Court Opinion

ID: 4420533
Source: CourtListenerOpinion
Date Created: 2019-07-26 15:04:26.719769+00
Date Added: 2024-06-11T14:23:49.445715
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

WINDY CITY INVESTMENTS                    )
HOLDINGS, LLC,                            )
                                          )
            Plaintiff,                    )
                                          )
      v.                                  )    C.A. No. 2018-0419-MTZ
                                          )
TEACHERS INSURANCE AND                    )
ANNUITY ASSOCIATION OF                    )
AMERICA f/k/a TEACHERS                    )
INSURANCE AND ANNUITY                     )
ASSOCIATION-COLLEGE                       )
RETIREMENT EQUITIES FUND,                 )
                                          )
            Defendant.                    )

                           MEMORANDUM OPINION

                         Date Submitted: February 13, 2019
                           Date Decided: May 31, 2019
                            Date Revised: July 26, 2019

David E. Ross and Eric D. Selden, ROSS, ARONSTAM & MORITZ LLP,
Wilmington, Delaware; K. Winn Allen, Kasdin M. Mitchell, Holly R. Trogdon,
Rebecca W. Forrestal, KIRKLAND & ELLIS LLP, Washington, D.C.;
Attorneys for Plaintiff

Michael A. Pittenger, Jennifer C. Wasson, Tyler J. Leavengood, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; Mary Eaton, Zeh Ekono,
Le-Ahn Bui, WILKIE FARR & GALLAGHER LLP, New York, New York;
Attorneys for Defendant

ZURN, Vice Chancellor
      The parties to this case dispute the meaning of a complex earn-out provision.

The plaintiff and defendant, both in the financial services industry, agreed that the

defendant would buy one of the plaintiff’s independent mutual fund and advisory

firms. That firm held approximately $221 billion under management at the time.

The parties settled on an initial payment of $6.25 billion, along with an earn-out of

up to $278 million payable to the plaintiff.

      The parties now dispute the earn-out amount due to the plaintiff. They have

not come to this Court for a final ruling on the amount itself. The purchase

agreement subjects that decision to an impartial referee process. Instead, they clash

on how to read the contractual variables in the earn-out calculation. The plaintiff

brought this case to obtain a declaratory judgment and specific performance on

contractual terms to guide the referee’s process, as well as specific performance on

a contractual books and records dispute.

      The defendant moved to dismiss, claiming that it offers the only reasonable

understanding of the earn-out and records provisions, and that the plaintiff failed to

state its claims. I disagree with the defendant and deny the motion to dismiss. The

earn-out provision is susceptible to more than one interpretation at this early stage.

In addition, I find that the plaintiff has adequately pled its other claims.
I.       BACKGROUND
         I draw the relevant facts from the allegations in, and those documents

incorporated by reference into, the Verified Complaint (the “Complaint”).1 At the

motion to dismiss stage, I presume well-pled allegations to be true.

         A.       The Parties Agree To A Purchase Agreement With An Earn-Out
                  Structure.
         Plaintiff Windy City Investments Holdings, LLC (“Windy City”) is a

Delaware limited liability company. Prior to April 2014, Windy City owned Nuveen

Investments, Inc. (“Nuveen”), an independent mutual fund and advisory firm with

approximately $221 billion under management at the time. “Nuveen’s core business

included managing, marketing, and distributing investment funds on behalf of

individual and institutional clients.”2       Defendant Teachers Insurance Annuity

Association of America (“TIAA”) is a New York financial services organization that

sells and markets financial products.

         In late 2013, the parties began negotiating a sale of Nuveen to TIAA. The

negotiations culminated in a term sheet on February 10, 2014, and a purchase

1
  Docket Item (“D.I.”) 1. I refer to briefing on the Motion to Dismiss as the Opening Brief,
the Answering Brief, and the Reply Brief. See D.I. 11-12, 21, 29. I refer to the transcript
of the February 13, 2019 hearing on the Motion to Dismiss as the Hearing Transcript. See
D.I. 38.
2
    Compl. ¶ 2.

                                             2
agreement on April 13, 2014 (the “Purchase Agreement”).3 In addition to an initial

payment of $6.25 billion, the parties agreed to an earn-out plan (the “Earn-Out”).

Under that plan, Windy City could receive an additional cash payout based on

Nuveen’s profitability.

         The Earn-Out period ran to January 31, 2018.4 The Earn-Out amount is based

on performance benchmarks derived from two variables: cumulative advisory

revenues (“Advisory Revenues”) and cumulative net flows (“Net Flows”). Section

1.8(b) of the Purchase Agreement defines those terms, respectively, as:

3
 Windy City includes allegations of the drafting history behind the Purchase Agreement,
but, at this stage, I decline to consider that history. See id. ¶¶ 29-37.
4
    Purchase Agreement § 1.8.

                                          3
      “Cumulative Advisory Revenue” means the cumulative advisory
      revenues of the Subject Companies, from and including January 1, 2015
      through and including December 31, 2017, derived from all assets
      managed or distributed by the Subject Companies,5 provided that
      “Cumulative Advisory Revenue” shall (i) include only 50% of the
      cumulative advisory revenues of the Subject Companies derived from
      assets that are advised by TIAA-CREF6 or products that are distributed
      through TIAA-CREF captive channels (except as otherwise provided
      in Section 1.8(c)) and (ii) exclude all cumulative advisory revenues of
      the Subject Companies derived from general account assets of TIAA-
      CREF.

