Court Opinion

ID: 9555564
Source: CourtListenerOpinion
Date Created: 2023-08-14 14:05:01.342792+00
Date Added: 2024-06-11T15:36:42.790941
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

BEAUTYCON MEDIA ABC                    )
TRUST, ACTING THROUGH                  )
SACCULLO BUSINESS                      ) C.A. No. N22C-12-143 MAA CCLD
CONSULTING, LLC, IN ITS                )
CAPACITY AS TRUSTEE OF THE             )
TRUST AND ASSIGNEE FOR THE             )
BENEFIT OF CREDITORS OF                )
ASSIGNOR BEAUTYCON MEDIA,              )
INC.,                                  )
                                       )
                  Plaintiff,           )
                                       )
            v.                         )
                                       )
NEW GENERAL MARKET                     )
PARTNERS, LLC,                         )
                                       )
                  Defendant.           )

                           Submitted: May 16, 2023
                           Decided: August 11, 2023

                   Upon Defendants’ Motion to Dismiss:
                  GRANTED in part and DENIED in part.

                        MEMORANDUM OPINION

Kevin M. Capuzzi, Esquire (Argued), of BENESCH, FRIEDLANDER, COPLAN
& ARONOFF, LLP, Wilmington, Delaware, Attorney for Plaintiff.

Paul D. Brown, Esquire, and Mark L. Desgrosseilliers, Esquire, of CHIPMAN
BROWN CICERO & COLE, LLP, Wilmington, Delaware, and F. Maximilian
Czernin, Esquire (Argued), and Peter R. Morrison, Esquire, of SQUIRE PATTON
BOGGS, LLP, Cincinnati, Ohio, Attorneys for Defendant.

Adams, J.
                                      INTRODUCTION

         This action was filed by BeautyCon Media ABC Trust (“Plaintiff”) in its

capacity as Trustee of the BeautyCon Media Company (the “Company”) against the

Company’s investor, New General Market Partners, LLC (“Defendant” or

“NGMP”). Plaintiff brought claims for breach of contract, fraudulent inducement,

and tortious interference with prospective contractual relations.1 This is the Court’s

decision on Defendant’s motion to dismiss these claims. For the reasons stated

herein, Defendant’s motion is GRANTED in part and DENIED in part.

                                             FACTS

    I.   The BeautyCon Media Company

         The Company was founded in 2013 and created as a “fashion and beauty

community portal that connected consumers with beauty brands and creators.”2

Over several years, the Company grew its business to include media and e-

commerce, in addition to the beauty and fashion industry. While the Company

attracted the attention of various investors, by 2018 it was struggling to fund its

Series A financing. Additional funding was critical to the Company’s ability to host

1
  Plaintiff also filed claims of breach of fiduciary duty and aiding and abetting breach of fiduciary
duty. Compl. ¶¶ 73-88. On May 16, 2023, the Court dismissed these claims on the record after
oral argument on Defendant’s motion to dismiss. BeautyCon Media ABC v. New General Market
Partners, C.A. No. N22C-12-143 MAA CCLD, Adams, J., Transaction ID 70026953 (Del. Super.
May 16, 2023).
2
  Compl. ¶ 16. Unless otherwise stated, the facts are drawn from Plaintiff’s Complaint and the
attached exhibits. The Court accepts these allegations as true for purposes of a motion to dismiss.
                                                 2
and operate its signature event scheduled in 2018: “BeautyCon LA.” In March 2018,

one of the Company’s investors, A&E network, rescinded its funding commitment,

leaving the Company in a precarious financial situation.

II.   Defendant’s Involvement with the Company

      In May 2018, the Company’s then CEO, Moj Mahdara (“Mahdara”), met with

the head of investment of NGMP, Darryl Thompson (“Thompson”), to discuss the

possibility of NGMP providing the Company with a bridge loan. Richelieu Dennis

(“Dennis”) of Essence Ventures (a private equity company), and founder of NGMP,

had been a previous sponsor of the Company’s events. Defendant committed to

funding $3 million but never executed the note (“May 2018 Note”) pursuant to the

original terms, despite repeated assurances from Thompson.3

      In connection with the May 2018 Note, the Company agreed to Defendant’s

demand that the Company “cease all conversations with other interested investors.”

In June 2018, Defendant made a second offer of $5 million (“NGMP 2018 Revised

Offer”), which the Company accepted. The Company and Defendant also entered

into a Memorandum of Understanding (the “Original MOU”) in June 2018, outlining

their understanding of Defendant’s future investment in, and commercial partnership

3
 In August 2018, Defendant reduced the amount of pledged capital from $3 million to $1.678
million. Compl. ¶ 27.
                                            3
with, the Company.4 Plaintiff alleges that in 2018 Defendant pushed the Company

to move forward with a plan to expand its retail business—“BeautyCon POP”—and

indicated future funding was contingent upon the Company’s compliance with this

expansion. The Company’s pursuit of BeautyCon POP worsened its financial

situation.5

       In 2019, the Company and Defendant entered into an Amended Memorandum

of Understanding (“Amended MOU”) which “extended the deadlines [in the

Original MOU] for NGMP to establish a long-term commercial partnership with the

Company . . . .6 “Once BeautyCon POP failed to materialize,” Plaintiff alleges it

became clear Defendant was not going to provide the funding as contained in the

MOUs or complete the common share acquisition.7 Plaintiff alleges that after the

Company hired an investment banker in July 2019 to remedy its growing funding

concerns, “[Defendant] demanded that they receive 51% of the Company as part of

any transaction[]” and “backchanneled with other Series A lead investors” who

“chilled” new investors at NGMP’s direction.8

4
  See infra ANALYSIS Section II.C. for additional information on the contents of the Amended
MOU, which is identical to the Original MOU, except for the deadlines in various provisions.
5
  Compl. ¶ 28.
6
  Compl. ¶ 29.
7
  Compl. ¶ 30.
8
  Compl. ¶¶ 31-32.
                                             4
III.   The Live Nation Deal

       Toward the end of 2019, the Company began to seek other avenues of

financing to compensate for the insufficient funding it was receiving from

Defendant. In December 2019, the Company reached a deal in principle with Live

Nation—an events promoter and venue operator—where Live Nation would receive

a 51% stake in the Company in exchange for $4 million. Live Nation confirmed its

support via emails sent on December 20 and 21, 2019.

       Plaintiff alleges Defendant had been interested in acquiring the Company as

early as 20189 and cites to a letter (the “Letter”) from Thompson to Laurent Ohana

(“Ohana”), the CEO of an investment bank providing advisory services to the

Company.10 In the Letter, dated December 21, 2019, Thompson indicated that he

was aware the Company was seeking additional capital, voiced NGMP’s belief that

there was special value in having the Company operate within the Essence Ventures

ecosystem, and indicated Essence Ventures’ preliminary interest in purchasing the

Company.11 Plaintiff alleges Defendant attempted to “dampen” the deal with Live

Nation and that the Company’s management was aware of this interference as of

9
  Compl. ¶ 38; Ex. 13. All exhibits referenced were attached to the complaint.
10
   Ex. 12.
11
   Ex. 12; Compl. ¶ 38 (citing to Exs. 12-15).
                                               5
January 22, 2020.12      The Company’s tentative deal with Live Nation did not

materialize.

IV.    Defendant’s May 2020 Investment

       In the spring of 2020, the Company approached Defendant for additional

funding needed to weather additional financial distress caused by the COVID-19

Pandemic. NGMP originally committed to loaning the Company an additional $2

million, but ultimately agreed to only fund $500,000 (May 2020 Note).

       Pursuant to the terms of the May 2020 Note, the Company was prohibited

from raising additional capital unless Defendant approved the terms. Plaintiff

alleges it was “forced to pass on two prospective investors interested in investing at

least $4 million” as a “direct result” of the terms of the May 2020 Note. Plaintiff

alleges that “[t]he loans orchestrated by NGMP granted it unfettered control over the

Company to the ultimate benefit of NGMP.”

       On April 26, 2021, the Company entered into the Assignment Agreement

which transferred the assets of the Assignor to the Trust. On April 28, 2021, the

Trust filed a Petition for Assignment for the Benefit of Creditors and Related

Injunctive Relief in the Court of Chancery.13 At a virtual public auction, Defendant’s

12
  Compl. 37; Ex. 11
13
  In re: BeautyCon Media, Inc. Assignor to: Saccullo Business Consulting LLC, C.A. No. 2021-
0368 (PAF).
                                             6
assignee, NGM1, lodged the successful secured party credit bid. Defendant

thereafter foreclosed on substantially all of the Company’s assets.

                              PROCEDURAL HISTORY

       Plaintiff filed its complaint on December 13, 2022, alleging five counts:

Breach of Contract regarding the Original MOU and Amended MOU (Count I);

Fraud in the Inducement (Count II); Tortious Interference with Prospective

Contractual Relations (Count III); Breach of Fiduciary Duty (Count IV); and Aiding

and Abetting Breach of Fiduciary Duty by the Company’s Directors and Officers.

Defendant filed its motion to dismiss on January 31, 2023. Briefing concluded on

April 6, 2023. On May 16, 2023, the Court held oral argument on the motion. After

the parties presented their arguments, the Court dismissed Counts IV and V for the

reasons stated on the record and reserved decision on Counts I-III.14 This is the

Court’s decision on Defendant’s motion to dismiss the remaining counts.

