Court Opinion

ID: 4399573
Source: CourtListenerOpinion
Date Created: 2019-05-22 21:02:52.459585+00
Date Added: 2024-06-11T14:52:21.008511
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SHAREHOLDER REPRESENTATIVE                )
SERVICES LLC, as representative of        )
the stockholders and optionholders of     )
Radixx Solutions International, Inc.,     )
                                          )
            Plaintiff/Counterclaim        )
            Defendant,                    )
      v.                                  )   C.A. No. 2018-0517-KSJM
                                          )
RSI HOLDCO, LLC and                       )
TA XII-A, L.P.,                           )
                                          )
            Defendants/Counterclaim       )
            Plaintiffs.                   )
                                          )
RSI HOLDCO, LLC and                       )
TA XII-A, L.P.,                           )
                                          )
            Third-Party Plaintiffs,       )
                                          )
      v.                                  )
                                          )
RONALD J. PERI, JAMES L.                  )
JOHNSTON, THOMAS R.                       )
ANDERSON, DENIS P. COLEMAN,               )
and JUDI LOGAN,                           )
                                          )
            Third-Party Defendants.       )

                         MEMORANDUM OPINION
                        Date Submitted: February 21, 2019
                          Date Decided: May 22, 2019

Rudolf Koch, Susan M. Hannigan, Matthew W. Murphy, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Christopher F. Robertson, Alison K. Eggers,
SEYFARTH SHAW LLP, Boston, Massachusetts; Counsel for Shareholder
Representative Services LLC, Ronald J. Peri, James L. Johnston, Thomas R.
Anderson, Denis P. Coleman, and Judi Logan.
John P. DiTomo, Jarrett W. Horowitz, MORRIS, NICHOLS, ARSHT & TUNNELL
LLP, Wilmington, Delaware; Roberto M. Braceras, Adam Slutsky, Ezekiel L. Hill,
GOODWIN PROCTER LLP, Boston, Massachusetts; Counsel for RSI Holdco, LLC
and TA XII-A, L.P.

McCORMICK, V.C.
      In September 2016, RSI Holdco, LLC acquired Radixx Solutions

International, Inc. (“Radixx”). The merger agreement provided for a $9 million

“holdback amount” to account for post-closing indemnification and set-off claims.

An entity designated by the merger agreement as the selling stockholders’

representative, Shareholder Representative Services LLC (“Representative”),

commenced this litigation to recover the holdback amount. In response, the acquirer

counterclaimed that Radixx’s founder fraudulently induced the merger. As relief,

the acquirer seeks in part to rescind the merger agreement. It also brought a third-

party claim for unjust enrichment against five (of over one hundred) of the selling

stockholders. Representative and the five selling stockholders named as third-party

defendants have moved for partial dismissal of the request for rescission and unjust

enrichment claim.

      In requesting to rescind the merger, acquirer and its affiliate ask this Court to

undo the merger agreement. Generally, a litigant seeking to rescind an agreement

must join in the lawsuit all parties to that agreement. In this case, the acquirer argues

that it need not join each Company Holder to the litigation; it need only sue

Representative to achieve rescission. This argument ignores that Representative’s

authority flows from and is limited by the merger agreement, and a claim for

rescission falls outside of the merger agreement’s four corners. The acquirer cannot

seek a remedy outside of the merger agreement from Representative, whose

                                           1
representation is solely limited to matters arising under the four corners of that

agreement. Thus, the acquirer’s request for rescission is dismissed, but without

prejudice to permit the absent sellers to be joined as parties.

         The unjust enrichment claim survives the partial motion to dismiss. Although

generally, an unjust enrichment claim cannot lie when a contract governs the parties’

relationship, in this case, the acquirer claims that the merger agreement arose from

fraud and thus does not govern the parties’ relationship. Accordingly, the claim for

unjust enrichment may proceed.

