Court Opinion

ID: 4422020
Source: CourtListenerOpinion
Date Created: 2019-08-01 13:03:09.468219+00
Date Added: 2024-06-11T14:51:00.581004
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
MATTHEW J. HILL and GREGG H.              )
HILL,                                     )
                                          )
                   Plaintiffs,            )
                                          )
         v.                               )       C.A. No. 2017-0591-MTZ
                                          )
LW BUYER, LLC, a Delaware Limited         )
Liability Company,                        )
                                          )
                   Defendant.             )

                         MEMORANDUM OPINION
                          Date Submitted: April 8, 2019
                           Date Decided: July 31, 2019

C. Barr Flinn, Emily V. Burton, Elisabeth S. Bradley, YOUNG CONAWAY
STARGATT & TAYLOR, LLP, Wilmington, Delaware; Nicholas M. Oertel,
Richard C. Kraus, James B. Jensen, Jr., FOSTER SWIFT COLLINS & SMITH
PC, Lansing, Michigan; Attorneys for Plaintiffs Matthew J. Hill and Gregg H. Hill.

William J. Lafferty, Kevin M. Coen, Jarrett W. Horowitz, MORRIS, NICHOLS,
ARSHT & TUNNELL, LLP, Wilmington, Delaware; Craig S. Primis and K. Winn
Allen, KIRKLAND & ELLIS LLP, Washington, D.C.; Attorneys for Defendant
LW Buyer, LLC.

ZURN, Vice Chancellor.
         The parties to this case entered into a securities purchase agreement in 2015

and escrowed funds to pay for valid post-closing indemnification claims.            In

mid-2016, the buyer asserted claims for indemnification of a diverse set of alleged

tax deficiencies and breaches of the sellers’ representations and warranties. In 2017,

the sellers sued to settle the fate of those escrow funds and their personal liability,

and the buyers counterclaimed. The sellers moved for partial summary judgment.

In this opinion, I grant in part and deny in part the sellers’ motion.

I.       BACKGROUND

         In the late 1990s, Matthew J. Hill founded Liquid Web, Inc. and Liquid Web,

B.V. (together, “Liquid Web”). He and his father, Gregg H. Hill (together with

Matthew J. Hill, the “Hills” or the “Sellers”), owned all of Liquid Web’s equity.1

They also jointly owned Hillcorp Properties LLC (together with Liquid Web, the

“Companies”), an entity organized in 2005 that held real property associated with

Liquid Web.2 Private equity funds managed by Madison Dearborn Partners, LLC

(“Madison Dearborn”) created LW Buyer, LLC (“LW Buyer”) to acquire Liquid

Web.3

1
    Docket Item (“D.I.”) 1 ¶ 1 [hereinafter “Complaint”].
2
    Compl. ¶ 18.
3
    D.I. 9, Counterclaims of LW Buyer, LLC ¶ 3 [hereinafter “Counterclaims”].
          A.    LW Buyer Acquires The Companies.

          Madison Dearborn and the Hills began discussing a potential acquisition of

Liquid Web in early 2015 (the “Acquisition”).4 On May 22, 2015, LW Buyer

entered into a securities purchase agreement (the “Purchase Agreement”)5 with the

Hills and the Companies.6 On July 1, the Acquisition closed (the “Closing Date”).7

LW Buyer paid $224,127,189 in cash on the Closing Date for the Companies, with

an additional $416,000 following later that year as a working capital adjustment to

the purchase price.8

          As part of the Acquisition, the parties also entered into an escrow agreement

(the “Escrow Agreement”).9 Under the Escrow Agreement, LW Buyer delivered

$11,250,000 (the “Escrow Funds”) to the escrow agent to hold subject to valid

claims for indemnification under Article 11 of the Purchase Agreement.10 On July

4
    Compl. ¶ 21.
5
  Compl. Ex. 1. I quote the Purchase Agreement throughout this opinion subject to its
internal definitions.
6
    Compl. ¶ 23.
7
    Id.
8
    Id. ¶ 24.
9
    Id. ¶ 25.
10
     Id. ¶¶ 26-27.

                                            2
11, 2016, the escrow agent was to disburse the Escrow Funds to the Hills unless

pending claims for indemnification required it to keep the Funds under lock.11

          Article 3 of the Purchase Agreement lays out the Hills’ and Companies’

representations and warranties.12 Several are relevant to this dispute. In Section 3.4,

the Hills represented and warranted that they had delivered a series of audited and

unaudited financial statements and balance sheets to LW Buyer.                   The Hills

represented that certain annual and quarterly financial statements (the “Financial

Statements”) were

          (i) accurate and complete in all material respects, are consistent with
          and fairly present[ed] the consolidated and combined financial
          condition and the results of operations, changes in shareholders’ equity,
          and cash flows of the Acquired Companies as at the respective dates of,
          and for the periods referred to in, the Financial Statements, and (ii) were
          prepared in accordance with GAAP, subject, in the case of [certain]
          compiled financial statements[,] . . . to normal recurring year-end
          adjustments (the effect of which will not, individually or in the
          aggregate, be material) and the absence of notes (that, if presented,
          would not differ materially from those included in the Audited
          Financial Statements).13

11
     Id. ¶ 31.
12
  Except as indicated in an external disclosure letter, the Hills and the Companies jointly
and severally made each of Article 3’s representations and warranties to LW Buyer.
Purchase Agreement § 3. I focus on the Hills’ representations and warranties, as do the
parties. See generally Counterclaims ¶¶ 33-34, 38, 50 (discussing certain of the Hills’
representations and warranties related to relevant provisions); Opening Br. 25 (same).
13
     Purchase Agreement § 3.4.

                                              3
          The Hills also represented that “[t]he Financial Statements reflect the

consistent application of GAAP throughout the periods involved, except as disclosed

in the notes to the Audited Financial Statements,” that “[n]o financial statements of

any Person other than the Acquired Companies are required by GAAP to be included

or reflected in the Financial Statements,” and that “[t]he Financial Statements were

prepared from, and are consistent with, the accounting Records14 of each Acquired

Company.”15 In Section 3.5, the Hills gave an additional, more general assurance

that “[t]he books of account and other Records of each Acquired Company that have

been made available to Buyer, are materially complete and correct, and represent

actual and bona fide transactions.”16

          In Section 3.9, the Hills stated that no Company

          ha[d] any liability or obligation, other than liabilities or obligations to
          the extent shown on the Interim Balance Sheet and current liabilities
          incurred in the Ordinary Course of Business since the date of the
          Interim Balance Sheet (none of which is a liability for breach of
          contract, breach of warranty, tort, infringement, a claim or lawsuit, or
          an environmental liability) which would not, or would not be
          reasonably expected to, individually or in the aggregate, cause a
          Material Adverse Change.17

14
   The Purchase Agreement defines a “Record” as “information that is inscribed on a
tangible medium or that is stored in an electronic or other medium.” Id. § 1.1.
15
     Id. § 3.4.
16
     Id. § 3.5.
17
     Id. § 3.9.

