Court Opinion

ID: 4191246
Source: CourtListenerOpinion
Date Created: 2017-07-31 20:06:18.050673+00
Date Added: 2024-06-11T14:39:53.643029
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THOMAS McKENNA and                    )
GARRETT McKENNA, both                 )
individually and derivatively on behalf
                                      )
of ROBISON ENERGY FUND                )
MANAGEMENT, LLC and GREEN             )
ENERGY COMPANIES, LLC,                )
                                      )
  Plaintiffs/Counterclaim Defendants, )
                                      )
             v.                       )         C.A. No. 11371-VCMR
                                      )
DAVID SINGER, DANIEL SINGER, )
and SINGER ENERGY GROUP,              )
LLC,                                  )
                                      )
  Defendants/Counterclaim Plaintiffs, )
                                      )
             v.                       )
                                      )
WESTPORT CAPITAL PARTNERS, )
LLC and GEC ENERGY HOLDINGS )
LLC,                                  )
                                      )
  Defendants,                         )
                                      )
ROBISON ENERGY FUND, LLC and )
GREEN ENERGY COMPANIES,               )
LLC,                                  )
                                      )
  Nominal Defendants.                 )

                         MEMORANDUM OPINION
                        Date Submitted: April 14, 2017
                         Date Decided: July 31, 2017
James S. Green, Kevin A. Guerke, and Jared T. Green, SEITZ, VAN OGTROP &
GREEN, P.A., Wilmington, Delaware; Attorneys for Plaintiffs/Counterclaim
Defendants.

Todd C. Schiltz and Lindsay B. Orr, DRINKER BIDDLE & REATH LLP,
Wilmington, Delaware; Betty M. Shumener, SHUMENER, ODSON & OH LLP,
Los Angeles, California; Fred D. Weinstein, KURZMAN EISENBERG CORBIN
& LEVER LLP, White Plains, New York; Attorneys for Defendants/Counterclaim
Plaintiffs.

MONTGOMERY-REEVES, Vice Chancellor.
      This case arises from a dispute between two families who were once in

negotiations to build a business together. The Singer family has owned and operated

an energy distribution business in New York for over ninety years. Thomas

McKenna was a practicing lawyer, and his son Garrett McKenna worked in the

financial services sector. The McKennas believed that through partnering with the

Singer brothers, they could capitalize on an opportunity to finance the work and

equipment required to convert the energy source for buildings in the Northeastern

United States from heating oil to natural gas. The Singer family business, which had

substantial debts coming due, would perform the conversion work. The McKennas

would raise capital from investors, which would be used to purchase the Singers’

family business and refinance that business’s debt. The McKennas purported to

have a lending plan that the new venture could use to make the oil-to-gas conversion

loans. The clients’ savings from the difference in price between oil and gas at the

time would allow the clients to service the loans.

      The Singers and the McKennas formed two Delaware limited liability

companies and attempted to raise capital. No one was willing to invest on their

proposed terms. But Westport Capital Partners proposed alternative terms for an

investment in the business idea. Under the Westport terms, the Singers would

contribute their business to a new entity, and Westport would contribute cash. The

McKennas would run the financing portion of the business, under Westport’s

                                          1
direction, as employees. After extended negotiations, the Singers and Westport

entered a deal primarily on Westport’s proposed terms. But they could not come to

an agreement with the McKennas.

      The McKennas now sue for breach of fiduciary duty on the theory that the

Singers misappropriated an opportunity that belonged to the limited liability

companies of which the Singers and the McKennas were members. The McKennas

also assert that the Singers and Westport secretly negotiated to the exclusion of the

McKennas in breach of the duty of loyalty. The Singers allege in a counterclaim

that the McKennas made material misrepresentations about their qualifications and

about the extent of the underwriting they had performed on a potential client that the

Singers and the McKennas hoped would be a successful test case for oil-to-gas

conversion loans.

      In this post-trial opinion, I hold that the McKennas came to this Court with

unclean hands in light of misrepresentations they made regarding their experience.

Even without unclean hands, however, the McKennas have not proven that the

Singers breached their fiduciary duties because the evidence shows that the Westport

opportunity never belonged to the limited liability companies, as the McKennas

claim. The core terms of the Westport opportunity did not change and never

included an equity capital account for the McKennas. Instead, Westport wanted to

invest in the Singers’ family business in which the McKennas had no interest, and

                                          2
the Singers were free to pursue that opportunity without the McKennas. Further, the

McKennas were aware of the terms of the Westport opportunity throughout the

negotiations. I also hold that the Singers failed to prove their counterclaim because

the monetary damages they seek did not flow from reliance on any

misrepresentations that the McKennas made.

I.    BACKGROUND

      The facts in this opinion are my findings based on the parties’ stipulations,

documentary evidence, depositions, and the testimony of eight witnesses presented

at a four-day trial before this Court beginning on November 14, 2016. I grant the

evidence the weight and credibility that I find it deserves.1

      A.     Parties and Relevant Non-Parties

      David Singer and Daniel Singer are brothers and owners of Singer Energy

Group, LLC (“SEG”) along with other members of the Singer family. David and

Daniel are co-presidents of SEG.

1
      Citations to testimony presented at trial are in the form “Tr. # (X)” with “X”
      representing the name of the speaker. After being identified initially, individuals
      are referenced herein by their surnames without regard to formal titles such as “Dr.”
      This opinion refers to the Singers and McKennas by first name for clarity. No
      disrespect is intended. Exhibits are cited as “JX #.” Unless otherwise indicated,
      citations to the parties’ briefs are to post-trial briefs, and citations to the oral
      argument transcript refer to the post-trial oral argument.

                                            3
       SEG has been in the business of selling and distributing natural gas, heating

oil, and electricity to buildings in the New York metropolitan area for over ninety

years.2

       Robison Energy, LLC d/b/a Original Energy (“Robison Energy”) is a

subsidiary of SEG in the business of converting oil heating systems to natural gas.

By 2011, Robison Energy had contracted to convert 204 apartment buildings from

oil to natural gas.3

       Thomas McKenna is a lawyer and entrepreneur. Before the negotiations in

question in this case, Thomas served as president of a start-up company called

Barnhardt Energy Partners (“Barnhardt”).4 Thomas’s son Garrett McKenna has

experience as an intern and analyst at Merrill Lynch and J.P. Morgan.5

       Westport Capital Partners, LLC (“Westport”) is an investment firm that

manages several funds. Jordan Socaransky and Peter Aronson are principals of

2
       Tr. 709 (Daniel).
3
       JX 338, at 16.
4
       JX 162.
5
       Tr. 448-50 (Garrett).

                                          4
Westport.6 And Dean Smith is an outside consultant to Westport who advises on

various investments.7

      Robison Energy Fund, LLC (“REF”) and Green Energy Companies, LLC

(“Green Energy Companies”) are Delaware limited liability companies that the

Singers and the McKennas formed to attempt to build a business together.

      Mount Hope Housing Company, Inc. (“Mount Hope”) is a nonprofit

management company for certain low-income housing properties in New York

City.8 During the events at issue in this case, Mount Hope managed thirty-three

multifamily buildings with approximately 1700 units.9 Fritz Jean was the chairman

of Mount Hope.10

      B.     Facts

             1.       The McKennas meet the Singers and form REF

      In the fall of 2012, Thomas McKenna met with David Singer at the Singers’

office in Elmsford, New York to discuss possible synergies between Barnhardt and

6
      JX 138, at 9.
7
      Tr. 934 (Smith).
8
      Id. at 17 (Thomas).
9
      Id.
10
      Id. at 54.

                                        5
SEG.11 At the time, Thomas was the president of Barnhardt, a start-up company

focused primarily on geothermal hot water heating for large residential buildings. 12

According to Thomas, he “presented our business sales model, built out in

conjunction with Garrett, which enabled our company to finance the costly

installation of geothermal energy systems.”13 Thomas told David that his clients’

savings over the first five years of using geothermal power were used to pay the

principal and interest on the conversion loans.14 In reality, Barnhardt never financed

a geothermal energy system installation, but the Singers did not know that at the

time.15

      Because SEG sells carbon-based fuel commodities and Barnhardt had the goal

of reducing the carbon footprint, discussions of synergies between those two

companies were not successful.16 But after David and Thomas’s meeting, David

expressed an interest in further exploring a model for extending financing to fund

11
      JX 339, at 27.
12
      JX 162.
13
      Id.
14
      Id.
15
      Tr. 104 (Thomas) (“Q. You never financed the costly installation of any geothermal
      energy systems, did you? A. No, we didn’t.”); id. at 1021 (David).
16
      JX 162.

                                          6
Robison Energy’s oil-to-gas conversions.17 Thomas then introduced David to his

son Garrett on October 19, 2012 at a lunch meeting at Thomas’s country club.18

      Thomas represented to David that he and Garrett had extensive finance

experience,19 which was important to the Singers because they were not familiar

with finance or underwriting loans.20 The evidence, however, shows that Thomas is

a litigator who has worked both in the Westchester County District Attorney’s office

and in private practice.21 In private practice, Thomas primarily focused on personal

injury litigation,22 but occasionally drafted a will or advised on a real estate closing.23

Thomas has never securitized loans24 and has limited experience with lending work.

He represented only two banks as a lawyer, Associate National Mortgage

Corporation and Bank of Ireland.25 He never prepared any loan documents for

Associate National Mortgage Corporation, and he testified that he may have

17
      JX 339, at 28.
18
      JX 30; Tr. 1018 (David).
19
      Tr. 1021 (David).
20
      Id. at 1022-23.
21
      Id. at 9 (Thomas).
22
      JX 339, at 5.
23
      Tr. 9 (Thomas).
24
      JX 339, at 47-48.
25
      Tr. 9-10 (Thomas).

                                            7
prepared some loan documents for Bank of Ireland in the 1980s, but he did not

remember.26 Thomas’s only substantial business experience was serving as an

interim manager of a beverage distributor in Ossining, New York for approximately

eighteen months. He was appointed along with the company’s accountants and

financial advisors to run the company following the sudden death of the CEO in a

car accident.27

      The evidence also suggests that Garrett’s credentials were not accurately

represented. Garrett worked at Merrill Lynch and J.P. Morgan as an intern and entry-

level employee for three and a half years, and he never underwrote loans in those

positions.28 Garrett subsequently worked with Merriman Capital, a broker/dealer,29

and as a managing director at Witter Partners, a financial firm in the business of

raising capital for mutual funds.30 But while Garrett was employed with Witter

Partners, Merriman Capital terminated its relationship with Garrett.31 At Witter

Partners, Garrett brought in Greenshift Corporation as a client. Garrett instructed

26
      Id. at 96.
27
      Id. at 10-11.
28
      Id. at 236, 450 (Garrett).
29
      Id. at 465.
30
      Id. at 311; JX 23.
31
      Tr. 465 (Garrett).

                                         8
Greenshift Corporation to pay $20,000 to the Kentros Group, a firm that Garrett and

Thomas controlled, rather than to Witter Partners.32 On July 31, 2012, Greenshift

Corporation fired Witter Partners and cited Garrett’s incompetence as the reason.33

Witter Partners’s successor entity, Wealth Partners Capital LLC, fired Garrett on

August 5, 2012.34 The Singers were not aware of these facts.

