Court Opinion

ID: 9908539
Source: CourtListenerOpinion
Date Created: 2023-12-09 18:01:58.953945+00
Date Added: 2024-06-11T12:49:14.406836
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

    ET AGGREGATOR, LLC,                          )
                                                 )
                Plaintiff,                       )
                                                 )
                 v.                              ) C.A. No.: N23C-02-096-EMD CCLD
                                                 )
    PFJE ASSETCO HOLDINGS LLC, and               )
    PILOT WATER SOLUTIONS LLC (f/k/a             )
    PDPS, LLC),                                  )
                                                 )
                Defendants.                      )

                                  Submitted: August 23, 2023
                                  Decided: December 8, 2023

Upon Partial Motion to Dismiss of Defendants PFJE AssetCo Holdings LLC and Pilot Solutions
                                   LLC (f/k/a PDPS LLC)
                                         DENIED

Bradley R. Aronstam, Esquire, S. Michael Sirkin, Esquire, Thomas C. Mandracchia, Esquire,
Ross Aronstam & Moritz LLP, Wilmington, Delaware, Adam Slutsky, Goodwin Procter LLP,
Boston, Massachusetts, James Nikraftar, Goodwin Procter LLP, Santa Monica, California.
Attorneys for Plaintiff ET Aggregator, LLC.

Jesse L. Noa, Esquire, David A. Seal, Esquire, P. Andrew Smith, Esquire, Potter Anderson &
Carroon LLP, Wilmington, Delaware. Attorneys for Defendants PFJE AssetCo Holdings LLC
and Pilot Solutions LLC (f/k/a PDPS LLC).

DAVIS, J.

                                   I.     INTRODUCTION

       This is a breach of contract action assigned to the Complex Commercial Litigation

Division of the Court. Plaintiff ET Aggregator, LLC (“ETA”) commenced this action against

Defendants PFJE Assetco Holdings, LLC ( “PFJE”) and Pilot Water Solutions LLC (the

“Company” and collectively with PFJE, “Defendants”). As set out in the Complaint, ETA is

seeking recovery for Defendants’ alleged breach of contractual obligations under the parties’

Membership Interest Purchase Agreement (“MIPA”). ETA alleged breaches include failures to:
“(i) negotiate at all with [ETA]; (ii) provide any draft 2021 tax returns at any point in time; (iii)

direct communications to [ETA’s majority owner]; and (iv) pay any Tax Distribution to cover

the allocation to [ETA] of $5.5 million of depreciation recapture income.”1 ETA seeks all its

relief though one claim for breach of contract entitled Count I Breach of Contract (“Count I”).2

         On March 23, 2023, Defendants filed their Defendants’ Partial Motion to Dismiss (the

“Motion”).3 Defendants request dismissal of that part of Count I that relates to the purported

contractual agreement to pay a Tax Distribution to ETA to cover the allocation of $5.5 million of

depreciation recapture income. Defendants rely on governing agreements, arguing that these

agreements preclude ETA’s claim for Tax Distributions. ETA opposed the Motion.4

         The Court held a hearing on the Motion on August 23, 2023.5 At the conclusion of the

Hearing, the Court took the Motion under advisement. For the reasons set forth below, the

Motion is DENIED.

                                   II.     RELEVANT FACTS

    A. PARTIES

         ETA is a Delaware LLC and was a member of the Company.6 ETA was a party to the

MIPA and the Company’s Second Amended and Restated Limited Liability Company

Agreement (the “LLC Agreement”).7 ETA owned a 1.47% membership interest in the Company

as of October 2021.8

1
  Compl. ¶ 35 (D.I. No. 1).
2
  Compl. ¶¶ 31-36.
3
  D.I. No. 5.
4
  D.I. No. 11.
5
  D.I. No. 19.
6
  Compl. ¶ 8.
7
  Id.
8
  Id.

