Court Opinion

ID: 2811012
Source: CourtListenerOpinion
Date Created: 2015-06-23 21:03:37.132277+00
Date Added: 2024-06-11T11:30:19.394544
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CMS INVESTMENT HOLDINGS, LLC,                   )
                                                )
             Plaintiff,                         )
                                                )
                    v.                          )
                                                )
LAWRENCE E. CASTLE, CAREN J.                    )
CASTLE, LEO C. STAWIARSKI, JR., THE             )
CASTLE LAW GROUP, LLC, LCS                      )
COLORADO HOLDINGS, LLC, LEC                     )       C.A. No. 9468-VCP
HOLDINGS, LLC, NEXT ORGANIZATION,               )
LLC, ASSOCIATES MANAGEMENT                      )
SERVICES, LLC, JENNIFER WILSON-                 )
HARVEY, individually, and as personal           )
representative of Robert M. Wilson, Jr., and    )
WILSON & ASSOCIATES, PLLC,                      )
                                                )
             Defendants.                        )

                            MEMORANDUM OPINION

                           Date Submitted: January 16, 2015
                            Date Decided: June 23, 2015

Lisa A. Schmidt, Esq., Catherine G. Dearlove, Esq., Robert L. Burns, Esq., Elizabeth A.
DeFelice, Esq., RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Bruce
A. Featherstone, Esq., FEATHERSTONE DeSISTO LLC, Denver, Colorado; Attorneys
for Plaintiff CMS Investment Holdings, LLC.

Seth A. Niederman, Esq., Carl D. Neff, Esq., FOX ROTHSCHILD LLP, Wilmington,
Delaware; Attorneys for Defendants Lawrence E. Castle, Caren J. Castle, The Castle
Law Group, LLC, LEC Holdings, LLC, and Next Organization, LLC.

Samuel T. Hirzel, II, Esq., PROCTOR HEYMAN LLP, Wilmington, Delaware;
Attorneys for Defendants Leo C. Stawiarski, Jr. and LCS Colorado Holdings, LLC.

David E. Wilks, Esq., WILKS, LUKOFF & BRACEGIRDLE, LLC, Wilmington,
Delaware; Attorneys for Defendant Associates Management Services, LLC.
Robert A. Penza, Esq., Christopher M. Coggins, Esq., POLSINELLI PC, Wilmington,
Delaware; Attorneys for Defendants Jennifer Wilson-Harvey, individually and as
personal representative of Robert M. Wilson, Jr. and Wilson & Associates, PLLC.

PARSONS, Vice Chancellor.
       The plaintiff in this action invested in a Delaware limited liability company

(―LLC‖) whose business was providing non-legal administrative services to law firms

and their mortgage lender clients in connection with mortgage foreclosures.              That

business was created by the principal defendants: five individuals who practiced law in

Colorado and Arkansas. Seeking to monetize their non-legal services businesses, those

individuals sold them to a Delaware LLC in 2007 in exchange for certain membership

units. The plaintiff and others paid cash to acquire other membership units in that LLC.

The defendants continued to run the services businesses, but now in the capacity of

employees, officers, and managers of the LLC.

       According to the plaintiff, the defendants, along with several of their affiliated

entities, enjoyed a lucrative business. But, they failed to facilitate the LLC‘s collection of

the administrative services fees owed to it by the law firms and clients, instead retaining

the fees for themselves or paying them in improper distributions, placing the LLC in

danger of defaulting on its debt obligations. The plaintiff further alleges that, instead of

helping the LLC restructure and survive, the defendants purposely ushered it into

insolvency. The LLC went into receivership in Colorado in 2012, and within a matter of

weeks the services businesses—the main assets of the company—were sold. The buyers

in the receivership sale were entities allegedly owned by the defendants.

       The plaintiff charges the defendants with a litany of wrongs, including: breach of

the LLC agreement, breach of the implied covenant of good faith and fair dealing, unjust

enrichment, breach of fiduciary duty, aiding and abetting, civil conspiracy, and fraudulent

transfer. The defendants, who divided into four groups, each moved to dismiss the

                                              1
complaint as it relates to them. In support of their motions, the defendants have raised

numerous arguments in favor of dismissal, some of which overlap to a certain extent.

       For the reasons set forth below, I largely deny the motions. I grant dismissal,

however, of some of the claims as to certain of the eleven defendants. For example, not

all of the defendants conceivably are bound by the LLC agreement, and not all owed

fiduciary duties to the plaintiff. Therefore, where appropriate, I dismiss the claims for

breach of contract and breach of fiduciary duty as to certain specific defendants.

                               I.        BACKGROUND1

                                    A.     The Parties

       Plaintiff is CMS Investment Holdings, LLC (―CMS‖), a Delaware LLC. The

members of CMS are CMS Corporate Holdings, Inc., a Delaware corporation, and

CalPERS Corporate Partners, LLC, a Delaware LLC. Plaintiff owns 99% of the Class A

Preferred Units2 of what I referred to above as the LLC, non-party RP Holdings Group,

LLC (―RPH‖ or the ―Company‖), a Delaware LLC.

1
       Unless otherwise noted, the facts are drawn from the well-pled allegations of
       Plaintiff‘s Verified Amended Complaint (the ―Complaint‖), which is the operative
       pleading. Defendants submitted a joint appendix of exhibits in support of their
       motions to dismiss, which I cite as ―Defs.‘ J. App., Ex. [#].‖ In that regard, I note
       that I relied only on those documents, like the relevant LLC Agreement, that are
       integral to the Complaint.
2
       Capitalized terms not otherwise defined in this Memorandum Opinion are used as
       defined in the Third Amended and Restated Limited Liability Company
       Agreement of RP Holdings Group, LLC. Defs.‘ J. App., Ex. 2 [hereinafter the
       ―RPH LLC Agreement‖]. The Complaint incorporates the RPH LLC Agreement
       by reference. Compl. ¶ 43.

                                             2
      The Complaint names eleven Defendants. Defendants Lawrence E. Castle, his

wife, Caren J. Castle, and Leo C. Stawiarski, Jr. are individuals residing in the State of

Colorado, where all three are licensed to practice law. Defendant LEC Holdings, LLC

(―LEC‖) is a Colorado LLC affiliated with the Castles. LEC is a party to the RPH LLC

Agreement and holds Class B Common Units in RPH.                Another Colorado LLC,

Defendant LCS Colorado Holdings, LLC (―LCS‖), affiliated with Stawiarski, is also a

party to the RPH LLC Agreement and a holder of RPH Class B units. Defendant The

Castle Law Group, LLC (―Castle Law Group‖), formerly known as Castle Meinhold &

Stawiarski, LLC, is a law firm organized as a Colorado LLC, of which the Castles and

Stawiarski are managers or affiliates. Defendant Next Organization, LLC (―Next Org‖)

is a Colorado LLC affiliated with the Castles. Next Org, Castle Law Group, LEC, and

the Castles are referred to as the ―Castle Defendants.‖ LCS and Stawiarski are the

―Stawiarski Defendants.‖

      Defendant Jennifer Wilson-Harvey is an individual residing in the State of

Arkansas, where she is licensed to practice law. Defendant Robert M. Wilson, who died

on August 3, 2012, also practiced law in Arkansas.          Wilson-Harvey, as personal

representative of the Estate of Robert M. Wilson, is named as a Defendant in Wilson‘s

place.3 Wilson-Harvey and Wilson (the ―Wilsons,‖ and, together with the Castles and

Stawiarski, the ―Individual Defendants‖) held Class B units in RPH. At relevant times,

3
      For simplicity, and without intending any disrespect, this Memorandum Opinion
      may use ―Wilson‖ to refer both to Mr. Wilson before August 3, 2012 and to his
      Estate afterward.

                                            3
the Wilsons were affiliated with Defendant Wilson & Associates (―W&A‖), a law firm

organized as a Tennessee LLC.         I refer to Wilson-Harvey, Wilson, and W&A,

collectively, as the ―Wilson Defendants.‖

       Defendant Associates Management Services, LLC (―AMS‖) is a Delaware LLC

affiliated with Wilson-Harvey.

                                      B.      Facts

                                 1.    RPH’s formation

       The Castles, Stawiarski, and the Wilsons were attorneys who focused on providing

legal services to mortgage lenders and mortgage servicing companies in connection with

mortgage foreclosures and bankruptcies. The Castles and Stawiarski, primarily through

Castle Law Group, operated in Colorado, New Mexico, Arizona, Nevada, Wyoming, and

Utah; the Wilsons, through W&A, operated in Arkansas and Tennessee. The Individual

Defendants also operated businesses related to, but formally separate from, their law

firms (respectively, the ―Castle Services Business‖ and the ―Wilson Services Business,‖

and together, the ―Services Businesses‖). The Services Businesses provided non-legal

support services to the law firms‘ clients in connection with mortgage defaults,

foreclosure processing, and sales of lender-owned real estate.

       In 2007, the Castles and Stawiarski sought to monetize their Services Business

through an outside investment, and were introduced to FTV Capital, a private equity firm.

FTV Capital formed Plaintiff, CMS, as the vehicle for its investment. The investment

plan called for the Castle Services Business to operate as an independent entity, which

would provide non-legal or administrative services, through Castle Law Group, to

                                            4
mortgage industry clients. If the project was successful, the independent business could

offer its administrative services to other law firms and other clients. Consistent with that

plan, the Castles and Stawiarski formed RPH, which acquired the Castle Services

Business in exchange for certain membership units.

       Plaintiff, the Castles, and Stawiarski devised an intricate structure that would

enable the Castle Services Business, which would be owned by RPH, to continue

servicing the law firms‘ clients while also protecting RPH from violating professional

ethics obligations and prohibitions against the unauthorized practice of law. In that

regard, RPH obtained a legal opinion from Professor Geoffrey Hazard (the ―Hazard

Opinion‖), which stated that Castle Law Group‘s law practice must be separated from the

Services Business. To effectuate that separation, Exclusive Services Agreements (the

―Castle ESAs‖) were executed by Plaintiff, the Castles, Stawiarski, and Castle Law

Group.4 Pursuant to the Castle ESAs, RPH was to be the exclusive provider of the

relevant non-legal services to Castle Law Group and its clients for a period of twenty-five

years. This mechanism envisioned that RPH would provide non-legal services to Castle

Law Group, which would bill its clients for the non-legal services provided and

ultimately pass the invoiced payments through to RPH.

4
       RPH‘s counterparties in the Castle ESAs included four non-party entities
       apparently affiliated with the Castles‘ and Stawiarski‘s law practices. Compl.
       ¶ 68. Defendant Castle Law Group allegedly is the successor to at least one of
       those entities. Id. ¶ 25. For simplicity, I refer to the various law firm entities
       affiliated with the Castles and Stawiarski as the Castle Law Group. Any
       distinctions among the entities party to the ESAs are immaterial to this
       Memorandum Opinion.

                                             5
      Effective August 27, 2007, Plaintiff, RPH, and the Castle Defendants entered into

several agreements, including the Castle ESAs, pursuant to which Plaintiff invested in the

RPH venture (the ―2007 Transactions‖). The RPH LLC Agreement was amended as part

of the 2007 Transactions. As relevant here, Section 4.1 provides the holders of Class A

Preferred Units, such as RPH, the right to receive preferred distributions in an amount

equal to the principal value of the units plus an 8% annual preferred accrual, before any

distributions could be made to holders of Class B or Class C units. 5 Section 6.8 requires

RPH to obtain the consent of the Class A unitholders before, among other things:

amending any provision of the LLC Agreement, making distributions to RPH members

or equity holders of RPH subsidiaries, transferring substantially all of the assets of RPH

or its subsidiaries, or materially changing the nature of RPH‘s business without Board

approval.6

      Through a Securities Purchase Agreement (the ―2007 SPA‖), Plaintiff paid $26.9

million in cash to acquire a majority of RPH‘s Class A Preferred Units. The ―Sellers‖ in

the 2007 SPA included the Castles, Stawiarski, and various affiliates. Plaintiff also

arranged for Freeport Financial LLC (―Freeport Financial‖) to make a secured loan of

approximately $20 million to RPH (the ―Freeport Credit Agreement‖). Plaintiff alleges

that the Castles and Stawiarski personally received a substantial portion of the proceeds

5
      Compl. ¶ 45; RPH LLC Agreement § 4.1.
6
      Compl. ¶ 47; RPH LLC Agreement § 6.8. As discussed infra, the ―Board‖ refers
      to the RPH ―Board of Managers.‖

                                            6
from Plaintiff‘s $26.9 million equity investment and Freeport Financial‘s $20 million

loan.

              2.      RPH’s initial operation and the Wilson acquisition

        RPH began operating according to the structure set up in the 2007 Transactions.