                              STANDARD OF REVIEW

       On a Rule 12(b)(6) motion to dismiss, the Court must accept all well pled

allegations as true.15 A complaint’s allegations are sufficiently “‘well-pleaded’ if

14
   BeautyCon Media ABC v. New General Market Partners, C.A. No. N22C-12-143 CCLD (MAA)
(Del. Super. May 16, 2023) (TRANSCRIPT at 62). The Court ruled that it lacked jurisdiction over
counts IV and V and that any narrow exception that may provide the Superior Court with
jurisdiction did not apply to these claims.
15
   Spence v. Funk, 396 A.2d 967, 968 (Del. 1978).
                                              7
they put the opposing party on notice of the claims being brought against it.”16 While

“[v]agueness or lack of detail . . . are insufficient grounds upon which to dismiss a

complaint under Rule 12(b)(6)[,]”17 courts are not “required to accept as true

conclusory allegations ‘without specific supporting factual allegations’ or ‘every

strained interpretation of the allegations . . . .’”18 The court must assess whether the

claimant “may recover under any reasonably conceivable set of circumstances

susceptible of proof.”19 The court must draw every reasonable factual inference in

favor of the non-moving party and must deny the motion to dismiss if the claimant

may recover under that standard.20 Dismissal will not be granted unless a claim is

clearly without merit.21

       As a general matter, when deciding a motion to dismiss pursuant to Rule

12(b)(6), the court is limited to reviewing the allegations in the complaint. The Court

may review, however, documents extrinsic to the complaint when one or both of the

following conditions are present: (1) when the document is “integral to a plaintiff's

16
   Hale v. Elizabeth W. Murphey School, Inc., 2014 WL 2119652, at *2 (Del. Super. May 20, 2014)
(citing Precision Air, Inc. v. Standard Chlorine of Delaware, Inc., 654 A.2d 403, 406 (Del. 1995));
Bramble v. Old Republic Gen. Ins. Corp., 2017 WL 345144, at *3 (Del. Super. Jan. 20, 2017)
(internal citations omitted).
17
   Bramble, 2017 WL 345144, at *3 (internal citations omitted).
18
   Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *4 (Del. 2017) (cleaned up).
19
   Hackett v. TD Bank, N.A., 2023 WL 3750378, at *2 (Del. Super. May 31, 2023) (internal
quotations omitted).
20
   Hackett, 2023 WL 3750378, at *2.
21
   Bramble, 2017 WL 345144, at *3 (internal citations omitted).
                                                8
claim and incorporated into the complaint[;]” or (2) “when the document is not being

relied upon to prove the truth of its contents.”22

                                       ANALYSIS

I.   Defendant’s motion to dismiss the claim for tortious interference with
     prospective contractual relations (Count III) is DENIED.

       In Plaintiff’s claim for tortious interference with prospective contractual

relations (“tortious interference”), it alleges that Defendant intentionally interfered

with and damaged the Live Nation commitment. Defendant alleges three grounds

for dismissal of this claim pursuant to Superior Court Civil Rule 12(b)(3) and (b)(6):

(1) the claim is barred by California’s statute of limitations, (2) Plaintiff has failed

to allege Defendant committed an independent wrongful act, and (3) Plaintiff fails

to plausibly allege Defendant’s intentional interference. For the reasons that follow,

Defendant’s motion to dismiss this claim is DENIED.

       A. Plaintiff’s claim is not barred by California’s statute of limitations.

       Defendant alleges that California’s statute of limitations applies to this claim

because California has the most significant relationship to the action relative to

Delaware, the forum state. California’s statute of limitations requires a plaintiff to

file their claims within two years from the date when the plaintiff discovered the loss

22
  Id. (quoting Vanderbilt Income & Growth Assocs., L.L.C., v. Arvida/JMB Managers, Inc., 691
A.2d 609, 613 (Del. 1996)).
                                             9
caused by a defendant’s interference.23 Defendant alleges Plaintiff was aware of the

loss caused by its alleged interference on or around January 22, 2020.24 As Plaintiff

filed its complaint on December 13, 2022, this claim would not be timely filed if

California’s limitation period applied. Delaware’s statute of limitations for this

claim provides a plaintiff with three years from the date of the tortious act causing

injury.25

       California’s statute of limitations does not apply for two reasons: (1) 10 Del.

C. § 8121 dictates that Delaware’s statute of limitations applies, and (2) statutes of

limitations govern matters of procedure and the procedural law of the forum state

generally applies.

       Pursuant to 10 Del. C. § 8121, for causes of action that arise outside of

Delaware, the shorter statute of limitations applies, which in this case is the

California statute.26 Section 8121, however, provides for an exception for Delaware

residents: “[w]here the cause of action originally accrued in favor of a person who

23
   Cal. Civ. P. § 339(1).
24
   Def. Op. Br. at 22; Compl. ¶ 37 (“The Company knew something was amiss on January 22, 2020,
because the Company’s management believed that NGMP (or its affiliates) were trying to
‘dampen’ the Live Nation deal.”).
25
   10 Del. C. § 8106. Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del.
2017) (“Tortious interference with prospective business relations is subject to a three-year statute
of limitations.”); WaveDivisions Holdings, LLC., 2011 WL 13175837, at *9 (“In Delaware, claims
for tortious interference with contractual relations are governed by the three year statute of
limitations.”); BTIG, LLC v. Palantir Technologies, Inc., 2020 WL 95660, at *3 (Del. Super. Jan.
3, 2020) (“For tort claims, ‘the wrongful act is a tortious act causing injury, and the cause of action
accrues at the time of injury.’”).
26
   Supra n. 23; 10 Del. C. § 8121.
                                                  10
at the time of such accrual was a resident of this State, the time limited by the law of

this State shall apply.”27 “Our courts have held this to mean that a Delaware

corporation is a Delaware ‘resident’ for the purpose of bringing an action in

Delaware court.”28 The Company was a resident of Delaware when this cause of

action accrued,29 therefore, Delaware’s statute of limitations applies.

       Additionally, under a conflicts of law analysis, as a general rule the forum

state applies its own statute of limitations.30 “This is consistent with the general

principle that the procedural law of the forum state (here, Delaware) usually

applies.”31 The Court will apply Delaware’s three-year statute of limitations because

this is purely a procedural matter.32 Defendant only argues that Plaintiff does not

meet California’s two-year statute of limitations, therefore, the Court declines to

analyze whether Plaintiff timely filed its claim within Delaware’s longer statute of

limitations.

27
   10 Del. C. § 8121.
28
   WaveDivision Holdings, LLC, 2011 WL 13175837, at *8.
29
   Compl. ¶ 11.
30
   US Dominion v. Fox Corp., 2022 WL 2229781, at *6 (Del. Super., June 21, 2022) (cleaned up);
Weinstein v. Luxeyard, Inc., 2022 WL 130973, at *3 (Del. Super. Jan. 14, 2022).
31
   US Dominion, 2022 WL 2229781, at *6 (cleaned up); Weinstein, 2022 WL 130973, at *3.
32
   Am. Energy Tech., Inc. v. Colley & McCoy Co., 1999 WL 301648, at *2 (D. Del. Apr. 15, 1999)
(“Statutes of limitations are generally considered to be procedural rather than substantive law.”);
Weinstein, 2022 WL 130973, at *3 (quoting MPEG LA, L.L.C. v. Dell Global B.V., 2013 WL
812489, at *3 (Del. Ch. Mar. 6, 2013)) (A modification of the general rule that the procedural law
of the forum state applies may be necessary when “the procedural law of the foreign state is so
inseparably interwoven with substantive rights[,]” such that a modification is necessary to
safeguard a party’s legal rights)).
                                                11
        B. Delaware substantive law applies to the tortious interference claim
           because there is no actual conflict between California and Delaware
           law.

       Defendant alleges that Plaintiff has failed to state a claim for tortious

interference because Plaintiff has failed to allege that Defendant committed an

independent wrongful act, which is an element of tortious interference with

prospective contractual relations pursuant to California law.33 Plaintiff argues that

Delaware law applies and that this element is not required under Delaware law.

Determining the elements of a legal claim and whether such elements are sufficiently

pled involves issues of substantive law. The Court, therefore, must first engage in a

choice of law analysis to determine whether California or Delaware’s substantive

law applies.

       A conflicts of tort law analysis consists of two steps.34 The court must first

determine whether there is an actual conflict between the elements of the tort as they

are defined by the jurisdictions at issue.35 If there is an actual conflict, courts must

then determine which state has the “most significant relationship” to the case.36 If

there is not an actual conflict, the court applies the substantive law of the forum

33
    Defendant also alleges that Plaintiff failed to plausibly allege Defendant’s intentional
interference. The Court addresses this ground separately in the section to follow. Def. Op. Br. at
24-27.
34
   KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *12 (Del. Super. June 24,
2021); Otto Candies, LLC v. KPMG, LLC, 2020 WL 4917596, at *5 (Del. Ch. Aug. 21, 2020).
35
   Bell Helicopter Textron, Inc., 113 A.3d 1045, 1050 (Del. 2015).
36
   Travelers Indem. Co. v. Lake, 594 A.2d 38, 47 (Del. 1991).
                                               12
state.37 “Delaware law recognizes two situations in which a conflict of law is

false.”38 If one of the two states have not addressed the legal question presented,

then there can be no conflict and the court must apply the law of the state that has

“settled law” on the matter.39 The court also need not engage in a choice of law

analysis if the result would be the same under either state’s law.40

        The first situation does not apply to this case because both “California and

Delaware have addressed the elements of, and defenses to, tortious interference with

prospective contractual relations claims.”41 Because the parties argue that the result

would be different depending on which State’s law applies, the Court will analyze

whether an actual conflict exists between California and Delaware’s definition of

tortious interference with prospective contractual relations.