      ....

      “Cumulative Net Flows” means the amount, if any, of the excess of all
      Additions to assets under management by the Subject Companies over
      Withdrawals from assets under management by the Subject Companies
      (excluding (a) in each case any increase or decrease in assets under
      management resulting from market appreciation or depreciation, and
      (b) dividends and distributions (as Withdrawals), but including
      reinvestments of dividends and distributions (as Additions)), from and
      including January 1, 2015 through and including December 31, 2017,
      provided that “Cumulative Net Flows” shall (i) include only 50% of
      assets added or withdrawn that are third-party assets advised by TIAA-
      CREF or third-party products distributed through TIAA-CREF captive
      channels and (ii) exclude all assets added or withdrawn that are general
      account assets of TIAA-CREF.

5
 Although this decision refers to a purchase of Nuveen, Windy City technically sold TIAA
another entity, Windy City Investments, Inc., which in turn owned Nuveen. The Purchase
Agreement refers often to the “Subject Companies,” which it defined as Windy City
Investments, Inc., its subsidiaries, and its successors or assigns. See Purchase Agreement
138. The parties agree that the “Subject Companies,” for purposes of this action, means
Nuveen. See Compl. ¶ 8 n.8; Opening Br. 6 n.5.
6
  “TIAA-CREF” refers to Teachers Insurance and Annuity Association - College
Retirement Equities Fund. See Purchase Agreement 139. Windy City alleges that TIAA,
the buyer in the Purchase Agreement, was formerly known as Teachers Insurance and
Annuity Association – College Retirement Equities Fund. See Compl. 1; Answering Br.
1. The parties do not assert any meaningful distinction between TIAA-CREF and TIAA.

                                            4
          The Earn-Out amount is calculated based on Nuveen’s Advisory Revenues

and Net Flows relative to floor and cap performance targets.            For Advisory

Revenues, the floor target was $3.15 billion and the cap target was $3.375 billion.7

For Net Flows, the floor target was $10 billion and the cap target was $22 billion.8

Windy City would receive a contribution under the Earn-Out if Nuveen’s Advisory

Revenues or Net Flows met the corresponding floor target. The amount of that

contribution increased until Nuveen hit the corresponding cap target.

          The Purchase Agreement calculated the Earn-Out contributions using

formulas established in Section 1.8(b)’s definitions for the “Cumulative Advisory

Revenue Payment Amount” and “Cumulative Net Flows Payment Amount.” Under

those definitions, if Nuveen met or cleared the unadjusted floor targets for each

variable, Windy City was due (i) at least $20 million, and up to $125.1 million, for

the Advisory Revenues Payment Amount, and (ii) at least $25 million, and up to

$152.9 million, for the Net Flows Payment Amount.9 The maximum Earn-Out

payment equaled a total of $278 million.

          The Purchase Agreement also defines a number of levers to raise or lower the

Earn-Out amount. The floor and cap targets could be adjusted “[i]n the event of

7
    Purchase Agreement § 1.8(b).
8
    Id.
9
    Compl. ¶¶ 46, 51.

                                            5
acquisitions or divestitures” from non-TIAA affiliated parties.10 Section 1.8(c)(iii)

explains that if Nuveen acquired or divested investment advisory businesses or

assets from or to a party not affiliated with TIAA, the targets should “be adjusted

upward (in the case of an acquisition) or downward (in the case of a divestiture).”11

And if TIAA sold, transferred, or disposed of all or substantially all of the businesses

or assets of Nuveen, Windy City would receive the maximum Earn-Out payment.12

           On the other hand, the Purchase Agreement did not alter the Earn-Out

calculation based on acquisitions or divestitures between Nuveen and TIAA’s

affiliates or successors. The targets did not adjust if Nuveen acquired investments,

advisory businesses, or assets from a TIAA affiliate or successor that did not count

towards the Earn-Out amount prior to the acquisition.13 Nor would those acquired

businesses and assets begin counting towards the Earn-Out amount through either

Advisory Revenues or Net Flows. Similarly, if Nuveen divested investments,

advisory businesses, or assets to a TIAA affiliate or successor that counted towards

the Earn-Out amount prior to the divestiture, they continued to count towards

10
     Purchase Agreement § 1.8(c)(iii).
11
     Id.
12
     Id. § 1.8(d).
13
     Id. § 1.8(c)(i).

                                           6
Advisory Revenues and Net Flows, and the floor and cap targets remained the

same.14

          With that framework in place, the parties also agreed to protections against

intents to smother the Earn-Out. Section 1.8(f) prohibited TIAA from taking, or

causing the Subject Companies to take, “any action the intent of which is to reduce

the Earn-Out Amount.”

          Section 1.8(h) lays out the structure for TIAA to provide Windy City with a

written statement “setting forth in reasonable detail its good faith calculation of the

Earn-Out Amount, including the calculation of Cumulative Net Flows Payment

Amount and Cumulative Advisory Revenue Payment Amount” (the “Preliminary

Earn-Out Statement”).        Windy City could dispute the Preliminary Earn-Out

Statement within sixty days of receipt by “setting forth, in reasonable detail, the basis

for such dispute.”        The Purchase Agreement also provided some rights of

cooperation between the parties and Windy City’s review of TIAA’s records:

14
     Id. § 1.8(c)(ii).

                                            7
         Seller and Buyer shall assist and cooperate with the other in all
         commercially reasonable respects in Seller’s review of, and the
         resolution of any dispute with respect to, the Preliminary Earn-Out
         Statement and the calculations of the Earn-Out Amount, Cumulative
         Net Flows Payment Amount and Cumulative Advisory Revenue
         Payment Amount, including by providing the other party and its
         accountants and advisors with reasonable access to relevant personnel
         (including its accountants), work papers and books and records related
         to the Subject Companies that are in its possession or under its control.
         Seller and Buyer shall use their commercially reasonable efforts to
         cause their accountants and advisors to reasonably cooperate with and
         respond to the other party’s reasonable inquiries.