Shortly thereafter, at the Castles‘ suggestion, RPH initiated discussions with the Wilsons

about acquiring their services business, which, like the Castle‘s, provided non-legal

mortgage-related administrative services to the Wilsons‘ law firm clients. On April 1,

2008, RPH acquired the Wilson Services Business (the ―2008 Transactions‖), pursuant to

a series of agreements substantially similar to those involved in the 2007 Transactions.

Specifically, RPH executed another Securities Purchase Agreement to acquire more Class

A Preferred units and other interests (the ―2008 SPA‖), and entered into an Exclusive

Services Agreement with the Wilsons‘ law firm, W&A (the ―Wilson ESA‖). To finance

the Wilson acquisition, Plaintiff injected another $18 million of cash into RPH, and

helped arrange a $3 million increase in the Freeport Credit Agreement. Allegedly, a

substantial portion of the proceeds of those investments went to the Wilsons.

        Plaintiff, as Majority Holder of the Class A series units, had the right to appoint

three of the five members of RPH‘s Board of Managers. The Class B unitholders had the

right to fill the other two Board seats, and initially appointed Mr. Castle and Stawiarski.

Importantly, however, the parties also agreed in connection with the 2007 Transactions to

form an ―Operating Board‖ for RPH, initially consisting of the Castles, Stawiarski, and

                                             7
another individual.7 After the 2008 Transactions, Wilson and Wilson-Harvey were added

to the Operating Board. The members of the Operating Board agreed to provide services

to and consult for RPH as independent contractors. According to the Complaint, the

Operating Board ―was not initially expected to act in any managerial capacity on behalf

of RPH.‖      According to Plaintiff, however, the Individual Defendants used their

positions, including as members of the Operating Board, ―to take effective control of

RPH and to limit the information provided to Plaintiff and its designees to the Board of

Managers.‖8

      In this regard, it also is relevant that Mr. Castle was the CEO of RPH from 2007

through July 2009, at which time he became CEO of RPH‘s ―West Region.‖ He also was

Chairman of the Board of Managers until July 2011, and a member of the Board until

October 2012. Mrs. Castle co-managed the West Region. In July 2009, Wilson-Harvey

became RPH‘s CEO, as well as the CEO of the ―South Region.‖9

                    3.     RPH struggles and Plaintiff intervenes

      Shortly after the 2008 Transactions, the United States housing market declined

precipitously, sending the economy into recession and causing a meltdown in U.S. and

global financial markets. What was a nightmare scenario for many, however, was a

golden opportunity for RPH: as the number of residential mortgage foreclosures

7
      Defs.‘ J. App., Ex. 8.
8
      Compl. ¶¶ 89-90.
9
      It appears that after it acquired the Wilson Services Businesses, RPH was divided
      into the West and South regions, each with a ―CEO,‖ but also retained an overall
      CEO of the Company.
                                           8
skyrocketed, so did the demand for the mortgage-related administrative services that RPH

was designed to offer. Consistent with that increase in foreclosure activity, RPH‘s

business appeared to grow, at least as measured by the volume of services it was

rendering to the relevant law firms and their clients. On paper, based on its use of the

accrual method of accounting, RPH‘s profits grew too. The Complaint alleges that

RPH‘s management, led by Castle and Wilson-Harvey, represented to Plaintiff and

Plaintiff‘s appointed Board members that RPH was performing well, but that the

structural transition to the separate-entity model, in which RPH invoiced the law firms for

non-legal services, and the law firms, in turn, billed the clients, was taking time to

implement and fine-tune.

       According to the Complaint, the Individual Defendants in fact had been invoicing

and collecting fees from the law firm clients, but diverting those funds from passing

through to RPH as they should have. Castle, for example, specifically is alleged to have

directed his law firm, Castle Law Group, not to pay RPH the amount prescribed by the

ESAs and instead to remit some portion of the firm‘s profits.10 The Wilsons allegedly

took payments from clients of their law firm, W&A, that were intended to remunerate

RPH for its non-legal services, and used the money to pay W&A‘s bills or make

distributions to the Wilsons themselves, for personal expenses and perquisites.

       The Individual Defendants allegedly told Plaintiff repeatedly that operational

efficiency issues, combined with the turmoil in the mortgage and housing sectors, were

10
       Id. ¶¶ 110-111.

                                            9
preventing RPH from realizing positive net cash flow.       Instead, RPH accumulated

significant accounts receivable or ―A/R‖ balances.      Plaintiff and Plaintiff‘s Board

appointees questioned these developments, but they allegedly were reassured repeatedly

that the payors—i.e., the Individual Defendants and their affiliated law firms—would

make good on the A/R. Plaintiff allegedly relied on those representations, finding them

plausible in light of the circumstances, especially based on the Individual Defendants‘

superior on-the-ground understanding of the business and their involvement in the daily

management of RPH.

       In April 2011, the situation had not improved, and Plaintiff‘s Board

representatives caused RPH to engage the accounting firm of Crowe Horwath, LLP

(―Crowe‖) to investigate and make recommendations regarding RPH‘s operational

efficiency issues, and in particular the A/R collection processes. Due to poor record-

keeping, Crowe encountered difficulties in determining how funds were being transferred

in and out of RPH.      Plaintiff further asserts that, as the investigation progressed,

Defendants failed to cooperate fully.

       In September 2011, Crowe issued a report containing its findings (the ―Crowe

Report‖). The Crowe Report found that the Individual Defendants and their affiliated law

firms had been invoicing and collecting from their clients for the cost of the services

provided by RPH, but had been retaining all or part of those payments rather than paying

them to RPH in accordance with the ―agreed-upon schedules.‖11 Crowe also discovered

11
       Id. ¶ 102.

                                          10
that Castle had tampered with a management representation letter prepared for the

accountants in connection with the 2010 year-end audit. Specifically, Castle deleted a

representation that he previously had made to the auditors and to Plaintiff and its Board

designees that the A/R would be paid.

       According to Plaintiff, the Crowe Report revealed extensive wrongdoing on the

part of the Individual Defendants, as well as ―extensive and long-lasting efforts to

conceal the true facts from Plaintiff and its representatives on the Board of Managers.‖12

As an example of the affirmative actions Defendants took to misrepresent the state of

RPH‘s affairs, Plaintiff avers that Defendants had fired RPH employees who attempted

loyally to carry out the separation of the Services Businesses within the RPH entity

structure, but hired and retained employees who were loyal to the Individual Defendants

and assisted in their malfeasance.

                    4.     Plaintiff tries unsuccessfully to save RPH

       Plaintiff further alleges that the machinations of the Individual Defendants, and in

particular Mr. Castle and the Wilsons, placed RPH in danger of engaging in the improper

legal services ―fee-splitting‖ against which the Hazard Opinion had counseled them.

Equally troubling for RPH, though, was its increasing lack of liquidity.          Because

Defendants allegedly starved RPH of cash, RPH not only failed to make the preferred

distributions as required by the RPH LLC Agreement, but also was doomed to default on

its loan obligations. In January 2012, RPH failed to make an interest payment to Freeport

12
       Id. ¶ 103.

                                            11
Financial. RPH then owed a total of approximately $22 million on the Freeport Credit

Agreement, which was secured by the Services Businesses as collateral. RPH also owed

$39 million in subordinated notes, mostly held by Defendants. Most vexing was a $20

million balloon payment on the Freeport Credit Agreement that was coming due in

August 2012.

          In late 2011, Castle was removed as Chairman of the Board of Managers, and an

outsider, Michael Bruder, was appointed CEO. Castle was directed to remove himself

from RPH‘s offices, but he refused. Plaintiff‘s Board appointees and Bruder developed a

proposal to restructure RPH, whereby Plaintiff and Freeport Financial each would make a

$2.5 million loan, and Freeport Financial would forbear on RPH‘s recent loan defaults

and extend the looming balloon payment. That plan would have subordinated obligations

RPH owed to the Castles and the Wilsons to the new loans. Perhaps unsurprisingly,

therefore, they rejected it. In March 2012, Plaintiff‘s Board appointees resigned from

their positions in frustration. Two new Board representatives were appointed, but they

quickly resigned. No restructuring plan was implemented, and by the summer of 2012,

RPH‘s break-up ―was inevitable.‖13

     5.      RPH’s assets are sold in foreclosure—to the Castles and Wilson-Harvey

          RPH defaulted on the Freeport Credit Agreement in August 2012, giving Freeport

Financial the right to foreclose on its collateral, including RPH‘s Services Businesses.

Plaintiff alleges that, rather than attempt in good faith to restructure RPH‘s debt and save

13
          Id. ¶ 137.

                                            12
the Company, the Castles and Wilson-Harvey initiated secret negotiations with Freeport

Financial, in which they sought to acquire RPH‘s assets in an eventual foreclosure sale.

According to Plaintiff, Defendants‘ motivation in this regard was clear: because they had

executed the ESAs, they were precluded for a twenty-five-year period from operating

their Services Businesses as they had before the RPH deal.

      Castle allegedly saw an ―out,‖ however: simply allow RPH to fold, thereby giving

the law firms a pretext to break the ESAs.14 The Complaint further avers that Defendants

knew the Services Businesses were viable, profitable businesses, and that because the

businesses depended heavily on the Castles and the Wilsons and their affiliated firms,

Defendants would face little or no competition from other buyers in a foreclosure sale.

      The Castles and Wilson-Harvey resigned from their positions as officers and

Managers of RPH on October 15, 2012.             Almost immediately thereafter, Freeport

Financial filed an action for replevin and for appointment of a receiver in the District

Court for the City and County of Denver, Colorado (the ―Colorado Action‖). That court

appointed a receiver on October 23, 2012, and by November 2 the receiver had moved

the court to approve the sale of RPH‘s West Region assets—the Castle Services

Business—to ―a new buyer.‖15       A similar motion was filed November 19, 2012 in

relation to RPH‘s South Region assets, the Wilson Services Business.16 The respective

14
      Id. ¶ 129.
15
      Defs.‘ J. App., Ex. 12.
16
      Id. Ex. 13. The Colorado Action is discussed in more detail in Section III.A infra.

                                            13
buyers as to each of these sales were Defendants Next Org and AMS. Next Org is

affiliated with the Castles; AMS is affiliated with Wilson-Harvey.

      Plaintiff avers that, given the timing of these events, ―it is clear that Castle and

Wilson-Harvey at least began to negotiate these transactions before their purported

resignations,‖ while they served as Board members and officers of RPH.17 It is further

alleged that the Individual Defendants, during negotiations with the receiver, demanded

that the receiver release or ―sell‖ to them any claims RPH may have had against them,

including claims for ―commercial tort actions.‖18 According to Plaintiff, the ―Castles and

Wilson-Harvey took the position that even though such claims were not part of the

Collateral for the loan, they would refuse to buy RPH‘s assets unless such claims were

assigned to them by the receiver in connection with the repurchases.‖19 The receiver

accepted that condition and purported to release such commercial tort claims.20

      The sales to Next Org and AMS became final by the end of 2012 or early 2013.

Plaintiff characterizes the course of events surrounding RPH‘s demise and the foreclosure

sale in the Colorado Action as a ―self-dealing scheme.‖ CMS contends that it enabled the

Castles and Wilson-Harvey to regain control of the same businesses they sold to RPH for

millions of dollars just a few years earlier, leaving Plaintiff with worthless membership

17
      Compl. ¶ 146.
18
      Id. ¶ 148.
19
      Id.
20
      As noted, the parties dispute the scope and validity of this purported release of
      claims. I discuss it in further detail infra.

                                           14
units, and leaving RPH with no operating assets and almost $40 million of debt.21

Plaintiff alleges that the Individual Defendants‘ plan in or around 2012 was to ―create the

appearance of an independently negotiated and judicially approved sale,‖ when in fact

Defendants had negotiated in secret with Freeport Financial to buy back the Services

Businesses, ―with the receiver merely serving as ex post ‗window dressing.‘‖22

                    C.   Procedural History and Parties’ Contentions

       Plaintiff filed this action on March 25, 2014, and amended its complaint on

August 1, 2014. Motions to dismiss the amended complaint were filed by: (1) Stawiarski

and LCS; (2) Wilson-Harvey and W&A; (3) AMS; and (4) the Castle Defendants and

Next Org.    After extensive briefing, I heard argument as to the four motions (the

―Motions‖) on January 16, 2015.23 This Memorandum Opinion sets forth my rulings as

to the Motions.