                                              4
          In Section 3.10, the Hills represented and warranted, among other things, that

the Companies had timely filed relevant tax returns, otherwise had their tax affairs

in order, and that “no claim has ever been made by any Governmental Body in a

jurisdiction where any Acquired Company does not file Tax Returns that it is or

could be subject to taxation by that jurisdiction, nor is there any reasonable basis for

such a claim.”18 In Section 3.13, the Hills represented and warranted that the

Companies were in compliance in all material respects with relevant legal

requirements.19

          Article 11 contains the parties’ agreement on indemnification. In Section

11.2, the Hills agreed to indemnify and hold harmless LW Buyer and the Companies

from “any Loss that [LW Buyer or other relevant parties] may suffer, sustain, or

become subject to, as a result of, in connection with, or relating to: (a) any Breach

of any representation or warranty made by Sellers . . .; [or] (d) any Indemnified

Taxes.”20 The Purchase Agreement defines a Loss, in relevant part, to include “any

cost, loss, liability (contingent or otherwise), obligation, claim, cause of action,

demand, damage, deficiency, expense, fine, penalty, judgment, Tax, award or

assessment, whether or not arising out of a third party claim,” subject to certain

18
     Id. § 3.10.
19
     Id. § 3.13.
20
     Id. § 11.2.

                                             5
conditions not relevant here.21 It defines Indemnified Taxes, in relevant part, as

“Taxes (or the non-payment thereof) imposed on the Acquired Companies for any

taxable period (or portion thereof) ending on or before the Closing Date, . . . and []

any breach by any Seller of the covenants contained in Section 12.1(g) or of the

representations contained in Section 3.10.”22 And it defines Taxes, in relevant part,

as “any income,. . . sales, use, transfer, value added, . . . and other tax, fee,

assessment, levy, tariff, charge, or duty or tax of any kind whatsoever and any

interest, penalty, addition, or additional amount imposed, assessed, or collected by

or under the authority of any Governmental Body whether disputed or not.”23

           Section 11.4 builds the procedure for the parties to notice an indemnification

claim. Section 11.4(a) deals with indemnification claims related to most alleged

breaches of a party’s representations and warranties, including those relevant here.

The Hills are only liable if “on or before [July 1, 2016 (the “Survival Period

Termination Date”)]         . . . [LW Buyer] notifies [Gregg Hill, as the Sellers’

representative,] of a claim, specifying the factual basis of the claim in reasonable

detail to the extent known by [LW Buyer].”24 Claims for indemnification of an

alleged breach of representations and warranties under Section 11.4(a) thus had to

21
     Id. § 1.1.
22
     Id. § 1.1.
23
     Id.
24
     Id. § 11.4(a).

                                              6
be validly noticed by the Survival Period Termination Date. If they were not, they

are untimely.

           Section 11.4(c) governs certain other claims for indemnification, including for

Indemnified Taxes under Section 11.2(d). The Hills may be liable for those claims

“at any time so long as [LW Buyer] notifies [Gregg Hill] of a claim thereunder,

specifying the factual basis of the claim in reasonable detail to the extent known by

[LW Buyer].”25 Section 11.4(c) makes clear that, “for the avoidance of doubt, the

parties intend[ed] the survival period contemplated by this Section [] to be an

indefinite period of time.”26 Thus, the parties carved up potential indemnification

claims into different tranches. They locked some into a one-year survival date after

the Acquisition to notice a claim, but allowed LW Buyer to submit notices for others

“at any time.”27

25
     Id. § 11.4(c).
26
     Id.
27
  Id. Delaware law permits parties to modify contractual limitation periods, within limits.
See generally Bear Stearns Mortg. Funding Tr. 2006-SL1 v. EMC Mortg. LLC, 2015 WL
139731, at *14-15 (Del. Ch. Jan. 12, 2015); Eni Hldgs., LLC v. KBR Grp. Hldgs., LLC,
2013 WL 6186326, at *7 (Del. Ch. Nov. 27, 2013). The parties do not raise any concerns
or issues with how the Purchase Agreement modifies these periods, and so I do not address
that particular structure.

                                              7
          Section 11.6 sets out an additional procedure to govern claim notices for

third-party claims (“Third-Party Claims”).28 In Section 11.7, LW Buyer agreed “to

seek all payment of all claims under this Article 11,” including the indefinitely

surviving tax-related claims under Section 11.4(c), “first from the Escrow Funds

until and unless the Escrow Funds are fully depleted or the amount of the then-

pending claims equals or exceeds the Escrow Funds.”29 But while the Escrow Funds

provide the “sole[] and exclusive[]” source of indemnification for claims under

Section 11.2(a),30 the Purchase Agreement does not so limit indemnification for tax-

related matters. The parties agree that these provisions, read together, permit LW

Buyer to seek indemnification of valid claims for Indemnified Taxes after the

Survival Period Termination Date, and ultimately from sources beyond the Escrow

Funds.

          B.       LW Buyer Evaluates Its Liability And Makes Claims On The
                   Escrow Funds.

          In late 2015, LW Buyer hired Ernst & Young to assess Liquid Web’s tax

exposure.31 Ernst & Young determined that Liquid Web owed various amounts of

28
  Purchase Agreement § 11.6. The Purchase Agreement defines a “Third-Party Claim” as
“any claim against any Indemnified Person by a [a Person that is not an Acquired Company
or a party to this Agreement], whether or not involving a Proceeding.” Id. § 1.1.
29
     Id. § 11.7.
30
     Subject to certain exceptions not relevant here. See id. § 11.8(b).
31
     Counterclaims ¶¶ 60-61; D.I. 35 ¶ 10 [hereinafter “Flood Affidavit”].

                                                8
pre-closing value-added taxes (“VAT”) and sales and use taxes. For the sales and

use taxes, Ernst & Young identified tax liabilities in various states, although none of

those jurisdictions had assessed any taxes against the Companies.32 Ernst & Young

did not complete its preliminary assessment of VAT liability before the Survival

Period Termination Date.33

          On June 30, 2016, one day before the Survival Period Termination Date, LW

Buyer sent the Hills a letter (the “First Notice”)34 asserting six claims for

indemnification (each a “Claim”).35 LW Buyer estimated its Losses to be “at least

$22,943,000,” and purported to “reserve the right to revise and supplement this claim

at any time and from time to time,” as well its “ability to give additional notice in

respect of the Claims or with respect to any other matters.” A one-page chart

attached to the First Notice named the six Claims, stated their factual bases, and

32
  The exact jurisdictions are not clear. In its Counterclaims, LW Buyer alleges that Ernst
& Young has identified pre-closing sales and use tax Losses “in Arizona, California,
Hawaii, Michigan, South Dakota, West Virginia, and the District of Columbia totaling over
$330,000.” Counterclaims ¶ 65. But in the later-filed Flood Affidavit, LW Buyer claims
the relevant jurisdictions, at least at the time of the First Notice, were Arizona, the District
of Columbia, Hawaii, South Dakota, and West Virginia. Flood Aff. ¶¶ 16-17.
33
     Id. ¶ 23.
34
     Compl. Ex. 3.
35
     Compl. ¶ 34.

