2018, and filed the

First Amended Complaint on January 11, 2019. Defendants moved to dismiss.

Plaintiffs then sought, and were granted, leave to file a Second Amended Complaint.

The Second Amended Complaint, which is the operative complaint, was filed on

March 20, 2019, and Defendants moved to dismiss on April 19, 2019.

      The Second Amended Complaint comprises nine counts: (I) a claim for breach

of the Separation Agreement against Talen, Talen Energy Holdings and Talen

Energy Supply for causing the Montana Actions to be filed in violation of the forum

selection clause; (II) a claim for declaratory relief that all Defendants cannot recover

the proceeds from PPL Montana’s sale of the hydroelectric assets; (III) a claim for

declaratory relief against Talen Montana that Plaintiffs did not breach any fiduciary

duties owed to PPL Montana and that claims for breach of fiduciary duty and aiding

and abetting breach of fiduciary duty are time-barred; (IV) a claim for declaratory

relief against Talen Montana that Farr, Wilten and Simonich are not liable for any

alleged breach of PPL Montana’s LLC Agreement, the implied covenant of good

faith and fair dealing associated with that agreement or any other breach of contract,

and that any claims of breach are time-barred; (V) a claim for declaratory relief

against Talen Montana that Plaintiffs are not liable for tortious interference,

negligent misrepresentation, constructive fraud, deceit, unjust enrichment,

                                          18
constructive trust or punitive damages; (VI) a claim for breach of the Separation

Agreement against Talen, Talen Energy Holdings, Talen Energy Supply, Talen

Montana, Raven, Jade and Sapphire for failure to indemnify Plaintiffs and violating

the Separation Agreement’s release clauses in connection with the Montana Actions;

(VII) a claim for breach of the implied covenant of good faith and fair dealing against

Talen, Talen Energy Holdings, Talen Energy Supply, Raven, Jade and Sapphire for

rendering Talen Montana insolvent and filing the Montana Actions; (VIII) a claim

for tortious interference against Riverstone for causing entities it controls to breach

the Separation Agreement; and (IX) a claim for declaratory relief that PPL is not

required to indemnify the Defendants for this Delaware action.99

         The Talen Defendants have moved to dismiss or stay Counts II–V under

McWane for improper venue pursuant to Court of Chancery Rule 12(b)(3), and

Counts I, VI–VII and IX for failure to state a claim under Court of Chancery

Rule 12(b)(6).100 The Riverstone Defendants have moved to dismiss Count VIII for

failure to state a claim under Court of Chancery Rule 12(b)(6).

99
     Compl. ¶¶ 126–205.
100
   The Talen Defendants move to dismiss Count I (stating a claim for breach of the forum
selection clause) under Rule 12(b)(6) but their arguments implicate a venue analysis under
McWane and Rule 12(b)(3). Accordingly, I analyze the arguments under both rules.

                                           19
                                      II. ANALYSIS

         Under McWane, this Court will stay or dismiss a case in deference to a first-

filed case in a different jurisdiction under Court of Chancery Rule 12(b)(3) if the

prior action involves the same parties, the same issues and is pending in a court

capable of doing prompt and complete justice.101 A valid forum selection clause,

however, can preempt application of the McWane doctrine.102 While Defendants

have addressed their Rule 12(b)(3) motion only to certain counts of the Complaint,

they have suggested in briefing that this Delaware litigation should be stayed in its

entirety in favor of the Montana Actions. Accordingly, I address the forum issues

first before turning to the viability of Plaintiffs’ claims as pled.

      A. The Motion to Dismiss Counts I and II–V Under McWane

         It is undisputed the Separation Agreement contains a forum selection clause

selecting the Delaware Court of Chancery as the exclusive venue for all disputes

among the parties “with respect to this Agreement and the rights and obligations

arising hereunder, or for recognition and enforcement of any judgment in respect of

this Agreement and the rights and obligations arising hereunder.”103 The parties

101
      McWane, 263 A.2d at 283.
102
      Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1145 (Del. 2010).
103
   Compl. ¶ 132; Compl. Ex. A, at 52; Talen Parties’ Opening Br. in Supp. of Their Mot.
to Dismiss or Stay Second Am. and Supplemental Verified Compl. (“Talen OB”) at 24.