I.       FACTUAL BACKGROUND
         The facts are drawn from the Verified Counterclaims and Third-Party

Complaint,1 the documents incorporated by reference therein, and matters not

subject to reasonable dispute, including allegations admitted in the non-movants’

Answer and Affirmative Defenses.2

1
 C.A. No. 2018-0517-KSJM Docket (“Dkt.”) 13 pp. 65–95, Verified Countercls. and
Third-Party Compl. (“Third-Party Complaint”).
2
    Dkt. 13 pp. 1–64, Answer and Affirmative Defenses (“Answer”).

                                            2
         A.     Events Leading to This Litigation
         Radixx is a cloud-based provider of travel distribution and passenger service

system software.3        Ronald J. Peri founded Radixx and served as its CEO until

November 2016.4

         In September 2016, RSI Holdco, LLC (“Holdco”) acquired Radixx from its

more than one hundred stockholders (the “Company Holders”) pursuant to an

Agreement and Plan of Merger (as amended, the “Merger Agreement”).5 Under the

Merger Agreement, Holdco agreed to pay a nominal amount of $120 million. The

Merger Agreement reduced that nominal amount by applying multiple purchase

price adjustments,6 to exclude consideration attributable to a portion of Peri’s equity

that would be rolled-over into the new entity,7 and to “holdback” $9 million (the

“Holdback Amount”) to account for post-closing indemnification and set-off

3
    Answer ¶ 10; see also id. at 2 (Preliminary Statement).
4
    Third-Party Compl. ¶ 9.
5
 Dkt. 2, Verified Compl. (“Compl.”) Ex. A, Agreement and Plan of Merger; Dkt. 4, Compl.
Ex. G, Ex. 2, Amendment to Agreement and Plan of Merger.
6
  The Merger Agreement provided purchase price adjustments for closing indebtedness,
transaction expenses, working capital surplus, working capital deficit, and the excess of a
closing cash target over the closing cash. Merger Agreement § 2.06.
7
    See Answer ¶ 16; Third-Party Compl. ¶ 9.

                                               3
claims.8 Accounting for these reductions, at closing, Holdco paid approximately

$86.4 million.9

         TA XII-A, L.P. (“TA”) owns and operates Holdco.                With the Merger

Agreement, TA executed a Guaranty dated as of September 19, 2016 (“Guaranty”)

in favor and for the benefit of the Company Holders.10 Through the Guaranty, TA

promised “the full and punctual payment of the Holdback Amount required to be

paid by [Holdco] and [Radixx] in accordance with Section 3.01 of the Merger

Agreement,” subject to the terms of the Merger Agreement.11

         Post-closing, the parties disputed purchase price adjustments. As required by

the Merger Agreement, Holdco and Representative submitted the dispute to an

accountant for arbitration. In November 2017, the arbitrator issued its report,

awarding a post-closing purchase price adjustment of $1,008,114 in Holdco’s

favor.12 On January 30, 2018, Holdco filed a complaint in this Court against

Representative and all of the Company Holders seeking payment of the arbitrator’s

award as well as “‘undisputed amounts’ of $762,597” in purchase price

8
    Merger Agreement § 3.01(a).
9
    Answer ¶ 16.
10
     Dkt. 2, Compl. Ex. B.
11
     Id. § 1 (underlining in original).
12
   Dkt. 6, Compl. Ex. J, at 5. In December 2017, the arbitrator issued a revised report, but
it did not change the post-closing purchase price award. See Dkt. 6, Compl. Ex. L, at 5.

                                             4
adjustments.13 Holdco voluntarily dismissed the action after Representative and the

Company Holders made payments to Holdco.

         The voluntary dismissal of the purchase-price adjustment action did not end

the parties’ post-closing disputes. Under the Merger Agreement, Holdco was

scheduled to pay the Holdback Amount to the Company Holders in March 2018,

subject to any then-pending indemnification claims and proposed set-offs.14 A few

weeks before the deadline, Holdco submitted to Representative a “Claim Certificate”

asserting breaches of representations and warranties in the Merger Agreement and

indemnification claims.15          The Claim Certificate “estimate[d] that these

indemnifiable Losses and fraud claims will greatly exceed the $9,000,000 Holdback