        The Court finds that the elements of tortious interference between California

and Delaware are the same in all important respects, therefore, no actual conflict

37
   Otto Candies, LLC, 2020 WL 4917596, at *6, 18, 21; KT4 Partners, LLC, 2021 WL 2823567,
at *12.
38
   KT4 Partners LLC, 2021 WL 2823567, at *12; see also In re Bay Hills Emerging Partners I,
LP, 2018 WL 3217650, at *5 (Del. Ch. July 2, 2018) (stating there is a false conflict when “there
is no material difference between the laws of competing jurisdictions”).
39
   Arch Insurance Co. v. Murdoch, 2018 WL 1129110, at *8 (Del. Super. Mar. 1, 2018) (“When
one state’s laws failed to address a particular issue, it cannot conflict with the laws of another state.
Where one state fails to address a particular issue, the Court should apply the settled law.”)
(cleaned up); KT4 Partners LLC, 2021 WL 2823567, at *12.
40
   Deuley v. DynCorp Int’l, Inc., 8 A.3d 1156, 1161 (Del. 2010); KT4 Partners LLC, 2021 WL
2823567, at *12.
41
    KT4 Partners LLC, 2021 WL 2823567, at *12; Great American Opportunities, Inc. v.
Cherrydale Fundraising, Inc., 2010 WL 338219, at *8 (Del. Ch. Jan. 29, 2010) (stating both
California and Delaware require the same basic elements to establish a claim for tortious
interference with prospective contractual relations.).
                                                   13
exists. Because no actual conflict exists, the substantive law of Delaware, the forum

state, applies.

       Pursuant to California law, a claim for tortious interference with prospective

economic advantage consists of the following elements:

               (i) an economic relationship between the plaintiff and some third party,
               with the probability of future economic benefit to the plaintiff;
               (ii) the defendant’s knowledge of the relationship;
               (iii) intentional acts on the part of the defendant designed to disrupt the
               relationship;
               (iv) actual disruption of the relationship; and
               (v) economic harm to the plaintiff proximately caused by the acts of the
               defendant.42

       California law also requires a plaintiff to prove that the defendant has

committed an “independent wrongful act.” An act is independently wrongful if it is

“unlawful, [i.e.,] proscribed by some constitutional, statutory, regulatory, common

law or other determinable legal standard.”43 California imposes the requirement of

42
   Golden Eagle Land Investment, LP v. Rancho Santa Fe Ass’n., 227 Cal. Rptr. 3d 903, at 927
(Cal. Ct. App. 4th Jan. 12, 2018) (cleaned up); SC Manufactured Homes, Inc. v. Canyon View
Estates, Inc., 56 Cal. Rptr. 3d 79, n. 7 (Cal. Ct. App. 2d Mar. 15, 2007). California courts typically
identify this tort by the name “tortious interference with prospective economic advantage.” See,
e.g., Golden Eagle Land Investment, LP, 227 Cal. Rptr. 3d at 927. Delaware identifies this tort as
either tortious interference with prospective “economic advantage,” “contractual relations” or
business relations. See, e.g., KT4 Partners, 2021 WL 2823567,at *13; Clouser v. Doherty, 175
A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del. 2017); Organovo Holdings, Inc. v. Dimitrov,
162 A.3d 102, 122 (Del. Ch. June 5, 2017). Regardless of the slight variations in names, the
elements of the torts, however, are the same in all important respects.
43
   KT4 Partners, 2021 WL 2823567, at *13 (quoting Edwards v. Arthur Anderson, LLP, 189 P.3d
285, 290 (Cal. 2008)).
                                                 14
an independent wrongful act to make unlawful “improper methods of disrupting or

diverting the business relationship” while also protecting “fair competition.”44

       A claim for tortious interference with prospective contractual relations

pursuant to Delaware law consists of the following elements:

              (i) the reasonable probability of a business opportunity;
              (ii) intentional interference by a defendant with that opportunity;
              (iii) proximate causation; and
              (iv) damages.45

       Delaware courts are “to consider these elements ‘in light of a defendant’s

privilege to compete or protect his business interests in a fair and lawful manner’”46

so that this tort does not unduly restrict free competition.47 If a defendant acts within

his privilege to compete, those actions are protected by the business competition

exception, and are not independently wrongful.48 Delaware courts look to the

following elements in the Second Restatement of Torts to assess whether

competition constitutes proper or improper interference:

              (a) the relation concerns a matter involved in the
              competition between the actor and the other and
              (b) the actor does not employ wrongful means and
              (c) his action does not create or continue an unlawful
              restraint of trade and

44
   Golden Eagle Land Investment, LP, 227 Cal. Rptr. 3d at 927 (quoting Settimo Associates v.
Environ Systems, Inc. 17 Cal. Rptr. 2d 757, 758 (Cal. Ct. App. 4th Mar. 26, 1993)).
45
   Clouser v. Doherty, 175 A.3d 86 (TABLE), 2017 WL 3947404, at *10 (Del. 2017).
46
   KT4 Partners LLC, 2021 WL 2823567, at *13 (quoting Kable Products Services, Inc. v. TNG
GP, 2017 WL 2558270, at *10 (Del. Super. June 13, 2017) (internal quotation marks omitted)).
47
   See Agilent Technologies v. Kirkland, 2009 WL 119865, at *8 (Del. Super. Jan. 20, 2009).
48
   Preston Hollow, LLC v. Nuveen, LLC, 2020 WL 1814756, at *17 (Del. Ch. Apr. 9, 2020).
                                            15
                (d) his purpose is at least in part to advance his interest in
                competing with the other.49

        Courts must find that all four factors are met to conclude that a defendant’s

competitive actions are proper.50 If a defendant’s actions violate statutory or

common law, this satisfies the independent wrongfulness requirement pursuant to

Delaware law and the conduct would not be protected by the business competition

exception.51      The nature of the defendant’s conduct is the principal factor in

analyzing whether a defendant’s conduct is independently wrongful.52

        The Court finds that the elements of this tort under California and Delaware

law are the same in all important respects. Both require some form of prospective

economic relationship between the plaintiff and a third party. Delaware requires the

“probability of a business opportunity” whereas California law requires the

“probability of an economic benefit.” The Court finds these terms to be substantially

similar.

49
   RESTATEMENT (SECOND) OF TORTS § 767 (1979). To assess whether a defendant’s actions are
independently wrongful, Delaware courts analyze the following factors: (i) the nature of the actor’s
conduct; (ii) the actor’s motive; (iii) the interests of the other with which the actor’s conduct
interferes; (iv) the interests sought to be advanced by the actor; (v) the social interests in protecting
the freedom of action of the actor and the contractual interests of the other; (vi) the proximity or
remoteness of the actor’s conduct to the interference; and (vii) the relations between the parties.
RESTATEMENT (SECOND) OF TORTS § 767 (1979); Preston Hollow Capital, LLC, 2020 WL
1814756, at *17 (citing RESTATEMENT (SECOND) OF TORTS § 767 (1979)).
50
   RESTATEMENT (SECOND) OF TORTS § 768; Preston Hollow Capital, LLC, 2020 WL 1814756, at
*17 (stating the court must find all four factors are met before excusing the defendant under this
analysis.).
51
   RESTATEMENT (SECOND) OF TORTS § 767 cmt. c.
52
   Preston Hollow, 2020 WL 1814756, at *17.
                                                   16
       Both states also require defendant’s knowledge of the relationship between

the plaintiff and the third party. California law requires that a plaintiff show the

defendant’s knowledge of the plaintiff’s relationship with the third party while

Delaware requires a showing of intentional interference with the prospective

business relationship. It is not logically possible for a defendant to intentionally

interfere with the relationship without first having knowledge of that relationship,

thus both states have a knowledge requirement.53

       Both states require that the act causing interference was committed

intentionally and that the interference results in damages. Additionally, both states

require that defendant’s conduct be independently wrongful to safeguard against the

infringement of free competition.54 “To be independently wrongful, each state asks

53
   DG BF, LLC v. Ray, 2021 WL 776742, at n. 146 (Del. Ch. Mar. 1, 2021).
54
  Kable Products Services, Inc. v. TNG GP, 2017 WL 2558270, at *10 (Del. Super. June 13, 2017)
(quoting DeBonaventura v. Nationwide Mut. Ins. Co., 419 A.2d 942, 947 (Del. Ch. 1980)) (stating
elements of this claim “must be considered in light of a defendant’s privilege to compete or protect
his business interests in a fair and lawful manner.”); Orthopaedic Assoc. of S. Delaware, PA v.
Pfaff, 2018 WL 822020, at *2 (Del. Super. Feb. 9, 2018); Preston Hollow Capital, 2020 WL
1814756, at *12 (“The tort is unusual, in that its application, even if these elements are met, is
circumscribed by consideration of competing rights. Thus, the elements of the tort must be
considered in light of a defendant’s privilege to compete in a lawful manner.”); Beard Research,
Inc. v. Kates, 8 A.3d 573, 608 (Del. Ch. Apr. 23, 2010) (“The tortious interference with prospective
business relations standard is arguably more favorable to a defendant than the tortious interference
with contractual relations standard because, under the former standard, a court must consider the
defendant’s privilege to compete or protect his business interests in a fair and lawful manner.”);
Agilent Technologies v. Kirkland, 2009 WL 119865, at *5 (Del. Super. Jan. 20, 2009); Korea
Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 953 (Cal. 2003) (stating a plaintiff bringing a
claim for interference with prospective economic advance must show defendant’s conduct was
independently wrongful); Quelimane Co. v. Stewart Title Guaranty Co., 960 P.2d 513, 530 (Cal.
1998) (stating claim for tortious interference with prospective economic advantage, unlike tortious
interference with an existing contract, requires plaintiffs to establish conduct was wrongful); Ixchel
Pharma, LLC v. Biogen, Inc., 470 P.3d 571, 576 (Cal. 2020) (“intentionally interfering with
                                                 17
whether the defendant’s conduct constitutes a violation of positive law, judicial

rulings, or expressly or by implication, a ‘determinable legal standard.’”55 Because

the result would be the same under either state’s law, the conflict is false and

Delaware law applies.

