Court Opinion

ID: 9896512
Source: CourtListenerOpinion
Date Created: 2023-11-13 15:04:29.937106+00
Date Added: 2024-06-11T09:15:06.124002
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

   MALT FAMILY TRUST and                  )
   TIMOTHY JAMES O’NEIL-DUNNE,            )
                                          )
                    Plaintiffs,           )
                                          )
               v.                         ) C.A. No. 2022-0652-MTZ
                                          )
   777 PARTNERS LLC, PHOENICIA            )
   LLC, STEVEN W. PASKO, JOSHUA           )
   WANDER, and ADAM WEISS,                )
                                          )
                    Defendants.           )
                       MEMORANDUM OPINION
                       Date Submitted: June 6, 2023
                     Date Decided: November 13, 2023

Catherine A. Gaul, Michael J. Vail, ASHBY & GEDDES, P.A., Wilmington,
Delaware; David W. Affeld, Edward E. Johnson, AFFELD GRIVAKES LLP, Los
Angeles, California, Attorneys for Plaintiffs MALT Family Trust and Timothy
James O’Neil-Dunne.

William E. Manning, Jessica M. Jones, Michelle C. Streifthau-Livizos, SAUL
EWING LLP, Wilmington, Delaware, Attorneys for Defendants 777 Partners
LLC, Phoenicia LLC, Steven W. Pasko, Joshua Wander, and Adam Weiss.

ZURN, Vice Chancellor.
      After approximately ten months of negotiations, plaintiffs Timothy O’Neil-

Dunne and MALT Family Trust (“MALT,” and together “Plaintiffs”), as well as

nonparties to this action, entered into a stock purchase agreement to sell all

outstanding equity in two entities in the aviation business to an affiliate of defendant

777 Partners LLC (the “SPA”). In return, the sellers would receive cash, and MALT

would receive vested and unvested equity in Phoenicia LLC, a newly formed LLC

(“Phoenicia” or the “Company”). They also entered into two related agreements:

Phoenicia’s operating agreement (the “Operating Agreement”), and an employment

agreement between O’Neil-Dunne and 777 Partners (the “Employment

Agreement”).

      Years passed quietly. Then Plaintiffs learned their SPA counterparties and

fellow Phoenicia members entered two new business lines related to aircraft leasing.

Plaintiffs allege they understood, and the relevant agreements provided that, any

such business would be conducted exclusively through Phoenicia. Believing they

were entitled to a share of these new ventures, Plaintiffs filed this action.

      Plaintiffs seek to hold the defendants to Plaintiffs’ alleged understanding that

all the defendants’ aviation-related business would be conducted exclusively

through Phoenicia.      Plaintiffs’ Verified Amended Complaint (the “Amended

Complaint”) asserts claims for fraudulent inducement, breaches of the SPA and

Operating Agreement, and breaches of fiduciary duty. They also claim that the

                                           1
defendants caused Phoenicia subsidiaries to enter into interested agreements, that

certain defendants breached miscellaneous corporate governance provisions in the

Operating Agreement, and that MALT is entitled to a larger stake in Phoenicia than

a recent Schedule K-1 states it holds.

          The defendants moved to dismiss. As explained below, Plaintiffs’ claims

meet mixed success. The motion to dismiss is granted in part.

          I.    BACKGROUND1

          MALT “is a discretionary trust established in accordance with the laws of the

Isle of Man.”2 O’Neil-Dunne is “a beneficiary of the MALT trust.”3 At least until

September 2018, MALT indirectly held assets in the aviation sector.

          In late 2017, Plaintiffs were approached by defendants Steven W. Pasko,

Joshua Wander, Adam Weiss, and others, who proposed that defendant 777 Partners

1
  The facts are drawn from the Amended Complaint, the documents integral to it, and those
incorporated by reference. See Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312,
320 (Del. 2004). Citations in the form “DOB” refer to Defendants’ Opening Brief in
Support of Motion to Dismiss Amended Complaint, available at docket item (“D.I.”) 20.
Citations in the form “PAB” refer to Plaintiffs’ Answering Brief in Opposition to
Defendants’ Motion to Dismiss, available at D.I. 34. Citations in the form “DRB” refer to
Defendants’ Reply Brief in Support of Motion to Dismiss Amended Complaint, available
at D.I. 35.
2
    D.I. 20 at Am. Compl. ¶ 11 [hereinafter “Am. Compl.”].
3
    Id. ¶ 12.
                                             2
acquire aviation- and travel-related assets from MALT.4 777 Partners is “a private

investment firm” with “investments in more than 50 operating companies,” many of

which are in the aviation and travel space.5 Pasko and Wander founded 777 Partners

and served as its managing partners at all relevant times. Weiss is CEO of 777

Partners’s “Aviation and Travel Group.”6 I will refer to Pasko, Wander, and 777

Partners together as the “777 Partners Defendants.” I will refer to the 777 Partners

Defendants and Weiss together as the “Defendants.”

                  A.   The Parties Enter Into A Stock Purchase Agreement And
                       Related Agreements.
          Early negotiations contemplated an all-cash transaction with a purchase price

“as high as $26 million.”7 The parties met at least twelve times between November

of 2017 and August of 2018. At some point, Plaintiffs agreed to forgo an all-cash

deal and accept a mix of cash and equity in Phoenicia, a newly formed entity.

          Plaintiffs allege that during the approximately ten months of negotiations,

Defendants represented that all their aviation-related business would be operated

4
 Plaintiffs allege that 777 Partners approached them in “early 2018,” but then plead that
an initial meeting took place on November 28 or 29 of 2017. Compare id. ¶ 47, with id. ¶
51.a. For purposes of this motion, I assume that these Defendants first approached
Plaintiffs in November of 2017, and that negotiations began at that time.
5
    Id. ¶¶ 2–3.
6
  Id. ¶ 8. The Amended Complaint does not explain how the Aviation and Travel Group
fits into 777 Partners’s business.
7
    Id. ¶ 48.
                                            3
through that newly formed entity. The only specific statement offered as support is

a portion of a June 17, 2018 email Wander sent to an unidentified recipient, which

conveyed “that [the acquiring 777 Partners entity] and O’Neil-Dunne were ‘a critical

piece of anything 777 will do in the aviation space.’”8

          On September 12, 777 Partners and MALT executed Phoenicia’s Operating

Agreement,9 and on September 13 the parties executed the SPA.10 The SPA

contemplated that a 777 Partners affiliate would purchase all outstanding equity of

two MALT affiliates.11 As consideration, the sellers received $4,072,525 in cash.12

Additionally, MALT received a 3% vested equity interest in Phoenicia.13 It also

received up to a 5% unvested interest, 1% of which vested annually for three years.14

8
    Id. ¶ 53.
9
    Am. Compl., Ex. B [hereinafter “Op. Agr.”].
10
     Am. Compl., Ex. A [hereinafter “SPA”].
11
   Id. § 2.1. For reasons that are not clear, the Amended Complaint describes the sale as
an asset transfer with MALT “and other sellers” transferring their assets to a 777 Partners
affiliate. Am. Compl. ¶ 67.a. Because these allegations are contradicted by the documents
attached to and incorporated by reference by the Amended Complaint, I disregard them.
See Teamsters Loc. 677 Health Servs. & Ins. Plan v. Martell, 2023 WL 1370852, at *20
(Del. Ch. Jan. 31, 2023) (“I need not credit an allegation that is unambiguously contradicted
by the documents integral to the Complaint’s allegations.”).
12
     SPA § 3.
13
     Id.; Op. Agr. sched. A.
14
  SPA § 3; Op. Agr. sched. A, sched. 1. It is not clear whether MALT and O’Neil-Dunne
both hold Phoenicia equity, and who was entitled to equity under the Employment
Agreement. The SPA provides that MALT would receive equity as consideration for the
stock purchase. SPA §§ 3, 5.1. Schedule 1 to Schedule A to the Operating Agreement
provides that MALT, not O’Neil-Dunne, was awarded the aggregate 8% vested and