Amount” and stated that the Holdback Amount would be retained in full.16

Representative objected to Holdco’s Claim Certificate, asserting that it was

“procedurally and substantively deficient” and sought “recovery for alleged losses

already adjudicated by the [arbitrator] . . . .”17 In its objection, Representative further

13
   See Answer ¶¶ 54–55, 58–59; see generally C.A. No. 2018-0071-AGB, Dkt. 1, Verified
Compl. (Del. Ch. Jan. 30, 2018). The Answer and the Third-Party Complaint provide scant
information regarding the $762,597 amounts alleged to be owed by Representative and the
Company Holders. See Answer ¶¶ 54–55, 58–59; Third-Party Compl. ¶¶ 81–82. On the
record before this Court, it is not clear whether these amounts were at issue and resolved
in the arbitration.
14
     See Merger Agreement §§ 1.01, 3.01.
15
     Answer ¶¶ 78, 80.
16
     Dkt. 6, Compl. Ex. M.
17
     Dkt. 6, Compl. Ex. N, at 1; see also Answer ¶ 88.

                                              5
asserted that Holdco had “affirmatively breached Article 9 of the Merger Agreement

relating to tax returns and tax refunds and credits . . . .”18

         Holdco continues to withhold the Holdback Amount.19 TA, as guarantor, has

likewise not paid the Holdback Amount.20

         B.     This Litigation
         On July 17, 2018, Representative commenced this litigation against Holdco

and TA.21 Representative asserts three breach of contract claims, two relating to the

Holdback Amount and one claiming that Holdco breached portions of the Merger

Agreement relating to Radixx’s 2016 tax returns.22

         On August 20, 2018, Holdco and TA answered Representative’s complaint

and asserted their third-party claims.          Holdco and TA name as defendants

Representative and five Company Holders: Peri, James Johnston, Thomas

Anderson, Denis Coleman, and Judi Logan.23 Holdco and TA assert three causes of

action against Representative and these individuals.24 Count I claims that Peri

fraudulently induced Holdco, TA, and TA’s affiliate TA Associates Management

18
     Compl. Ex. N, at 7.
19
     See Answer ¶ 3.
20
     Id. ¶¶ 93–94.
21
     See generally Dkt. 1, Compl.
22
     Id. ¶¶ 142–56.
23
     Third-Party Compl. ¶¶ 9–13.
24
     Id. ¶¶ 83–103.

                                            6
L.P. to close the merger by misrepresenting material facts.25 Count II claims that the

Company Holder defendants were unjustly enriched by the merger consideration.26

Count III claims breaches of the Merger Agreements’ representations and warranties

and as a result of the Company Holders’ failure to pay $762,597 in purchase price

adjustments.27

         On October 5, 2018, Representative and the Company Holder defendants

moved for partial dismissal of the Third-Party Complaint.28 The parties completed

briefing on the motion for partial dismissal on November 20, 2018,29 and the Court

heard oral arguments on February 21, 2019.

II.      LEGAL ANALYSIS
         Pursuant to Court of Chancery Rule 12(b)(6), Representative and the

Company Holder defendants (together, “Movants”) seek dismissal of the portion of

25
     See id. ¶¶ 83–89.
26
     See id. ¶¶ 90–97.
27
     See id. ¶¶ 81–82, 98–103.
28
  Peri answered the Third-Party Complaint and joined in Representative’s and the other
Company Holder defendants’ motion for partial dismissal. Dkt. 20, Third Party Def.
Ronald Peri’s Answer to Verified Third-Party Compl. of Countercl. Pls. and Third-Party
Pls.; Dkt. 21, Countercl. and Third-Party Defs.’ Partial Mot. to Dismiss the Verified
Compl. of Countercl. Pls. and Third-Party Pls.
29
  See Dkt. 22, Countercl. and Third Party Defs.’ Opening Br. in Supp. of Partial Mot. To
Dismiss the Verified Compl. of Countercl. Pls. and Third-Party Pls. (“Opening Br.”); Dkt.
31, Countercl. and Third-Party Pls.’ Br. in Opp’n to Partial Mot. to Dismiss (“Ans. Br.”);
Dkt. 38, Countercl. and Third Party Defs.’ Reply in Further Supp. of Partial Mot. to
Dismiss the Verified Compl. of Countercl. Pls. and Third-Party Pls. (“Reply Br.”).

