Court Opinion

ID: 4878944
Source: CourtListenerOpinion
Date Created: 2021-08-26 15:05:31.367978+00
Date Added: 2024-06-11T08:12:37.320053
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PETER SERVAAS, ILYA REKHTER,               )
JUSTIN REES, and KELLY REES,               )
                                           )
             Plaintiffs,                   )
                                           )
      v.                                   )   C.A. No. 2020-0909-LWW
                                           )
FORD SMART MOBILITY LLC and                )
JOURNEY HOLDING CORP., d/b/a               )
TRANSLOC INC.,                             )
                                           )
             Defendants.                   )

                           MEMORANDUM OPINION
                            Date Submitted: June 3, 2021
                           Date Decided: August 25, 2021

Michael A. Barlow, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Renita
Sharma, Ty Adams, and Charles Sangree, QUINN EMANUEL URQUHART &
SULLIVAN, LLP, New York, New York; Counsel for Plaintiffs Peter SerVaas,
Justin Rees, and Kelly Rees
Michael A. Barlow, ABRAMS & BAYLISS LLP, Wilmington, Delaware; George
Gasper, ICE MILLER LLP, Indianapolis, Indiana; Counsel for Plaintiff Ilya Rekhter
Raymond J. DiCamillo and John M. O’Toole, RICHARDS, LAYTON & FINGER,
P.A., Wilmington, Delaware; Katherine V.A. Smith, GIBSON, DUNN &
CRUTCHER LLP, Los Angeles, California; Jason J. Mendro, Molly T. Senger, Matt
Gregory, Brittany A. Raia, and Rebecca Rubin, GIBSON, DUNN & CRUTCHER
LLP, Washington, D.C.; Counsel for Defendants Ford Smart Mobility LLC and
Journey Holding Corp.

WILL, Vice Chancellor
      In July 2019, the plaintiffs—the founders and original owners of two start-

ups—sold their companies to defendant Ford Smart Mobility LLC. The parties

entered into various agreements in connection with that sale, including agreements

addressing the plaintiffs’ employment, transaction bonuses, and deferred

consideration. In June 2020, the plaintiffs were terminated (purportedly) for cause

one month before certain payments to them were scheduled to vest.

        The plaintiffs claim that those terminations were improper and assert claims

for breach of contract, breach of the implied covenant of good faith and fair dealing,

unjust enrichment, and violation of the Delaware Wage Payment and Collection Act.

The defendants have moved to dismiss the majority of those claims. This decision

holds that the plaintiffs have failed to state a claim for relief as to the breach of

contract claim that the defendants challenge, the unjust enrichment claim, and the

claim for violation of the Delaware Wage Payment and Collection Act. The

plaintiffs have, however, stated a viable claim at the pleadings stage for breach of

the implied covenant of good faith and fair dealing. The defendants’ partial motion

to dismiss is granted in part and denied in part.

                                           1
I.        FACTUAL BACKGROUND

          The following facts are drawn from the Verified Complaint and the documents

it incorporates by reference.1

          A.    Ford Buys Journey

          Plaintiffs Peter SerVaas and Ilya Rekhter co-founded DoubleMap, Inc. during

college in 2010.2 Plaintiffs Justin Rees and Kelly Rees (together with SerVaas and

Rekhter, the “Founders” and each a “Founder”) co-founded Ride Systems LLC

while attending college in 2004.3 DoubleMap and Ride Systems sought to “provide

intelligent transportation solutions for municipal transit fleets, university systems,

corporations, hospitals, and airports.”4

          The Founders formed defendant Journey Holding Corp. in October 2018 for

the purposes of owning and operating DoubleMap and Ride Systems.5 In January

2019, DoubleMap and Ride Systems were merged under the Journey umbrella.6

1
  Verified Compl. (“Compl.”) (Dkt. 1). See Winshall v. Viacom Int’l, Inc., 76 A.3d 808,
818 (Del. 2013) (“[A] plaintiff may not reference certain documents outside the complaint
and at the same time prevent the court from considering those documents’ actual terms.”);
Freedman v. Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff
expressly refers to and heavily relies upon documents in her complaint, these documents
are considered to be incorporated by reference into the complaint . . . .”), aff’d, 58 A.3d
414 (Del. 2013).
2
    Compl. ¶¶ 12, 19.
3
    Id. ¶ 20.
4
    Id. ¶¶ 11–12, 19.
5
    Id. ¶ 10.
6
    Id.