                                               9
                  Buyer’s investigation is ongoing, but it appears
                  the Acquired Companies have obligations and
                  other types of Loss with respect to sales and use
                  taxes in various jurisdictions (including
                  Washington,      California,    Arizona,     and
The sales and     Michigan). The existence of such obligations
use tax claim     and other forms of Loss would constitute
                                                                    $1,586,000
(the “Sales and   breaches of several representations in the
Use Claim”)       Purchase Agreement (including Section 3.9
                  (No Undisclosed Liabilities), Section 3.10
                  (Taxes), and Section 3.13 (Compliance with
                  Legal Requirements)) and such obligations and
                  other forms of Loss would also constitute
                  Indemnified Taxes.
                  Inaccuracies in the conversion of the Acquired
The revenue       Companies’ cash basis books to accrual basis
and revenue       financial statements led to materially misstated
growth            revenue and revenue growth on an intra-period
misstatements     basis, which inaccuracies constitute breaches of
                                                                    $14,778,000
claim (the        several representations in the Purchase
“Revenue          Agreement, including Section 3.4 (Financial
Misstatements     Statements), Section 3.5 (Books and Records),
Claim”)           Section 3.8 (Accounts Receivable) and Section
                  3.9 (No Undisclosed Liabilities).
                  The Acquired Companies’ allowance for
The accounts      doubtful accounts as of Closing and as of
receivable and    several relevant pre-closing periods was
allowance for     materially     understated     and       required
doubtful          adjustments to bad debt expenses, and such
                                                                    $5,807,000
accounts claim    matters constitute breaches of several
(the “Accounts    representations in the Purchase Agreement,
Receivable        including Section 3.4 (Financial Statements),
Claim”)           Section 3.5 (Books and Records), and Section
                  3.8 (Accounts Receivable).

                                       11
         On July 1, 2016, the State of Washington’s Department of Revenue assessed

Liquid Web $82,042.59 in taxes (the “Washington Tax”).37 LW Buyer claims that

the “Hills were made aware of [the Washington Tax],” and LW Buyer paid that

assessment on July 13.38

         On July 8, Ernst & Young completed its preliminary analysis of Liquid Web’s

potential VAT liability in Norway, the United Kingdom, the Netherlands, Estonia,

South Africa, Sweden, Spain, and other European Union countries.39 The Hills

sought clarification and further detail on the Claims by letters dated July 15, July 19,

July 27, and August 10.40

         On August 17, LW Buyer provided a spreadsheet showing its calculations for

the various Claim amounts and supplying some predicate financial information to

support those calculations (the “Spreadsheet”).41 LW Buyer increased its expected

Losses in the Spreadsheet from $22,943,000 to $45,676,000. Part of that increase

was attributed to recurring annual tax exposure (the “Recurring Exposure Claim”).

The Hills sought more information in letters dated October 5 and December 15.42

37
     Flood Aff. ¶ 20.
38
     Id. ¶ 21; Counterclaims ¶ 65.
39
     Flood Aff. ¶¶ 23, 27.
40
     Compl. ¶¶ 44, 46, 48, 50.
41
     Id. ¶ 51 & Ex. 9.
42
     Id. ¶¶ 55-56.

                                          12
On January 11, 2017, LW Buyer responded with narrative explanations of its

Claims.43 The parties continued discussions until August 2017.

          C.     The Hills Sue, And LW Buyer Mitigates Liquid Web’s VAT
                 Liability.

          On August 15, 2017, the Hills brought this action seeking declaratory

judgments as to the status of the Claims and a final determination ordering a release

of portions of the Escrow Fund (the “Complaint”). On September 28, LW Buyer

answered the Complaint, and brought its Counterclaims for breach of contract,

indemnification, and declaratory judgments. On October 18, the Hills answered the

Counterclaims.

          As these proceedings progressed, LW Buyer negotiated with various

jurisdictions to mitigate Liquid Web’s potential VAT liability.44 On December 7,

2017, and March 6, 2018, LW Buyer sought the Hills’ consent to settle Liquid Web’s

VAT liability in certain jurisdictions for a total of approximately $6,364,964. The

Hills consented to a portion of those settlements. On May 2, LW Buyer informed

the Hills that it could settle all the contested and outstanding VAT liability for

$312,350—less than 4% of the original exposure estimates. The Hills consented on

43
     Id. ¶ 57.
44
   Section 11.8(e) of the Purchase Agreement requires any party seeking indemnification
to “take all reasonable steps to mitigate any Loss to the extent required by applicable Legal
Requirements upon becoming aware of any event or circumstance that would reasonably
be expected to, or does, give rise to a Loss.”

                                             13
May 9, although they disclaimed any underlying liability. Since then, LW Buyer

settled the VAT Claim for $312,350, and spent approximately $300,000 in advisors’

fees to reach that conclusion.45

         On August 31, the Hills moved for partial summary judgment (the “Motion”)

to resolve the Accounts Receivable, VAT, Sales and Use, Revenue Misstatements,

and Recurring Exposure Claims.46 The parties completed briefing on January 9,

2019, and presented argument on March 6, 2019 (the “Hearing”).47

         LW Buyer’s claims crystallized over the course of briefing and at the Hearing.

It “determined not to pursue indemnification for [the Accounts Receivable and

Recurring Exposure Claims] from the escrow, but reserve[d] the right to pursue them

at a later time from the Hills individually.”48 The parties dispute whether that

reservation of rights warrants summary judgment in the Hills’ favor, or dismissal

based on mootness. Because the parties expressed a willingness to meet and confer

45
     Flood Aff. ¶¶ 36-52.
46
   D.I. 23. I refer to briefing on the Motion as the Hills’ “Opening Brief,” LW Buyer’s
“Answering Brief,” and the Hills’ “Reply Brief.” D.I. 24, 33, 40. The Hills are not seeking
judgment on the two additional disputed Claims—relating to capital lease obligations,
undocumented costs, and transaction expenses—because they “may raise disputed factual
questions and, in any event, involve relatively small amounts that the parties should be able
to settle.” Opening Br. 4. In the Complaint, the Hills also concede indemnification on a
portion of the Claim relating to undocumented costs and transaction expenses.
Compl. ¶ 84.
47
     D.I. 52 [hereinafter “Hearing Transcript”].
48
     Answering Br. 29 n.10.

                                              14
on a stipulation to resolve those issues,49 the Court requested that they “lay some

manner of baseline stipulation as to the [Accounts Receivable, Recurring Exposure,

and VAT Claims].”50

          The parties were unable to agree to any stipulation. Instead, they submitted

brief position letters on April 5 and 8, cementing a few more undisputed facts

relevant to this opinion. First, LW Buyer seeks $620,558 in indemnification on the

VAT Claim, and $330,000 in indemnification on the Sales and Use Claim. 51 And

second, the Hills have withdrawn their Motion in part such that the Court “need not

decide now whether the still-contested $620,558 of [the VAT Claim] is time barred

or otherwise invalid.”52

          The remaining issues are: (i) the Revenue Misstatements Claim, (ii) the

contested portion of the Sales and Use Claim, and (iii) whether the uncontested

Claims and portions of Claims are moot or merit judgment in the Hills’ favor.

