Court Opinion

ID: 9948178
Source: CourtListenerOpinion
Date Created: 2024-03-06 17:04:58.435779+00
Date Added: 2024-06-11T14:29:17.898815
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RICHARD A. GRACIANO, JR. AS        )
SELLERS’ REPRESENTATIVE,           )
                                   )
                Plaintiff,         )
                                   )
      v.                           ) C.A. No. 2022-0728-SG
                                   )
ABODE HEALTHCARE, INC. and         )
BRIGHTSPRING HEALTH SERVICES, )
INC.,                              )
                                   )
                Defendants,        )
                                   )
      and                          )
                                   )
CITIBANK, N.A.,                    )
                                   )
                Escrow Agent       )
                Nominal Defendant. )

                      MEMORANDUM OPINION

                    Date Submitted: November 29, 2023
                       Date Decided: March 4, 2024

Christopher J. Day, DAY LAW GROUP, LLC, Wilmington, Delaware, Attorney for
Plaintiff Richard A. Graciano.

Michael J. Maiomone and Gabriella Mouriz, BARNES & THORNBURG LLP,
Wilmington, Delaware, Attorneys for Defendants Abode Healthcare, Inc. and
BrightSpring Health Services, Inc.

GLASSCOCK, Vice Chancellor
          Like its 18th century English predecessor, the Delaware Court of Chancery is

a court of limited jurisdiction. Setting aside jurisdiction derived from statute,1 this

Court may only act where complete relief is unavailable at law. That is the case

where the law courts do not recognize an (equitable) cause of action, as well as where

the cause of action is itself legal in nature, but where relief at law—money damages

or declaratory judgment—are insufficient to remedy a plaintiff’s injury.

          The latter standard, in the hands of an artful pleader, is plastic; malleable to

the extent that, without vigilance on the part of the Court, the legal shrubbery would

soon overgrow the limited garden of equity. This matter requires such vigorous

jurisdictional topiary.

          Here, Plaintiff, a seller’s representative under a purchase agreement, seeks to

vindicate contractual rights. These are legal rights implicating monetary relief.

Plaintiff points out, however, that the sellers’ right to payment, under the contract,

will come from an escrow fund. Plaintiff first argues that the contract itself requires

an order of specific performance to accomplish release of the funds in escrow, but a

reading of the plain contractual language makes it clear that a declaratory judgment

(combined with Plaintiff’s instruction to the escrow agent) is the only judicial action

required under the agreement. Plaintiff also posits that, if he succeeds on the contract

claims, the escrow agent may nonetheless balk at releasing the funds. But that would

1
    The parties here have not suggested any statute confers subject matter jurisdiction.

                                                   1
likely entail a bad-faith refusal to comply with the agent’s contractual and fiduciary

obligations, and is in any case speculative. Speculation as to the need to employ

equity to vindicate a legal judgment does not, in my view, invoke equitable

jurisdiction, lest limited jurisdiction become a fiction. In the event that an equitable

ruling should prove necessary to complete relief post judgment, this Court is open,

but speculation about the need for such relief, under these facts, is insufficient to that

purpose. My reasoning follows.

                                   I. BACKGROUND

       A. Factual Background2

              1. The Parties

       Plaintiff Richard A. Graciano, Jr. (“Plaintiff”), along with David F. Graciano,

Ross J. Nese, and Jeffrey J. Graciano (collectively, the “Sellers”) each owned a

percentage of Grane Hospital Care, Inc., a Pennsylvania corporation (the

“Company”).3 Collectively, the Sellers owned 100% of the Company prior to

January 31, 2021, when Defendant Abode Healthcare, Inc. purchased the Company.4

       Defendant Abode Healthcare, Inc. (“Abode”) is a Delaware corporation.5

Abode acquired all outstanding stock in the Company on January 31, 2021.6

2
  The following facts are drawn from the operative complaint. See Am. Compl., Dkt. No. 10.
3
  Id. ¶¶ 1–2.
4
  Id. ¶¶ 2, 23.
5
  Id. ¶ 3.
6
  Id.

                                              2
        Abode did not abide, at least as an independent entity; Defendant

BrightSpring Health Services, Inc. (“BrightSpring” and collectively with Abode, the

“Defendants” or “Buyers”) is a Delaware corporation that acquired Abode in

February 2021.7

        Nominal Defendant Citibank, N.A. (the “Escrow Agent” or “Citibank”) is a

national banking association that conducts business in Delaware.8

               2. The CARES Act Grant

        Following the onset of the COVID-19 pandemic in early 2020, the federal

government approved the Coronavirus Aid, Relief, and Economic Security Act (the

“CARES Act”).9       Under the CARES Act, federal funds were appropriated to

reimburse qualified health care providers for health care-related expenses and lost