                                            2
Several companies, including defendant Ford Smart Mobility LLC (“Ford”), a

wholly owned subsidiary of Ford Motor Company that “design[s], build[s], grow[s],

and invest[s] in emerging mobility services,”7 subsequently expressed interest in

acquiring Journey.8

          On July 25, 2019, Ford agreed to purchase Journey from the Founders—who

were Journey’s sole stockholders at the time—for approximately $40 million in

immediate and deferred consideration.9 The Founders, Ford, and Journey entered

into a series of contracts to govern that acquisition and the Founders’ employment

arrangements and compensation post-closing.

                1.     The Stock Purchase Agreement and Transaction Bonuses

          The agreement effectuating the sale of Journey to Ford is the Stock Purchase

Agreement (the “SPA”). In addition to the purchase price of approximately $40

million, Section 7.14 of the SPA required Ford and Journey create an “Employee

Incentive Bonus Plan” of up to $5 million:10

          Following the Closing, [Ford] shall, or shall cause [Journey] to, either
          adopt a plan or enter into agreements that provide for grants of possible
          cash performance incentives in the aggregate amount of $5 million to
          employees of the Company allocated as set forth on Schedule 7.14 and

7
    Id. ¶ 9.
8
    See id. ¶¶ 10, 25–26.
9
    Id. ¶ 2.
10
     Compl. Ex. B (Stock Purchase Agreement) § 7.14.

                                             3
           subject to vesting based on the achievement of performance metrics as
           summarized on Schedule 7.14.11

Section 7.14 also provides that “nothing in this Section 7.14 shall create any rights

in any employees of the Company or any other Person not a party to this

Agreement.”12

           Schedule 7.14 to the SPA details the revenue “performance metrics”

necessary to trigger these “transaction bonuses” and spells out the “Potential Bonus

Amounts” that each Founder and other specified Journey employees could receive.13

Schedule 7.14 provides that 50% or $2.5 million of the bonus pool would be payable

by March 15, 2020 if Journey met certain revenue growth targets for fiscal year

2019.14 The remaining $2.5 million would be payable by March 15, 2021 if Journey

met further revenue growth targets for fiscal year 2020.15

           Through an agreement titled Founder Consent to Transaction Bonus Plan

Reallocation (the “Reallocation Agreement”) dated March 10, 2020, SerVaas, Kelly

Rees, and Rekhter agreed to an adjustment to their “Potential Bonus Amounts” in

11
     Id.
12
     Id.
13
     See Compl. Ex. C (Disclosure Schedule 7.14 to the Stock Purchase Agreement).
14
     See id.
15
     See id.

                                            4
Schedule 7.14.16 This adjustment allowed for each Founder to receive potential

“transaction bonuses”:17

        Founder            March 2020            March 2021                Total
                          Bonus Amount          Bonus Amount
       Ilya Rekhter         $500,000              $100,000                $600,000
      Peter SerVaas         $495,000              $495,000                $990,000
        Kelly Rees          $120,000              $120,000                $240,000
        Justin Rees         $500,000              $500,000               $1,000,000

Recital B to the Reallocation Agreement states that each Founder can only receive a

transaction bonus if Journey meets the performance targets and he or she is

employed at Journey on the payment date:

         Certain employees of [Journey] have been designated to participate in
         the Bonus Pool with the potential to receive two cash Transaction
         Bonus payments if the performance targets are attained, and the
         employee is still employed with the Company on each payment date, in
         accordance with the terms of the transaction bonus agreements to be
         executed in connection with the Transaction Bonus (the “Transaction
         Bonus Agreements”).18

         Journey and each Founder also entered into “Transaction Bonus Agreements”

dated March 5, 2020.19 A recital in the Transaction Bonus Agreements explains that

bonus payments are available if certain performance targets are attained and the

Founder “is still employed with the Company Group on each payment date, in

16
     Compl. Ex. D (Founder Consent to Transaction Bonus Reallocation).
17
     Compl. Ex. D at Ex. A.
18
     Compl. Ex. D (emphasis added).
19
     See O’Toole Decl. Ex. 1 (Transaction Bonus Agreements) (Dkt. 12).