                                              20
further agreed they would “not bring any Action relating to this Agreement or any

of the transactions contemplated by this Agreement in any court other than the

[Court of Chancery].”104 Forum selection clauses like this are presumptively valid

and vigorously enforced in Delaware.105

         Much of the analysis this Court usually undertakes when analyzing a forum

selection clause is unnecessary here because Defendants do not contest the validity

or breadth of the clause in the Separation Agreement.106 Instead, they argue the

Montana plaintiffs are non-signatories to the Separation Agreement and, therefore,

are not bound by the forum selection provision.107 This argument elides Delaware

law and ignores Plaintiffs’ well-pled allegations.

         The forum separation provision at issue is, by any measure, broad.108 Broad

forum selection clauses “apply not only to claims dealing directly with the terms of

the contract itself, but also to any issues that touch on contract rights or contract

104
      Compl. Ex. A, at §10.04.
105
      Capital Gp. Cos., Inc. v. Armour, 2004 WL 2521295, at *6 (Del. Ch. Nov. 3, 2004).
106
   The Talen Parties’ Reply Br. in Supp. of Their Mot. to Dismiss the Second Am. and
Supplemental Verified Compl. (“Talen RB”) at 7.
107
      Talen OB 26.
108
   See ASDC Hldgs., LLC v. Richard J. Malouf 2008 All Smiles Grantor Retained Annuity
Trust, 2011 WL 4552508, at *5 (Del. Ch. Sept. 14, 2011). The forum selection clause in
the Separation Agreement captures claims “with respect to” the parties’ “rights and
obligations” “arising” under the agreement. Compl. Ex. A, at § 10.04.

                                             21
performance.”109 That the parties negotiated a broad forum selection clause is

relevant to the question of whether the parties intended the clause to apply to non-

signatories.110

         The doctrine of equitable estoppel “prevents a non-signatory to a contract

from embracing the contract, and then turning her back on the portions of the

contract, such as a forum selection clause, that she finds distasteful.”111 This court

conducts a three-part inquiry to determine if equitable estoppel binds non-parties to

a forum selection clause: (1) is the clause valid?; (2) are the defendants third-party

beneficiaries or closely related to the contract?; and (3) does the claim arise from

defendants standing relating to the agreement?112

         Defendants only contest the third factor, arguing the Montana Actions do not

arise from or relate to the Separation Agreement.113 Specifically, they argue the

Montana Actions assert common law, statutory and contractual claims that are not

109
      ASDC, 2011 WL 4552508, at *5 (quotations omitted).
110
    See Weygandt v. Weco, LLC, 2009 WL 1351808, at *4 n.15 (Del. Ch. May 14, 2009)
(Strine, V.C.). In Weygandt, the court held that in order for non-signatories to be bound,
their claims must “arise from” the operative agreement. This analysis tracks the analysis
the court undertakes when determining the extent to which certain claims are captured by
a forum selection clause. See ASDC, 2011 WL 4552508, at *5.
111
      Armour, 2004 WL 2521295, at *6.
112
      Weygandt, 2009 WL 1351808, at *4.
113
      Oral Arg. on Defs.’ Mots. to Dismiss (“OA”) at 25.

                                             22
dependent on the existence of the Separation Agreement.114               According to

Defendants, the Montana plaintiffs are not attempting to enforce the Separation

Agreement nor are they seeking any benefits from it.115 While this may be true,

Defendants choose to ignore that, if the Montana Actions proceed, the Montana

defendants undoubtedly will point to and rely upon the Separation Agreement as

their first and principal line of defense.116 While all roads may not lead to Rome, all

litigation roads these parties might travel, both in Delaware and Montana, invariably

will lead back to the Separation Agreement.

