Court Opinion

ID: 6496666
Source: CourtListenerOpinion
Date Created: 2022-06-30 14:01:58.816387+00
Date Added: 2024-06-11T08:50:06.863410
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

CPC MIKAWAYA HOLDINGS, LLC,              )
                                         )
           Plaintiff,                    )
                                         )
     v.                                  )    C.A. No. 2021-0707-MTZ
                                         )
MYMO INTERMEDIATE, INC., and             )
MIKAWAYA HOLDINGS, INC.,                 )
                                         )
           Defendants.                   )

                          MEMORANDUM OPINION
                         Date Submitted: March 15, 2022
                          Date Decided: June 29, 2022

Kevin R. Shannon, Christopher N. Kelly, and Emma K. Diver, POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware; John E. Schreiber and
Aaron C. O’Dell, WINSTON & STRAWN LLP, Los Angeles, California, Attorneys
for Plaintiff CPC Mikawaya Holdings, LLC.

A. Thompson Bayliss and April M. Kirby, ABRAMS & BAYLISS LLP,
Wilmington, Delaware; Timothy R. Farrell, ROPES & GRAY LLP, Chicago,
Illinois; Patrick S. Doherty, ROPES & GRAY LLP, London, United Kingdom;
Sarah M. Milkovich, ROPES & GRAY LLP, Boston, Massachusetts, Attorneys for
Defendants MyMo Intermediate, Inc. and Mikawaya Holdings, Inc.

ZURN, Vice Chancellor.
      This matter stems from the January 2020 sale of an ice cream company to a

private buyer. The parties’ merger agreement included a comprehensive structure

allocating tax benefits from the transaction between the buyer and the sellers, with

much of the benefit going to the sellers. Where the buyer was required to complete

the target’s pre-closing tax returns, the merger agreement prioritized consistency

with the sellers’ preferences and past practices. It obligated the buyer to prepare the

target’s pre-closing tax returns using the “existing procedures and practices and

accounting methods” the sellers used before the merger.          It gave the sellers’

representative an opportunity to comment on those tax returns before the buyer filed

them. And it obligated the buyer to incorporate any reasonable comments the

sellers’ representative made.

      Changes to the tax code in the wake of the global pandemic rocked the parties’

bargain. The buyer sought to take advantage of new tax opportunities that were

previously not part of the target’s practice. The sellers’ representative orally agreed

to allow the buyer to take advantage of these opportunities, using novel tax practices,

if the buyer promised to remit the resulting refunds to the sellers. The buyer agreed,

and the returns were completed using the new practices. But when the refunds

arrived, the buyer largely kept them for itself, arguing the merger agreement required

nothing different.

                                          1
      The sellers’ representative sued under contract, quasi-contract, and fraud to

recover portions of the target’s tax refunds. On the buyer’s motion to dismiss, I

conclude the sellers’ representative states viable claims for breach of the merger

agreement, breach of the parties’ alleged oral agreement, and an unjust enrichment

claim in the alternative. But the sellers’ representative’s other quasi-contract claims

are foreclosed by the comprehensive language in the merger agreement. And the

sellers’ representative fails to plead an actionable false statement for the purposes of

its fraud claim. And so, for the reasons I will explain, the buyer’s motion is granted

in part and denied in part.

      I.     BACKGROUND1

      The Verified Amended Complaint (the “Amended Complaint”) in this action

alleges contract, quasi-contract, and fraud claims arising from the January 29, 2020

merger (the “Merger”) between Defendant Mikawaya Holdings, Inc. (the

1
  I draw the following facts from the Amended Verified Complaint, available at Docket
Item (“D.I.”) 13 [hereinafter “Am. Compl.”], as well as the documents attached and
integral to it. See, e.g., Himawan v. Cephalon, Inc., 2018 WL 6822708, at *2 (Del. Ch.
Dec. 28, 2018); In re Gardner Denver, Inc. S’holders Litig., 2014 WL 715705, at *2 (Del.
Ch. Feb. 21, 2014). Citations in the form of “Kirby Decl. Ex. ––” refer to the exhibits
attached to the Declaration of April M. Kirby in Support of Defendants’ Motion to Dismiss
the Amended Verified Complaint, available at D.I. 17. Citations in the form of “OB ––”
refer to the Opening Brief in Support of Defendants’ Motion to Dismiss the Amended
Verified Complaint, also available at D.I. 17. Citations in the form “AB ––” refer to
Plaintiff’s Answering Brief in Opposition to Defendants’ Motion to Dismiss the Amended
Verified Complaint, available at D.I. 19. And citations in the form “RB ––” refer to the
Reply Brief in Further Support of Defendants’ Motion to Dismiss the Amended Verified
Complaint, available at D.I. 22.

                                           2
“Company”) and a subsidiary of Defendant MyMo Intermediate, Inc. (“Buyer,” and

together with the Company, “Defendants”).            The Company’s wholly owned

subsidiary, The Mochi Ice Cream Company, is the creator of mochi ice cream and

operates the My/Mo Mochi Ice Cream brand. Buyer is an affiliate of Lakeview

Capital, Inc. (“Lakeview”), a Michigan-based family office.            Plaintiff CPC

Mikawaya Holdings, LLC (“Plaintiff”) is an affiliate of Century Park Capital

Partners, LLC (“Century Park”), a California-based private equity firm. It is also

the appointed post-Merger representative of the Company’s former stockholders and

optionholders (the “Sellers”).

               A.     The Parties Finalize The Merger And The Merger
                      Agreement.

         On December 14, 2019, the parties finalized the Merger, wherein Lakeview,

through Buyer, would ultimately acquire the Company from Century Park at a $185

million enterprise value. The parties memorialized the Merger in an agreement and

plan of merger (the “Merger Agreement”).2 The Merger closed on January 29, 2020,

with the Company as the surviving entity.

         Several provisions of the Merger Agreement detailing the treatment of taxes

are notable to the parties’ dispute. I summarize them briefly for context and quote

the full provision as relevant in my analysis. Section 8.08 required Plaintiff, as the

2
    See generally Am. Compl. Ex. A [hereinafter “Merger Agr.”].

                                            3
stockholders’ representative, to prepare and file the Company’s tax returns that were

due before closing, known as the “Stockholder Prepared Returns.”3 After closing,

Buyer was obligated to prepare the Company’s other tax returns, known as “Buyer

Prepared Returns.”4 Where the Buyer Prepared Returns touched on pre-closing tax

periods, Section 8.08(a)(ii) obligated Buyer to prepare them “on a basis consistent

with existing procedures and practices and accounting methods.”5 That section also

obligated Buyer to provide those returns to Plaintiff, as the stockholders’

representative, for review and comment thirty days before filing.6 Buyer was

obligated to incorporate Plaintiff’s reasonable comments.7

          The Merger Agreement also addressed how to allocate tax benefits from the

Merger. Section 8.08(i) requires the Buyer to pay to Sellers, through Plaintiff,

certain deductions attributable to the Merger, defined as “Transaction Tax

Benefits.”8 Section 8.08(j) also requires Buyer to pay to Plaintiff any tax refunds

attributable to the Company’s overpayment of income taxes for the tax period ending

3
    See id. § 8.08(a)(i).
4
    See id. § 8.08(a)(ii).
5
    See id.
6
    See id.
7
    See id.
8
    See id. § 8.08(i).

                                          4
on June 30, 2019 (the “2019 Tax Period”) or the final 2020 pre-closing stub period

(the “2020 Stub Period”).9

         The Merger Agreement also contained an indemnification provision10 and a

prohibition on oral amendments.11

                 B.        After Closing, Federal Tax Law Changes, Creating New Tax
                           Assets For The Company.

         The COVID-19 pandemic began shortly after closing, prompting changes in

the applicable tax law. On March 27, Congress passed the Coronavirus Aid, Relief,

and Economic Security Act, known as the “CARES Act.” The CARES Act modified

the internal revenue code’s treatment of net operating losses (“NOLs”). Before the

CARES Act, NOLs generally could only be “carried forward,” meaning NOLs in

one year could only be applied to reduce tax liability in future years. The CARES

Act changed this system, permitting companies to carry NOLs accrued in the three

most recent tax years back to the five tax years preceding the loss.12 This offered

liquidity to companies struggling in the pandemic, as they could retroactively reduce

their tax liability and obtain immediate refunds.

9
    See id. § 8.08(j).
10
     See id. § 11.03(a).
11
     See id. § 12.11.
12
     See Am. Compl. ¶ 33 (citing 26 U.S.C. § 172).

                                              5
          The CARES Act also modified the treatment of previously paid alternative

minimum tax (“AMT”). AMT sets a floor on the percentage of taxes a filer must

pay, regardless of available deductions or tax credits. Before the 2017 Tax Cuts and

Jobs Act (“TCJA”), corporations were subject to a twenty percent AMT. The TCJA

repealed the corporate AMT for tax years beginning after December 31, 2017.13

Previously paid AMT was treated as a future credit that could be carried forward

indefinitely.14 And fifty percent of the excess AMT over the allowable credit was

refundable.15 The CARES Act changed this system and made one hundred percent

of AMT credits refundable for tax years beginning in 2018 or 2019.16 As Plaintiff

explains, the CARES Act’s NOL and AMT rules interact. If the corporation uses an

NOL carryback to reduce its tax liability in a previous year, it may increase its AMT

liability, thus preventing the corporation from receiving the immediate cash flow the

CARES Act sought to provide. Making AMT credits fully refundable avoids that

result.

13
     See id. ¶ 34 (citing 26 U.S.C. § 55(a)).
14
     See id. (citing 26 U.S.C. § 53(d)(2)).
15
     See id. (citing 26 U.S.C. § 53(e)).
16
     See id. (citing 26 U.S.C. § 53(e)).