         If, following a dispute, the parties could not agree on the Earn-Out Amount,

Section 1.8(h) called for them to submit the issues to a referee (the “Referee”) for

final resolution.15 However, the Referee “shall be bound by the provisions of []

Section 1.8,” which the parties agree means, at least in this instance, that the Referee

may not determine the meaning of disputed contract terms. To interpret those terms,

the parties would have to seek judicial review first, and then take the Court’s

interpretations to the Referee for use in determining “disputed items” or

“calculations” under the Purchase Agreement.16

15
     The Purchase Agreement designates Houlihan Lokey as the Referee. See id. § 1.6(b)(ii).
16
     See id. §§ 10.15, 10.16 (agreeing to Delaware choices of law and forum).

                                              8
          B.     TIAA Provides, And Windy City Disputes, The Preliminary Earn-
                 Out Statement.
          The sale closed in October 2014. Following that, TIAA began marketing its

funds through Nuveen’s brand and distribution networks. Nuveen started offering

not only funds it advised, but also TIAA-advised funds. Through Nuveen’s sales

force and distribution, TIAA was able to generate “substantial advisory revenues

and net flows.”17

          In January 2018, TIAA delivered its Preliminary Earn-Out Statement to

Windy City. TIAA’s calculations put Advisory Revenues at $3.141 billion and Net

Flows at approximately $17.915 billion.18 The Preliminary Earn-Out Statement

included nearly 100 pages of data supporting the calculation.19 TIAA contends its

data shows that the Earn-Out was based on 100% credit for Nuveen’s advisory

revenues and net flows generated from providing investment advisory services, 50%

credit for revenues and flows on which TIAA or Nuveen served as sub-advisor to

the other, and 50% credit for revenues and flows that were advised by Nuveen and

distributed through TIAA’s captive channel.20

17
     Compl. ¶ 62.
18
     Id. ¶ 63.
19
     Compl. Ex. 3.
20
     Opening Br. 18-19.

                                          9
           A month later, TIAA made an unprompted revision based on an error it found,

increasing Net Flows to $18.189 billion, but decreasing Advisory Revenues to

approximately $3.140 billion. Both the original and revised Statements pegged

Advisory Revenues under its floor target of $3.15 billion, and Net Flows over its

floor target of $10 billion. Based on the revised Statement, TIAA set the Earn-Out

amount due to Windy City at approximately $112.283 million, well below the

maximum potential payout of $278 million.21 TIAA paid Windy City on January 31

and February 27, 2018.

           Windy City exercised its contractual rights to review the books and records

underlying TIAA’s Earn-Out calculations. The Complaint acknowledges that TIAA

provided Windy City with a series of documents and a one-hour conference call with

TIAA personnel. But it also alleges that TIAA failed to provide:

                  Documents relating to “the responsibilities of TIAA’s Joint Sales
                   Force;”22

                  Documents relating to “the extent to which Nuveen employees
                   distributed TIAA Products;”23

21
     Compl. ¶ 65.
22
     Id. ¶ 68.
23
     Id.

                                            10
                  Documents relating to “how Nuveen employees were compensated for
                   such sales (for example, through Nuveen’s Long Term Performance
                   Program or otherwise);”24

                  Documents relating to “how Nuveen employees’ sales activity for
                   TIAA Products was tracked by TIAA for accounting purposes;”25

                  “[A]n organizational chart for Nuveen Finance, LLC;”26

                  “[T]he amount of total advisory revenues and net flows derived from
                   Nuveen’s management or distribution of TIAA Products during the
                   relevant three-year period;”27 and

                  “[T]he underlying documents relating to valuation analyses performed
                   by TIAA’s outside accounting firm, Ernst & Young (“EY”), including
                   a February 22, 2017 analysis in which EY projected that the cap and
                   floor targets for both Cumulative Advisory Revenue and Cumulative
                   Net Flows would have to be adjusted downward under the terms of the
                   Purchase Agreement.”28

           On March 22, 2018, Windy City disputed the Preliminary Earn-Out

Statement. On June 7, 2018, it filed suit in this Court. The primary dispute concerns

how to treat TIAA financial products that Nuveen distributed, but did not advise.

Windy City seeks a declaratory judgment to settle those rights (Count I), and two

counts of specific performance ordering TIAA to comply with Windy City’s

interpretation of the Purchase Agreement (Counts II and III). The Complaint also

24
     Id.
25
     Id.
26
     Id. ¶ 69.
27
     Id.
28
     Id.

                                             11
alleges TIAA used four specific corporate arrangements to divert money from the

Earn-Out in a manner that intentionally depressed the Earn-Out under Section 1.8(f),

and seeks an equitable adjustment to the Earn-Out amount in light of those acts

(Count IV). Finally, Windy City seeks an order compelling access to TIAA

personnel, books, and other records under Section 1.8(h) (Count V).