revenue attributable to the COVID-19 pandemic.10 The federal Department of

Health and Human Services (“HHS”) distributed the CARES Act funds and the

program was administered under the federal Health Resources & Services

Administration (“HRSA”).11 HRSA was tasked with determining the amount to pay

7
  Id. ¶ 4.
8
  Id. ¶ 5.
9
  Id. ¶ 14.
10
   Id. ¶ 15.
11
   Id.

                                        3
each eligible provider, including the Company,12 and automatically made

distributions from the CARES Act funds.13

       Over the course of 2020, the Company suffered from lost revenues amounting

to millions of dollars while incurring direct COVID-19-related unreimbursed

expenses.14 In April 2020, as an eligible provider under the CARES Act, the

Company received a Phase 1 general distribution of the CARES Act funds

amounting to $1,884,212.75, subject to terms and conditions imposed by HRSA.15

As a condition to receiving the CARES Act funds, the Company agreed to repay any

CARES Act funds that were not used to pay for eligible COVID-19-related expenses

or to replace lost revenues permitted under the HRSA Terms and Conditions and the

HRSA Guidelines.16

              3. Abode Purchases the Company

       On July 9, 2020, Sellers and Abode entered into a confidentiality agreement

so that Abode could conduct due diligence in connection with a potential purchase

of the Company.17 Thereafter, Sellers and Abode entered into a purchase agreement

dated December 21, 2020 (the “Purchase Agreement”).18 Under the terms of the

12
   The Company has provided hospice care to terminally ill patients since December 2005. Id.¶
17.
13
   Id. ¶ 16.
14
   Id. ¶ 18.
15
   Id. ¶ 17.
16
   Id. ¶ 19.
17
   Id. ¶ 22.
18
   Id. ¶ 23.

                                             4
Purchase Agreement, Abode would acquire all of the issued and outstanding capital

stock of the Company at closing on January 31, 2021.19

        When the parties entered into the Purchase Agreement, the parties agreed that

if the Company was required to repay, return, or reimburse any CARES Act funds

received by the Company prior to the January 31, 2021 closing, Sellers would be

liable for repayment.20 Because the amount that Sellers could report as lost revenue

incurred in 2020 was unknown in January 2021, it was uncertain if the Company

would be required to repay any of the CARES Act funds it received in April 2020.21

Accordingly, the parties agreed that the Sellers would escrow an amount equal to the

amount of the CARES Act funds the Company received prior to closing to ensure

that Buyers would have cash available to make any requirement repayment.22

                    a. Escrow Account

        When Abode’s purchase of the Company closed on January 31, 2021, the

parties executed an escrow agreement (the “Escrow Agreement”, and collectively

with the Purchase Agreement, the “Transaction Agreements”).23 Pursuant to the

Escrow Agreement, Citibank was appointed the Escrow Agent and Sellers caused

the Company to deposit $1,884,212.75 (the “Escrow Fund”) into the escrow account

19
   Id.
20
   Id. ¶ 25.
21
   Id. ¶ 26.
22
   Id. ¶ 27.
23
   Id. ¶ 32.

                                          5
(the “Escrow Account”).24 Under the Escrow Agreement, the parties agreed to

instruct the Escrow Agent to release from the Escrow Account first any repayment

amount required by the federal government.25 If funds remained in the Escrow

Account after the required repayment was made to the federal government, the

parties agreed to instruct the Escrow Agent to then release to the Sellers funds

totaling the amount expended, spent, or otherwise used for purposes permitted under

the CARES Act on eligible pre-closing losses.26 After reimbursing the Sellers, if the

Escrow Account still had funds, the parties agreed to instruct the Escrow Agent to

release such remaining funds to the Company.27

              4. BrightSpring Acquires Abode

       In February 2021, BrightSpring closed its purchase of Abode.28 When

BrightSpring was negotiating the purchase of Abode, BrightSpring was aware that

Abode was also negotiating with Sellers to purchase the Company.29 Section 11.4

of the Purchase Agreement allows Sellers or Abode to assign the relevant rights and

obligations under the Purchase Agreement to an affiliate who would then be bound

by the Purchase Agreement’s terms.30                Upon purchasing Abode, BrightSpring

24
   Id. ¶¶ 24, 32.
25
   Id. ¶ 29.
26
   Id. ¶ 30 (citing Am. Compl., Ex. A § 2.7(c)(ii)(x), Dkt. No. 10 (the “Purchase Agreement”)).
27
   Id. ¶ 31 (citing Purchase Agreement § 2.7(c)(ii)(y)).
28
   Id. ¶ 41.
29
   Id. ¶¶ 42–43.
30
   Id. ¶ 44.

                                                6
assumed all rights, obligations, and liabilities of Abode under the Transaction

Agreements.31

              5. The HRSA Report

       The HRSA required each provider that had received CARES Act funds to

report to HRSA by a specified deadline the allocation of the funds such provider

received.32 The portal to file an Initial CARES Act Funds Report (“HRSA Report”)

did not open until July 1, 2021, so the parties did not file such report prior to the

January 31, 2021 closing date.33 Moreover, the HRSA did not provide how to

calculate lost revenues for CARES Act reporting purposes, until August 2021.34

Ultimately, the Company was required to submit its first HRSA Report by

November 30, 2021.35 Buyers prepared the HRSA Report and allowed Sellers to

review the HRSA Report before filing the HRSA Report on November 30, 2021.36

The HRSA Report allocated the full $1,884,212.75 in CARES Act funds received

by the Company.37

       Section 2.7(c) of the Purchase Agreement provided, in relevant part, that if

the HRSA had not made a final determination of the Company’s repayment

31
   Id. ¶ 45.
32
   Id. ¶ 49.
33
   Id. ¶ 50.
34
   Id. ¶ 66.
35
   Id. ¶ 51. The initial deadline was September 30, 2021, but the Company received an extension.
Id.
36
   Id. ¶ 52.
37
   Id.