                                                6
                C.     Plaintiff And Buyer Discuss How To Allocate The
                       Company’s Tax Refunds.

         After the CARES Act passed, representatives from the Plaintiff and the

Company discussed how to apply the new rule permitting NOL carrybacks under the

Merger Agreement. This was a significant question: Sellers incurred $16.5 million

in Merger-related expenses, approximately $13.6 million of which were tax-

deductible as NOLs. On April 3, Craig Berger, the Company’s CEO, spoke with

Martin Sarafa, the head of Plaintiff’s affiliate Century Park. Though he was initially

unaware of the CARES Act’s NOL provision, Berger indicated that Lakeview and

Buyer would likely agree to an arrangement wherein if Plaintiff agreed to let the

Company carry back the transaction deductions as NOLs and refrain from using its

comment rights under the Merger Agreement to force the Company to carry the

transaction deductions forward, Buyer would pay Plaintiff the refunds derived from

those NOL carrybacks (the “NOL Carryback Arrangement”). Sarafa and Berger

exchanged emails to that effect. On April 22, Berger emailed Sarafa:

         I spoke to Plante Moran [Defendants’ accountants] and they are
         planning on filing our stub return (7/1-1/29) around the same time that
         they file the stub 2 return (1/30-6/30). They are currently looking into
         how best to file for the loss carryback (there are a few different ways
         that it can be handled…amend prior returns or file a specific tax form).
         They also agree that the benefit goes back to the seller and think it
         would be best to handle it this way as the transaction benefit can be
         specifically identified and given back to seller.17

17
     Id. ¶ 38 (brackets and ellipse in original) (emphasis removed).

                                               7
Plaintiff alleges subsequent emails “made clear Defendants’ recognition that they

were not entitled” to keep tax refunds derived from NOL carrybacks.18 On May 15,

Berger confirmed Lakeview’s agreement to the NOL Carryback Arrangement to

Sarafa. The Company also confirmed its agreement.

                 D.    Buyer Prepares And Files The Company’s Tax Returns And
                       Pays Plaintiff $357,393.

          Buyer then prepared the Company’s tax returns for several tax periods,

including the 2019 Tax Period and the 2020 Stub Period. Buyer also completed an

IRS Form 1139 (Corporation Application for Tentative Refund) for the taxable

periods ending June 30, 2015; June 30, 2017; and June 30, 2018 (the “Forms 1139”),

carrying back the transaction NOLs to those years to generate refunds under the

CARES Act.19 These were part of the “Buyer Prepared Returns” contemplated in

the Merger Agreement.20

          As required by the Merger Agreement, Buyer sent the Buyer Prepared Returns

to Plaintiff on August 17 for its review and comment. Buyer’s counsel indicated the

stockholders’ payment under Section 8.08(j) would be $357,393. Plaintiff replied

by inquiring about the NOL carryback claims; the Company, apparently through

18
     Id. ¶ 40.
19
  See Am. Compl. Ex. B; see also Am. Compl. Ex. F. Buyer also submitted a Form 1139
for the 2019 tax year, but the dispute over that refund is encapsulated in the dispute over
the 2019 Tax Period.
20
     See Merger Agr. § 8.08(a)(ii).

                                            8
Berger, confirmed these refunds were for the former stockholders and thus would be

paid to Plaintiff.21 Based on these representations and the parties’ alleged agreement

to pay the tax refunds to Plaintiff, Plaintiff did not object and signed off on the Buyer

Prepared Returns. Plaintiff alleges that without the assurances and agreement it

received from Defendants, it would have objected to the Buyer Prepared Returns and

would have submitted comments that the NOLs should be carried forward, not back.

          Defendants ultimately paid Plaintiff only the $357,393 they originally

proposed.22 The parties thereafter sparred about Plaintiff’s entitlement to refunds

derived from the NOL carrybacks. On April 30, 2021, Plaintiff’s counsel wrote to

Defendants’ counsel, claiming “the Company’s position that refunds for [NOL]

carryback claims are not for the account of Sellers . . . is contrary to both the terms

of the Merger Agreement and the Company’s own prior representations to Sellers.”23

Defendants’ counsel responded on May 7, denying that Berger ever made such an

agreement and pressing that, even if he did, it would not have been legally effective

21
  Plaintiff does not specifically allege what was said or who said it; Plaintiff alleges only
that “In connection with the Plaintiff’s review and consideration of the Buyer Prepared
Returns . . . the Company again confirmed that the refunds for these items were for the
account of the Stockholders and Optionholders,” and that “Berger as Company CEO had
full authority to make these arrangements.” Am. Compl. ¶¶ 48–49.
22
   Am. Compl. ¶¶ 46 & n.6, 54. Buyer’s payments to Plaintiff total $428,597, which
include an additional $71,204 in “other, unrelated tax benefits owed under the Merger
Agreement.” Id. ¶ 45 n.5. Those payments are not subject to the parties’ dispute here.
23
     Id. ¶ 55.

                                             9
because the Merger Agreement prohibits oral waivers.24 Despite another letter from

Plaintiff’s counsel on May 27,25 Buyer did not relent.

                E.     Plaintiff Initiates This Litigation.

          Plaintiff filed its initial complaint in this action on August 17.26 Defendants

moved to dismiss the initial complaint on October 1.27 Plaintiff responded by filing

the Amended Complaint on November 9.28 Plaintiff seeks tax refunds from the 2019

Tax Period under the Merger Agreement, and the refunds from the Forms 1139 under

the subsequent discussions about the CARES Act. From the 2019 Tax Period,

Plaintiff seeks the Company’s entire refund for that year, minus what Buyer has

already remitted.

          The Company’s tax liability for the 2019 Tax Period was $933,995. After

applying an NOL carryback to reduce its tax liability, the Company paid the rest of

its liability using AMT credit. Then, the Company contributed $2,029,166 over and

above its liability from two sources: (1) it was “deemed” to have paid its remaining

$737,778 of AMT credit (the “AMT Surplus”), and (2) it actually paid $1,291,388

24
     Id. ¶ 56; Am. Compl. Ex. D at 1.
25
     Am. Compl. Ex. E.
26
     D.I. 1.
27
     D.I. 8.
28
     See generally Am. Compl.

                                             10
in cash.29 The Company claimed that total, $2,029,166, as a refund on its Form 1139

for 2019.30 Buyer remitted $357,393 of that amount to Plaintiff,31 leaving a disputed

refund amount of $1,671,733. Plaintiff contends it is entitled to the entire refund

under Section 8.08(j), because both the AMT Surplus and cash are overpayments in

the 2019 Tax Period.

         Buyer also carried back NOLs attributable to transaction expenses to the

taxable periods ending June 30, 2015; June 30, 2017; and June 30, 2018, and

obtained refunds from those years via the Forms 1139. These refunds total $887,125

(the “Forms 1139 Refunds”).32 Plaintiff contends it is entitled to these refunds

because Buyer said it was.

         The Amended Complaint contains seven counts. Counts I and III assert

breach of contract theories under the Merger Agreement. Specifically, Count I

asserts a claim that Buyer breached Section 8.08(j) by failing to remit the full

2019 Tax Period refund to Plaintiff.            And Count III asserts a breach of

Section 8.08(a)(ii) by using the novel NOL carryback practice, inconsistent with the

29
     Id. ¶ 46 & n.6.
 The Amended Complaint does not specify or adequately explain how the Company’s
30

AMT credit came to be. See id.; see also id. ¶ 34. Defendants argue it arises from earlier
AMT payments, an issue I do not reach as it is outside the pleadings.
31
   This remittance ($357,393) is equal to the excess of the Company’s cash payment
($1,291,388) over the Company’s tax liability ($933,995).
32
  See Am. Compl. Ex. B (describing a $46,944 refund for 2018, a $188,377 refund for
2017, and a $651,804 refund for 2015).

                                           11
Company’s existing procedures and practices and accounting methods. Counts II

and IV assert breaches of the implied covenant of good faith and fair dealing.

Count V asserts a claim for fraud based on Buyer’s representation that it would pay

Plaintiff the refunds from the NOL carrybacks. Count VI asserts a claim for unjust

enrichment. And Count VII asserts a claim for indemnification under the Merger

Agreement. Defendants moved to dismiss the Amended Complaint on December 9

(the “Motion”).33 The parties briefed the Motion and the Court heard oral argument

on March 15, 2022.34

         II.     ANALYSIS

         The standards governing a motion to dismiss under Court of Chancery

Rule 12(b)(6) for failure to state a claim for relief are well settled:

         (i) all well-pleaded factual allegations are accepted as true; (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 to proof.”35

33
     D.I. 17.
34
     D.I. 31; D.I. 32 [hereinafter “Hr’g Tr.”].
35
     Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations omitted).

                                                  12
Thus, the touchstone “to survive a motion to dismiss is reasonable

‘conceivability.’”36 This standard is “minimal”37 and “plaintiff-friendly.”38 “Indeed,

it may, as a factual matter, ultimately prove impossible for the plaintiff to prove his

claims at a later stage of a proceeding, but that is not the test to survive a motion to

dismiss.”39

                A.     Count I States A Claim For Breach Of Section 8.08(j).

         As crystalized in briefing and at oral argument, Count I alleges that Buyer

breached Section 8.08(j) by failing to remit to Plaintiff the rest of the Company’s

refunds for the 2019 Tax Period, totaling $1,671,773.40 In the Motion, Defendants

argue Count I fails to state a claim for two primary reasons. First, Defendants argue

that by accepting the $357,393 payment in August 2020, Plaintiff waived any

36
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 537
(Del. 2011).
37
     Id. at 536 (citing Savor, 812 A.2d at 896).
38
  See, e.g., Clouser v. Doherty, 175 A.3d 86 (Del. 2017) (TABLE); In re Trados Inc.
S’holder Litig., 2009 WL 2225958, at *9 (Del. Ch. July 24, 2009).
39
     Cent. Mortg., 27 A.3d at 536.
40
  Plaintiff originally pled Count I as relating to its entire $2,558,898 claim, including the
Forms 1139 Refunds. See Am. Compl. ¶¶ 65–67 (alleging Defendants, received but did
not remit to Plaintiff, the “Tax Refunds” and casting this failure as a breach of Section
8.08(j)); id. ¶ 1 (defining “Tax Refunds” as “approximately $2.6 million”). In briefing,
Plaintiff clarified that the Forms 1139 Refunds are not the subject of Count I. See AB 16
n.9 (“Plaintiff’s breach of contract claim against Defendants in Count I is with respect to
the $933,995 and $737,778 tax refunds that Defendants have refused to pay Plaintiff in
breach of Section 8.08(j). Count I does not relate to the other $887,125 tax refunds from
the NOL carrybacks to the 2015-2018 tax periods.”).

                                               13
entitlement to the remaining 2019 refunds.41 Second, Defendant argues Plaintiff is

not entitled to the AMT Surplus because that money does not fit into

Section 8.08(j)’s defined categories of “overpayments.” 42 Both arguments are fact-

intensive and ill-suited for a motion to dismiss. So at this early stage, I cannot follow

Defendants down these paths.