         Additionally, Plaintiffs have well-pled that Riverstone caused entities over

which it exercised control to file the Montana Actions, in part, to attempt to avoid

the Delaware forum selection clause.117 If Plaintiffs prove this to be true, it would

be inequitable not to enforce the contractually bargained for forum selection clause

114
      Talen RB 12.
115
      Talen OB 30.
116
    To state the obvious, the Montana defendants will argue that, under the Separation
Agreement, they can have no liability for Energy Supply Liabilities or for so-called
“Missing Assets,” are fully indemnified for such claims and, in any event, the Montana
plaintiffs have contractually waived their right to prosecute such claims. Compl. ¶¶ 41–
60. Defendants acknowledged as much at oral argument. (The Court: “you are looking
for some sort of declaration of what all this means in the Separation Agreement here in
Delaware that can then be used in some sort of preclusive way in Montana?” Defendants’
counsel: “That’s the way it’s been set up through this motion.”) OA at 18. Of course,
whether vel non these defenses have merit remains to be seen.
117
      Compl. ¶¶ 109, 121, 134–39.

                                          23
simply because Riverstone caused the Montana Actions to be filed by nonparties to

that contract. This Court does not countenance such tactics when they are employed

to defeat bargained-for rights.118

         Because the Separation Agreement’s forum selection clause captures the

claims brought in the Montana Actions, there is no need to engage in a McWane

analysis.119 Defendants’ Motion to Dismiss or Stay Counts I and II–V is denied. As

bound parties, Plaintiffs have well-pled that Defendants breached the Separation

Agreement by causing the Montana Actions to be filed. Thus, Defendants’ Motion

to Dismiss Count I must be denied as well.

      B. The Motion to Dismiss Counts I, VI, VII & IX Under Rule 12(b)(6)120

         The standard for deciding a Motion to Dismiss under Court of Chancery

Rule 12(b)(6) is well-settled:

         (i) all well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are “well-pleaded” if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences

118
    See Ashall Homes, 992 A.2d at 1252 (refusing to allow “artful pleading” to circumvent
a forum selection clause); Neurvana Med., LLC v. Balt USA, LLC, 2019 WL 4464268,
at *5 (Del. Ch. Sept. 18, 2019) (noting “it would be inconsistent with [public] policy to
allow the entities through which one of the parties chooses to act to escape the forum
selection clause” (quoting Weygandt, 2009 WL 1351808, at *5)).
119
      Ingres, 8 A.3d at 1145.
120
    Having determined that Plaintiffs have properly invoked the forum selection clause, it
follows they have stated a viable claim of breach of that clause by virtue of the filing of the
Montana Actions. Accordingly, I need not analyze the Rule 12(b)(6) motion as to Count I
any further.

                                              24
            in favor of the non-moving party; and (iv) dismissal is inappropriate
            unless the plaintiff would not be entitled to recover under any
            reasonably conceivable set of circumstances susceptible of proof.121

            Because this case presents legal issues surrounding the “proper interpretation

of language in a contract,”122 the Court may address these issues at the motion to

dismiss stage “[w]hen the language of [the] contract is plain and unambiguous.”123

Contract language is ambiguous “only when the provisions in controversy are

reasonably or fairly susceptible of different interpretations or may have two or more

different meanings.”124 Dismissal is appropriate when the defendant’s interpretation

is the only reasonable construction as a matter of law; if the plaintiff has proffered a

reasonable construction upon which its claim of breach rests, the motion to dismiss

must be denied.125

            Count VI alleges breaches of express provisions of the Separation Agreement;

Count VII alleges a breach of the implied covenant of good faith and fair dealing;

and Count IX seeks a declaratory judgment that PPL is not obligated to indemnify

121
      Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citation omitted).
122
    Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006)
(Strine, V.C.) (noting that issues of contract interpretation present questions of law).
123
      Id.
124
      AT&T Corp. v. Lillis, 953 A.2d 241, 252 (Del. 2008) (quotations omitted).

  Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine P’rs 2006, L.P., 93 A.3d 1203,
125

1205 (Del. 2014); Kahn v. Portnoy, 2008 WL 5197164, at *1 (Del. Ch. Dec. 11, 2008).

                                              25
the Defendants for this action. Each claim turns on the construction of the Separation

Agreement’s definition of            “Energy Supply Liabilities” and “Excluded

Liabilities.”126 Accordingly, it is appropriate to begin the analysis there. I begin by

considering the parties’ competing construction of these terms and then address the

viability of Plaintiffs’ breach of contract, breach of the implied covenant and

declaratory judgment claims.