      TIAA moved to dismiss on August 13, 2018 (the “Motion”). The parties

completed briefing on October 18. I heard argument on February 13, 2019 (the

“Hearing”).

II.   ANALYSIS
      TIAA moved to dismiss under Court of Chancery Rules 12(b)(1) and 12(b)(6).

Rule 12(b)(1) tests the Court’s subject matter jurisdiction. “Plaintiff[] bear[s] the

burden of establishing subject matter jurisdiction.”29 “There is a strong public policy

in favor of arbitration in Delaware; thus, a motion to dismiss for lack of subject

matter jurisdiction will be granted if the ‘dispute is one that, on its face, falls within

the arbitration clause of the contract.’”30 Rule 12(b)(6) tests whether plaintiffs have

stated a claim. “The standards governing a motion to dismiss for failure to state a

claim are well settled: (i) all well-pleaded factual allegations are accepted as true;

29
  HBMA Hldgs., LLC v. LSF9 Stardust Hldgs. LLC, 2017 WL 6209594, at *3 (Del. Ch.
Dec. 8, 2017).
30
  Id. at *3 (quoting SBC Interactive, Inc. v. Corp. Media Partners, 714 A.2d 758, 761 (Del.
1998)).

                                            12
(ii) even vague allegations are ‘well-pleaded’ if they give the opposing party notice

of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-

moving party; and [(iv)] dismissal is inappropriate unless the ‘plaintiff would not be

entitled to recover under any reasonably conceivable set of circumstances

susceptible of proof.’”31

      A.     Count I Is Not Dismissed Because The Definitions Of Advisory
             Revenues And Net Flows Are Ambiguous.
      The parties dispute the interpretations of Advisory Revenues and, less

vigorously, Net Flows. The core disagreement is whether revenues or flows advised

or managed solely by TIAA, but distributed through Nuveen, generate credit in the

Earn-Out calculations.32 Windy City believes it gets 50% credit for all such gains,

while TIAA believes that Windy City only receives credit where Nuveen advised on

the financial products.

31
  Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (quoting Kofron v. Amoco
Chemicals Corp., 441 A.2d 226, 227 (Del. 1982)).
32
   See Compl. 57 (seeking in prayer for relief declaratory judgment that “under Section
1.8(b) of the Purchase Agreement, in calculating Cumulative Advisory Revenue [and Net
Flows], TIAA must include 50% of the advisory revenues [and net flows] derived from
Nuveen’s distribution of TIAA Products”); see also id. ¶ 108 (“Windy City is entitled to a
judgment declaring that TIAA must include in its calculation of the Earn-Out Amount (1)
50% of cumulative advisory revenues derived from Nuveen’s distribution of TIAA
Products; and (2) 50% of cumulative net flows derived from Nuveen’s distribution of TIAA
Products.”).

                                           13
         “To determine what contractual parties intended, Delaware courts start with

the text.”33 “[A] court interpreting any contractual provision . . . must give effect to

all terms of the instrument, must read the instrument as a whole, and, if possible,

reconcile all the provisions of the instrument.”34 “When the contract is clear and

unambiguous,” Delaware courts “will give effect to the [plain meaning] of the

contract’s terms and provisions.”35 But when the Court “may reasonably ascribe

multiple and different interpretations to a contract, [it] will find that the contract is

ambiguous.”36 “To be ambiguous, a disputed contract term must be fairly or

reasonably susceptible to more than one meaning.”37 “The court may grant a motion

to dismiss based on contractual language, however, only if the contractual language

is unambiguous—meaning, the language is susceptible of only one reasonable

interpretation.”38

         To prevail on its Motion, TIAA must demonstrate that its interpretations of

Advisory Revenues and Net Flows are the only reasonable readings. I find that

33
   Sunline Commercial Carriers, Inc. v. CITGO Petroleum Corp., 2019 WL 1068183,
at *8 (Del. Mar. 7, 2019).
34
  Alta Berkeley VI C.V., 41 A.3d at 385 (quoting Elliott Assocs., L.P. v. Avatex Corp., 715
A.2d 843, 854 (Del. 1998)).
35
     Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159-60 (Del. 2010).
36
     Id. at 1160.
37
     Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).
38
  Fortis Advisors LLC v. Stora Enso AB, 2018 WL 3814929, at *3 (Del. Ch. Aug. 10,
2018).

                                             14
TIAA has failed to meet that burden. But Windy City’s interpretations are likewise

not the only reasonable readings. Each party’s constructions leave something to be

desired and would require the Court to minimize deliberately placed language or, in

some cases, import extra-contractual concepts to reconcile that language.

               1.     Advisory Revenues
         As the parties’ dispute requires a granular reading of the definition of

Advisory Revenues, I restate it here for reference:

         “Cumulative Advisory Revenue” means the cumulative advisory
         revenues of the Subject Companies, from and including January 1,
         2015 through and including December 31, 2017, derived from all assets
         managed or distributed by the Subject Companies, provided that
         “Cumulative Advisory Revenue” shall (i) include only 50% of the
         cumulative advisory revenues of the Subject Companies derived from
         assets that are advised by TIAA-CREF or products that are distributed
         through TIAA-CREF captive channels (except as otherwise provided
         in Section 1.8(c)) and (ii) exclude all cumulative advisory revenues of
         the Subject Companies derived from general account assets of TIAA-
         CREF.39

         TIAA believes that the parties intended to give Windy City credit only where

Nuveen helped advise or manage, and not where Nuveen merely distributed TIAA-

advised or TIAA-managed financial products. In shorthand form, TIAA reads the

disputed portions of Advisory Revenues to provide Earn-Out credit for:

39
     Purchase Agreement § 1.8(b) (emphases added).

                                           15
        1.      100% of revenues from products that are advised by Nuveen; except
                only
        2.      50% of revenues from products that are:
                (a) jointly advised by Nuveen and TIAA; or
                (b) advised by Nuveen and distributed by TIAA.