                      1.     Defendants’ Waiver Argument Is Premature.

         Defendants seek to dismiss the entirety of Count I on an admittedly fact-

intensive argument: waiver. They argue that by accepting $357,393 in August 2020,

Plaintiff waived any entitlement to any other money. I cannot grant the Motion on

this basis.

         “Waiver is the voluntary and intentional relinquishment of a known right. It

implies knowledge of all material facts and an intent to waive, together with a

willingness to refrain from enforcing those rights.”43 “[T]he facts relied upon to

prove waiver must be unequivocal,” and the party claiming waiver must show three

elements: “(1) that there is a requirement or condition to be waived, (2) that the

waiving party must know of the requirement or condition, and (3) that the waiving

41
     See OB 23–26; RB 7–11; see also Hr’g Tr. 89.
42
     See OB 17–23; RB 4–7.
43
   Bantum v. New Castle Cty. Vo-Tech Educ. Ass’n, 21 A.3d 44, 50 (Del. 2011) (footnotes,
alterations, and internal quotation marks omitted) (quoting AeroGlobal Cap. Mgmt., LLC
v. Cirrus Indus., Inc., 871 A.2d 428, 444 (Del. 2005)).

                                            14
party must intend to waive that requirement or condition.”44 This standard has been

described as “quite exacting.”45 At the pleading stage, it is even harder to establish:

the Court may only dismiss the claim if the plaintiff pleads facts that

“incontrovertibly constitute” a waiver.46 Because of waiver’s fact-intensive nature,

Delaware courts have been reluctant to evaluate it at the pleading stage.47

         The Motion does not clear this high bar. Defendants’ argument is premised

entirely on a single email, where Sarafa, Century Park’s CEO, responded to Buyer’s

counsel that “based on your responses to our questions on the state and federal

returns below, we are signed off.”48 As a threshold matter, this email is not an exhibit

to the Amended Complaint, and Defendants’ argument for incorporating it by

44
     Id. at 50–51 (internal quotation marks omitted) (quoting AeroGlobal, 871 A.2d at 444).
45
     Id. at 50 (internal quotation marks omitted) (quoting AeroGlobal, 871 A.2d at 444).
46
  E.g., Seven Invs., LLC v. AD Cap., LLC, 32 A.3d 391, 397 (Del. Ch. 2011) (internal
quotation marks omitted) (quoting Canadian Com. Workers Indus. Pension Plan v. Alden,
2006 WL 456786, at *3 (Del. Ch. Feb. 22, 2006)); see also Caravias v. Interpath
Commc’ns, Inc., 2008 WL 2268355, at *4 (Del. Ch. May 28, 2008); Capano v. Capano,
2003 WL 22843906, at *2 (Del. Ch. Nov. 14, 2003).
47
   See, e.g., Mergenthaler v. Hollingsworth Oil Co. Inc., 1995 WL 108883, at *2 (Del.
Super. Feb. 22, 1995) (“Waiver implies knowledge and an intent to waive, and the facts
relied on to prove waiver must be unequivocal. The question of waiver is normally a jury
question, unless the facts are undisputed and give rise to only one reasonable inference.”
(citations omitted) (citing Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 535 (Del.
Super. 1990), and George v. Frank A. Robino, Inc., 334 A.2d 223, 224 (Del. 1975), and
G.M.S. Realty Corp. v. Girard Fire & Marine Ins. Co., 89 A.2d 857, 860 (Del. Super.
1952))).
48
     See Kirby Decl. Ex. B at 1.

                                              15
reference is weak.49 More to the point, the Amended Complaint paints a different

picture. It alleges this email is part of a broader conversation in which Buyer,

through Berger, agreed that Plaintiff would receive the full $2.6 million in refunds,

including refunds attributable to the NOL carryback and all the 2019 refunds.50

These facts call into question whether Plaintiff intended to waive its right to other

tax refund payments under Section 8.08(j). Even considering Defendants’ proffered

exhibit, the facts fall well short of “incontrovertibly constitut[ing]”51 a waiver and

so, it would be inappropriate to dismiss Count I on those grounds.

                       2.     Defendants’ Attempt To Recharacterize The
                              AMT Surplus Presents A Fact Question.

         In addition to its waiver argument, Defendants attack Plaintiff’s claimed

entitlement to the AMT Surplus, arguing it fails to state a claim under

Section 8.08(j). Rather than disputing the meaning of Section 8.08(j), the parties

clash over how to characterize the AMT Surplus and whether it constitutes an

49
   See OB 9 n.8 (citing Am. Compl. ¶¶ 58, 91, 113). Though the paragraphs Defendants
cite generally discuss the parties’ back-and-forth surrounding tax returns, none of them
quote, cite, or even reference the email exchange Defendants attached. See Am.
Compl. ¶¶ 58, 91, 113. Indeed, paragraph 58 is mostly a block quote of a different
exchange between the parties. See id. ¶ 58 (quoting a May 27, 2021 letter from Plaintiff’s
counsel to Defendants’ counsel). The closest is paragraph 43, which references
Defendants’ counsel’s August 17, 2020 message, the first in the Exhibit B chain. See
id. ¶ 43. But none of the other messages are referenced in the Amended Complaint; and
the August 17 message is not the message Defendants cite as evidence of waiver.
50
     See, e.g., Am Compl. ¶ 48; see also id. ¶¶ 43–44, 49–52, 54.
51
     Seven Invs., 32 A.3d at 397 (quoting Canadian Com. Workers, 2006 WL 456786, at *3).

                                              16
“overpayment” in the 2019 Tax Period (or 2020 Stub Period). At this early stage, I

must accept Plaintiff’s factual characterization of the AMT Surplus, so I deny the

Motion on that basis.

         “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 resultant damage to the plaintiff.”52 In determining the scope of the parties’

obligations under the Merger Agreement, I apply Delaware’s well-understood

objective theory of contract interpretation. “To determine what contractual parties

intended, Delaware courts start with the text.”53 In doing so, the Court aims to “give

priority to the parties’ intentions as reflected in the four corners of the agreement,

construing the agreement as a whole and giving effect to all its provisions.”54

“Delaware adheres to the objective theory of contracts, [meaning that] a contract’s

construction should be that which would be understood by an objective, reasonable

third party.”55 The Court will “give effect to the plain-meaning of the contract’s

52
     VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
53
     Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846 (Del. 2019).
54
  Salamone v. Gorman, 106 A.3d 354, 368 (Del. 2014) (internal quotation marks omitted)
(quoting GMG Cap. Inv., LLC. v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del.
2012)).
55
  Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (footnotes and internal
quotation marks omitted) (quoting NBC Universal v. Paxson Commc’ns, 2005 WL
1038997, at *5 (Del. Ch. Apr. 29, 2005)).

                                             17
terms and provisions,” “will read a contract as a whole and . . . will give each

provision and term effect, so as not to render any part of the contract mere

surplusage.”56 “Contract terms themselves will be controlling when they establish

the parties’ common meaning so that a reasonable person in the position of either

party would have no expectations inconsistent with the contract language.”57

         Section 8.08(j) requires the Buyer to remit to Plaintiff any of the Company’s

income tax refunds (or credits in lieu thereof) which are “attributable to

overpayments of Income Tax” for the 2019 Tax Period.

         Tax Refunds. Following Closing, any cash Income Tax refunds (or
         credits in lieu thereof) attributable to overpayments of Income Taxes
         by the Target Companies for (i) the taxable period ending June 30,
         2019, or (ii) the final Pre-Closing Tax Period (but only to the extent
         such Taxes were paid prior to the Closing (including by crediting
         overpayments of Tax from a prior tax year)) attributable to Transaction
         Deductions (determined on a “with or without” basis), that are received
         by the Buyer, the Target Companies, or any of their Affiliates will be
         for the account of the Stockholders and the Optionholders. Buyer shall
         pay or cause to be paid within thirty (30) days of actual receipt (by
         Buyer, the Target Companies, or any of their Affiliates) of such
         refund(s) in cash the amount of such refund(s) to the Stockholders’
         Representative for distribution to the Stockholders and the
         Optionholders. The amount of any payment under this Section 8.08(j)
         shall be calculated net of any reasonable costs, including Taxes,
         incurred by the Buyer, the Target Companies or any of their Affiliates
         of obtaining, distributing, or paying over any refund.58

56
  Id. at 1159–60 (internal quotation marks omitted) (quoting Kuhn Constr., Inc. v.
Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010)).
57
     Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).
58
  Merger Agr. § 8.08(j). The “final Pre-Closing Tax Period” is the 2020 Stub Period.
Section 8.08(j) also invokes the phrase “attributable to Transaction Deductions.” Id. It is

                                              18
As defined, “Income Tax” is “any Tax that is based on, or computed with respect to,

income or earnings (and any franchise Tax or Tax on doing business imposed in lieu

thereof), including any interest, penalty or addition thereto.”59             The phrase

“overpayments of Income Tax” plainly includes a standard refund where the

Company paid more income tax than it truly owed. But nothing in this language

confines “overpayments” to true overpayments, to the exclusion of constructive

“overpayments” labeled as such by tax authorities.60

         Plaintiff argues the IRS treats the AMT Surplus as a 2019 overpayment, so it

falls within Section 8.08(j)’s definition—even though on a practical level, it is the

application of credits made available by a change in the law, not a true overpayment.

Under Plaintiff’s characterization, the IRS deemed the Company to have paid

$1,214,165 in AMT, a form of “Income Tax,” in the 2019 Tax Period, only $476,387

not immediately clear to me whether that phrase is intended to modify only the Stub Period
in romanette (ii) or if it also limits refunds from the 2019 Tax Period. I do not wade into
this issue because the parties do not present argument on it and apparently agree that the
refunds at issue here are all attributable to “Transaction Deductions,” as defined. See Hr’g
Tr. 28–29, 51.
59
     Merger Agr. at 9 (defining “Income Tax”).
60
  See id. § 8.08(j). I am reminded of the classic board game, Monopoly, in which one of
the game’s “Community Chest” card reads “Bank Error in Your Favor,” and directs the
drawer to collect $200. Of course, the Monopoly “bank” never made a real “error”; the
card was designed to infuse cash into the game’s small economy. If the drawer had
contracted to remit to another player all “bank errors,” nothing in that language would
exclude a payment that the bank identified as a “bank error,” even if that label was a bank-
created fiction.

                                            19
of which was necessary to cover its tax liabilities.61 Thus, the Company “overpaid”

by $737,778: the excess of the AMT credit it was deemed to have paid over and

above the portion applied to its tax liabilities.62 Indeed, some of the tax return

documents describe this money as an “overpayment.”63 Plaintiff’s characterization

is reasonably conceivable.