        C. Plaintiff sufficiently alleged Defendant committed an independent
           wrongful act.56

       For Plaintiff to show that Defendant tortiously interfered with Plaintiff’s

prospective contractual relations with Live Nation, it must show Defendant’s

conduct was wrongful independent of the interference and not protected by the

business competition exception.57 The business competition exception “rests on the

belief that competition is a necessary or desirable incident of free enterprise”58 and

exists to prevent “wholesome competitive practices” from being “made tortious.”59

prospective economic advantage requires pleading that the defendant committed an independently
wrongful act.”).
55
   KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *14 (Del. Super. June 24, 2021)
(cleaned up).
56
   Because Defendant contests only that Plaintiff has failed to sufficiently plead that Defendant
committed an independent wrongful act and intentionally interfered, the Court limits its Rule
12(b)(6) analysis to these two elements.
57
   KT4 Partners, LLC, 2021 WL 2823567, at *13; Preston Hollow Capital, LLC, 2020 WL
1814756, at *12. The Court notes that Plaintiff did not expressly include the term “independent
wrongful act” in its count for tortious interference. Defendant raised this requirement as an
affirmative defense to the claim of tortious interference. Def. Op. Br. at 23-24. In Plaintiff’s brief
in opposition to Defendant’s motion to dismiss, Plaintiff only asserts that independent
wrongfulness is not a requirement pursuant to Delaware law. Pl. Br. at 32-33. As explained above,
Delaware does require plaintiffs to plead an independent wrongful act. Because this is a
requirement and because Defendant raised this as an affirmative defense in the motion to dismiss,
the Court will analyze whether Plaintiff has sufficiently alleged that Defendant committed an
independent wrongful act.
58
   RESTATEMENT (SECOND) OF TORTS § 768 cmt. on Clause (b).
59
   NuVasive, Inc. v. Miles, 2020 WL 5106554, at *12 (Del. Ch. Aug. 31, 2020).
                                                 18
Competition is not necessarily an improper basis for interference. 60 “If one party is

seeking to acquire a prospective contractual relation, the other can seek to acquire it

too.”61

       The second element in § 768 asks whether the defendant has employed

wrongful means. Delaware courts look to the factors listed in § 767 to determine

whether a defendant has employed wrongful means. When a plaintiff has only a

prospective contractual relationship with a third party as opposed to a present

contractual relationship, there is a higher burden on the plaintiff to show that the

defendant improperly interfered with that relationship.62 The burden for the plaintiff

is lower in the context of a present contractual relationship because of “the greater

definiteness of the [plaintiff’s] expectancy and his stronger claim to security for it

and in part to the lesser social utility of the [defendant’s] conduct.”63

       While the nature of Defendant’s conduct related to the Live Nation deal when

viewed in isolation is not improper, the Court finds that when viewed within the

larger context of Defendant’s actions, Plaintiff has sufficiently pled that Defendant

committed an independent wrongful act pursuant to § 767 and § 768. Plaintiff has

60
   RESTATEMENT (SECOND) OF TORTS § 768 cmt. a.
61
   Id.
62
    § 767 cmt. on Clause (c) (“the actor’s conduct in interfering with the other’s prospective
contractual relations with a third party may be held to be not improper, although his interference
would be improper if it involved persuading the third party to commit a breach of an existing
contract with the other.”).
63
   Id.
                                               19
pled sufficient facts at this stage to establish that Defendant’s conduct was part of a

larger scheme of economic pressure it wrongfully exerted upon the Company for the

ultimate purpose of takeover. This finding is based primarily on an analysis of

certain enumerated factors in § 767, specifically Defendant and the Company’s (“the

Parties”) interests, and Defendant’s purpose or motivation for interfering with the

Live Nation deal.64 Because the Court finds Defendant has employed wrongful

means, it will not address the remaining elements of the business competition

exception.65

               1. The Nature of Defendant’s Conduct Relating to the Live Nation
                  Deal

       The “chief factor in determining whether the conduct is privileged despite its

harm to the other person,” is the nature of a defendant’s conduct. 66 As stated above,

the Company and Live Nation reached a deal in principle in December 2019, with

Live Nation confirming its support in writing on December 20 and 21, 2019.

Plaintiff alleges the nature of Defendant’s conduct in response to the deal as follows:

     • Thompson’s letter to Ohana wherein he expressed awareness that the

       Company was “seeking to raise additional equity capital[,]” conveying

64
   For the sake of economy, the Court hereinafter refers to “Defendant and the Company”
collectively as “the parties,” while noting that Plaintiff is not the Company, but the BeautyCon
Media ABC Trust in its capacity as Trustee of the Company.
65
   See § 767; Preston Hollow Capital, LLC v. Nuveen, LLC, 2020 WL 1814756, at *17 (Del. Ch.
Apr. 9, 2020) (declining to address the remaining elements, having found defendant employed
wrongful means in its competition with plaintiff.).
66
   § 767 cmt. on Clause (a).
                                              20
        Essence Ventures’ “preliminary indication of interest to purchase certain

        assets of [the Company,]” and conveying Essence Ventures’ belief that “there

        is special value [] by having [the Company] operate within the Essence

        Ventures ecosystem.”67

     • “[U]pon information and belief, [Defendant] was in contact with Live Nation

        about [Defendant’s] non-support of the proposed Live Nation deal” and told

        Live Nation that it preferred to “roll-up” the Company with other brands to

        sell as one package.68

To summarize, Plaintiff alleges that Defendant intentionally interfered with the Live

Nation deal when Defendant’s head of investment contacted the Company’s

investment banker to discourage the Live Nation deal and encouraged the sale of the

Company to Essence Ventures; and when Defendant allegedly contacted Live

Nation directly around January 2020 to discourage the deal.

        This conduct is not in itself wrongful. Plaintiff does not identify any of

Defendant’s conduct as violative of statutory law, common law or “legal standards

of behavior more broadly.”69 There is no allegation that Defendant committed any

67
   Compl. ¶ 38; Ex. 12.
68
   Compl. ¶ 36.
69
   KT4 Partners LLC v. Palantir Tech., Inc., 2021 WL 2823567, at *19 (Del. Super. June 24, 2021).
                                               21
acts of physical violence, threatened suit, or made any false representations to Live

Nation to induce it to pull away from the deal.70

                 2. Plaintiff sufficiently alleged that Defendant exerted improper
                    economic pressure on the Company.

         The nature of Defendant’s conduct with respect to the Live Nation deal, in

isolation, is not wrongful. The question remains, however, whether this conduct was

proper when viewed within the larger context of Defendant’s dealings with the

Company.71 For the reasons that follow, the Court finds that, viewing the complaint

as a whole and drawing all reasonable inferences therefrom, Plaintiff has sufficiently

alleged Defendant’s conduct with respect to Live Nation was committed in

furtherance of Defendant’s goal to weaken the Company’s capital structure and

position itself to take over the Company. As an investor who also entered into

MOUs to negotiate a long-term commercial partnership with the Company, the

Court finds that Defendant’s conduct was improper and not protected by the business

competition exception.

         “A party loses its privilege to compete if it exerts improper economic pressure

. . . . Propriety of economic pressure is a contextual inquiry: there is no ‘crystallized

set of definite rules,’ and the ‘decision therefore depends upon a judgment and

70
     § 767 cmt. on Clause (a).
71
     Preston Hollow Capital, LLC, 2020 WL 1814756, at *17.
                                              22
choice of values in each situation.’”72 When analyzing whether a defendant’s

conduct was independently wrongful due to economic pressure, “it is proper to look

at the entire picture to understand the economic pressure applied.”73 Although a

defendant may exert limited economic pressure, “Delaware law also recognizes that

when a defendant intends the interference to drive a competitor out of business and

‘shut its doors,’ this constitutes wrongful means, and the conduct is not privileged.”74

       At the motion to dismiss phase, Plaintiff sufficiently alleges Defendant

exerted wrongful economic pressure in a concerted effort to take ownership of the

Company.75 Plaintiff alleges Defendant accomplished this by delaying or refusing

to fully fund promised investments,76 demanding the Company not solicit other

72
   Id. at *18 (quoting § 767 cmt. b.); § 767 cmt. on Clause (a) (To examine the propriety of
economic pressure, courts should assess “the circumstances in which it is exerted, the object sought
to be accomplished by the actor, the degree of coercion involved, the extent of the harm that it
threatens, the effect upon the neutral parties drawn into the situation, the effects upon competition,
and the general reasonableness and appropriateness of this pressure as a means of accomplishing
the actor’s objective.”).
73
   Preston Hollow LLC, 2020 WL 1814756, at *18.
74
   Id. (citing Beard Research, Inc. v. Kates, 8 A.3d 573, 611–12 (Del. Ch. Apr. 23, 2010), aff’d
sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010). Limited economic pressure
is permitted as long as a defendant avoids an illegal restraint on trade and does not intentionally
interfere to drive a competitor out of business. Id.
75
   The Letter expressed a desire that Essence Ventures purchase the Company. Ex. 12. Plaintiff
also alleged “numerous conversations” from 2018 forward wherein Thompson allegedly expressed
a desire to own the Company. Compl. ¶ 38.
76
   Plaintiff alleges: Defendant committed to a $3 million investment in the May 2018 Note, but
reduced the amount of pledged capital to $1.678 million in August 2018; in June 2018, Defendant
committed to funding a $5 million convertible note based on a $27 million valuation, as opposed
to the $60 million valuation agreed upon approximately one month earlier (“NGMP 2018 Revised
Offer”); instead of timely funding $2 million promised in the May 2020 Note, Defendant delayed
and only funded $500,000, and with the knowledge that this amount “left many vendors and other
customers” of the Company unpaid during the pandemic; Defendant never completed its
commitments under the Amended MOU).
                                                 23
investors,77 discouraging other investors from investing in the company,78 and

conditioning future investment on the Company’s pursuit of commercial endeavors

harmful to its financial interests,79 all while Defendant allegedly knew of the

Company’s dire financial situation.80 Defendant’s conduct with respect to the Live

Nation deal, when viewed in this broader context, sufficiently alleges that Defendant

interfered with the Deal as a means of exerting improper economic pressure on the

Company.

