Court Opinion

ID: 9367469
Source: CourtListenerOpinion
Date Created: 2023-01-31 20:02:56.248124+00
Date Added: 2024-06-11T17:15:34.761568
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SUNIL M. MALKANI, NICHOLAS            )
MATARAGAS, and RED DRAGON             )
PARTNERS, LLC,                        )
                                      )
                                      )
                Plaintiffs,           )
                                      )
      v.                              ) C.A. No. 2020-1004-SG
                                      )
GEMMA CUNNINGHAM a/k/a                )
GEMMA TURI, CHARLES D. ROSEN, )
GARY WILSON, and TRUTHMD, LLC, )
a Delaware limited liability company, )
                                      )
               Defendants.            )
                                      )

                        MEMORANDUM OPINION

                      Date Submitted: November 2, 2022
                       Date Decided: January 31, 2023

Philip Trainer, Jr., Marie M. Degnan, and Randall J. Teti, of ASHBY & GEDDES,
Wilmington, Delaware; OF COUNSEL: Marcos D. Jimenez, of MARCOS D.
JIMENEZ, P.A., Miami, Florida, Attorneys for Plaintiffs.

Ryan P. Newell, Lakshmi A. Muthu, Tara C. Pakrouh, and Michael A. Carbonara, Jr.
of YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware;
Michael C. Heyden, Jr. and Joseph E. Brenner of GORDON REES SCULLY
MANSUKHANI, LLP, Wilmington, Delaware, Attorneys for Defendants.

GLASSCOCK, Vice Chancellor
       This matter seeks enforcement of a contract between a private investor and a

Delaware LLC. The Plaintiff-investor is Dr. Sunil Malkani; the LLC is Defendant

TruthMD. Over twenty years ago, in an influential paper, La Porta et al. posited that

the differing rates of success among common law economies can be explained based

upon the relative abilities of parties, particularly investors, to protect and enforce

their rights via contract.1 To that proposition can perhaps be appended a paraphrase

of Nelson Algren’s famous “Rules of Life”: never eat at a place called Mom’s, never

play poker with a man called Doc, and be careful investing in a business called

Truth.2

       The facts here, post-trial, demonstrate a different method of investing: put the

money in first; work the details out later. A testament to the felicity of that strategy,

for both investor and investee, is presented below, in which mixed results obtain.

                              I. FACTUAL BACKGROUND3

       Defendant TruthMD (the “Company”) is a Delaware LLC founded in 2012

by Defendants Gemma Cunningham and Dr. Charles Rosen, a married couple,

1
  See generally Rafael La Porta, et al., Legal Determinants of External Finance, 52 J. of Fin. 1131
(1997).
2
  See generally Nelson Algren, A Walk on the Wild Side (1956).
3
  Citations to the parties’ joint trial exhibits are referred to by the numbers provided by the parties
and cited as “JX __”. See Updated Final Joint Trial Exhibit List, Dkt. No. 195. Citations to the
parties’ stipulated pre-trial order are cited as “PTO ¶ __”. Pretrial Stipulation and [Proposed]
Order, Dkt. No. 173. References to the trial transcript are cited as “Tr. __:__”. Tr. of 4-18-2022
Trial – Volume I, Dkt. No. 183; Tr. of 4-19-2022 Trial – Volume II, Dkt. No. 184.

                                                  1
together with non-party Dr. Kourosh Maddahi.4 The Company aggregates data on

healthcare providers, including their training, sanctions, exclusions, medical

malpractice suits, and conflicts, allowing it to provide comprehensive data

solutions to managed care organizations, insurers, and government agencies in the

United States through its product MedFax.5

       TruthMD is run by a board of managers (the “Board”), which currently

includes Defendants Cunningham, Rosen, Gary Wilson, and non-party Morgan St.

John.6 In addition to their roles as managers, Cunningham has served as CEO and

Rosen as Chief Medical Officer since the Company’s founding.7 Similarly, Wilson

has served as the Company’s Chairman since at least 2017,8 while St. John has

acted as a financial adviser to the Company since its inception.9

       Plaintiff Sunil Malkani is an ophthalmologist based in Fort Meyers,

Florida.10 He is the founder, owner, and sole physician of Malkani Retina Care.11

Dr. Malkani was introduced to TruthMD in 2016 by Shailesh Gupta, who is the

principal of Plaintiff Red Dragon Partners, LLC.12 Late that year, impressed with

4
  PTO ¶ 18; JX 267 14:10-16:5.
5
  DF Pre-Trial Br. at 5-6; PTO ¶ 17.
6
  PTO ¶¶ 22-24; DF Pre-Trial Br. at 8. Over the years, other individuals have served on the Board,
but these four managers are central to the issues at dispute here. PTO ¶¶ 25-26.
7
  PTO ¶¶ 22-23.
8
  Id. ¶ 24.
9
  JX57 at 1; Tr. 258:1-19.
10
   JX 286 at 267:22-268:23; DF Pre-Trial Br. at 9.
11
   JX 286 at 268:21-269:9
12
   Id. at 289:16-24; DF Pre-Trial Br. at 10.

                                                2
the Company’s ability to provide critical information to the healthcare industry,13

Malkani purchased three Series E preferred units for $498,000.14 The events that

followed form a set of facts that are the basis of the dispute among the parties, as

adduced at trial. As the reader will see, the parties negotiated investment terms

piecemeal as Malkani’s money poured into the Company.