      After discussions, Daniel, David, Thomas, and Garrett formed REF and

signed the REF operating agreement on February 26, 2013.35 Daniel, David,

Thomas, and Garrett each contributed $1 to REF and were each entitled to a 25%

interest in the company.36

      Daniel met Garrett the day the Singers and the McKennas signed the REF

operating agreement, and at that meeting, Garrett told Daniel that he had

underwritten hundreds of millions of dollars of loans while at J.P. Morgan, a fact

32
      JX 29; Tr. 120 (Thomas). Plaintiffs objected to evidence of Garrett’s employment
      history with Witter Partners at trial as improper extrinsic character evidence under
      Delaware Rules of Evidence 404 and 608. Tr. 108. I do not consider the evidence
      of Garrett’s prior employee performance to show that Garrett acted in conformity
      with the prior conduct here (D.R.E. 404(a)) or as evidence of Garrett’s character for
      truthfulness (D.R.E. 608(b)). I consider it only for the fact that it was not disclosed
      when the McKennas touted Garrett’s experience and potential investor contacts to
      the Singers.
33
      JX 23.
34
      Tr. 465 (Garrett).
35
      JX 37.
36
      Id.

                                             9
that was untrue.37 Further, despite having been fired by Witter Partners, Garrett

mentioned that Witter Partners may be a potential investor in REF in discussions

with the Singers for the purpose of inducing the Singers to enter a business

relationship.38 Neither Garrett nor Thomas ever disclosed to the Singers that Garrett

had instructed Greenshift Corporation to pay the Kentros Group rather than Witter

Partners or that Garrett had been fired from Wealth Partners Capital, facts that made

Witter Partners far less likely to invest in a business Garrett managed.39

      In March 2013, REF presented a loan term sheet to Mount Hope, a nonprofit

low-income housing management company in New York City.40 Under the loan

term sheet, REF would finance heating system conversions from oil to gas for a

Mount Hope property, and Robison Energy would perform the work to convert the

Mount Hope energy systems from oil to gas. The term sheet calls for a “[f]irst lien

UCC 1 Financing Statement on all equipment provided by [Robison Energy] to

[Mount Hope] for conversion.”41 And it is explicitly contingent upon underwriting

37
      Tr. 774-75 (Daniel).
38
      Id. at 776.
39
      Id.; id. at 1022 (David).
40
      JX 37A.
41
      Id.

                                          10
and approval by REF and Robison Energy.42 Mount Hope signed the term sheet and

fourteen others on similar terms for fourteen other properties.43 Mount Hope paid a

$29,250 application fee to REF upon signing the term sheets.44

            2.     Robison Energy engages an investment bank

      In September 2013, SEG had liquidity problems and would soon need to

refinance debt that it owed to creditors Angus Fund LLC and Rosenthal & Rosenthal,

Inc.45 On September 11, 2013, Robison Energy engaged the investment bank Brean

Capital to raise capital to pursue a financing business for Robison Energy’s oil-to-

gas conversions.46 Mark Hall was Robison Energy’s primary contact at Brean

Capital. At the time, the Singers and SEG were in search of solutions to improve

SEG’s balance sheet, including a potential sale of Robison Energy for cash to a new

42
      Id.
43
      Id.
44
      Id.; Tr. 18 (Thomas).
45
      Tr. 781-82 (Daniel).
46
      JX 63. The McKennas assert that REF, not Robison Energy, engaged Brean Capital.
      The engagement letter was sent to c/o Thomas McKenna and references the “Fund
      Conversion business associated with multifamily housing in New York City.” Id.
      But the engagement letter is addressed to Robison Energy and states that “Robison
      Energy, LLC, its subsidiaries and affiliates (collectively, the “Company”) has
      engaged Brean Capital . . . .” Id. The signature block of the engagement letter also
      states “Robison Energy, LLC,” and Daniel signed it as president and CEO of
      Robison Energy. Thus, I find that Robison Energy engaged Brean Capital.

                                           11
venture in which the Singers would remain involved or a refinancing of SEG’s

debt.47

             3.     The parties replace REF with Green Energy Companies

      In September 2013, the Singers and the McKennas hoped that the Mount Hope

project and REF would be successful, and REF retained attorney Steve Weiss for

transactional advice. REF sought funds from friends and family48 but failed to raise

any money and did not actually make any loans to Mount Hope.49 Beginning in

October 2013, the Singers and the McKennas sought to pitch a different corporate

structure to the market. Thomas formed Green Energy Companies, which the

Singers and the McKennas believed was a better name for marketing purposes.50

      Daniel, David, Thomas, and Garrett did not execute a limited liability

company (“LLC”) agreement for Green Energy Companies.51 But, Weiss drafted a

Private Placement Memorandum (“PPM”) for Robison Energy Fund I, L.P., a

Delaware limited partnership, (“Fund I”), which outlined the proposed ownership

47
      Tr. 263 (Garrett).
48
      Id. at 16 (Thomas); JX 34.
49
      Tr. 16 (Thomas).
50
      JX 172; JX 60.
51
      Tr. 719 (Daniel).

                                        12
structure for Green Energy Companies.52       An unexecuted draft Green Energy

Companies operating agreement was an attachment to the PPM.53 Under the PPM,

investors would buy limited partnership interests in Fund I, and Thomas and Garrett

would control the general partner of Fund I. The general partner was entitled to only

1% of Fund I’s capital and profits, and the limited partners were entitled to 99%.54

Fund I would own 80% of Green Energy Companies, and the Singers and the

McKennas would each own 5% of Green Energy Companies.55 They hoped that

Fund I could raise between $8 million and $25 million, which would be invested

into Green Energy Companies and which Green Energy Companies would use to

purchase Robison Energy from the Singers.56 In reality, no one was willing to invest

on the terms proposed in the PPM.

               4.    Westport presents investment terms showing interest in
                     Robison Energy
      In January 2014, Mark Hall at Brean Capital introduced the McKennas and

the Singers to Westport’s principal Peter Aronson.57 Hall sent Aronson the PPM

52
      JX 88, at 2.
53
      Id. Ex. 2.
54
      Id. at 20.
55
      Id.
56
      Id. at 9.
57
      JX 98.

                                         13
and exhibits, including the draft Green Energy Companies limited liability company

agreement and wrote, “[i]t will be modified to fit whatever we do with you if you

choose to move forward.”58 Hall also sent historic financials for Robison Energy59

but no financial data for REF or Green Energy Companies, as those companies had

no operations and no assets other than a small amount of cash. On January 23, 2014,

David and Hall met Aronson and Jordan Socaransky at Westport’s offices in

Connecticut,60 and on January 24, 2014, Socaransky wrote to Hall in an email, “[i]t’s

a very interesting opportunity and we will get a term sheet together in short order.”61

      Westport expressed no interest in having additional retail investors participate

as the PPM suggested.62 Westport also was not interested in a deal that involved

purchasing Robison Energy from the Singers for cash like the PPM proposed.63 On

January 30, 2014, Socaransky sent Hall a draft term sheet for a Westport loan to

Robison Energy and a Westport equity investment in Green Energy Companies.64

58
      JX 99.
59
      JX 100.
60
      JX 106.
61
      Id.
62
      JX 105.
63
      Tr. 1031 (David).
64
      JX 110.

                                          14
Under the term sheet, the Singers would contribute the Robison Energy commercial

business to Green Energy Companies, and the Robison Energy valuation would

determine the value of their capital account.65 The term sheet included a capital

account for the owners of Robison Energy. And it provided an eight-tier profit

distribution waterfall under which Westport received a priority return of its capital

plus a 12% profit; “Management”66 with a capital account would receive a return of

capital plus 12% in the fourth and fifth tiers; and Management without a capital

account would share as a carried interest in the seventh and eighth tiers.67 Garrett

vehemently opposed the draft term sheet, calling it an “insult”68 and “completely

without understanding of the deal” in the PPM.69 Daniel also opposed the first term

sheet.70

65
      Id.
66
      Id. Plaintiffs argue and Thomas testified that the McKennas were included in the
      definition of the term “Management” in the term sheet. Pls.’ Answering Br. 3; Tr.
      174 (Thomas). I agree, but the waterfall distinguishes between Management with
      capital accounts and Management without capital accounts. And the term sheet does
      not provide for a capital account for the McKennas because the McKennas had no
      interest in Robison Energy.
67
      JX 110.
68
      JX 111.
69
      JX 112.
70
      JX 115.

                                         15
      Hall continued to negotiate with Westport,71 and on February 13, 2014,

Westport proposed a similar term sheet under which Westport’s investment in

Robison Energy would be preferred equity rather than debt.72 Under the second term

sheet, Westport indicated that it was open to considering a higher valuation for

Robison Energy as well.73 But the basic structure was unchanged from the first term

sheet. Under the second term sheet, the Singers would contribute Robison Energy

in exchange for a capital account, and Westport would contribute cash and receive a

priority return. Management without a capital account would share in the seventh

and eighth tiers of a profit distribution waterfall.74

      On February 26, 2014, Westport sent a final term sheet on substantially the

same terms as the February 13, 2014 draft.75 Daniel signed on behalf of Green

Energy Companies and Robison Energy on February 28, 2014,76 and Socaranky and

Aronson signed on behalf of Westport on March 3, 2014.77 The term sheet outlined

71
      JX 113.
72
      JX 120.
73
      Id.
74
      Id.
75
      JX 133.
76
      JX 137.
77
      JX 139.

                                           16
Westport’s intent to “(i) make a preferred equity investment in Robison Energy LLC

(‘Robison’) to facilitate refinancing of Robison’s existing indebtedness, and (ii) to

make an investment in a newly formed company called Green Energy Companies,

LLC (‘GEC’ or ‘Newco’) which has been formed by a group led by David Singer

and other key executives of Robison (hereinafter referred to as ‘Management’), to

acquire Robison’s commercial energy business . . . .”78 The final term sheet included

the same core terms as the first term sheet. After debt service, Westport was entitled

to a 12% return and the return of its invested capital. After that, Management with

a capital account was entitled to a 12% return and the return of its invested capital.79

Management without a capital account would share only in the seventh and eighth

tiers as a carried interest.80

       The McKennas and the Singers decided together to sign the term sheet.81

Nothing in the term sheet indicates that the McKennas planned to contribute any

assets. Thus, they would not have capital accounts and would share in profits in the

seventh and eighth tiers through a carried interest.82 Thomas and Garrett understood

78
       Id.
79
       JX 138, at 6-7.
80
       Id. at 7.
81
       JX 139 (email with signed term sheet addressed to Thomas, Garrett, Daniel, and
       David); Tr. 45 (Thomas); id. at 282 (Garrett); Pls.’ Opening Br. 15.
82
       Tr. 601-02 (Socaransky).