                                              4
In connection with these agreements, O’Neil-Dunne entered into the Employment

Agreement with 777 Partners.15 If the Employment Agreement was terminated

within four years, MALT forfeited 1% of its vested interest.16

           The remaining 2% was given in the form of restricted warrants, which were

“convertible . . . subject to the terms and conditions of” the Employment

Agreement.17 Under the Employment Agreement, MALT received the right to

convert the warrants into a 0.5% interest each time one of four milestones were

met.18 If all four milestones were satisfied within four years, MALT could convert

all its warrants for the full 2%.19

                 B.      777 Partners And Its Affiliates Launch The Jet Leasing
                         Business.
           All was quiet from the September 2018 signing through the end of 2020. But

in early 2021, 777 Partners and its affiliates entered a new aircraft leasing business

unvested interest in Phoenicia. And the same schedule provides that MALT would forfeit
1% of its interest if the Employment Agreement is terminated. But the Employment
Agreement provides that O’Neil-Dunne was to receive a 0.5% interest in Phoenicia each
time a milestone was met. DOB, Ex. A § 5(C)(ii) [hereinafter “Emp. Agr.”]. The parties
generally treat MALT as receiving this interest, but at times Plaintiffs suggest that
O’Neil-Dunne also holds Phoenicia equity. See, e.g., PAB 41 (referring to O’Neil-Dunne
as a Phoenicia member). For purposes of this decision, I assume that MALT, rather than
O’Neil-Dunne, asserts a right to the disputed Phoenicia equity.
15
     Emp. Agr.
16
     Op. Agr. sched. A, sched. 1.
17
     Id.
18
     Emp. Agr. § 5(C)(ii).
19
     Id. §§ 5(C)(ii)–(iii).
                                            5
through which they lease aircraft from third parties and then sublease them to

airlines, profiting from the markup. In March of 2021, 777 Partners and its affiliates

contracted to purchase aircraft for a second line of business, through which they

lease aircraft directly to airlines. 777 Partners and its affiliates purchase the aircraft

at the below-market price of approximately $42 million and lease them to airlines

based on the approximately $52 million fair market value. They “are expected to

accumulate a net asset value of more than $1 billion in a fleet of jets.”20 I refer to

these two business lines together as the “Jet Leasing Business.” Plaintiffs learned

of the Jet Leasing Business in March of 2021.

                C.      This Litigation

          Plaintiffs filed their original complaint in this action on July 26, 2022.21 On

July 31, 777 Partners sent MALT a Schedule K-1 “indicating that at the beginning

of 2021, according to Phoenicia, MALT had only a 5% membership interest in

Phoenicia.”22 The K-1 indicated that MALT’s interest declined to 3% at the end of

2022.

          Plaintiffs filed the Amended Complaint on November 11. The Amended

Complaint asserts ten nominal counts encompassing at least twenty claims. The

20
     Am. Compl. ¶ 45.
21
     D.I. 1.
22
     Am. Compl. ¶ 116.
                                             6
claims generally fall into two categories. The first category centers on Plaintiffs’

alleged understanding that 777 Partners would conduct all aviation business through

Phoenicia—including the Jet Leasing Business. Claims in this category include (1)

Pasko and Wander, on behalf of themselves or 777 Partners, fraudulently induced

MALT to enter into the Operating Agreement and MALT and O’Neil-Dunne to enter

into the SPA; (2) 777 Partners and Phoenicia breached a promise, representation, or

warranty in the Operating Agreement that all 777 Partners’s aviation-related

business would be conducted through Phoenicia; (3) in the alternative, 777 Partners

and Phoenicia breached the implied covenant of good faith and fair dealing by

operating the Jet Leasing Business outside Phoenicia; (4) 777 Partners breached

express and implied provisions in the SPA based on the theory that a breach of the

Operating Agreement results in a breach of the SPA; (5) the 777 Partners Defendants

breached their fiduciary duties by usurping a Company business opportunity; (6) the

777 Partners Defendants breached their fiduciary duties by causing Phoenicia to

enter into self-interested, unfair transactions; (7) the 777 Partners Defendants

breached their fiduciary duty duties by grossly mismanaging Phoenicia; (8) Weiss

aided and abetted the forgoing breaches of fiduciary duty; and (9) Pasko, Wander,

and Weiss were unjustly enriched. The second category, a bit of a grab bag, includes

a claim for breach of contract asserting that 777 Partners and Phoenicia failed to

convey to MALT the full equity interest it is entitled to under the Operating

                                         7
Agreement and SPA, and a claim for breach of certain corporate governance

provisions in the Operating Agreement.

         Defendants moved to dismiss under Court of Chancery Rule 12(b)(6). The

parties briefed the motion, and the Court held oral argument on June 1, 2023.23

Plaintiffs’ claims and Defendants’ arguments would have benefitted from more

focus, precision, and support. Where the parties have not seriously or substantively

developed their own positions, I have given them quick treatment. Plaintiffs’ claims

meet mixed results.

         II.    ANALYSIS

         The standard governing a motion to dismiss under Court of Chancery Rule

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

         (i) [A]ll well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are “well-pleaded” if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences
         in favor of the non-moving party; and [(iv)] dismissal is inappropriate
         unless the “plaintiff would not be entitled to recover under any
         reasonably conceivable set of circumstances susceptible of proof.”24

23
     D.I. 39.
24
   Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (footnotes omitted)
(quoting Kofron v. Amoco Chems. Corp., 441 A.2d 226, 227 (Del. 1982)).
                                             8
The touchstone “to survive a motion to dismiss is reasonable ‘conceivability.’”25

This standard is “minimal”26 and plaintiff-friendly.27 “Indeed, it may, as a factual

matter, ultimately prove impossible for the plaintiff to prove his claims at a later

stage of a proceeding, but that is not the test to survive a motion to dismiss.” 28

Despite this forgiving standard, the Court need not accept conclusory allegations

unsupported by specific facts or draw unreasonable inferences in favor of the

nonmoving party.29 “Moreover, the court ‘is not required to accept every strained

interpretation of the allegations proposed by the plaintiff.’”30

                   A.   Fraudulent Inducement

          I begin with what I see as the crux of the Amended Complaint: that Pasko

and Wander made a series of misrepresentations during negotiations to induce

Plaintiffs to enter into the SPA and Operating Agreement. This theory is presented

25
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 537 (Del.
2011).
26
     Id. at 536.
27
  E.g., Clouser v. Doherty, 175 A.3d 86, 2017 WL 3947404, at *9 (Del. 2017) (TABLE);
In re USG Corp. S’holder Litig., 2021 WL 930620, at *3–4 (Del. Ch. Mar. 11, 2021), aff’d
sub nom. Anderson v. Leer, 265 A.3d 995 (Del. 2021); In re Trados Inc. S’holder Litig.,
2009 WL 2225958, at *8 (Del. Ch. July 24, 2009).
28
     Cent. Mortg., 27 A.3d at 536.
29
     E.g., Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009).
30
  Trados, 2009 WL 2225958, at *4 (quoting In re Gen. Motors (Hughes) S’holder Litig.,
897 A.2d 162, 168 (Del. 2006)).
                                              9
in Count IV’s claim for fraudulent inducement against the 777 Partners Defendants.

Plaintiffs fail to plead fraud with particularity, as they must.

         The elements of fraudulent inducement are: “(i) a false representation, (ii) the

defendant’s knowledge of or belief in its falsity or the defendant’s reckless

indifference to its truth, (iii) the defendant’s intention to induce action based on the

representation, (iv) reasonable reliance by the plaintiff on the representation, and (v)

causally related damages.”31 Under Rule 9(b), “[i]n all averments of fraud or

mistake, the circumstances constituting fraud or mistake shall be stated with

particularity,” but “[m]alice, intent, knowledge and other condition of mind of a

person may be averred generally.”32 To satisfy Rule 9(b), a complaint must typically

allege: “(1) the time, place, and contents of the false representation; (2) the identity

of the person making the representation; and (3) what the person intended to gain by

31
   LVI Gp. Invs., LLC v. NCM Gp. Hldgs., LLC, 2018 WL 1559936, at *11 (Del. Ch.
Mar. 28, 2018) (internal quotation marks omitted) (quoting Prairie Cap. III, L.P. v. Double
E Hldg. Corp., 132 A.3d 35, 49 (Del. Ch. 2015)); Smith v. Mattia, 2010 WL 412030, at *5
n.37 (Del. Ch. Feb. 1, 2010) (“The elements of fraudulent inducement are the same for
those of common law fraud . . . .”).
32
     Del. Ch. Ct. R. 9(b).
                                            10
making the representations.”33 “The core test is whether the claim has been pled

‘with detail sufficient to apprise the defendant of the basis for the claim.’”34

          Paragraph 50 of the Amended Complaint alleges that during the

approximately ten months of negotiations, certain Defendants assured Plaintiffs that

“777 Partners would own and operate all aviation and travel-related businesses in

which it was engaged . . . and all aviation and travel-related business in which it

would later engage, directly through Phoenicia or through a subsidiary of

Phoenicia.”35 Paragraph 51 alleges that “[t]hese representations were each made to

O’Neil-Dunne by [Pasko, Wander, and Weiss] and others at 777 Partners in or

around the time period from November 2017 up until the close in September 2018.”36

Paragraph 52 lists twelve meetings O’Neil-Dunne attended during that period.