       The presence of economic pressure in this case shares similarities with that

found in Preston Hollow, LLC v. Nuveen, LLC.81 In Preston Hollow, the court found

77
   In conjunction with the May 2018 Note, Plaintiff alleges Defendant demanded the Company
cease all conversations with other interested investors; the May 2020 Note prohibited the Company
from raising additional capital without preapproval from Defendant, resulting in the Company
foregoing two prospective investment offers which could have delivered at least $4 million in
capital. See Ex. 20.
78
   Plaintiff alleges Defendant demanded it receive 51% of the Company once it learned that the
Company had hired an investment banker, which allegedly deterred potential investors; Defendant
consorted with other Series A lead investors to chill new investors; Defendant expressed to Live
Nation its non-support of Live Nation’s $5 million investment and “dampened” the deal.
79
   Dennis and Thompson allegedly told the Company it would only fund the Original MOU if the
Company moved forward with BeautyCon POP, which the Company allegedly told Defendant was
stretching to the “breaking point.”
80
   Compl. ¶ 42. “Upon information and belief, [Defendant] was aware that funding only 25% of
the promised amount left many vendors and other customers of [the Company] unpaid during the
middle of a global pandemic . . . .”).
81
   2020 WL 1814756 (Del. Ch. Apr. 9, 2020). The Court notes that Preston Hollow is a post-trial
memorandum opinion. The Court of Chancery found by a preponderance of the evidence that the
defendant committed tortious interference with prospective business relations after a review of the
evidence submitted at trial. Id. at *11-12; see Robinson v. Oakwood Village, LLC, 2017 WL
1548549, at *11 (Del. Ch. Apr. 28, 2017) (stating plaintiffs bare the burden of proving each
element of their claims by a preponderance of the evidence). The Court does not have the benefit
of viewing evidence and testimony that would be submitted at trial, however, Plaintiff has a lesser
burden here defending against the motion to dismiss compared to proving this claim at trial by a
preponderance of the evidence. At this stage in the litigation, Plaintiff need not prove that
                                                24
that, while each of the defendant’s interactions with third parties may not have

amounted to wrongful means of shutting down the plaintiff’s ability to do business,

when the court considered the defendant’s conduct as a whole, it revealed the

defendant’s systematic efforts to push the plaintiff out of business.82 Here, while

Defendant’s alleged interaction with Live Nation and letter communication with the

Company’s investment banker may not be sufficient to establish wrongful means of

interfering with the Live Nation deal, when these alleged acts are viewed in the

context of Defendant’s broader efforts to control and take ownership of the

Company, it is reasonably conceivable at the pleading stage that this conduct was

part of a broader campaign of exerting economic pressure on the Company.

       The Court notes that additional factors in § 767, namely Defendant’s

motivation, the Parties’ relationship, their respective interests, and social interests

weigh in favor of a finding that Defendant’s conduct is not protected by the business

competition exception. It is not necessary at this stage to analyze these factors as

the Court has already found Plaintiff sufficiently alleged Defendant exerted

improper economic pressure on the Company.

Defendant did in fact tortiously interfere, but only that it has alleged “a reasonably conceivable set
of facts susceptible to proof entitling it to relief.” See Hackett v. TD Bank, N.A., 2023 WL
3750378, at *2 (Del. Super. May 31, 2023) (internal quotations omitted).
82
   See Preston Hollow, 2020 WL 1814756, at *18-19 (finding defendant exerted improper
economic pressure because “[t]he record, taken as a whole, shows consistent, systematic efforts
by [the defendant] to shut down [the plaintiff’s] ability to continue to do business.”). Id. at *18.
                                                 25
          D. Plaintiff has plausibly alleged Defendant intentionally interfered with
             the Live Nation deal.

         Defendant also argues Plaintiff’s tortious interference claim should be

dismissed because Plaintiff failed to plausible allege that Defendant intentionally

interfered with the Live Nation deal. The analysis required for the intentional

interference requirement overlaps substantially with the above analysis on the

independent wrongful act requirement. The Court will not unnecessarily duplicate

that analysis here and briefly sets forth the reasons demonstrating that Plaintiff has

plausibly alleged intentional interference.

         “The interference with the other’s prospective contractual relation is

intentional if the actor desires to bring it about or if he knows that the interference is

certain or substantially certain to occur as a result of his action.” 83 At this stage of

the proceedings, the Court must accept all non-conclusory allegations as true.

Plaintiff’s allegation of intentional interference would be conclusory if, for example,

it stated only that “Defendant intentionally interfered because Defendant

intentionally interfered.” This example is not to suggest that an allegation of any

greater specificity would adequately plead this element. Plaintiff’s allegations,

however, go far enough beyond this by including: (1) how Defendant interfered, (2)

when Defendant interfered, (3) the individuals involved in the interference, (4) why

83
     RESTATEMENT (SECOND) OF TORTS § 766B cmt. d. (1979).

                                             26
Defendant may have interfered (to purchase the Company), (5) and the proximity in

time between the acts of interference and the deal’s failure.

       Plaintiff alleged Defendant interfered by way of the Letter that Thompson sent

on the same day Live Nation confirmed its support. The Letter in no uncertain terms

expressed Defendant’s dislike for the deal. When drawing all reasonable inference

from the complaint, it is no far inferential leap that Defendant contacted Live Nation

with the intent to quelch the deal, especially considering that this deal would likely

decrease Defendant’s stake in the Company.84 For these reasons, the Court finds

Plaintiff has sufficiently stated that Defendant desired to bring about the

interference, or at the very least knew that its actions made it substantially certain

interference would occur.

     II.    Defendant’s motion to dismiss the claim for breach of contract
            regarding of the Original MOU and Amended MOU (Count I) is
            GRANTED in part.

           A. California law applies to Plaintiff’s claim for breach of the MOUs.

       The MOUs contain identical California choice-of-law provisions.                        The

choice-of-law provision states, “This Agreement and all actions arising out of or in

connection with this Agreement shall be governed by and construed in accordance

with the laws of the State of California, without regard to the conflicts of law

84
  Plaintiff also alleged that Defendant contacted Live Nation directly to convey its non-support of
the deal and preference to combine the Company with various brands to sell as one package.
Compl. ¶ 36.
                                                27
provisions of the State of California or of any other state.”85 As a general matter,

where parties specify a choice of law, Section 187 of the Restatement (Second) of

Conflicts “allows the law of the state chosen by the parties to govern contractual

rights and duties unless the chosen state lacks a substantial relationship to the parties

or transaction or applying the law of the chosen state will offend a fundamental

policy of a state with a material greater interest.”86 The parties do not dispute that

California law applies to Plaintiff’s breach of contract claims. The Court finds that

this choice-of-law provision is valid and enforceable and that the exceptions listed

in Section 187 do not apply to this case.87 Principles of contract law as applied by

California courts therefore apply to this claim.88

        B. Defendant’s motion to dismiss the claim for breach of the Original
           MOU is GRANTED.

       In Count I of the complaint, Plaintiff alleges that Defendant breached both the

Original MOU and the Amended MOU. In Defendant’s first ground for dismissal,

85
   Exs. 5, 5-A.
86
    SIGA Technologies, Inc. v. PharmaAthene, Inc., 67 A.3d 330, 342 (Del. 2013) (citing
RESTATEMENT (SECOND) OF CONFLICTS OF LAWS § 187 (1971), then quoting Abry Partners V, L.P.
v. F & W Acq. LLC, 891 A.2d 1032, 1047 (Del. Ch. Feb. 14, 2006)); Change Capital Partners
Fund I, LLC v. Volt Electrical Sys., LLC, 2018 WL 1635006, at * 1 (Del. Super. Apr. 3, 2018)
(“Delaware courts are generally reluctant to subvert parties’ agreed-upon choice-of-law
provisions.”).
87
   The Court does not find that California lacks a substantial relationship to the parties or
transaction. The Company’s headquarters were located in California, the parties’ relationship was
centered in California, injury to the Company was suffered in California, and key witnesses are
located in California.
88
   See infra ANALYSIS Section II.C.4.
                                               28
it argues that Plaintiff’s claim of breach of the original MOU is barred by the

Amended MOU based on the integration clause in the Amended MOU:

              This Agreement constitutes the sole and entire agreement
              of the parties to this agreement with respect to the subject
              matter contained herein, and supersedes all prior
              contemporaneous understandings and agreements, both
              written and oral, with respect to such subject matter.

       Pursuant to California law,

              “[w]hen the parties to an agreement express their intention
              that it is the final and complete expression of their
              agreement, an integration occurs. Such a contract may not
              be contradicted by evidence of other agreements. Whether
              an agreement is an integration, i.e., intended as the final
              and complete expression of the parties’ agreement, is a
              question of law . . . .”89

As Plaintiff correctly asserts, the MOUs are identical except for the fact that the

Amended MOU extended the deadlines for performance. Curiously, Plaintiff does

not contest the validity or enforceability of the integration clause and simply states

that it has pled a viable claim of breach of both MOUs.

       The Court finds no merit to Plaintiff’s claim that the original MOU is still

actionable in light of the integration clause. The parties agreed in unequivocal

language that the Amended MOU superseded all prior written agreements, which

includes the Original MOU. Any deadlines in the Original MOU, therefore, were

89
   Williams v. Atria Las Posas, 235 Cal. Rptr. 3d 341, 344 (Cal. Ct. App. 2d. June 27, 2018)
(internal citations omitted).
                                            29
superseded by the new deadlines in the Amended MOU.           Defendant’s motion to

dismiss Plaintiff’s claim of breach of the Original MOU is GRANTED.