       As amended, the Complaint pleads seven counts. Plaintiff defines the Castles,

Stawiarski, the Wilsons, LEC, and LCS as the ―Control Group Defendants,‖ and charges

them with breaching: the RPH LLC Agreement (Count I); the covenant of good faith and

fair dealing implied in the RPH LLC Agreement (Count IV); and fiduciary duties they
21
       Id. ¶ 141.
22
       Id. ¶ 147.
23
       Briefing in connection with the Motions was voluminous. The Castle Defendants,
       the Stawiarski Defendants, the Wilson Defendants, and AMS each filed opening
       and reply briefs in support of their respective motions to dismiss. The Wilson
       Defendants and AMS also filed a joint submission in the opening round containing
       their shared recitation of the relevant facts and legal standards. Plaintiff filed a
       single omnibus answering brief. I cite the various briefs as, for example, ―Castle
       Defs.‘ Opening Br.,‖ or ―Pl.‘s Answering Br.‖

                                            15
allegedly owed to RPH and its members (Count II). Plaintiff also asserts claims against

all of the Defendants for aiding and abetting breaches of fiduciary duties (Count III); civil

conspiracy (Count V); unjust enrichment (Count VI); and fraudulent transfer (Count VII).

       The four groups of Defendants that each separately moved to dismiss the

Complaint as it pertains to them are: (1) the Castle Defendants—Lawrence and Caren

Castle, LEC, Castle Law Group, and Next Org; (2) the Stawiarski Defendants—

Stawiarski and LCS; (3) the Wilson Defendants—Wilson, Wilson-Harvey, and W&A;

and (4) AMS. The four Defendant camps raise a plethora of arguments in favor of

dismissing each of the legal and equitable theories under which Plaintiff seeks relief,

resulting in a somewhat dizzying array of arguments and counter-arguments. Rather than

attempt to catalog them here, I describe the important arguments in the context of the

analysis below.

                             II.      LEGAL STANDARD

       A motion to dismiss under Court of Chancery Rule 12(b)(6) must be denied

―unless the plaintiff could not recover under any reasonably conceivable set of

circumstances susceptible to proof.‖24 In determining whether the Complaint meets this

pleading standard, this Court will draw all reasonable inferences in favor of Plaintiffs and

―accept all well-pleaded factual allegations in the Complaint as true.‖25 The Court,

however, need not ―accept conclusory allegations unsupported by specific facts or . . .

24
       Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536
       (Del. 2011).
25
       Id.

                                             16
draw unreasonable inferences in favor of the non-moving party.‖26 In ruling on the legal

sufficiency of a claim under Rule 12(b)(6), this Court ―may consider documents outside

of the pleadings only when: (1) the document is integral to a plaintiff‘s claim and

incorporated in the complaint or (2) the document is not being relied upon to prove the

truth of its contents.‖27

                            III.      THRESHOLD ARGUMENTS

       Defendants raise several arguments that, if successful, could result in dismissal of

the entire Complaint. I therefore address those arguments first. For the reasons set forth

below, I do not find any of Defendants‘ threshold arguments persuasive.

                      A.           Plaintiff’s Claims Are Not Derivative

       Defendants assert that all of Plaintiff‘s asserted claims are derivative claims that

can be asserted only on behalf of RPH. From that premise, they argue that Plaintiff

cannot bring those claims for any one of following reasons: (1) the claims were sold as

part of the Colorado Action; (2) Plaintiff is barred by res judicata; (3) Plaintiff has not

complied with the demand requirement of Court of Chancery Rule 23.1; and (4) Plaintiff

failed to join the Colorado receiver, a necessary party to this action.28 Because I reject

the foundational premise to all these arguments—that the claims asserted in this action

belong to RPH and that Plaintiff only can prosecute them derivatively on RPH‘s behalf—

26
       Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011).
27
       Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 96 n.2 (Del. 2013).
28
       E.g., Castle Defs.‘ Opening Br. 9-12; Castle Defs.‘ Reply Br. 1-10; Wilson Defs.‘
       Opening Br. 8-12; Wilson Defs.‘ Reply Br. 9-10; AMS Opening Br. 2-10; AMS
       Reply Br. 1-9.

                                                 17
I need not proceed further to address the merits of Defendants‘ subsidiary arguments in

any detail.

       Determining whether the claim of a stockholder or other representative is direct or

derivative under Delaware law turns ―solely on the following questions: (1) who suffered

the alleged harm (the corporation or the suing stockholders, individually); and (2) who

would receive the benefit of any recovery or other remedy (the corporation or the

stockholders, individually)?‖29 If all of the stockholders (or in this case, LLC members)

―are harmed and would recover pro rata in proportion with their ownership of the

[company] solely because they are [interest holders], then the claim is derivative in

nature.‖30 Delaware courts ―have long recognized,‖ however, ―that the same set of facts

can give rise to both a direct claim and a derivative claim.‖31 With those principles in

mind, I consider whether Plaintiff‘s claims in this action are exclusively derivative claims

of RPH‘s. If any of them are, the possibility would exist that such claim would have to

be dismissed for one of the several reasons Defendants advanced.

       As noted above and discussed in detail below, Plaintiff asserts seven causes of

action. Those counts can be grouped usefully as follows: (1) claims for breach of the

RPH LLC Agreement, as well as Plaintiff‘s related claims for breach of the implied

covenant of good faith and fair dealing, and unjust enrichment; (2) claims for breach of

29
       Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004).
30
       Feldman v. Cutaia, 951 A.2d 727, 733 (Del. 2008).
31
       Gentile v. Rossette, 906 A.2d 91, 99 n.19 (Del. 2006) (quoting Grimes v. Donald,
       673 A.2d 1207, 1212 (Del. 1996)).

                                            18
fiduciary duty, as well as related claims for aiding and abetting and civil conspiracy; and

(3) statutory claims for fraudulent transfer. Applying the Tooley analysis to Plaintiff‘s

claims, I conclude that they are more direct than derivative in nature. At a minimum, the

claims are dual claims that have both direct and derivative aspects, which would be

sufficient to overcome Defendants‘ argument and warrant allowing Plaintiff to prosecute

the direct claims it has, without regard to any hypothetical derivative claims that may

exist.32

       First, Plaintiff has direct claims for breach of contract (and related causes of

action) stemming from the RPH LLC Agreement. As I discuss in more detail infra, one

reasonable way to characterize the allegations in the Complaint is that the parties to the

Agreement, including some Defendants, promised Plaintiff that Distributions33 would be

made in accordance with a specified schedule. Specifically, Plaintiff, as the Class A

unitholder, had priority over the Class B and C unitholders or the recipients of

Management Incentive Units with respect to allocations of RPH‘s free cash flows.

According to the Complaint, certain Defendants used their positions within the Company

to deceive Plaintiff while paying to themselves, as Class B and C unitholders and

recipients of Management Incentive Units, the Distributions that should have been paid to

Plaintiff. Taking those allegations as true, there may be a sense in which the Company

32
       In that regard, I note that Plaintiff has represented that it seeks only to pursue its
       direct claims in this action. I therefore conclude that, to the extent any aspect of
       Plaintiff‘s claims could be considered partially derivative, Plaintiff has abandoned
       or waived such claims.
33
       RPH LLC Agreement § 4.1.
                                             19
was harmed, but the predominant harm fell on the Class A unitholders, including

Plaintiff. That is, their contractual rights were breached. Those allegations, which I take

as true at this stage, give rise to direct claims against the individuals who allegedly

caused the breaches to occur.34

       The same is true with the alleged breaches of fiduciary duties, and related claims

for aiding and abetting and civil conspiracy. Under Delaware law, shares of stock and

interests in non-corporate business entities ―carry with them particular rights that a holder

of the [interest] can exercise by virtue of being the owner.‖35 Direct claims for breach of

fiduciary duty arise when those rights are infringed. Moreover, even in cases involving

derivative claims, the same claims can have direct aspects when the allegedly faithless

transaction involves an extraction from one group of stockholders, and a redistribution to

another, of ―a portion of the economic value and voting power embodied in the minority

interest.‖36 As discussed in more detail below, the Complaint alleges that the Individual

Defendants purposefully engineered the dissolution of RPH in order to disloyally

purchase its only valuable assets out of receivership. Put another way, those Defendants

purportedly engaged in a series of actions that culminated in the re-allocation of

34
       See Section IV.B infra.
35
       In re Activision Blizzard, Inc. S’holder Litig., 2015 WL 2438067, at *18 (Del. Ch.
       May 20, 2015). In the corporate context, ―[c]lassic examples‖ of such direct
       claims include suits alleging infringement of ―the right to vote, the right to compel
       payment of a contractually specified dividend, and the right to own and alienate
       shares,‖ or actions ―to enforce contractual constraints on a board‘s authority under
       the charter, bylaws, and provisions of the DGCL.‖ Id. at *19.
36
       Gentile, 906 A.2d at 100.

                                             20
economic and voting power over RPH, from a situation in which they held Class B and

Class C membership units subordinate to the Class A, to one in which the Class A

unitholders essentially were squeezed out for less than fair value.37 If Plaintiff‘s fiduciary

duty claims are proven, it is the Class A unitholders—individually, and not on a pro rata

basis along with all the unitholders of RPH—that will be the principal recipient of any

recovery. It is true that RPH also was harmed by the allegedly disloyal scheme. RPH

might have (or might have had) derivative claims for those harms. That makes no

difference here, however, because Plaintiff has limited the claims it is asserting based on

the RPH fiduciaries‘ alleged breaches of fiduciary duties solely to breaches that Plaintiff

can pursue directly. If Plaintiff ultimately succeeds at proving those claims, it would

receive a remedy directly. Under Tooley, therefore, I conclude that Plaintiff has direct

claims in this regard.

       In arguing for a contrary conclusion, Defendants assert that the Complaint can be

distilled to ―a sensational story about how Defendants pillaged RPH for years causing it

immeasurable harm and, as a result, Plaintiff lost its investment.‖ 38 That may be one way

37
       In this regard I note again Defendants‘ protestations that, because Plaintiff
       controlled three of the five seats on RPH‘s Board, the sort of direct harm
       articulated in cases like Gentile cannot be present here, where Plaintiff was not a
       minority investor taken advantage of by a controller. That argument might prove
       persuasive after the factual record is developed more fully. At this time, however,
       taking all allegations as true and drawing reasonable inferences from them, it is
       conceivable that Plaintiff‘s ability to exert control through its Board designees and
       holdings of a majority of the Class A units was rendered ineffective by the
       misrepresentations and self-interested dealings in which Defendants allegedly
       engaged, while they held positions of authority at RPH.
38
       Castle Defs.‘ Reply Br. 4.

                                             21
to read the Complaint, but it is not the only reasonable one. At this procedural stage,

Plaintiff is entitled to have all reasonable inferences drawn in its favor. Viewed in the

light most favorable to Plaintiff, another reasonable inference from the Complaint is that

certain Defendants caused improper Distributions to be made to themselves, in violation

of the promises they made to Plaintiff as parties to the RPH LLC Agreement. In addition,

certain Defendants allegedly breached their fiduciary duty of loyalty by actively

concealing their misconduct and by deceptively engineering a foreclosure sale in which

the pre-ordained outcome was a sale of the Company‘s assets to themselves for less than

full value. As discussed in more detail below, those theories support direct claims for

breaches of contract and the implied covenant, as well as for breach of fiduciary duties

and for related equitable relief. In short, for Defendants to succeed in this line of

argument, they would have to show that there exist no direct claims that Plaintiff might

pursue on its own. They failed to make such a showing.

       AMS, which purchased RPH‘s South Region assets (formerly the Wilson Services

Business) from the receiver, effectively devoted its entire briefing allotment to a version

of this line of argument. In particular, AMS contends that actions taken in the Colorado

Action preclude Plaintiff from bringing claims against AMS here. AMS‘s res judicata

argument, which relies on a voluminous record from the Colorado Action, may or may

not have merit as to the issues of whether the RPH receivership estate possessed

commercial tort claims against certain individuals and entities (including some or all of

the Defendants in this action), and whether the court-approved receivership sales

extinguished those claims. Assuming arguendo that AMS‘s argument is sound, it is

                                            22
conceivable that RPH‘s claims became part of the receivership estate, later were sold or

otherwise extinguished, and now cannot be litigated in any court.         That argument,

however, proceeds from the necessary premise that the claims in this action are the same

claims as those that purportedly were sold by the receiver in the Colorado proceedings,

which Plaintiff strenuously disputes. It is at least reasonably conceivable that they are

not. Rather, the claims brought here are direct claims that accrued to Plaintiff, not RPH.