This framework relies on the opening words of the definition: that Advisory

Revenues “means the cumulative advisory revenues of the Subject Companies.”

TIAA reads these words to limit Advisory Revenues to revenues derived from the

Subject Companies’ advisory work, not mere distribution.40                  Under this

interpretation, products solely advised by TIAA cannot generate “advisory revenues

of the Subject Companies.” Accordingly, TIAA construes “assets that are advised

by [TIAA],” which generate 50% Earn-Out credit, to refer to the industry practice

of sub-advising arrangements, or joint advising by primary and secondary advisors,

between TIAA and Nuveen.41

        TIAA’s insistence that earning Advisory Revenues requires Nuveen to advise

or sub-advise carries through to its interpretation of Earn-Out credit from Nuveen’s

distribution.    The definition of Advisory Revenues provides 100% credit for

revenues “derived from all assets managed or distributed by the Subject

40
  Opening Br. 27-28; see also Reply Br. 6 (“One does not earn ‘advisory revenues’ through
the distribution of investment products.”).
41
     Opening Br. 28.

                                           16
Companies.”42 TIAA relies on securities law sources43 to interpret this language as

referring to “wrap fee” financial products that include both advisory and distribution

activities.44 It also argues that the parties must have intended Advisory Revenues to

only count services where Nuveen at least partly advised, because, otherwise, the

addition of even 50% credit for products advised solely by TIAA would render the

floor and cap targets for both Advisory Revenues and Net Flows too low to serve as

Earn-Out benchmarks.45          In other words, TIAA claims that the Purchase

Agreement’s default floor and cap targets must be based on Nuveen advisory

services, not TIAA services distributed through Nuveen. Finally, TIAA contends its

interpretation avoids an unintuitive result of giving Windy City 100% credit where

Nuveen solely distributes a financial product advised by a third party, but only 50%

credit where Nuveen distributes the same product advised by TIAA.46

42
     Purchase Agreement § 1.8(b) (emphasis added).
43
     Opening Br. 31-32.
44
   TIAA asserts that any other reading would render the phrase “investment advisory
revenues” meaningless. See id. at 31-32. “Investment advisory revenues” does not appear
in the definition of Advisory Revenues, or anywhere else in TIAA’s brief, and TIAA does
not indicate where it comes from. I assume that TIAA instead meant the phrase
“cumulative advisory revenues of the Subject Companies” from the Advisory Revenues
definition.
45
     Id. at 34; Hearing Tr. 12:7-20. TIAA applies this same argument to Net Flows.
46
  Hearing Tr. 70:3-12; accord Osborn, 991 A.2d at 1160 (“An unreasonable interpretation
produces an absurd result or one that no reasonable person would have accepted when
entering the contract.”).

                                             17
         For its part, Windy City reads the definition of Advisory Revenues to

“include[] not only the assets that Nuveen itself managed, but also those assets that

Nuveen had no role in managing but nonetheless ‘distributed’ through its extensive

salesforce.”47 Windy City points to the language that Advisory Revenues are

“derived from all assets managed or distributed by the Subject Companies” and to

the 50% credit given for Advisory Revenues “derived from assets that are advised

by TIAA-CREF or products that are distributed through TIAA-CREF captive

channels.”48 According to Windy City, these two phrases are rendered meaningless

if the prefatory phrase of “cumulative advisory revenues of the Subject Companies”

limits the definition to revenues from Nuveen’s own advising. Put another way,

Windy City argues Advisory Revenues cannot be limited to revenues Nuveen

generated by advising because they must be able to be “derived from all assets . . .

distributed” by Nuveen and “derived from assets that are advised by [TIAA].”

Finally, Windy City derides TIAA’s construction of the “derived from” phrases

based on “sub-advisement” and “wrap fee” concepts, as improperly modifying

Section 1.8(b) and reading out the plain language.49

47
     Answering Br. 13-14.
48
     Purchase Agreement § 1.8(b) (emphases added).
49
   Answering Br. 16-20. Moreover, other areas of the Purchase Agreement refer to sub-
advising arrangements, and so its absence in Section 1.8(b) weighs against TIAA’s attempt
to import the concept into the text. See, e.g., Purchase Agreement §§ 1.8(c)(ii), 1.8(c)(iv),
2.18(e); 2.19(a)(v); Purchase Agreement 138.

                                             18
          The parties’ dispute hinges on the interpretation of “cumulative advisory

revenues of the Subject Companies,” which appears twice in the relevant portions of

the definition. TIAA reads that term strictly to include only revenues earned by the

Subject Companies from their advising. This is intuitive for that particular phrase,

but requires a strained reading of nearly everything else in the definition. For

instance, TIAA’s construction demands extrinsic evidence and divergence from the

plain meaning to read language giving Earn-Out credit for Nuveen’s distributions as

actually referring to a niche class of “wrap fee” products. It also inserts the concept

of sub-advising into the definition’s reference to assets advised by TIAA. That is

problematic because the Purchase Agreement uses that same term elsewhere,50

which suggests the parties chose not to use it in Section 1.8(b).