                                            5
accordance with the terms described” in the agreement.20            Section 3 of the

Transaction Bonus Agreements similarly provides that each Founder’s “potential

Transaction Bonus amount” will be paid “provided that the performance targets set

forth below are attained, and Employee is continuously employed with the Company

Group through and including the applicable payment dates.”21

                2.     The Deferred Consideration Agreements
         Each Founder also entered into a Founder Deferred Consideration Agreement

(the “DCAs”) with Ford and Journey in connection with the acquisition. The

Founders agreed to defer approximately 30% of the $40 million purchase price

through the DCAs and receive distributions of the remaining consideration over the

following two years.22 The DCAs provide that the deferred consideration “will vest

in installments” based on the achievement of certain time-based and performance-

based targets.23

         The DCAs detail what will happen to unvested deferred consideration if a

Founder is terminated. Section 4.a of the DCAs provides for immediate vesting of

any unvested amount if a Founder is terminated “without Cause” or resigns for

20
     Id. at 1 (emphasis added).
21
     Id. § 3 (emphasis added).
22
     Compl. ¶ 28.
23
     See Compl. Ex. A (Founder Deferred Consideration Agreements) § 3.a.

                                            6
“Good Reason.”24 In that case, “any portion of the Time-Based portion of the

Aggregate Founder Deferred Consideration Amount that is unvested immediately

prior to Founder’s employment termination date will vest effective as of the date of

his or her employment termination.”25 Alternatively, Section 4.e states that if a

Founder is terminated for “Cause” or resigns “without Good Reason,” the “Founder

will forfeit any portion of the Aggregate Founder Deferred Consideration Amount

that has not vested as of the date of his or her employment termination.”26

           The DCAs define what constitutes “Cause” for termination. Relevant here,

“Cause”:

           [M]eans the occurrence of any of the following: . . . (iii) Founder’s
           commission of an act of fraud, theft, embezzlement, misappropriation,
           self-dealing, or breach of fiduciary duty against the Company or any of
           its Affiliates, including, but not limited to, the offer, payment,
           solicitation or acceptance of any unlawful bribe or kickback with
           respect to the Company’s business; . . . and (v) Founder’s misconduct
           that constitutes a violation of a material written policy or rule of the
           Company or any of its Affiliates that is applicable to Founder and has
           been provided to Founder prior to such misconduct, as may be in effect
           from time to time during Founder’s employment with the Company and
           its Affiliates, after there has been delivered to Founder a written
           notification from Parent that describes such violation and provides
           Founder with the ability to immediately take satisfactory corrective
           action, if corrective action is possible.27

24
     Id. § 4.a.
25
     Id.
26
     Id. § 4.e.
27
     Id. at 2.

                                              7
           B.    The Founders Are Terminated from Employment at Journey.

           The Founders continued as employees of Journey after the acquisition

pursuant to Executive Employment Agreements.28             Rekhter became the Vice

President of Growth and later the Special Projects Lead.29 SerVaas became the Vice

President of Innovation and was appointed to Journey’s board of directors.30 Kelly

Rees became the Vice President of Integration.31 Justin Rees became the Chief

Executive Officer.32

           In fiscal year 2019, Journey exceeded the revenue goal set forth in Schedule

7.14 to the SPA, the Transaction Bonus Agreements, and the Reallocation

Agreement.33 Journey timely paid the 2020 bonus amounts to the Founders.34

           On June 23, 2020—one month before the first portion of the Founders’

deferred consideration under the DCAs was scheduled to vest—Ford terminated

each Founder for cause through video conference calls.35 During these calls, Ford

28
     Compl. ¶ 31; see Compl. Ex. E (Executive Employment Agreements).
29
     Id. ¶ 32.
30
     Id. ¶ 33.
31
     Id. ¶ 34.
32
     Id.
33
     Id. ¶ 35.
34
   See id. Although not mentioned in the Complaint, the plaintiffs represent in their
answering brief that “Journey timely paid the 2020 Bonuses” and do not challenge or
otherwise seek to recover damages related to this element of the agreements. See Pls.’
Answering Br. 29 (Dkt. 24).
35
     Compl. ¶ 36.