                                            7
the fraudulent inducement claim against Peri (Count I) seeking rescission as well as

the unjust enrichment claim against the Company Holder defendants (Count II).30

         In deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court “accept[s]

all well-pleaded factual allegations in the [c]omplaint as true,” and “draw[s] all

reasonable inferences in favor of the plaintiff . . . .”31 “[E]ven vague allegations are

‘well-pleaded’ if they give the opposing party notice of the claim[.]” 32 The court is

neither required to “accept conclusory allegations unsupported by specific facts, nor

. . . draw unreasonable inferences in the plaintiff’s favor.”33 The Court denies the

30
  Initially, Movants also sought dismissal of Count III, arguing in their opening brief that
the Merger Agreement’s Exclusive Remedy Provision (Section 11.08) barred the breach of
contract claim. Opening Br. at 12. Based on the parties’ briefing and oral argument, the
parties now appear to agree that the relief sought by Count III is confined to the Holdback
Amount and interest, and is therefore not barred by the Exclusive Remedy Provision. See
Ans. Br. at 15; Reply Br. at 10–11; Dkt. 60, Tr. of Oral Argument on Countercl. Def.’s and
Third-Party Defs.’ Partial Mot. to Dismiss and Defs.’/Countercl. Pls.’ and Third-Party Pls.’
Mot. for Disposition of Privilege Dispute (“Oral Arg. Tr.”) at 26–29.
       Movants further sought dismissal of Count III’s assertion that the Company Holders
breached Section 2.07 of the Merger Agreement by failing to pay “a $762,597 Parent
Adjustment.” Opening Br. at 22. Movants seem to argue that this claim is barred because
the $762,597 amount was subject to the parties’ arbitration, but the argument was not well
developed in briefing or at argument. See id.; Ans. Br. at 8–9; Oral Arg. Tr. at 28–29. The
Court denies the motion on this theory without prejudice to Movants’ ability to argue that
issues or amounts subject to arbitration cannot be recovered in this action.
31
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del.
2011) (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).
32
     In re General Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006).
33
     Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009).

                                             8
motion “unless the plaintiff could not recover under any reasonably conceivable set

of circumstances susceptible of proof.”34

           A.    The Request for Rescission (Count I)
           Count I of the Third-Party Complaint “request[s] that the Court rescind the

Merger and order [Movants] to return all consideration received in connection with

the Merger, plus interest.”35        Movants argue that each Company Holder is

indispensable to a request for rescission,36 and because Holdco and TA did not join

each of the Company Holders as parties, Count I’s request for rescission must be

dismissed under Court of Chancery Rule 19.37

           Court of Chancery Rule 19 establishes a multi-step test for determining

whether absent persons are necessary or indispensable to pending litigation. First,

evaluating the criteria set forth in Rule 19(a), “the court must determine whether an

absent person should be party to the litigation.”38 If the absent persons should be

joined, then the court determines whether joinder is feasible.39 If joinder is feasible,

34
     Cent. Mortg., 27 A.3d at 536.
35
     Third-Party Compl. ¶ 89.
36
     See Opening Br. at 7.
37
  See Opening Br. at 7–11. Movants argument is in essence an argument for dismissal
pursuant to Court of Chancery Rule 12(b)(7) for failure to join a party under Court of
Chancery Rule 19.
38
     Makitka v. New Castle Cty. Council, 2011 WL 6880676, at *2 (Del. Ch. Dec. 23, 2011).
39
     Id.