          Windy City’s construction, on the other hand, brings more intuitive readings

of the phrases “derived from all assets managed or distributed by the Subject

Companies” and “derived from assets that are advised by TIAA-CREF or products

that are distributed through TIAA-CREF captive channels.” But Windy City

stretches the “cumulative advisory revenues of the Subject Companies” language to

mean something more like revenues that involve advising and some participation

50
     See, e.g., id. §§ 1.8(c)(ii), 1.8(c)(iv), 2.18(e); 2.19(a)(v); id. at 138.

                                                  19
from the Subject Companies.           Neither reading is perfect, and neither reading

provides the “only reasonable” way to understand Section 1.8(b).51

                 2.    Net Flows
           The parties’ disagreements on Net Flows are similar to those on Advisory

Revenues. For reference, the definition of Net Flows reads:

           “Cumulative Net Flows” means the amount, if any, of the excess of all
           Additions to assets under management by the Subject Companies over
           Withdrawals from assets under management by the Subject
           Companies (excluding (a) in each case any increase or decrease in
           assets under management resulting from market appreciation or
           depreciation, and (b) dividends and distributions (as Withdrawals), but
           including reinvestments of dividends and distributions (as Additions)),
           from and including January 1, 2015 through and including December
           31, 2017, provided that “Cumulative Net Flows” shall (i) include only
           50% of assets added or withdrawn that are third-party assets advised
           by TIAA-CREF or third-party products distributed through TIAA-
           CREF captive channels and (ii) exclude all assets added or withdrawn
           that are general account assets of TIAA-CREF.52

           Net Flows’ definition is built on “assets under management by the Subject

Companies.”53 From that language, TIAA asserts Section 1.8(b) makes “plain that

it is net flows generated by Nuveen’s success in retaining and attracting assets under

its management that matters.”54 Because Net Flows’ definition does not explicitly

51
  Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine Partners 2006, L.P., 93 A.3d
1203, 1205 (Del. 2014) (quoting Vanderbilt Income & Growth Assocs., L.L.C. v.
Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996)).
52
     Id. § 1.8(b) (emphases added).
53
     Id.
54
     Opening Br. 28-29.

                                             20
reference distribution by Nuveen, TIAA also argues that Windy City cannot seek

credit for distribution via its Advisory Revenues arguments.

         In response, Windy City points to romanette (i) in the Net Flows definition,

which provides Earn-Out credit for “only 50% of assets added or withdrawn that are

third-party assets advised by TIAA-CREF or third-party products distributed

through TIAA-CREF captive channels.” Windy City reads this phrase to provide

credit for products that are advised by TIAA, but distributed by Nuveen.55

         TIAA’s interpretation, that the Earn-Out should get credit only for flows

Nuveen managed or partly managed, matches well with the opening lines of the

definition. But it clashes with romanette (i), which requires that the Earn-Out

include 50% credit for third-party assets that TIAA advised. TIAA’s reading here

again requires importing some concept of sub-advising to harmonize the

interpretation.56 But the plain text does not invoke that concept.

         Windy City’s reading has a similar outcome, if in reverse. It fits more

comfortably with the mechanics of the Earn-Out receiving 50% credit for third-party

assets advised by TIAA and distributed by Nuveen.57 But the definition’s language

tying Net Flows to “assets under management by the Subject Companies” does not

55
     Answering Br. 14 n.3.
56
     Opening Br. 29.
57
  The parties have not argued that the “third-party assets” language in the Net Flows
definition favors one party’s interpretation or the other.

                                          21
neatly support Windy City’s distribution theory. Neither party provides the only

reasonable interpretation.

                                    *       *       *

         At the motion to dismiss stage, no party has offered the only reasonable

construction. “If, after applying [] canons of contract interpretation, the contract is

nonetheless reasonably susceptible to two or more interpretations or may have two

or more different meanings, then the contract is ambiguous and courts must resort to

extrinsic evidence to determine the parties’ contractual intent.”58 Extrinsic evidence

will be necessary here to find what the parties truly meant. That will allow the Court

to decide which reading prevails, and which language to minimize in line with the

parties’ drafting intentions.

         B.    The Court Has Jurisdiction Over Counts II And III, And Counts
               II And III State Claims.
         Counts II and III seek specific performance ordering TIAA to calculate the

Earn-Out amount in accordance with Windy City’s interpretation of Section 1.8.

Specifically, they ask for an order “requiring TIAA to include in its calculation of

Cumulative Advisory Revenue advisory revenues derived from Nuveen’s

distribution of TIAA Products . . . . [and] requiring TIAA to include in its calculation

of Cumulative Net Flows flows derived from Nuveen’s distribution of TIAA

58
     Sunline Commercial Carriers, 2019 WL 1068183, at *8 (quotation omitted).

                                           22
Products.”59 TIAA opposes these orders on the same substantive grounds as Count

I,60 but also asserts that the Court lacks jurisdiction to decide Counts II and III

because they compel a particular calculation and therefore invade the Referee’s

province under Section 1.8(h).61 Windy City responds that Counts II and III seek

only to determine and enforce the same legal right as Count I, not a particular

monetary calculation, and thus the Court, rather than the Referee, has jurisdiction.62

         The parties agree that the Referee must answer questions on calculating the

Earn-Out amount, but that this Court has jurisdiction to answer interpretative

questions under Section 1.8.63 At the Hearing, Windy City’s counsel conceded that