                                                   2
        PFJE is a Delaware LLC and was a member of the Company.9 PFJE was party to the

MIPA and LLC Agreement.10 The Company is a Delaware LLC with its principal place of

business in Texas.11 The Company was a party to the MIPA for the sole purpose of Section 16,

titled “Company Agreement.”12

     B. THE DISPUTE

        In 2018, the Company was created to own and operate infrastructure associated with the

management and disposal of water resulting from the production of oil and gas.13 On November

1, 2018, ETA and the Company (and others) executed the LLC Agreement.14

        The LLC Agreement describes circumstances in which the Company is required to make

Tax Distributions.15 The terms of the LLC Agreement provide liquidity to its members to permit

each member to pay its assumed tax liability based on its share of the taxable income generated

by the operations of the company.16 Pursuant to the LLC Agreement, ETA was the “NAH

Member” of the Company.17 Section 9.03 of the LLC Agreement gave the Company the ability,

at its sole discretion, to exercise a call option to buy the Membership Interests of the NAH

Member at a specific price determined by the LLC Agreement.18 On February 7, 2019, the LLC

Agreement was amended to change the method of calculating the Company’s call option.19

9
  Id. ¶ 9.
10
   Id.
11
   Id. ¶ 10.
12
   Id.
13
   Defendants’ Partial Motion to Dismiss (“Defendants’ Mot.”) at 3.
14
   Id.
15
   Id.
16
   Id. at 3-4.
17
   Id. at 7.
18
   Id.
19
   Id.

                                                         3
        PFJE exercised its call option as the 2021 deadline to exercise that option approached.20

On September 16, 2021, PFJE sent ETA a first draft of the MIPA, with a closing date of October

15, 2021.21 Following negotiations, ETA and PFJE agreed in principle to a $3,000,000 purchase

price for ETA’s Membership Interest on September 30, 2021.22 ETA insisted on post-closing tax

protection from the Company such as it would have received if it had remained a member of the

Company.23 In an email from ETA’s counsel dated October 15, 2021, ETA requested that ETA

“should not come out of pocket to pay taxes on any income allocated to it.”24 The Company

agreed, and Section 16 was added to the MIPA to reflect ETA’s request.25 The parties closed on

the MIPA on October 15, 2021.26

        In July 2022, the Company filed its tax return, allocating $5,523,798 of taxable income

generated from the sale of ETA’s membership interest in the form of depreciation recapture to

ETA.27 On February 13, 2023, ETA brought the present action for breach of contract against

Defendants asserting, in relevant part, that Defendants failed to “pay any Tax Distribution to

cover the allocation to [ETA] of $5.5 million of depreciation recapture income.”28

20
   Compl. ¶ 15-16.
21
   Defendants’ Mot. at 8.
22
   Compl. ¶ 17.
23
   Id. ¶ 19.
24
   Id. ¶ 20.
25
   Id.
26
   Defendants’ Mot. at 10.
27
   Id. at 11.
28
   Compl. ¶ 35.

                                                 4
     C. THE GOVERNING AGREEMENTS29

        1. The LLC Agreement

        On November 1, 2018 ETA and the Company executed the LLC Agreement.30 In

relevant part, under Section 6.01 of the LLC Agreement, the Company is required to make

certain Distributions:

        (a) Any available cash of the Company, after allowance for payment of all
        Company obligations then due and payable, including debt service and operating
        expenses and for such reasonable reserves as the Management Committee, acting
        in accordance with Section 7.06(e), may determine, shall be distributed to the
        Members from time to time as determined by the Management Committee, pro rata
        in accordance with their respective Percentage Interests (subject to Section
        6.01(b)).

        …

        (c) Notwithstanding any provision to the contrary contained in this Agreement, the
        Company shall not make any distribution to the Members if such distribution would
        violate § 18-607 of the Delaware Act or other Applicable Law or if such distribution
        is prohibited by the Company’s then-applicable debt-financing agreements.31

        Specifically, Section 6.02 of the LLC agreement requires the Company to make

Tax Distributions under specific circumstances:

        (a) Subject to Section 6.01(a) and Section 6.01(c), at least ten (10) days before each
        date prescribed by the Code for a calendar-year corporation to pay quarterly
        installments of estimated tax, the Company shall, subject to any restriction on the
        Company’s ability to do so arising under Applicable Law or contractual
        arrangement, distribute cash to each Member in proportion to and to the extent of