                                          17
that to the extent they would have capital accounts, they were still to be negotiated.83

But Westport and the Singers never had any intention of giving away some of their

assets to the McKennas.84 And the McKennas never made an offer to contribute

assets in exchange for a capital account.85

      On March 18, 2014, Westport’s in-house counsel Marian V. Presti sent a

disclosure form to Thomas, Garrett, Daniel, and David and requested that they each

complete it.86 The form stated that

             [a] separate copy of this Disclosure Statement should be
             completed by Robison Energy, LLC (“Robison”), all
             general partners or managing members of Robison, and all
             “Key Principals” (meaning David Singer, Daniel Singer,
             Thomas McKenna, Garrett McKenna and any
             individuals/entities owning a 20% or greater interest,
             directly or indirectly, in Robison or its general partners or
             managing members).87

The form requested respondents’ ownership interest and percentage in Robison

Energy, but it did not request any information about other asset holdings.88 Daniel,

David, Thomas, and Garrett completed the disclosure forms. Thomas indicated that

83
      Id. at 50 (Thomas); id. at 490 (Garrett).
84
      Tr. 601-02 (Socaransky).
85
      Id. at 166 (Thomas).
86
      JX 142.
87
      Id.
88
      Id.

                                            18
he held 0% of Robison Energy,89 and Garrett left that question blank.90 Both Thomas

and Garrett also wrote on their disclosure forms that they owned 25% of Green

Energy Companies and 25% of REF even though no ownership information was

requested regarding those entities.91

             5.     The Singers and Westport become concerned about
                    Garrett’s performance
      In April 2014, the parties began seeking a senior term loan and a revolving

credit line for the Green Energy Companies project. On April 11, 2014, Hall

submitted a request for proposal to NY Green Bank to obtain a $75 million line of

credit for Green Energy Companies.92 The request was in the form of a PowerPoint

presentation that showed Thomas on the board of Green Energy Companies.93

Socaransky and Smith edited the presentation but did not remove Thomas from the

board.94 Thomas and Garrett argue that at that time, the parties understood that

Thomas was a managing member of Green Energy Companies.95

89
      JX 144.
90
      JX 145.
91
      JX 144; JX 145.
92
      JX 157; JX 154.
93
      JX 155, at 35.
94
      Id.; JX 156, at 35.
95
      Pls.’ Opening Br. 19.

                                        19
         While attempting to obtain a loan commitment for a Green Energy Companies

working capital loan, the Singers became concerned about Garrett’s performance.

In the spring of 2014, Garrett was coordinating a request for a line of credit and

senior term loan from Santander Bank. On April 2, 2014, Mark Becue at Santander

Bank sent Daniel an email indicating that he had requested additional information

from Garrett a week before and Garrett had not responded to his follow-up calls and

emails.96 Daniel forwarded the email to David who sent Thomas the following

email:

                  [W]e are coming down the home stretch and I need to
                  know what’s going on with Garrett. I have to be perfectly
                  honest with you that the partners are very concerned about
                  your participation going forward. Garrett will definitely
                  be compensated for the work and effort he has put in but I
                  am very concerned about building a business together.97

After this email, Garrett sent Robison Energy an invoice for $20,000 in “investment

banking consulting” from the Kentros Group.98 Robison Energy paid the Kentros

Group that amount on April 28, 2014.99

96
         JX 151.
97
         Id.
98
         JX 47.
99
         Id.

                                             20
        By May 2014, Smith became concerned that Garrett and Thomas had not

established a detailed business plan for originating and underwriting the loans that

the parties planned to make through Green Energy Companies.100 On May 14, 2014,

Smith wrote to Socaransky and the Singers, “I think we need to get realistic about

[the McKennas’] role and capacities.       We need to talk about bringing in an

experienced origination professional who can actually develop and execute an action

plan.     It is now clear that this is simply beyond Garrett’s and Thomas’s

capabilities.”101 Daniel responded, “I think the McKenna’s [sic] have put in the time

that has earned them an uncontested first shot. . . . If they can’t get us to where we

need to be, then we need to look for alternatives.”102

        While Thomas and Garrett had the idea to start a financing business, they did

not develop a lending program in which Westport was comfortable investing.

Westport never received underwriting guidelines from Garrett,103 and on May 15,

2014, Smith sent draft underwriting guidelines for the Green Energy Companies

business to the McKennas and the Singers for discussion.104

100
        JX 168.
101
        Id.
102
        Id.
103
        Tr. 941 (Smith).
104
        JX 169.

                                          21
      Later that day, Thomas sent a memorandum to Westport outlining proposed

job descriptions for Thomas, Garrett, and certain other positions. Both Thomas’s

and Garrett’s proposed job descriptions anticipated that they would “[r]eport to

partners.”105 By this point, the McKennas understood that they would not be partners

in Green Energy Companies. The parties nevertheless continued to negotiate.

      On June 9, 2014, Thomas asked Socaransky for draft employment agreements

for him and Garrett.106 Socaransky testified that he did not believe at that point that

the parties were negotiating with the McKennas for a capital account or equity stake

in Green Energy Companies.107 Rather, he thought that the McKennas would be

employees.108

             6.     The McKennas fail to reach agreement on an employment
                    relationship with the Singers and Westport
      On June 10, 2014, Socaransky completed a draft Investment Memorandum

for the Westport Investment Committee describing the Green Energy Companies

project as proposed in the February 26, 2014 term sheet in more detail.109 The

Investment Memorandum states that Westport will provide funding to recapitalize

105
      JX 170.
106
      JX 174.
107
      Tr. 595 (Socaransky).
108
      Id.
109
      JX 176; JX 309.

                                          22
SEG and that SEG and Westport will sponsor Green Energy Companies.110 The

Investment Memorandum states that the McKennas will run the finance business

under the direction of Smith, Westport’s consultant.111 Separately, the Investment

Memorandum contemplates hiring a CFO and Credit Risk Manager to supplement

the SEG and Green Energy Companies management teams. 112 The memorandum

does not suggest that the McKennas were being considered for those roles.

      On June 13, 2014, Westport and the Singers sent a modified version of the

NY Green Bank presentation to Citibank as they continued to pitch the Green Energy

Companies business for a line of credit. In the modified version, Daniel replaced

Thomas on the board of directors.113 But the parties still expected the McKennas to

be employees of Green Energy Companies, provided that they could agree on

employment terms. Around this time, after a meeting with a potential loan servicing

vendor, Smith told the McKennas to negotiate their employment agreements because

the deal was going to close.114

      On June 24, 2014, Thomas emailed Garrett and the Singers as follows:

110
      JX 176, at 2.
111
      Id. at 8.
112
      Id. at 7.
113
      JX 179.
114
      Tr. 963-64 (Smith).

                                        23
               Per a discussion G[arrett] and I had with Dean [Smith], we
               should get together, either Thursday AM or Friday to
               discuss all our ownership interest in GEC, how it presently
               (at closing) will be evaluated and how the Remainder
               interest will be calculated when and if the company is
               successful.115

The McKennas and the Singers met on June 27, 2014.116 At that meeting, the

McKennas focused on the waterfall in the term sheet they had seen in February. The

Singers explained that because the McKennas did not have a capital account, they

would share in the seventh and eighth tiers of the waterfall through a carried

interest.117

       Thomas sent an email on July 2, 2014 to Socaransky, Smith, and Garrett, with

an attached letter stating, “I am opposed to having any part of my equity aligned

with the capital contribution based on the value of [Robison Energy].” 118 But the

Singers and Westport would not agree to Thomas’s proposal. Socaransky testified

that Westport was not willing to invest in a company where members who

contributed no assets had a capital account.119 And David testified that the Singers

115
       JX 183.
116
       Tr. 69 (Thomas) (testifying that the meeting was “somewhere around” June 30,
       2014); JX 191 (stating that the meeting was on Friday).
117
       Tr. 69 (Thomas).
118
       JX 192.
119
       Tr. 565, 601-02 (Socaransky).

                                           24
were not willing to give away a portion of the value of Robison Energy to the

McKennas.120

      The McKennas wanted a better deal than the Westport term sheet offered, and

they continued to negotiate. On July 7, 2014, Thomas sent the Singers and Garrett

a list of issues outstanding.121 He wrote, in part, as follows:

                    1. Garrett and I should be part of Management and
             the term should be clearly defined in all documentation;

                    2. Garrett and I should have one seat on the Board[;]
                   3. The issue of how company percentages must be
             defined, along with what are the expected [sic] from
             Westport-how much and what they will invest over what
             period and will this diminish percentages. Original’s
             contribution could be diminished to virtually 0%.122

But Westport was never willing to agree to granting a board seat to members who

had not contributed assets.123 And, to the extent Thomas was requesting a capital

account, the Singers were not willing to give part of Robison Energy to the

McKennas through Green Energy Companies.124

120
      Id. at 1111 (David).
121
      JX 197.
122
      Id.
123
      Tr. 604 (Socaransky).
124
      Id. at 1030-31 (David).

                                          25
      The Singers and the McKennas met on July 8, 2014 and began to negotiate

the terms of a proposed release of any interest the McKennas had in Green Energy

Companies because Westport and SEG wanted to use the Green Energy Companies

name to operate the financing business outlined in the Westport term sheets.125 The

proposed release relinquished the McKennas’ interest in Green Energy Companies

in exchange for each of Thomas’s and Garrett’s right to receive “20% of any and all

amounts distributed to SEG pursuant to Section ___ of the GEC Amended and

Restated Operating Agreement . . . provided that at the time SEG receives such

distribution, [Thomas] or Garrett, as applicable, is still employed by GEC or an

affiliate of GEC.”126 The blank space in the draft release indicates that the Singers

and the McKennas had not yet decided out of which tier of the waterfall the

McKennas would share in exchange for the release. Regardless, the Singers and

McKennas never agreed to the terms of that draft release.

      During the July 8 meeting, Daniel sent an email to Socaransky, Smith, and

David, stating that “[w]e are in [a] meeting with Tom and Garrett right now. I think

125
      Id. at 1092 (“[W]e were trying to proceed forward under this corporate name that
      the McKennas still had an interest in . . . .”).
126
      JX 200, ¶ 3. Plaintiffs argued that this draft release refers to the fourth tier of the
      waterfall (Pls.’ Answering Br. 4), but the draft agreement is silent on that point.
      And the other evidence Plaintiffs cite relates to the negotiation of the terms of
      Thomas’s and Garrett’s employment with Green Energy Companies, which is
      unrelated to this release.

                                            26
we are much closer together then [sic] we had feared this morning.”127 After the

meeting, Daniel sent an email to Smith and Socaransky explaining that the

McKennas had only one request that required discussion.128 “Basically it is an option

on their part to invest any compensation bonus they would be eligible for into the

company for participation in the water fall at some point between the return of our

capital +12% and the 92.5/7.5 distribution”—in other words, somewhere between

the fifth and seventh tiers.129 “They are fine with just and [sic] advisory role on the

board.”130

      On July 14, 2014, Smith sent a closing checklist to the Singers, Socaransky,

and Presti, which included a line item for the McKennas’ employment

agreements.131 At this point, the Singers and Westport were willing to employ the

McKennas and allow them to share in the Green Energy Companies profits as a

carried interest and potentially with a capital account to the extent the McKennas

contributed assets.132 And the McKennas were interested in being Green Energy

127
      JX 195.
128
      JX 196.
129
      Id.
130
      Id.
131
      JX 199.
132
      Tr. 567 (Socaransky).

                                          27
Companies employees. On July 22, 2014, Thomas sent Socaransky an email stating,

“I am anxious to discuss employment contracts and the specific role G[arrett] and I

have in the corporate structure.”133 But at trial, Thomas testified that the McKennas

did not want to be employees even if that was the only way in which Westport and

the Singers would invest their assets in the business.134

             7.     The Singers and the McKennas’ relationship breaks down

      By late summer 2014, Westport and the Singers were becoming frustrated

with the McKennas’ lack of progress on developing a financing program for Green

Energy Companies. On August 5, 2014, Smith sent Garrett a list of documents that

Westport would need for Mount Hope due diligence.135 Garrett did not respond to

that email. On August 8, 2014, Westport and the Singers learned from Garrett that

a full diligence package to obtain a working capital line of credit would not be ready

until mid-September, meaning that Robison Energy would have to enter the heating

season without a working capital loan from a bank.136 Daniel and Smith were both

133
      JX 203.
134
      Tr. 89 (Thomas) (“Garrett and I were never in this to have a job.”).
135
      JX 222.
136
      JX 227A.