         1. Energy Supply Liabilities vs. Excluded Liabilities

         Delaware law governs the Separation Agreement. And, “under Delaware law,

courts interpret contracts to mean what they objectively say” 127 with a purpose of

“satisfying the ‘reasonable expectations of the parties at the time they entered into

the contract.’”128 Our courts construe contracts “as a whole, giving effect to all

provisions therein.”129 “The meaning inferred from a particular provision cannot

control the meaning of the entire agreement if such an inference conflicts with the

agreement’s overall scheme or plan.”130

126
      See Talen OB 33–55.
127
  Plaze, Inc. v. Callas, 2019 WL 1028110, at *4 (Del. Ch. Feb. 28, 2019) (quotations
omitted).
128
   Dittrick v. Chalfant, 948 A.2d 400, 406 (Del. Ch. 2007) (quoting The Liquor Exchange,
Inc. v. Tsaganos, 2004 WL 2694912, at *2 (Del. Ch. Nov. 16, 2004)).
129
   Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55 A.3d 330, 334 (Del. 2012)
(quotations omitted).
130
      GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012).

                                              26
          As noted, the Separation Agreement provides that assets and liabilities

subject to the Spin would be characterized either as “Energy Supply” or

“Excluded.”131 Plaintiffs argue the Montana plaintiffs have brought claims based on

liabilities that Talen expressly assumed and agreed to indemnify the PPL parties for

in the Separation Agreement.132 Defendants counter that they are suing on liabilities

specifically retained by PPL in the Separation Agreement, and because their claims

relate to “Excluded Liabilities,” the Separation Agreement’s indemnification,

release of claims and “Missing Assets” provisions do not apply.133

         As noted, Talen agreed to assume all liabilities related to the Energy Supply

Business, specifically promising to “assume, perform, discharge and fulfill when due

and, to the extent applicable, comply with, such Energy Supply Liabilities in

accordance with their respective terms.”134 Energy Supply Liabilities are defined as

“all Liabilities of [PPL] . . . arising out of, relating to or produced from the operation

or conduct of the Energy Supply Assets or . . . the operation or conduct of the Energy

Supply Business . . . .”135 In short, under this construction, any liability (except for

131
      Compl. ¶¶ 57–64.
132
      Compl. ¶¶ 61–69.
133
      Talen OB 36–41.
134
      Compl. Ex. A, at § 1.01(g).
135
      Compl. Ex. A, at § 2.03(a).

                                           27
Excluded Liabilities) of PPL Energy Supply prior to the Spin would be assumed by

the newly created Talen. Consequently, all of PPL Montana’s liabilities would be

transferred to Talen Montana after the Spin. Defendants do not dispute that this

would capture PPL Montana’s environmental liabilities and unfunded pension

obligations.136

         The Separation Agreement specifically carves out certain assets and liabilities

as “Excluded.”           This includes the proceeds of the hydroelectric sale to

NorthWestern. To define “Excluded Assets,” the Separation Agreement points to

“the Assets listed or described on Schedule 2.02(b)(ix) . . . .”137 The second item

listed in that schedule is “[a]ll proceeds payable to Energy Supply Sub pursuant to

that certain Purchase and Sale Agreement dated September 29, 2013 between

PPL Montana, LLC and NorthWestern Corporation. . . .”138 Section 2.03(b)(ii) of

the Separation Agreement defines “Excluded Liabilities” as “any Liability of Parent

and/or any of its Affiliates to the extent arising out of or relating to any Excluded

Asset, or any other Asset of Parent or any of its Affiliates that is not an Energy

Supply Asset. . . .”139 Therefore, under a reasonable construction of the relevant

136
      See OA at 11–15.
137
      Compl. Ex. A, at § 2.02(a).
138
      Compl. Ex. C, at 1.
139
      Compl. Ex A, at § 2.03(b).