Neither AMS nor any Defendant even attempts to argue how Plaintiff‘s direct claims

could have become part of the RPH receivership estate and thereafter been sold away.39

                B.      Plaintiff’s Claims are Not Barred by Laches

      Several Defendants contend that Plaintiff‘s claims should be dismissed as

untimely.40 They focus on the three-year statute of limitations applicable to claims for

39
      E.g., AMS Opening Br. 1-10; AMS Reply Br. 1-9. The first sentences of AMS‘s
      opening brief illustrate how AMS assumes the very conclusion it seeks to prove:
      ―Plaintiff was on notice of—and indeed effectively participated through one of its
      two members in—proceedings in Colorado state court that properly and
      definitively adjudicated the claims that Plaintiff asserts against AMS here. At the
      urging of Calpers and others, the Colorado court found that these claims belong to
      the RP Holdings receivership estate.‖ Nowhere does AMS establish how RPH‘s
      receiver could have purported to attach and take possession of property—like
      Plaintiff‘s direct claims, that it owns personally—i.e., that was not RPH‘s and
      never was pledged as collateral for the foreclosed loan. Indeed, AMS‘s own brief
      contains statements that reveal this fatal logical gap, but makes no attempt to
      bridge it. E.g., AMS Opening Br. 5 (―The receiver and AMS sought the court‘s
      approval of the AMS [asset purchase agreement], which transferred ownership of
      property belonging to the estate.‖). A cursory review of the filings in the Colorado
      action, which are beyond the Complaint but of which I take judicial notice,
      buttresses my conclusion in this regard. See Defs.‘ J. App., Exs. 15-24.
40
      Wilson Defs.‘ Opening Br. 5-7; Wilson Defs.‘ Reply Br. 13-14; Stawiarski Defs.‘
      Opening Br. 19-20.

                                           23
breach of contract or the implied covenant of good faith and fair dealing, unjust

enrichment, and breach of fiduciary duty, and argue that each of Plaintiff‘s causes of

action here accrued more than three years before its Complaint was filed on March 25,

2014.41 I consider Defendants‘ laches argument, on its face, to be without merit. In

addition, Plaintiff conceivably could show that it is entitled to the benefit of tolling,

which would provide a further ground for avoiding a finding of laches here.

      To determine whether an action was timely filed, this Court adheres to the doctrine

of laches, the ―equitable analog of the statute of limitations defense.‖42 Laches analysis

calls for a context-specific application of the maxim that ―equity aids the vigilant, not

those who slumber on their rights.‖43 While there is ―no hard and fast rule as to what

constitutes laches,‖ establishing the elements of the defense generally requires: (1)

knowledge by the claimant; (2) unreasonable delay in bringing the claim; and (3)

resulting prejudice to the defendant.44 The defense of laches is ―not ordinarily well-

suited‖ for treatment on a Rule 12(b)(6) motion.45 While the statute of limitations is not

41
      See 10 Del. C. § 8106; Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC,
      2010 WL 363845, at *6 (Del. Ch. Jan. 27), aff’d, 7 A.3d 485 (Del. 2010); Dubroff
      v. Wren Hldgs., LLC, 2011 WL 5137175, at *12 (Del. Ch. Oct. 28, 2011).
42
      TrustCo Bank v. Mathews, 2015 WL 295373, at *5 (Del. Ch. Jan. 22, 2015).
43
      Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009) (quoting 2 JOHN NORTON
      POMEROY, EQUITY JURISPRUDENCE §§ 418, 419 (5th ed. 1941)).
44
      Id.
45
      Id.

                                           24
controlling in this Court, a suit in equity generally ―will not be stayed for laches before,

and will be stayed after, the time fixed by the analogous statute of limitations at law.‖46

       Based on the non-conclusory factual allegations in the Complaint, it would be

inappropriate to dismiss Plaintiff‘s claims on laches grounds. The main reason is that

Plaintiff has alleged wrongdoing that occurred well after March 25, 2011—the critical

date that is three years before the filing of this action. For example, the process by which

certain Defendants are alleged to have guided RPH into insolvency and then re-purchased

its major assets from the receiver, which forms the basis of several of Plaintiff‘s claims,

took place throughout 2011 and did not conclude until late 2012 or early 2013. Thus, all

of the claims tied to those factual allegations, which I discuss further below, are

presumptively timely as they fall within the analogous limitations period.

       Even as to the alleged wrongdoing that took place before March 25, 2011,

however, Plaintiff‘s claims cannot be dismissed on the pleadings as untimely.             As

discussed below, for example, Plaintiff alleges that Distributions were made in violation

of the RPH LLC Agreement. Based on the alleged facts, those breaches conceivably may

have begun as early as 2007 or 2008. I decline at this preliminary stage to bar Plaintiff

from pursuing claims based on acts committed before March 25, 2011, however, because

Delaware law allows the statute of limitations to ―be tolled if a defendant engaged in

fraudulent concealment of the facts necessary to put a plaintiff on notice of the truth.‖47

46
       IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177 (Del. 2011).
47
       In re Dean Witter P’ship Litig., 1998 WL 442456, at *5 (Del. Ch. July 17, 1998),
       aff’d, 725 A.2d 441 (Del. 1999).

                                             25
According to the Complaint, certain Defendants, whose positions gave them credibility

and superior knowledge of the day-to-day management of the RPH business, consistently

lied to Plaintiff‘s representatives on the Board of Managers as to why the A/R balances

were growing and the Company was not realizing profit, despite having a steady volume

of sales.48 In early 2011, Plaintiff engaged the Crowe firm to look into the cash flow

problems at RPH. It was not until the Crowe Report came back in late 2011, however,

that Plaintiff had reason to believe that managerial misconduct, rather than business

efficiency issues, were in fact to blame for those problems.49          It is reasonably

conceivable, therefore, that Plaintiff could prove that the statute of limitations and any

laches time period must be tolled until that time. Thus, even claims arising specifically

out of conduct that occurred from 2008 to early 2011, which otherwise might be time-

barred, cannot be dismissed at this preliminary stage.

       Defendants further contend that Plaintiff either was or reasonably should have

been aware of the problems at RPH, because of the growing A/R balances, and should

have investigated the possibility of wrongdoing much earlier than it did. Defendants also

emphasize that Plaintiff controlled three of the five seats on RPH‘s Board, giving

Plaintiff ―overarching control over RPH‖ and ―superior access to information,‖ and

contend that this should negate any argument of concealment or any plea for equitable

48
       E.g., Compl. ¶¶ 100-109, 124-126.
49
       Id.

                                            26
tolling.50   Plaintiff‘s Board appointees well may be guilty of mismanagement or

negligence. That is not the issue here, however. Rather, the question is at what point

they were on inquiry notice that it might not be prudent to continue relying on

Defendants for information about RPH‘s apparently outsized A/R.

       Whether one is on inquiry notice of something depends on the perception of a

reasonably prudent person—i.e., it is an objective standard. Determining the answer will

be a fact-intensive inquiry.   Thus, Defendants‘ argument fails based on the alleged

misrepresentations and concealment by at least certain Defendants. A critical aspect of

Plaintiff‘s allegations in this regard is that, notwithstanding its theoretical ability to

exercise control over RPH, it was prevented from exercising that control effectively

because of Defendants‘ exploitation of their superior knowledge of the Services

Businesses and their positions as the lead individuals managing RPH‘s operations and in

charge of the purported transfer of the Services Businesses into RPH.           Taking all

Plaintiff‘s allegations as true, and drawing all reasonable inferences in their favor, it is

conceivable that Plaintiff‘s Board designees reasonably relied on the Individual

Defendants‘ misrepresentations up until the time the Crowe Report indicated otherwise.

For those reasons, I decline to dismiss any part of the Complaint on grounds of

untimeliness.

50
       Wilson Defs.‘ Opening Br. 6, 7.

                                            27
                    C.      Wilson is Properly Named a Defendant

       As noted above, Robert Wilson died in August 2012, and Plaintiff seeks to name

his Estate as a Defendant in his place. On August 11, 2012, notice was provided pursuant

to Arkansas law to creditors of the Estate that all claims against the Estate would be

barred if not filed within six months of that date. The Wilson Defendants contend that all

Plaintiff‘s claims against Wilson or his Estate are barred because this action was

commenced more than a year after that cut-off.51 Plaintiff responds that, under the statute

the Wilson Defendants cite as support for their argument in this regard, ―known or

reasonably ascertainable‖ creditors are entitled to either ―actual notice‖ from the Estate or

to have the statutory period enlarged from six months to two years.52 Plaintiff asserts that

it received no such notice, and that this action was filed against Wilson less than two

years after the Estate first gave notice. The Wilson Defendants largely fail to counter this

argument.53

       On a more complete record, the Wilson Defendants may be able to demonstrate

that Plaintiff was not entitled to actual notice under the statute, that such notice properly

51
       Wilson Defs.‘ Opening Br. 4.
52
       Pl.‘s Answering Br. 80 (citing Ark. Code Ann. § 28-50-101(h) (2014)).
53
       Wilson Defs.‘ Reply Br. 14-15. Since the argument on the Motions, the Wilson
       Defendants have apprised this Court of certain developments in an action relating
       to Wilson‘s Estate pending in Arkansas state court, in which the court ruled that
       CMS‘s claims against Wilson‘s Estate were untimely. See Docket Item [―D.I.‖]
       No. 102. Because CMS has appealed that order, however, I decline at this
       relatively early stage of the case to accord that ruling any preclusive effect here.
       See D.I. No. 103 (Plaintiff‘s response to the Wilson Defendants‘ letter of May 21,
       2015, citing relevant authorities as to the preclusive effect of orders subject to
       pending appeals, including Restatement (Second) of Judgments § 13 cmt.f (1982)).

                                             28
was provided, or that the Arkansas court‘s ruling is entitled to preclusive effect. At this

motion to dismiss stage, however, I find that the Wilson Defendants have not shown

sufficient grounds for dismissing Wilson‘s Estate from this case entirely.

                           IV.      COUNTS I, IV, AND VI

       In Counts I, IV, and VI, Plaintiff purports to state claims for breach of the RPH

LLC Agreement, breach of the implied covenant of good faith and fair dealing, and

unjust enrichment. The contract and implied covenant claims are leveled against the

Control Group Defendants only. Plaintiff charges all Defendants with unjust enrichment.

              A.       Relevant Provisions of the RPH LLC Agreement

       Plaintiff contends that it adequately has pled breaches of Sections 4.1, 6.8, 5.1, and

14.3 of the RPH LLC Agreement. Section 4.1 governs Distributions. It requires that

Distributions, meaning any disbursements of cash or property from the Company to a

Member, must be made in accordance with the priority schedule it sets forth: first to pay

the Class A Preferred Unitholders‘ yield, then to the same holders for returns of capital,

then to the Class B Common Unitholders, and finally to pay Management Incentive

Units, which were to be paid by the Company in the form of Class C Common Units.54

As relevant here, the RPH Board had the authority to approve Distributions of

Management Incentive Units, but the Castle Continuing Member Affiliates and the

Wilson Continuing Member Affiliates had the discretion to determine which specific

employees, officers, or other individuals would receive the approved Management

54
       RPH LLC Agreement § 4(a); see also id. Art. I (defining all capitalized terms,
       including ―Distributions‖); id. § 3.6 (concerning Management Incentive Units).

                                             29
Incentive Units.55 The ―Castle Continuing Member Affiliates‖ and ―Wilson Continuing

Member Affiliates‖ consisted of any Castle and Wilson ―Member Affiliates‖ who were

―providing services to the Company or serving as a member of the Operating Board.‖56

The Castle Member Affiliates included the Castles and Stawiarski; the Wilson Member

Affiliates included Wilson and Wilson-Harvey.57

       Section 6.8 identifies certain actions the Company could not take without the

consent of the Class A Preferred Unitholders. Those actions included: entering into ―any

agreement or arrangement with any officer, director, Manager or Member, any relative

thereof, or any Affiliate‖; or materially changing ―the nature of the business of the

Company.‖58 Section 5.1 vests in the Board ―all management powers over the business

and affairs‖ of RPH.59 Section 14.3 provides that RPH assets shall be owned by the

Company, and ―no Member, individually or collectively, shall have any ownership

interest‖ in any Company asset.60

       Section 5.7 of the RPH LLC Agreement contains a Limitation of Liability. In

particular, it states that:

55
       Id. § 3.6(a).
56
       Id.
57
       Id. Art. I.
58
       Id. § 6.8(h)-(j).
59
       Id. § 5.1(a).
60
       Id. § 14.3.

                                          30
                  Except as otherwise provided herein or in an agreement
                  entered into by such Person and the Company, no Manager or
                  any of such Manager‘s Affiliates shall be liable to the
                  Company or to any Member for any act or omission
                  performed or omitted by such Manager in its capacity as a
                  member of the Board pursuant to authority granted to such
                  Person by this Agreement; provided that, except as otherwise
                  provided herein, such limitation of liability shall not apply to
                  the extent the act or omission was attributable to such
                  Person‘s gross negligence, willful misconduct or knowing
                  violation of law or for any present or future breaches of any
                  representations, warranties or covenants by such Person or its
                  Affiliates contained herein or in the other agreements with the
                  Company.61

The Agreement broadly defines ―Person‖ as including any individual or entities, and

―Affiliate‖ as a Person that directly or indirectly ―controls or is controlled by, or is under

common control with,‖ another specified Person.62

          The operative version of the RPH LLC Agreement was executed February 1, 2010

by RPH and its Members.63            A schedule attached to the Agreement identifies the

Members and their unit holdings. In addition to Plaintiff, Defendants LEC, LCS, Wilson,

and Wilson-Harvey signed the Agreement as Members of RPH.