                                           28
disappointed by this development since Garrett had taken the lead on obtaining a

working capital loan months before.137

      On August 16, 2014, Smith emailed a fillable loan application form that he

had created for the Green Energy Companies oil-to-gas conversion projects to

Socaransky and other Westport employees.138 In that email, he stated that he was

“well along in drafting detailed loans underwriting policies and procedures,” and

had document checklists for condominium and cooperative buildings.139 Smith

wrote, “Garrett McKenna was supposed to provide me with checklists for other

property types, but as is becoming depressingly familiar, he has failed to do so.”140

On August 19, 2014, Smith followed up with Garrett regarding his August 5 request

for diligence documents from Mount Hope to conduct the underwriting.141

      On August 25, 2014, Garrett wrote to Smith, Socaransky, Thomas, David, and

Jordan Estevez, a Westport employee, requesting a meeting to discuss the

underwriting of the Mount Hope project.142        Smith responded explaining that

137
      Id.
138
      JX 231.
139
      Id.
140
      Id.
141
      JX 234.
142
      JX 237.

                                         29
Westport was planning on making a bridge loan to Mount Hope apart from the Green

Energy Companies “program loans” for which a lending program had yet to be

developed. As to the bridge loan, Smith wrote, “Westport is underwriting this

deal.”143 Smith directed Garrett to the list of documents that he had requested twenty

days earlier for that due diligence.144 As to establishing an underwriting process for

the “program loans” going forward, Smith agreed that they needed to develop a

lending platform and asked for feedback on the underwriting guidelines he sent the

week before, which Garrett never provided.145 Garrett responded, “I guess my

interest becomes what am I getting paid to originate this deal? Westport and I need

a contract.”146

      By this time, the Singers’ and Westport’s relations with the McKennas,

particularly Garrett, had soured.147 On the evening of August 25, 2014, David

emailed Garrett regarding Smith’s document request as follows:

             His doc request has been out there for weeks for your
             review. We had a meeting on mount hope last week and
             you didn’t say a word about the scanning or the docs. Now
             we are past the 11th hour on mount hope and we are just
             starting to gather docs that we knew we needed for
143
      Id.
144
      Id.; JX 222.
145
      JX 237; Tr. 1056 (David).
146
      JX 237.
147
      JX 236.

                                         30
             months. We can’t keep pointing fingers at each other, it’s
             time to get things done. Without Westport’s bridge the
             mount hope deal is dead, if we don’t get the mount hope
             deal done we can forget the not for profit sector.148

Daniel replied only to David stating, “[t]hese guys have to produce something real.

If they don’t start showing their worth soon they will be out of a job and out of this

deal.”149

      On September 2, 2014, Thomas emailed Daniel and David explaining his and

Garrett’s frustration “with the process of moving GEC forward.”150 He wrote, “[w]e

do not wish to leave anyone in a[n] unacceptable position but in balancing our needs

and the companies’ needs we need to be adequately compensated to continue

working on behalf of GEC even if this is without an employment contract.” 151 The

same day, Thomas failed to attend a meeting with Smith, Socaransky, and the

Singers for which he had previously confirmed he was available.152

             8.    The Singers pursue the Westport investment alone

      On July 29, 2014, Thomas wrote to the Singers and Smith as follows:

             Pertaining to GEC, LLC. This entity started out as
             Robison Energy Fund, LLC—I put this together, authored

148
      Id.
149
      Id.
150
      JX 248
151
      Id.
152
      JX 249.

                                         31
             the Operating Agreement, obtained the EIN and opened a
             bank account. . . . Afterward, we wanted to change the
             name to Green Energy Fund and we hire [sic] Steve Weiss
             and he formed the entity and the Operating Agreement . .
             . . However, the Operating Agreement was never fully
             executed by the members of Robison Energy Fund. I did
             obtain a EIN number (which you all have) but no bank
             account was opened for GEC. Essentially GEC is a shell
             that again you can use and design as you wish.153

Smith replied to all, including Thomas, stating, “[a]s I understand it, there actually

is no company called ‘Green Energy Companies, LLC.’ In that case I would

recommend just form a new company and be done with it, rather than amending an

obsolete operating agreement, getting releases, changing the name with the IRS,

etc.”154 In response, Thomas wrote, “[t]he name is already taken & [the EIN] already

in place[.] [It’s] essentially a shell for you to mold as you please.”155 Thomas, thus,

acknowledged that Green Energy Companies’ only desirable asset was its name.

      In light of the ongoing tensions with the McKennas, the Singers and Westport

did not come to agreement with them regarding employment with Green Energy

Companies. Westport and the Singers decided that the Green Energy Companies

153
      JX 213.
154
      Id.
155
      JX 215.

                                          32
name was not worth the effort of dealing with the McKennas.156 On August 26,

2014, Daniel wrote to Aronson, Socaransky, and Smith as follows:

            [T]he actual Green [E]nergy Compan[ies], LLC itself . . .
            is still owned by the Robison fund which the McKenna’s
            [sic] have a 50% ownership interest in. The plan was to
            induce them to sign a release of any claim to GEC but
            given their behavior this week and the fact that they don’t
            have an employment contract yet (we intended to use
            David and mine as a model) they may not be inclined to
            sign off and I don’t want to risk that standing in the way
            of the closing. I think it would be prudent to form a new
            Delaware LLC and potentially use the newly created
            company as our holding company.157

The next day, Daniel emailed Smith, Socaransky, David, and Presti, stating “I am

about to instruct [the Singers’ attorney] Levy to create a new Delaware company

named ‘GEC Holdings, LLC’ to replace ‘Green Energy Companies, LLC’ in all of

our agreements and documents.         Any objections?”158       Socaransky responded

156
      Tr. 607 (Socaransky) (“[T]he only thing we liked about the Green Energy
      Companies was the name. I mean, it was just an empty shell . . . we could form a
      new entity very easily, and we were looking for the path of least resistance to not
      have more brain damage at that point in the process.”); id. at 701 (“[W]e made the
      decision that we weren’t going to jump through hoops just to save a name of a shell
      company . . . .”).
157
      JX 241.
158
      JX 243.

                                          33
“[o]k,”159 and Levy created GEC Energy Holdings, LLC, a Delaware limited liability

company (“GEC Holdings”).160

      The Singers and Westport proceeded to close the deal outlined in the February

26, 2014 term sheet, but they decided not to employ the McKennas. In resolving

final issues to close the deal, Smith wrote to Socaransky on September 8, 2014 as

follows:

            I’ve had no update re McKenna’s [sic] since . . . last week.
            . . . [T]hey’re not receiving any consideration at closing so
            asking for a release isn’t in order. The entity they were to
            own 50% of is defunct . . . . So, again, I say proceed to
            close—realizing there is risk if Tom gets his back up—and
            deal with them after the fact.161

      On September 18, 2014, six Westport funds and Singer Commercial Energy,

LLC, a new entity formed by the Singers, executed the operating agreement for GEC

Holdings on terms similar to those outlined in the Socaransky Investment

Memorandum and the February 26, 2014 term sheet.162

159
      Id.
160
      Tr. 760 (Daniel).
161
      JX 252.
162
      Compl. Ex. L; JX 322; Tr. 632 (Socaransky).

                                         34
             9.     GEC Holdings makes loans to Mount Hope with capital from
                    Westport
      A month before the Singers and Westport closed the GEC Holdings deal, the

parties began to focus on Mount Hope again as a test case for the lending project.

On August 5, 2014, over a year after Mount Hope signed the REF loan term sheets,

Thomas wrote an email to Garrett, Smith, and Socaransky, stating that “Fritz [Jean

at Mount Hope] just called me again nervous about getting the money and how

quickly he needs it to make this heating season. Garrett has underwritten the

financials, everything is ready con ed wise and he needs a $500,000 draw down as

soon as possible.”163 Smith replied to all and added the Singers to the email, stating

that “[w]e haven’t done ANY underwriting yet. . . . I can appreciate that the borrower

is nervous, but that is not a reason for us to lose our credit discipline.”164 Later the

same day, Garrett wrote in an email to Smith, Socaransky, Thomas, and the Singers

that “[t]he only review of the [Mount Hope] deal [that] has been done was a savings

calculation for last winter.”165

      The evidence at trial showed that Westport, the Singers, and the McKennas

all wanted Mount Hope to be successful so they could use it as a test case for future

163
      JX 221.
164
      Id.
165
      JX 223.

                                          35
oil-to-gas conversion financing projects. In August 2014, while the Singers were

aware that Westport was only beginning diligence on Mount Hope, Robison Energy

began spending money on conversion work for Mount Hope.166 And in November

2014, Robison Energy began actual conversion work on Mount Hope properties,

which continued at least through January 2016.167 Even though the March 2013

Mount Hope loan term sheets were contingent upon underwriting168 and Mount

Hope had been slow to provide the documents needed to complete the

underwriting,169 Robison Energy began the conversion work before financing had

been committed170 and continued “spending hundreds of thousands of dollars for

Mount Hope’s conversions.”171 Westport considered funding a bridge loan to Mount

Hope in order to allow the conversion work to continue.172 On August 15, 2014,

166
      Oral Arg. Tr. 100; JX 229.
167
      JX 278 (mechanics liens on Mount Hope buildings showing November 2014 as the
      earliest “time when the first item of work was performed” and January 2016 as the
      latest “time when the last item of work was performed”).
168
      JX 39A.
169
      JX 271.
170
      Tr. 1057 (David).
171
      Defs.’ Opening Br. 11.
172
      JX 207; JX 209; JX 237 (Smith wrote on August 25, 2014, “if we are talking about
      Mt. Hope, remember, even though it’s being propped as a GEC Finance deal, this is
      a one-off bridge loan being funded by Westport. Westport is underwriting this deal
      . . . . Westport knows how to do this, and it isn’t going to fit the model for ordinary
      course loans.”).