49
     See, e.g., Hearing Tr. 49, 77.
50
     Id. 81.
51
     See D.I. 51 at 3-4.
52
   D.I. 50 at 5. The Hills originally requested summary judgment awarding them
reasonable fees and costs pursuant to the fee-shifting provision of the Purchase Agreement.
But they have since withdrawn their fee-shifting request for the time being. See id.

                                            15
II.        ANALYSIS

           “The function of summary judgment is the avoidance of a useless trial where

there is no genuine issue as to any material fact.”53           Summary judgment is

appropriate where the “pleadings, depositions, answers to interrogatories and

admissions on file, together with the affidavits, if any, show that there is no genuine

issue as to any material fact and the moving party is entitled to judgment as a matter

of law.”54 “A fact is material if it ‘might affect the outcome of the suit under the

governing law.’”55 A material issue of fact exists if “a rational trier of fact could

find any material fact that would favor the non-moving party in a determinative way,

drawing all inferences in favor of the nonmoving party.”56 But “[t]here is no ‘right’

to a summary judgment,”57 and “[t]he Court maintains the discretion to deny

summary judgment if it decides that a more thorough development of the record

would clarify the law or its application.”58

53
     Emmert v. Prade, 711 A.2d 1217, 1219 (Del. Ch. 1997).
54
     Ct. Ch. R. 56(c).
55
  Deloitte LLP v. Flanagan, 2009 WL 5200657, at *3 (Del. Ch. Dec. 29, 2009) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
56
     Id.
57
     Telxon Corp. v. Meyerson, 802 A.2d 257, 262 (Del. 2002).
58
  Zimmerman v. Crothall, 2012 WL 707238, at *5 (Del. Ch. Mar. 5, 2012) (citations and
quotations omitted), as revised (Mar. 27, 2012).

                                            16
         In interpreting contracts, this Court’s “task is to fulfill the parties’ shared

expectations at the time they contracted.”59 “Delaware adheres to an objective theory

of contracts, [and so] the contract’s construction should be that which would be

understood by an objective, reasonable third party.”60 The Court can consider

extrinsic evidence to interpret an ambiguous contract. But “a contract is ambiguous

only when the provisions in controversy are reasonably or fairly susceptible of

different interpretations or may have two or more different meanings.”61 Put another

way, “[a]mbiguity does not exist where the court can determine the meaning of a

contract without any other guide than a knowledge of the simple facts on which,

from the nature of language in general, its meaning depends.”62

         A.      The Court Denies Summary Judgment On The Revenue
                 Misstatements Claim.

         LW Buyer asserts the Revenue Misstatements Claim based alleged breaches

of the representations and warranties.          The First Notice listed a series of

representations and warranties, but the Counterclaims specify that Liquid Web’s

59
  Leaf Invenergy Co. v. Invenergy Renewables LLC, — A.3d —, 2019 WL 1965888, at *6
(Del. May 2, 2019) (quotations omitted).
60
     Id. at *6 (quotations omitted).
61
  Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del.
1992).
62
     Id. at 1196 (quotations omitted).

                                           17
monthly financial statements or records63 for December 2014, January 2015, and

February 2015 (the “Monthly Financials”)64 were in breach of Sections 3.4 and 3.5

of the Purchase Agreement.65 Section 3.4 addresses the accuracy of the Companies’

Financial Statements, while Section 3.5 governs “books of account and other

Records.”66

          The Hills challenge the Revenue Misstatements Claim on two fronts: first,

that the Hills never represented or warranted the accuracy of the Monthly Financials;

and second, that LW Buyer’s First Notice failed to provide the “factual basis of the

[Claim] in reasonable detail to the extent known by [LW Buyer]” as required by

Section 11.4(a).67 I disagree with the first argument, and find that the second is not

amenable to decision on summary judgment. The Hills’ Motion on the Revenue

Misstatements Claim is denied.

63
  The parties differ in how they characterize the materials at issue—for purposes of this
opinion, that distinction does not matter.
64
     Counterclaims ¶ 30; Answering Br. 30.
65
    Counterclaims ¶¶ 89-98. The Counterclaims also reference the terms of a disclosure
letter, but the parties do not address this factual nuance in the briefing. I thus find that LW
Buyer has waived reliance on it to oppose the Motion. See Emerald P’rs v. Berlin, 726
A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”).
66
     Purchase Agreement §§ 3.4, 3.5.
67
     Id. § 11.4(a).

                                              18
            1.     The Revenue Misstatements Claim May Derive From
                   Monthly Financial Records.

      Section 3.4 provides that the Financial Statements must be “accurate and

complete in all material respects,” and lists specific requirements for gauging that

accuracy and completeness. Section 3.5 provides more generally that “[t]he books

of account and other Records of each Acquired Company that have been made

available to [LW Buyer], are materially complete and correct, and represent actual

and bona fide transactions.”

      The parties dispute whether any representation or warranty governs the

Monthly Financials.    The Hills argue that Section 3.4, the far more specific

provision, represents the accuracy and completeness of only certain named financial

records, and did not name the Monthly Financials. The Hills also argue that they

did not represent or warrant the Monthly Financials in Section 3.5, because the

Monthly Financials are the same type of record as those enumerated in Section 3.4,

which Section 3.5 cannot address without stepping on Section 3.4. The Hills

conclude that only Section 3.4 could represent or warrant the accuracy or

completeness of any financial statements, and thus that they did not represent or

warrant the accuracy of the Monthly Financials.

      LW Buyer argues that Section 3.5 governs the Monthly Financials by its plain

and unambiguous language, and that Section 3.5 does not conflict with Section 3.4

or address the Monthly Financials at all. LW Buyer interprets the more specific

                                        19
representations in Section 3.4 as applying stricter standards only to the enumerated

Financial Statements. And because the Monthly Financials are not included within

the Financial Statements, LW Buyer concludes they fall under the more general

Section 3.5.

         “The contract must [] be read as a whole, giving meaning to each term and

avoiding an interpretation that would render any term mere surplusage.”68 “Specific

language in a contract controls over general language, and where specific and

general provisions conflict, the specific provision ordinarily qualifies the meaning

of the general one.”69 Here, Section 3.4, as the more specific provision, must limit

the overlapping language in Section 3.5. If it did not, Section 3.5 would cover even

the Financial Statements and be at least partly redundant of Section 3.4’s similar,

more stringent demands.70

         This Court addressed a similar question in ClubCorp, Inc. v. Pinehurst, LLC.71

There, the Court considered whether a general contractual loss provision permitted

68
  Sunline Commercial Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846 (Del.
2019) (quotations omitted).
69
     DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005).
70
  See Sunline Commercial Carriers, 206 A.3d at 846; Reybold Venture Grp. XVI LLC v.
Cresswell, 2014 WL 7010757, at *3 (Del. Super. Ct. Nov. 26, 2014) (“[A] contract should
be read to give effect to all the provisions of the contract and not render one provision
superfluous or redundant.”), aff’d, 115 A.3d 1215 (Del. 2015).
71
     2011 WL 5554944 (Del. Ch. Nov. 15, 2011).