     B.      Plaintiff States Claims for Breach of Contract Against Some Defendants

          ―In order to survive a motion to dismiss for failure to state a breach of contract

claim, the plaintiff must demonstrate: first, the existence of the contract, whether express

or implied; second, the breach of an obligation imposed by that contract; and third, the

61
          Id. § 5.7(a).
62
          Id. Art. I.
63
          Id. Recitals. The operative agreement is the Third Amended and Restated Limited
          Liability Company Agreement of RP Holdings, Inc.

                                                31
resultant damage to the plaintiff.‖64 At the pleadings stage, dismissal of a claim for

breach of contract ―is proper only if the defendants‘ interpretation is the only reasonable

construction as a matter of law.‖65

                             1.       The Castle Defendants

       The Castle Defendants seek dismissal of Plaintiff‘s breach of contract claims on

the ground that the Castles are not parties to the RPH LLC Agreement, and therefore

cannot be liable for any alleged breaches thereof. Because the contract claims relate to

LEC, the Castle Defendants also contend that all the alleged breaches are barred by the

limitation of liability in Section 5.7 of the Agreement.66 Their first argument is partially

correct, in that not all the Castle Defendants are bound by the Agreement. The second

argument, however, is unpersuasive.

       First, it is not reasonably conceivable that Plaintiff will be able to demonstrate that

all of the Castle Defendants are liable for breaches of the RPH LLC Agreement. Under

Delaware law, ―only a party to a contract may be sued for breach of that contract.‖67 The

Castle Defendants concede that as a Member of the Company and signatory of the RPH

LLC Agreement, LEC is bound by its terms. But, LEC is not the only Castle Defendant

who conceivably may be bound by the Agreement. Lawrence Castle was at relevant

64
       VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003)
65
       Id. at 615.
66
       Castle Defs.‘ Opening Br. 12-15. The Castle Defendants did not challenge the
       enforceability of the RPH LLC Agreement against Next Org.
67
       Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160, 172 (Del. 2002).

                                             32
times a member of RPH‘s Board. Therefore, he is bound by the Agreement regardless of

the fact that he personally did not execute it.68

       Whether Caren Castle is bound by the RPH LLC Agreement, however, is a closer

question. Unlike Lawrence, Caren Castle was not a member of RPH‘s Board, although

she was an Operating Board Member69 and held a high-level position in the Company.

Plaintiff also avers that Caren Castle ―held substantial membership interests in RPH,

indirectly, through various entities.‖70 Even assuming the truth of those allegations, as I

must at this stage, I cannot find that they support a reasonable inference that Caren Castle

conceivably could be liable to Plaintiff for breach of the RPH LLC Agreement. The first

element of proof that an enforceable contract exists between two parties requires

allegations sufficient to prove that the parties intended to be bound. Under Delaware law,

courts look to objective manifestations of the parties‘ intent to determine whether they

undertook any contractual obligations.71       Nothing in the Complaint, the RPH LLC

Agreement, Caren Castle‘s Operating Board Member Agreement, or any of the other

68
       Compl. ¶ 21; see 6 Del. C. § 18-101(7) (―A member or manager of a limited
       liability company or an assignee of a limited liability company interest is bound by
       the limited liability company agreement whether or not the member or manager or
       assignee executes the limited liability company agreement.‖).
69
       Defs.‘ J. App., Ex. 8.B.
70
       Pl.‘s Answering Br. 24 n.4; Compl. ¶ 24.
71
       See, e.g., Otto v. Gore, 45 A.3d 120, 138 (Del. 2012); Indus. Am., Inc. v. Fulton
       Indus., Inc., 285 A.2d 412, 415 (Del. 1971); Black Horse Capital, LP v. Xstelos
       Hldgs., Inc., 2014 WL 5025926, at *16 (Del. Ch. Sept. 30, 2014).

                                              33
documents in the record support a reasonable inference that she intended to be bound by

the terms of the RPH LLC Agreement.72

      Furthermore, Delaware does not recognize a cause of action for aiding and

abetting a breach of contract.73 I therefore reject Plaintiff‘s conclusory attempt to widen

the scope of its breach of contract claim by using defined terms such as ―Control Group

Defendants‖ or by lumping together all entities and persons affiliated with LEC and

Lawrence Castle, instead of pleading, as it must, non-conclusory facts supporting a

reasonable inference that each of the named Defendants undertook contractual

72
      I decline Plaintiff‘s invitation to infer that Caren Castle could be bound by the
      RPH LLC Agreement merely because she allegedly holds interests in LEC, which
      is a Member of RPH and therefore a party to the contract. Plaintiff effectively
      asks the Court to disregard LEC‘s separate legal identity and hold that one of its
      alleged interestholders could be liable for contractual breaches it committed. Yet,
      Plaintiff has failed to allege sufficient facts to support such a piercing of the
      corporate veil. See Crosse v. BCBSD, Inc., 836 A.2d 492, 497 (Del. 2003).
73
      See, e.g., Allen v. El Paso Pipeline GP Co., 2014 WL 8266199, at *22 (Del. Ch.
      June 20, 2014) (citing Gotham P’rs, L.P., 817 A.2d at 172), aff’d, 2015 WL
      803053 (Del. Feb. 26, 2015); Gerber v. EPE Hldgs., LLC, 2013 WL 209658, at
      *11 (Del. Ch. Jan. 18, 2013). I note, however, that ―[b]ecause the alternative
      entity statutes permit the entity‘s governing agreement to modify, alter, or expand
      fiduciary duties, there are situations involving alternative entities where a party
      could owe fiduciary duties, the scope of the fiduciary duty would be established by
      contract, and a third party could aid and abet a breach of the contractually
      measured fiduciary duty.‖ Allen, 2014 WL 8266199, at *22. Notwithstanding the
      analytical overlap between breach of contract and breach of ―contractual‖
      fiduciary duty claims in the alternative entity context, those are distinct causes of
      action, and secondary liability in the form of aiding and abetting can lie only as to
      the latter. Id. at *23; see also Gerber, 2013 WL 209658, at *11 (dismissing claims
      for aiding and abetting breaches of a limited partnership agreement because the
      predicate breaches sounded in contract, not fiduciary duty). I discuss infra
      whether Plaintiff adequately has stated claims for breach of fiduciary duty and for
      aiding and abetting such breaches.

                                            34
obligations to Plaintiff and later breached them. Thus, I conclude that Count I must be

dismissed as it relates to Caren Castle.

       LEC and Lawrence Castle, however, are bound by the RPH LLC Agreement, and

the Complaint adequately pleads that they each breached certain provisions of the

Agreement. For example, Plaintiff alleges that the priority of Distributions agreed to in

Section 4.1 essentially was turned upside down, as the revenues due to RPH were

directed to the Company‘s managers and officers and their affiliated law firms, while the

Class A Preferred Unitholders at the top of Section 4.1‘s priority schedule received

nothing. Lawrence Castle specifically is alleged to have orchestrated that aspect of the

wrongdoing, to the detriment of RPH and the benefit of his law firm, Castle Law

Group.74 The Distributions under Section 4.1 are within the authority of the RPH Board,

of which Castle was Chairman.          Thus, assuming the truth of the allegations, it is

reasonably conceivable that Castle was a cause of their being made, and therefore, he

could be liable to Plaintiff for at least that breach of contract.

       It also is reasonably conceivable that LEC violated Section 4.1 of the Agreement,

because as a Class B Unitholder, it too was supposed to receive Distributions only after

the requisite Class A payments were made.            At this preliminary stage, drawing all

reasonable inferences in favor of Plaintiff, I find it conceivable that LEC could be in

breach of this provision, if it knowingly accepted Distributions in violation of the Section

4.1 priority schedule due to its collusion with Castle. For at least these reasons—and,

74
       Compl. ¶ 110; see also id. ¶¶ 114-121.

                                               35
perhaps more, based on the other alleged breaches of the Agreement—I deny the motion

to dismiss Plaintiff‘s breach of contract claim as to either Lawrence Castle or LEC.75

                          2.      The Stawiarski Defendants

       Like the Castle Defendants, Stawiarski and LCS contend that the breach of

contract claims against them must be dismissed because they are exculpated from liability

under Section 5.7 of the RPH LLC Agreement. Stawiarski and LCS also argue that the

Complaint fails to allege how they participated in the alleged wrongdoing, apart from

lumping them together with the Castles and the Wilsons through broadly defined terms

such as ―Defendants‖ and ―Control Group Defendants.‖ Their argument in this regard

focuses particularly on two facts: first, that Stawiarski resigned from RPH‘s Board of

Managers in January 2012 and took no part in Defendants‘ alleged plot to drive RPH into

insolvency and repurchase its assets out of receivership; and second, that Stawiarski‘s

involvement on the Operating Board—the group to which Plaintiff attributes many of its

allegations of wrongdoing—was significantly less than that of the Castles or the

Wilsons.76

75
       The Castle Defendants also contend that the Complaint fails to state claims for
       breach of the RPH LLC Agreement as to any of them based on the exculpation
       provision in Section 5.7. That argument is without merit. The parties to that
       Agreement contracted for limited liability, ―provided that . . . such limitation of
       liability shall not apply‖ in cases of gross negligence or intentional wrongdoing,
       ―or for any present or future breaches of any representations, warranties or
       covenants by such Person or its Affiliates contained herein . . . .‖ RPH LLC
       Agreement § 5.7(a). The Complaint alleges, in a non-conclusory manner,
       intentional wrongdoing by the Castle Defendants.
76
       Compl. ¶ 23.

                                            36
       Initially, I note that both Stawiarski and LCS are Members of RPH, and neither

denies that they are both bound by the Agreement. Like Lawrence Castle, Stawiarski was

a member of both the RPH Board and the Operating Board that allegedly performed most

of the day-to-day functions of RPH. As discussed above, the Complaint avers that during

the time period that Stawiarski was on the Board and the Operating Board, material

breaches of the RPH LLC Agreement were committed, including Distributions in

violation of Section 4.1.

       As with Castle and LEC, one reasonably could infer that Stawiarski was involved

in the payment of those Distributions and benefited from them, to the extent that his law

firm received monies that rightfully should have been paid to the Class A Preferred

Unitholders. Similarly, because both Stawiarski and LCS held Class B units, to the

extent they knowingly accepted improper Distributions or colluded with the Castles to

facilitate their payment, it is reasonably conceivable that they breached Section 4.1 of the

Agreement. While there ultimately might be merit to Stawiarski and LCS‘s position that

it was the Castles and the Wilsons who were truly behind all the alleged wrongdoing, and

Stawiarski is a victim of alleged guilt by association, I cannot conclude at the motion to

dismiss stage that there is no conceivable set of facts under which Stawiarski and LCS

would be liable for breach of the RPH LLC Agreement. Accordingly, I deny their

motion to dismiss as to Count I.

                            3.      The Wilson Defendants

       The Wilson Defendants concede that the Wilsons are parties to the RPH LLC

Agreement. They contend, however, that the breach of contract claims against them must

                                            37
be dismissed under Rule 12(b)(6). Their primary contention is that the Wilsons cannot

have breached any of the sections upon which Plaintiff bases its breach of contract claim,

because those sections contain obligations binding the RPH Board, rather than

obligations the Wilsons owe to Plaintiff. According to the Wilson Defendants, Plaintiff‘s

complaints in this regard boil down to allegations that funds wrongly were diverted from

RPH to the Wilsons‘ law firm, W&A, and that even assuming that were true, no claim for

breach of the RPH LLC Agreement would lie against any of the Wilson Defendants.

         For similar reasons to those supporting the breach of contract claims against the

Castles and Stawiarski, I conclude that the contract claims against the Wilsons are well-

pled.77 As Members of RPH and parties to the RPH LLC Agreement, they were bound

not to take actions that would result in a breach of one of its provisions. Among other

alleged breaches, Plaintiff alleges that Wilson-Harvey, as CEO of RPH and a member of

the Operating Board, took actions that resulted in improper Distributions being made to

members of management (including herself) and other unitholders in violation of Section

4.1.78    Wilson also was a member of the Operating Board when the wrongful

Distributions are alleged to have occurred. While neither Wilson-Harvey nor Wilson

were on the RPH Board of Managers, I nevertheless conclude, based on the factual

77
         I refer to the Wilsons advisedly, rather than the Wilson Defendants. The Wilson
         Defendants include W&A, which is not a party to the RPH LLC Agreement.
         Apart from general references to the Wilson Defendants, however, the Complaint
         provides no basis for a breach of contract claim against W&A. As to W&A,
         therefore, Defendants‘ motion to dismiss this count is well-founded.
78
         E.g., Compl. ¶¶ 111-115.