                                            28
language, the proceeds from the sale of PPL Montana’s hydroelectric assets are

Excluded Assets and any liabilities arising from or relating to those assets are

Excluded Liabilities.

         Defendants say the contract construction exercise can end here. Specifically,

they argue that, because their claims in Montana relate to the Distribution, the

unambiguous language of the contract renders the liabilities giving rise to those

claims Excluded Liabilities.140       But this stops the analysis halfway.          In their

fraudulent transfer claim, the “liability” the Montana plaintiffs say is “Excluded” is

the Distribution that caused Talen Montana’s insolvency.141 In this regard, the

Montana plaintiffs (and Defendants here) attempt a “but for” argument: but for

PPL Montana sending the proceeds of the hydroelectric sale upstream to PPL,

Talen Montana would have sufficient funds to pay its debts.142 Framing the claim

140
      Talen OB 37–39.
141
   Compl. ¶ 7. The Montana Actions allege insolvency “under all three solvency tests—
balance sheet insolvency, inability to pay debts when due, and unreasonably small
capital . . . .” Talen OB Ex. A, at 15. See generally, Insolvency, BLACK’S LAW
DICTIONARY (11th ed. 2019) (“[t]he condition of being unable to pay debts as they fall
due . . . when the debtor’s liabilities exceed its assets.”).
142
   See Talen RB 21 (“Every claim in the Montana Actions seeks redress for the harm
caused by the PPL Parties’ scheme to strip Talen Montana of its value and render it
insolvent by causing the sale of hydroelectric assets and Distribution of the sale
proceeds.”). As Plaintiffs point out, while it is certainly true the money sent upstream to
PPL in the Distribution could have covered at least some portion of these debts, the same
could be said of the billions of dollars that allegedly have flowed in and out of Talen since
the Spin (Plaintiffs specifically point to $1.2 billion spent by Talen to buy MACH Gen,
LLC, and a $500 million special dividend declared and received by Riverstone as
                                             29
this way exposes the inherent connection of the claim to the Separation Agreement;

the alleged insolvency exists because Talen Montana allegedly cannot pay its debts,

specifically its underlying environmental and pension obligations.143 These debts

arise separately from and predate the Distribution. Thus, there is reason under the

Separation Agreement to conclude that Talen expressly assumed these liabilities as

Energy Supply Liabilities.144 As pled in the Complaint, it is reasonably conceivable

that Defendants’ attempt to characterize the “liabilities” at issue as arising solely

from the Distribution is actually an effort to circumvent the Separation Agreement’s

bargained for allocation of risk.145

         Riverstone negotiated the Spin with the assistance of experienced counsel on

a clear day. The parties conducted extensive diligence before executing the deal and

the Separation Agreement expressly recognizes that the newly created Talen had no

claim to the proceeds of the hydroelectric sale.146 As pled, all the parties were aware

examples). Compl. ¶¶ 82, 102. And, while Talen was not obliged under the Separation
Agreement to provide Talen Montana with intercompany financing, it is undisputed that
Talen, as a whole, was solvent prior to the take-private transaction and had the ability to
provide some funding to Talen Montana. Talen OB 10.
143
      See Talen OB Ex. A, at 14–15.
144
      See Compl. Ex. A, at § 2.03(a).
145
   Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010) (holding that Delaware courts may
not “rewrite the contract to appease a party who later wishes to rewrite a contract he now
believes to have been a bad deal.”).
146
      Compl. ¶¶ 10–12, 64.

                                            30
of the Distribution and nothing in the Separation Agreement indicates any party took

issue with it.147 Moreover, Talen expressly assumed PPL Montana’s liabilities and

Riverstone presumably was aware how PPL had supported its subsidiary through

intercompany financing and how a decline in the wholesale energy market could

threaten the newly-created Talen Montana’s solvency.148 These pled facts support

Plaintiffs’ construction of the operative provisions of the Separation Agreement.

Whether Plaintiffs’ is the only reasonable construction of the contract is a question

not called by the motion sub judice. Suffice it to say, Plaintiffs have proffered a

reasonable construction and, as discussed below, their construction supports their

claims for breach of contract and declaratory judgment.