         Defendants argue that the AMT Surplus does not fall under Section 8.08(j)

because it is not a 2019 overpayment. They assert that the AMT credit underlying

the AMT Surplus must derive from AMT payments made before the 2019 Tax

Period, and so cannot be a 2019 overpayment. They also argue the AMT Surplus is

properly viewed as a tax credit, not as an “overpayment,” because it does not

represent a refund of money the Company actually paid.

         This dispute does not present purely legal questions, such as the meaning of

the word “overpayment” in Section 8.08(j). Rather, Defendants take aim at the

nature of the AMT Surplus, arguing it cannot factually be what Plaintiff claims it is.

61
     See Am. Compl. ¶ 46 & n.6.
62
     See id.
63
   See Am. Compl. Ex. F at 8 (depicting a Form 1120 that lists the entire claimed amount,
$2,029,166 as an “overpayment” that the Company seeks to have “refunded” and “credited
to 2019 estimated tax”); id. at 1 (depicting a Form 1139 that lists $737,778 as “overpayment
of tax due to a claim of right adjustment under section 1341(b)(1)”). Exhibit F is not
paginated.

                                            20
The Court cannot resolve factual disputes on a motion to dismiss.64 When such a

motion turns on the Court’s characterization of a disputed fact and its application to

a contract, the plaintiff’s burden is to plead sufficient facts to support its

characterization.65 Plaintiff has done so here. While I cannot resolve the dispute

over whether the AMT Surplus was truly a qualifying overpayment on the record

before me, Plaintiff’s characterization of it as an IRS-deemed 2019 overpayment is

64
   See, e.g., Highland Pipeline Leasing, LLC v. Magellan Pipeline Co., L.P., 2021 WL
1292794, at *3 (Del. Super. Apr. 6, 2021) (“The purpose of a motion to dismiss is to test
the sufficiency of the complaint, not to resolve dispute[d] issue[s] of material facts or
decide the merits of the case.” (citing Belfint, Lyons, & Shuman v. Potts Welding & Boiler
Repair, Co., Inc., 2006 WL 2788188, at *2 (Del. Super. Aug. 28, 2006)); Cantor
Fitzgerald, L.P. v. Chandler, 1998 WL 44981, at *1 (Del. Ch. Jan. 27, 1998) (“As the
parties dispute many of the facts material to the issue of whether Defendants’ consent to
suit should be disregarded and the action dismissed for lack of personal jurisdiction or on
the grounds of forum non conveniens, it would be inappropriate for me to grant Defendants’
motion to dismiss. On these bases, the motion is denied.”); Henry v. Middletown Farmers
Mkt., LLC, 2014 WL 4426311, at *2 (Del. Super. Sept. 8, 2014) (denying motion to dismiss
in the face of a factual dispute).
65
   See Hudson v. Bank of Am., N.A., 2014 WL 4693242, at *7 (Del. Super. Sept. 16, 2014)
(“Only when under no reasonable interpretation of the facts alleged could the complaint
state a claim for which relief may be granted should a Court dismiss the complaint. The
parties may indeed be in disagreement as to whether the Tender Letter constituted tender,
but Plaintiff has pled facts sufficient to sustain the claims in the Complaint.” (footnote and
internal quotation marks omitted) (quoting Boyce Thompson Inst. v. MedImmune, Inc.,
2009 WL 1482237, at *4 (Del. Super. May 19, 2009))). In Hudson, the Superior Court
similarly considered a motion to dismiss based on the defendant’s alternative
characterization of the relevant facts. There, the parties disagreed about whether plaintiff’s
purported “Tender Letter” was a sufficient tender of his remaining loan payments under
both the parties’ mortgage agreement and relevant statutory law. Id. at *4–7. The
defendant bank moved to dismiss the plaintiff’s claims by characterizing the Tender Letter
as a mere offer to pay, not a tender of payment. Id. at *6–7. The Court rejected the motion,
finding the plaintiff had pled sufficient facts to support his characterization of the letter as
a tender of the necessary payment. Id. at *7.

                                              21
sufficient at this stage. In other words, Plaintiff’s breach theory is reasonably

conceivable.66 Additional discovery, perhaps including expert testimony, will be

necessary to determine if Plaintiff will succeed on the merits.

       The Motion is denied with respect to Count I.

              B.     Count III States A Claim For Breach Of Section 8.08(a)(ii).

       Count III alleges Buyer breached Section 8.08(a)(ii) when it carried the NOLs

back instead of forward, both in the 2019 Tax Period and in the Forms 1139. It also

includes an “alternative” claim alleging Buyer breached the oral NOL Carryback

Arrangement, wherein the Plaintiff agreed to permit Buyer to carry the NOLs back

if Buyer agreed to give the proceeds of those NOL carrybacks to Plaintiff. I conclude

the Amended Complaint sufficiently pleads both claims.

                     1.     Carrying     The     NOLs           Back      Breached
                            Section 8.08(a)(ii).

       Section 8.08(a)(ii) deals with the Buyer Prepared Returns. The first two

sentences require Buyer to prepare returns for pre-closing tax periods just as Sellers

had before the Merger:

66
  Admittedly, this factual question has elements of tax law wrapped into it. But I cannot
resolve this question on the pleadings alone. So, like the Superior Court in Hudson, I
decline to reject Plaintiff’s theory as inconceivable and permit it to move into discovery to
support its characterization. See id.

                                             22
           Buyer, at its sole cost and expense, shall cause each Target Company
           to prepare and timely file all Tax Returns (other than Stockholder
           Prepared Returns) of such Target Company (the “Buyer Prepared
           Returns”). To the extent that a Buyer Prepared Return relates to a Pre-
           Closing Tax Period, such Tax Return shall be prepared on a basis
           consistent with existing procedures and practices and accounting
           methods.67

The second two sentences describe a comment and revision procedure, wherein

Buyer must provide drafts of the Buyer Prepared Returns to Plaintiff, Plaintiff may

respond with comments on those drafts, and Buyer is obliged to incorporate

Plaintiff’s reasonable comments:

           At least thirty (30) days prior to the due date of any Buyer Prepared
           Return that relates to a Pre-Closing Tax Period, Buyer shall provide a
           draft of such Tax Return to the Stockholders’ Representative for the
           Stockholders’ Representative’s review and comment. Buyer shall
           cause the applicable Target Company to incorporate any reasonable
           comments made by the Stockholders’ Representative in the Tax Return
           actually filed.68

Plaintiff claims Buyer’s decision to carry the NOLs back, rather than forward,

breached Section 8.08(a)(ii)’s second sentence because it was inconsistent with the

Company’s “existing procedures and practices and accounting methods” at the time

of the Merger Agreement. I agree.

67
     Merger Agr. § 8.08(a)(ii) (emphasis added) (underline in original).
68
     Id.

                                              23
       The plain meaning of the phrase “existing procedures and practices and

accounting methods,” as defined in common dictionaries, is broad.69 A “procedure”

is a particular way of accomplishing something, sometimes characterized by a series

of steps or an established way of doing things.70 A “practice” is the way a party

regularly behaves, or the usual way of doing something.71 An “accounting method”

refers to the specific rules or system a company uses to determine and record its

financial information, especially for tax purposes.72 It is undisputed that before the

Merger, the Company only carried its NOLs forward when it prepared its tax

69
   “Under well-settled case law, Delaware courts look to dictionaries for assistance in
determining the plain meaning of terms which are not defined in a contract,” as
“dictionaries are the customary reference source that a reasonable person in the position of
a party to a contract would use to ascertain the ordinary meaning of words not defined in
the contract.” Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del.
2006).
70
       See       Procedure,       Merriam-Webster       Dictionary,       https://www.merriam-
webster.com/dictionary/procedure (last visited June 29, 2022) (“1a: a particular way of
accomplishing something or of acting . . . 2a: a series of steps followed in a regular definite
order . . . 3a: a traditional or established way of doing things”); see also Procedure, Black’s
Law Dictionary (11th ed. 2019) (“1. A specific method or course of action.”).
71
       See        Practice,     Merriam-Webster           Dictionary,     https://www.merriam-
webster.com/dictionary/practice (last visited June 29, 2022) (“a: actual performance or
application . . . b: a repeated or customary action . . . c: the usual way of doing something”);
see also Practice, Black’s Law Dictionary (11th ed. 2019) (“3. An established custom or
prescribed usage.”).
72
   See Accounting Method, Black’s Law Dictionary (11th ed. 2019) (“A system for
determining income and expenses, profit and loss, asset value, appreciation and
depreciation, and the like, esp. for tax purposes.”).

                                              24
returns.73 In other words, carrying NOLs forward, not back, was the Company’s

existing practice at the time of the Merger. Plaintiff’s allegation that Buyer chose to

carry the NOLs back alleges the Buyer Prepared Returns were inconsistent with the

Company’s existing practices. This states a claim for breach of Section 8.08(a)(ii).

          This interpretation is consistent with other Delaware cases interpreting similar

language in merger agreements.           Parties sometimes have reason to prioritize

consistent application of accounting principles; when they do, that agreement on

consistency will be respected. In Chicago Bridge & Iron Co. N.V. v. Westinghouse

Electric Co. LLC,74 for example, the merger agreement’s “true up” process required

both the buyer and the seller to calculate the target’s net working capital “in

accordance with United States generally accepted accounting principles (‘GAAP’)

applied on a consistent basis throughout the periods indicated and with the Agreed

Principles.”75 The “Agreed Principles” further required that working capital “will

be determined in a manner consistent with GAAP, consistently applied by [the

target] in preparation of the financial statements of the Business, as in effect on the

Closing Date,” and that calculation “shall be based on the past practices and

73
  Indeed, this was the Company’s only option. The CARES Act, which allowed taxpayers
to carry their NOLs back, passed in March 2020, after the Merger Agreement was signed
in December 2019 and the Merger closed in January 2020. See Am. Compl. ¶¶ 5, 17–18.
74
     166 A.3d 912 (Del. 2017).
75
     Id. at 922.

                                             25
accounting principles, methodologies and policies applied by [target] and its

subsidiaries.”76 The parties used different accounting methods, to tremendously

different results. The buyer asserted the target’s historical financial statements

“were not based on a proper application of [GAAP]” and contended the contract

language allowed the buyer to prepare the calculations in a manner it viewed as

GAAP compliant, even though that method was inconsistent with the target’s past

practices.77 The Chicago Bridge Court rejected that argument and held that the

contract language required consistent treatment, even in the face of tension with the

buyer’s view of GAAP.