                                            38
allegations in the Complaint, that their position of influence in the operational structure of

RPH makes it reasonably conceivable that they caused improper payments to be made, or

fees to be misdirected into their own coffers instead of RPH‘s, in violation of at least

Section 4.1 of the Agreement. Therefore, I deny the Wilsons‘ motion to dismiss the

breach of contract claims against them.

                                       4.      AMS

       AMS was not a Member of RPH, and Plaintiff makes no effort to explain why it

would be bound by the RPH LLC Agreement. All of the allegations concerning AMS

pertain to the later time period during which RPH was rendered insolvent and the receiver

sold its assets to AMS and Next Org. Based on the lack of specific allegations or

arguments linking AMS to the Agreement, I conclude it is not reasonably conceivable

that AMS would be liable to Plaintiff for any breach of that contract asserted in the

Complaint.

 C.       Plaintiff States Claims for Breach of the Implied Covenant Against Some
                                          Defendants

       In Count IV, Plaintiff charges the Control Group Defendants—the Castles, LEC,

Stawiarski, LCS, and the Wilsons—with breaching the implied covenant of good faith

and fair dealing.    All those Defendants seek dismissal of this claim.         Because the

Complaint alleges that all but one of these Defendants breached a specific term that is

implicit in the RPH LLC Agreement and thereby harmed Plaintiff, I largely deny this

aspect of the Motions.

                                             39
       The implied covenant of good faith and fair dealing ―attaches to every contract,‖

and ―requires ‗a party in a contractual relationship to refrain from arbitrary or

unreasonable conduct which has the effect of preventing the other party to the contract

from receiving the fruits‘ of the bargain.‖79 Nevertheless, ―Delaware law requires that

the contract‘s express terms be honored, and prevents a party who has after-the-fact

regrets from using the implied covenant of good faith and fair dealing to obtain in court

what it could not get at the bargaining table.‖80 Analysis of an implied covenant claim

hinges on ―inferring contractual terms to handle developments or contractual gaps‖ that

neither party anticipated, so the implied covenant cannot apply when the contract

addresses the conduct at issue.81 Thus, to state a claim for breach of the implied covenant

of good faith and fair dealing, a plaintiff must allege ―a specific obligation implied in the

contract, a breach of that obligation, and resulting damages.‖82 This Court cannot invoke

an implied covenant, however, ―to re-write the agreement between the parties, and

79
       Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005) (quoting
       Wilgus v. Salt Pond Inv. Co., 498 A.2d 151, 159 (Del. Ch. 1985)); see also Fortis
       Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *3 (Del. Ch.
       Jan. 30, 2015).
80
       Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878,
       881 (Del. 2015).
81
       Id. at 896 (quotation marks omitted) (quoting Nemec v. Shrader, 991 A.2d 1120,
       1125 (Del. 2010)).
82
       Fortis Advisors LLC, 2015 WL 401371, at *3.

                                             40
‗should be most chary about implying a contractual protection when the contract could

easily have been drafted to expressly provide for it.‘‖83

       As a threshold matter, I note that, because I found that she was not a party to the

RPH LLC Agreement, Caren Castle cannot conceivably be liable for breach of the

covenant of good faith and fair dealing implicit in that contract. As a non-party, she is

not bound by the terms of the Agreement, express or implied. As to the Defendants who

are parties to the RPH LLC Agreement, however, Plaintiff adequately has stated claims

for breach of the implied covenant. The Complaint supports a reasonable inference that

the underlying purpose of the Agreement was to create an operational structure that

would enable the parties to separate the Services Businesses from Defendants‘ law firm

businesses. It is further inferable that compliance with the Hazard Opinion, on which

Plaintiff alleges Defendants knew it relied in entering into the 2007 and 2008

Transactions,84 was an implied term in the parties‘ Agreement. Plaintiff avers that the

Hazard Opinion outlined the need for the separate-entity structure so that the parties

could conduct their contemplated business without risking a violation of legal ethics rules

or engaging in the unauthorized practice of law. Thus, I find it conceivable that Plaintiff

83
       Nationwide Emerging Managers, LLC, 112 A.3d at 897 (quoting Allied Capital
       Corp. v. GC–Sun Hldgs., L.P., 910 A.2d 1020, 1035 (Del. Ch. 2006)).
84
       In connection with the 2008 Transactions, the parties obtained another legal
       opinion from Adams & Reese, LLP that was similar in substance to the Hazard
       Opinion, but focused on the Wilson Services Businesses rather than the Castle
       Services Businesses. Compl. ¶ 76. For the sake of simplicity, I refer only to the
       Hazard Opinion because the parties did not identify any material distinction
       between that and the later opinion.

                                             41
will be able to show that adherence to the strictures embodied in the Hazard Opinion,

which the Complaint alleges the parties were cognizant of when they executed the RPH

LLC Agreement, was an implied term of the Agreement.85

       Defendants allegedly made no attempt, however, to transfer the Services

Businesses into RPH and maintain the separation contemplated by the Hazard Opinion as

that implied term required. Rather, they took the tens of millions of dollars Plaintiff paid

in connection with the 2007 and 2008 Transactions and largely continued doing business

the way they had been doing it, with the Individual Defendants and their law firms

directly or indirectly receiving the relevant fees and RPH accruing what ultimately

proved to be relatively worthless A/R balances. By so doing, Defendants are alleged to

have frustrated the basic purpose of the RPH LLC Agreement, as reflected in the Hazard

Opinion, on which all the parties allegedly relied at the time of contractual formation.

Taking all facts in the Complaint as true and drawing all reasonable inferences from

them, I find that those Defendants who are parties to the RPH LLC Agreement

conceivably could be liable to Plaintiff for breach of the implied covenant of good faith

and fair dealing.86

85
       In analyzing an implied covenant claim, ―[t]he temporal focus is critical.‖ Gerber
       v. Enter. Prods. Hldgs., LLC, 67 A.3d 400, 418 (Del.), overruled on other grounds
       by Winshall v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013). Thus, the court must
       focus on ―what the parties would have agreed to themselves had they considered
       the issue in their original bargaining positions at the time of contracting.‖ Id.
86
       See Gerber, 67 A.3d at 422 (holding that an implied covenant claim adequately
       was stated because the defendants used a fairness opinion that ―did not fulfill its
       basic function,‖ an eventuality that plaintiff could not have anticipated at the time
       of contractual formation).

                                            42
      In arguing for a contrary conclusion, the Castle Defendants and the Wilsons

contend that the implied covenant claim fails because neither the RPH LLC Agreement

nor any of the other written agreements refer either to the Hazard Opinion, or to the

separation of the Services Businesses that Plaintiff suggests was critical to an underlying

purpose of the parties‘ bargain.87 That argument is unpersuasive. The implied covenant

of good faith and fair dealing is, by definition, implied—that is, it is ―[n]ot directly

expressed,‖ or ―[r]ecognized by law as existing inferentially.‖88 The Complaint alleges

that, at the time the relevant parties entered into the RPH LLC Agreement, they shared an

understanding that the Services Businesses would operate separately from the law firms,

as envisioned in the Hazard Opinion, but that the Individual Defendants later deviated

from that implicit aspect of the Agreement. Thus, the allegations in the Complaint

support a reasonable inference that the Defendants with whom Plaintiff entered into the

Agreement ―‗frustrate[d] the overarching purpose of the contract by taking advantage of

[their] position[s] to control implementation of the agreement‘s terms.‘‖89 Accordingly,

87
      Castle Defs.‘ Opening Br. 22 (―[I]t is unreasonable, as a matter of law, to read into
      the Agreement an implied promise based upon the Hazard Opinion. While
      described in Plaintiff‘s pleading . . . it is nowhere mentioned or incorporated into
      any applicable contract.‖); Wilson Defs.‘ Opening Br. 26 (―Plaintiff fails to allege
      how the Opinion was an ‗implied‘ obligation of the LLC Agreement and how it
      was breached. Neither the LLC Agreement nor the SPA references the Opinion or
      its underlying purpose.‖). Stawiarski joins in this argument.
88
      BLACK‘S LAW DICTIONARY 770 (8th ed. 2004) (defining ―implied‖).
89
      Winshall v. Viacom Int’l, Inc., 55 A.3d 629, 636 (Del. Ch. 2011), aff’d, 76 A.3d
      808 (Del. 2013) (quoting Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434,
      442 (Del. 2005)).

                                            43
at this initial stage and in light of the near-cursory counterarguments actually advanced

by Defendants, a sufficient claim for breach of the implied covenant of good faith and

fair dealing has been stated as to all of the Defendants who are party to the Agreement.

                D.      Plaintiff States Claims for Unjust Enrichment

       Unjust enrichment is the ―‗unjust retention of a benefit to the loss of another, or

the retention of money or property of another against the fundamental principles of

justice or equity and good conscience.‘‖90       Unjust enrichment, or ―quasi-contract,‖

developed ―as a theory of recovery to remedy the absence of a formal contract.‖91 ―When

the complaint alleges an express, enforceable contract that controls the parties‘

relationship . . . a claim for unjust enrichment will be dismissed,‖92 because the ―contract

is the measure of plaintiffs‘ right.‖93 Nevertheless, as with the implied covenant of good

faith and fair dealing, it is not unusual for plaintiffs to attempt to supplement claims for

breach of contract with additional claims for unjust enrichment, generally as a hedge

against the possibility that the court might conclude that there was no formal contract

between the parties.    There are five elements to an unjust enrichment claim under

Delaware law: ―(1) an enrichment, (2) an impoverishment, (3) a relation between the

90
       Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891-92 (Del. Ch. 2009) (quoting
       Schock v. Nash, 732 A.2d 217, 232 (Del. 1999)).
91
       Choupak v. Rivkin, 2015 WL 1589610, at *20 (Del. Ch. Apr. 6, 2015).
92
       Kuroda, 971 A.2d at 891.
93
       Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del. 1979).

                                            44
enrichment and impoverishment, (4) the absence of justification, and (5) the absence of a

remedy provided by law.‖94

       With the exception of Caren Castle, the substance of this claim arguably is

duplicative of Plaintiff‘s well-pled claims for breach of contract and of the implied

covenant of good faith and fair dealing. If the alleged wrongs underlying Plaintiff‘s

unjust enrichment claim related solely to the same allegations as the contract and implied

covenant claims, this Count might be susceptible to dismissal.95 Plaintiff contends,

however, that it has stated a claim for unjust enrichment because of its allegations that

―Defendants, through their breaches of fiduciary duty, self-dealing conduct, and

otherwise inequitable behavior, sold the Services Businesses to RPH for tens of millions

of dollars, then unfairly and unlawfully paid RPH less than it was entitled to‖ and instead

retained the benefit for themselves.96 The Court of Chancery Rules permit alternative

pleading, and Plaintiff‘s unjust enrichment claim conceivably might proceed in tandem

with any well-pled claim for breach of fiduciary duty that it may have. 97 Because, as

discussed infra, Plaintiff has stated claims for breaches of fiduciary duties, and points to

94
       Calma ex rel. Citrix Sys., Inc. v. Templeton, --- A.3d ---, 2015 WL 2265535, at
       *20 (Del. Ch. Apr. 30, 2015) (quotation marks omitted) (quoting Nemec, 991 A.2d
       at 1130)).
95
       Kuroda, 971 A.2d at 891; Wood, 401 A.2d at 942.
96
       Pl.‘s Answering Br. 69.
97
       See, e.g., Calma, 2015 WL 2265535, at *20. The right to plead in the alternative,
       however, ―does not obviate the need to provide factual support for each theory.‖
       Fortis Advisors LLC, 2015 WL 401371, at *5 (internal quotation omitted).

                                            45
the alleged facts underlying those claims as supporting the unjust enrichment claim, 98 I

decline to dismiss the claim for unjust enrichment at this procedural stage.

                           V.       COUNTS II, III, AND V

       In Count II, Plaintiff charges the Control Group Defendants—the Castles, LEC,

Stawiarski, LCS, and the Wilsons—with breaching fiduciary duties owed to RPH and its

Members. Plaintiff also brings claims against all Defendants in Count III for aiding and

abetting the alleged breaches of fiduciary duty. In a related vein, Count V accuses all

Defendants of engaging in a civil conspiracy.