                                             9
Rule 19(a) “directs the Court to order the joinder[.]”40 If joinder is not feasible, then

Rule 19(b) calls for a “balancing test whereby the Court must determine whether the

action can equitably proceed without the absent party. Where the Court finds that

the action cannot so proceed, the absent party is regarded as ‘indispensable’ and the

action must be dismissed.”41

           Turning to the first step, Rule 19(a) describes the criteria for regarding a party

as necessary for a full adjudication.42 A person should be a party to the litigation if:

“(1) in the person’s absence complete relief cannot be accorded among those already

parties, or (2) the person claims an interest relating to the subject of the action and

is so situated that the disposition of the action in the person’s absence may (i) as a

practical matter impair or impede the person’s ability to protect that interest . . . .”43

           Both of the Rule 19(a) criteria are easily met. On the face of the Third-Party

Complaint, Holdco and TA seek to rescind the Merger Agreement.44 This is extreme

relief, which cannot be accomplished absent all parties to the agreement.45 Also, the

40
  Council of Civic Orgs. of Brandywine Hundred, Inc. v. New Castle Cty., 1991 WL
279374, at *2 (Del. Ch. Dec. 26, 1991).
41
     Id.
42
     Id.
43
     Ct. Ch. R. 19(a).
44
     Third-Party Compl. ¶ 89.
45
  See generally Elster v. Am. Airlines, Inc., 106 A.2d 202, 204 (Del. Ch. 1954) (“All parties
to a contract sought to be cancelled are indispensable parties to the suit for cancellation
unless it is obvious that one not joined has no interest whatsoever in the subject matter of
the suit.”); Strassburger v. Earley, 752 A.2d 557, 578 (Del. Ch. 2000) (holding that a
                                               10
Company Holders, as recipients of consideration from the merger,46 have interests

relating to the subject of the action, the requested rescission of the merger.47

Disposition of the action without the Company Holders may impair or impede their

ability to protect their interests.

          Holdco and TA contend that joinder of the Company Holders is unnecessary

Because Representative will “fully represent the interests of the Company

Holders[.]”48 Holdco and TA argue that Representative cannot use its status as

representative for the Company Holders as both a sword and a shield by claiming

the ability to pursue claims for recovery on behalf of the Company Holders, but

rejecting the ability to defend against claims seeking recovery from the Company

Holders.49

transaction could not be rescinded because a party to the transaction was not a party the
lawsuit); Naartex Consulting Corp. v. Watt, 722 F.2d 779, 789 (D.C. Cir. 1983)
(“Numerous cases hold that ‘an action seeking rescission of a contract must be dismissed
unless all parties to the contract, and others having a substantial interest in it, can be
joined.”) (citation omitted); Bonoff v. Troy, 589 N.Y.S.2d 340, 341 (1st Dept. 1992)
(“[P]laintiff’s failure to join all of the signatories to the 1975 Shareholder Agreements as
necessary parties to the action precludes partial rescission.”) (internal citation omitted);
12A C.J.S. Cancellation of Inst. § 115 (“All parties to a contract or agreement are necessary
parties to an action to rescind it.”).
46
     Third-Party Compl. ¶ 89.
47
  For the same reasons, Holdco and TA’s alternative argument, that they should be entitled
to obtain rescission from the five individual defendants only, fails.
48
     Ans. Br. at 13.
49
     Id. at 4–6.

                                             11
         This argument misses the mark. The Representative’s authority is defined by

contract. The Merger Agreement limits the scope of Representative’s authority to

“any matter relating to or under this [Merger] Agreement.”50 Count I for fraudulent

inducement, through which Holdco and TA seek rescission, claims that the Merger

Agreement is void as a result of the alleged fraud. Holdco and TA cannot seek a

remedy outside of the scope of the Merger Agreement from Representative alone,

when Representative’s authority is limited to matters relating to or arising under the

four corners of that agreement. Holdco and TA cite to no case interpreting a similar

provision as expressly empowering a stockholder representative to defend a claim

for rescission, reach into the pockets of each Company Holder, or otherwise compel