                                               7
obligations for the CARES Act funds, then three months after the Company filed the

first post-closing HRSA Report, the “Buyer and Sellers’ Representative shall deliver

a joint written instruction to the Escrow Agent to release” the “aggregate amount

equal to the portion (if any) of the [Escrow Funds] expended, spent or otherwise

used by or on behalf of the Company on or before the Closing Date exclusively for

the purposes permitted under the CARES Act,” to Sellers.38 The HRSA Report was

filed on November 30, 2021, thus (per the complaint) on March 1, 2022, the

Purchase Agreement obligated parties obligated to submit a joint release instruction

(the “Joint Release Instruction”) directing the Escrow Agent to release the Sellers’

portion of the Escrow Funds to Sellers.39

       On March 2, 2022, Sellers notified Buyers that the Escrow Funds had become

due for release and provided Buyers with the proposed Joint Release Instructions.40

Buyers have refused to execute the Joint Release Instructions.41 Consequently, the

Escrow Funds remain in the Escrow Account, and the Escrow Agent cannot release

any portion of the Escrow Funds to Sellers.42

38
   Id. ¶ 53 (quoting Purchase Agreement § 2.7(c)(ii)(x)). Upon review of the field HRSA Report,
the federal government determined that the Company was not required to repay any CARES Act
funds received in 2020. Id. ¶ 76.
39
   Id. ¶ 54.
40
   Id. ¶¶ 56–57.
41
   Id. ¶ 82.
42
   Id. ¶ 83.

                                              8
       B. Procedural History

       On August 17, 2022, Plaintiff filed suit against Defendants.43 The initial

complaint contained two counts: Count I for specific performance and Count II for

breach of contract pertaining to the Escrow Account.44 Plaintiff filed an amended

complaint on April 5, 2023, to add a third count for breach of contract that the parties

have since resolved.45 On June 14, 2023, Plaintiff filed a motion for judgment on

the pleadings.46 The briefing on Plaintiff’s motion was stayed after I requested, sua

sponte,47 that the parties brief the issue of subject matter jurisdiction in accordance

with this Court’s decision in ISS Facility Servs., Inc. v. JanCo FS 2, LLC.48 The

parties completed briefing the issue of subject matter jurisdiction on August 31,

2023.49 I heard oral arguments on November 29, 2023, and consider the matter fully

submitted as of that date.50

43
   See Verified Compl. of Pl., Dkt. No. 1.
44
   Id. ¶¶ 85–94.
45
   See Am. Compl. ¶¶ 138–54; Opening Br. of Defs. 7 n.1, Dkt. No. 15 (“Defs.’ OB”).
46
   See Mot. of Pl. for J. on the Pleadings, Dkt. No. 12.
47
   See Crown Castle Fiber LLC v. City of Wilmington, 2021 WL 2838425, at *3 (Del. Ch. July 8,
2021) (“The Court has a duty to determine whether it has subject matter jurisdiction over a
plaintiff’s claims and can raise the issue sua sponte.”); see also Int’l Bus. Machs. Corp. v.
Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch. 1991) (“[J]udges in the Delaware Court of Chancery
are obligated to decide whether a matter comes within the equitable jurisdiction of this Court
regardless of whether the issue has been raised by the parties.”).
48
   See Stipulation and Order Governing Briefing Schedule, Dkt. No. 14.
49
   See Reply Br. of Defs., Dkt. No. 19 (“Defs.’ RB”).
50
   See Judicial Action Form re Oral Argument via Zoom before Vice Chancellor Sam Glasscock
dated 11.29.23, Dkt. No. 21.

                                               9
                                      II. ANALYSIS

       The Court of Chancery is a court of limited jurisdiction.51 As such, this Court

“can acquire subject matter jurisdiction over a cause in only three ways, namely, if:

(1) one or more of the plaintiff’s claims for relief is equitable in character, (2) the

plaintiff requests relief that is equitable in nature, or (3) subject matter jurisdiction

is conferred by statute.”52 Here, Plaintiff seeks to invoke this Court’s equitable

jurisdiction to obtain an equitable remedy, an order for specific performance.53

       A. Equitable Jurisdiction and Specific Performance Generally

       Parties cannot contractually confer equitable jurisdiction where the Court

otherwise lacks jurisdiction.54 Instead, “[e]quitable jurisdiction must be determined

from the face of the complaint as of the time of filing, with all material factual

allegations viewed as true.”55 When reviewing the complaint to determine whether

equitable jurisdiction exists, “[t]he Court must examine what the parties to the

litigation are actually seeking . . . to ensure that Chancery jurisdiction is a necessity

to adequate justice, and not . . . a ‘formulaic “open sesame”’ by which artful pleaders

may attach equitable jurisdiction.”56

51
   See El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp., 669 A.2d 36, 39 (Del. 1995).
52
   Candlewood Timber Grp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997 (Del. 2004).
53
   Am. Compl. ¶¶ 114–26.
54
   El Paso Natural Gas Co., 669 A.2d at 39 (citing Elia Corp. v. Paul N. Howard Co., 391 A.2d
214, 215–16 (Del. Super. 1978)).
55
   Int’l Bus. Machs. Corp., 602 A.2d at 78.
56
   Elavon, Inc. v. Elec. Transaction Sys. Corp., 2022 WL 667075, at *2 (Del. Ch. Mar. 7, 2022)
(quoting Int’l Bus. Machs. Corp., 602 A.2d at 78).

                                              10
       Where, as here, a plaintiff seeks to invoke this Court’s equitable jurisdiction

by requesting an order for specific performance, the plaintiff “must [be prepared

ultimately to] prove by clear and convincing evidence” that she is entitled to such

relief.57 “Specific performance . . . is an equitable remedy by which a court of equity

may compel the actual accomplishment of a contract by the party bound to fulfill

it.”58 The purpose of specific performance is to address “situations where the

assessment of money damages is impracticable or somehow fails to do justice.”59

Thus, to prove she is entitled to specific performance, a plaintiff must also prove that

there exists no adequate remedy at law.60 “[I]n order to be ‘adequate’, a legal remedy

must be available as a matter of right, be full, fair and complete, and be as practical

to the ends of justice and to prompt administration as the remedy in equity.”61

              1. Specific Performance and Escrow Accounts

       Whether this Court has equitable jurisdiction based solely on a plaintiff’s

request for an order of specific performance or injunction to direct an agent to release

escrowed funds is an issue with which the Court is familiar. In my view, the issue

turns on whether the relief is necessary to the full vindication of the plaintiffs’ rights,

57
   Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).
58
   E. Balt LLC v. E. Balt US, LLC, 2015 WL 3473384, at *2 (Del. Ch. May 28, 2015) (internal
quotation marks omitted).
59
   Id.
60
   Minn. Invco of RSA No. 7, Inc. v. Midwest Wireless Hldgs. LLC, 903 A.2d 786, 793 (Del. Ch.
2006).
61
   Clark v. Teeven Hldg. Co., Inc., 625 A.2d 869, 881 (Del. Ch. 1992).

                                             11
and not merely speculative or pretextual. In addressing this issue, this Court has

issued conflicting lines of decisions: those that find such a request is facially

sufficient to invoke this Court’s equitable jurisdiction, and those that find this Court

lacks jurisdiction unless is appears that full relief is unavailable without equitable

intervention. Naturally, the parties in the instant matter have relied upon the line of

cases that reach their preferred outcome for this motion. I will briefly discuss the

reasoning used in each line of decisions to support their respective conclusions,

beginning with this Court’s decision in East Balt.

       In East Balt, this Court concluded it could assert equitable jurisdiction over

the plaintiffs’ request for an order of specific performance requiring the defendants

to issue instructions to the escrow agent to release escrowed funds.62 To reach this

conclusion, the Court explained that, even if plaintiff were to receive declaratory

relief in its favor from a court of law, plaintiff would have to seek recourse in the

Court of Chancery to enforce the declaratory judgment against the non-party escrow

agent.63 Therefore, the Court reasoned the remedy available at law was inadequate

as it “would not be as certain, prompt, complete, or efficient as the equitable

remedies” sought by the plaintiffs.64

62
   E. Balt LLC, 2015 WL 3473384, at *2, 4.
63
   Id. at *3–4 (citing SecNet Hldgs., LLC, v. Potash, C.A. No. 7781-VCP, at 33–35 (Del. Ch. Apr.
2, 2013) (TRANSCRIPT)).
64
   Id. at *4.

                                              12
       Subsequent decisions as have followed East Balt found that this Court has

equitable jurisdiction over a plaintiff’s request for an order of specific performance

requiring the defendants to cause an escrow agent to release escrowed funds. United

BioSource LLC v. Bracket Holding Corporation had analogous facts to those in East

Balt and similarly concluded that the Court had equitable jurisdiction to grant an

order for specific performance for the non-party escrow agent to release the

escrowed funds at issue on grounds that relief at law would not be complete.65 In

American Healthcare Administrative Services, Inc. v. Aizen, the Court built on the

holding in East Bolt to find that equitable jurisdiction existed where the plaintiffs

“point[ed] to provisions in the Purchase Agreement that provide expressly for a

decree of specific performance and stipulate to the existence of irreparable harm in

the event of a breach.”66 According to the Aizen Court, these contractual provisions

established that the plaintiffs had no adequate remedy at law.67

       Other decisions in our jurisdiction have reached conclusions than depart from

the reasoning in East Balt. In Evalon, Inc. v. Electronic Transaction Systems

Corporation, this Court found that it lacked equitable jurisdiction over a plaintiff’s

request for an order of specific performance to direct an escrow agent to release the

65
   United BioSource LLC v. Bracket Hldg. Corp., 2017 WL 2256618, at *4 (Del. Ch. May 23,
2017).
66
   285 A.3d 461, 495 (Del. Ch. 2022).
67
   Id. at 495–97. I note that Aizen is not squarely under the East Balt line, in that it focused not on
the request for equitable relief alone, but, significantly, on an examination of the contract at issue
and whether enforcement at law would be complete.