29
   As set out below, the Court is not addressing the merits of Defendants’ Motion on the viability of ETA’s Tax
Distribution “sub-claim,” However, ETA’s argument with respect to Defendants’ interpretation of the governing
agreements creating ambiguity is not strong. “Although the parties disagree as to the proper interpretation of the
contract, their disagreement does not create an ambiguity. ‘Rather 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.’” Northwestern Nat. Ins. v. Esmark, Inc., 672 A.2d 41, 43 (Del. 1996). Accordingly, the disagreements
by ETA and Defendants over the proper interpretation of the governing agreements does not create an ambiguity.
This opinion lays out the relevant provisions of the governing agreements for a reason. The Court has spent some
time reviewing the MIPA and the LLC Agreement and the language of these agreements as they relate to taxable
income, etc., seems plain and unambiguous. The parties may want to stipulate to facts and make legal arguments in
dispositive motions at the proper time to resolve this subpart of Count I.
30
   Defendants’ Mot. at 3.
31
   Compl., Ex. B (the “LLC Agreement”) § 6.01.

                                                         5
          such Member’s Quarterly Estimated Tax Amount for the applicable calendar
          quarter (each such distribution, a “Tax Distribution”).

          (b) Subject to Section 6.01(a), if, at any time after the final Quarterly Estimated Tax
          Amount has been distributed pursuant to Section 6.02(a) with respect to any Fiscal
          Year, the aggregate Tax Distributions to any Member with respect to such Fiscal
          Year are less than such Member’s Tax Amount for such Fiscal Year (a “Shortfall
          Amount”), the Company shall use commercially reasonable efforts to distribute
          cash in proportion to and to the extent of such Member’s Shortfall Amount.

          (c) Any distributions made pursuant to this Section 6.02 shall be (i) reduced by
          distributions previously made pursuant to Section 6.01(a) in the same Fiscal Year,
          and (ii) treated for purposes of this Agreement as advances of distributions pursuant
          to Section 6.01(a) and shall reduce, dollar-for-dollar, the amount otherwise
          distributable to such Member pursuant to Section 6.01(a).32

          The LLC Agreement provides additional structure through its defined terms.

These include:

          “Adjusted Taxable Income” of a Member for a Fiscal Year (or portion thereof)
          with respect to the Membership Interest held by such Member means the federal
          taxable income allocated by the Company to the Member with respect to its
          Membership Interest (as adjusted by any final determination in connection with any
          tax audit or other proceeding) for such Fiscal Year (or portion thereof); provided,
          however, that such taxable income shall be computed (a) assuming that any
          deduction described under Code Section 199A is unavailable to the Members, (b)
          without regard to any allocations pursuant to Code Section 704(c), and (c) taking
          into account any special basis adjustment with respect to such Member resulting
          from an election by the Company under Code Section 754.33

          “Estimated Tax Amount” of a Member for a Fiscal Year means the Member’s
          Tax Amount for such Fiscal Year as estimated in good faith from time to time by
          the Management Committee. In making such estimate, the Management Committee
          shall take into account amounts shown on Internal Revenue Service Form 1065 and
          all accompanying Member Schedule K-1s filed by the Company and similar state
          or local forms filed by the Company for the preceding taxable year and such other
          adjustments as the Partnership Representative reasonably determines are necessary
          or appropriate to reflect the estimated operations of the Company for the Fiscal
          Year.34

          “Membership Interest” means an interest in the Company owned by a Member,
          including such Member’s right (a) to its share of Net Income, Net Losses and other

32
   Id. § 6.02.
33
   Id. § 1.01.
34
   Id.

                                                    6
        items of income, gain, loss and deduction of the Company; (b) to its distributive
        share of the assets of the Company; (c) to vote on, consent to, or otherwise
        participate in any decision of the Members as provided in this Agreement; and (d)
        to any and all other benefits to which such Member may be entitled as provided in
        this Agreement or the Delaware Act. The Membership Interest of each Member
        shall be expressed as a Percentage Interest.35