Paragraph 53 quotes a portion of an email Wander sent to O’Neil-Dunne on June 17,

33
   Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1050 (Del. Ch. 2006); accord
Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 142 (Del. Ch. 2009) (quoting
Trenwick Am. Litig. Trust v. Ernst & Young LLP, 906 A.2d 168, 207–08 (Del. Ch. 2006),
aff’d sub nom. Trenwick Am. Litig. Trust v. Billett, 931 A.2d 438 (Del. 2007)). Failure to
plead these details, colloquially referred to as “newspaper facts,” is not always fatal under
circumstances not present here. See, e.g., Anschutz Corp. v. Brown Robin Cap., LLC, 2020
WL 3096744, at *16 (Del. Ch. June 11, 2020) (“While the failure to plead these so-called
‘newspaper facts’ can be excused in circumstances where the plaintiff would have no way
to know that level of detail in advance of bringing the claim, it is reasonable to expect a
counter-party in contractual negotiations to be able to back a fraud claim related to the
contract with detailed factual allegations.” (footnote omitted)).
34
     Airborne Health, 984 A.2d at 142 (quoting Abry P’rs, 891 A.2d at 1050).
35
     Am. Compl. ¶ 50.c.
36
     Id. ¶ 51.
                                             11
2018, which conveyed “that [the acquiring 777 Partners entity] and O’Neil-Dunne

were ‘a critical piece of anything 777 will do in the aviation space.’”37

          These allegations are insufficient under Rule 9(b). First, the June 18 email

does not alone support the fraud claim, as it is not clear what being a “critical piece”

of anything 777 Partners is doing in the aviation industry means. Even with a

plaintiff-friendly eye, I do not read it to promise Plaintiffs will be involved in, or

profit from, everything 777 Partners does or will ever do in that space.

          The rest of the allegations relate only that meetings took place over a period

of about ten months and that some combination of Pasko, Wander, and Weiss

attended each of those meetings. The Amended Complaint does not identify which

of these Defendants attended nine of those meetings.38 And it is devoid of a single

allegation as to what was said at any meeting and by whom. This fails under the

applicable standard, as “[a] plaintiff cannot lump together defendants but must

‘identify specific acts of individual defendants’ and ‘who made any particular

misrepresentation.’”39

37
     Id. ¶ 53.
38
     Id. ¶¶ 52.a, e–l.
39
   Trusa v. Nepo, 2017 WL 1379594, at *9 (Del. Ch. Apr. 13, 2017) (quoting Fortis
Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *8 (Del. Ch.
Jan. 30, 2015)).
                                            12
         Notably, Plaintiffs do not plead when any allegedly fraudulent statement was

made, beyond generally alleging that such statements were made during the

negotiations. That is likewise insufficient.40 “Without this level of detail, which a

plaintiff who actually was defrauded should be able to provide, Rule 9(b) requires

dismissal.”41 Plaintiffs pled only that they came away from about ten months of

negotiations with the general impression that Phoenicia would be involved in all of

40
   See MHS Cap. LLC v. Goggin, 2018 WL 2149718, at *9 (Del. Ch. May 10, 2018)
(reasoning Rule 9(b)’s requirements were not met where the plaintiff failed to specify when
during a six-year period a defendant omitted material information and made allegedly false
statements); id. at *9 n.120 (“Federal courts applying the analogous Federal Rule of Civil
Procedure 9(b) have held that alleging a time frame of six or more months is insufficient
to satisfy the particularity requirement.” (citing Hatteras Enters. Inc. v. Forsythe Cosmetic
Grp., Ltd., 2018 WL 1935984, at *11 (E.D.N.Y. Apr. 23, 2018); and McCann v. Jupina,
2017 WL 1540719, at *2 (N.D. Cal. Apr. 28, 2017)); Trusa, 2017 WL 1379594, at *9
(concluding the plaintiff failed to satisfy Rule 9(b) where he pled the allegedly fraudulent
statements “occurred ‘before the Loan Agreement was signed’” (citation omitted)); Fortis
Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *7 (Del. Ch.
Jan. 30, 2015) (reasoning that alleging misrepresentations were made “some time during a
period of approximately 3–1/2 months from when the parties began their negotiations
(March 12, 2013) until the Merger Agreement was signed (July 1, 2013)” was “the
functional equivalent to providing no time parameter at all because the misrepresentations
logically could not have occurred during any other period of time”); see also Edinburgh
Hldgs., Inc. v. Educ. Affiliates, Inc., 2018 WL 2727542, at *11 n.114 (Del. Ch.
June 6, 2018) (“Buyers allege that Sellers made the fraudulent statements ‘continually’ and
‘throughout’ the nine months the parties negotiated the Transaction. That lack of precision
with respect to timing arguably falls short of the particularity requirement as set forth in
Rule 9(b).” (citation omitted)); McCann v. Jupina, 2017 WL 1540719, at *2 (N.D. Cal.
Apr. 28, 2017) (“[C]ourts have held that a nine-month window is not sufficiently narrow
to satisfy Rule 9(b).” (citing In re NJOY, Inc. Consumer Class Action Litig., 2015 WL
12732461, at *13 (C.D. Cal. May 27, 2015); and Franco v. U.S. Bank N.A., 2014 WL
6090647, at *3 (W.D. Tex. Nov. 13, 2014); and Hirata Corp. v. J.B. Oxford & Co., 193
F.R.D. 589, 598 (S.D. Ind. 2000)).
41
     Airborne Health, 984 A.2d at 143.
                                             13
777 Partners’s aviation-related business ventures. This is not enough to state a claim

for fraud, and Count IV is dismissed.42

             B.     Breach Of The Operating Agreement
      In Count I, Plaintiffs allege that operating the Jet Leasing Business outside of

Phoenicia and executing self-interested agreements with alleged Phoenicia

subsidiaries breached the Operating Agreement’s express or implied terms.

Defendants’ motion to dismiss is granted as to the claim for breach of an express

requirement to operate the Jet Leasing Business through Phoenicia. The motion to

dismiss is denied as to the rest of the claims asserted in Count I.

                    1.     Breach Of The Company Purpose Clause

      Count I asserts that by “failing to cause Phoenicia to operate the 777 Jet

Leasing Business through Phoenicia and/or a subsidiary of Phoenicia,” 777 Partners

breached the Operating Agreement’s company purpose clause.43 Plaintiffs interpret

this provision as “memorializ[ing] Defendants’ representations that 777 Partners’s

aviation business would be carried out through Phoenicia,” calling it “essentially a

representation or warranty, committing the company to carry out the stated

42
 The Amended Complaint also alleges that the same representation was included in the
Operating Agreement. Am. Compl. ¶ 164. As explained in Section II.B.1, infra, the
Operating Agreement includes no such representation.
43
  Am. Compl. ¶ 129. Count I is also nominally against Phoenicia itself, though it appears
that the claim for breach of the Company’s purpose clause is being pursued against only
777 Partners. The parties briefed this issue consistently with this claim being asserted
against only 777 Partners.
                                           14
purpose.”44 777 Partners argues that the purpose clause permits Phoenicia to carry

out the referenced purposes and empowers it to do so, but imposes no obligations,

and is not a representation or warranty, such that members could breach by engaging

in activity outside Phoenicia. I agree with 777 Partners.