                                                 13
escrowed funds.68 To reach this conclusion, the Court distinguished the facts from

East Balt by noting that the Evalon plaintiff sought legal relief in the form of the

release of escrowed funds either through joint release instructions from the parties

or with a final order from a court, but the plaintiff failed to plead sufficient facts to

demonstrate a need for injunctive relief.69 The Evalon Court explained that “[a] legal

action cannot be transformed into an equitable one merely suggesting that contingent

relief, such as an escrow agent gone rogue, may necessitate an injunction.”70

Similarly, in ISS Facility Services, Inc. v. JanCo FS 2, LLC, this Court found that

the plaintiffs had a sufficient remedy at law even where there was contractual

language requiring an escrow agent to release escrowed funds upon receipt of a final

order from a court of competent jurisdiction.71 This examination of the need for

equity, and not simply the request for equity, departs from East Balt. Importantly,

to my mind, this approach of looking for the true nature of the relief required, under

the facts asserted in the complaint, is consistent with this Court’s duty to disallow

jurisdiction through artful pleading alone, as called for under Comdisco and its

progeny.

68
   2022 WL 667075, at *2–4 (Del. Ch. Mar. 7, 2022).
69
   Id. at *3.
70
   Id. at *4.
71
   2023 WL 4096014, at *1–2 (Del. Ch. June 20, 2023).

                                            14
       B. Equitable Jurisdiction Over the Specific Performance Sought Here

       In the instant case, Plaintiff seeks an order of specific performance to require

Buyers to comply with the Escrow Agreement or, in the alternative, to require the

Escrow Agent to release the Escrow Funds in accordance with written instructions

included in a court order for specific performance.72 Based on the Court’s decision

in ISS Facility, I requested supplemental briefing to assist me in determining whether

Plaintiff’s request requires this Court’s equitable jurisdiction.73

       Buyers have refused to issue Joint Release Instructions to release the Escrow

Funds under the terms of the Purchase Agreement, due to a disagreement about

amounts due.74       In such circumstances, the Escrow Agreement provides for

alternative mechanisms to govern the release of the Escrow Fund by the Escrow

Agent. Specifically, the Escrow Agreement provides:

       Upon receipt by the Escrow Agent of a Final Order from any Party,
       together with proof of simultaneous delivery thereof to the other Party,
       the Escrow Agent shall within five (5) Business Days following receipt
       of such Final Order, disburse as directed in such Final Order, part or
       all, as the case may be, of the applicable Escrow Funds (but only to the
       extent funds are available in the applicable Escrow Account(s)) from
       the applicable Escrow Account(s) in accordance with such Final Order.
       Notwithstanding the foregoing, while the Escrow Agent may act on
       such Final Order without further inquiry, the Escrow Agent shall be
       entitled to request an opinion of counsel of the prevailing Party to the
       effect that an order or judgment is final and non-appealable and from a

72
   Pl.’s Suppl. Answering Br. on Issue of Jurisdiction 22–24, Dkt. No. 18 (“Pl.’s AB”).
73
   See Stipulation and Order Governing Briefing Schedule, Dkt. No. 14.
74
   Am. Compl. ¶ 82.

                                               15
       court of competent jurisdiction for purposes of this Section [ ] before
       making such disbursement.75

       The Escrow Agreement defines the term “Final Order” as follows:

       “Final Order” means a certified copy of a final non-appealable order or
       judgment of any court of competent jurisdiction or arbitrator awarding
       amounts to be paid out of any of the Escrow Accounts, together with
       (A) a certificate of the prevailing Party to the effect that such order or
       judgment is final and non-appealable and from a court of competent
       jurisdiction or arbitrator (in each case in accordance with the terms of
       the Purchase Agreement) having proper authority and (B) the written
       payment instructions of the prevailing Party to effectuate such order or
       judgment.76

       Plaintiff advances three principal arguments in favor of this Court’s equitable

jurisdiction over this dispute: (1) the Amended Complaint facially seeks relief that

is equitable in nature; (2) the parties agreed to this Court’s equitable jurisdiction in

the Transaction Agreements; and (3) equitable jurisdiction is inevitable.

              1. Equitable Jurisdiction From the Face of the Amended Complaint

       Plaintiff asserts that the Amended Complaint sufficiently states a request for

equitable relief on its face because the primary relief sought is an order of specific

performance requiring Defendants “to deliver a joint written instruction the Escrow

Agent to release” the escrowed Escrow Funds.77 In response, Defendants note that

the Purchase Agreement clearly provides for an alternative remedy if Defendants

75
   Am. Compl., Ex. B ¶ 4(a)(ii), Dkt. No. 10 (“Escrow Agreement”).
76
   Id. (emphases added).
77
   Pl.’s AB 22 (quoting Purchase Agreement § 2.7(c)(ii)).