                                            36
Mount Hope and Robison Energy signed a bridge loan term sheet for a $2,500,000

loan, and the capital for the loan would come from a Westport investment in GEC

Holdings or Robison Energy.173

      On September 9, 2014, David emailed Fritz Jean at Mount Hope about

outstanding due diligence document requests that the Singers and Westport believed

Garrett had made to Mount Hope.174 Jean was not aware of the request and

responded that he would “jump on it” the next morning.175

      On October 3, 2014, Chris Page, a Robison Energy employee, sent an email

to Steven Goldenberg at Mount Hope requesting diligence materials in order to send

them to Smith at Westport.176 Goldenberg responded that the information had

already been given to Garrett, and Garrett wrote that he had sent the information to

Smith.177 David testified that a box of Mount Hope files from Garrett, which

primarily included rent rolls, was sitting in Robison Energy’s office, and David

scanned those documents and sent them to Smith with his assistant.178

173
      JX 229.
174
      JX 253.
175
      Id.
176
      JX 256.
177
      Id.
178
      Tr. 1062 (David).

                                        37
      After all of the Mount Hope diligence documents that had been received were

assembled in Smith’s possession, David “took it upon [himself] to go to Mount Hope

and get the rest of the documents.”179 By this time, David had known for at least

two months that no one had completed underwriting for loans to Mount Hope.180

When David went to Mount Hope, Fritz Jean explained to him that a loan to Mount

Hope could not be secured by mortgages on Mount Hope’s properties without the

consent of the City of New York.181 The more Westport learned about Mount Hope,

the worse the Mount Hope deal appeared. On January 15, 2015, Smith sent

Socaransky an email explaining that the affordable housing regulator had forced

Mount Hope to engage a property management company for its building portfolio

and was requiring that Mount Hope complete a capital needs assessment.182 Finally,

Smith wrote that the Singers had spent $700,000 in work on Mount Hope buildings

and that if they had not done that, Smith would “run away” from this deal. 183 On

January 16, 2015, GEC Holdings filed mechanics liens for the work done on the

179
      Id.
180
      See JX 221.
181
      Tr. 1064-65 (David).
182
      JX 270.
183
      Id.

                                       38
Mount Hope properties.184 As of January 27, 2015, Mount Hope had not produced

“basic requested information” to Westport.185

      By April 9, 2015, Westport learned of the full extent of Mount Hope’s lack of

available collateral. Socaransky wrote Smith an email stating that 99% of the

appraised value of Mount Hope’s assets is subject to a priority debt claim. 186 On

January 21, 2016, GEC Holdings finally entered forbearance and installment

payment agreements with Mount Hope.187

      C.     Procedural History

      Plaintiffs Thomas and Garrett McKenna filed their complaint in this case on

August 5, 2015 alleging claims for breach of fiduciary duty, unjust enrichment,

aiding and abetting in breach of fiduciary duty, and civil conspiracy with respect to

REF in counts I through IV. The complaint alleges the same claims with respect to

Green Energy Companies in counts V through VIII. The Singers and SEG filed an

answer and counterclaim for fraudulent inducement on September 22, 2015.

Westport and GEC Holdings also filed an answer on September 22, 2015. Plaintiffs

filed a reply answering the counterclaim on October 12, 2015. The Singers and SEG

184
      JX 278.
185
      JX 271.
186
      JX 299.
187
      JX 332; JX 333.

                                         39
amended their answer on October 12, 2015 and again on October 24, 2015. Westport

and GEC Holdings amended their answer on May 6, 2016. The Court held a four-

day trial beginning on November 14, 2016 and heard post-trial oral argument on

April 7, 2017. The parties filed post-trial submissions on April 10, 2017, April 13,

2017, and April 14, 2017. This post-trial opinion resolves this case.

II.   ANALYSIS

      “Plaintiffs, as well as Counterclaim-Plaintiffs, have the burden of proving

each element, including damages, of each of their causes of action against each

Defendant or Counterclaim-Defendant, as the case may be, by a preponderance of

the evidence.”188 “Proof by a preponderance of the evidence means proof that

something is more likely than not. It means that certain evidence, when compared

to the evidence opposed to it, has the more convincing force and makes you believe

that something is more likely true than not.”189 “By implication, the preponderance

188
      Mrs. Fields Brand, Inc. v. Interbake Foods LLC, 2017 WL 2729860, at *16 (Del.
      Ch. June 26, 2017) (quoting inTEAM Assocs., LLC v. Heartland Payment Sys., Inc.,
      2016 WL 5660282, at *13 (Del. Ch. Sept. 30, 2016)) (internal quotation marks
      omitted).
189
      Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010)
      (quoting Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *17 (Del. Ch.
      Oct. 23, 2002)) (internal quotation marks omitted).

                                         40
of the evidence standard also means that if the evidence is in equipoise, Plaintiffs

lose.”190

       A.    Plaintiffs Seek Equity with Unclean Hands

       Defendants assert that the McKennas come to the Court of Chancery with

unclean hands. The Court of Chancery is a court of equity. And “[t]he maxim of

equity that ‘[he] who comes into equity must do so with clean hands’ . . . is well

embedded in American jurisprudence.”191 Plaintiffs are not entitled to equitable

relief when their “own acts offend the very sense of equity to which [they]

appeal[].”192 As this Court stated in Skoglund v. Ormand Industries, Inc., “the

purpose of the clean hands maxim is to protect the public and the court against

misuse by one who, because of his conduct, has forfeited his right to have the court

consider his claims, regardless of their merit.”193 The Delaware Supreme Court has

stated that “[t]he Court of Chancery has broad discretion in determining whether to

190
       inTEAM Assocs., LLC v. Heartland Payment Sys., Inc., 2016 WL 5660282, at *13
       (Del. Ch. Sept. 30, 2016) (quoting Revolution Retail Sys., LLC v. Sentinel Techs.,
       Inc., 2015 WL 6611601, at *9 (Del. Ch. Oct. 30, 2015)) (internal quotation marks
       omitted).
191
       Nakahara v. NS 1991 Am. Tr., 718 A.2d 518, 522 (Del. Ch. 1998) (quoting Kousi v.
       Sugahara, 1991 WL 248408, at *2 (Del. Ch. Nov. 21, 1991)).
192
       Nakahara, 718 A.2d at 522.
193
       Skoglund v. Ormand Indus., Inc., 372 A.2d 204, 213 (Del. Ch. 1976).

                                           41
apply the doctrine of unclean hands.”194 This Court “[is] not bound by formula or

restrained by any limitation that tends to trammel the free and just exercise of

discretion.”195

      But the Court’s discretion is not completely unlimited. For the doctrine of

unclean hands to apply, the plaintiff’s inequitable conduct must be related to the

equitable relief the plaintiff seeks.196 “The standard, as applied by the Court of

Chancery, is that the inequitable conduct must have an ‘immediate and necessary’

relation to the claims under which relief is sought.”197 The Court of Chancery has

held that fraudulent misrepresentations can constitute inequitable conduct for

unclean hands purposes when the misrepresentations have an “immediate and

necessary” connection to the claims asserted.198

      Ultimately, this dispute is about the fiduciary duties that attach when

managing members form a Delaware limited liability company together. The

McKennas argue that the Singers breached those duties by misappropriating an

194
      RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 876 (Del. 2015) (quoting
      SmithKline Beecham Pharm. Co. v. Merck & Co., 766 A.2d 442, 448 (Del. 2000))
      (internal quotation marks omitted).
195
      Nakahara, 718 A.2d at 522-23 (quoting Keystone Driller Co. v. Gen. Excavator
      Co., 290 U.S. 240, 245-46 (1933)) (internal quotation marks omitted).
196
      Nakahara, 718 A.2d at 523.
197
      Id. (quoting Kousi v. Sugahara, 1991 WL 248408, at *2 (Del. Ch. Nov. 21, 1991)).
198
      In re Rural/Metro Corp. S’holders Litig., 102 A.3d 205, 238-39 (Del. Ch. 2014).

                                          42
opportunity to receive an investment from Westport that belonged to Green Energy

Companies or REF. And they ask this Court to order that the investment from

Westport be rescinded, that the Singers pay damages, and that they disgorge any

profits. Essentially, the McKennas want a remedy that would allow them to share

in the GEC Holdings business.

      But the McKennas made a series of misrepresentations to the Singers in their

initial discussions to form the very business they now invoke as the basis for their

claims.

            In an arm’s length negotiation, where no special
            relationship between the parties exists, “a party has no
            affirmative duty to speak” and “is under no duty to
            disclose facts of which he knows the other is ignorant even
            if he further knows the other, if he knew of them, would
            regard them as material in determining his course of action
            in the transaction in question.” But, if a party “chooses to
            speak then it cannot lie,” and “once the party speaks, it also
            cannot do so partially or obliquely such that what the party
            conveys becomes misleading.”199
Once Garrett and Thomas chose to make the representation regarding their

experience, they could not lie or mislead. But in the fall of 2012, Thomas met David

and told him that he was the president of Barnhardt, a geothermal energy company.

Thomas represented to David that Barnhardt had financed the installation of costly

199
      Trusa v. Nepo, 2017 WL 1379594, at *10 (Del. Ch. Apr. 13, 2017) (quoting Prairie
      Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 52 (Del. Ch. 2015)).

                                         43
geothermal energy systems while Thomas was president of the company.200 Thomas

represented that Barnhardt paid the initial capital for oil-to-geothermal conversions,

and the energy savings over the first five years were used to repay Barnhardt’s

principal plus interest.201 But that was false. Thomas admitted at trial that Barnhardt

never financed any geothermal energy system installations.202 And Barnhardt never

paid the initial capital for an oil-to-geothermal conversion.203 Thomas also has never

securitized loans.204

      Thomas also represented to the Singers that his son Garrett had extensive

finance experience,205 which was important to the Singers because they were not

familiar with finance or underwriting loans.206       The day the Singers and the

McKennas signed the REF operating agreement, Garrett told Daniel that he had

underwritten hundreds of millions of dollars of loans while at J.P. Morgan.207 Garrett

also mentioned that his former employer, Witter Partners, may be a potential investor

200
      Tr. 1020 (David); JX 162.
201
      JX 162.
202
      Tr. 104 (Thomas).
203
      Id.
204
      JX 339, at 47-48.
205
      Id. at 1021 (David).
206
      Id. at 1022-23.
207
      Id. at 774-75 (Daniel).

                                          44
in REF.208 In fact, Garrett worked at Merrill Lynch and J.P. Morgan as an entry-

level employee for three and a half years, and he never underwrote loans in those

positions.209       Garrett   subsequently    worked    with   Merriman   Capital, a

broker/dealer,210 and Witter Partners, a financial firm in the business of raising

capital for mutual funds.211 But while Garrett was employed with Witter Partners,

Merriman Capital terminated its relationship with Garrett.212 At Witter Partners,

Garrett brought in Greenshift Corporation as a client. Garrett instructed Greenshift

Corporation to pay $20,000 to the Kentros Group, a firm that Garrett and Thomas

controlled, rather than to Witter Partners.213         On July 31, 2012, Greenshift

Corporation fired Witter Partners and cited Garrett’s incompetence as the reason.214

Witter Partners’s successor entity, Wealth Partners Capital LLC, fired Garrett on

August 5, 2012.215

208
      Id. at 776.
209
      Id. at 236, 450 (Garrett).
210
      Id. at 465.
211
      Id. at 311.
212
      Id. at 465.
213
      JX 29; Tr. 120 (Thomas).
214
      JX 23.
215
      Tr. 465 (Garrett).