       A. April 2017 to November 2018

       In April 2017, Cunningham and Malkani began to discuss the possibility of

additional funding in the form of a line of credit.15 Early the following month, the

Board formally authorized Cunningham to negotiate on the Company’s behalf,

giving her the ability to “execute all documents and take all action that she deemed

necessary or advisable to consummate the transactions.”16                Cunningham and

Malkani then began the negotiation of a $1,000,000 revolving line of credit.17

However, Cunningham indicated that the Company needed cash quickly, and

Malkani was willing “to get creative and get [the Company’s] capital needs met[.]”18

As a result, on May 26, 2017, Malkani advanced the Company $166,000 (the “2017

Advance”) to be tied with a future warrant, details of which the parties’ attorneys

13
   JX 268 at 14:5-13.
14
   JX 1 at 7; PTO ¶ 28.
15
   See generally JX 4 (documenting Malkani and Cunningham’s texts from April 2017); JX 5; Tr.
7:5-9:4.
16
   Tr. 281:3-9, 282:5-11; JX 11 at 2.
17
   PTO ¶ 30; JX 14 at 1-5.
18
   JX 9 at 68-69, 143.

                                             3
could work out later.19 The credit line negotiations subsequently fell apart,20 but the

Company did not return the 2017 Advance.21

       In October 2018, Cunningham reached out to Malkani regarding the

Company’s issuance of Series-F preferred units, raising the possibility of rolling the

2017 Advance and accrued interest into the new equity offering.22 Subsequent

negotiations resulted in the consolidation of the 2017 Advance ($166,000), its

accrued interest ($22,132), and an additional $311,868 advance into a note

convertible into two Series-F preferred units at a price of $250,000 per unit (the

“2018 Note”).23

       B. December 2018 to March 2020: Malkani Advances $980,000 More

       Between December 2018 and March 2020, Malkani made seven additional

advances to the Company, totaling $980,000.24 During this period the parties,

including through their respective attorneys, made several fruitless attempts to

formalize loan agreements in what became an evolving tug-of-war between the

Company’s constant need for capital and Malkani’s increasing demands for

safeguards.25

19
   PTO ¶ 31; JX 9 at 136-39, 142.
20
   JX 13 at 1-16; Tr. 8:20-9:20.
21
   Tr. 9:21-23; see JX 20 at 1 (Cunningham acknowledging in October 2018 that the Company still
held the 2017 Advance).
22
   JX 19 at 1.
23
   JX 26; JX 25; Tr. 203:16-20, 441:11-442:20.
24
   PTO ¶¶ 34, 36-37, 40, 43-45.
25
   See, e.g., JX 37 at 1; JX 46 at 1; JX 294 at 1.

                                              4
       On April 9, 2019, Malkani’s counsel, John Crivelli, proposed documents that

would govern both previous and forthcoming advances.26 Based on precedent forms

provided by TruthMD’s attorney, Curt Barwick, these redlined documents included

a draft purchase agreement and a draft note.27 Critically, these documents contained

three provisions (collectively, the “Disputed Provisions”) intended to safeguard

Malkani’s investment.28 The purchase agreement contained a change-in-control

provision (the “CIC Provision”), which provides in part that “[t]he Company shall

not change its ownership, control or management structure during the term of the

Consolidated Note” without Malkani’s prior written consent.29        The purchase

agreement also contained a “most-favored nation” provision (the “MFN Provision”),

which requires the Company to (1) provide Malkani with written notice upon the

issuance of subsequent debt and (2) allow him to amend his outstanding note to

incorporate any terms from the new issuance that he deems favorable.30 The third

Disputed Provision was a debt-to-equity conversion formula (the “Conversion

Formula”) contained in the draft note, which dictates the valuation method and

procedure under which the note would convert to equity following the Company’s

sale or certain subsequent capital raises.31

26
   JX 59 at 1.
27
   JX 59; Tr. 307:17-310:2, 397:16-398:8.
28
   Tr. 20:21-21:9, 25:16-26:23.
29
   JX 59 at 24-25.
30
   JX 59 at 28.
31
   JX 59 at 10-11.

                                            5
        On April 13, 2019, Cunningham sent Malkani revised drafts that had been

reviewed by Barwick, notably omitting the Disputed Provisions.32 Apparently at an

impasse, substantive negotiations ceased until November, when Cunningham

informed Malkani that the Company was potentially going to be acquired and that

“it might be good to get the monies you do have in the company organized – as at

the moment I have them on the books as a loan.”33

        Thereafter, Cunningham suggested that Malkani “move a set of a drafts along

ASAP to get the process started.”34 On January 29, 2020, Crivelli (on Malkani’s

behalf) reengaged with Barwick by recirculating versions of the draft purchase

agreement and draft note that contained the Disputed Provisions.35 While these

inclusions were not highlighted, Crivelli explicitly noted to Barwick that he “was

not sure which note and purchase agreement to use as a base for a redline, and so

[he] figured [the Company] could decide that internally.”36

        Malkani and Cunningham discussed these drafts a week later.37 Cunningham

followed up with an email memorializing her understanding of the conversation,

noting that “[w]e also agreed that we cannot give you the right to approve the sale

32
   JX 61.
33
   JX 70.
34
   JX 81 at 1.
35
   Id. at 3-4, 18, 22.
36
   Id. at 1.
37
   PTO ¶ 42

                                         6
of the company or any part of the company.”38 In his reply, Malkani did not

explicitly disagree with Cunningham’s stance on control, suggesting instead that the

parties could “work through” it.39 The two spoke again on February 17, with

Cunningham following up via text that she felt “really good after our call last night.