         Delaware follows the objective theory of contracts, meaning “a contract’s

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

third party.”45 Delaware courts interpret contracts with the goal of effectuating the

parties’ intent.46 “When a contract is clear and unambiguous, the court will give

effect to the plain meaning of the contract’s terms and provisions.”47 The Court “will

read a contract as a whole and we will give each provision and term effect, so as not

to render any part of the contract mere surplusage.”48

         Section 3.1 includes the company purpose clause, as well as other language.

Broken out by sentence number for clarity, Section 3.1 reads in full:

44
     PAB 23.
45
  Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal quotation
marks omitted) (quoting NBC Universal v. Paxson Commc’ns, 2005 WL 1038997, at *5
(Del. Ch. Apr. 29, 2005)).
46
     Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006).
47
  Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1208 (Del. 2021) (internal
quotation marks omitted) (quoting Osborn, 991 A.2d at 1159–60).
48
 See Osborn, 991 A.2d at 1159 (internal quotation marks omitted) (quoting Kuhn, 2010
WL 779992, at *2).
                                            15
         Company Purposes.

         [1] The purpose of the Company is to (i) engage in the business of
         acquiring and operating airlines and other related industries, providing
         services and creating, selling and licensing software for use in the
         airline and travel industries, and such other activities incident,
         necessary, advisable or desirable to carry out the foregoing (the
         “Company Business”), and (ii) engage in any other lawful act or
         activity for which a limited liability company may be organized under
         the laws of the State of Delaware as determined by the Board from time
         to time.

         [2] The Company shall have all powers available to limited liability
         companies under the Act to make and perform all contracts and to
         engage in all actions and transactions necessary or advisable to carry
         out the purposes of the Company.
         [3] Subject to any additional restrictions set forth in the . . . Employment
         Agreement, [MALT] shall conduct the Company Business through the
         Company, and, for the avoidance of doubt, [MALT], either directly or
         through any other company, may not conduct any business activities
         substantially similar to the Company Business or the business of any
         Subsidiary or Affiliate (in each case, including any reasonable
         extensions thereof), or to any future line of business which the
         Company or any Subsidiary or Affiliate enters into while [MALT]
         holds an interest in or is employed by the Company (or, if [MALT] is
         an entity, while the person who owns the Membership Interests is
         employed by the Company), regardless of whether such Company
         Business is conducted by the Company or any Subsidiary directly or
         through one or more of its respective Affiliates.49
I refer to the first sentence as the “Purpose Clause.”

         I begin with this clause’s text. The Purpose Clause’s plain language does not

reflect that 777 Partners is promising to limit its business activities outside of

49
     Op. Agr. § 3.1 (formatting altered).
                                             16
Phoenicia. No language suggests that 777 Partners is representing or warranting the

same. Elsewhere in the Operating Agreement, 777 Partners and MALT made

representations and warranties prefaced by the language “[e]ach Member hereby

represents and warrants to the others that . . . .”50 This language is absent from

Section 3.1.

         Other language in Section 3.1 demonstrates that the parties did not intend for

the Purpose Clause to limit 777 Partners’s business activities outside of Phoenicia.

Section 3.1’s third sentence prohibits MALT and its affiliates from engaging in

Company Business outside the Company while, among other things, it holds

Phoenicia equity. It does not similarly restrict 777 Partners. Under the interpretative

maxim of expressio unius est exclusio alteris, the inclusion of only MALT and its

affiliates indicates the intentional exclusion of 777 Partners from this prohibition.51

         Additionally, Plaintiffs’ reading of the first sentence would render the third

sentence superfluous. MALT and 777 Partners are both parties to the Operating

50
     Op. Agr. §§ 14.17, 14.18.
51
  Seidensticker v. Gasparilla Inn, Inc., 2007 WL 4054473, at *3 (Del. Ch. Nov. 8, 2007)
(“By saying only Seidensticker, the drafters excluded the other individuals contemplated
by section V, because expressio unius est exclusio alterius.”); 5 Corbin on Contracts
§ 24.28 (2023) (“If the parties in their contract have specifically named one item or if they
have specifically enumerated several items of a larger class, a reasonable inference is that
they did not intend to include other, similar items not listed.”); see also e.g., Active Asset
Recovery, Inc. v. Real Est. Asset Recovery Servs., Inc., 1999 WL 743479, at *11 (Del. Ch.
Sept. 10, 1999) (applying the maxim and reasoning that the inclusion of one term but not
another “speaks volumes”).
                                             17
Agreement. Assuming arguendo that the Purpose Clause restricted 777 Partners

from conducting Company Business outside Phoenicia, that limitation would apply

equally to MALT. But Section 3.1’s third sentence expressly restricts MALT from

conducting Company Business outside Phoenicia. Plaintiffs’ reading would render

that sentence superfluous, and is therefore disfavored.52

         Having ruled out what the Purpose Clause does not do, I turn to what it does.

By its plain language, the first sentence of Section 3.1 is an express purpose clause.

Delaware’s LLC Act does not require an LLC operating agreement to include a

purpose clause, and by default permits companies to “carry on any lawful business,

purpose or activity.”53 Against this backdrop, LLC purpose clauses “generally may

be viewed more as helpful clarification than as a necessity and . . . may function

more as limiting than enabling provisions.”54 They deprive the entity of authority to

52
   See Seidensticker, 2007 WL 4054473, at *3 (“When interpreting contracts, this Court
gives meaning to every word in the agreement and avoids interpretations that would result
in ‘superfluous verbiage.’” (quoting NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC,
948 A.2d 411, 419 (Del. Ch. 2007), aff’d, 945 A.2d 594 (Del. 2008)); NAMA Hldgs., LLC
v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007) (“Contractual
interpretation operates under the assumption that the parties never include superfluous
verbiage in their agreement, and that each word should be given meaning and effect by the
court.”), aff’d, 945 A.2d 594 (Del. 2008).
53
     6 Del. C. § 18-106(a).
54
  Robert L. Symonds, Jr. & Matthew J. O’Toole, Delaware Limited Liability Companies
§ 2.07, at 2-22 (2nd ed. 2019).
                                           18
validly engage in activities beyond those limits.55 A limited purpose clause restricts

the company, not its members.56 A purpose clause does not itself restrain the

company from competing with its own members.57

          Nevertheless, a party to an operating agreement may breach a limited purpose

clause by causing the company to exceed its authority.58 In determining whether

such a breach occurred, the “threshold question” is “whether the Company has acted

in accordance with” the limited purpose clause.59 Only after a plaintiff makes a

showing that the company failed to act in accordance with its purpose will the Court

inquire whether another party breached the operating agreement by causing it to do

so.60

55
    Symbiont.io, Inc. v. Ipre Hldgs., LLC, 2021 WL 3575709, at *43 (Del. Ch.
Aug. 31, 2021); In re Arrow Inv. Advisors, LLC, 2009 WL 1101682, at *4 (Del. Ch.
Apr. 23, 2009) (“[A]n important reason for parties to include a broad purpose clause in an
entity’s governing instrument is to ensure that the entity has flexibility to adapt in the face
of changing circumstances.”).
56
     See Symbiont.io, 2021 WL 3575709, at *43–44.
57
  Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile Phone Service of Cincinnati, 1996
WL 506906, at *7 (Del. Ch. Sept. 3, 1996). A purpose clause can expand or narrow the
universe of corporate opportunities that, if taken from the company by a member, would
undergird a breach of fiduciary duty action. See LLCs, P’ships & Unincorporated Entities
Comm., ABA Bus. L. Section, Single-Member LLC Entity Member Form, 69 Bus. Law.
745, 773 n.9 (2014) (“Use of a narrow purpose clause also can affect the application of the
business opportunity doctrine and limit the circumstances where the member or the
manager would be deemed to be taking an opportunity.”).
58
     See Symbiont.io, 2021 WL 3575709, at *43–44.
59
     Id. at *44.
60
     See id.
                                              19
         Here, the Purpose Clause enumerates and limits what Phoenicia can do,

setting the contours of the Company’s business as follows:               “the business of

acquiring and operating airlines and other related industries, providing services and

creating, selling and licensing software for use in the airline and travel industries,

and such other activities incident, necessary, advisable or desirable to carry out the

foregoing.”61 In doing so, the clause confines the Company’s zone of authorized

action to aviation and travel sectors, unless the Company’s Board of Managers (the

“Board”) determines otherwise.62 The Purpose Clause can be breached if Phoenicia

acts outside of its enumerated business lines—but that is not what Plaintiffs allege.