        “Quarterly Estimated Tax Amount” of a Member for any calendar quarter of a
        Fiscal Year means the excess, if any, of (a) the product of (i) a quarter (1⁄4) in the
        case of the first calendar quarter of the Fiscal Year, half (1⁄2) in the case of the
        second calendar quarter of the Fiscal Year, three-quarters (3⁄4) in the case of the
        third calendar quarter of the Fiscal Year, and one (1) in the case of the fourth
        calendar quarter of the Fiscal Year and (ii) the Member’s Estimated Tax Amount
        for such Fiscal Year, over (b) all distributions previously made during such Fiscal
        Year to such Member.36

        “Tax Amount” of a Member for a Fiscal Year means the product of (a) the Tax
        Rate for such Fiscal Year and (b) the Adjusted Taxable Income of the Member for
        such Fiscal Year with respect to its Membership Interest.37

        2. The MIPA

        On October 15, 2021, ETA and the Company closed on the MIPA.38 MIPA Section 16

addresses tax consequences of the transaction and provides:

        Company Agreements. The Company consents to and approves in all respects
        (whether required under the LLCA or otherwise) to the purchase and sale of the
        Interests pursuant to this Agreement and the consummation of the transactions
        contemplated by the Transaction Documents. The Parties intend that, for federal
        income tax purposes, the purchase and sale described in Section 1 be treated as (i)
        from Seller’s perspective, the sale of a partnership interest pursuant to Section 741
        of the Internal Revenue Code of 1986 (the “Code”) and (ii) from Buyer’s
        perspective, a liquidating distribution by the Company of an undivided interest in
        the Company’s assets to Buyer and Seller pursuant to Section 731 of the Code,
        immediately followed by Buyer’s taxable acquisition of the assets deemed to be
        distributed to Seller, in each case, in a manner consistent with Revenue Ruling 99-
        6 (Situation 1). The Closing shall cause the termination of the Company as a
        partnership for federal and state income tax purposes. Following the Closing, the
        Parties shall negotiate in good faith to allocate the Purchase Price (and any other
        items required to be treated as consideration for federal income tax purposes,
        including amounts described in the penultimate sentence of this Section 16) among

35
   Id.
36
   Id.
37
   Id.
38
   Defendants’ Mot. at 10.

                                                  7
        the assets deemed to be acquired by Buyer in a manner consistent with Section 1060
        of the Code and the Treasury Regulations promulgated thereunder and, if the Parties
        reach an agreement on such allocation, each Party shall prepare and file all relevant
        tax returns in a manner consistent with such allocation. As soon as reasonably
        practicable after the Closing, the Company will deliver or cause to be delivered to
        Seller, IRS Schedule K-1 to Form 1065 and such other information with respect to
        the Company as may be necessary for the preparation of Seller’s federal, state and
        local income tax returns for 2021. The federal and state and other income tax returns
        of the Company and related Schedule K-1s for its final year ending as of the Closing
        shall be prepared in accordance with and consistent with the past practice of the
        Company. Complete drafts of such income tax returns shall be provided by the
        Company to Seller at least twenty (20) business days in advance of the due date and
        intended filing date for review and comment, and the Company shall reasonably
        consider all such comments in good faith. Notwithstanding the Closing and Seller
        ceasing to be a Member (as defined in the LLCA) of the Company as of the Closing,
        the Company shall timely pay to Seller all Tax Distributions and Shortfall Amounts,
        each as defined in Section 6.02 of the LLCA, to which Seller otherwise would be
        entitled under such Section 6.02 of the LLCA with respect to income allocated to
        Seller during the period during which it was a Member. Such payments shall not
        reduce any amounts to which Seller is otherwise entitled under this Agreement.39

        3.       PROCEDURAL POSTURE

        On February 13, 2023, ETA filed the present action for breach of contract against

Defendants.40 As stated above, ETA is seeking recovery for Defendants’ alleged breach of

contractual obligations under the MIPA, including the failure of Defendants to pay any Tax

Distribution to cover the allocation to [ETA] of $5.5 million of depreciation recapture income.”41

        On March 23, 2023, Defendants filed the Motion asserting that the Court should dismiss

ETA’s claim that the Company breached its contractual agreements by failing to pay any Tax

Distribution.42 On April 28, 2023, ETA filed its Answering Brief in Opposition to Defendants’

39
   Compl., Ex. A. (hereinafter, “The MIPA”) Section 16.
40
   D.I. No. 1.
41
   Id. ¶ 35
42
   See Defendants’ Mot.

                                                          8
Partial Motion to Dismiss.43 On May 23, 2023, Defendants filed their Reply Brief in support of

their Partial Motion to Dismiss.44 The Court held a hearing on August 23, 2023.