           The phrases “applied on a consistent basis throughout the periods
           indicated” and “based on the past practices and accounting principles,
           methodologies and policies” both require consistent accounting
           treatment. They recognize that GAAP allows for a variety of treatments
           and different accountants may come to differing views on what
           constitutes acceptable GAAP treatment, but for the purpose of these
           calculations, both [the buyer] and [the seller] must hold the accounting
           approach constant. Thus, the True Up and the Agreed Principles work
           together to establish a requirement of consistency.78

           Parties may instead prioritize something other than consistency, like a

particular accounting principle.          In Golden Rule Financial Corporation v.

Shareholder Representative Services LLC,79 the true up provision required the

76
     Id.
77
     See id. at 915.
78
     Id. at 929.
79
     2021 WL 305741 (Del. Ch. Jan. 29, 2021), aff’d, 267 A.3d 382 (Del. 2021).

                                             26
Buyer’s post-closing financial statements be prepared “in accordance with the

Accounting Principles, consistently applied.”80 The buyer in Golden Rule Financial

argued that, consistent with Chicago Bridge, this language required a consistent

approach to the company’s accounting principles, even if that was not the technically

correct approach.81 But the Court found that the company’s “Accounting Principles”

compelled adherence to a particular identified accounting method.82 The Golden

Rule Financial Court concluded this specific reference compelled the buyer to

prioritize applying that method correctly, rather than consistently, stressing that the

parties “bargained for the application of a specific accounting principle.”83

          Section 8.08(a)(ii) more closely resembles the Chicago Bridge provision than

the Golden Rule Financial provision. It does not reference GAAP, or any particular

accounting method or set of rules. It only mentions the Company’s past practices.

By using this language, the parties prioritized historical consistency over flexibility

or the correct application of a set of external rules.          As in Chicago Bridge,

prioritizing consistency “makes sense when considering the whole point of these

80
     Id. at *2.
81
     Id. at *5–6.
82
  Id. (noting the Accounting Principles specifically state “[t]he Closing Balance Sheet and
Tangible Net Worth will reflect the impact of the requirements of [a particular accounting
method]” and concluding the plain meaning of this language “requires [the accounting
method] to be applied correctly”).
83
     Id. at *9.

                                            27
statements.”84 Buyer is not bound to follow Sellers’ lead for all time, but rather, only

in preparing the Company’s pre-closing tax returns for the period where Sellers

owned the Company. Because Section 8.08(j) largely gives Sellers the benefit of

the refunds generated by those tax returns, it makes sense that Sellers’ past practices

ought to govern. Section 8.08(a)(ii)’s opportunity for Sellers to comment and review

reinforces the focus on Sellers’ past practices, and underscores the primacy of the

Sellers’ preferences in preparing pre-closing tax returns.

           Defendants argue Section 8.08(a)(ii) gives them more flexibility, and only

requires them to comply with the existing tax law. But reading the Company’s

“existing procedures and practices and accounting methods” to mean something less

specific, such as “complying with the tax code” or “maximizing tax refunds,” as

Buyer suggests, would be to render the provision meaningless. This Court in AB

Stable VIII LLC v. Maps Hotels and Resorts One LLC85 cautioned against such a

broad interpretation of an “ordinary course” obligation. There, the seller argued it

behaved consistently with past its practice by “maximizing margins given existing

demand.”86 The AB Stable Court observed “[t]he breadth of this statement shows

that it is no standard at all.”87

84
     See 166 A.3d at 929.
85
     2020 WL 7024929 (Del. Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del. 2021).
86
     Id. at *79 (alterations and internal quotation marks omitted).
87
     Id.

                                               28
        Defendants also argue this interpretation would require Buyer to “ignore

changes in the tax code.”88 This is true insofar as the changes are optional and the

past practice remains legal.89 But this rigidity does not doom the interpretation

requiring consistency with past practices. The parties chose to contract for that

consistency, not the maximization of new opportunities or even a set of accounting

rules that could leave room for varying results.90 Sophisticated parties, represented

88
     OB 27.
89
  Section 8.08(a)(ii) would not compel Buyer to break the law. For example, suppose that
instead of creating a carryback option, the CARES Act eliminated the option to carry NOLs
forward and required they be carried back. In that circumstance, Plaintiff could not be
heard to argue Section 8.08(a)(ii) would force Buyer to continue to carry NOLs back, as
doing so would be a positive violation of the law. The Merger Agreement guards against
this possibility in its recital of the Company’s existing tax policies in Section 3.11(a), which
represents the Company has always prepared its tax returns in compliance with the law.
See Merger Agr. § 3.11(a). Because part of the Company’s “existing procedures and
practices and accounting methods” already incorporate compliance with applicable law,
Buyer would not be compelled to break the law if the law changed to prohibit the
Company’s then-existing practices. Buyer would be compelled to follow the new law. No
party has argued carrying the NOLs forward instead of back would amount to a positive
violation of the law.
90
   See Golden Rule Fin., 2021 WL 305741, at *5; see also id. at *6 (“Admittedly, this
dispute involves accounting principles, which do not always lend themselves to black-and-
white conclusions about correct application.” (citing Chicago Bridge, 166 A.3d at 929, and
Alliant Techsystems, Inc. v. MidOcean Bushnell Hldgs., L.P., 2015 WL 1897659, at *8
(Del. Ch. Apr. 24, 2015))); Thor Power Tool Co. v. Comm’r, 439 U.S. 522, 544 (1979)
(noting even generally accepted accounting principles do not prescribe a single “canonical
set of rules” and instead “tolerate a range of reasonable treatments, leaving the choice
among alternatives to management” (internal quotation marks omitted)).

                                              29
by counsel, could have taken those or other paths.91 Our law respects and will

enforce that choice.

                     2.      The Motion Does Not Provide A Basis To
                             Dismiss   Plaintiff’s NOL    Carryback
                             Arrangement Claim.

         While Count III is titled “Breach of Merger Agreement § 8.08(a)(ii),” it also

contains what Plaintiff describes as an “alternative” claim: that Buyer and Plaintiff

agreed to modify the Merger Agreement to reflect the NOL Carryback Arrangement

and Buyer breached that arrangement.92 As Plaintiff tells it, Plaintiff and Buyer

agreed that in exchange for Plaintiff refraining from commenting on the Buyer

Prepared Returns and causing the NOLs to be carried forward instead of carried

back, Buyer agreed the refunds from the NOL carrybacks would go to Plaintiff.93

Defendants argue this claim should be dismissed for two reasons. First, Defendants

assert the NOL Carryback Arrangement was not supported by consideration, so the

parties could not form a contract.94 And second, Defendants argue the Merger

91
  For example, in Edinburgh Holdings, Inc. v. Education Affiliates, Inc., the parties agreed
the seller was obliged to “conduct its activities in a reasonable manner consistent with its
past practices,” but, “notwithstanding” that restriction, “will be afforded the ability to make
and execute strategies and plans to grow their business with full cooperation from Buyer.”
2018 WL 2727542, at *14 (Del. Ch. June 6, 2018) (alterations omitted). The Court noted
the “notwithstanding” language gave the Sellers flexibility to take action “even if not
consistent with its past practices.” Id. (internal quotation marks omitted).
92
     See Am Compl. ¶¶ 93–95.
93
     See id. ¶ 93.
94
     See OB 29–30; RB 15.

                                              30
Agreement’s prohibition on oral modifications bars Plaintiff’s claim.95 In the

interests of judicial economy, I consider Plaintiff’s alternative claim and conclude it

survives the Motion.

         Defendants’ primary argument, that the NOL Carryback Arrangement lacks

consideration, falls readily. “It is the blackest of black-letter law that an enforceable

contract requires an offer, acceptance, and consideration. Consideration is a benefit

to a promisor or a detriment to a promisee pursuant to the promisor’s request.”96

Defendants’ consideration argument relies on their contractual argument that

Section 8.08(a)(ii) does not require Buyer to carry the NOLs forward. In that

universe, Defendants contend, Plaintiff’s agreement to allow Buyer to carry the

NOLs back and surrender its right to comment on the Buyer Prepared Returns was

not consideration, because Buyer could have carried the NOLs back anyway.97 For

the reasons explained above, I disagree with Defendants’ reading of

95
     See OB 30–32; RB 14.
96
  Cigna Health & Life Ins. Co. v. Audax Health Sols., Inc., 107 A.3d 1082, 1088 (Del. Ch.
2014) (alterations and internal quotation marks omitted) (quoting James J. Gory Mech.
Contracting, Inc. v. BPG Residential P’rs V, LLC, 2011 WL 6935279, at *2 (Del. Ch.
Dec. 30, 2011)); see Cont’l Ins. Co. v. Rutledge & Co., 750 A.2d 1219, 1232 (Del. Ch.
2000).
97
     See OB 29–30.

                                           31
Section 8.08(a)(ii). Plaintiff’s promise to forgo its contractual rights, a detriment to

Plaintiff, is valid consideration to support the NOL Carryback Arrangement.98

         Defendants’ second argument, that the Merger Agreement’s prohibition on

oral modification bars Plaintiff’s claim, is a bit harder to resolve.                  Plaintiff

acknowledges the Merger Agreement does not allow for oral modification.99 Section

12.11 provides:

98
   See, e.g., Rsch. & Trading Corp. v. Powell, 468 A.2d 1301, 1305 (Del. Ch. 1983)
(holding employer’s forbearance from exercising its right to terminate an at-will employee
is valid consideration); see also Se. Chester Cty. Refuse Auth. v. BFI Waste Servs. of
Pennsylvania, LLC, 2015 WL 3528260, at *3 (Del. Super. June 1, 2015) (noting “a promise
to forbear enforcement and to dismiss a lawsuit is valid consideration for an agreement”
(internal quotation marks omitted) (quoting Hensel v. U.S. Elecs. Corp., 262 A.2d 648, 650
(Del. 1970)). To be clear, there was no promise not to sue alleged here; Plaintiff’s promise
to not press its rights under Section 8.08(a)(ii) is itself sufficient consideration without such
a promise.
99
     See Am Compl. ¶ 93 n.10.