It’s like we finally broke through[,]” to which Malkani replied, “yes, same here.”40

       The next week, Crivelli sent Cunningham and Barwick drafts of the purchase

agreement and note, which incorporated updates from a previous conversation

between the two attorneys.41 This email also mentions warrants tied to specific

milestones, under which the Company would grant Malkani the right to purchase a

set number of equity units.42 These warrants would become a second major area of

dispute, in addition to the Disputed Provisions.

       On March 4, Barwick replied to Crivelli with revised drafts of the purchase

agreement and note, as well as initial warrant drafts.43 In the body of the email,

Barwick wrote, “[t]he [C]ompany believes that the changes to your February 26 th

drafts of [the purchase agreement and note] are clarifying and minor. There are no

38
   JX 85 at 1.
39
   JX 86 at 1. Malkani clarified at trial that he did not agree with Cunningham’s position on the
CIC Provision. Tr. 52:19-54:6.
40
   JX 292 at 90-91.
41
   JX 93. Plaintiffs contend that these revisions included the Disputed Provisions, but the email’s
attachments were not entered into evidence. See, e.g., Pl.’s Post-Trial Opening Br. 23 n.88 (citing
to JX 306, which appears in the Joint Trial Exhibit List, but not the exhibits provided to the Court)
(“PL PTOB”).
42
   JX 93.
43
   JX 98.

                                                 7
other comments or changes that I am aware of.”44 Barwick’s revised purchase

agreement draft contained both the CIC and MFN Provisions, while his revised note

draft contained a revised Conversion Formula.45

        Crivelli followed up two days later highlighting three “open business/legal

points that require input from the business principals to resolve[,]” including

reverting the Conversion Formula to an earlier iteration proposed by Malkani.46

Barwick replied later that day indicating that Cunningham and St. John had agreed

to all three points and that “[w]ith that, I think we are in agreement. Please make

the changes and send out execution versions.”47

        The following Monday, the parties spoke by phone.48           Once again,

Cunningham followed up with an email summarizing the discussion.49 She clarified

that the Company was contemplating warrants for 12 units tied to both the closing

of the parties’ current loan consolidation and, in part, to Malkani achieving the

milestone of $2,000,000 in loans to the Company.50 That evening, Crivelli sent

Barwick updated drafts of the purchase agreement and note, once again containing

the Disputed Provisions, as well as two draft warrants.51 One warrant for nine units

44
   Id. at 1.
45
   Id. at 21, 59, 63.
46
   JX 100 at 2.
47
   Id. at 1.
48
   JX 101.
49
   Id.
50
   Id.
51
   JX 103.

                                         8
would be exercisable upon closing of the loan consolidation, while the remaining

three-unit warrant would be contingent upon the additional post-closing funding

needed to reach $2,000,000 in loans.52

       The following afternoon, Barwick replied that “we are in agreement in most

respects,” taking exception only to a provision in the warrants that Malkani

subsequently agreed to remove.53 That evening, Crivelli sent a proposed side letter,

meant to accompany the previous day’s drafts, that threw a temporary wrench in the

works.54 The side letter sought to leverage the loan consolidation to give Malkani

broad protections by, among other things, limiting Cunningham and Rosen’s ability

to issue additional equity or grant members certain rights adverse to Malkani’s

interests.55 Shortly thereafter, Cunningham texted Malkani that “the side letter is not

what we agreed to.”56 In a subsequent email, Cunningham indicated that she was

prepared to sign the draft warrant and accompanying paperwork, but asked Malkani

to give her a call about the side letter.57 The side letter was never executed.58

       The next day, March 12, 2020, Barwick emailed Crivelli a draft of the nine-

unit warrant that tweaked the definition of fair market value to align with the

52
   Id. at 1, 5-22, 75-92.
53
   JX 102 at 1; JX 107 at 1-2.
54
   JX 104 at 1, 21-22.
55
   Id. at 21-22.
56
   JX 95 at 101.
57
   JX 106.
58
   JX 286 at 360:12-362:14.

                                           9
Company’s past practice, concluding that “[i]f this is acceptable, then I think we are

done.”59 Cunningham followed up with a text to Malkani that read, in part, “I think

we are there. Call me so we can discuss and finally move on[.]”60

      On March 13, Cunningham emailed Malkani signed copies of the note,

purchase agreement, and nine-unit warrant, adding “[s]o excited we finally got this

done.”61 These documents (the “March 13 Consolidation”), which contained the

Disputed Provisions, were initialed by Cunningham on each page.62 Malkani texted

Cunningham that the documents “will need cleanup when” Barwick gets back from

vacation and that a “stack of docs” remained to be signed off on. 63 Later that day,

pursuant to the terms of the purchase agreement, Malkani wired $162,132 to

TruthMD’s bank account.64 Cunningham confirmed receipt by text.65

      C. After March 13, 2020, Malkani Advances an Additional $380,000

      March 13, 2020, was also the day on which the United States declared the

emerging COVID-19 pandemic a national emergency.66 The subsequent stay-at-

home orders brought with them significant uncertainty for American businesses.