         2. Plaintiffs Have Stated Viable Breach of Contract and Declaratory
            Judgment Claims

         To state a claim for breach of contract, a plaintiff must plead: (1) the existence

of a contract; (2) the breach of a contractual obligation; and (3) damage to the

plaintiff.149     Having determined that Plaintiffs have proffered a reasonable

construction of the Separation Agreement that supports their claim that the liabilities

in the Montana Actions are Energy Supply Liabilities, it follows they have stated a

147
      Compl. ¶ 107.
148
      Compl. ¶¶ 112–15.
149
      Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 883 (Del. Ch. 2009).

                                             31
viable claim that the filing of the Montana Actions constitutes a material breach of

the Separation Agreement by violating the agreement’s indemnification and antisuit

provisions. Accordingly, the Talen Defendants’ Motion to Dismiss Count VI must

be denied.150 And because the liabilities of Talen Montana are conceivably Energy

Supply Liabilities such that Defendants would not be entitled to indemnification for

defending this action, Defendants’ Motion to Dismiss Count IX must also be denied.

            3. Plaintiffs Have Failed to State a Viable Implied Covenant Claim

            Along with their express breach of contract claims, Plaintiffs allege

Defendants have breached the implied covenant of good faith and fair dealing.151

Specifically, they allege Talen’s failure to support Talen Montana with

intercompany financing and the Talen controlled entities’ act of filing the Montana

Actions both breach the implied covenant.152 As explained below, these claims fail

as a matter of law.

150
    Defendants’ arguments about the inapplicability of the indemnification, waiver of
claims, antisuit and “Missing Assets” provisions of the Separation Agreement all rest on
their construction of the language concerning Energy Supply and Excluded liabilities.
Talen OB 36–41. While that construction may ultimately prevail, the Court’s
determination that Plaintiffs’ have proffered a reasonable construction that would place the
claims in the Montana Actions within the definition of Energy Supply Liabilities precludes
dismissal of claims alleging those provisions have been breached.
151
      Compl. ¶¶ 187–93.
152
      Id.

                                            32
         The implied covenant of good faith and fair dealing “attaches to every

contract.”153 But our courts appreciate that “the implied covenant is a cautious

enterprise” that should not be invoked imperiously.154 Delaware implies terms

within a contract only when there is a gap in a contract that the parties would have

covered with additional covenants had they thought to do so.155 It is not surprising,

then, that “Delaware courts rightly employ the implied covenant sparingly when

parties have crafted detailed, complex agreements, lest parties be stuck by judicial

error with duties they never voluntarily accepted.”156

         Plaintiffs have failed to identify the contractual “gap” in the Separation

Agreement the implied covenant must fill. Although the Separation Agreement is

silent regarding Talen’s obligation to provide intercompany support to Talen

Montana, mere silence does not a contractual gap make.157 “The most obvious

reason a term would not appear in the parties’ express agreement is that the parties

simply rejected that term ex ante when they articulated their contractual rights and

153
      Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 442 (Del. 2005).
154
  Oxbow Carbon & Minerals Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482,
506–07 (Del. 2019); Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146
(Del. Ch. 2009).
155
      Nemec, 991 A.2d at 1125.
156
   Bay Ctr. Apartments Owner, LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *7
(Del. Ch. Apr. 20, 2009) (Strine, V.C.).
157
      Nemec, 991 A.2d at 1125.

                                             33
obligations.”158     The Separation Agreement thoroughly details each party’s

obligations and there is no indication the parties bargained for, or even contemplated,

a post-closing duty for Talen to provide financing support to Talen Montana. Had

the parties intended to impose that obligation upon Talen, they would have said so

in the Spin documents.159

         Plaintiffs argue the Defendants’ construction of the Separation Agreement

vests Defendants with the ability to “exercise discretion in a manner that could strip

[Plaintiffs] of the benefits of the agreement.”160 “Discretion” in the implied covenant

context does not exist wherever a party to the contract has some decision-making

flexibility; it only exists “in contracts that defer a decision at the time of contracting

and empower one party to make that decision later.”161 Plaintiffs have failed to

address exactly what that discretion is here, other than the obvious power Talen has