59
     Compl. ¶¶ 120, 132.
60
  To the extent TIAA seeks dismissal on 12(b)(6) grounds, the analysis from Count I
applies and prevents dismissal at this stage. Counts II and III reasonably plead a breach of
Section 1.8 on Windy City’s theory of interpretation.
61
  Opening Br. 37-38. Section 1.8(h) requires that the parties submit disputes to the neutral
Referee to determine “disputed items or calculations” in a “final, binding and conclusive”
report that “shall be bound by the provisions of [] Section 1.8.”
62
     Answering Br. 30.
63
  Opening Br. 37, 52 n.32 (“While the Referee is not called upon to resolve legal disputes
as to the meaning of the Purchase Agreement—which is the subject of Count I of the
Complaint—the Referee is more than capable and specifically tasked with performing the
calculations necessary to determine the Earn-Out Amount” . . . . “Once the Court construes
the terms of Section 1.8(h) as outlined here, it should dismiss this claim because the
calculation of the Earn-Out Amount is a task for the Referee pursuant to the process
outlined in Section 1.8(h).”); Answering Br. 30-31 (“It thus appears that the Parties are in
full agreement about the only jurisdictional issue that matters in this case: This Court can
and should decide the issues of contract interpretation currently before it. Once those legal
disputes are resolved, the Parties will return to the Referee to resolve any remaining

                                             23
there is “not a whole lot” of daylight between Count I, on the one hand, and Counts

II and III, on the other.64 Because all three Counts depend on a determination

favoring Windy City’s interpretation of Section 1.8, Windy City believes that it

“would have the exact same remedies under Counts I, II, or III.”65

           If Counts II and III requested an order compelling TIAA to include a specific

calculated amount or figure in the Earn-Out amount, they would infringe on the

Referee’s jurisdiction to determine the “disputed items or calculations,” “bound by

the provisions of [] Section 1.8.” But Windy City has shown that it, instead, seeks

only a different remedy to enforce the same outcome and legal question at issue in

Count I: which party has the right interpretation. While Counts II and III seem

duplicative of the ultimate relief in Count I, they do not fail for lack of jurisdiction

or failure to state a claim. I deny the Motion on this ground, but note that I do not

view Counts II or III to provide for any greater relief or scope of contractual

interpretation than Count I, other than the form of the remedy.

questions about the calculations of the Earn-Out Amount, with the benefit of this Court’s
ruling on the contact interpretation questions.”).
64
     Hearing Tr. 69:13-15.
65
     Id.

                                             24
         C.     Count IV States A Claim.
         Count IV seeks an equitable adjustment to the Earn-Out amount to rectify

TIAA’s allegedly improper actions that intentionally depressed the Earn-Out

amount, including by failing to adjust the targets for Advisory Revenues and Net

Flows.66 Windy City bases Count IV on a series of four corporate actions. Windy

City failed to press one of these corporate actions, a rebranding of Nuveen’s parent

entity under TIAA, in its answering papers opposing the Motion and at the Hearing.

TIAA pointed out Windy City’s silence in both its reply papers and at the Hearing.67

I agree that Windy City abandoned what the parties have described as the

“rebranding” claim, and therefore do not address it.68 But I find that the Complaint

pleads each of the remaining bases for Count IV in reasonable detail and adequately

alleges breaches of Section 1.8.

         TIAA challenges Count IV on two main grounds: first, that the Purchase

Agreement did not give Windy City the right to prevent TIAA from undertaking any

of the actions Windy City references; and second, that Windy City has failed to

66
     Compl. ¶¶ 133-139.
67
     See Reply Br. 23-24; Hearing Tr. 35:22-36:9.
68
   See Compl. ¶¶ 81-85; In re Dow Chem. Co. Derivative Litig., 2010 WL 66769, at *7
(Del. Ch. Jan. 11, 2010) (“Plaintiffs quietly abandoned this claim in their brief in opposition
to defendants’ motion to dismiss, by failing to address or respond to defendants’ arguments
in their motion to dismiss.”).

                                              25
allege a breach of Section 1.8(f)’s intent requirement and damages. I reject both

arguments. The Complaint pled that TIAA conceivably took each of the actions at

issue in Count IV with an intent to depress the Earn-Out amount.69 TIAA’s efforts

to refute Windy City’s version of the facts are not appropriate at the motion to

dismiss stage, where Windy City has pled its allegations adequately.70 The more

pertinent challenges at this stage are to the sufficiency of Windy City’s pleadings.

TIAA contends that Windy City failed to plead damages, or a breach of the Purchase

Agreement, with respect to any of the alleged actions.71 I disagree.

         First, Windy City alleges that TIAA consolidated and liquidated certain funds

from NWQ Investment Management Company, LLC (“NWQ”), an affiliate operated

by Nuveen prior to the transaction, in a manner that failed to give Windy City

appropriate Earn-Out credit. Windy City supports its theory by noting that EY

prepared a valuation report anticipating a reduction in the Earn-Out targets.

Although the report did not specify the cause of that reduction, it stated that the

targets were “subject to adjustments as discussed in Section 1.8 of the [Purchase

69
     See id. ¶¶ 86-95, 133-139.
70
   “Long standing Delaware case law holds that a complaint will survive a motion to
dismiss if it states a cognizable claim under any ‘reasonably conceivable’ set of
circumstances inferable from the alleged facts.” Winshall v. Viacom Int’l, Inc., 76 A.3d
808, 813 n.12 (Del. 2013), as corrected (Oct. 8, 2013).
71
     Opening Br. 40-50.