                                             16
refuse to execute the Joint Release Instructions, which alternative Plaintiff is in fact

pursuing in its lawsuit.78 Specifically, the Purchase Agreement states that either

party is entitled to file suit against the other for breach of contract and seek monetary

relief in accordance with the Escrow Agreement.79 Thus, the Escrow Agreement

furnishes Plaintiff with an adequate remedy at law.80

       Plaintiff is correct that this Court will determine whether it has equitable

jurisdiction by reviewing the face of the complaint.81 However, when reviewing the

complaint, the Court must “take a practical view of the complaint, and [ ] not permit

a suit to be brought in Chancery where a complete legal remedy otherwise

exists[.]”82 Put another way, the Court’s consideration of whether it has equitable

jurisdiction to decide a dispute is not limited to a review of the prayer for relief

included in a complaint, or else an artful pleader’s “incantation of magic words”

would circumvent this Court’s otherwise limited jurisdiction.83 Instead, this Court

“review[s] the allegations of the complaint as a whole to determine the true nature

of the claim.”84 To ascertain the true nature of a plaintiff’s claims, the Court

conducts “a realistic assessment of the nature of the wrong alleged and the remedy

78
   Defs.’ OB 14–15.
79
   Id. at 14.
80
   Id. at 15.
81
   Pl.’s AB 22 (citing Int’l Bus. Machs. Corp., 602 A.2d at 78).
82
   Int’l Bus. Machs. Corp., 602 A.2d at 78.
83
   McMahon v. New Castle Assocs., 532 A.2d 601, 603 (Del. Ch. 1987).
84
   Christiana Town Ctr., LLC v. New Castle County, 2003 WL 21314499, at *3 (Del. Ch. June 6,
2003).

                                            17
available in order to determine whether a legal remedy is available and fully

adequate.”85

       Upon a holistic review of the allegations in the Amended Complaint, I

conclude that Plaintiff brought this suit in pursuit of legal relief. The driving force

behind this lawsuit is Plaintiff’s desire to obtain escrowed funds that Plaintiff

believes he is entitled to under the Transaction Agreements. Even though Plaintiff

asserts that the most efficient manner to obtain the Escrow Funds is a court order for

specific performance, such assertion does not change the true nature of this lawsuit.

Besides a formulaic statement that an order for specific performance is required for

Plaintiff to have “certain, efficient, and complete relief,” Plaintiff fails to explain

why equitable jurisdiction is necessary for him to obtain the legal remedy sought.

Thus, my inquiry into whether this Court has equitable jurisdiction will not end with

the face of the Amended Complaint.

               2. Equitable Jurisdiction Under the Transaction Agreements

       Despite the fact that “[i]t is settled law that parties may not confer subject

matter jurisdiction by agreement[,]”86 Plaintiff nevertheless contends that this Court

should defer to the parties’ interpretation of the language of their own agreements

governing the business relationship.87 In asserting that the Transaction Agreements

85
   McMahon, 532 A.2d at 603.
86
   Thompson v. Lynch, 990 A.2d 432, 434 (Del. 2010).
87
   Pl.’s AB 2.

                                             18
confer equitable jurisdiction on this Court, Plaintiff relies on his interpretation of

two aspects of the Transaction Agreements: (1) the definition and use of the term

“Final Order;” and (2) the inclusion of a “Specific Performance Clause.”

                      a. Equitable Jurisdiction to Issue the “Final Order”

       Plaintiff asserts that the language of the Transaction Agreements

unambiguously require that the contractually-defined term “Final Order” be a court

order expressly ordering specific performance, a form of relief only available from

the Court of Chancery.88 Paragraph 4(a)(ii) of the Escrow Agreement dictates that

the Escrow Agent is required to “disburse as directed in such Final Order, part or all,

. . . of the Escrow Funds . . . in accordance with the Final Order.”89 “Final Order” is

a defined term in the Agreement. It is defined, in relevant part, as “a final non-

appealable order or judgment of any court of competent jurisdiction . . . awarding

amounts to be paid out of any of the Escrow Accounts together with . . . the written

payment instructions of the prevailing Party to effectuate such order or judgment.”90

According to Plaintiff, when these two provisions are read together, the definition

of Final Order permits the Escrow Agent to disburse Escrow Funds only as

specifically directed by the court.91 Therefore, per Plaintiff, the language of the

88
   Id. at 12–15.
89
   Id. at 13 (quoting Escrow Agreement ¶ 4(a)(ii)).
90
   Escrow Agreement ¶ 4(b)(ii).
91
   Pl.’s AB 14.

                                               19
Escrow Agreement requires the equitable power of the Court of Chancery to cause

the Escrow Agent to act.