each Company Holders to return the consideration each Company Holder received.51

50
     Merger Agreement § 11.09(a).
51
   Citing Shareholder Representative Services LLC v. Gilead Sciences, Inc., 2017 WL
1015621 (Del. Ch. Mar. 15, 2017), Holdco and TA contend that Representative has in the
past defended against such requests for relief, without joinder of stockholders. This
argument goes too far. Ans. Br. at 7–8. In Gilead Sciences, Representative defended
against, on behalf of former security holders of an acquired company, a single counterclaim
for declaratory relief regarding milestone payments under a merger agreement—not a
request for rescission or even damages from the security holders. 2017 WL 1015621, at
*15.
       Holdco’s and TA’s citations to Ballenger v. Applied Digital Solutions, Inc., 2002
WL 749162 (Del. Ch. Apr. 24, 2002), and Mercury Systems, Inc. v. Shareholder
Representative Services LLC, 2014 WL 591218 (D. Mass. Feb. 14, 2014), also do not
change this Court’s analysis. Ans. Br. at 7–8. In Ballenger, the stockholder representatives
asserted claims for breaches of a merger agreement and related agreement; the absent
parties did not face the possibility of having to repay the merger consideration. 2014 WL
591218, at *1–4. In Mercury Systems, Representative only defended against claims for
which the “sole recourse available” was an “indemnity escrow account which, by [the
                                            12
         Because the Company Holders should be joined, Rule 19(a) directs the Court

to determine whether they can be joined. Here, it appears that the unnamed

Company Holders were named as defendants in the prior purchase price adjustment

litigation filed by Holdco in this Court,52 suggesting that they can be named as

defendants in this litigation.53

         The Court thus dismisses Holdco’s and TA’s request for rescission of Count I

without prejudice to permit them to join the currently-unnamed Company Holders

as third-party defendants.54

         B.    The Unjust Enrichment Claim (Count II)
         Count II of the Third-Party Complaint asserts a claim of unjust enrichment

against the Company Holder defendants based on Peri’s alleged fraud.

acquirer’s] own admission, [was] funded to the full extent of any indemnification amount
it may be owed.” 2014 WL 591218, at *1.
52
     See C.A. No. 2018-0071-AGB, Dkt. 1, Verified Compl. (Del. Ch. Jan. 30, 2018).
53
   Although the Court need not undertake the balancing test called for by Rule 19(b)
because joinder seems feasible, that test weighs against Holdco and TA. If the absent
Company Holders cannot be named as defendants, it would inequitable to proceed with a
claim that might require them to return the merger consideration.
54
  See In re Nat’l Auto Credit, Inc. S’holders Litig., 2003 WL 139768, at *16 (Del. Ch. Jan.
10, 2003) (dismissing application to rescind agreement pursuant to Court of Chancery Rule
19); Elster, 106 A.2d at 204 (granting motion to dismiss based on failure to join
indispensable parties, but providing plaintiffs an opportunity to join those indispensable
parties as defendants).

                                            13
         Citing Metcap Securities LLC v. Pearl Senior,55 Movants contend “Holdco

and TA are not entitled to unjust enrichment because the Merger Agreement governs

the parties’ relationship and provides an adequate remedy at law[.]”56

         Under Delaware law, “[i]f a contract comprehensively governs the parties’

relationship, then it alone must provide the measure of the plaintiff’s rights and any

claim of unjust enrichment will be denied.”57           But the “contract itself is not

necessarily the measure of [the] plaintiff’s right where the claim is premised on an

allegation that the contract arose from wrongdoing (such as breach of fiduciary duty

or fraud) or mistake and the [defendant] has been unjustly enriched by the benefits

flowing from the contract.”58      And at the pleadings stage, the mere existence of a

breach of contract claim will not automatically foreclose pursuit of an unjust

55
  2009 WL 513756, at *5 (Del. Ch. Feb. 27, 2009), aff’d, 977 A.2d 899 (Del. 2009)
(TABLE).
56
     Opening Br. at 14–15.
57
  RCS Creditor Tr. v. Schorsch, 2018 WL 1640169, at *7 (Del. Ch. Apr. 5, 2018) (internal
quotation marks omitted) (quoting BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed
Martin Corp., 2009 WL 264088, at *7 (Del. Ch. Feb. 3, 2009)).
58
   Id.; see also Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2014
WL 6703980, at *27 (Del. Ch. Nov. 26, 2014) (“If the validity of that agreement is
challenged, however, claims of unjust enrichment may survive a motion to dismiss.”);
Haney v. Blackhawk Network Hldgs., Inc., 2016 WL 769595, at *9 (Del. Ch. Feb. 26, 2016)
(“Although merely suggesting that the validity of a contract may be in doubt is insufficient
to support a claim for unjust enrichment, a claim that the underlying agreement is subject
to rescission due to fraudulent conduct or omissions is sufficient to do so.”).