                                             45
      The Singers and the McKennas executed the REF operating agreement and

formed Green Energy Companies in part because of the McKennas’

misrepresentations. The Singers had no experience in finance and wanted to partner

with experts.216 The McKennas now seek to enforce the equitable fiduciary duties

that attached when they formed REF and Green Energy Companies. But the doctrine

of unclean hands bars that attempt.217 The McKennas’ misrepresentations have an

“immediate and necessary” relationship to the formation of REF and Green Energy

Companies, and the McKennas cannot now seek to enforce the fiduciary duties that

attached in part because of their misrepresentations.218

216
      Id. at 1022-23 (David).
217
      Plaintiffs assert that Westport was also founded based on a breach of fiduciary duty,
      but that is not the subject of this litigation.
218
      Defendants argue that only Green Energy Companies has standing to pursue the
      breach of fiduciary duty claims asserted in this case because neither REF nor the
      McKennas in their individual capacities owned the opportunity that was allegedly
      misappropriated.     The McKennas can sue derivatively on Green Energy
      Companies’s behalf only if they are members of Green Energy Companies or
      assignees of Green Energy Companies membership interests. 6 Del. C. § 18-1001.
      Questions exist as to whether the McKennas and the Singers ever became members
      or managers of Green Energy Companies and whether any Green Energy
      Companies operating agreement, if it exists, is enforceable in light of the
      McKennas’ misrepresentations. Regardless, I do not address standing because the
      claims fail on their merits, and a decision on standing would save no resources at
      this stage.

                                           46
      B.     Plaintiffs’ Breach of Fiduciary Duty Claims Fail

      Even without the doctrine of unclean hands, however, Plaintiffs failed to

prove the breach of fiduciary duty claims alleged in counts I and V. “A claim for

breach of fiduciary duty requires proof of two elements: (1) that a fiduciary duty

existed and (2) that the defendant breached that duty.”219 Managers of Delaware

limited liability companies owe the same fiduciary duties as directors of Delaware

corporations when the limited liability company agreement does not opt out of

fiduciary duties.220 Directors of Delaware corporations owe two fiduciary duties:

the duty of care and the duty of loyalty.221 No allegations suggest that REF or Green

Energy Companies opted out of traditional fiduciary duties in this case.               The

managers of REF and Green Energy Companies, thus, owe fiduciary duties of care

and loyalty. The duty of care requires that directors act on an adequately informed

basis with director liability for a duty of care violation “predicated upon concepts of

gross negligence.”222 “[T]he duty of loyalty mandates that the best interest of the

219
      Beard Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010).
220
      Auriga Capital Corp. v. Gatz Props., 40 A.3d 839, 851 (Del. Ch. 2012); see 6 Del.
      C. § 18-1104 (“In any case not provided for in this chapter, the rules of law and
      equity, including the rules of law and equity relating to fiduciary duties and the law
      merchant, shall govern.”).
221
      See Auriga Capital, 40 A.3d at 851.
222
      Smith v. Van Gorkom, 488 A.2d 858, 873 (Del. 1985) (quoting Aronson v. Lewis,
      473 A.2d 805, 812 (Del. 1984)) (internal quotation marks omitted), overruled on
      other grounds by Gantler v. Stephens, 965 A.2d 695 (Del. 2009).

                                            47
corporation and its shareholders takes precedence over any interest possessed by a

director, officer or controlling shareholder and not shared by the stockholders

generally.”223

             1.     Neither REF, Green Energy Companies, nor the McKennas
                    had an interest or expectancy in the Westport investment
      The McKennas argue that the Singers misappropriated the opportunity for

REF and Green Energy Companies to obtain a Westport investment. The Delaware

Supreme Court held in the often-cited Guth v. Loft, Inc. case that when a director

pursues a corporate opportunity for himself or herself, the director violates the duty

of loyalty.224 The Supreme Court in Broz v. Cellular Information Systems, Inc.

explained the corporate opportunity doctrine as follows:

             [A] corporate officer or director may not take a business
             opportunity for his own if: (1) the corporation is
             financially able to exploit the opportunity; (2) the
             opportunity is within the corporation’s line of business; (3)
             the corporation has an interest or expectancy in the
             opportunity; and (4) by taking the opportunity for his own,
             the corporate fiduciary will thereby be placed in a position
             inimicable to his duties to the corporation.225

223
      Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993).
224
      Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939) (“The rule, referred to briefly as the
      rule of corporate opportunity, is merely one of the manifestations of the general rule
      that demands of an officer or director the utmost good faith in his relation to the
      corporation which he represents.”).
225
      Broz v. Cellular Info. Sys., Inc., 673 A.2d 148, 155 (Del. 1996).

                                            48
      The Broz factors generally are applied where a director and a corporation

compete in buying an asset.226 In Thorpe by Castleman v. CERBCO, Inc., the

Delaware Supreme Court applied this doctrine in the context of competition between

a corporation and its controlling stockholder in selling stock to a potential buyer.227

In Thorpe, the Eriksons were directors, officers, and controlling stockholders of

CERBCO Inc. INA expressed interest to the Eriksons in purchasing CERBCO’s

subsidiary East. In response, the Eriksons made a counterproposal to sell the

Eriksons’ controlling interest in CERBCO to INA.228 The Eriksons did not inform

CERBCO’s outside directors of the offer from INA,229 and when one outside director

asked at a board meeting if INA had expressed interest in purchasing East, the

Eriksons said that INA had not.230 The Supreme Court explained that “[i]n order for

the Eriksons and CERBCO to compete against one another, their stock must have

been rough substitutes in the eyes of INA. If INA considered none of the CERBCO

transactions to be an acceptable substitute to the INA-Erikson transaction, then the

226
      Thorpe by Castleman v. CERBCO, Inc., 676 A.2d 436, 443 (Del. 1996).
227
      Id.
228
      Id. at 438.
229
      Id. at 439.
230
      Thorpe v. Cerbco, Inc., 1995 WL 478954, at *5 (Del. Ch. Aug. 9, 1995), aff’d in
      part, rev’d in part sub nom. Thorpe by Castleman v. CERBCO, Inc., 676 A.2d 436
      (Del. 1996).

                                          49
opportunity was never really available to CERBCO.”231 “[T]hose transactions which

were not economically rational alternatives need not be considered by a court

evaluating a corporate opportunity scenario.”232 The Court of Chancery and the

Supreme Court in Thorpe held that INA’s purchase of East was an economically

rational alternative to an INA-Eriksons transaction such that the Eriksons breached

the duty of loyalty by taking the INA investment for themselves.233

      Here, the McKennas assert breach of fiduciary duty claims against the Singers

for misappropriation of a corporate opportunity that allegedly belonged to REF and

Green Energy Companies. The parties frame the opportunity in question in various

ways. But the only opportunity presented in this case was an investment opportunity

from Westport. And neither REF nor Green Energy Companies, as those companies

were structured prior to Westport’s involvement, had any interest or expectancy in

that opportunity. Like in Thorpe, Robison Energy and Green Energy Companies

were competing for Westport’s investment of capital. And if an investment in Green

Energy Companies was a viable alternative to an investment in Robison Energy for

Westport, then these facts would be analogous to Thorpe. But, unlike in Thorpe,

231
      Thorpe, 676 A.2d at 443.
232
      Id.
233
      Id. at 445; see In re Digex Inc. S’holders Litig., 789 A.2d 1176, 1190-91 (Del. Ch.
      2000) (framing Thorpe as a decision under the “interest or expectancy” prong of the
      corporate opportunity doctrine test).

                                          50
Westport made clear from the outset of its involvement that the investment structures

the McKennas sought to negotiate were not “economically rational alternatives” for

Westport.234 Instead, Westport presented an opportunity under which it would invest

on certain static terms.

      REF is an LLC with a small amount of cash and no other assets in which the

Singers and the McKennas are each 25% members. The McKennas and the Singers

hoped that REF would raise capital to make oil-to-gas conversion loans. Garrett

suggested raising capital for REF through issuing preferred equity with a guaranteed

return.235 No investors were willing to invest in that entity as it was structured.236

The McKennas and the Singers appear to have realized this problem, and they set

out to negotiate a corporate structure with potential investors outside REF.237 REF’s

business was abandoned.238 As such, Plaintiffs did not prove at trial that REF had

an interest or expectancy in any opportunity.

234
      See Thorpe, 676 A.2d at 443 (“If INA considered none of the CERBCO transactions
      to be an acceptable substitute to the INA-Erikson transaction, then the opportunity
      was never really available to CERBCO.”).
235
      JX 34.
236
      Tr. 16 (Thomas) (REF raised no money).
237
      JX 99 (“It will be modified to fit whatever we do with you if you choose to move
      forward.”).
238
      Tr. 205 (Thomas).

                                          51
      Green Energy Companies was the vehicle for the McKennas and the Singers’

next attempt to raise capital for oil-to-gas conversion loans. Garrett proposed a

corporate structure through the PPM under which investors would invest in Fund I

and collectively would own 99% of Fund I. The McKennas would own the general

partner of Fund I, and that general partner would own 1% of Fund I. Fund I would

own 80% of Green Energy Companies, and David, Daniel, Garrett, and Thomas

would each own 5% of Green Energy Companies. Under the PPM, Green Energy

Companies would use the investors’ capital to purchase Robison Energy from the

Singers. No investors were willing to invest on the terms in the PPM.239

239
      Plaintiffs presented evidence suggesting that the McKennas individually had some
      interest in the opportunity through Green Energy Companies. For example, the
      McKennas point to the request for proposal sent to NY Green Bank that listed
      Thomas on the Green Energy Companies board (JX 155, at 35); the fact that the
      McKennas and the Singers decided together to sign the Westport term sheet (JX
      139; Tr. 282 (Garrett)); the McKennas’ involvement in drafting the PPM; and the
      draft release of the McKennas’ interest in Green Energy Companies that the
      McKennas and the Singers had begun to negotiate (JX 200). But none of these facts
      change this analysis because, apart from the potential opportunity to sell its name,
      neither the McKennas nor Green Energy Companies had any interest or expectancy
      in the opportunity Westport presented, which was on completely different terms
      from the PPM. Only Robison Energy did. And after Westport discovered that the
      McKennas had no interest in Robison Energy, Thomas was removed from the Green
      Energy Companies board in the request for proposal presentation (JX 179). The
      Westport investment memorandum describing the Green Energy Companies deal
      clearly indicated that the McKennas would be employees, not members (JX 176).
      And the Singers and Westport later determined that negotiating a release with the
      McKennas for the Green Energy Companies name was not worth the effort.

                                           52
      On January 30, 2014, in response to Hall’s solicitation efforts and after

receiving Robison Energy’s financial information, Westport provided an initial term

sheet for an investment in Green Energy Companies and Robison Energy on a

completely different set of terms from the PPM. The new Westport terms constituted

an opportunity to use the Green Energy Companies name but none of the corporate

structure that the Singers and the McKennas had proposed. Instead, the opportunity

Westport provided in response to the solicitation efforts was primarily directed at

Robison Energy.