       In response, Defendants argue that the language in the Escrow Agreement is

unambiguous in its mandate that the Escrow Agent release the Escrow Funds upon

receipt of a Final Order.92 The contractual definition of Final Order does not require

the court to give the Escrow Agent written instructions to effectuate the court’s

order.93 Rather, the language of the Escrow Agreement allows for either party to

obtain a court order adjudicating the amount of the Escrow Funds to which the party

is contractually entitled and to deliver that to the Escrow Agent, along with the

prevailing party’s written instructions.94 Only where the Escrow Agent defies the

court order does the Escrow Agreement contemplate an order of specific

performance from this Court.95

       The Transaction Agreements unambiguously require that the Escrow Agent

disburse the Escrow Funds upon receipt of a Final Order. Plaintiff emphasizes that

this disbursement must be done “in accordance with the Final Order.” However, as

just described, “Final Order” is a contractually defined term; Final Order comprises

(1) “a final non-appealable order or judgment of any court of competent jurisdiction

92
   Defs.’ OB 14.
93
   Id. at 14–15.
94
   Id. at 13.
95
   Id. at 13–14.

                                         20
. . . awarding amounts to be paid out of any of the Escrow Accounts”; (2) “a

certificate of the prevailing Party” certifying that the court “order or judgment is

final and non-appealable and from a court of competent jurisdiction”; and (3)

“written payment instructions of the prevailing Party to effectuate such order or

judgment.”96

         The plain language of the Transaction Agreements does not require a court

order for specific performance. As it is defined, the Final Order requires the

prevailing party to instruct the Escrow Agent on how to disburse the Escrow Funds

in accordance with the court’s decision. Put another way, the court itself does not

provide written instructions directing the Escrow Agent how to disburse the Escrow

Funds; those instructions are to come from the prevailing party. Therefore, the

Transaction Agreements’ definition and use of Final Order do not invoke equity to

issue an order for specific performance.

                       b. Equitable Jurisdiction Under the Specific Performance
                       Clause

         Plaintiff next argues that the Purchase Agreement includes a “Specific

Performance Clause” that, according to Plaintiff, contains language under which I

96
     Escrow Agreement ¶ 4(b)(ii) (emphases added).

                                               21
must conclude that equitable jurisdiction exists.97 Here, the Specific Performance

Clause states, in relevant part:

       The parties agree that irreparable damage would occur in the event that
       any provision of this Agreement was not performed in accordance with
       its specific terms or was otherwise breached or the Transaction was not
       consummated, and that money damages would not be an adequate
       remedy, even if available. It is accordingly agreed that the parties shall
       be entitled to an injunction or injunctions, or any other appropriate form
       of specific performance or equitable relief, to prevent breaches of this
       Agreement and to enforce specifically the terms and provisions hereof
       in the Delaware Courts, this being in addition to any other remedy to
       which they are entitled at law or in equity. Each of the parties agrees
       that it will not oppose the granting of an injunction, specific
       performance and other equitable relief on the basis that any other party
       has an adequate remedy at law or that any award of specific
       performance is not an appropriate remedy for any reason at law or in
       equity.98

       While Delaware is a contractarian state that will honor parties’ contractual

agreements unless doing so would contradict public policy,99 “[i]t is settled law that

parties may not confer subject matter jurisdiction by agreement.” 100 If the Court

were to defer to the parties’ contractual agreement to decide whether the ability of

the Court to assert equitable jurisdiction over a dispute, limited jurisdiction would

have no meaning; all contracting parties who wish for their dispute to be heard in

the Court of Chancery, regardless of the true nature of the dispute, would be

97
    Pl.’s AB 9–10; see Aizen, 285 A.3d at 495–97 (basing jurisdiction in part on contractual
recitation of insufficiency of legal relief).
98
   Purchase Agreement § 11.11.
99
   See Cantor Fitzgerald, L.P. v. Ainslie, 2024 WL 315193, at *1 (Del. Jan. 29, 2024).
100
    Thompson, 990 A.2d at 434.

                                            22
permitted to contractually agree to this Court’s jurisdiction. Put another way, the

parties may bind themselves, they may not bind the Court, and they may not provide

a context in which this Court may violate the jurisdictional limitations imposed upon

it by the Delaware Constitution.

          Even though the parties contractually agree that any breach of the Transaction

Agreements would result in irreparable harm that could only be remedied through

an order for specific performance, it is incumbent upon the Court to “determine the

‘true reason’ for which the plaintiff has brought suit.”101 At the heart of this

complaint is Plaintiff’s desire to receive the Escrow Funds to which Plaintiff believes

he is contractually entitled. While the parties contractually agreed “that money

damages would not be an adequate remedy”102 for any breach of the Transaction

Agreements, that does not change that the ultimate relief Plaintiff seeks is monetary,

relief that may be vindicated by a final judgment at law. Finally, I note, obtaining a

court order, and submitting it to the Escrow Agent with the required certification and

instructions, is itself an explicit contractual remedy endorsed by the contracting

parties.