                                            14
enrichment claim.59 “[W]here a plaintiff pleads a right to recovery ‘not controlled

by contract’ or where “it is the [contract], itself that is the unjust enrichment[,]”

courts will permit unjust enrichment claims to proceed.60

         In this case, Holdco and TA allege that the Merger Agreement was the product

of fraud. Holdco and TA assert that they were “fraudulently induced” to “pay a

purchase price for Radixx that was in excess of a true and fair valuation of Radixx”61

and that the Company Holders were unjustly enriched by the monies they received

from the merger “in excess of a true and fair valuation of Radixx at the time the

Merger closed.”62 Because Holdco and TA have challenged the validity of the

Merger Agreement,63 the Merger Agreement does not preclude the unjust

enrichment claim from proceeding.64

59
  See also Haney, 2016 WL 769595, at *7, *9 (Del. Ch. Feb. 26, 2016) (allowing breach
of contract and unjust enrichment claims to proceed on a motion to dismiss).
60
     Great Hill, 2014 WL 6703980, at *27 (internal footnotes omitted).
61
     Third-Party Compl. ¶¶ 91–92.
62
     Id. ¶¶ 93–97.
63
   Representative and the Company Holder defendants have not moved to dismiss the
fraudulent inducement claim set forth in the Third-Party Complaint, except to the extent it
requests rescission. Accordingly, this decision assumes that the Third-Party Complaint
adequately pleads fraudulent inducement against Peri.
64
  The Exclusive Remedy Provision provided in Section 11.08 of the Merger Agreement
does not preclude the unjust enrichment claim. See JCM Innovation Corp. v. FL Acq.
Hldgs., Inc., 2016 WL 5793192, at *7 (Del. Super. Sept. 30, 2016) (“Logically, the Court
cannot, at this stage in the proceedings, use a provision of the Agreement to dismiss JCM’s
unjust enrichment claim that must rely on the theory there is no valid Agreement.”).

                                             15
         Movants further contend the unjust enrichment claim should be dismissed

because it seeks to hold stockholders personally liable for Radixx’s alleged

wrongs.65 Under Delaware law, however, “[r]estitution is permitted even when the

defendant retaining the benefit is not a wrongdoer.”66 As the Delaware Supreme

Court has stated, “[r]estitution serves to deprive the defendant of benefits that in

equity and good conscience he ought not to keep, even though he may have received

those benefits honestly in the first instance, and even though the plaintiff may have

suffered no demonstrable losses.”67 Accordingly, any request for restitution does

not require dismissal of the unjust enrichment claim. 68

65
     Opening Br. at 20.
66
     Schock v. Nash, 732 A.2d 217, 232 (Del. 1999) (internal quotation marks omitted).
67
     Id. at 232–33.
68
   Movants also argue that by seeking to disgorge merger consideration from each
Company Holder, Count III impermissibly ignores corporate formalities, and therefore
should be dismissed. Movants cite to McKesson HBOC, Inc. v. New York State Common
Retirement Fund, Inc., 339 F.3d 1087 (9th Cir. 2003), in which an acquirer argued that
merger consideration was artificially inflated by accounting improprieties. The Court
declined to permit the merger to recover from the stockholders who were theoretically
unjustly enriched by merger consideration, holding that the stockholders were not parties
nor third-party beneficiaries to the merger agreement, and that an adequate remedy of law
precluded the unjust enrichment claim. In this case, the Company Holders are each parties
to the Merger Agreement. Further, it is premature at this stage to evaluate the availability
of other legal remedies. I deny dismissal of the unjust enrichment claim on this basis.

                                             16
III.   CONCLUSION
       For the foregoing reasons, Count I’s request for rescission is dismissed

without prejudice. The motion for partial dismissal of the Third-Party Complaint is

otherwise denied.

       IT IS SO ORDERED.

                                        17