They allege Phoenicia’s members conducted business through other entities, rather

than through Phoenicia. That conduct is not a breach of Phoenicia’s Purpose Clause

under any theory presented to the Court.

         I conclude the Purpose Clause does not require 777 Partners to operate the Jet

Leasing Business through Phoenicia.63 Count I fails to state a claim for breach of

the Purpose Clause.

61
     Op. Agr. § 3.1(i).
62
  Id. § 3.1(ii) (allowing the Company to engage in “in any other lawful act or activity . . .
as determined by the Board from time to time”).
63
  Count I also includes a claim that 777 Partners and Phoenicia breached the Operating
Agreement “by failing to pursue diligently and to execute the Phoenicia Purpose.” Am.
Compl. ¶ 130. Defendants briefed this issue in their opening brief, but Plaintiffs did not
address it in their answering brief. DOB 18–19. I find that it has been abandoned. See

                                             20
                       2.    Breach Of The Operating Agreement For Entering
                             Into Interested Leases
         Count I also alleges 777 Partners breached the Operating Agreement by

causing Phoenicia subsidiaries to enter into interested contracts that did not comport

with the Operating Agreement’s requirements for such contracts set forth in Section

5.4.64 Section 5.4, titled “Transactions Between the Company and the Members,”

prohibits the Company and its subsidiaries from entering into certain interested

transactions unless a cleansing process is followed.65 In moving to dismiss Count I,

777 Partners did not take on Section 5.4; it overlooked the Amended Complaint’s

allegations concerning Section 5.4 and its obligations, and argued the Amended

Capano v. Capano, 2014 WL 2964071, at *16 (Del. Ch. June 30, 2014). Regardless, it
fails for this same reason.
64
  Am. Compl. ¶¶ 87–90, 131–32; Op. Agr. § 5.4 (“The Company or any Subsidiary shall
not enter into an Interested Transaction (as defined below) unless it has first fully disclosed
the terms and conditions of such Interested Transaction to the Board and the Board
determines that the Interested Transaction is fair and reasonable to the Company or such
Subsidiary, and the terms and conditions are at least as favorable to the Company or such
Subsidiary as those that are generally available from persons capable of similarly
performing them and in similar transactions between parties operating at arm’s length.”).
        Like the claim for breach of the Purpose Clause, this count is nominally asserted
against 777 Partners and Phoenicia, but Plaintiffs briefed the claim as if asserted against
only 777 Partners. PAB 26 (“[The Amended Complaint] further alleges that 777 Partners
caused Phoenicia subsidiaries to enter into leases with these affiliates, which were
consequently “interested transactions” under the Phoenicia Agreement.”). Like Plaintiffs’
brief, I treat the claim as asserted against only 777 Partners.
65
     Op. Agr. § 5.4.
                                              21
Complaint did not identify any specific contractual provision that was breached.66

777 Partners’s contentions that it has not breached Section 5.4 will have to wait for

trial.67

                       3.    Breach Of The Implied Covenant Of Good Faith And
                             Fair Dealing

           Plaintiffs allege, nearly in passing, that certain Defendants breached the

Operating Agreement’s and SPA’s implied terms by pursuing the Jet Leasing

Business outside of Phoenicia.68 Defendants argue that the implied covenant claims

66
   DOB 17–18 (“Because Plaintiffs fail to identify any specific contractual obligation
breached by defendants, their claim should be dismissed.”). Plaintiffs pointed out they
alleged a breach of Section 5.4 in their answering brief, and Defendants argued Plaintiffs
failed to state a claim thereunder in their reply brief. PAB 25–27; DRB 17–18; see also
Am. Compl. ¶ 89 (“The 777 Leases were not objectively ‘fair and reasonable’ under the
circumstances for the [aviation] lessees as required by Section 5.4 of the Phoenicia
Agreement.”).
67
   Mack v. Rev Worldwide, Inc., 2020 WL 7774604, at *16 (Del. Ch. Dec. 30, 2020);
Keen-Wik Ass’n v. Campisi, 2020 WL 6162957, at *6 n.53 (Del. Ch. Oct. 19, 2020)
(“Generally, arguments are waived if presented for the first time in a reply brief.”). The
scheduling order in this case should require that any party seeking to move for summary
judgment first seek leave from the Court for doing so.
68
   The Amended Complaint mentions the implied covenant only three times. Am. Compl.
¶¶ 21, 133–34. Paragraph 21 alleges that “Defendants’ diversion of aviation opportunities
from Phoenicia was . . . a material breach of Defendants’ implied covenants of good faith
and fair dealing in [the Operating Agreement and SPA].” Id. ¶ 21. Paragraphs 133 and
134 allege only that 777 Partners and Phoenicia each “breached [their] covenants of good
faith and fair dealing” in the Operating Agreement, and that 777 Partners breached the
SPA’s implied covenant. Id. ¶¶ 133–34. I read the Amended Complaint as pleading a
breach of the implied covenant only for operating the Jet Leasing Business outside
Phoenicia. This is consistent with how the parties briefed the issue. DOB 24–28; PAB
27–29; DRB 18–20.
                                           22
should be dismissed because they are duplicative of the express breach of contract

claims.69

         The implied covenant of good faith and fair dealing “attaches to every

contract.”70 But where express terms govern the conduct at issue, the Court will

decline to imply contrary terms.71 As explained by Vice Chancellor Laster in

Garfield v. Allen, seeking dismissal of duplicative claims is “a throwback to common

law pleading.”72 Plaintiffs are entitled to plead in the alternative under Court of

Chancery Rule 8,73 and litigants do not have a right to dismissal on the basis that

claims are duplicative.74 Nevertheless, dismissal of duplicative claims “can help

69
   Defendants also broadly argue that the scope of the term Plaintiffs seek to have implied
is itself so broad that “one would think that Plaintiffs would have insisted that it be
explicitly set forth in the Share Purchase agreement.” DOB 26. Defendants did not attempt
to support this argument with any law. I do not consider it.
70
     Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005).
71
  All. Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746, 770 (Del. Ch.), aff’d,
976 A.2d 170 (Del. 2009).
72
     Garfield ex rel. ODP Corp. v. Allen, 277 A.3d 296, 360 (Del. Ch. 2022).
73
    Ct. Ch. R. 8(e)(2) (“A party may set forth 2 or more statements of a claim or defense
alternately or hypothetically, either in 1 count or defense or in separate counts or defenses.
. . . A party may also state as many separate claims or defenses as the party has regardless
of consistency.”); Goldstein v. Denner, 2022 WL 1797224, at *3 (Del. Ch. June 2, 2022)
(“Court of Chancery Rule 8 permits a plaintiff to plead theories in the alternative. It
therefore does not matter at the pleading stage whether the Brophy claim might be
duplicative of the Sale Process Claims.”); Garfield, 277 A.3d at 362 (“[T]he plaintiff is
entitled to plead in the alternative under Rule 8 . . . .”).
74
  See Garfield, 277 A.3d at 361 (quoting Spencer v. Malik, 2021 WL 719862, at *5 (Del.
Ch. Feb. 23, 2021) (ORDER); cf. Swipe Acq. Corp. v. Krauss, 2020 WL 5015863, at *8
(Del. Ch. Aug. 25, 2020) (“Whether to dismiss a claim as duplicative is within the
discretion of the Court.”).
                                             23
formulate and simplify the issues for trial.”75 Relevant here, at the motion to dismiss

stage, our courts have dismissed claims for breach of the implied covenant where

they are duplicative of claims for breach of express terms that survive a motion to

dismiss or that the defendants did not move to dismiss.76

         Here, as explained, I dismissed Plaintiffs’ claim that operating the Jet Leasing

Business outside Phoenicia breached the Purpose Clause. And Defendants have not

identified any contractual language specifically addressing the issue in dispute.

Plaintiffs’ broad pleadings, and Defendants’ conclusory arguments, give me no

foothold from which to dismiss the implied covenant claims on the grounds that they

are duplicative.