                                             20
indemnification of tax claims.72 The general provision did not name tax claims

among its covered losses.         But another provision “expressly provide[d] for

indemnification of taxes,” although “on a more limited basis than would” the general

provision.73 The Court concluded that “to whatever extent [the general and specific

provisions] might conflict if [the general provision] applied equally to tax matters,

[the specific provision] would be the narrower of the two provisions and, therefore,

control.”74

           The interplay between Sections 3.4 and 3.5 does not, as the Hills suggest,

require reading out any representation or warranty of the Monthly Financials. Under

its plain meaning, Section 3.4 removes only the named Financial Statements, not

additional unnamed records, from Section 3.5’s more general representation.

Although Section 3.5 is qualified by Section 3.4 with regard to Financial Statements,

that does not compel a conflict regarding all financial materials. To impose that

conflict would require me to re-write the parties’ agreement and “upset[] the

allocation of risk deliberately established by the” Purchase Agreement.75 I conclude

72
     Id. at *11.
73
     Id.
74
  Id.; see also Delta Hldgs., Inc. v. Nat’l Distillers & Chem. Corp., 945 F.2d 1226, 1248
(2d Cir. 1991).
75
  Delta Hldgs., 945 F.2d at 1248. Reading Sections 3.4 and 3.5 this way comports with
how these kinds of provisions typically interact. As explained by the drafters of the
American Bar Association’s Model Stock Purchase Agreement, provisions like Section 3.5

                                           21
Section 3.5 covers the Monthly Financials to the extent the Monthly Financials are

not included in Section 3.4’s more specific representations.                “Consistent with

foundational principles of contract interpretation, this construction harmonizes and

gives meaning to both provisions at issue, obviating any need to prefer one over the

other.”76 Accordingly, the Hills’ motion for summary judgment based on the

premise that they did not represent or warrant the Monthly Financials is denied.

               2.     LW Buyer’s First Notice Presents Issues Not Amenable To
                      Summary Judgment.

         The Hills also claim that the First Notice failed to satisfy Section 11.4(a)’s

requirement to specify the Revenue Misstatements Claim’s “factual basis in

reasonable detail.” The First Notice asserted that “[i]naccuracies in the conversion

of the Acquired Companies’ cash basis books to accrual basis financial statements

led to materially misstated revenue and revenue growth on an intra-period basis,”

provided an itemized list of allegedly breached provisions, and estimated the Loss.

cover “books of account . . . [as] the basis of the financial statements” of more specific
provisions like Section 3.4. ABA Mergers and Acqs. Comm., Model Stock Purchase
Agreement With Commentary (2d ed. 2010) § 3.5 cmt. at 100. That is because “[i]f the
books of account are inaccurate or incomplete, the information provided [in the financial
statements] . . . will be suspect and the financial statements will be of little value to Buyer.”
Id. Provisions like Section 3.5 “go behind the financial statements by requesting
representations concerning the quality of the [a]cquired [c]ompanies’ recordkeeping.” Id.
76
     Acela Invs. LLC v. DiFalco, 2019 WL 2158063, at *22 (Del. Ch. May 17, 2019).

                                               22
         Where parties have completely omitted the bases for an indemnification claim

in a notice, or attempted to retroactively fit a new claim into a prior notice, this Court

has granted summary judgment for failure to give sufficient notice of that claim.77

But on the limited question of the specificity or detail in a claim, the Court has

concluded that the reasonable quantum of detail “depends on the circumstances and

the allegations; in other words, it involves questions of fact.”78 On similar facts and

contractual language, this Court held that “the [contractual] term ‘reasonable

particularity’ is susceptible to two reasonable interpretations” because it could mean

either “to itemize the particular representations and warranties that were breached,

such that the other party is on ‘notice,’” or to require “significantly more detail.”79

Because of that ambiguity, and because the Court found that interpretation of the

claim notice would benefit from development at trial, the Court denied summary

judgment.

77
  See i/mx Info. Mgmt. Sols., Inc. v. Multiplan, Inc, 2014 WL 1255944, at *12 (Del. Ch.
Mar. 27, 2014); Winshall v. Viacom Int’l Inc., 2012 WL 6200271, at *3 n.20, *8 (Del. Ch.
Dec. 12, 2012), aff’d, 76 A.3d 808 (Del. 2013).
78
     ChyronHego Corp. v. Wight, 2018 WL 3642132, at *11 (Del. Ch. July 31, 2018).
79
  Impact Invs. Colo. II, LLC v. Impact Hldg., Inc., 2012 WL 3792993, at *8 (Del. Ch. Aug.
31, 2012).

                                           23
         The First Notice may very well have fallen short of Section 11.4(a)’s

requirements.        But the issue raises questions of fact and would benefit from

development at trial.80 Summary judgment on this point is denied.

         B.      The Court Grants Summary Judgment On The Sales And Use
                 Claim Without Prejudice To Future Contractual Indemnification
                 Claims.

         LW Buyer’s First Notice presented the Sales and Use Claim as follows:

         Buyer’s investigation is ongoing, but it appears the Acquired
         Companies have obligations and other types of Loss with respect to
         sales and use taxes in various jurisdictions (including Washington,
         California, Arizona, and Michigan). The existence of such obligations
         and other forms of Loss would constitute breaches of several
         representations in the Purchase Agreement (including Section 3.9 (No
         Undisclosed Liabilities), Section 3.10 (Taxes), and Section 3.13
         (Compliance with Legal Requirements)) and such obligations and other
         forms of Loss would also constitute Indemnified Taxes.81

LW Buyer currently seeks $330,000 in indemnification for its Sales and Use Claim,

based on Losses from both Indemnified Taxes and breaches of representations and

warranties.82 The parties’ submissions do not clearly explain the source of that

80
     Zimmerman, 2012 WL 707238, at *5.
81
     See First Notice at 3.
82
  Although LW Buyer’s Counterclaims also rely on Section 11.2(e) for the Sales and Use
Claim, the Hills argued in their Opening Brief that the First Notice never raised Section
11.2(e) and, thus, LW Buyer is time-barred from relying on it. Counterclaims ¶ 101;
Opening Br. 27 n.59. LW Buyer did not invoke or mention Section 11.2(e) in its
Answering Brief or at the Hearing. Without reaching the merits of the Hills’ argument as
to Section 11.2(e), I find that LW Buyer has waived reliance on it for purposes of this
Motion. See Emerald P’rs, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”).