                                    III.     PARTIES’ CONTENTIONS

     A. THE MOTION

         Defendants request that the Court dismiss part of Count I—ETA’s breach of contract

claim relating to contractual obligations under the governing agreements with respect to the Tax

Distribution.45 Defendants contend that dismissal is warranted because ETA has misconstrued

the language of the MIPA and LLC Agreement and invented a benefit that was not contemplated

in the agreements.46

         Defendants maintain that the “plain and unambiguous language of the LLC Agreement”

contradicts ETA’s claim in Count I that ETA is entitled to receive a Tax Distribution for taxable

income arising from the sale of ETA’s membership interest.47 Defendants argue that taxable

income recognized upon the sale of the membership interest is not the type of income that is to

be reimbursed under the LLC Agreement.48 Defendants assert the Tax Distribution claim set out

in Count I fails to state a claim for breach of contract for failure to make a Tax Distribution.49

     B. THE OPPOSITION

         ETA argues that the Motion should be denied because it is defective on two grounds, one

procedural and one substantive.50 First, ETA contends that the Motion is procedurally defective

43
   See Plaintiff’s Answering Brief in Opposition to Defendants’ Partial Motion to Dismiss (hereinafter, “Plaintiff’s
Opp.”) (D.I. No. 11).
44
   See Defendants’ Reply Brief in Support of its Partial Motion to Dismiss (hereinafter, “Defendants’ Rep.”) (D.I.
No. 14).
45
   Defendants’ Mot. at 2.
46
   Id. at 1.
47
   Id. at 2.
48
   Id.
49
   Id.
50
   Plaintiff’s Opp. at 2.

                                                          9
because Civil Rule 12(b)(6) does not permit partial dismissal of a cause of action.51 ETA asserts

that under Delaware caselaw, Rule 12(b)(6) does not allow for “piecemeal dismissals of parts of

claims.”52

          Second, ETA charges that its claim for breach of contract “satisfies Delaware’s ‘minimal’

pleading standards.”53 ETA notes that the MIPA unambiguously does not limit Tax

Distributions to “income generated by the everyday operations.”54 ETA argues that the

Company misreads the MIPA by failing to give full effect to the parties’ intentions.55 Thus, ETA

claims that, even if not procedurally flawed, the Motion is substantively deficient in that

Defendants are creating a limitation that does not exist in the MIPA.56 Alternatively, ETA

asserts that the Company’s competing interpretation of the MIPA, at the very least, raises an

ambiguity not appropriate for resolution at the pleading stage of the proceeding.57 As such, ETA

takes the position that Count I does not fail to state a claim for a breach of the Company’s

contractual obligation to pay a Tax Distribution for the $5.5 million depreciation recapture

income that was allocated to ETA upon the sale of its interest.58

                                   IV.     STANDARD OF REVIEW

          Upon a motion to dismiss, the Court (i) accepts all well-pled factual allegations as true,

(ii) accepts even vague allegations as well-pled if they give the opposing party notice of the

claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) only

dismisses a case where the plaintiff would not be entitled to recover under any reasonably

51
   Id.
52
   Id.
53
   Id. at 11.
54
   Id. at 12.
55
   Id. at 13.
56
   Id. at 2.
57
   Id. at 17.
58
   Id. at 1.

                                                   10
conceivable set of circumstances.59 However, the court must “ignore conclusory allegations that

lack specific supporting factual allegations.”60

        In considering a motion to dismiss under Rule 12(b)(6), the court generally may not

consider matters outside the complaint.61 However, documents that are integral to or

incorporated by reference in the complaint may be considered.62 “If . . . matters outside the

pleading are presented to and not excluded by the Court, the motion shall be treated as one for

summary judgment and disposed of as provided in Rule 56, and all parties shall be given

reasonable opportunity to present all material made pertinent to such a motion by Rule 56.”63