                                          * * *

         Count I is dismissed as to breach of the Operating Agreement’s Purpose

Clause, but not as to the claims for breach of Section 5.4 and the implied covenant.

                C.     Breach Of The SPA Claims
         Count II alleges that 777 Partners breached the SPA “by breaching the

Phoenicia Agreement.”77 777 Partners moved to dismiss this count, asserting that

75
     Garfield, 277 A.3d at 361.
76
  See, e.g., Edinburgh Hldgs, 2018 WL 2727542, at *9 (dismissing implied covenant claim
as duplicative where the plaintiff brought claims for breach of the same contractual rights
that the defendants did not move to dismiss, and where the relevant agreement expressly
addressed the rights at issue).
77
     Am. Compl. ¶ 142.
                                            24
Plaintiffs did not identify any SPA provisions that were breached. In responsive

briefing, Plaintiffs cited warranties in the SPA binding 777 Partners.78

         “At the pleading stage of a written contract dispute, Rule 8 requires the

plaintiff to take the basic and customary step of producing the agreement and citing

to the provisions alleged to have been breached.”79 And the “[f]ailure to do so ‘is

not a technical foot fault; it reflects, instead, a fundamental failure to give the

[defendant] fair notice of the claim asserted against [him] as required by [] Rule

8.’”80 The Amended Complaint did not identify any provisions of the SPA that were

breached, and “[a]rguments in briefs do not serve to amend the pleadings.”81

Plaintiffs’ claims for breaches of express provisions of the SPA are dismissed.

Similarly, the Amended Complaint does put 777 Partners on notice of what implied

SPA provisions Plaintiffs alleges were breached. Plaintiffs’ claim for breach of the

SPA’s implied covenant of good faith and fair dealing is dismissed.

78
     PAB 31–32 (citing SPA § 6.5(ii)).
79
 Enzolytics, Inc. v. Empire Stock Transfer Inc., 2023 WL 2543952, at *3 (Del. Ch.
Mar. 16, 2023).
80
  Id. (alterations in original) (quoting Ryan v. Buckeye P’rs, L.P., 2022 WL 389827, at *6
(Del. Ch. Feb. 9, 2022), aff’d, 285 A.3d 459 (Del. 2022)).
81
  Cal. Pub. Emps. Ret. Sys. v. Coulter, 2002 WL 31888343, at *12 (Del. Ch.
Dec. 18, 2002).
                                           25
             D.     Breach Of Fiduciary Duty Claims

      Count VI asserts a derivative breach of fiduciary duty claim against the 777

Partners Defendants.82 It alleges these Defendants breached their fiduciary duties by

(1) conducting the Jet Leasing Business outside Phoenicia, thus usurping a company

business opportunity; (2) causing “Phoenicia to acquire and participate in marginally

profitable and unprofitable airline businesses through Interested Transactions and

related party transactions”; and (3) grossly mismanaging Phoenicia. The motion is

denied as to the usurpation claim and the claim that the 777 Partners Defendants

caused Phoenicia to enter into unfair, interested transactions. These Defendants did

not move to dismiss as to the claim that they grossly mismanaged Phoenicia, so that

claim survives as well.83

                    1.      Usurpation Of A Business Opportunity

      Court VI asserts a breach of fiduciary duty claim against the 777 Partners

Defendants for operating the Jet Leasing Business outside of Phoenicia, which the

82
  Defendants have not moved to dismiss under Court of Chancery Rule 23.1 and do not
contest that demand is futile.
83
 This claim was not mentioned or addressed in Defendants’ opening brief or reply brief.
Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed
waived.”).
         Count VI alleges that “Pasko, Wander, and 777 Partners further breached their
fiduciary duties by baselessly failing to provide MALT with the 8% membership interest
to which it was entitled, and by reducing the membership interest of MALT from 5% to
3% without basis and in bad faith.” Am. Compl. ¶ 190. Defendants did not brief this claim,
so it is not dismissed.
                                           26
parties brief as a claim for usurpation of a business opportunity.84 The 777 Partners

Defendants argue the Operating Agreement eschews the corporate opportunity

doctrine. They misread the Operating Agreement and Delaware law.

         By default, managers of manager-managed LLCs owe fiduciary duties,

including the duty of loyalty.85 Similarly, controllers of an LLC owe fiduciary

duties.86 Such duties may be waived in an operating agreement only through “plain

and unambiguous” language.87 The corporate opportunity doctrine sounds in the

duty of loyalty,88 and may be waived or limited in the same manner.89

84
  Our caselaw in this area refers to the doctrine as the “corporate opportunity doctrine”
notwithstanding its application to LLCs. See, e.g., Skye Min. Invs., LLC v. DXS Cap. (U.S.)
Ltd., 2020 WL 881544, at *25 (Del. Ch. Feb. 24, 2020); CelestialRX Invs., LLC v. Krivulka,
2017 WL 416990, at *18 (Del. Ch. Jan. 31, 2017). I do the same.
85
  Auriga Cap. Corp. v. Gatz Props., 40 A.3d 839, 851 (Del. Ch.), aff’d, 59 A.3d 1206 (Del.
2012); Feeley v. NHAOCG, LLC, 62 A.3d 649, 661 (Del. Ch. 2012) (“[T]he Delaware
Limited Liability Company Act . . . contemplates that equitable fiduciary duties will apply
by default to a manager or managing member of a Delaware LLC.”).
86
     See Glidepath Ltd. v. Beumer Corp., 2019 WL 855660, at *18 (Del. Ch. Feb. 21, 2019).
87
 Ross Hldg. & Mgmt. Co. v. Advance Realty Grp., LLC, 2014 WL 4374261, at *13 (Del.
Ch. Sept. 4, 2014) (internal quotation marks omitted) (quoting Feeley, 62 A.3d at 664).
88
  See Sci. Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 963–64 (Del. 1980)
(“[T]he law of corporate opportunity sets the parameters of permissible employee conduct
consistent with an employee’s fiduciary duties to his employers of loyalty and fair
dealing.”).
89
     See, e.g., Skye, 2020 WL 881544, at *25.
                                                27
         The 777 Partners Defendants argue the usurpation claim is foreclosed by

Section 4.8 of the Operating Agreement, which they contend “expressly disclaims

the corporate opportunity doctrine.”90 Numbered for clarity, that section reads:

         [1] No Manager shall be required to manage the Company as his or her
         sole and exclusive function, and may have other business interests and,
         except as otherwise expressly set forth herein or in any employment
         agreement between a Manager and the Company or an Affiliate thereof,
         if applicable, may engage in other activities in addition to those relating
         to the Company.
         [2] Neither the Company nor any Member shall have any right, by
         virtue of this Agreement, to share or participate in such other
         investments or activities of the Managers or their Affiliates or to the
         income or proceeds derived therefrom.
         [3] Notwithstanding the foregoing, nothing in this Section 4.8 or any
         other provision herein, shall limit, waive or otherwise amend the
         Managers’ fiduciary duty of care and loyalty to the Company and its
         Members pursuant to Section 18-1104 of the Act with respect to such
         other business interests and activities; and the Managers shall refrain
         from engaging in any activity which is inconsistent with their
         obligations thereunder.91

The 777 Partners Defendants point to Section 4.8’s first sentence and contend this

Court concluded similar language rejected the corporate opportunity doctrine in Skye

Mineral Investors.92

         In Skye, the Court interpreted an operating agreement provision reading: “[i]n

view of the limited purposes of the Company, no Member nor any of its Affiliates

90
     DOB 30.
91
     Op. Agr. § 4.8 (formatting altered).
92
     2020 WL 881544 (Del. Ch. Feb. 24, 2020).
                                             28
shall have any fiduciary obligations with respect to the Company or to the other

Members insofar as making other investment opportunities available to the

Company or to the other Members.”93                The Court concluded that language

“unambiguously ‘eschews the corporate opportunity doctrine.’”94 Skye relied on

CelestialRX Investments’ interpretation of “similar language.”95 The provision in

CelestialRX read:

          Nothing in this Agreement shall be construed to prohibit any Director
          or any Member from engaging in or possessing an interest in another
          business venture of any nature, even if competitive with the Company;
          and neither the Company nor any other Member shall have any rights
          by virtue of this Agreement in or to any such venture or the income or
          profits derived therefrom. No Person solely by virtue of his or its status
          as a Director or Member of the Company, shall be prohibited from
          engaging in or possessing an interest in another business venture of any
          nature, even if competitive with the Company. Neither any Director
          nor any Member shall be obligated, by the provisions hereof or by their
          status as a Director or Member, to present any particular investment or
          business opportunity to the Company even if such opportunity is of a
          nature which could be taken by the Company.96
CelestialRX held this language “eschews the corporate opportunity doctrine, and

permits conflicted interests to be held by Directors and Members, unless provided

otherwise by separate contract.”97

93
     Id. at *3 (internal quotation marks omitted) (emphasis added) (citation omitted).
94
     Id. at *25 (quoting CelestialRX, 2017 WL 416990, at *18).
95
     Id. at *25 n.311.
96
     CelestialRX, 2017 WL 416990, at *17.
97
     Id. at *18.
                                              29
         The provisions in both Skye and CelestialRX differ from Section 4.8. Those

provisions expressly stated that the member or manager had no “fiduciary

obligations with respect to the Company or to the other Members” concerning

opportunities,98 or that members shall not “be obligated . . . to present” the

opportunities to the company or the other members: Section 4.8 does not.99 Indeed,

Section 4.8’s last sentence makes plain that the Managers still owe fiduciary duties:

“Notwithstanding the foregoing, nothing in this Section 4.8 or any other provision

herein, shall limit, waive or otherwise amend the Managers’ fiduciary duty of care

and loyalty to the Company and its Members pursuant to Section 18-1104 of the Act

with respect to such other business interests and activities . . . .” 100 “A dependent

phrase that begins with notwithstanding indicates that the main clause that it

introduces or follows derogates from the provision to which it refers.”101 Section

4.8’s first sentence, which the 777 Partners Defendants rely on, is subservient to its

third. That third sentence makes clear that the parties did not intend to waive

98
     Skye, 2020 WL 881544, at *25 (internal quotation marks omitted) (citation omitted).
99
     CelestialRX, 2017 WL 416990, at *17.
100
      Op. Agr. § 4.8.
101
   Antonin Scalia & Bryan A Garner, Reading Law: The Interpretation of Legal Texts
126–27 (2012); Kenneth A. Adams, A Manual of Style for Contract Drafting § 13.631 (5th
ed. 2023); see also JER Hudson GP XXI LLC v. DLE Invs., LP, 275 A.3d 755, 804–08
(Del. Ch. 2022) (applying Virginia law and interpreting the phrase “notwithstanding
anything to the contrary”).
                                             30
fiduciary duties relating to usurpation of “other business interests and activities.”102

Section 4.8 does not preclude the usurpation claim.

                       2.     Interested Transactions With Phoenicia Subsidiaries
         Count VI also includes a claim for breach of fiduciary duty on the basis that

the 777 Partners Defendants “caused Phoenicia to acquire and participate in

marginally profitable and unprofitable airline businesses through” unfair and

self-dealing transactions.103 Only 777 Partners moved to dismiss this claim, and it

did so solely on the basis that it is duplicative of the breach of contract claim for that

same conduct.104 Defendants have also argued in the alternative that the other breach

of fiduciary duty claims are duplicative of the breach of contract claims.

         As stated earlier, there is no right to dismissal of such claims on the grounds

they are duplicative, but doing so “can help formulate and simplify the issues for

trial.”105 If 777 Partners is correct that this fiduciary duty claim is truly duplicative

of the contract claims, “[a]ll of the claims arise from a common nucleus of operative

102
   Defendants’ argument falls short in other ways. For example, Section 4.8 applies only
to Company managers, and 777 Partners is not a manager.
103
      Am. Compl. ¶ 185.
104
   DOB 31 (titling section “Plaintiffs’ Breach Of Fiduciary Duty Claims Against 777
Partners Should Be Dismissed Because It Is Duplicative Of Plaintiffs’ Breach Of Contract
Claims.”); id. at 32 (“Plaintiffs’ breach of fiduciary duty claim against 777 Partners arises
from the same set of alleged facts as its breach of contract claims.”); id. at 33 (“Therefore,
Plaintiffs’ fiduciary duty claim against 777 Partners must be dismissed.”).
105
      See Garfield, 277 A.3d at 361.
                                             31
fact, so a pleading-stage ruling is unlikely to simplify discovery or the presentation

of the evidence at trial.”106 At this stage, “the game is not worth the candle.”107 The

parties did not fairly join issue on whether the self-interested transactions breached

Section 5.4. I decline to dismiss the breach of fiduciary duty claims on the grounds

that they are duplicative.108

                    E.   Unjust Enrichment

          Count V asserts a claim for unjust enrichment against Pasko, Wander, and

Weiss. The allegedly wrongful conduct underlying the unjust enrichment claim is

identical to that underlying the breach of fiduciary duty claim. Pasko and Wander

moved to dismiss the unjust enrichment claim on the basis that “Plaintiffs failed to

plead facts demonstrating a breach of fiduciary duty by either Pasko or Wander, their

unjust enrichment claim must be dismissed.”109 But these Defendants moved to

dismiss the relevant breach of fiduciary duty claim solely on the basis that Section

4.8 eschews the corporate opportunity doctrine—not on whether any underlying

wrongdoing was pled. Regardless, all of the breach of fiduciary duty claims survive

this motion, including the usurpation claim. Pasko and Wander have not presented

106
      Id. at 361–62.
107
      Id. at 362.
108
   777 Partners also moved to dismiss the claim for breach of fiduciary duty for operating
the Jet Leasing Business outside Phoenicia on the grounds that it is duplicative of the
breach of contract claims. I likewise decline to dismiss that claim as duplicative.
109
      DOB 35 (internal citation omitted).
                                             32
any cogent or compelling argument on which to dismiss the unjust enrichment claim

against them.

         Weiss moved to dismiss the unjust enrichment claim as duplicative of the

aiding and abetting claim against him and on the basis that the Amended Complaint

did not plead he participated in any breach. As with the breach of fiduciary duty

claims, I decline to dismiss the unjust enrichment claim on the basis that it is

duplicative.110 But, as explained below in the context of the aiding and abetting

claim against Weiss, Plaintiffs did not plead that he participated in any wrongdoing

in this action.111 Count V is dismissed as against Weiss.

               F.     Aiding And Abetting

         Count VII asserts a derivative claim against Weiss for aiding and abetting “in

the breaches of fiduciary duties committed by Pasko, Wander and 777 Partners.”112

An aiding and abetting claim has four elements: “(1) the existence of a fiduciary

relationship; (2) the fiduciary breached its duty; (3) a defendant, who is not a

110
   See Garfield, 277 A.3d at 360–62 (declining to dismiss an unjust enrichment claim as
duplicative of a breach of contract claim).
111
   In re Lear Corp. S’holder Litig., 967 A.2d 640, 657 (Del. Ch. 2008) (dismissing unjust
enrichment claim where the complaint failed “to support an inference that [the defendant]
was engaged in some form of wrongdoing,” just as it had failed to support knowing
participation in a breach).
112
      Am. Compl. ¶ 206.
                                           33
fiduciary, knowingly participated in a breach; and (4) damages to the plaintiff

resulted from the concerted action of the fiduciary and the nonfiduciary.”113

            “The most critical element for an aiding-and-abetting claim is the defendant’s

knowing participation in the breach.”114             Knowing participation “has two

dimensions: knowledge and culpable participation.”115 Aiding and abetting liability