       The Castle Defendants seek dismissal of Counts II, III, and V as they relate to

them, contending that Plaintiff‘s claims are subsumed by the parties‘ express contracts,

and, in any case, the Complaint fails to allege violations of either the duty of care or the

duty of loyalty.99 The Wilson Defendants make essentially the same arguments.100 The

Stawiarski Defendants join in the arguments of the Castle and Wilson Defendants, but

also contend, as with the breach of contract claims, that the Complaint lacks specific

allegations regarding what actions Stawiarski took in violation of any fiduciary duties.101

None of these arguments are persuasive.          Plaintiff has stated claims for breach of

fiduciary duty against each of the Defendants that conceivably might owe such duties to

98
       Pl.‘s Answering Br. 70.
99
       Castle Defs.‘ Opening Br. 8-18.
100
       Wilson Defs.‘ Opening Br. 8-19; AMS Opening Br. 1.
101
       Stawiarski Defs.‘ Opening Br. 18-21.

                                            46
RPH and Plaintiff. Plaintiff also has stated claims for aiding and abetting breaches of

fiduciary duty as to certain other Defendants.

            A.       Plaintiff States Claims for Breach of Fiduciary Duty

                                1.      Legal Standards

       ―In the absence of language in an LLC agreement to the contrary, the managers of

an LLC owe traditional fiduciary duties of care and loyalty.‖102 Because the limitation of

liability contained in Section 5.7 of the RPH LLC Agreement does ―not apply to the

extent the act or omission was attributable to such Person‘s gross negligence, willful

misconduct or knowing violation of law,‖ I conclude that the Agreement does not

diminish the default standards of care and loyalty under Delaware law.103 None of the

Defendants dispute this point. Thus, the relevant inquiry in determining whether Plaintiff

has stated claims for breach of fiduciary duty is whether it is reasonably conceivable

based on the non-conclusory allegations in the Complaint that one or more Defendants

breached the duties of care and loyalty they owed to RPH and its Members.

102
       CSH Theatres, LLC v. Nederlander of San Francisco Assocs., 2015 WL 1839684,
       at *11 (Del. Ch. Apr. 21, 2015); see also Feeley v. NHAOCG, LLC, 62 A.3d 649,
       660 (Del. Ch. 2012); Auriga Capital Corp. v. Gatz Props., 40 A.3d 839, 850 (Del.
       Ch.), aff’d sub nom. Auriga Capital Corp. v. Gatz Props., LLC, 59 A.3d 1206
       (Del. 2012); 6 Del. C. § 18-1104 (―In any case not provided for in this chapter, the
       rules of law and equity, including the rules of law and equity relating to fiduciary
       duties and the law merchant, shall govern.‖).
103
       See In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 64 (Del. 2006) (―[A] lack of
       due care [is] fiduciary action taken solely by reason of gross negligence and
       without any malevolent intent.‖).

                                            47
      2.       Which Defendants Owe Fiduciary Duties to RPH and Plaintiff?

       Before reaching the question of whether the Complaint contains well-pled

allegations of breaches of fiduciary duty, I first must determine which Defendants

conceivably might have owed fiduciary duties to RPH and Plaintiff. Delaware law is

clear that, ―[u]nder traditional principles of equity, a manager of an LLC would qualify as

a fiduciary of that LLC and its members.‖104 This Court has held that an LLC manager

owes fiduciary duties because it has ―more than an arms-length, contractual relationship

with the members of the LLC,‖ and ―is vested with discretionary power to manage the

business of the LLC.‖105     The corollary of that proposition, however, is that while

managers and managing members owe default fiduciary duties, ―passive members do

not,‖ absent a modification of the LLC agreement or facts suggesting that the purportedly

passive member was acting in a managerial capacity. 106

       With those principles in mind, I conclude that, as members of RPH‘s Board of

Managers, Lawrence Castle and Stawiarski owed fiduciary duties to RPH and its

Members. The situation is somewhat less clear, however, as to Caren Castle and the

104
       Auriga Capital Corp., 40 A.3d at 850 (emphasis added).
105
       Id. at 850-51.
106
       Feeley, 62 A.3d at 662 (discussing the analogous provisions of the Delaware
       Revised Uniform Limited Partnership Act, and concluding that, ―For Section 17–
       1101(d) to say that fiduciary duties can be restricted or eliminated ‗[t]o the extent
       that . . . a partner or other person‘ owes fiduciary duties acknowledges these
       situationally specific possibilities and recognizes that epistemological questions
       about the extent to which a partner or other person owes duties will be answered
       by the role being played, the relationship to the entity, and the facts of the case.
       The same is true for the LLC Act.‖)

                                            48
Wilsons. During the relevant time period, Wilson-Harvey was the CEO of RPH, and

Caren Castle was a high level officer of the Company and CEO of the West Region.

Based on those alleged facts, I find it reasonably conceivable that each of those two

Defendants stood in the position of a fiduciary to RPH and its Members. Indeed, none of

the Castles, Stawiarski, or Wilson-Harvey seriously contest that they owed fiduciary

duties in this regard.

       As to Wilson, however, the Wilson Defendants deny that he had a fiduciary

relationship to Plaintiff, because he merely was a member of the Operating Board, not

RPH‘s ―real‖ Board of Managers.107 While there ultimately may be merit to this position,

at the motion to dismiss stage, taking all alleged facts as true and drawing reasonable

inferences in favor of Plaintiff, I conclude that, while he was involved with RPH as a

Member, Wilson conceivably did owe fiduciary duties to RPH and to Plaintiff. Wilson,

along with Wilson-Harvey, was responsible for running the South region operations of

RPH. The level of knowledge and control Wilson allegedly had over RPH‘s business in

that regard supports a reasonable inference that he was ―vested with discretionary power

to manage the business of the LLC.‖108 It also is possible that, after all the evidence is in,

Wilson will be found merely to have had a contractual relationship with RPH or Plaintiff

as an Operating Board member.          Based on the non-conclusory allegations in the

Complaint, however, it is conceivable that Wilson had ―more than an arms-length,

107
       Wilson Defs.‘ Opening Br. 12-13.
108
       Auriga Capital Corp., 40 A.3d at 850.

                                             49
contractual relationship with the members of the LLC,‖ and therefore may be found to

have owed fiduciary duties to them.109

      Plaintiff also attempts to plead claims for breach of fiduciary duty against LEC

and LCS, the only business entities among the Control Group Defendants. As a general

matter, corporations and other business entities can owe fiduciary duties, as most easily

exemplified in the situation where a corporation, LLC, or other entity is the managing

member of an LLC or the general partner of a limited partnership.110 In this case,

however, LEC and LCS are not managing members of RPH. And, unlike the Individual

Defendants, LEC and LCS are not alleged to have occupied a position in which they

exercised control over the business and affairs of the Company, such that they

conceivably could owe fiduciary duties to RPH and its Members on that basis. To state a

cognizable claim for breach of fiduciary duty against LEC and LCS, Plaintiff must do

more than merely including them in a defined category such as Control Group

Defendants. Based on the lack of factual allegations that could support a reasonable

inference that either entity owed fiduciary duties to RPH and its Members, I therefore

find that Count II must be dismissed as to Defendants LEC and LCS.

109
      Id.
110
      E.g., Feeley, 62 A.3d at 663; In re USACafes, L.P. Litig., 600 A.2d 43, 48 (Del.
      Ch. 1991).

                                           50
      3.      Has Plaintiff Stated Claims for Breaches of Fiduciary Duty against the
                                      Defendant Fiduciaries?

           As to the Castles, Stawiarski, and the Wilsons, all of whom conceivably could be

found to have owed fiduciary duties to RPH and its Members, I find that the Complaint

adequately pleads claims for breach of those fiduciary duties. Plaintiff has alleged non-

conclusory facts that support a reasonable inference that each of the Individual

Defendants breached the duty of loyalty and possibly also the duty of care. As to the

Castles and the Wilsons,111 without addressing other alleged wrongdoing that might

implicate their fiduciary duties, I focus on one of the most egregious allegations in the

Complaint: that, beginning in late 2011 and continuing until late 2012, they purposefully

took actions to block RPH from receiving much-needed debt refinancing, facilitated the

Company‘s decline into insolvency, secretly negotiated with its creditors, and then,

through Next Org and AMS, purchased on favorable terms the Services Businesses back

from RPH in receivership.112 At this motion to dismiss stage, I take those allegations as

111
           I note that Wilson died in August 2012, before the alleged plot to drive RPH into
           insolvency and then repurchase its assets came to fruition. It may turn out,
           therefore, that only Wilson-Harvey, and not Wilson, would be liable to Plaintiff
           for breaches of her fiduciary duties in connection with those specific allegations.
           The Complaint alleges, however, that Wilson took part in this process before his
           death in August 2012. Compl. ¶¶ 130-139. At this stage, these allegations
           preclude dismissal of the claims against Wilson in this regard.
112
           Compl. ¶¶ 130-154.

                                               51
true. In that context, it is at least reasonably conceivable that the individuals who devised

and executed that scheme will be liable for breach of the duty of loyalty.113

       It was during the time period in which those alleged breaches took place that

Stawiarski resigned from his position on the RPH Board, ―to avoid having to vote on

these matters.‖114 Stawiarski asserts that the allegations in the Complaint regarding those

breaches focus on the Castles and the Wilsons, and fail to state a claim against him in this

regard.   As with the claims for breach of contract, although Stawiarski might be

vindicated on a more developed record, it would be inappropriate at this stage to

conclude that it is not reasonably conceivable that he, too, might have breached his

fiduciary duties. For example, because he allegedly did not resign and step away from

the Company until January 2012, it is possible that RPH‘s financial collapse was

foreseeable even before then and that Stawiarski disloyally acceded to the Castles‘ and

the Wilsons‘ plan to facilitate its insolvency and repurchase the Services Businesses. If

113
       Defendants‘ contrary arguments on this point range from merely unpersuasive to
       frivolous. The strongest such argument they make is that these claims are
       derivative in nature, and therefore Plaintiff faces several procedural barriers to
       prosecuting this action. I addressed and rejected those contentions supra. Another
       colorable argument is that the fiduciary duty claims actually arise from the parties‘
       relevant agreements, including the RPH LLC Agreement, and therefore must be
       dismissed as duplicative of Plaintiff‘s claims for breach of contract. But, as
       previously discussed, while the fiduciary duty claims may overlap with the breach
       of contract claims in certain respects, the fiduciary duty claims ―depend on
       additional facts as well, are broader in scope, and involve different considerations
       in terms of a potential remedy.‖ Schuss v. Penfield P’rs, L.P., 2008 WL 2433842,
       at *10 (Del. Ch. June 13, 2008). I therefore decline to dismiss the fiduciary duty
       claims as ―superfluous.‖ Wilson Defs.‘ Opening Br. 13. None of the other related
       arguments raised by the Individual Defendants has merit.
114
       Compl. ¶ 132.

                                             52
he were aware of those designs, it conceivably could have been a breach of his fiduciary

duties to have done nothing other than resign from the Board.115 For at least that reason, I

conclude that the claims for breach of fiduciary duty cannot be dismissed as to

Stawiarski.

 B.      Plaintiff States Claims Against Some Defendants for Aiding and Abetting

       Plaintiff charges all Defendants with aiding and abetting the alleged breaches of

fiduciary duty in Count III. To state a claim for aiding and abetting a breach of fiduciary

duty, a plaintiff must allege: (1) the existence of a fiduciary relationship; (2) a breach of

the fiduciary‘s duty; (3) knowing participation in that breach by the defendants; and (4)

damages proximately caused by the breach.116 In this case, Plaintiff has met this pleading

standard as to almost all Defendants.

       As an initial matter, having found that Plaintiff has stated claims for breach of

fiduciary duty against the Castles, Stawiarski, and the Wilsons, I question whether

Plaintiff also can sue those Defendants on an aiding and abetting theory. Delaware cases

dealing with claims for aiding and abetting a breach of fiduciary duty have held that, as a

matter of law, aiding and abetting liability generally cannot attach to defendants who

115
       See, e.g., In re China Agritech, Inc. S’holder Deriv. Litig., 2013 WL 2181514, at
       *24 (Del. Ch. May 21, 2013) (―At a later stage of the case, I will take into account
       [the defendant directors‘] resignations, which could well serve to limit their
       potential liability for events described in the Complaint that post-date their board
       service.‖) (citing In re Puda Coal, Inc. S’holders Litig., C.A. No. 6476-CS, at 15-
       17 (Del. Ch. Feb. 6, 2013) (TRANSCRIPT)).
116
       Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001).

                                             53
themselves owe fiduciary duties to the relevant entity and plaintiff.117 The reason is that

wrongful conduct on the part of the defendant fiduciary simply would give rise to direct

liability for a breach of the duties he owes, rather than secondary liability on the theory of

aiding and abetting.118 Those principles militate in favor of dismissing the aiding and

abetting claims in Count III as to the Defendants who indisputably owed fiduciary duties

to RPH and its Members—namely, Lawrence Castle and Stawiarski, as members of the

Board of Managers, and Wilson-Harvey, as the Company‘s CEO. The existence of a

fiduciary relationship may be less apparent in the cases of Caren Castle and Wilson, but

as discussed supra, it is reasonably conceivable that those two individuals also may be

liable for breach of fiduciary duty.