158
Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 183 (Del. Ch. 2014) (quoting
Mohsen Manesh, Express Contract Terms and the Implied Contractual Covenant of
Delaware Law, 38 DEL. J. CORP. L. 1, 19 (2013)).
159
   Additionally, as Defendants note, the Spin documents do address other post-closing
matters. Talen OB 44–45. Although none concern intercompany financing, the fact that
some post-closing matters were bargained for, but not intercompany financing, strengthens
the argument that the parties did not intend for there to be any contractual obligation for
Talen to provide post-Spin financing to Talen Montana.
160
   Pls.’ Answering Br. in Opp’n to Defs.’ Mots. to Dismiss the Second Am. and
Supplemental Verified Compl. (“AB”) 54 (citing Amirsaleh v. Bd. of Trade of City of New
York, Inc., 2008 WL 4182998, at *8 (Del. Ch. Sept. 11, 2008)).
161
      Amirsaleh, 2008 WL 4182998, at *8.

                                            34
to control its subsidiaries.162 Our case law is clear the discretion required to invoke

the implied covenant is narrower and more definite than Plaintiffs have proffered

here.163

         Plaintiffs also attempt an argument that, in essence, grounds the alleged

breach of the implied covenant in Defendants’ alleged breaches of the express terms

of the Separation Agreement.164 Of course, that is not how the implied covenant

works. If Plaintiffs have a claim for breach of contract, they should state it as such.

There is no room or need for the implied covenant.165 Count VII must be dismissed.

162
   AB 55 (“This would give Defendants the discretion to operate the Talen entities in a
bad faith manner and then shift their post-Spin liabilities to PPL.”).
163
    See Winshall v. Viacom Int’l, Inc., 55 A.3d 629, 637 (Del. Ch. 2011) (Strine, C.)
(dismissing an implied covenant claim alleging an acquiring company had a duty to run
the acquired company in a manner that maximized payouts to shareholders), aff’d, Winshall
v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013); Amirsaleh, 2008 WL 4182998, at *8–9
(denying summary judgment of an implied covenant claim in a contract which contained
explicit discretion granting language); Emery Bay, 2009 WL 1124451, at *7 (denying
Motion to Dismiss of an implied covenant claim where a party was expressly vested with
discretion to cause agreements to be performed); Miller v. HCP & Co., 2018 WL 656378,
at *10–11 (Del. Ch. Feb. 1, 2018) (dismissing implied covenant claim where scope of
discretion was specified).
164
      AB 55–57.
165
   See Fisk Ventures, LLC v. Segal, 2008 WL 1961156, at *10 (Del. Ch. May 7, 2008)
(“because the implied covenant is, by definition, implied, and because it protects the spirit
of the agreement rather than the form, it cannot be invoked where the contract itself
expressly covers the subject at issue.”).

                                             35
      C. Plaintiffs Have Stated a Viable Tortious Interference Claim Against
         Riverstone

         Plaintiffs allege Riverstone tortiously interfered with the Separation

Agreement by intentionally rendering Talen Montana insolvent and subsequently

causing the Montana Actions to be filed.166 Riverstone accepts as true Plaintiffs’

allegations for now and rests its motion to dismiss on the lack of an underlying

contractual breach, or in the alternative, the affiliate privilege.167 As I have declined

to dismiss Plaintiffs’ breach of contract claims, I turn directly to Riverstone’s

affiliate privilege defense.

         The elements of tortious interference are “(1) a contract, (2) about which

defendant knew, and (3) an intentional act that is a significant factor in causing the

breach of such contract, (4) without justification, (5) which causes injury.” 168 The

so-called “affiliate privilege” is a qualified privilege in the intentional interference

realm that protects a parent company’s ability to engage in legitimate business

activities with its subsidiaries.169 If the privilege applies, the plaintiff will not be

able to prove a prima facie element of the tort of intentional interference—that the

166
      Compl. ¶ 197.
167
   The Riverstone Defs.’ Br. in Supp. of Their Mot. to Dismiss the Second Am. and
Supplemental Verified Compl. (“Riverstone OB”) 2 n.1, 4–5.
168
      Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013).
169
      Shearin v. E.F. Hutton Gp., Inc., 652 A.2d 578, 591 (Del. Ch. 1994) (Allen, C.).