59
   JX 107 at 1.
60
   JX 95 at 114.
61
   JX 111. Barwick, Crivelli, and St. John were copied on the email.
62
   Id. at 1-39.
63
   JX 95 at 133-34.
64
   JX 113 at 7; PTO ¶ 47.
65
   JX 95 at 137.
66
   See CNN, Text of Trump's National Emergency Declaration over Coronavirus,
CNN (March 13, 2020), https://www.cnn.com/2020/03/13/politics/trump-nationalemergency-
proclamation-text/index.html.

                                           10
TruthMD was no exception. In the weeks that followed, Cunningham and Rosen

pressured Malkani for additional advances to help keep the Company afloat. 67 In

response, Malkani made a total of seven additional advances between March and

April 2020,68 bringing the total loan balance to $1,980,000.

       In light of these changes, Crivelli reached out to Barwick on April 29, stating:

       My client and I believe it is time to finish the funding and have loan
       documents correctly executed. Unfortunately, we cannot accept
       [Cunningham’s] signature on a select few of the documents as being
       sufficient. All of the documents need to be executed with all blanks
       completed and disclosure schedules attached.69

Crivelli also conveyed Malkani’s demand for three “business changes”: a seat on

the Company’s board, a three-unit warrant upon reaching $2,000,000 in funding,

and read-only access to the Company’s bank accounts.70

       Over the next week, Cunningham and Malkani exchanged a flurry of texts.71

Malkani sought documentation of his recent advances, together with the formalities

(disclosures and Board consents) that had been overlooked in March.72 In contrast,

Cunningham “thought the [March 13] paperwork was done”73 and contained “all of

the signatures that were requested and due[,]” with the exception of the three-unit

67
   JX 95 at 158, 203; JX 112 at 195-201; JX 116.
68
   PTO ¶¶ 48-54.
69
   JX 120.
70
   Id.
71
   JX 121 at 6, 8, 30-31, 33, 42, 61, 68-70, 85.
72
   JX 127 at 1.
73
   JX 121 at 65.

                                              11
warrant, which awaited the $2,000,000 milestone.74 Once again, the parties found

themselves at an impasse that dragged on for months.

       D. TruthMD Explores Another Potential Acquisition

       On August 5, 2020, TruthMD entered into an exclusivity agreement regarding

a potential $180 million acquisition of the Company.75 During due diligence

associated with that transaction, the Company acknowledged the validity of the

March 13 Consolidation.76 The potential windfall apparently helped overcome the

previous deadlock, with Crivelli reaching out to Barwick on August 10 to renew the

request for the missing disclosure schedules and board resolutions associated with

the March 13 Consolidation.77 A week later, Cunningham emailed Malkani updated

redline drafts of the purchase agreement, note, and three-unit warrant.78 Among

other revisions,79 these drafts removed the CIC Provision and MFN Provision, while

reverting the Conversion Formula back to a fixed $250,000-per-unit valuation.80

The next day, Crivelli followed up with Barwick, writing that, although he’d thought

74
   JX 123 at 1; JX 121 at 60, 71, 78, 86.
75
   JX 170 at 2; JX 162 at 1.
76
   JX 155 at 1-2.
77
   JX 161.
78
   JX 169 at 1.
79
   The “Existing Notes” figure in August 17 draft of the purchase agreement matches the number
in the March 13 agreement, however, the “Existing Advances” number has been updated to
account for the intervening loans. JX 171 at 11. Defendants claim this as proof that the parties
did not consider the earlier agreement binding.
80
   JX 169 at 1, 48, 52.

                                              12
the previous drafts were the “final form[,]” Cunningham’s revisions “seem[ed]

reasonable at first glance.”81

       On September 1, Malkani forwarded Cunningham revised drafts that accepted

the deletion of the CIC provision but reinserted the MFN Provision and Conversion

Formula.82     Two days letter, Cunningham sent an email memorializing her

understanding of a September 1 discussion with Malkani, attaching drafts that once

again removed the MFN Provision and fixed the conversion rate to $250,000 per

unit.83 However, this was as close as the parties would get to a final consolidation,

as negotiations were soon derailed.

       Less than a week later, Malkani texted Cunningham to express concern that

the potential transaction would lead to a “large dilution” in his equity interest.84

Specifically, Malkani worried that the Board was attempting to line its pockets by

creating new ownership units85 or, later, through post-transaction earn-outs and

reimbursement for purportedly foregone salaries.86 Despite Cunningham’s repeated

assurances that “[t]his is a great deal” and that he “should be very happy[,]” 87

Malkani sought to negotiate a better deal for himself, writing, “I have supported you,

81
   JX 171 at 1.
82
   JX 183 at 1, 9, 13, 54.
83
   JX 199 at 1.
84
   JX 184 at 48-49.
85
   JX 236 at 2-4.
86
   JX 229 at 12; see JX 302 ¶¶ 65-80.
87
   JX 184 at 72, 74.

                                         13
and now it’s your turn to make sure [I am] taken care of, and I know you are going

to do the right thing.”88 Cunningham replied that Malkani had “been great[,] but this

is not possible[.]”89 Instead, Cunningham warned Malkani that “we have yet to agree

on terms that would entitle you to convert your loans and receive an equity position

in TruthMD.”90

       On October 1, 2020, Malkani’s litigation counsel sent the Company a letter

alleging that the Board had breached its fiduciary duties and demanding that the

transaction be postponed.91 This litigation resulted.