“requires that ‘the accessory actor’s conduct be informed by knowledge of the

primary duty or its breach and that [the accessory actor] make a causally significant

contribution to the wrong suffered by the party to whom the primary actor owes a

duty.’”116

113
  Globis P’rs, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *15 (Del. Ch.
Nov. 30, 2007).
114
      In re Columbia Pipeline Grp., Merger Litig., 299 A.3d 393, 470 (Del. Ch. 2023).
115
      Id.
116
    Id. at 471 (alteration in original) (quoting Deborah A. DeMott, Culpable Participation
in Fiduciary Breach, in Research Handbook on Fiduciary Law 219 (D. Gordon Smith &
Andrew S. Gold, eds. 2018); In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214,
at *42 (Del. Ch. Aug. 27, 2015) (finding an advisor did not aid and abet a breach of
fiduciary duty where the advisor “was not directly involved, nor even secondarily involved,
in the critical breaches of duty”); see also In re Gen. Motors (Hughes) S’holder Litig., 2005
WL 1089021, at *28 n.256 (Del. Ch. May 4, 2005) (dismissing claim of aiding and abetting
a breach of fiduciary duty in part because the “plaintiffs have failed to adequately plead
facts such that this Court could reasonably infer that [the defendant] was actively involved
in deciding what information would be disclosed through the Consent Solicitation and
how.”), aff’d, 897 A.2d 162 (Del. 2006); Weinberger v. Rio Grande Indus., Inc., 519 A.2d
116, 131 (Del. Ch. 1986) (dismissing an aiding and abetting claim because “the plaintiff
alleges no facts from which it can be reasonably inferred that Anschutz or TAC played any
role in the Rio Grande defendants’ decision not to disclose the existence of the ICC
proceedings or the pro forma financial projections”).
                                              34
          Nearly all of the allegations Plaintiffs identify as demonstrating knowing

participation are conclusory and fail to show that Weiss contributed to the alleged

breaches.117      Paragraph 9 pleads that Weiss “participated materially in the

management of Phoenicia, including by making decisions on behalf of the

company,” but does not explain how he was involved in any breach.118 Paragraph

52 alleges only that Weiss was present for three meetings during the approximately

ten months of negotiations.        Paragraph 91 states only that Weiss participated

materially “in the business of 777 Partners and Phoenicia” and in Phoenicia’s

management.119 Paragraphs 200 through 204 allege in conclusory fashion that Weiss

knew the 777 Partners Defendants intended to wrongfully conduct the Jet Leasing

Business outside Phoenicia and “intentionally assisted [the 777 Partners Defendants]

in their diversion of business opportunities.”120 These paragraphs do not contain any

well-pled allegation that Weiss participated in the alleged breaches. Count VII is

dismissed.

117
      PAB 39 (citing Am. Compl. ¶¶ 9, 52, 91, 200–04).
118
  Am. Compl. ¶ 9. The same paragraph mentions that Weiss is the CEO of 777 Partners’s
“Aviation and Travel Group,” but the Amended Complaint does not explain what that is or
how it relates to Phoenicia or the allegations in the Amended Complaint, if at all.
119
      Id. ¶ 91.
120
      Id. ¶¶ 200–04.
                                            35
                 G.        Corporate Governance Claims

          Count X alleges Defendants breached the Operating Agreement by (1) failing

to hold Board meetings at least quarterly; (2) failing to submit and approve the

annual budget; (3) failing to consult with the Board concerning the corporate actions

enumerated in Section 4.3(a); and (4) failing to keep O’Neil-Dunne informed and

apprised of the activities of the Company in his capacity as a manager. Section

4.3(a) of the Operating Agreement requires the Board to meet at least quarterly to

“consult with, advise and direct the [Company’s officers] . . . with respect to” an

enumerated list of subjects, “among other things.”121 Section 4.7(b) requires the

Company’s officers to submit a budget for Board approval within sixty days of the

start of each fiscal year, and Section 4.7(c) requires that the Board approve or

disapprove the proposed budget within thirty days of receipt.122

          The 777 Partners Defendants moved to dismiss on the ground that Plaintiffs

may obtain specific performance against Phoenicia, but not the other Defendants in

their individual capacities. Plaintiffs do not contest this.123 The only remaining issue

is whether Plaintiffs may prevail on this claim against Phoenicia.

121
      Op. Agr. § 4.3(a).
122
      Id. §§ 4.3(b)–(c).
123
   PAB 42–43 (“Plaintiffs have no objection to dismissal of the specific performance cause
of action against 777 Partners (the Series A member) and Pasko and Wander (a majority
of the Board) based upon the same premise—that those defendants will be bound by an
order.”).
                                            36
         Defendants argued that Plaintiffs have not identified any provision of the

Operating Agreement that imposes an obligation to keep O’Neil-Dunne informed of

the Company’s activities. Plaintiffs did not refute this in their answering brief. The

claim seeking specific performance on this basis is dismissed.124

         Defendants do not dispute that Phoenicia was obligated to take the other three

enumerated actions and failed to do so. Rather, Defendants contest this claim on the

basis that because O’Neil-Dunne is a Phoenicia manager,125 he has “the power to

take (or at least request) the very actions he complains Defendants failed to take.”126

Plaintiffs retort that “[n]othing in the [Operating Agreement] gives [O’Neil-Dunne]

the authority to take unilateral action for the company.”127 At this stage, the fact that

the parties agree these actions were required and were not taken is sufficient to state

a claim for breach. The motion to dismiss is granted in part as to Count X.

124
      Enzolytics, 2023 WL 2543952, at *3.
125
   The Amended Complaint does not plead that O’Neil-Dunne is a Company manager, but
Plaintiffs concede this point in their answering brief. PAB 42 (“But O’Neil-Dunne is only
one of three Managers—i.e., a minority.”).
  DOB 43. The movants do not assert MALT could take these actions, so MALT’s claim
126

would stand even if O’Neil-Dunne’s fell.
127
      PAB 42.
                                            37
                H.   MALT’s Interest In Phoenicia

        Finally, Count III asserts that 777 Partners and Phoenicia breached the SPA

by failing to provide MALT with an 8% interest in Phoenicia. Count IX seeks a

declaratory judgment that it holds an 8% interest in Phoenicia.

        For purposes of this motion, the parties do not dispute that MALT held at least

a 6% interest; the dispute is over whether it should hold 7%.128 MALT would have

received an additional 1% stake if the third and fourth milestones had been satisfied;

Plaintiffs contend those milestones would have been met if Defendants had operated

the Jet Leasing Business through Phoenicia.

        Defendants seek dismissal of these counts on the grounds that the Amended

Complaint does not allege the milestones were actually met.129 This argument

misses the point: I understand Plaintiffs to allege that the milestones were not met,

128
    In July of 2022, 777 Partners sent a Schedule K-1 to MALT, which indicated it had a
5% interest in Phoenicia at the beginning of 2021, which was reduced to a 3% interest at
the end of 2021. Defendants concede that the K-1 was mistaken, and that it should have
stated 777 Partners held a 6% interest. DOB 22 & n.12. The undisputed 6% interest
comprises the 3% immediately vested interest, 3% interest that vested over three years, and
1% from the satisfaction of the first and second milestones, minus 1% because the
Employment Agreement was terminated within four years of signing. To be sure, the
Amended Complaint does not mention termination of the Employment Agreement, and so
that termination would typically fall outside the scope of this motion. But MALT did not
address the issue in briefing or at oral argument, and does not appear to contest this point.
For purposes of this motion, I conclude that MALT forfeited that 1% interest.
129
      DOB 31.
                                             38
but should have been met, and would have been met, if the Jet Leasing Business had

been operated within Phoenicia.

      Defendants also seek dismissal on the grounds that Section 3.1 of the

Operating Agreement did not require them to operate the Jet Leasing Business

through Phoenicia. Here, as explained, I agree with Defendants. Any obligation to

operate the Jet Leasing Business through Phoenicia is not founded in Section 3.1.

But Plaintiffs also contend that running the Jet Leasing Business outside of

Phoenicia breached the Operating Agreement’s implied covenant and the 777

Defendants’ fiduciary duties. If Plaintiffs prevail on those claims, there may be grist

for Count III. Count III is not dismissed.

      As to Count IX, because Count IX seeks a declaratory judgment that MALT

owns 8%, and because MALT conceded it is entitled to, at most, 7% because the

Employment Agreement was terminated within four years, Count IX is dismissed.

      III.   CONCLUSION

      The motion to dismiss is GRANTED as to Counts II, IV, VII, and IX. The

motion is GRANTED IN PART as to Counts I, V, and X. The motion is DENIED

as to Counts III and VI.130

130
    Plaintiffs withdrew Count VIII. PAB 43–44 (“Defendants also challenge the Eighth
Cause of Action, which seeks a declaratory judgment that the guarantee given by 777
Partners in the [SPA] has been triggered. Plaintiffs hereby withdraw that cause of action.”
(citation omitted)).
                                            39