                                           V.      DISCUSSION

        Under Civil Rule 12(b)(6) and Delaware law, “a defendant must seek dismissal of an

entire claim for its motion to be deemed procedurally valid.”64 However, Delaware courts will

“allow 12(b)(6) motions for partial dismissal so long as they do not seek to just trim down

theories within a single claim.”65 “Put simply, the Court must consider a claim or counterclaim

its entirety when ruling on a Rule 12(b)(6) motion to dismiss.”66 “[A]t the pleading stage of a

case, a trial judge is not a robed gardener employing Rule 12(b)(6) as a judicial shear to prune

individual theories from an otherwise healthily pled claim or counterclaim.”67

59
   See Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 227 A.3d 531, 536 (Del. 2011); Doe v.
Cedars Academy, No. 09C-09-136, 2010 WL 5825353, at *3 (Del. Super. Oct. 27, 2010).
60
   Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998).
61
   Super. Ct. Civ. R. 12(b).
62
   In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 70 (Del. 1995).
63
   Super. Ct. Civ. R. 12(b).
64
   Blue Cube Spinco LLC v. Dow Chemical Company, 2021 WL 4453460, at *12 (Del. Super. Sept. 29, 2021) (citing
inVentiv Health Clinical, LLC v. Odonate Therapeutics, Inc., 2021 WL 252823, at *6 (Del. Super. Jan. 26, 2021)).
65
   Unbound Partners Limited Partnership v. Invoy Holdings Inc., 251 A.3d 1016, 1028 (Del. Super. Mar. 17, 2021)
(citing inVentiv, 2021 WL 252823, at *6).
66
   inVentiv, 2021 WL 252823, at *6 (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23
(2007)).
67
   Id. at *4.

                                                      11
         ETA argues that the Motion is procedurally defective as “it does not seek dismissal of the

entire claim for breach of contract.”68 Specifically, ETA asserts that the Company does not seek

to dismiss the parts of the claim arising from its failure to: (i) negotiate in good faith to allocate

the purchase price of the assets; (ii) send ETA complete drafts of its 2021 income tax return at

least twenty days before the filing deadline and consider ETA’s comments in good faith; and (iii)

consult with ETA’s majority owner, David Florance.69 ETA relies on the Delaware caselaw

cited above which purportedly establishes that granting the Motion would constitute an

impermissible piecemeal dismissal of part of Count I.

         In response, Defendants argue that ETA’s “artful pleading tactic” is an “attempt to

smuggle in a claim that would not otherwise survive a motion to dismiss.”70 Specifically,

Defendants assert that “[t]he payment of Tax Distributions is a distinct obligation of the MIPA

that Defendants are alleged to have violated, separate from [ETA’s] other three ‘theories’ in the

Complaint’s ‘single’ count.”71 As such, Defendants maintain that the Tax Distribution theory

should have been pled as a separate and distinct breach of contract claim.72

         Defendants support their position by making a public policy argument that allowing

ETA’s pleading tactics to stand in this matter could “incentivize mischief.”73 Defendants rely

upon various decisions where the Court of Chancery has dismissed parts or theories of a claim

under the identical Chancery Rule 12(b)(6). Defendants also rely on Intermec IP Corp. v.