                                               32
          Amendments and Waivers. No amendment of any provision of this
          Agreement shall be valid unless the same shall be in writing and signed
          by Parent, Buyer, Merger Sub and the Stockholders’ Representative;
          provided that the proviso to Section 12.02, this proviso to Section 12.11
          and Section 12.18 may not be amended in a manner adverse to the
          interests of any Debt Financing Source without the prior written
          consent of such Debt Financing Sources that are commitment parties
          under any commitment letter or any definitive financing agreement to
          provide Debt Financing. No waiver by any Party of any default,
          misrepresentation or breach of warranty or covenant hereunder,
          whether intentional or not, shall be deemed to extend to any prior or
          subsequent default, misrepresentation, or breach of warranty, covenant
          or agreement hereunder or affect in any way any rights arising by virtue
          of any prior or subsequent such occurrence. In furtherance of the
          cooperation covenant set forth in Section 7.05, the consent of the Parties
          to any amendment to Section 12.02 (No Third Party Beneficiaries);
          Section 12.11 (Amendments and Waivers) and Section 12.18 (Lender
          Matters) to incorporate customary comments of any Debt Financing
          Source that is a commitment party under any commitment letter to
          provide Debt Financing shall not be unreasonably withheld,
          conditioned or delayed.100

Plaintiff does not argue the NOL Carryback Arrangement was ever reduced to

writing.101 In a footnote in the Amended Complaint, Plaintiff nevertheless suggests

it should be allowed to avoid this clear prohibition because Defendants waived

Section 12.11.102 While Plaintiff will carry a heavy burden to prove this theory, I

cannot foreclose it at this early stage.

100
      Merger Agr. § 12.11.
101
      See Am Compl. ¶ 93 n.10.
102
      See id.

                                             33
      Delaware courts recognize that “contract provisions deeming oral

modifications unenforceable can be waived orally or by a course of conduct just like

any other contractual provision.”103 Establishing waiver of such a provision thus

requires the same elements described above: “(1) that there is a requirement or

condition to be waived, (2) that the waiving party must know of the requirement or

condition, and (3) that the waiving party must intend to waive that requirement or

condition.”104 Though permissible, “oral waivers of written contracts are not favored

for a host of pragmatic and public policy reasons.”105 “There must be a clear

intention to alter the express terms.”106 An oral waiver thus “must be of such

specificity and directness that there is no doubt regarding the parties’ intention to

change the formally solemnized written contract.”107

103
    Symbiont.io, Inc. v. Ipreo Hldgs., LLC, 2021 WL 3575709, at *52 (Del. Ch.
Aug. 13, 2021) (internal quotation marks omitted) (quoting Cont’l Ins., 750 A.2d at 1229);
accord Pepsi-Cola Bottling Co. of Asbury Park v. Pepsico, Inc., 297 A.2d 28, 33
(Del. 1972) (“The prohibition against amendment except by written change may be waived
or modified in the same way in which any other provision of a written agreement may be
waived or modified, including a change in the provisions of the written agreement by [t]he
course of conduct of the parties.”).
104
   Bantum, 21 A.3d at 51 (Del. 2011) (internal quotation marks omitted) (quoting
AeroGlobal, 871 A.2d at 444).
105
   Symbiont.io, 2021 WL 3575709, at *52 (internal quotation marks omitted) (quoting
Tunney v. Hilliard, 2008 WL 3975620, at *5 (Del. Ch. Aug. 20, 2008), aff’d, 970 A.2d 257
(Del. 2009)).
106
   Simon Prop. Gp., L.P. v. Brighton Collectibles, LLC, 2021 WL 6058522, at *3 (Del.
Super. Dec. 21, 2021).
107
   Symbiont.io, 2021 WL 3575709, at *52 (internal quotation marks omitted) (quoting
Reserves Dev. LLC v. Severn Sav. Bank, FSB, 2007 WL 4054231, at *8 (Del. Ch.
Nov. 9, 2007), aff’d, 961 A.2d 521 (Del. 2008)); see also Simon Prop., 2021 WL 6058522

                                           34
         That said, waiver is a fact-intensive inquiry and Delaware courts have been

reluctant to decide waiver on the pleadings. At the pleading stage, where this Court

must read the facts in the light most favorable to the plaintiff and make all reasonable

inferences in its favor, the Superior Court has twice declined to dismiss claims that

a no-oral-modification clause was orally waived as part of an oral modification. In

Good v. Moyer108 and Simon Property Group, L.P. v. Brighton Collectibles, LLC,109

the plaintiff alleged an oral modification to a written contract in the face of a

provision prohibiting oral modifications, and argued the defendant waived the

protections of that provision by silence and conduct inconsistent with that

requirement.110 Both cases concluded that where an oral modification was pled, it

was reasonably conceivable that the parties also waived the no-oral-modification

provision.111

         The NOL Carryback Arrangement fits that mold. Plaintiff sufficiently alleges

that Buyer, through Berger, and Sellers, through Sarafa at Century Park, orally

agreed that if Plaintiff promised to forgo its right to comment on the Buyer Prepared

at *3 (discussing the “specificity and directness” requirement in evaluating a motion to
dismiss).
108
      2012 WL 4857367 (Del. Super. Oct. 10, 2012).
109
      2021 WL 6058522.
110
      Good, 2012 WL 4857367, at *5–6; Simon Prop., 2021 WL 6058522, at *3–4.
111
      Good, 2012 WL 4857367, at *5–6; Simon Prop., 2021 WL 6058522, at *3–4.

                                           35
Returns and let Buyer carry the NOLs back, Buyer would remit the benefit to

Plaintiff once the Company received the refunds.112 At this early stage, it is

reasonably conceivable that Buyer also waived Section 12.11.                  The strenuous

evidentiary standard for an oral waiver of a no-oral-modification provision awaits

Plaintiff after discovery.113

         The Motion is denied as to Count III.

                C.     Counts II And IV Fail To State Claims For Breach Of The
                       Implied Covenant Of Good Faith And Fair Dealing.

         The Amended Complaint asserts two implied covenant theories, one in

Count II and the other in Count IV. I conclude neither states a claim because

Plaintiff has not identified a gap in the Merger Agreement that requires implied

contract terms to fill it.

112
      See Am. Compl. ¶¶ 37–42, 48–49, 93.
113
      As then-Vice Chancellor Strine wrote:
         The law has long struggled with the question of whether a contractual
         provision requiring written modifications or waivers can itself be modified
         by the oral statements or conduct of a party. . . . [O]ur law has embraced a
         handy tool of the common law jurist: the ability to increase the level of proof
         the plaintiff must submit in order to prevail. Arguably, our law has done that
         in this area by upping that level of proof from a mere preponderance to clear
         and convincing evidence, a move that also has been made in situations when
         a party seeks to prove the existence of a partially performed oral contract in
         derogation of the statute of frauds.
Eureka VIII LLC v. Niagara Falls Hldgs. LLC, 899 A.2d 95, 109–10 (Del. Ch.
June 6, 2006) (footnotes omitted).

                                               36
       “The implied covenant of good faith and fair dealing inheres in 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.”114 “To state a claim for breach of

the implied covenant, [Plaintiff] must allege a specific implied contractual

obligation, a breach of that obligation by the defendant, and resulting damage to

[Plaintiff].”115

       “[I]mposing an obligation on a contracting party through the covenant of good

faith and fair dealing is a cautious enterprise and instances should be rare,”116

especially “when the contract easily could have been drafted to expressly provide

for it.”117 “It must be clear from what was expressly agreed upon that the parties

who negotiated the express terms of the contract would have agreed to proscribe the

114
   Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009) (internal quotation
marks omitted) (quoting Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del.
2005)).
115
   Wiggs v. Summit Midstream P’rs, LLC, 2013 WL 1286180, at *9 (Del. Ch.
Mar. 28, 2013) (internal quotation marks omitted) (quoting Cantor Fitzgerald, L.P. v.
Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998)).
116
   Superior Vision Servs., Inc. v. ReliaStar Life Ins. Co., 2006 WL 2521426, at *6 (Del.
Ch. Aug. 25, 2006) (quoting Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027, at *28
(Del. Ch. Apr. 29, 2005)).
117
   Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146 (Del. Ch. 2009) (quoting
Allied Cap. Corp. v. GC–Sun Hldgs., L.P., 910 A.2d 1020, 1035 (Del. Ch. 2006)).

                                          37
act later complained of had they thought to negotiate with respect to that matter.”118

The implied covenant “cannot be used to circumvent the parties’ bargain, or to create

a free-floating duty unattached to the underlying legal documents.”119

         Thus, an essential predicate for the application of the implied covenant is the

existence of a “gap” in the relevant agreement.120 “The implied covenant provides

a limited gap-filling tool that allows a court to impose contractual terms to which the

parties would have agreed had they anticipated a situation they failed to

[address].”121 Determining whether the implied covenant applies turns on the

language of the contract itself.122 A claim for breach of the implied covenant cannot

be based “on conduct authorized by the terms of the agreement.”123 The Court relies

on the implied covenant “only in that narrow band of cases where the contract as a

118
   Lonergan v. EPE Hldgs., LLC, 5 A.3d 1008, 1018 (Del. Ch. 2010) (alterations omitted)
(quoting Katz v. Oak Indus. Inc., 508 A.2d 873, 880 (Del. Ch. 1986)).
119
   Dunlap, 878 A.2d 434, 441 (Del. 2005) (alterations, footnote, and internal quotation
marks omitted) (compiling sources and quoting Glenfed Fin. Corp., Com. Fin. Div. v.
Penick Corp., 647 A.2d 852, 858 (N.J. Super. Ct. App. Div. 1994)).
120
  See Fortis Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *4 (Del.
Ch. Jan. 30, 2015).
121
      Gerber v. EPE Hldgs., LLC, 2013 WL 209658, at *10 (Del. Ch. Jan. 18, 2013).
122
   Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 183 (Del. Ch. 2014), aff’d,
2015 WL 803053 (Del. Feb. 26, 2015) (ORDER).
123
   Dunlap, 878 A.2d at 441; see also Allen, 113 A.3d at 183 (stating the covenant cannot
be used to “contradict[] a clear exercise of an express contractual right” (quoting Nemec v.
Shrader, 991 A.2d 1120, 1127 (Del. 2010))).