       E. Procedural History

       Plaintiffs filed their initial complaint on November 21, 2020, seeking, among

other direct and derivative relief, both expedition and a temporary restraining order

enjoining the pending acquisition.92 Expedition was granted, along with a restriction

that the Company could not undergo a change in control or management without

first giving Plaintiffs’ counsel 60-days’ notice.93           A subsequent preliminary

injunction further memorialized this restriction, pending final resolution of this

action.94

88
   JX 219 at 1.
89
   Id.
90
   JX 231 at 1 (emphasis omitted).
91
   JX 236 at 2-4.
92
   See Pls.’ Opening Br. in Supp. of their Mot. for a TRO, Dkt. No. 1; see also Pls.’ Mot. for
Expedited Proceedings, Dkt. No. 1.
93
   Order Granting Expedited Proceedings, Dkt. No. 24.
94
   Order Granting Pls.’ Mot. for Preliminary Injunction, Dkt. No. 67.

                                             14
       Plaintiffs then received leave to amend their complaint,95 which they filed on

June 28, 2021.96 The amended complaint drops the derivative claims, instead

naming the Company as a defendant.97 In addition to a variety of new factual

allegations, the amended complaint also narrowed the seven original causes of action

to four: breach of fiduciary duty against Cunningham, Rosen, and Wilson (Count I);

specific performance for delivery of a warrant for three additional equity units

(Count II); declaratory judgment that the March 13 note and purchase agreement are

valid and enforceable (Count III); and breach of contract with regard to the CIC

Provision (Count IV).98

       Defendant Wilson moved for summary judgment on the fiduciary duty

claim,99 however, I denied that motion on the basis that Wilson’s potential for

liability hinges on a genuine factual dispute.100 The action was bifurcated, and a trial

on Count I was deferred.101 A two-day trial on Counts II-IV was held in April 2022,

and, following post-trial briefing and argument, I took the matter under advisement.

95
   Order Granting Pls.’ Mot. for Leave to File Verified Am. Compl., Dkt. No. 83.
96
   Pls.’ Verified Am. Compl., Dkt. No. 84.
97
   See Id., Ex. 1 (Redline Comparison).
98
   Id. ¶¶ 98-119.
99
   Def. Gary Wilson’s Mot. Summ. J., Dkt. No. 126; Opening Br. Supp. Def. Gary
Wilson’s Mot. Summ. J., Dkt. No. 134; Reply Br. in Supp. of Def. Gary Wilson’s Mot. Summ. J.,
Dkt. No. 149.
100
    Letter Opinion Decided April 5, 2022 at 4, Dkt. No. 165.
101
    See Order Granting Stipulated and Proposed Second Amended Scheduling Order, Dkt. No. 151.

                                             15
                                       II. ANALYSIS

       Before me are three causes of action from the amended complaint: Counts

II-IV.102 Plaintiffs have the burden of proving each element of these causes of

action by a preponderance of the evidence.103 This standard of proof requires that

the evidence shows that something is more likely than not.104

       I begin my analysis with Count III, under which Plaintiffs seek a declaratory

judgment that the note and purchase agreement comprising, in part, the March 13

Consolidation are valid and enforceable. Finding that they are, I then turn to Count

II, for specific performance of the three-unit warrant. Because Malkani has not

reached $2,000,000 in principal advanced to the Company, I find that he is not yet

entitled to this warrant. Next, I find that Count IV for breach of contract is unripe

and that, accordingly, the preliminary injunction must be discharged. Finally, I

determine that the parties’ requests for attorneys’ fees are untimely.

       My reasoning follows.

       A. The March 13 Consolidation Is Valid and Enforceable

       The validity of the March 13 Consolidation is the central issue in this action.105

In Delaware, “a valid contract exists when (1) the parties intended that the contract

102
    PTO ¶ 3.
103
    Physiotherapy Corp. v. Moncure, 2018 WL 1256492, at *3 (Del. Ch. Mar. 12, 2018).
104
    Id.
105
    Defendants raise the issue that Count III of Plaintiffs’ amended complaint does not seek a
declaratory judgment that the 9-unit warrant is valid and enforceable, as it does for the purchase

                                               16
would bind them, (2) the terms of the contract are sufficiently definite, and (3) the

parties exchange legal consideration.”106 Following trial, the parties’ arguments

narrowed to the first element, with Defendants contending that Malkani had rejected

their terms prior to accepting and, additionally, could not establish a meeting of the