       Thus, I conclude that Plaintiff‘s aiding and abetting claims against Lawrence

Castle, Stawiarski, and Wilson-Harvey are technically flawed as a matter of law, and

must be dismissed. The same alleged facts as to those Defendants, however, may provide

117
       Id. (―A third party may be liable for aiding and abetting a breach of a corporate
       fiduciary‘s duty to the stockholders if the third party ‗knowingly participates‘ in
       the breach.‖) (emphasis added); see also Weinberger v. Rio Grande Indus., Inc.,
       519 A.2d 116, 131 (Del. Ch. 1986) (aiding and abetting liability ―requires . . . a
       knowing participation in that breach by the defendants who are not fiduciaries.‖);
       Gilbert v. El Paso Co., 490 A.2d 1050, 1057 (Del. Ch. 1984), aff’d, 575 A.2d
       1131 (Del. 1990) (―It is well settled that a third party who knowingly participates
       in the breach of a fiduciary‘s duty becomes liable to the beneficiaries of the trust
       relationship. . . . [Among the necessary elements is] knowing participation in that
       breach by the party not in direct fiduciary relationship.‖); Penn Mart Realty Co. v.
       Becker, 298 A.2d 349, 351 (Del. Ch. 1972).
118
       See, e.g., Higher Educ. Mgmt. Gp., Inc. v. Mathews, 2014 WL 5573325, at *13
       (Del. Ch. Nov. 3, 2014) (citing Gantler v. Stephens, 965 A.2d 695, 708-09 (Del.
       2009)).

                                             54
additional grounds for finding they breached a fiduciary duty owed to Plaintiff. Although

the same ultimately may be true of the aiding and abetting claims against Caren Castle

and Wilson, I nevertheless conclude that it would be premature to dismiss Count III as it

relates to them. The reason is that if they ultimately are found not to have owed fiduciary

duties and Plaintiff‘s fiduciary duty claims fail as to them, they still could be subject to

liability as aiders and abettors.119 Thus, based on the facts discussed previously, it is

reasonably conceivable that those two Defendants knowingly participated in breaches of

fiduciary duty allegedly committed by the other Individual Defendants.

       As for LEC, LCS, Castle Law Group, Next Org, W&A, and AMS, I find it

reasonably conceivable, taking the allegations in the Complaint as true, that each of them

could be liable for aiding and abetting the breaches of fiduciary duty allegedly committed

by the Castles, Stawiarski, and the Wilsons. All of these Defendant entities are alleged to

be owned by or affiliated with the Individual Defendants. Just focusing on the alleged

scheme to push the Company into insolvency and then buy the Services Businesses from

the receiver, it is conceivable that each of those entities knowingly participated in that

scheme. For example, it was through LEC that the Castles allegedly took the challenged

actions vis-à-vis RPH, because they only held RPH units indirectly through LEC. A

reasonable inference arises that LCS served a similar role with respect to Stawiarski. The

law firm Defendants, W&A and Castle Law Group, were the loci of the Services

119
       See Wallace v. Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999) (allowing plaintiff to
       bring aiding and abetting claims as alternative pleading, in case the defendants
       accused of aiding and abetting might later be found not to have owed fiduciary
       duties).

                                            55
Businesses before RPH acquired them. As such, they presumably would have benefitted

from the Individual Defendants‘ re-assertion of control over the Services Businesses

through the alleged manipulation of the Colorado Action. The ―knowing participation‖

of Next Org and AMS is even more patently evident from the face of the Complaint.

Those entities, allegedly affiliated with the Castles and Wilson-Harvey, respectively, are

accused of having served as the Individual Defendants‘ straw buyers in the sale by the

receiver. This Court has found aiding and abetting claims well pled when an entity acts

as ―middleman for and beneficiary of improper disbursements by‖ the allegedly faithless

fiduciaries with which they are affiliated.120 Taking all alleged facts as true and drawing

reasonable inferences in Plaintiff‘s favor, I find that it is reasonably conceivable that each

of LEC, LCS, Castle Law Group, W&A, Next Org, and AMS acted as middlemen for the

Individual Defendants in connection with the disloyal plot they allegedly carried out.

Thus, I deny the motions to dismiss this aspect of Plaintiff‘s aiding and abetting claims.

      C.       Plaintiff States Claims Against Defendants for Civil Conspiracy

       In Count V, Plaintiff brings a claim for civil conspiracy against all Defendants.

―Under Delaware law, to state a claim for civil conspiracy, a plaintiff must plead facts

supporting: (1) the existence of a confederation or combination of two or more persons;

(2) that an unlawful act was done in furtherance of the conspiracy; and (3) that the

120
       Carlton Invs. v. TLC Beatrice Int’l Hldgs., Inc., 1995 WL 694397, at *15 (Del.
       Ch. Nov. 21, 1995).

                                             56
conspirators caused actual damage to the plaintiff.‖121 Defendants join in contending

that, because all of Plaintiff‘s other causes of actions are insufficient, there is no well-

pled allegation of an ―unlawful act,‖ and for that reason the civil conspiracy claims must

be dismissed. As discussed above, Plaintiff adequately has stated claims for breach of

contract, breach of the implied covenant of good faith and fair dealing, breach of

fiduciary duty, and aiding and abetting breaches of fiduciary duty. Thus, Defendants‘

principal argument provides no basis for dismissal of the civil conspiracy claim.

       The Castle Defendants additionally argue that Plaintiff‘s allegations as to the

―meeting of the minds‖ element are fatally non-specific. ―Even to prevail at trial,‖

however, a plaintiff does ―not need to prove the existence of an explicit agreement; a

conspiracy can be inferred from the pled behavior of the alleged conspirators. And to

survive a motion to dismiss, all that is needed is a reasonable inference that [the

defendant in question] was part of this conspiracy.‖122 I find that the Complaint alleges

that the Castle Defendants were part of the alleged conspiracy. Thus, their argument in

this regard is unavailing. It is reasonably inferable from the non-conclusory facts alleged

in the Complaint that Defendants formed a ―confederation,‖ conducted unlawful acts in

121
       Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1036 (Del. Ch.
       2006).
122
       In re Am. Int’l Gp., Inc., 965 A.2d 763, 806 (Del. Ch. 2009) (citing Empire Fin.
       Servs., Inc. v. Bank of N.Y. (Del.), 900 A.2d 92, 97 (Del. 2006) (―To prove a
       conspiracy, however, it is not necessary that there be an express agreement. What
       is necessary is evidence of a combination between two or more persons, followed
       by an unlawful act carried out in furtherance of such combination, and
       damages.‖)), aff’d sub nom. Teachers’ Ret. Sys. of La. v. PricewaterhouseCoopers
       LLP, 11 A.3d 228 (Del. 2011).

                                            57
furtherance of the conspiracy, and caused actual damages to Plaintiff. Count V for civil
                                                            123
conspiracy, therefore, is well-pled as to all Defendants.

                                  VI.      COUNT VII

       Plaintiff‘s final Count charges all Defendants with fraudulent transfer under the

Delaware Uniform Fraudulent Transfers Act (―DUFTA‖).124 As support for this claim,

Plaintiff points to the alleged underpayment of fees to RPH and the allegedly wrongful

receivership sales of the Services Businesses.125 Plaintiff contends that those transfers

actually were, or reasonably appear to have been, made purposefully to hinder Plaintiff‘s

interest as a holder of RPH equity and debt, for less than reasonably equivalent value,

123
       I emphasize that the arguments actually advanced by Defendants do not support
       dismissal of Plaintiff‘s civil conspiracy claim. In reaching this conclusion,
       however, I recognize that there may be other grounds to challenge that claim. For
       example, the preceding section explained that Delaware law generally does not
       permit a claim against a fiduciary for aiding and abetting a breach of fiduciary
       duties, because liability in such a situation would be primary (i.e., an actual breach
       of fiduciary duty), not secondary (i.e., aiding and abetting such a breach).
       Conspiracy and aiding and abetting are both secondary bases of liability and, in
       several ways, are related concepts. See, e.g., Carlton Invs., 1995 WL 694397, at
       *15. Because Defendants did not adequately present the issue, I do not address
       whether Delaware law might recognize a claim of conspiracy among fiduciaries to
       breach fiduciary duties, a situation arguably implicated here. That this alleged
       conspiracy potentially includes both fiduciaries and non-fiduciaries only adds
       further nuance not addressed by Defendants. Similarly, issues exist regarding
       whether a breach of contract can form the basis of a civil conspiracy claim.
       NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009) (―A breach of
       contract is not an underlying wrong that can give rise to a civil conspiracy
       claim.‖). See discussion in text and note 73, supra.
124
       6 Del. C. §§ 1301-1312.
125
       Pl.‘s Answering Br. 70; Compl. ¶¶ 229-240.

                                             58
while RPH was in financial distress. Thus, Plaintiff asserts that it has stated claims for

actual and constructive fraud under 6 Del. C. §§ 1304-1305.

         Defendants‘ several arguments in favor of dismissing Plaintiff‘s claims for

fraudulent transfer are without merit. First, the Wilson Defendants argue that this claim

improperly is asserted against Defendants instead of the debtor, RPH. Second, the Castle

Defendants contend that the time period for bringing claims under DUFTA has lapsed.

Both of those arguments, however, ignore the plain text of the statute. That language

allows judgments to be entered against transferees,126 which Defendants are alleged to be,

and deems claims timely if they are brought within one year of discovery or four years of

the date of the wrongful transfer, whichever is later.127 Here, the claims for fraudulent

transfer were brought in March 2014. The Complaint accuses Defendants of engaging in

a number of wrongful transfers leading up to and including the alleged scheme to push

RPH into insolvency, which occurred less than four years earlier (i.e., in or after March

2010).

         Defendants also assert that to the extent the wrongful transfer was the transfer of

―services‖ by RPH, those services cannot qualify as ―property‖ that would be subject to

DUFTA. That argument erroneously narrows the scope of Plaintiff‘s allegations. The

statute prohibits fraudulent ―transfers,‖ defined to mean every mode of ―disposing of or

126
         6 Del. C. § 1308(b)(1)-(2); id. § 1307(a)(2).
127
         6 Del. C. § 1309(1).

                                              59
parting with an asset or an interest in an asset.‖128 An ―asset‖ is broadly defined to be

―property of the debtor,‖ which in turn is broadly defined as ―anything that may be the

subject of ownership.‖129 Plaintiff persuasively argues that to the extent RPH rendered

services for which Defendants improperly failed to remunerate it, those services gave rise

to contractual rights to receive payment, which are ―traditional property right[s].‖130 As a

separate basis for this conclusion, I note that Plaintiff‘s fraudulent transfer claims are not

predicated solely on the allegedly wrongful transfers relating to the payment of fees for

services during RPH‘s operational life time. The claims also relate to the alleged scheme

by which certain Defendants manipulated the insolvency and foreclosure of RPH to

facilitate their re-purchase of the Services Businesses—which clearly are ―assets‖—on

the cheap. Defendants put forth no cogent argument as to why, assuming the truth of

those allegations, they do not give rise to a legally sufficient claim for fraudulent transfer.

       Finally, Defendants contend that because some or all of the allegedly fraudulent

transfers also might give rise to a claim for breach of the relevant agreements between the

parties, the fraudulent transfer claims are subsumed by Plaintiff‘s contract claims.

Defendants did not develop this argument well in their briefing and it does not provide

the Court with sufficient grounds for dismissing Count VII. This is especially true in

128
       Id. § 1301(12).
129
       Id. § 1301(2), (10).
130
       Abdul-Akbar v. Corr. Med. Sys., Inc., 1991 WL 50151, at *4 (Del. Ch. Mar. 22,
       1991) (noting that, in the context of a due process analysis, the test for deprivation
       of a protected interest ―is easily met when traditional property rights are involved
       (an interest in land for example, a debt or a contract right).‖).

                                              60
light of DUFTA‘s express statement that, ―Unless displaced by the provisions of this

chapter, the principles of law and equity . . . supplement its provisions.‖131 I cannot

conclude, therefore, at this procedural stage that it is inconceivable Plaintiff would be

able to recover against Defendants under the fraudulent transfer statute.

                               VII.     CONCLUSION

       For the foregoing reasons, Counts I and IV are dismissed as they relate to

Defendant Caren Castle. Count II is dismissed as it relates to Defendants LEC and LCS.

Count III is dismissed as to Defendants Lawrence Castle, Stawiarski, and Wilson-Harvey.

In all other respects, Defendants‘ Motions are denied.

       IT IS SO ORDERED.

131
       6 Del. C. § 1310.

                                            61