                                            38
whole speaks sufficiently to suggest an obligation and point to a result, but does not

speak directly enough to provide an explicit answer.”124

                        1.    Count II Fails To State A Claim.

            In Count II, Plaintiff alleges Buyer had an “implied contractual obligation

under the Merger Agreement to act in good faith and to not act so as to deprive

Plaintiff . . . of the benefits thereto.”125 Plaintiff asserts that the Merger Agreement

makes plain that Buyer had an obligation “not to take for themselves the economic

benefits of the transaction tax benefits, which the Merger Agreement specified were

for the account of Plaintiff (and the Stockholders and Optionholders) and not to

engage in conduct that would directly or indirectly violate that directive.”126

Specifically, Plaintiff asserts “[t]he parties did not foresee a post-Closing tax law

change that permitted NOL carrybacks to prior years, given existing tax law at the

time of contracting only permitted NOLs to be carried forward to future years.”127

It argues that this unexpected change created a gap in the Merger Agreement, which

“did not address NOL carrybacks.”128

124
      Lonergan, 5 A.3d at 1018 (quoting Airborne Health, 984 A.2d at 146).
125
      Am. Compl. ¶ 79.
126
      Id.
127
      AB 35 (citing Am. Compl. ¶ 74).
128
      Id. 36.

                                             39
        It is true that the Merger Agreement provides that transaction tax benefits

should go to the Sellers. It is true that the Merger Agreement does not specifically

address NOL carrybacks and carryforwards. It is true that Section 8.08(j) only remits

tax refunds from the 2019 Tax Period and the 2020 Stub Period to Plaintiff. And it

is true that the CARES Act’s result of NOL carrybacks for transaction deductions,

generating refunds from previous years, was not contemplated when the Merger

Agreement was negotiated and executed. But Section 8.08(a)(ii) simply does not

permit Buyer to carry NOLs back at all in the Buyer Prepared Returns, as doing so

was inconsistent with the Company’s pre-Merger practices.              As explained,

Section 8.08(a)(ii) compels consistency in tax treatment even in the wake of changes

in methods or opportunities; a change in opportunities does not create a gap because

the provision tells the parties to stay the course. CARES Act carrybacks do not

create a gap because Section 8.08(a)(ii) tells Buyer how to respond.

        And if Plaintiff prevails on its claim that the Merger Agreement was modified

to permit NOL carrybacks, then those contractual terms will govern and the benefits

will flow to Plaintiff accordingly. There will be no gap for the implied covenant to

fill.

        The Motion is granted with respect to Count II.

                                          40
                      2.     Count IV Fails To State A Claim.

         In Count IV, Plaintiff alleges Buyer had an implied obligation to prepare the

Buyer Prepared Returns “on a basis consistent with the tax law existing as of the

parties’ entry into the Merger Agreement.”129 Once again, Plaintiff claims Buyer

breached this obligation by carrying NOLs back instead of forward. 130 Plaintiff

appears to present this claim in the alternative to its breach theory in Count III.131

But as I have explained, Section 8.08(a)(ii) explicitly addresses Buyer’s obligations

regarding preparing the Buyer Prepared Returns, and requires Buyer to prepare the

Buyer Prepared Returns just as the Company had prepared its pre-closing returns.

The Merger Agreement therefore does not have a gap capable of being filled by the

implied covenant on this subject.132

         Count IV goes on to claim that Buyer breached an implied obligation “to not

materially mislead Plaintiff in connection with its review and comment on the Buyer

Prepared Returns.”133 Defendants counter that this simply repackages Plaintiff’s

129
      Am. Compl. ¶ 101.
130
      See id. ¶¶ 103–05; see also AB 37–38.
131
   AB 37 (arguing Buyer’s implied obligation exist “to the extent not already required by
the express terms of the Merger Agreement”).
132
   To the extent Plaintiff would have me imply a term into the Merger Agreement requiring
compliance with prior tax law, that possibility is displaced by the contract language. As I
have explained, Section 8.08(a)(ii) fully addresses the interplay between compliance with
the tax code and Buyer’s post-Merger obligations preparing the Buyer Prepared Returns.
133
      Am. Compl. ¶ 102.

                                              41
fraud claim.134 It is true that “[t]he implied covenant generally prohibits a party from

providing false information to its contractual counterparty.”135 But even assuming

the implied covenant operated in the Merger Agreement as Plaintiff alleges, Plaintiff

has not alleged Buyer made any false statements that would have breached such a

term. As explained in more detail in my discussion of Plaintiff’s fraud claim,

Plaintiff conspicuously stops short of alleging any of Buyer’s or its affiliates’

statements were false when made. Lacking any allegation that Buyer lied to

Plaintiff, Plaintiff cannot state a claim for a breach of an implied obligation not to

lie.136

          The Motion is granted with respect to Count IV.

134
      See OB 37; RB 21.
135
   In re El Paso Pipeline P’rs, L.P. Deriv. Litig., 2014 WL 2768782, at *23 (Del. Ch.
June 12, 2014); see also id. (“Even when agreeing to a contractual relationship that either
party could terminate at will, parties generally would not grant each other the right to
commit fraud. It would be a rare party who, in the original bargaining position, would
agree that their counterparty could defraud him. Absent explicit anti-reliance language
pursuant to which a sophisticated party knowingly assumes risk, a court can presume that
the question ‘Can I lie to you?’ would have been met with a resounding ‘No.’ Proof of
fraud therefore violates the implied covenant, not because breach of the implied covenant
requires fraud, but because ‘no fraud’ is an implied contractual term.” (alterations omitted)
(quoting ASB Allegiance Real Estate Fund v. Scion Breckenridge Managing Member, LLC,
50 A.3d 434, 443 (Del. Ch. 2012), rev’d on other grounds, 68 A.3d 665 (Del. 2013))).
136
    See id. (granting summary judgment dismissing a claim for breach of an implied
obligation not to “misrepresent facts” where the plaintiffs failed to “submit[] evidence from
which a fact-finder could infer that [defendants] provided false information”).

                                             42
                 D.      Count V Fails To State A Claim For Fraud.

         Count V asserts a claim for fraud, alleging Berger’s promises to remit the tax

returns derived from NOL carrybacks to Sellers in exchange for Sellers’ agreement

not to comment on the Buyer Prepared Returns wrongfully induced Plaintiff’s

silence.137 Defendants’ Motion points out a fundamental problem: Plaintiff’s failure

to allege that Defendants made an actionable false statement.

         To survive a motion to dismiss on a claim for fraud, a plaintiff must plead:

         1) a false representation, usually one of fact; 2) the defendant’s
         knowledge or belief that the representation was false, or was made with
         reckless indifference to the truth; 3) an intent to induce the plaintiff to
         act or to refrain from acting; 4) the plaintiff’s action or inaction taken
         in justifiable reliance upon the representation; and 5) damage to the
         plaintiff as a result of such reliance.138

Court of Chancery Rule 9(b) requires that “[i]n all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with particularity.”139

137
      See Am. Compl. ¶¶ 113–14.
138
   Hauspie v. Stonington P’rs, Inc., 945 A.2d 584, 586 (Del. 2008) (alterations omitted)
(quoting Gaffin v. Teledyne, Inc., 611 A.2d 467, 472 (Del. 1992)); see also Abry P’rs V,
L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1050 (Del. Ch. 2006).
139
      Ct. Ch. R. 9(b).

                                             43
         To satisfy Rule 9(b), a complaint must allege: (1) the time, place, and
         contents of the false representation; (2) the identity of the person
         making the representation; and (3) what the person intended to gain by
         making the representations. Essentially, the plaintiff is required to
         allege the circumstances of the fraud with detail sufficient to apprise
         the defendant of the basis for the claim.140

This heightened standard for the circumstances of an alleged fraud is distinct from

state of mind and knowledge, which plaintiffs usually may aver generally.141

         Plaintiff’s fraud allegations are not based on false representations of fact;

rather, Plaintiff relies on Defendants’ and their affiliates’ promises that Plaintiff

would be paid the benefit of tax refunds from the NOL carrybacks.142 Plaintiff’s

allegations are thus best considered through the lens of “promissory fraud.” “This

Court looks with particular disfavor at allegations of fraud when the underlying

utterances take the form of unfulfilled promises of future performance.”143 Thus

when a fraud claim hinges on promissory statements, or expressions as to what will

happen in the future, a plaintiff faces a heightened burden to plead “particularized

140
   Abry P’rs, 891 A.2d at 1050 (footnotes omitted) (citing H-M Wexford LLC v. Encorp,
Inc., 832 A.2d 129, 145 (Del. Ch. 2003)).
141
      See Ct. Ch. R. 9(b).
142
    See Am. Compl. ¶¶ 113–15. To the extent Plaintiff casts statements like “Lakeview
agreed to the NOL carryback arrangement whereby Defendants would pay over the
resulting Tax Refunds to Plaintiff” as statements of fact, Plaintiff does not plead that this
statement is false or even that the arrangement fell through because Lakeview did not
approve the deal. See Am. Compl. ¶ 42; see also AB 45.
143
  Winner Acceptance Corp. v. Return on Cap. Corp., 2008 WL 5352063, at *9 (Del. Ch.
Dec. 23, 2008).

                                             44
facts that allow the Court to infer that, at the time the promise was made, the speaker

had no intention of keeping it.”144 In Grunstein v. Silva, this Court explained:

          [B]ecause the factual predicate of a promissory fraud claim is the
          speaker’s state of mind at the time the statement is made, a general
          averment of a culpable state of mind is insufficient. Instead, the
          plaintiff “must plead specific facts that lead to a reasonable inference
          that the promissor had no intention of performing at the time the
          promise was made.”145

“This is, in part, because of the general rule that ‘statements which are merely

promissory in nature and expressions as to what will happen in the future are not

actionable as fraud.’”146 “To anticipate the future and predicate falsehood upon an

act to be done or omitted at a future day would change a mere broken promise into

a fraud on the part of him who was bound to fulfill the engagement[.]”147 “[A]

144
    MicroStrategy Inc. v. Acacia Rsch. Corp., 2010 WL 5550455, at *15 (Del. Ch.
Dec. 30, 2010); see Grunstein v. Silva, 2009 WL 4698541, at *13 (Del. Ch. Dec. 8, 2009)
(stating plaintiff must allege particularized facts that infer “the speaker had no intention of
performing”); Outdoor Techs., Inc. v. Allfirst Fin., Inc., 2001 WL 541472, at *4 (Del.
Super. Apr. 12, 2001) (“Only when such statements are made with the present intention
not to perform will courts endorse a fraud claim.”); see also Winner, 2008 WL 5352063,
at *10 (“[T]o state a claim for promissory fraud, a plaintiff must plead something more
than a promise, mere nonperformance, justifiable reliance, damages, and a general
averment of a culpable state of mind. To assert a claim for promissory fraud, the plaintiff
also must plead specific facts that lead to a reasonable inference that the promissor had no
intention of performing at the time the promise was made.” (footnote omitted) (citing
Berdel, Inc. v. Berman Real Estate Mgmt., Inc., 1997 WL 793088, at *8–9 (Del. Ch.
Dec. 15, 1997))).
145
      Grunstein, 2009 WL 4698541, at *13 (quoting Winner, 2008 WL 5352063, at *10).
146
      Id. (citing Outdoor Techs., 2001 WL 541472, at *4).
147
      Id. (citation omitted).