       C. Defendant’s motion to dismiss the claim for breach of the Amended
          MOU is GRANTED in part.

      The parties executed the Amended MOU on December 16, 2018, which “sets

forth certain agreements and understandings” between the Parties. The purpose of

the document, as stated in paragraph 1, is “to outline the terms and conditions under

which the parties intend that Investor [Defendant] will provide subsequent

investment in the Company.” Paragraph 2, titled “Partnership framework” states

that “[t]he Parties would like to enter into an understanding for a larger partnership

going forward, which is connected, but not contingent on, Investor’s [Defendant]

investment of $5.0M.”       The MOU lists the following key elements of this

partnership: “Qualified Financing Investment,” “Common Share Acquisition,” and

“Commercial Agreement(s).”

              1. The Partnership Framework

      Under the “Qualified Financing Investment” provision (“QFI Provision”), the

parties agreed that the Company would use “commercially reasonable efforts to

provide that Investor [Defendant] will be permitted to invest additional amounts in

                                         30
the first Qualified Financing (as defined in the Note) after the date hereof, which

may occur . . . no later than June 2019.”90 The parties agreed:

              “within 6 months of the closing of the Note investment,
              the Company and Investor shall negotiate in good faith
              with respect to the terms and conditions upon which
              Investor would serve as the lead investor in the Qualified
              Financing, with an investment of at least $10 million in
              additional capital.”91

The “Common Share Acquisition” provision (“CSA Provision”) of the partnership

framework provides that the Company believed certain existing holders of Common

Stock would be willing to sell their existing shares to Defendant. The Parties agreed

that the Company would use “commercially reasonable efforts to cooperate with

Investor [Defendant]” so that Defendant could acquire such shares. This provision

also memorialized Defendant’s understanding that the number of shares and pricing

was “not guaranteed.” The Parties agreed to cooperate to complete this acquisition

by March 1, 2019.92 The “Commercial Agreement(s)” provision provides that the

parties agreed to “negotiate in good faith to establish a long-term commercial

partnership across multiple lines of business no later than March 31, 2019.”93

90
   By the terms of the Original MOU, the deadline for the qualified financing investment was
March 2019.
91
   Am. MOU (emphasis added).
92
   By the terms of the Original MOU, the deadline for the common shares acquisition was
December 31, 2018.
93
   Am. MOU (emphasis added). By the terms of the Original MOU, the deadline to establish a
long-term commercial partnership was December 31, 2018.
                                            31
               2. Plaintiff’s Allegations of Breach of the Amended MOU

       Plaintiff alleges Defendant breached the three provisions summarized above

in the following ways:

          • “[A]mong other things . . . [Defendant] fail[ed] to serve as the lead

              investor in the Qualified Financing, with an investment of at least $10M

              in additional capital.”94

          • Defendant failed to complete the common shares acquisition.95

          • “[A]mong other things[,] . . . failing to establish a long-term

              commercial partnership . . . .”96

Plaintiff alleges damages of no less than $10 million. Defendant asserts Plaintiff’s

claims under the MOUs should be dismissed because the terms are not sufficiently

definite to support a breach of contract claim.

       For the reasons that follow, Defendant’s motion to dismiss Plaintiff’s claim

for breach of the Common Shares Acquisition Provision is GRANTED; Defendant’s

motion to dismiss Plaintiff’s claim for breach of the Qualified Financing Provision

and the Commercial Agreement(s) Provision is GRANTED in part, because the

agreement to “negotiate in good faith” is enforceable pursuant to California law.

94
   Compl. ¶ 56. Plaintiff does not allege that Defendant failed to fund the NGMP 2018 Revised
Offer referenced in Paragraph 2.a. of the Amended MOU and the first sentence of the QFI
Provision.
95
   Compl. ¶ 57.
96
   Compl. ¶ 57.
                                             32
               3. Principles of California Contract Law

       For a contract to be enforceable, the terms must be sufficiently definite. 97 A

contract’s terms are sufficiently definite if they create a reasonable certainty of

performance and “provide a basis for determining breach and fashioning a

remedy.”98 “If, by contrast, a supposed ‘contract’ does not provide a basis for

determining what obligations the parties have agreed to, and hence does not make

possible a determination of whether those agreed obligations have been breached,

there is no contract.”99

       An “agreement to agree” is not sufficiently definite to be enforceable. 100 “It

is still the general rule that where any of the essential elements of a promise are

reserved for the future agreement of both parties, no legal obligation arises ‘until

such future agreement is made.’”101 “Whether a term is essential depends on its

relative importance to the parties and whether its absence from the contract would

make enforcing the contract unfair to any party.”102

97
    Ladas v. California State Auto. Ass’n, 23 Cal. Rptr. 2d 810, 814 (Cal. Ct. App. 1st Oct. 22,
1993).
98
    Gordon v. Rother, 2019 WL 762151, at *5 (Cal. Ct. App. 2d Feb. 21, 2019); Weddington
Productions Inc. v. Flick, 71 Cal. Rptr. 2d 265, 277 (Cal. Ct. App. 2d Jan. 7, 1998).
99
   Weddington Productions Inc., 71 Cal. Rptr. 2d at 277.
100
    Gordon, 2019 WL 762151, at *5 (quoting Copeland v. Baskin Robbins USA, 117 Cal. Rptr. 2d
875 (Cal. App. Ct. 2d. Mar. 19, 2002)).
101
    Id. (quoting Baskin Robbins 117 Cal. Rptr. 2d 875, 879).
102
    Id. (quoting Baskin Robbins 117 Cal. Rptr. 2d at n. 3).
                                              33
               4. Defendant’s motion to dismiss Plaintiff’s claim for breach of
                  the Qualified Financing Provision is GRANTED in part.

       The second sentence of the QFI Provision states that “[w]ithin 6 months of

the closing of the Note investment, the company and [Defendant] shall negotiate in

good faith with respect to the terms and conditions” on which Defendant would

become the lead investor and invest at least an additional $10 million. For the

reasons that follow, this provision did not obligate Defendant to invest at least $10

million, thus there can be no breach on this basis; however, the Parties’ agreement

to negotiate in good faith to determine the means by which Defendant would become

the lead investor and invest this minimum amount is enforceable.

       Copeland v. Baskin Robbins U.S.A, issued by the California Court of Appeals,

Second District, speaks directly to the narrow issue presented by Plaintiff’s claim

for breach of the Amended MOU.103 In Baskin Robbins, the plaintiff-buyer entered

into a contract with the defendant-seller to buy an ice cream factory.104 The contract

provided that the parties agreed to negotiate a separate co-packing agreement

wherein the defendant would agree to provide the ice cream to the plaintiff over a

three-year period.105 The contract stated that the parties agreed to negotiate the

specific terms of the co-packing agreement.106 Negotiations over the co-packing

103
    Baskin Robbins, 117 Cal. Rptr. 2d 875.
104
    Id. at 878-89.
105
    Id. at 878.
106
    Id.
                                             34
agreement failed and the plaintiff filed suit alleging the defendant breached the

contract by refusing to enter into a co-packing agreement.107 The trial court granted

summary judgment to the defendant and the plaintiff appealed.108 The appellate

court distinguished an “agreement to negotiate” from an “agreement to agree” and

found that, while the latter was unenforceable, the former was enforceable.109 When

parties have agreed to negotiate a specific term or provision, “[f]ailure to agree is

not, itself, a breach of the contract to negotiate. A party will be liable only if a failure

to reach ultimate agreement resulted from a breach of that party’s obligation to

negotiate or to negotiate in good faith.”110 When parties have agreed to negotiate in

107
    Id. at 878-79.
108
    Id. at 879.
109
    Id. at 880-83.
110
    Id. at 880 (internal citations omitted). California courts have repeatedly affirmed and cited to
the holding in Baskin Robbins that an agreement to negotiate or negotiate in good faith is an
enforceable agreement. See, e.g., Sheen v. Wells Fargo Bank, NA, 505 P.3d 625, nn. 4-5 (Cal.
2022); Machado v. Myers, 252 Cal. Rptr. 3d 493, n. 9 (Cal. Ct. App. 4th Aug. 16, 2019) (holding
“parties’ agreement to ‘meet and confer’ regarding conditions for revocation of the license
agreement does not render the agreement unenforceable” (citing Baskin Robbins)); Cedar Fair,
LP v. City of Santa Clara, 123 Cal. Rptr. 3d 667, 681 (Cal. Ct. App. 6th Apr. 6, 2011) (holding
term sheet expressly bound parties to continue negotiating in good faith); Brehm v. 21st Century
Ins. Co, 83 Cal. Rptr. 3d 410, 423 (Cal. Ct. App. 2d. Sept. 16, 2008) (holding defendant’s “express
contractual right to resolve any remaining disputes by arbitration is not inconsistent with its
implied obligation to attempt in good faith to reach agreement with its insured prior to
arbitration”); Keystone Land & Development Co. v. Xerox Corp., 353 F.3d 1093, 1097 (9th Cir.
2003) (finding “[m]ost jurisdictions recognize the enforceability of contracts to negotiate in an
appropriate case” (citing Baskin Robbins and collecting cases in accord)); In re Sony Gaming
networks and Customer Data Security Breach Litigation, 996 F. Supp. 2d 942, 1013-1014 (S.D.
Cal. 2014) (holding “[p]laintiff’s claim could be based on an alleged breach of an ‘agreement to
negotiation’” (citing to Baskin Robbins)).
                                                35
good faith, the defendant has performed his obligations under the contract when it

has made a good faith effort to reach an ultimate agreement.111

          Here, Defendant was obligated to negotiate in good faith to determine the

terms and conditions under which it would become the lead investor and provide at

least $10 million, but was not obligated to reach an ultimate agreement on the

necessary terms. Plaintiff’s claim for breach of contract on the basis that Defendant

did not provide at least $10 million in additional financing and by not becoming the

lead investor is DISMISSED. Plaintiff’s claim that Defendant failed to negotiate in

good faith to establish the terms under which Defendant could accomplish the goals

in the QFI Provision remains pending.