                                               36
parent’s alleged interference with its subsidiary’s contract was “without

justification.”

         “[T]he test for holding a parent corporation liable for tortious interference

ha[s] to be high or every-day consultation or direction between parent corporations

and subsidiaries about contractual implementation would lead parents to be always

brought into breach of contract cases.”170 In Shearin v. E.F. Hutton Group, Inc.,

Chancellor Allen described how a plaintiff must plead the interfering party acted in

bad faith to overcome the privilege:

         [T]he gist of a well-pleaded complaint for interference by a corporation
         of a contract of its affiliate is a claim that the “interfering” party was
         not pursuing in good faith the legitimate profit seeking activities of the
         affiliated enterprises. If one is privileged by reason of a recognized
         relationship to discuss the financial welfare of an affiliated party, one
         may in good faith suggest that a termination of a contract, and the
         assumption of any resulting liability, would be beneficial to that
         party.171

The bad faith standard is “stringent” and will not be found where a parent was merely

advising or causing the subsidiary to engage in an efficient breach of the contract.172

         Plaintiffs’ allegations that Riverstone intentionally caused its subsidiaries to

render Talen Montana insolvent and to file the Montana Actions are sufficient to

170
      Allied Capital, 910 A.2d at 1039.
171
      Shearin, 652 A.2d at 591.
172
  Allied Capital, 910 A.2d at 1039; NAMA Hldgs., LLC v. Related WMC LLC, 2014
WL 6436647, at *30 (Del. Ch. Nov. 17, 2014).

                                            37
allege bad faith and overcome the privilege.173 In this regard, then-Vice Chancellor

Strine’s decision in Allied Capital v. GC-Sun Holdings, L.P. is instructive.174

In Allied Capital, a company engaged in a series of transactions with its subsidiaries

by which a note holder’s priority, and ultimate financial return, was dramatically

reduced.175 The court noted, “this case does not involve the classic efficient breach

scenario that underlies the limited privilege in the tortious interference context[,]”

and emphasized that “[parent] is alleged to have purposely injured [subsidiaries] so

as to enable [parent’s] newly-created affiliate [company] to reap gain.”176

          Plaintiffs have also sufficiently pled this is not a “classic efficient breach

scenario” and that Riverstone purposefully damaged its subsidiary, Talen Montana,

in order to orchestrate this lawsuit as a means to achieve a cash recovery from

Plaintiffs.177 As in Allied Capital, it is well-pled here that Riverstone “use[d] its

control of a subsidiary, not to enrich the subsidiary, but to divert value from the

173
      Compl. ¶¶ 197–98.
174
   Allied Capital, 910 A.2d at 1040. Although the court dismissed the tortious interference
claim because there was no underlying breach of contract, in discussing a claim of civil
conspiracy among business entities under common control, the court specifically noted,
“[i]n this case, there is no doubt that the complaint pleads facts that satisfy . . . the bad faith
standard articulated in Shearin.” Id.
175
      Id. at 1026–29.
176
      Id. at 1040.
177
      Id. at 1041; Compl. ¶¶ 197–98.

                                                38
subsidiary to itself in a bad faith manner . . . .”178 Riverstone is not alleged to have

caused Talen Montana to breach the Separation Agreement because it viewed paying

damages as less costly than performance. Rather, it is well-pled that Riverstone

caused a breach because it thought it could profit from a subsequent lawsuit against

the PPL parties.179 Whether Plaintiffs can prove those allegations remains to be seen.

For now, however, the Riverstone Defendants’ Motion to Dismiss Count VIII must

be denied.

                                    III.   CONCLUSION

         For the foregoing reasons, the Talen Defendants’ Motion to Dismiss is

DENIED as to Counts I–VI and Count IX, and GRANTED as to Count VII.

Riverstone’s Motion to Dismiss Count VIII is DENIED.

         IT IS SO ORDERED.

178
      Allied Capital, 910 A.2d at 1042.
179
      Compl. ¶ 110.

                                            39