                                              45
party’s failure to keep a promise does not prove the promise was false when

made.”148

          Despite repeatedly alleging Defendants or their affiliates made statements

promising to remit the tax returns derived from NOL carrybacks to Sellers, Plaintiff

does not ever allege these promises were false. In fact, Plaintiff conspicuously

tiptoes around such an allegation. For example, Plaintiff alleges:

          Berger stated that Lakeview would most likely agree to an NOL
          carryback arrangement whereby if Sellers agreed to go along with the
          Company carrying back the transaction deductions over five years and
          refrain from exercising their right under the Merger Agreement to
          comment on the Buyer Prepared Returns to require the Company to
          carry the transaction deductions forward, Buyer would pay over the Tax
          Refunds derived from those loss carrybacks to Sellers.149

In the next paragraph, Plaintiff alleges Berger told Sarafa that Defendants’

accountants “also agree that the benefit goes back to the seller.”150 Plaintiff similarly

alleges Lakeview, Buyer’s affiliate, agreed to the NOL Carryback Arrangement.151

The Amended Complaint summarizes several of these statements in a single

paragraph152 and then alleges:

148
      Id. (quoting Berdel, 1997 WL 793088, at *8).
149
      Am. Compl. ¶ 37.
150
      Id. ¶ 38.
151
      Id. ¶ 42.
152
      Id. ¶ 6.

                                             46
          Had Plaintiff not been deceived by Defendants based on Defendants’
          representations and agreement to the carryback arrangement, Plaintiff
          would have provided reasonable comments to Defendants regarding
          Defendants’ tax returns such that the NOLs would have been carried
          forward and thus indisputably subject to the transaction tax benefit
          provision of the Merger Agreement.153

But Plaintiff stops short of alleging these representations were false or the promises

insincere. In fact, Plaintiff repeatedly alleges the parties affirmatively agreed to the

NOL Carryback Arrangement—not just that Defendants stated their agreement

attempting to deceive Plaintiff.154 Without an allegation that Defendants’ (or their

affiliates’) promises were knowingly false when made, Plaintiff cannot sustain a

fraud claim.

          Faced with this pleading deficiency, Plaintiff falls back on its argument that

the fact Defendants ultimately broke their alleged promises ought to support a

reasonable inference that they never intended to follow through.155 But again, “a

party’s failure to keep a promise does not prove the promise was false when

made.”156 Without particularized facts to support that inference, Plaintiff cannot

state a fraud claim.157

153
      Id. ¶ 8.
154
      E.g., id. ¶¶ 5, 6, 44, 93, 112.
155
      See AB 45–46.
156
      Grunstein, 2009 WL 4698541, at *13 (quoting Berdel, 1997 WL 793088, at *8).
157
  See MicroStrategy, 2010 WL 5550455, at *15; Grunstein, 2009 WL 4698541, at *13;
Outdoor Techs., 2001 WL 541472, at *4; Winner, 2008 WL 5352063, at *10.

                                            47
         This fate for Plaintiff’s fraud claim does not mean Defendants’ broken

promise is beyond Plaintiff’s reach. I have accepted Plaintiff’s allegation that

Defendants sincerely promised to remit the tax returns. This allegation forms the

basis of an oral contract, the NOL Carryback Arrangement, a claim for breach of

which survives the Motion in Count III. And, as explained below, an alternative

claim for unjust enrichment based on the same facts also survives the Motion in

Count VI. But lacking particularized allegations asserting or supporting a reasonable

inference that “at the time the promise was made, the speaker had no intention of

keeping it,”158 Plaintiff cannot pursue a fraud claim.

         The Motion is granted with respect to Count V.

               E.     Count VI States A Claim For Unjust Enrichment.

         Count VI alleges Defendants were wrongfully enriched when they retained

the tax refunds to Plaintiff’s detriment.159 Plaintiff’s unjust enrichment claim

presents a similar theory to its breach of contract claims in Counts I and III. On that

basis, Defendants argue Count VI should be dismissed because the parties’ contracts

comprehensively govern Plaintiff’s claim.160 Plaintiff argues it should be permitted

158
      MicroStrategy, 2010 WL 5550455, at *15.
159
      See Am. Compl. ¶¶ 118–22.
160
      OB 47–48; RB 28–30.

                                           48
to maintain its unjust enrichment claim in the alternative because Defendant is

pressing the position that the parties’ oral agreement is unenforceable.161

         “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.”162 It is “a theory of recovery to remedy

the absence of a formal contract.”163 Under Delaware law, the elements of unjust

enrichment are (1) an enrichment, (2) an impoverishment, (3) a relation between the

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

of a remedy provided by law.164

         Defendants’ Motion is premised on an important threshold question:

“whether a contract already governs the relevant relationship between the parties.”165

If the parties’ relationship is comprehensively governed by contract, a claim for

unjust enrichment will be dismissed because the “contract is the measure of

161
      AB 56.
162
    Doberstein v. G-P Indus., Inc., 2015 WL 6606484, at *6 (Del. Ch. Oct. 30, 2015)
(internal quotation marks omitted) (quoting Kuroda, 971 A.2d at 891–92).
163
  Choupak v. Rivkin, 2015 WL 1589610, at *20 (Del. Ch. Apr. 6, 2015) (internal quotation
marks omitted) (quoting ID Biomedical Corp. v. TM Techs., Inc., 1995 WL 130743, at *15
(Del. Ch. Mar. 16, 1995)).
164
      Nemec, 991 A.2d at 1130.
165
    BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL
264088, at *7 (Del. Ch. Feb. 3, 2009) (citing Bakerman v. Sidney Frank Importing Co.,
Inc., 2006 WL 3927242, at *18 (Del. Ch. Oct. 10, 2006)); accord Metcap Sec. LLC v. Pearl
Senior Care, Inc., 2009 WL 513756, at *5 (Del. Ch. Feb. 27, 2009), aff’d, 977 A.2d 899
(Del. 2009) (TABLE).

                                            49
plaintiffs’ right.”166 But “[i]f the validity of that agreement is challenged . . . claims

of unjust enrichment may survive a motion to dismiss.”167 Defendants question the

validity of one of the contracts on which Plaintiff bases its claims, namely, the

alleged oral NOL Carryback Arrangement. Because this decision cannot resolve the

gating issue of whether Plaintiff can show a valid oral contract, Plaintiff’s unjust

enrichment claim survives in the alternative.

         The Motion is denied as to Count VI.

                F.   The Motion Does Not Assert A Basis To Dismiss Count VII’s
                     Indemnification Claim.

         Count VII seeks indemnification under Section 11.03(a) of the Merger

Agreement.168 Under that provision, Buyer must indemnify Plaintiff for, among

other things,

166
  Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del. 1979); accord Kuroda, 971
A.2d at 891.
167
    Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2014 WL 6703980,
at *27 (Del. Ch. Nov. 26, 2014) (citing Bakerman, 2006 WL 3927242, at *18); see Boulden
v. Albiorix, Inc., 2013 WL 396254, at *14 (Del. Ch. Jan. 31, 2013) (“As is typical,
[Plaintiff] has pleaded this claim in the alternative. In some circumstances, alternative
pleading allows a party to seek recovery under theories of contract or quasi-contract. This
is generally so, however, only when there is doubt surrounding the enforceability or the
existence of the contract. Courts generally dismiss claims for quantum meruit on the
pleadings when it is clear from the face of the complaint that there exists an express contract
that controls. Where, as here, doubt exists surrounding the existence of a contract, the
Court will allow [Plaintiff] to seek recovery under this theory provided the requisite
elements are adequately pleaded.” (footnote omitted) (quoting Albert v. Alex. Brown Mgmt.
Servs., Inc., 2005 WL 2130607, at *8 (Del. Ch. Aug. 26, 2005))).
168
      Am. Compl. ¶¶ 123–30.

                                              50
         From and after the Closing, Buyer and Merger Sub shall jointly and
         severally indemnify and hold harmless the Stockholders and
         Optionholders and their respective Representatives (each, a
         “Stockholder Indemnified Party”) against and in respect of any and all
         Damages resulting from (i) the breach by Buyer or Merger Sub of any
         representation or warranty made by Buyer or Merger Sub in
         ARTICLE V (Representations and Warranties of Buyer and Merger
         Sub) (in each case as such representation, warranty or statement would
         read had any references to “material,” “materiality,” or any similar
         materiality qualifications been deleted therefrom), (ii) the breach by
         Buyer or Merger Sub of any covenant or agreement to be performed by
         it hereunder, (iii) the breach by the Company of any covenant or
         agreement to be performed by it after the Closing hereunder and (iv)
         any Fraud by Buyer or Merger Sub relating to the Transactions. All
         Damages payable by Buyer and Merger Sub to the Stockholders and
         Optionholders pursuant to this Section 11.03(a) shall be paid to the
         Stockholders’ Representative on behalf of each such Stockholder and
         to the Surviving Company for further distribution to each Optionholder
         in accordance with such Person’s Indemnity Percentage Allocation. All
         Damages under this Section 11.03(a) shall be determined without
         regard to any qualifications in any such representation or warranty
         referencing the terms “materiality” or other terms of similar import or
         effect.169

The only basis the Motion asserts to dismiss Count VII is that the Amended

Complaint fails to state a predicate claim.170 Because I conclude Counts I, III, and

VI state viable predicate claims, Defendants’ argument is without merit.171

         The Motion is denied with respect to Count VII.

169
      Merger Agr. § 11.03(a).
170
      OB 48; RB 30.
171
   E.g., IAC Search, LLC v. Conversant LLC, 2016 WL 6995363, at *12 (Del. Ch.
Nov. 30, 2016) (denying motion to dismiss contractual indemnification claim where
motion to dismiss predicate claims was denied).

                                           51
      III.   CONCLUSION

      For the foregoing reasons, the Motion is GRANTED in part and DENIED in

part. The Motion is granted with respect to Counts II, IV, and V. The Motion is

denied with respect to Counts I, III, VI, and VII.

                                          52