                  5. Defendant’s motion to dismiss Plaintiff’s claim for breach of
                     the Commercial Agreements Provision is GRANTED in part.

          The Commercial Agreements Provision states that “the Parties agree to

negotiate in good faith to establish a long-term commercial partnership across

multiple lines of business no later than March 31, 2019.”112 Due to the language in

the Amended MOU, Plaintiff’s characterization of Defendant’s breach, as stated

above, is particularly important in adjudicating Defendant’s motion to dismiss.

          The Court applies the analysis used for the QFI provision to the Commercial

Agreements Provision (the “Provision”). Like the QFI Provision, Defendant’s

111
      Baskin Robbins, 117 Cal. Rptr. 2d at 880-81.
112
      Am. MOU (emphasis added).
                                                 36
alleged failure to establish a “long-term commercial partnership” is not a breach of

this Provision. The Amended MOU did not require that the parties reach an ultimate

agreement on the nature and scope of a long-term commercial partnership. The

failure to “negotiate in good faith” to establish this partnership, however, is

sufficiently definite to establish that Defendant had an obligation to negotiate the

establishment of this partnership. 113

                      a. Plaintiff has stated a claim for breach based on
                         Defendant’s failure to “negotiate in good faith.”

       Defendant asserts that the complaint does not include a claim for breach of

the duty to negotiate in good faith and that Plaintiff therefore cannot raise this claim

of breach in its opposition to the motion to dismiss.114 Although Plaintiff does not

expressly allege in its complaint that Defendant breached the Amended MOU by

failing to negotiate in good faith, the Court has an obligation to generously construe

the allegations in the complaint at this stage in the litigation. Plaintiff has alleged

generally that Defendant breached the Amended MOU, which includes a provision

113
    See supra nn. 103-111 and accompanying text. Pursuant to California law, reliance damages
(including out of pocket costs of negotiating or perhaps lost opportunity costs) are the only form
of damages available for a breach of an agreement to negotiate in good faith. Baskin Robbins, 117
Cal. Rptr. 2d at 885. Expectation damages are not permitted because courts have “no way of
knowing what the ultimate terms of the agreement would have been or even if there would have
been an ultimate agreement.” Id. Plaintiff has not alleged reliance damages for this claim.
Plaintiff only alleges damages in the amount of $10 million or more based on a breach of the QFI
provision. Although Defendant does not raise this issue, it could constitute an independent ground
for dismissal.
114
    Def. Reply Br. at 18-19.
                                               37
to “negotiate in good faith.”         In the factual background section to Plaintiff’s

complaint, Plaintiff makes several allegations related to Defendant’s alleged refusal

to negotiate in good faith.115 For these reasons, the Court finds that Plaintiff has

alleged breach of contract based on Defendant’s alleged failure to negotiate in good

faith a long-term commercial partnership.

                      b. Plaintiff has not stated a claim for breach based on
                         Defendant’s failure to establish a “long-term commercial
                         partnership” with the Company.

       Although Plaintiff claims that Defendant had an obligation to enter into a

commercial partnership, the phrase “agree to negotiate in good faith” itself shows

that the term “long-term commercial partnership” was left to the future agreement

of both parties. Where an essential element of an agreement is left to the “future

agreement of both parties, no legal obligation arises ‘until such future agreement is

made.’”116 The plain language of the Provision shows that at the time the Amended

MOU was signed, the parties had yet to negotiate, or at least complete negotiations,

to finalize the parameters of a “long-term commercial partnership.” If the parties

115
    Compl. ¶¶ 23, 28, 29, 42 (shortly after Defendant signed the May 2018 commitment, Defendant
refused to respond to numerous communications and “went dark” as the Company “sought to
secure the promised funds with BeautyCon LA looming”; Defendant refused to completely fund
its loan agreements and conditioned funding on the Company’s pursuit of BeautyCon POP which
“stretched the Company to the breaking point”; Defendant’s chief of retail was unable (or
unwilling) to support BeautyCon POP as Defendant promised; Upon information and belief,
Defendant was aware that funding only 25% of the May 2020 Note left many vendors and
Company customers unpaid during the pandemic.).
116
    Baskin Robbins, 117 Cal. Rptr. 2d at 879 (quoting City of Los Angeles v. Superior Court, 333
P.2d 745, 750 (Cal. 1959)).
                                              38
had already reached an agreement on this term, there would be no need specify that

the parties were agreeing to negotiate its establishment.

      Even if this Provision had not included the phrase, “agree to negotiate,” and

had unambiguously stated that “the parties shall establish a long-term commercial

partnership,” it would still not be sufficiently definite for the Court to determine

breach or fashion a remedy. The provision does not define the parameters of a “long-

term commercial partnership.” It does not specify what amount of time would

qualify as “long term.”     Would Plaintiff have had a claim for breach if the

commercial partnership with Defendant broke down after five years, for example, or

would Defendant have met its obligation under this provision? Furthermore, while

the provision does state that this partnership was to span across “multiple lines of

business,” there is a lacuna of information as to what would constitute the

partnership itself. The Provision does not define the nature and extent of the parties’

collaboration or whether it would include any profit-sharing arrangement. Even if

the MOU had obligated Defendant to engage in a commercial partnership, without

this term being further fleshed out, it would not be possible to determine whether

Defendant had breached.

              6. Defendant’s motion to dismiss Plaintiff’s claim for breach of
                 the Common Share Acquisition Provision is GRANTED.

      The Court finds that the CSA Provision is not enforceable because its terms

are not sufficiently definite to determine Defendant’s performance obligations with
                                          39
respect to acquiring shares. While the CSA Provision states that Defendant was to

complete acquisition of the shares by a date certain, the provision does not specify

whether any shares needed to be acquired for Defendant to have performed.

Subsection 3 of the CSA Provision states that Defendant “acknowledges that the

total number of shares available for acquisition (if any) and the exact pricing is not

guaranteed” and is subject to the Company and shareholders receiving approvals for

transfer.117

       The CSA Provision plainly provides for the possibility that Defendant would

not acquire any shares because this acquisition depended in part on factors outside

of Defendant’s control.        Thus, under the CSA Provision, it was possible for

Defendant to acquire zero shares and not be in breach. In fact, the weight of the

obligations in this provision appears to be on the Company rather than Defendant.

The Company agreed to use “commercially reasonable efforts” to cooperate with

Defendant and determine the optimal structure and mechanism to complete the

acquisition. It is fair to assume that the Company’s agreement to cooperate with

Defendant implies Defendant’s agreement to reciprocate that cooperation. The CSA

Provision fails, however, to sufficiently define what Defendant had to do or refrain

from doing to cooperate in accordance with this Provision. 118 For these reasons,

117
   Am. MOU (emphasis added).
118
   See Ladas v. California State Auto. Ass’n., 23 Cal. Rptr. 2d 810, 814 (Cal. Ct. App. 1st, Oct.
22, 1993) (affirming trial court’s holding that insurance company’s alleged promise to pay parity
                                               40
   there is no workable basis to identify Defendant’s obligations and whether

   Defendant is in breach.

III.   Fraud in the Inducement

          Plaintiff alleges that Defendant fraudulently induced it into executing the

   MOUs. Plaintiff claims that during negotiations leading up to the execution of the

   MOUs Defendant represented that Defendant would perform under them if the

   Company ceased discussions with other investors. Defendant asserts three grounds

   for dismissal: (1) Plaintiff’s claim is barred by California’s statute of limitations; (2)

   Plaintiff’s claim violates the economic loss doctrine; and (3) the allegations of

   fraudulent inducement do not satisfy Superior Court Civil Rule 9(b).

          Delaware law applies to the procedural ground for dismissal.

          As a threshold matter, both Delaware and California have a three-year statute

   of limitations for the claim of fraud in the inducement. Plaintiff does not contest

   that it did not file this claim within the three-year time period, but argues that the

   statute of limitations was tolled pursuant to Delaware law for the following reasons:

   the discovery rule tolls Plaintiffs claims, Defendant fraudulently concealed facts

   in setting commission rates “is too vague and indefinite to give rise to an enforceable contractual
   duty.”); Peterson Development Co. v. Torrey Pines Bank, 284 Cal. Rptr. 367, 374-75 (Cal. Ct.
   App. 4th Aug. 9, 1991) (holding loan commitment was not enforceable where it did not specify
   identity of the potential borrower, loan amount, percentage of purchase price, interest rates or
   repayment terms); Goldberg v. Santa Clara, 98 Cal. Rptr. 862, 862-63 (Cal. Ct. App. 1st, Dec. 6,
   1971) (finding contract calling for additional compensation if plaintiff achieved “savings to the
   City of such magnitude” to justify that compensation was too vague to be enforceable).
                                                   41
regarding this claim, this claim is equitably tolled, and the filing of the assignment

tolls the statute. Defendant argues in its reply that the statute of limitations is not

tolled and also cites exclusively to Delaware law, however, Defendant also asserts

California law applies because of the California choice-of-law provision in the

MOUs. Although the statutory time period is equivalent, because the parties appear

to disagree on which state’s law applies, the Court will briefly address the conflict

of law issue presented.

       As stated above, the MOUs contain a choice-of-law provision wherein the

Parties agreed that California law would apply to “all actions arising out of or in

connection with this Agreement . . . without regard to the conflicts of law provisions

of the State of California or of any other state.” However, pursuant to Delaware law,

“choice-of-law provisions in contracts do not apply to statutes of limitations, unless

a provision expressly includes it. If no provision expressly includes it, then the law

of the forum applies because the statute of limitations is a procedural matter.”119

Here, the choice of law provision does not specify whether it includes California’s

statute of limitations. As such, because statutes of limitations relate to matters of

119
    Pivotal Payments Direct Corp. v. Planet Payment, Inc., 2015 WL 11120934, at *3 (Del. Super.
Dec. 29, 2015) (internal citations omitted); see also Weinstein v. Luxeyard, Inc., 2022 WL 130973,
at *3 (Del. Super. Jan. 14, 2022); In re Rehabilitation of Manhattan Re-Insurance Co., 2011 WL
4553582, at *8 (Del. Ch. Oct. 4, 2011); B.E. Capital Management Fund LP v. Fnd.com, Inc., 171
A.3d 140, 147 (Del. Ch. Oct. 4, 2017).
                                               42
procedure, Delaware law applies. Because Delaware’s statute of limitations applies,

Delaware law with respect to tolling also applies.