TransCore, LP, where the Court stated:

         [T]he Court cautions claimants who include multiple “sub-theories” within one
         count, instead of pleading them as separate counts. Not only are sub-theories easy

68
   Plaintiff’s Opp. at 11.
69
   Id.
70
   Defendants’ Rep. at 3.
71
   Id. at 5.
72
   Id.
73
   Id.

                                                   12
        to miss, but also this Court has held that motions to dismiss (or to trim) parts of
        claims are invalid. See inVentiv Health Clinical, LLC v. Odonate Therapeutics,
        Inc., 2021 WL 252823, at *4–6 (Del. Super. Ct. Jan. 26, 2021). By logical
        extension, the same could be said, in the appropriate case, for pleading those “parts”
        in the first place. If a defendant must attack whole counts, a defendant should have
        whole counts to attack. Otherwise, a plaintiff could be insulated from dismissal by
        embedding weak theories into strong ones and then claiming they all fall or none
        fall.74

        In inVentiv, the Court denied a motion to dismiss which sought the dismissal “of but a

few of [defendant’s] theories of recovery supporting its breach-of-contract counterclaim.”75

Plaintiff filed a complaint for breach of contract, equitable estoppel, promissory estoppel, and

unjust enrichment.76 Defendant filed counterclaims against plaintiff for (i) breach of the implied

covenant of good faith and fair dealing and (ii) fraud in the inducement.77 In one counterclaim,

defendant asserted that plaintiff breached the relevant agreements through overbillings, missed

contractual milestones, continued billings after suspending services, and unreturned grant

funds.78 Plaintiff filed a motion to dismiss which addressed, in relevant part, only a few of the

theories of that counterclaim.79 In the motion, plaintiff readily admitted the implausibility of

dismissing the entire breach-of contract counterclaim.80

        In denying the motion, the Court held that it “…must consider a claim or counterclaim

its entirety when ruling on a Rule 12(b)(6) motion to dismiss.”81 Quoting the Seventh Circuit,

the Court reasoned that “[a] motion to dismiss under Rule 12(b)(6) doesn't permit piecemeal

74
   Intermec IP Corp. v. Transcore, LP, 2021 WL 3620435, at *24 (Del. Super. Aug. 16, 2021).
75
   inVentiv, 2021 WL 252823, at *4.
76
   Id. at *2.
77
   Id.
78
   Id.
79
   Id. at *5.
80
   Id.
81
   Id. at *6.

                                                       13
dismissals of parts of claims; the question at this stage is simply whether the complaint includes

all factual allegations that state a plausible claim for relief.”82

        The Court agrees with the reasoning set out in inVentiv—Civil Rule 12(b)(6) does not

permit piecemeal dismissals of parts of a claim. In the instant case, Defendants seek partial

dismissal of Count I (the only Count) of the Complaint. Count I alleges Defendants’ breach of

contractual obligations under the MIPA, including failures to “(i) negotiate at all with [ETA]; (ii)

provide any draft 2021 tax returns at any point in time; (iii) direct communications to Mr.

Florance; and (iv) pay any Tax Distribution to cover the allocation to [ETA] of $5.5 million of

depreciation recapture income.”83

        Count I is similar to the counterclaim at issue in inVentiv, which alleged various

“theories” for plaintiff’s breach of contract.84 Like inVentiv, Defendants here are seeking the

dismissal of only one of the theories of Count I. Furthermore, Defendants fail to point to “a

single Delaware state court that allowed partial dismissal by plucking out individual allegations

from a single claim on a Rule 12(b)(6) motion.”85 The Court finds that the present case is on

point with inVentiv.

        It should be noted that Defendants appear correct that ETA’s tactful pleading is exactly

the type of conduct warned of in Intermec. However, Defendants’ public policy arguments as to

why this Court should contradict legal precedent are not persuasive. The Court is cognizant of

the problem of “artful” pleading. The Court is also aware of the liberal use of Rule 12(b) motion

practice. If the Court allows parties to seek piecemeal dismissals this could create a situation

82
   Id.
83
   Compl. ¶ 35.
84
   inVentiv, 2021 WL 252823, at *2.
85
   Id. at *4.

                                                    14
where parties prematurely test legal issues and parts of claims best dealt with after the filing of

an answer and some discovery. For these reasons, the Motion is DENIED.

                                      VI.     CONCLUSION

       Now, therefore, it is ordered that the Motion to Dismiss is DENIED.

IT IS SO ORDERED.

December 8, 2023
Wilmington, Delaware

                                                      /s/ Eric M. Davis
                                                      Eric M. Davis, Judge

cc:    File&ServeXpress

                                                 15