minds.107

               1. Malkani Did Not Reject the March 13 Consolidation

       The record shows that Cunningham considered the disputed purchase

agreement, note, and 9-unit warrant to have been fully executed on behalf of the

Company on and after March 13, 2020.108 Nonetheless, Defendants assert that they

should not be held to the Disputed Provisions within the March 13 Consolidation

agreement and note. PTO ¶ 11; Df.’s Answering Post-Trial Br. 33-35, Dkt. No. 194 (“DF PTAB”).
Defendants further argue that consideration of the 9-unit warrant claim is prejudicial, and that the
Court should refuse to consider it. DF PTAB at 34-35 (citing Merck and Co., Inc. v. SmithKline
Beecham Pharms. Co., 1999 WL 35793685, at *2 (Del. Ch. Jan. 27, 1999)). Here, all three
documents at issue in Count III were negotiated together and approved as part of a single
transaction. The Company does not dispute any provision within the 9-unit warrant, only the
validity of the transaction authorizing it. As a result, a finding that the purchase agreement and
note are valid will inherently extend to the 9-unit warrant as well.
106
    Eagle Force Holdings, LLC v. Campbell, 187 A.3d 1209, 1212-13 (Del. 2018) (quoting Osborn
ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010)).
107
    Def.’s Opening Post-Trial Br. 30-41, Dkt. No. 190 (“DF PTOB”). Defendants also argue that,
even if the March 13 Consolidation is found valid and enforceable, that I should invoke equity to
nullify it. DF PTOB at 44-46. I find the Company’s arguments that Cunningham would never
(and could never) give away a right like the CIC Provision uncompelling given the substantial
record to the contrary.
108
    JX 111 (Cunningham sending signed March 13 Consolidation paperwork, stating “[s]o excited
we finally got this done.”); JX 95 at 137 (Cunningham texting Malkani on March 13, thanking him
for wiring funds); JX 121 at 60 (Cunningham on May 7, 2020: “hopefully [Crivelli is] not trying
to change the [March 13] deal”), 65 (Cunningham on May 7, 2020: “Seriously I thought the [March
13 Consolidation] paperwork was done. I signed everything when you asked.”); JX 123 at 1
(Cunningham confirming signatures on March 13 Consolidation were all “that were requested and
due”).

                                                17
because of their own failure to sign a stack of ancillary documents.109 They argue

that, prior to performing, Malkani rejected the core purchase agreement, note, and

nine-unit warrant because the ancillary paperwork was not signed. This is far from

the most compelling reading of the record.

       In the hours after the Company signed the March 13 Consolidation, Malkani

texted Cunningham that the closing documents would “need cleanup once [Barwick]

gets back” and that a “stack of [documents]” remained to be signed off on.110

Defendants contend that these communications constitute a rejection that overrides

Malkani’s undisputed and contemporaneous performance111 of his sole obligation

under the contract: wiring TruthMD exactly $162,132.112 This litigation-driven

argument ignores both the lack of explicit rejection in Malkani’s communications113

and the Company’s months of post-consolidation conduct evidencing an intent to be

bound.114     A more straightforward reading, consistent with both Malkani’s

109
    See generally DF PTOB; DF PTAB (arguing that rejection occurred or there was no meeting
of the minds, based on the lack of signed ancillary documents).
110
    JX 95 at 133-34.
111
    See Tr. 233:5-9 (Cunningham acknowledging that Malkani’s sole obligation was to wire the
money); PTO ¶ 47.
112
    Tr. 233:5-9; See generally JX 111 at 4 (laying out the requirements for closing under the
purchase agreement).
113
    To support their rejection argument, Defendants cite inapposite caselaw involving rejections
that are far more unequivocal or outright. See Independence Mall, Inc. v. Wahl, 2012 WL 6945505,
at *4 (Del. Super. Dec. 31, 2012) (contract in question was “rejected outright”); see also
Centreville Veterinary Hospital, Inc. v. Butler-Baird, 2007 WL 1965538, at *2 (Del. Ch. July 6,
2007) (rejecting party explicitly “told [his counterparty] that he did not accept [the terms]”).
114
    JX 121 at 71 (Cunningham texting Malkani on May 7, 2020 “your sudden demand of minor
paperwork is not going over well” (emphasis added)). The Company’s stance only changed once

                                              18
performance115 and the Company’s response, is that Malkani’s texts represent a

request that Defendants sign additional ancillary documents that Defendants thought

extraneous to the deal.116

       Under Delaware law a party may accept an offer through performance.117

Here, the Company has conceded that the only obligation that Malkani had under

the March 13 Consolidation was to wire the specific advance of $162,132. 118 It is

undisputed that Malkani complied with that obligation.119 Because the Company’s

arguments of rejection are based on inapposite caselaw and tenuous readings of the

factual record, I find that Malkani’s acceptance-by-performance was not preempted

by a rejection of the March 13 Consolidation.

               2. There Was a Meeting of the Minds

       Defendants next argue that, even if there was no rejection, a contract could

not have been formed because there was no meeting of the minds as to all material

terms.120 Delaware law requires that “all essential or material terms must be agreed

the threat of litigation began to emerge. See JX 231 (September 24, 2020, email from Cunningham
to Malkani stating “we have yet to agree on terms that would entitle you to convert your loans and
receive an equity position in TruthMD” (emphasis removed)).
115
    It is unclear whether Malkani’s texts precede his performance or vice versa. Pl.’s Post-Trial
Answering Br. 6-8, Dkt. No. 193 (“PL PTAB”). Neither party was able to provide conclusive
evidence on this point.
116
    JX 121 at 60, 65; JX 123 at 1.
117
    Eaton v. Eaton, 2005 WL 3529110, at *6 (Del. Ch. Dec. 19, 2005); Hunter v. Diocese of
Wilmington, 1987 WL 15555, at *4-5 (Del. Ch. Aug. 4, 1987).
118
    Tr. 233:5-9; JX 267 at 137:11-15.
119
    PTO ¶ 47.
120
    DF PTOB at 37-41.

                                               19
upon before a court can find that the parties intended to be bound[.]”121 The

determination of what terms are material is done “on a case-by-case basis[.]”122 A

signed contract “generally offers the most powerful and persuasive evidence of the

parties’ intent to be bound[,]” however, “the court may [also] consider evidence of

the parties’ prior or contemporaneous agreements and negotiations in evaluating”

their intent.123

       Defendants contend that no meeting of the minds could have occurred because

the parties continued to engage in negotiations after the March 13 Consolidation.