      Certain key terms of the Westport opportunity did not change from the

January 30, 2014 term sheet through the final terms of Westport’s investment in

Robison Energy and GEC Holdings. Those key terms form the core of the Westport

opportunity. Under those core terms, Westport was entitled to a priority return;

members’ capital accounts would be based on the value of the assets they

contributed; and Management with capital accounts would receive a priority return

over Management without capital accounts.240 The Singers would contribute the

Robison Energy business to Green Energy Companies in exchange for a capital

account, and Westport would contribute cash.241 None of the Westport term sheets

outlined a capital account for the McKennas. In the January 30, 2014 Westport term

240
      JX 110.
241
      Id.

                                        53
sheet, Management without a capital account shared in the seventh and eighth tiers

of the waterfall as a carried interest,242 and the same was true in the final term

sheet.243 Westport and the Singers never had any intention of giving away some of

their assets to the McKennas through a capital account.244 And the McKennas never

made an offer to contribute assets in exchange for a capital account.245

      No investor presented any financing terms to REF, and no one other than

Westport presented an investment opportunity to Green Energy Companies.246 The

Westport opportunity relied primarily on the Singers’ contribution of Robison

Energy. The only Green Energy Companies asset in which Westport and the Singers

were interested was the Green Energy Companies name. In the end, however, they

decided to pursue the oil-to-gas conversion finance business with a different name

242
      Id.
243
      JX 133.
244
      Tr. 601-02 (Socaransky).
245
      Id. at 166 (Thomas). At trial, Garrett also framed the opportunity in question as an
      opportunity to negotiate with Westport using the term sheet as a starting point. Id.
      at 482-83 (Garrett). But even if the opportunity were merely an opportunity to
      negotiate, the McKennas never offered to contribute any assets, and Westport had
      no duty to give away a capital account in exchange for nothing.
246
      See Thorpe, 676 A.2d at 443. The parties also extensively brief whether the
      McKennas rejected the opportunity for a Westport investment, rendering the Singers
      free to pursue that investment themselves. See McGowan v. Ferro, 859 A.2d 1012,
      1039 (Del. Ch. 2004). Because I hold that no opportunity was presented to REF or
      Green Energy Companies, however, I do not reach the question of whether that
      opportunity was rejected.

                                           54
to avoid negotiating with the McKennas. As such, the Singers and Westport did not

take any asset or opportunity in which Green Energy Companies or REF had an

interest or expectancy, and none of the Defendants had any duty to reject Westport’s

investment.247

             2.     The Singers’ communications with Westport did not
                    constitute a breach of fiduciary duty
      Plaintiffs also argue that the Singers breached their fiduciary duties to the

McKennas through secret dealing with Westport.                 Plaintiffs identify nine

communications between the Singers and Westport in which the McKennas were

not included and argue that those communications constitute breaches of the duty of

loyalty.248 They cite this Court’s opinion in Hollinger International, Inc. v. Black249

in support of their position.

247
      Even if Green Energy Companies did have an interest or expectancy in the
      opportunity (cf. In re Digex S’holder Litig., 789 A.2d 1176, 1190-91 (Del. Ch.
      2000)), the result is the same. Defendants also assert that Green Energy Companies
      was not financially able to exploit the opportunity at issue. If the opportunity at
      issue is the business plan to pursue oil-to-gas conversion financing, neither REF nor
      Green Energy Companies was financially able to pursue that opportunity without a
      substantial outside investment because both of those entities had essentially no
      assets. As such, the Singers were free to pursue it themselves. Broz v. Cellular
      Info. Sys., Inc., 673 A.2d 148, 155 (Del. 1996). The business plan became possible
      with an investment from Westport, but that investment did not include an equity
      interest for the McKennas.
248
      Pls.’ Opening Br. 39-41.
249
      844 A.2d 1022, 1029 (Del. Ch. 2004).

                                           55
      “Delaware courts have long held that a certain duty to disclose inheres in the

duty of loyalty.”250 For example, Chancellor Allen held in Hoover Industries, Inc.

v. Chase that “[t]he intentional failure or refusal of a director to disclose to the board

a defalcation or scheme to defraud the corporation of which he has learned, itself

constitutes a wrong . . . .”251 “But this duty to disclose is not a general duty to

disclose everything the director knows about transactions in which the corporation

is involved.”252 The Delaware cases addressing director disclosure typically deal

with circumstances where the director is personally involved in transactions that are

harmful to the corporation but beneficial to the director.253 Hollinger has been

recognized as “the paradigmatic example of this claim.”254

      In Hollinger, Hollinger International, Inc.’s ultimate controlling stockholder

and chairman of the board Conrad M. Black “concealed from the [Hollinger] board

[a potential buyer’s] intense interest in acquiring [the Telegraph],” 255 which was a

250
      Big Lots Stores, Inc. v. Bain Capital Fund VII, LLC, 922 A.2d 1169, 1184 (Del. Ch.
      2006), abrogated on other grounds by N. Am. Catholic Educ. Programming Found.,
      Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007).
251
      Hoover Indus., Inc. v. Chase, 1988 WL 73758, at *2 (Del. Ch. July 13, 1988).
252
      Big Lots, 922 A.2d at 1184.
253
      Id.
254
      Id.
255
      Hollinger, 844 A.2d at 1061.

                                           56
Hollinger asset. “Rather, Black took it upon himself to first reject that opportunity

and later to divert that opportunity to [Hollinger’s immediate controlling

stockholder].”256   “Black compounded this improper behavior by giving false

assurances that he was honoring his obligations to [Hollinger] and not shopping

[Hollinger’s immediate controlling stockholder].”257      The Court in Hollinger

clarified that Black took these actions “under circumstances in which full disclosure

was obviously expected . . . .”258

      None of the communications between Westport and the Singers constitute a

breach of fiduciary duty.     Westport’s primary interest was in partnering with

Robison Energy, a company in which the McKennas had no interest, and the

Westport opportunity made that clear from the first term sheet. The McKennas

provided Westport with disclosure forms in March 2014, indicating that they did not

own any equity in Robison Energy.259 The secret communications Plaintiffs identify

in their opening brief are from May through August 2014. By May 2014, the

McKennas were aware that the Westport opportunity was a Robison Energy

opportunity, and Westport knew that the McKennas had no interest in Robison

256
      Id.
257
      Id.
258
      Id.
259
      JX 144; JX 145.

                                         57
Energy. Westport and the Singers, thus, were free to deal without the McKennas

regarding a Westport investment.260

      Even in and after May 2014, the McKennas were aware of their position vis-

a-vis Westport and the Singers. On May 15, 2014, Thomas sent Westport his and

Garrett’s proposed job descriptions, which anticipated that they would “[r]eport to

partners”261 as employees. In or around June 2014, Smith informed the McKennas

that the deal was going to close, and if they wanted to be employed by Green Energy

Companies, they should negotiate employment agreements.262 And on July 2, 2014,

Thomas drafted an email attempting to change the terms of the opportunity as

presented because he and Garrett wanted capital accounts.263 Further, Thomas

received Smith’s July 29, 2014, email suggesting that the parties “just form a new

260
      Plaintiffs’ briefing emphasizes the August 26 and 27, 2014 emails between the
      Singers and Westport regarding the formation of GEC Holdings to close the deal
      between Westport and the Singers. Pls.’ Answering Br. 1, 6. Plaintiffs argue that
      those emails are evidence of a breach of fiduciary duty. But for the reasons
      described above, the Singers were free to pursue an investment from Westport to
      the exclusion of the McKennas. And the McKennas received sufficient notice of
      the terms of the Westport deal to comply with the Singer’s duty of disclosure. In In
      re Digex Shareholder Litigation, the Court of Chancery held on a preliminary
      injunction record that “defendants only had to give fair notice of the opportunity to
      Digex.” 789 A.2d 1176, 1194 (Del. Ch. 2000). The McKennas had fair notice, as
      they were fully aware of the fact that Westport was pursuing a deal under which
      only Westport and SEG would have capital accounts.
261
      JX 170.
262
      Tr. 963-64 (Smith).
263
      JX 191.

                                           58
company and be done with it.”264 By the time the Singers and Westport were

deciding to form GEC Holdings to facilitate the closing, the McKennas were fully

aware of the Westport opportunity and of the fact that they had not been offered

capital accounts in connection with that opportunity. The only fact that was not

disclosed to the McKennas was that the Singers actually closed a deal on the terms

that the McKennas knew were offered months before. Because Green Energy

Companies had no interest or expectancy in the Westport investment and the

McKennas were aware of that fact, the Singers had no obligation to tell the

McKennas when and how they planned to close the deal with Westport.

      As further support for my finding that the McKennas knew that the Westport

opportunity belonged to Robison Energy, the evidence shows that throughout the

course of the negotiations, the McKennas acted as negotiating counterparties with

the Singers rather than as fiduciaries. Westport wanted to invest in the Singers’

operating business, Robison Energy, and to finance Robison Energy’s oil-to-gas

conversions; the Singers wanted to sell their business or refinance its debt; and the

McKennas wanted to obtain an equity stake in the proposed financing arm of this

new venture. The Singers’ and the McKennas’ interests were opposed in the

determination of the value of Robison Energy because the higher the value of

264
      JX 213.

                                         59
Robison Energy, the greater the Singers’ capital account would be and the more the

McKennas would have to contribute to obtain the same share.

      Thomas’s July 2, 2014 email265 acknowledged that reality. He did not want

his equity stake to be tied to the value of Robison Energy,266 but at the same time,

he recognized that the parties’ capital accounts were still being negotiated.267 Garrett

also acted as if his interests were opposed to the Singers’ interests. He demanded,

and the Kentros Group was paid, $20,000 for “investment banking consulting”

services in April 2014.268 And in August 2014, when Smith told Garrett that

Westport was underwriting a bridge loan to Mount Hope but that Westport and

Garrett needed to meet to discuss procedures for the program loans, Garrett

responded that his interest was in how he was getting paid for his work.269 Further,

the McKennas had not offered to contribute any assets270 and had never run the

265
      JX 192.
266
      Id. (“I am opposed to having any part of my equity aligned with the capital
      contribution based on the value of [Robison Energy].”).
267
      Tr. 50 (Thomas) (“[T]he capital account for the McKennas was going to be
      something that we wanted to negotiate and finalize with our negotiations with
      Westport.”).
268
      JX 47.
269
      JX 237.
270
      Tr. 166 (Thomas).

                                          60
operations of a bank or lending company before,271 but they demanded a seat on the

Green Energy Companies board for themselves.272 Such behavior shows that the

McKennas were negotiating as counterparties to the Singers and did not consider

themselves to be in a fiduciary relationship with the Singers with respect to the

Westport investment. These facts starkly contrast with the facts of Hollinger, where

Black affirmatively gave assurances that he was acting as a fiduciary, and they

support my finding that the McKennas were aware that the Westport opportunity

was focused on Robison Energy. Plaintiffs, thus, failed to prove the breach of

fiduciary duty claims in counts I and V.

      C.     Plaintiffs’ Aiding and Abetting and Civil Conspiracy Claims Fail

      In counts III and VII, Plaintiffs allege aiding and abetting in breach of

fiduciary duty claims against Westport, GEC Holdings, and SEG for aiding and

abetting in the Singers’ breach of fiduciary duty. In counts IV and VIII, Plaintiffs

allege claims for civil conspiracy against the same three Defendants for joining in

confederation with the Singers to breach the Singers’ fiduciary duties. To succeed

on a claim for aiding and abetting a breach of fiduciary duty, a plaintiff must prove

“‘(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary’s duty, .