       “[C]ourts apply a three-step analysis to determine whether a claim is time-

barred. First, the court determines when the cause of action accrues. Second, the

court determines whether the statute of limitations may be tolled so that the cause of

action accrues after the time of breach or injury.”120 If a plaintiff has not filed within

the statutory time period, it “bear[s] the burden of pleading specific facts

demonstrating that the statute was tolled.”121 The third step in the analysis, assuming

tolling applies, is to determine when the plaintiff was on inquiry notice, which is the

date the statute of limitations begins to run.122 Once the plaintiff has discovered

“facts sufficient to put a person of ordinary intelligence on inquiry which, if pursued,

would lead to discovery” the plaintiff has inquiry notice.123 A plaintiff need not

know of every aspect of the alleged wrongful conduct for the court to find the

plaintiff is on inquiry notice, but only when the plaintiff should have discovered the

120
    AssuredPartners of Virginia, LLC v. Sheehan, 2020 WL 2789706, at *12 (Del. Super. May 29,
2020).
121
    Puig v. Seminole Night Club, LLC, 2011 WL 3275948, n. 21 (Del. Ch. July 29, 2011) (quoting
In re Coca–Cola Enters., Inc., 2007 WL 3122370, at *6 (Del. Ch. Oct. 17, 2007); see also Solow
v. Aspect Resources, LLC, 2004 WL 2694916, at *3 (Del. Ch. Oct. 19, 2004)).
122
    AssuredPartners of Virginia, LLC, 2020 WL 2789706, at *12.
123
    S&R Associates, LP v. Shell Oil Co., 725 A.2d 431, 439 (Del. Super. Sept. 30, 1998); Jeter v.
RevolutionWear, Inc., 2016 WL 3947951, at *10 (Del. Ch. July 19, 2016); Pivotal Payments Direct
Corp. v. Planet Payment, Inc., 2015 WL 11120934, at *5 (Del. Super. Dec. 29, 2015).
                                               43
“general fraudulent scheme.”124 “[N]o theory will toll the statute beyond the point

where the plaintiff was objectively aware, or should have been aware, of facts giving

rise to the wrong.”125

       With respect to the first step in the analysis, a claim for fraudulent inducement

accrues at the time of the wrongful act, i.e., when the fraudulent statements were

made, not when the harmful effects of the wrongful act were felt.126 “The fraudulent

statements must have occurred on or before the date when the parties entered into

the contract.”127 With respect to the dates of execution of the MOUs, the original

MOU does not contain the date that it was signed, though Plaintiff alleges in the

complaint that the parties entered into the original MOU in June 2018.128 The

Company’s board of directors approved the original MOU on June 24, 2018. For

the purpose of Defendant’s motion, the Court assumes that the original MOU was

executed between June 24 and June 30, 2018. For Plaintiff’s claim to be timely filed

with respect to the Original MOU, it would have to be filed no later than June 30,

2021, unless the statute is tolled. The Amended MOU is dated December 16, 2018.

For Plaintiff’s claim to be timely filed with respect to the Amended MOU, it would

have to be filed within three years of that date, unless the statute is tolled. Plaintiff

124
    Ocimum Biosolutions (India) Ltd. v. AstraZeneca UK Ltd., 2019 WL 672836, at *9 (Del. Super.
Dec. 4, 2019).
125
    In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. Feb. 6, 2007).
126
    See Pivotal Payments Direct Corp., 2015 WL 11120934, at *4.
127
     Id.
128
    The Note referred to in the original MOU is dated June 18, 2018.
                                              44
filed its complaint on December 13, 2022, therefore, unless a tolling exception

applies, Plaintiff’s claim is time-barred.

       With respect to the second step in the analysis, statutes of limitations may be

tolled in “certain circumstances, including fraudulent concealment, inherently

unknowable injury [known as the “discovery rule”], and equitable tolling.”129 To

toll the statute of limitations based on fraudulent concealment “the plaintiff must

allege some affirmative act by the defendant that either prevented the plaintiff from

gaining knowledge of material facts or led the plaintiff away from the truth.”130 The

discovery rule applies where the injury was “inherently unknowable” and the injured

party was “blamelessly ignorant.”131 “When these ‘factual requisites’ are met, ‘“the

limitations period commence[s] to run when the person ha[s] reason to know that a

wrong ha[s] been committed.’”132 The limitations period is only tolled until the

plaintiff is on inquiry notice.

       Plaintiff asserts that its fraudulent inducement claim is tolled by the discovery

rule because it was not on notice that it possessed this claim until December 21,

2019, the date Thompson sent the Letter to Ohana. In support of its position that it

129
    Pivotal Payments Direct Corp., 2015 WL 11120934, at *5.
130
    Jeter v. RevolutionWear, Inc., 2016 WL 3947951, at *10 (internal quotations omitted).
131
    Morton v. Sky Nails, 884 A.2d 480, 482 (Del. 2005); Pack & Process, Inc. v. Celotex Corp.,
503 A.2d 646, 650 (Del. Super. Oct. 16, 1985) (quoting Pioneer Nat. Title Ins. Co. v. Sabo, 382
A.2d 265 (Del. Super. Jan. 17, 1978); S&R Associates, LP v. Shell Oil Co., 725 A.2d 431, 439
(Del. Super. Sept. 30, 1998).
132
    Pack & Process, Inc., 503 A.2d at 650 (quoting Pioneer Nat. Title Ins. Co., 382 A.2d 266-67.
                                              45
was not on notice until this date, Plaintiff cites to paragraphs 32, 38, and 39 of its

complaint.133 Paragraphs 38 and 39 discuss the Letter wherein Thompson indicated

Essence Ventures’ interest in purchasing the Company. If Plaintiff was not on

inquiry notice until December 21, 2019, this would toll the statute until December

20, 2022, seven days after Plaintiff filed the complaint.

       The Court does not find that the discovery rule applies because the injury was

not inherently unknowable before Thompson sent the Letter on December 21, 2019.

Plaintiff alleged that “it was no secret going back to 2018” that Defendant wished to

control the Company.134 Plaintiff also alleges that the Company had to hire an

investment banker in July 2019 due to Defendant’s failure to provide the promised

financing —a little over a year after entering into the original MOU and about seven

months after entering into the Amended MOU. The Court finds that Plaintiff has

established by its own allegations that it was on inquiry notice it had a claim for

fraudulent inducement for more than three years before it filed this claim.

       Plaintiff asserts the same grounds in its fraudulent concealment argument as

it does for its discovery rule argument, namely the Letter. Plaintiff, however, has

failed to articulate how the Letter amounts to an affirmative act that prevented

Plaintiff from gaining knowledge of material facts or lead it away from the truth that

133
    Paragraph 32 of the complaint alleges that Defendant backchannelled with other Series A
investors to chill new investors but does not provide a time frame as to when this occurred.
134
    Compl. ¶ 38.
                                            46
Defendant did not intend to fund the MOUs.135 Plaintiff bears the burden of asserting

specific facts of fraudulent concealment and it has not done so.

         Plaintiff’s claim of equitable tolling is without merit as it relies on Defendant’s

alleged role as a fiduciary. The Court dismissed the claim for breach of fiduciary

duty on the record after oral argument.136 Finally, Plaintiff argues the filing of the

Assignment tolls the statute. The Court finds that there is no merit to this claim.

The Assignment was filed twenty months before Plaintiff filed its claim which

provided a reasonable amount of time for the Trust to file the complaint within the

statutory time period. Plaintiff has not identified any relevant Delaware caselaw to

support its position, and the Court has not identified a case to support tolling on this

basis.

         Plaintiff’s claim for fraud in the inducement is barred by Delaware’s statute

of limitations because Plaintiff did not file it within the statutory time period and no

tolling exception applies. Because Plaintiff’s claim is time barred, the Court will not

address Defendant’s remaining two grounds for dismissal for this claim.

                                     CONCLUSION

For the reasons stated herein:

135
  See Jeter v. RevolutionWear, Inc., 2016 WL 3947951, at *10.
136
  See BeautyCon Media ABC v. New General Market Partners, C.A. No. N22C-12-143        MAA
CCLD, Adams, J., Transaction ID 70026953 (Del. Super. May 16, 2023).
                                             47
1.      Defendant’s motion to dismiss Plaintiff’s claim of tortious interference with

     prospective contractual relations is DENIED.

2.      Defendant’s motion to dismiss Plaintiff’s claim of breach of the Original

     MOU and Amended MOU is GRANTED in part.

        a. Defendant’s motion to dismiss Plaintiff’s claim of breach of the Original

            MOU is GRANTED.

        b. Defendant’s motion to dismiss Plaintiff’s claim of breach of the Amended

            MOU is DENIED in part.

                i. Plaintiff’s claim of breach of the CSA Provision is DISMISSED.

                ii. Plaintiff’s claim of breach of the QFI and Commercial Agreements

                   provisions based on Defendant’s alleged failure to negotiate those

                   provisions in good faith remains pending; the balance of Plaintiff’s

                   claims of breach of these provisions is DISMISSED.

3.      Defendant’s motion to dismiss Plaintiff’s claim of fraud in the inducement is

     GRANTED, because it was not timely filed and no exception applies to toll the

     statute.

        IT IS SO ORDERED.

                                           48