101
      Int’l Bus. Machs. Corp., 602 A.2d at 78.
102
       Purchase Agreement § 11.11.

                                                 23
               3. Equitable Jurisdiction as Inevitable

       Finally, Plaintiff avers that this Court’s equitable jurisdiction is inevitable to

enforce any court order.103 According to Plaintiff, invoking this Court’s equitable

jurisdiction to order specific performance at this early stage “would not be the result

of the tail wagging the dog based upon an uncertain future contingency[,]” but rather

is necessary to provide Plaintiff with complete and efficient relief that cannot

otherwise be accomplished.104 Plaintiff posits that he is not asking for this Court to

invoke its equitable jurisdiction to avoid a hypothetical future failure of the Escrow

Agent to comply with a court order.105 In support of this contention, Plaintiff

reasserts his interpretation that the Escrow Agreement requires the Final Order to

include written instructions specifically directing the Escrow Agent to disburse the

Escrow Funds.106 Therefore, according to Plaintiff, declaratory judgment would be

insufficient to cause the Escrow Agent to act under the terms of the Escrow

Agreement.107 I have rejected this reading of the Transaction Agreements, above.

       This leaves Plaintiff’s argument that equitable relief will be required to

compel the Escrow Agent to act.               Defendants criticize Plaintiff’s position as

assuming that the Escrow Agent will ignore a court order issued by the Superior

103
    Pl.’s AB 17–18.
104
    Id. at 21–22.
105
    Id. at 21 (distinguishing the facts from those in Athene Life & Annuity Co. v. Am. Gen. Life Ins.
Co., 2019 WL 3451376 (Del. Ch. July 31, 2019)).
106
    Id.
107
    Id. at 21–22.

                                                24
Court.108 According to Defendants, the Escrow Agreement creates a two-step

process for either party to enforce the Escrow Agreement where the parties cannot

agree to Joint Release Instructions.109 Under this two-step process, Plaintiff must

first seek and obtain an order from a court of competent jurisdiction to deliver to the

Escrow Agent.110 Only if the Escrow Agent refuses to disburse the funds in

accordance with the Final Order, as defined by the Escrow Agreement, can Plaintiff

then invoke the second step, which would be to seek specific performance from the

Court of Chancery to enforce the Final Order.111 In other words, equity is only

invoked upon a future, speculative breach by the Escrow Agent of the Escrow

Agreement.       In Defendants’ opinion, Plaintiff’s request to invoke equitable

jurisdiction at this juncture invokes equity which may never be required.112 I agree.

       The Escrow Agreement directs the Escrow Agent to disburse the Escrow

Funds if one of two situations occurs: (1) the parties deliver Joint Release

Instructions or (2) a party obtains and delivers a Final Order, as defined in the

Escrow Agreement.113 While Plaintiff believes both (1) and (2) require an order of

this Court directing a party to specifically perform, specific performance is not

implicated at all for option (1) and a declaratory judgment issued by the Superior

108
    Defs.’ RB 5.
109
    Id. at 13.
110
    Id.
111
    Id.
112
    Id. at 13–14.
113
    Escrow Agreement ¶¶ 4(a)(i)–(ii).

                                          25
Court (together with the requisite certification and instructions from the prevailing

party) is adequate to cause the Escrow Agent to release the Escrow Funds under

option (2). As I explained above in Section II.B.2.a, the Escrow Agreement does

not narrowly define the term Final Order to require the court issuing such order or

judgment to include written instructions on how the Escrow Agent is to disburse the

Escrow Funds. Instead, the definition of the term Final Order requires that the

prevailing party provide the Escrow Agent with written instructions to effectuate the

court’s order or judgment, at which point the Escrow Agent’s contractual duty to

release the funds is triggered.

      Accordingly, a declaratory judgment obtained from the Superior Court that

adjudges Plaintiff’s entitlement to receive a disbursement from the Escrow Account,

alongside written instructions from Plaintiff, satisfies the contractual definition of a

Final Order and is sufficient to cause the Escrow Agent to act. Plaintiff has an

adequate remedy at law in the form of a declaratory judgment from the Superior

Court. Equitable relief will only become necessary if the Escrow Agent refuses to

act in accordance with such Final Order. There is no indication in the record that

the Escrow Agent, who is bound by contractual and fiduciary duties, will refuse to

comply with a declaratory judgment issued by the Superior Court, supplemented by

the prevailing party as contractually mandated. To invoke equitable jurisdiction at

this early juncture would contradict the principle that the Court of Chancery is a

                                          26
court of limited jurisdiction.114        Therefore, the Amended Complaint must be

dismissed for lack of subject matter jurisdiction.

                                    III. CONCLUSION

       This Court lacks equitable jurisdiction, because an adequate remedy at law

exists. Therefore, Defendants’ Motion to Dismiss is GRANTED, with leave to refile

in Superior Court.115 The parties shall submit a form of order in accordance with

this memorandum opinion.

114
    See Athene Life & Annuity Co., 2019 WL 3451376, at *7–8 (explaining “that if the mere threat
of future breach or disregard of court orders triggered equitable jurisdiction, such jurisdiction
would be general, not limited.”).
115
    10 Del. C. § 1902.

                                               27