. . (3) knowing participation in that breach by the defendants,’ and (4) damages

271
      Id. at 94; id. at 477 (Garrett).
272
      JX 197.

                                           61
proximately caused by the breach.”273 To prove civil conspiracy, the following

elements are required, “(1) the existence of a confederation or combination of two

or more persons; (2) that an unlawful act was done in furtherance of the conspiracy;

and (3) that the conspirators caused actual damage to the plaintiff.”274 Because

Plaintiffs did not prove the underlying breach of fiduciary duty claims brought on

behalf of REF and Green Energy Companies, Plaintiffs’ aiding and abetting and

conspiracy claims in counts III, IV, VII, and VIII also fail.

      D.     Plaintiffs’ Unjust Enrichment Claims Fail

      Plaintiffs also assert unjust enrichment claims in counts II and VI to recover

for any benefits the McKennas provided to the Defendants without compensation.

The elements of an unjust enrichment claim are “(1) an enrichment, (2) an

impoverishment, (3) a relation between the enrichment and impoverishment, (4) the

absence of justification, and (5) the absence of a remedy provided by law.”275

      Even though the Singers and Westport decided not to employ the McKennas

in the GEC Holdings venture, they arguably received some value from the

McKennas during the negotiation process. For example, the McKennas attended

273
      Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (quoting Penn Mart Realty
      Co. v. Becker, 298 A.2d 349, 351 (Del. Ch. 1972)).
274
      Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1036 (Del. Ch. 2006).
275
      Vichi v. Koninklijke Philips Elecs. N.V., 62 A.3d 26, 58 (Del. Ch. 2012).

                                           62
meetings with prospective vendors for Green Energy Companies,276 and Garrett

gathered certain diligence documents from Mount Hope.277

      The McKennas were compensated for their services in April 2014 when

Garrett sent an invoice for “investment banking consulting” to Robison Energy for

$20,000, which Robison Energy paid to the Kentros Group, an entity that Thomas

and Garrett control.278 The evidence does not show whether that $20,000 covered

past or future “investment banking consulting” services, and the parties’ briefing

does not clearly identify what services the McKennas seek to be compensated for.

Additionally, the McKennas put forth damages evidence related to the value of GEC

Holdings, but the proper calculation of damages, if there are any, is the fair market

value of the McKennas’ services minus the $20,000 they were paid. The record

contains no evidence sufficient to allow this Court to conclude what value to place

on those services. Thus, Plaintiffs have not carried their burden of establishing an

unjust enrichment and did not prove counts II or VI.279

276
      Tr. 963 (Smith).
277
      Id. at 1062 (David).
278
      JX 47.
279
      Defendants also argue that even if Plaintiffs did otherwise prove their breach of
      fiduciary duty, aiding and abetting, conspiracy, and unjust enrichment claims, they
      failed to prove damages because Plaintiffs’ damages expert report suffers from
      serious flaws. I need not address those arguments, however, because I hold that the
      McKennas failed to prove liability on their claims.

                                          63
      E.     Counterclaim Plaintiffs Failed to Prove an Actionable Fraudulent
             Misrepresentation
      Daniel, David, and SEG allege in a counterclaim that the McKennas

fraudulently induced them to build a financing business together and to fund work

on the Mount Hope oil-to-gas conversions.          To prove a claim for fraudulent

misrepresentation, a party must prove:

             1) the existence of a false representation, usually one of
             fact, made by the defendant; 2) the defendant had
             knowledge or belief that the representation was false, or
             made the representation with requisite indifference to the
             truth; 3) the defendant had the intent to induce the plaintiff
             to act or refrain from acting; 4) the plaintiff acted or did
             not act in justifiable reliance on the representation; and 5)
             the plaintiff suffered damages as a result of such reliance.
             In addition to overt representations, fraud may also occur
             through deliberate concealment of material facts, or by
             silence in the face of a duty to speak.280

      The Counterclaim Plaintiffs argue that the McKennas falsely represented their

professional experience. Thomas led the Singers to believe that he had financed

geothermal conversions at Barnhardt281 when in fact he had not.282 And he led them

to believe that Garrett had extensive experience in banking and had a great ability to

raise funds for new ventures through his network of contacts. But Garrett had only

280
      Kronenberg v. Katz, 872 A.2d 568, 585 n.25 (Del. Ch. 2004).
281
      JX 162.
282
      Tr. 104 (Thomas) (“Q. You never financed the costly installation of any geothermal
      energy systems, did you? A. No, we didn’t.”).

                                          64
three and a half years’ experience as an intern and loan originator at Merrill Lynch

and J.P. Morgan283 and had been fired by his subsequent employers Merriman

Capital and Wealth Partners Capital.284 Counterclaim Plaintiffs also contend that

Garrett falsely represented that Mount Hope was financeable and that Garrett had

completed the underwriting for the Mount Hope project.285 The Singers and SEG

contend that they relied to their detriment on the McKennas’ misrepresentations

regarding their experience by forming Delaware entities with them and entrusting

them to establish a lending platform for Robison Energy. Additionally, the Singers

and SEG claim that they relied on Garrett’s misrepresentations regarding Mount

Hope by agreeing to move forward with the Mount Hope oil-to-gas conversions.286

      The Singers did form Delaware entities REF and Green Energy Companies

with the McKennas in reliance on the McKennas’ misrepresentations regarding their

experience. But the monetary damages Counterclaim Plaintiffs seek relate only to

283
      Id. at 233-34 (Garrett).
284
      Id. at 465.
285
      JX 221. The Counterclaim Defendants argue that the Counterclaim Plaintiffs did
      not adequately plead a claim regarding the alleged Mount Hope misrepresentations
      because the Verified Counterclaim does not mention Mount Hope. But the
      Counterclaim Defendants opened the door to the facts of the Mount Hope deal in
      the Verified Complaint (Compl. ¶¶ 25-26) and were on notice before the trial that
      this evidence would be presented (McKenna v. Singer, C.A. No. 11371-VCMR, at
      26 (Del. Ch. Nov. 9, 2016) (TRANSCRIPT)).
286
      Defs.’ Opening Br. 56.

                                         65
Mount Hope.287 The Singers and SEG do not point to any other quantifiable

damages that arose from forming REF and Green Energy Companies. The Verified

Counterclaim seeks rescission of any contracts entered in reliance on the McKennas’

misrepresentations, but none of the parties’ summary judgment or post-trial briefs

address rescission or any remedy other than monetary damages.288

      As to the lending platform for Robison Energy, soon after the Singers began

negotiating with Westport, they made clear that they were relying on Westport, not

the McKennas, for financial expertise.289 On May 14, 2014, Smith wrote to the

Singers and stated in reference to Garrett’s loan origination plan, “Frankly, they are

pretty pictures, but they don’t come close to setting forth a plan detailed [enough] to

meet the actual demands of the business of originating these loans as I have laid out

here.”290 In response, Daniel indicated that the Singers were relying on Westport for

a loan origination plan. He wrote, “As David and I have said many times, we are

leaning on you for this part of the business model. I think the McKenna’s [sic] have

put in the time that has earned them an uncontested first shot.”291 The Singers did

287
      Id. at 57-58.
288
      Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are
      deemed waived.”).
289
      JX 168.
290
      Id.
291
      Id.

                                          66
not have a sophisticated understanding of finance, and they did rely on the advice of

others. But because Westport took over the establishment of a financing program

for GEC Holdings and provided the Singers with financial expertise, the Singers

failed to prove that they relied on the McKennas misrepresentations in establishing

a lending program.

      Regarding the decision to move forward with Mount Hope, Counterclaim

Plaintiffs failed to prove that they relied on the McKennas’ misrepresentations. On

August 5, 2014, Thomas stated to Smith and Socaransky that Mount Hope needed a

$500,000 draw down to get through the heating season. He wrote, “Garrett has

underwritten the financials,”292 which Counterclaim Plaintiffs assert was a

misrepresentation. But the Singers were not included on that email. Twenty minutes

later, Smith responded and included the Singers on copy. He wrote, “We haven’t

done ANY underwriting yet. That’s the purpose of the term sheet. To get the

applicant committed so we can perform our due diligence.”293 And later that day,

Garrett further corrected the record by sending an email to the Singers and Westport,

which stated that “[t]he only review of the deal [that] has been done was a savings

calculation for last winter.”294 The Singers, thus, could not have relied on Thomas’s

292
      JX 221.
293
      Id.
294
      JX 223.

                                         67
misrepresentation because they did not see it until it was corrected by Smith’s

subsequent email. Further, Smith wrote to the McKennas and the Singers on August

25, 2014, stating that “even though [the Mount Hope loan is] being propped as a

GEC Finance deal, this is a one-off bridge loan being funded by Westport. Westport

is underwriting this deal . . . . Westport knows how to do this, and it isn’t going to

fit the model for ordinary course loans.”295 SEG remained a solvent business only

because of Westport’s investment. The evidence shows that by the time of SEG’s

alleged reliance on the McKennas’ misrepresentations, SEG and the Singers were

relying only on Westport for financial expertise. Any harm to the Singers or SEG

relating to Mount Hope was in reliance on Westport’s underwriting and expertise,

not the McKennas’ representations.296 The Counterclaim Plaintiffs, thus, failed to

prove their fraudulent misrepresentation counterclaim.

      F.     The Defendants’ Request for Fee Shifting Is Denied

      The McKennas request attorneys’ fees for bad faith litigation conduct, and the

Singers reserve their right to seek attorneys’ fees later. In order to warrant the

Court’s departure from the American Rule requiring each party to bear its own costs

295
      JX 237; see also JX 207; JX 209.
296
      Notably, no funds were advanced for the Mount Hope projects until August 2014
      by which time the Counterclaim Plaintiffs were relying on Westport for financial
      expertise. JX 237; JX 229 (Robison Energy August 2014 term sheet for a
      $2,500,000 loan to Mount Hope). And no work was performed on the Mount Hope
      conversions until November 2014. JX 278.

                                         68
and fees, Plaintiffs must show that Defendants “‘unnecessarily required the

institution of litigation, delayed the litigation, and asserted frivolous motions,’ or,

put another way, [that] [D]efendants’ bad faith has ‘made the procession of the case

unduly complicated and expensive.’”297 But no litigation conduct in this case rose

to the level of bad faith. The McKennas point to the fact that the Singers’ summary

judgment motion was denied without an argument as evidence of bad faith. But that

a motion is denied does not mean that the motion was filed in bad faith. And the

parties used their summary judgment briefs in place of pre-trial briefing, which

saved the McKennas from a substantial additional expense. As such, each party will

bear its own attorneys’ fees.

III.   CONCLUSION

       For the reasons stated herein, judgment is entered for the Defendants and

against the Plaintiffs on counts I through VIII of the complaint. And judgment is

entered for the Counterclaim Defendants and against the Counterclaim Plaintiffs on

their misrepresentation counterclaim. All parties will bear their own attorneys’ fees.

       IT IS SO ORDERED.

297
       Fairthorne Maint. Corp. v. Ramunno, 2007 WL 2214318, at *9 (Del. Ch. July 20,
       2007) (quoting Johnston v. Arbitrium (Cayman Islands) Handels, 720 A.2d 542,
       546 (Del. 1998); ATR-Kim Eng Fin. Corp. v. Araneta, 2006 WL 3783520, at *23
       (Del. Ch. 2006)).

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