Plaintiffs respond that Malkani’s post-consolidation demands represented an attempt

to leverage new advances to extract the desired ancillary documents in an additional

deal, rather than, per Defendants, the continuation of an ongoing negotiation.124

Indeed, the post-consolidation demands that Defendants allude to are not

contemporaneous with the March 13 Consolidation but post-date it by more than a

month in the earliest instance.125 Thus, Defendants’ argument glosses over the

undisputed fact that Malkani made numerous additional advances, totaling

$350,000, in the time period between the March 13 Consolidation and the first of his

renewed demands.126 Given the deference appropriate when a facially valid contract

121
    Eagle Force, 187 A.3d at 1230.
122
    Id.
123
    Id. (internal citations omitted).
124
    PL PTAB at 20-22.
125
    DF PTOB at 39 n.215-17, 40 n.225.
126
    PTO ¶¶ 48-54.

                                        20
exists, I find that Defendants’ arguments surrounding renewed negotiations fail to

undermine Malkani’s evidence of the parties’ intent to be bound.

       Defendants also assert that there was no meeting of the minds because

Malkani never received the ancillary documents he desired, his continued demands

for which purportedly prove that those documents contained material terms.127

“What terms are material is determined on a case-by-case basis, depending on the

subject matter of the agreement and on the contemporaneous evidence of what terms

the parties considered essential.”128 The documents in question include a security

agreement, subordination agreement, guaranty, completed disclosure schedules, and

documentation of a board resolution approving the transaction.129

       Once again, Defendants’ argument that these documents contained material

terms is undermined by the fact that both parties did not treat them as such. Despite

near-daily    communications        with    Cunningham        following      the   March      13

Consolidation, Malkani did not raise the ancillary documents issue again until he

had advanced hundreds of thousands of dollars in additional funding to the

Company.130 This sudden drop-off in deal talk allows an inference of Malkani’s

intent to be bound. Cunningham, for her part, explicitly confirmed that, in the

127
    DF PTOB at 39-40.
128
    Eagle Force, 187 A.3d at 1230 (citing Leeds v. First Allied Connecticut Corp., 521 A.2d 1095,
1097 (Del. Ch. 1986)).
129
    DF PTOB at 39.
130
    See generally JX 95 at 135-208 (documenting Cunningham and Malkani’s text exchanges
through 3/31/20); see also JX 120 (Crivelli raising the issue of ancillary documents on 4/29/20).

                                               21
Company’s view, the March 13 Consolidation contained “all of the signatures that

were requested and due[.]”131

       While absent or incomplete ancillary documents have been held to “cut the

other way[,]” in a determination of parties’ intent to be bound, they are not

dispositive.132 Here, I find that the parties, implicitly and explicitly, manifested an

objective intent to be bound by the terms of the March 13 Consolidation. As a result,

I further find that the transaction underlying the March 13 Consolidation gave rise

to valid and enforceable contracts in the form of the purchase agreement, note, and

nine-unit warrant.133

       B. Specific Performance Is Unavailable on these Facts

       I turn next to Count II, under which Malkani seeks specific performance for

delivery of the three-unit warrant tied to his achievement of $2,000,000 in aggregate

funding to the Company. Generally, “[a] party seeking specific performance must

establish that (1) a valid contract exists, (2) he is ready, willing, and able to perform,

and (3) that the balance of equities tips in favor of the party seeking performance.”134

Because Defendants do not dispute that Malkani is entitled to a three-unit warrant

131
    JX 125 at 1.
132
    Eagle Force, 187 A.3d at 1231.
133
    Once again, I note that my finding on the documents at issue in Count III—the purchase
agreement and note—extends to the 9-unit warrant, regardless of the exact pleading in the amended
complaint.
134
    Supernus Pharmaceuticals, Inc. v. Reich Consulting Grp., Inc., 2021 WL 5046713, at *3 (Del.
Ch. Oct. 29, 2021) (quoting Osborn, 991 A.2d at 1158).

                                               22
13 Consolidation counts towards the $2,000,000 milestone.137 As a result, the

question before me is: what did the parties mean by “$2,000,000?”

       Malkani argues that the $2,000,000 figure refers to total outstanding loans to

the Company. This interpretation allows the Plaintiffs to include the interest that

had accrued on various advances before they were rolled into the 2018 Note and

March 13 Consolidation. For example, Cunningham described the calculation of the

2018 Note’s $500,000 face value as: $166,000 in existing advances, plus $22,132 in

accrued interest, plus a new advance of $311,868.138 Because the notes appear to

provide for simple interest on the total amount loaned, including the accrued interest

due at consolidation, per Plaintiffs, it follows that the accrued interest component is

being treated as loan principal.139 Calculating based on these assumptions, Malkani

argues that he unwittingly exceeded the $2,000,000 threshold by more than a quarter

million dollars.140

137
    PL PTOB at 66-69.
138
    JX26. The Company disagrees with Malkani’s interpretation, contending that accrued interest
was only intended to be included in the calculation of the notes’ value for the purpose of conversion
into equity. Tr. of 11.2.22 Post-Trial Oral Arg. 78:11-79:8, Dkt. No. 204.
139
     JX 25 at 2. Plaintiffs reason that because interest on existing interest is, by definition,
compound interest, the reference to simple interest on the balance reveals that the accrued interest
has been rolled into principal. Unavailingly, the note is for an amount, “[n]ot to exceed
US$500,000.” Id. Neither party submitted evidence indicating the amount of interest payments,
which would have allowed an inference of how accumulated interest was treated within the note.
Subsequent communications between the parties treated the 2018 Note as a loan for $500,000. JX
30 at 1.
140
    PL PTOB at 40-41. Plaintiffs provide no satisfactory explanation for how Malkani, whose
contemporaneous communications show his extreme focus on hitting the funding milestone,
managed to overshoot the mark to by more than 10%.