                                           26
Agreement],” and Windy City alleges that “TIAA appears to have been considering

. . . a divestiture or transfer at or around the time EY prepared its valuation report.”72

Windy City has asked for more information about EY’s valuation, and TIAA has

allegedly refused to provide further access.73 When prodded about the report, TIAA

contended that “Nuveen management ultimately made different decisions with

respect to the way it structured its reorganization of NWQ and associated liquidation

of funds that obviated the need for an adjustment to the Floor and Cap Targets.”74

Windy City alleges that those decisions, in light of EY’s report, indicate “that

TIAA’s decisions about how to dispose of NWQ funds was made, at least in part,

with the purpose and intent of reducing the Earn-Out Amount.”75 According to the

Complaint, EY’s suggested target reductions “would have [] entitled [Windy City]

to approximately $27 million dollars more in its earn-out payment from TIAA.”76

           Second and third, Windy City alleges that TIAA wound down another Nuveen

affiliate, Tradewinds Global Investors, LLC (“Tradewinds”), and a series of other

Nuveen funds (the “Nuveen Funds”), without attempting to sell or transfer portions

72
  Compl. ¶¶ 86-91. Windy City received the valuation report from TIAA in early 2018.
See id. ¶ 87.
73
     Id. ¶ 91.
74
     Id.
75
     Id.
76
     Id. ¶ 90.

                                           27
of those funds and preserve value.77 Under Section 1.8(c)(iii) of the Purchase

Agreement, Advisory Revenues and Net Flows targets are adjusted when portions

of a Nuveen fund are divested to third parties not affiliated with TIAA. Accordingly,

Windy City asserts that TIAA disposed of Tradewinds and the Nuveen Funds in a

manner that avoided a target adjustment, and thus “adversely affected Nuveen’s

advisory revenues and net flows.” Windy City also alleges that TIAA did so

intentionally.78

         Drawing all inferences in Windy City’s favor and recognizing the low

standard of reasonable conceivability, Windy City has pled that these three

transactions implicate a potential breach of Section 1.8(f) that intentionally

depressed the Earn-Out and harmed Windy City. To the extent TIAA disagrees with

the specificity of damages pled, it seeks a pleading standard higher than is required.79

Windy City has also credibly explained that its ability to allege damages was

weakened by the subject of Count V—TIAA’s alleged failure to provide contractual

access to books and records supporting the Preliminary Earn-Out Statement. I deny

the Motion against Count IV.

77
     Id. ¶¶ 92-95.
78
     Id. ¶¶ 93, 95.
79
   “Proof of [alleged] damages and of their certainty need not be offered in the complaint
in order to state a claim.” IAC Search, LLC v. Conversant LLC, 2016 WL 6995363, at *8
(Del. Ch. Nov. 30, 2016) (quoting Anglo Am. Sec. Fund, L.P. v. S.R. Glob. Int’l Fund, L.P.,
829 A.2d 143, 156 (Del. Ch. 2003)).

                                            28
         D.    Count V States A Claim.
         Count V seeks an order of specific performance permitting greater access to

personnel, work papers, books, and records under Section 1.8(h). The relevant

language of Section 1.8(h) provides that the parties “shall assist and cooperate with

the other in all commercially reasonable respects” for Windy City to review and

resolve disputes relating to the Preliminary Earn-Out Statement and calculations of

the Earn-Out amount, Advisory Revenues Payment Amount, and Net Flows

Payment Amount, “including by providing the other party and its accountants and

advisors with reasonable access to relevant personnel (including its accountants),

work papers and books and records related to the Subject Companies that are in its

possession or under its control.” The parties also agreed to “use their commercially

reasonable efforts to cause their accountants and advisors to reasonably cooperate

with and respond to the other party’s reasonable inquiries.” Windy City alleges that

TIAA has improperly resisted certain of its demands under Section 1.8(h).

         TIAA hinges its argument here on a contention that Section 1.8(h) provides

access to information in response to Windy City’s demands only to the extent they

“relate[] to the Subject Companies.”80 TIAA contends it is only refusing Windy

80
     Opening Br. 52.

                                          29
City’s requests that improperly “demand information on other topics, including other

aspects of TIAA’s business.”81

           Section 1.8(h) grants Windy City broad access rights to review and attempt to

resolve “any dispute with respect to [] the Preliminary Earn-Out Statement and the

calculations of the Earn-Out Amount, Cumulative Net Flows Payment Amount and

Cumulative Advisory Revenue Payment Amount.”82 Those rights “include[] . . .

reasonable access” to certain materials “related to the Subject Companies that are in

[TIAA’s] possession or under its control.”83 But that access right does not limit

Windy City’s          broader, bargained-for right      of commercially reasonable

cooperation.84 And even if it did, Windy City’s requests with respect to Section

1.8(h) and how TIAA has calculated the Earn-Out amount and statements “relate[]

to the Subject Companies” under the plain language of Section 1.8(h) by seeking

information about whether funds were diverted away from those companies under

the Earn-Out provisions. I deny the Motion as to Count V.

III.       CONCLUSION
           For these reasons, I deny TIAA’s Motion to Dismiss.

           IT IS SO ORDERED.

81
     Id.
82
     Purchase Agreement § 1.8(h) (emphasis added).
83
     Id.
84
     Id.

                                             30