                                           24
number. It appears to represent LW Buyer’s current estimate of the amount of sales

and use tax the Companies should have paid for the years 2012 through 2014, and

the period between January 2015 to June 2015.83 It also appears to include the

Washington Tax.84

          The Hills agreed to indemnify and hold harmless LW Buyer and the

Companies from “any Loss that [LW Buyer or other relevant parties] may suffer,

sustain, or become subject to, as a result of, in connection with, or relating to: (a)

any Breach of any representation or warranty made by Sellers . . .; [or] (d) any

Indemnified Taxes.”85 A Loss may include, among other things, “any . . . Tax,”

which the Purchase Agreement requires to be “imposed, assessed, or collected.”86 A

Loss relating to Indemnified Taxes similarly must be “Taxes (or the non-payment

thereof) imposed on the Companies.” 87

83
     Counterclaims ¶ 65.
84
     Id. ¶¶ 102-103.
85
     Purchase Agreement § 11.2.
86
     Id. § 1.1.
87
   Id. The definition of Losses also provides for “liabilit[ies] (contingent or otherwise).”
Id. The parties did not focus on this issue in their briefing, and LW Buyer only raised it in
passing at the Hearing. See Hearing Tr. 71-72 (“This is a contingent liability. It’s a liability
that we owe. And even though we haven’t paid it out yet, it is a tax that is owed in another
jurisdiction.”). I find that LW Buyer’s Losses are in the category of a “Tax,” not a “liability
(contingent or otherwise).” See ClubCorp, 2011 WL 5554944, at *11 (“[I]nsert[ing] the
defined term ‘Taxes’ into the definition of ‘Loss’” indicates parties’ intent to “include taxes
among the various costs encompassed within the term ‘Loss’”). The only source of harm
from the Sales and Use Claim is tax liability and related expenses arising from the alleged

                                              25
         Other than the Washington Tax, LW Buyer has not suffered the Losses alleged

in its Sales and Use Claim.88           This raises ripeness concerns.         “A ripeness

determination requires a common sense assessment of whether the interests of the

party seeking immediate relief outweigh the concerns of the court in postponing

review until the question arises in some more concrete and final form.”89 “Delaware

courts ‘typically decline to decide issues that may not have to be decided or that

create hypothetical harm.’”90 “Ripeness, the simple question of whether a suit has

failure to appropriately collect and pay the Companies’ taxes. See Counterclaims ¶¶ 102-
103. Taxes must be “imposed, assessed, or collected”—they cannot be contingent.
Purchase Agreement § 1.1. Reading “liability (contingent or otherwise)” to include Tax
liability would overlap entirely with the defined term of “Taxes,” and elide the requirement
that the Taxes be “imposed, assessed, or collected.” Id. Under a plain reading of the
Purchase Agreement, the parties intended to confine all tax-related Losses to those that
meeting the definition of a “Tax.” Reybold Venture Grp., 2014 WL 7010757, at *3 (“[A]
contract should be read to give effect to all the provisions of the contract and not render
one provision superfluous or redundant.”). This reading makes sense, as the parties also
bargained to permit LW Buyer to bring Section 11.4(c) claims—including for Indemnified
Taxes—after the Survival Period Termination Date, and so there would be little reason to
permit contingent Tax Loss claims prior to that Date.
88
     See Counterclaims ¶¶ 102-103; First Notice.
89
  XI Specialty Ins. Co. v. WMI Liquid. Tr., 93 A.3d 1208, 1217 (Del. 2014) (quotations
omitted); see also id. 1217-18 (“Generally, a dispute will be deemed ripe if litigation sooner
or later appears to be unavoidable and where the material facts are static. Conversely, a
dispute will be deemed not ripe where the claim is based on uncertain and contingent events
that may not occur, or where future events may obviate the need for judicial intervention.”
(quotations omitted)).
90
  Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 940 (Del. Ch. 2013)
(quoting 3 Stephen A. Radin, The Business Judgment Rule: Fiduciary Duties of Corporate
Officers 3498 (6th ed. 2009)), judgment entered sub nom. Boilermakers Local 154 Ret.
Fund & Key W. Police & Fire Pension Fund v. Chevron Corp. (Del. Ch. 2013).

                                             26
been brought at the correct time, goes to the very heart of whether a court has subject

matter jurisdiction.”91

         At the time of the First Notice, the Sales and Use Claim was not based on

payment, or even an agreement to pay, any tax liability. LW Buyer based the Claim

solely on Ernst & Young’s ongoing analysis and estimates of its tax exposure. With

the exception of the Washington Tax, the Companies have yet to pay or be assessed

any taxes that may fall under the Sales and Use Claim. LW Buyer argues that “it

[is] not a question of whether the company [will] have to make payments to taxing

authorities, but rather, how much it [will] have to pay.”92

         Both questions must be answered before the Sales and Use Claim is ripe.

Otherwise, LW Buyer could seek indemnification—and reap a windfall—for

speculative Losses that it never actually suffered. Such a payment would be

antithetical to the concept of indemnification:          repaying a loss to make the

indemnitee whole.93 Nor does indemnifying LW Buyer’s inchoate Loss make

practical sense. For instance, if the Hills were to indemnify LW Buyer for an

91
     Bebchuk v. CA, Inc., 902 A.2d 737, 740 (Del. Ch. 2006).
92
     Answering Br. 19.
93
   See Horton v. Organogenesis Inc., 2019 WL 3284737, at *4 (Del. Ch. July 22, 2019)
(“[T]he purpose of the [m]erger [a]greement’s indemnification provisions” is “to
indemnify and hold harmless the indemnitee from and against [l]osses incurred”); Nw.
Nat’l Ins. Co. v. Esmark, Inc., 1996 WL 527349, at *5 (Del. Super. Ct. Aug. 9, 1996) (“The
purpose of an indemnity contract is to make the indemnitee whole.”).

                                             27
estimated Sales and Use Claim that exceeded the Companies’ actual and eventual

sales and use tax payments, presumably LW Buyer would have to pay the Hills back

the difference. Determining damages presents similar problems of proof. When

asked at the Hearing how it would prove the amount of Loss before paying or

agreeing to pay that Loss, LW Buyer indicated that the parties could hire and present

“experts talking about the taxes that are owed in these jurisdictions.”94 These issues

support my “common sense assessment” that LW Buyer’s Sales and Use Claim is

largely unripe.95

          This    Court   has    dismissed      without   prejudice   unripe    contractual

indemnification demands that rely on predictions that a party “may face future

additional [l]osses,” like the Sales and Use Claim.96 While the Purchase Agreement

and the contracts in those cases differ on various points, I find the cases instructive.

As in Kilcullen v. Spectro Scientific, Inc., LW Buyer’s “alleged ‘exposure’ is

insufficient to render its indemnification claim ripe under the governing language”

because “the potential claims [LW Buyer] raises may never be asserted and [LW

Buyer] may never suffer harm.”97               This case is also analogous to Horton v.