                                                24
       Defendants counter that Malkani’s interpretation is revisionist and finds no

support in the record of the parties’ pre-litigation communications.141 They argue

that the parties always understood the milestone to be $2,000,000 in advances.142

Defendants support their position with numerous citations to the record.                       For

example, in the week leading up to the March 13 Consolidation, the parties

exchanged texts and emails discussing the 9- and three-unit warrants.143 Both sides’

calculations precisely match Malkani’s total advances,144 but don’t include the

accrued interest the Plaintiffs now advocate for.145 Indeed, even the October 1, 2020,

letter from Malkani’s counsel foreshadowing this litigation calculates total loan

principal at $1,980,000, making no mention of the Plaintiffs’ current calculation

formula.146

       Having weighed the evidence before me, I find that the Plaintiffs have not

proved their interpretation by clear and convincing evidence.147 In fact, I find it more

likely than not that the three-unit warrant obligation has not been met. Malkani seeks

141
    DF PTAB at 39.
142
    Id. at 39-41.
143
    JX 95 at 59-60; JX 103 at 1.
144
    Once adjusted for their shared oversight of the advance of $50,000 on February 14, 2020.
145
    JX 95 at 59-60; JX 103 at 1.
146
    JX 236 at 2-4.
147
    Certainteed Corp. v. Celotex Corp., 2005 WL 217032, at 6 n.29 (Del. Ch. Jan.
24, 2005).

                                              25
specific performance, but he has not complied with his investment obligation or

demonstrated a willingness, at present, to perform.148

       C. The Claim for Breach of Contract Is Unripe

       In Count IV of the amended complaint, Plaintiffs allege breach of contract for

violation the CIC Provision in connection with the contemplated acquisition.149

Defendants contend that Malkani waived this claim by failing to argue Count IV in

his pre-trial brief or, in the alternative, that the claim is unripe.150 Because I find that

dismissal is merited on ripeness grounds, I need not address the waiver argument.

       A dispute will generally be deemed unripe where the underlying claim rests

on uncertain or contingent events, the unfolding of which may obviate the need for

judicial intervention.151 True to its name, the CIC Provision prevents TruthMD from

undergoing a change in control (or management structure) without prior written

consent from Malkani.152 It does not, however, prevent Defendants from courting

potential acquirers or engaging in negotiations.153 Malkani concedes that that “there

is no imminent Acquisition that would currently constitute a breach of the [CIC

148
    I note, however, that Defendants have repeatedly expressed willingness to issue a three-unit
warrant once Malkani funds an additional $20,000. Tr. of 11.2.22 Post-Trial Oral Arg. at 36:3-
20, 81:22-82:12, 83:12-17; Tr. 277:20-278:10, 222:19-223:22.
149
    Pls.’ Verified Am. Compl. ¶¶ 117-119.
150
    DF PTOB at 51-54.
151
    XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1217 (Del. 2014).
152
    JX 111 at 10.
153
    Id.

                                               26
Provision.]”154 It is therefore clear that any claim for breach is currently both

hypothetical and unripe.

          Accordingly, Count IV is dismissed as unripe, with respect to the transaction

formerly contemplated. I must also discharge the preliminary injunction that was

issued in conjunction with the contractual right at issue.155 However, given my

finding in Section II.A that Malkani’s rights under the March 13 Consolidation are

valid and enforceable, Plaintiffs will not be left without recourse in the event of a

future change in control.

          D. The Parties’ Attorneys’ Fees Requests are Untimely

          Because trial in this action was bifurcated between Counts II-IV, in the initial

trial, and Count I, to be tried in the future, I find that adjudication of attorneys’ fees

at this juncture would be untimely. I therefore defer consideration of this issue

pending resolution of both Count I and any additional disputes between the parties.

                                      III. CONCLUSION

          For the foregoing reasons, Counts II and IV are DENIED. Count III is

GRANTED. An Order is attached.

154
      PTO ¶ 9.
155
      Order Granting Pls.’ Mot. for Preliminary Injunction.

                                                 27
   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SUNIL M. MALKANI, NICHOLAS            )
MATARAGAS, and RED DRAGON             )
PARTNERS, LLC,                        )
                                      )
                  Plaintiffs,         )
                                      )
      v.                              ) C.A. No. 2020-1004-SG
                                      )
GEMMA CUNNINGHAM a/k/a                )
GEMMA TURI, CHARLES D. ROSEN, )
GARY WILSON, and TRUTHMD, LLC, )
a Delaware limited liability company, )
                                      )
                  Defendants.         )

                                    ORDER

    For the reasons provided in my Memorandum Opinion of January 31, 2023,

Plaintiffs’ claim for declaratory judgment (Count III) is GRANTED, while the

claims for specific performance (Count II) and breach of contract (Count IV) are

DENIED. In conjunction with the denial of Count IV, my preliminary injunction

of April 21, 2021, is discharged.

IT IS SO ORDERED.

                                            /s/ Sam Glasscock III
                                            Vice Chancellor