94
     Hearing Tr. 73.
95
     XI Specialty Ins. Co., 93 A.3d at 1217.
96
     Kilcullen v. Spectro Sci., Inc., 2019 WL 3074569, at *7 (Del. Ch. July 15, 2019).
97
     Id. at *7.

                                                28
Organogenesis Inc., where the Court dismissed without prejudice unripe third-party

indemnification demands because the asserting party’s “position ignore[d] the

purpose of the [m]erger [a]greement’s indemnification provisions—to indemnify

and hold harmless the indemnitee from and against [l]osses incurred.”98

      I conclude LW Buyer’s claims for indemnification under Sections 11.4(a) and

(c) are unripe. LW Buyer may still be able to pursue indemnification for sales and

use taxes that materialize: it can notice claims for Indemnified Taxes under Section

11.4(c) “at any time,” and the parties recognized an “indefinite” contractual survival

period for those claims.99      The parties bargained for that indefinite period,

presumably in recognition that tax-related liabilities may not have been ripe by the

Survival Period Termination Date. Although LW Buyer may be able to pursue these

same tax Losses later, the Sales and Use Claim cannot proceed against the Hills or

hold up disbursal of the Escrow Funds as presently based on estimated tax liabilities

that have not yet been imposed or suffered. I grant summary judgment on the

98
   Organogenesis Inc., 2019 WL 3284737, at *4. While I recognize the differences
between the Purchase Agreement’s language indemnifying against Losses that LW Buyer
“may suffer, sustain, or become subject to,” and the language the parties agreed to in
Organogenesis indemnifying against losses “that any [b]uyer [i]ndemnitee incurs,” I find
the provisions sufficiently analogous in this circumstance. Id.
99
  The Hills acknowledge that “[u]nlike claims based on breaches of representations and
warranties under Section 11.2(a), claims based on Indemnified Taxes do not have to be
asserted before the Survival Period Termination Date,” because “indemnification for
Indemnified Taxes may be sought at any time under Section 11.4(c).” Reply Br. 29. The
parties have not raised any concern over outer limitations periods for these claims.

                                          29
inchoate portion of the Sales and Use Claim to the Hills, without prejudice to LW

Buyer’s ability to raise or renew claims later in a manner permitted by the Purchase

Agreement.

         As for the Washington Tax, the Hills contend that LW Buyer never notified

them of, or obtained their consent to settle and pay, that tax.100 According to the

Hills, LW Buyer’s failure to provide the Hills notice of the Washington Tax, or

obtain their consent in resolving it, violated one or all of Sections 11.6(a), (b)(ii),

and (c). Section 11.6 requires the party seeking indemnification to “giv[e] notice of

a Third-Party Claim” to the indemnifying party, and gives an indemnifying party the

right to “assume the defense of” Third-Party Claims in certain situations.101 LW

Buyer asserts that “[t]he Hills were made aware of [the Washington Tax]

assessment” and of LW Buyer’s payment of the Washington Tax, although it

provides no supporting documentation.102 For now, I assume, without deciding, that

LW Buyer provided the Hills notice of the Washington Tax under Section 11.6(a).

100
      See Opening Br. 38 n.72.
101
    Purchase Agreement §§ 11.6(a)-(b); see also id. § 11.6(a) (“[P]rovided, however, that
no failure or delay on the part of an Indemnified Person in notifying an Indemnifying
Person will relieve the Indemnifying Person from any obligation under [Section 11] except
to the extent that the failure of delay materially adversely affects resolution of the Third-
Party Claim.”).
102
   See Answering Br. 19. LW Buyer cites the Flood Affidavit, which states: “The Hills
were made aware of [the Washington Tax], and LW Buyer paid that $82,042.59 assessment
on July 13, 2016. The Hills were again notified about the Washington assessment and
payment on August 17, 2016, and January 11, 2017.” Flood Aff. ¶ 21. Neither the

                                             30
         No party argues that the Hills assumed the defense of the Washington Tax,

and it appears from LW Buyer’s payment that LW Buyer handled the process. In

that circumstance, either Section 11.6(b)(ii) or (c) governs. Section 11.6(b)(ii)

mandates:

         If the Indemnifying Person does not assume the defense of a Third-
         Party Claim in the manner and within the period provided in Section
         11.6(b)(i), or if the Indemnifying Person does not diligently conduct the
         defense of a Third-Party Claim, the Indemnified Person may conduct
         the defense of the Third-Party Claim at the expense of the Indemnifying
         Person and the Indemnifying Person shall be bound by any
         determination resulting from the Third-Party Claim, provided that the
         Indemnified Person shall obtain the prior consent of the
         Indemnifying Person for any compromise or settlement of the Third-
         Party Claim, which may not be unreasonably withheld or delayed.103

Section 11.6(c) provides that “[n]otwithstanding the foregoing, if the Third-Party

Claim . . . (iv) involves Taxes of the Acquired Companies, . . . or (vii) involves

reasonably foreseeable Losses that would exceed the then-current Escrow Funds (net

of any unresolved claims),” LW Buyer could “by notice to” the Hills “assume the

exclusive right to defense, compromise, or settle the Third-Party Claim.” But, like

Section 11.6(b)(ii), there is a catch: “the Indemnifying Person shall not be bound by

any compromise or settlement effected without its prior consent, which may not be

Answering Brief nor the Flood Affidavit make clear how or when LW Buyer notified the
Hills of the Washington Tax.
103
      Purchase Agreement § 11.6(b)(ii) (emphasis added).

                                            31
unreasonably withheld or delayed.”104 The parties do not explain which provision

should apply.105 But I need not reconcile them at this point because both required

that LW Buyer obtain the Hills’ consent to compromise or settle the Washington

Tax.

          LW Buyer recognized that Section 11.6 generally requires the Hills’ consent,

but has not asserted that it sought or obtained the consent required to settle the

Washington Tax under either Section 11.6(b)(ii) or (c).106 Nor has LW Buyer

meaningfully contested the Hills’ arguments that failure to obtain their consent

renders the Washington Tax not subject to indemnification.107 I find that LW Buyer

waived opposition to this issue, and, as a result, I grant summary judgment in favor

of the Hills on this portion of the Sales and Use Claim.108

104
      Id. § 11.6(c).
105
   See Opening Br. 38 n.72 (arguing that “under Sections 11.6(b)(ii) and 11.6(c), LW
Buyer was not permitted to settle the claim without consent from the Hills, and it is
undisputed that LW Buyer never requested, much less obtained such consent”).
106
      See Answering Br. 14, 23-24, 44 n.17.
107
    LW Buyer’s only engagement on this issue was a passing statement at the Hearing that
the Washington Tax “was not a settlement or a compromise” that required the Hills’
consent under Section 11.6, because LW Buyer “[was] assessed $80,000 in sales and use
tax by the State of Washington, and [] paid it.” Hearing Tr. 71. It did not raise this theory
in its briefing.
108
    See Emerald P’rs, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”);
Winshall v. Viacom Int’l, Inc., 55 A.3d 629, 642 (Del. Ch. 2011) (where argument was
raised for the first time at hearing, “argument was [] not fairly or timely presented and was
waived”), aff’d, 76 A.3d 808 (Del. 2013). I do not reach the Hills’ other arguments on the
merits of the Washington Tax claim. See Opening Br. 38 n.72.

                                              32
      C.     The Court Grants Summary Judgment On The Accounts
             Receivable and Recurring Exposure Claims, And Will Not Enter
             An Order Capping Liability For The VAT Claim At This Time.

      Finally, I address the procedural resolution of the substantively uncontested

Claims: (i) the Accounts Receivable and Recurring Exposure Claims in their

entirety, and (ii) the uncontested amounts of the Sales and Use and VAT Claims.

On the second issue, I have already granted summary judgment on the Sales and Use

Claim, and so I only discuss a potential limitation on the VAT Claim. The Hills seek

judgment in their favor on the Accounts Receivable and Recurring Exposure Claims,

and a judgment that the VAT claim cannot exceed the amounts LW Buyer currently

seeks. In doing so, the Hills hope to limit current and future indemnification Claims

against themselves personally or the Escrow Funds.

      LW Buyer instead seeks a mootness finding as to the Accounts Receivable

and Recurring Exposure Claims, arguing that it no longer seeks indemnification on

those Claims from the Escrow Funds. LW Buyer also argues that the Court should

not enter partial judgment capping liability on the VAT Claim at this time. While

LW Buyer is pursuing specified amounts on that Claim now, “taxing authorities

could in the future seek to recover more than these amounts, or assert new claims

for additional pre-closing taxes,” and so “LW Buyer must reserve the right to seek

                                         33
indemnification for any such claims, either from the escrow funds (if funds are still

available) or from Hills themselves.”109

          The Hills seek summary judgment on their declaratory judgment claims.

They brought those claims to resolve an anticipated controversy based on LW

Buyers’ Claims both against the Escrow Funds and against the Hills personally.

Declaratory judgment requires an “actual controversy” “in which the claim of right

or other legal interest is asserted against one who has an interest in contesting the

claim.”110 Where there is no controversy, the Court does not have jurisdiction to

enter declaratory judgment.           “[A]lthough there may have been a justiciable

controversy at the time the litigation was commenced, the action will be dismissed

if that controversy ceases to exist.”111

          LW Buyer originally purported to drop the Accounts Receivable and

Recurring Exposure Claims against the Escrow Funds, while reserving them against

the Hills individually.112 At the Hearing, LW Buyer’s counsel elaborated:

109
      D.I. 51 at 4.
110
      Rollins Int’l Inc. v. Int’l Hydronics Corp., 303 A.2d 660, 662 (Del. 1973).
111
      Gen. Motors Corp. v. New Castle Cty., 701 A.2d 819, 823 (Del. 1997).
112
    Answering Br. 29 n.10 (“The Hills also seek summary judgment on the ‘Accounts
Receivable Claim’ or ‘Recurring Annual Exposure’ claims . . . . However, LW Buyer has
determined not to pursue indemnification for those claims from the escrow, but reserves
the right to pursue them at a later time from the Hills individually.”).

                                               34
          [LW Buyer] has no current intention to pursue either the [Accounts
          Receivable and Recurring Exposure Claims] claim against the Hills
          individually or the escrow fund. It’s just not something that my client
          has any intention of doing at this point in time. So yes, we reserve some
          rights in those footnotes, probably out of an abundance of caution, but
          it’s just not something that we expect ever to occur or to happen.113

Under that scenario, LW Buyer may have mooted the Accounts Receivable and

Recurring Exposure Claims as against the Escrow Funds by removing that portion

of the dispute from justiciable controversy.

          But after the Hearing, LW Buyer clarified that it was reserving the Claims

against “either [] the escrow funds (if funds are still available) or from the Hills

themselves.”114 LW Buyer has not withdrawn the Claims from dispute. Instead, it

hung them like a sword poised to drop on the Escrow Fund or the Hills at some

unspecified later date. A controversy thus remains as to whether LW Buyer can

pursue the Accounts Receivable and Recurring Exposure Claims against the Escrow

Funds, or against the Hills individually, in the future. A controversy also remains as

to whether the Escrow Funds can be released with respect to these Claims. The Hills

sought declaratory judgment to resolve these issues and moved for summary

judgment on them. LW Buyer elected to insert a placeholder for later claims, rather

than assert a defense. I grant summary judgment to the Hills on these Claims.

113
      Hearing Tr. 48-49.
114
      D.I. 51 at 4.

                                             35
         The Hills also seek judgment capping the liability of the VAT Claim at

$620,558. The parties withdrew the merits of the VAT Claim from my consideration

for the time being. I decline to limit the Claim at this time: the terms of the parties’

bargain counsel against such an order. As noted in finding part of the Sales and Use

Claim unripe, LW Buyer’s pre-closing tax liability for the Companies may change

in the future, and Section 11.4(c) of the Purchase Agreement permits LW Buyer to

notice tax-related indemnification claims after the Survival Period Termination

Date. But LW Buyer has waived its ability to further hold up the Escrow Funds to

support the VAT Claim in excess of the amounts it has specified.115 To the extent

LW Buyer’s tax liability for the Companies grows under that Claim, and the Escrow

Funds are no longer available, it will have to pursue indemnification against the

Hills.

         The parties litigated this procedural dispute in the shadow of Section 12.13 of

the Purchase Agreement, which permits a “prevailing party” to receive reasonable

fees and costs for its “action, claim, complaint, proceeding, judgment . . . or suit.”116

115
    Cf. Hermelin v. K-V Pharm. Co., 2011 WL 6225377, at *1 (Del. Ch. Dec. 13, 2011)
(“Having waived its right to contest indemnification with respect to [certain issues], and
having specifically waived the right to claw back amounts paid, the Defendant and its
assigns are barred from further actions inconsistent with such waiver. Moreover, I have
relied specifically on the Defendant’s waivers in reaching my decision here, and thus the
Defendant and its assigns are judicially estopped from litigating the issue in this or any
court in a manner inconsistent with its representations here.”).
116
      See Purchase Agreement §§ 1.1, 12.13.

                                              36
That dispute is not squarely before me—the parties did not substantially brief it, and

the Hills’ April 5 letter withdrew the issue until later in this proceeding. I will hear

the fee-shifting arguments at that time, and the parties should not interpret my

determinations here as resolving the specific question of who prevailed under

Section 12.13.

III.   CONCLUSION

       The Court GRANTS IN PART and DENIES IN PART the Hills’ Motion for

Partial Summary Judgment.        LW Buyer may continue to assert the Revenue

Misstatements Claim and the VAT Claim117 against the Escrow Funds. I do not

comment here on any Claims not litigated or at issue in the Motion. The parties shall

coordinate to submit a proposed order, or competing proposed orders, consistent

with this opinion.

117
   As limited by LW Buyer’s representations and this opinion to $620,558.02 against the
Escrow Funds.

                                          37