                                             8
cited “fraud,” “misappropriation of company resources,” and “breach of fiduciary

duties” as reasons for the terminations.36       Ford also told each Founder that

“everything has been investigated, corroborated, and verified, and we are not going

to get into the details.”37

           On July 29, 2020, counsel for Ford sent counsel for the Founders a letter

describing the purported grounds for terminating each Founder for cause.38 Ford

contended that Justin and Kelly Rees had improperly placed their nanny on the Ride

Systems payroll and had attempted to secure employment or seek promotions for

“unqualified friends and family.”39 Ford claimed that SerVaas had used Journey

funds to pay a personal assistant, made false and misleading statements about

“DoubleMap’s products capabilities,” and “engag[ed] in unethical business

practices.”40 Ford asserted that Rekhter had made false representations about

DoubleMap’s and Journey’s product capabilities and misrepresented himself as the

CEO of Journey.41

36
     Id. ¶ 37.
37
     Id.
38
     Id. ¶ 51.
39
     Id. ¶ 53.
40
     Id. ¶ 82 (brackets in original).
41
     Id. ¶¶ 98, 105.

                                           9
         C.     The Plaintiffs Bring this Action.

         The plaintiffs filed this action on October 22, 2020, alleging that they were

wrongfully terminated for cause and are entitled to approximately $12 million in

forfeited deferred consideration for the sale of their stock to Ford and potential

bonuses. The Complaint advances six counts: breach of the DCAs in Counts I and

II; breach of the SPA and the Reallocation Agreement in Count III; breach of the

implied covenant of good faith and fair dealing in Count IV; unjust enrichment in

Count VI;42 and violation of the Delaware Wage Payment and Collection Act (the

“Wage Act”)43 in Count VII.

         The defendants moved to dismiss Counts III through VII but did not seek

dismissal of Counts I and II.44

II.      LEGAL ANALYSIS

         The defendants have moved to dismiss Counts III through VII pursuant to

Court of Chancery Rule 12(b)(6) for failing to state a claim on which relief can be

granted. When considering such a motion:

         (i) all 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

42
     The Complaint does not include a Count V.
43
     19 Del. C. § 1103.
44
     Dkt. 9; see Defs.’ Opening Br. 2 n.1 (Dkt. 10).

                                              10
      unless the plaintiff would not be entitled to recover under any
      reasonably conceivable set of circumstances susceptible to proof.45

“[T]he pleading standards for purposes of a Rule 12(b)(6) motion ‘are minimal,’”

and the operative test is “one of ‘reasonable conceivability,’” which “asks whether

there is a ‘possibility’ of recovery.”46

      As the parties do in their briefs, I will address the plaintiffs’ Wage Act claim

before turning to their claims for breach of contract, breach of the implied covenant,

and unjust enrichment. For the reasons that follow, I find that Count VII fails to

state a claim on which relief can be granted because the plaintiffs cannot avail

themselves of the Wage Act. I also find that Count III fails based on the plain

language of the SPA and Reallocation Agreement and that Count VI fails to state a

viable unjust enrichment claim because it is duplicative of the plaintiffs’ contract-

based claims. Count IV, for breach of the implied covenant of good faith and fair

dealing, narrowly survives at this stage in the proceeding.

      A.     Claim for Violation of the Wage Act

      The plaintiffs contend that Ford and Journey violated Delaware’s Wage Act

through their “unreasonable and illegal failure to pay the Founders’ owed wages”

45
  Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (internal citations and
quotation marks omitted).
46
  In re China Agritech, Inc. S’holder Deriv. Litig., 2013 WL 2181514, at *23–24 (Del. Ch.
May 21, 2013) (quoting Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27
A.3d 531, 536 (Del. 2011)).

                                           11
under the DCAs, the SPA, and the Reallocation Agreement.47 The core issue is

whether the plaintiffs can be considered “employees” for purposes of the statute.48

Section 1101(a)(3) limits the applicability of the Wage Act to “any person suffered

or permitted to work by an employer under a contract of employment either made in

Delaware or to be performed wholly or partly therein.”49 I conclude that the

plaintiffs were not “employees” under that definition and, therefore, they cannot

invoke the Wage Act.

           The plaintiffs do not contend (nor could they) that any of the contracts relevant

to this action were “made in Delaware.”50 None of the plaintiffs physically worked

in Delaware during their employment. Justin Rees and Kelly Rees reside in Morgan,

Utah51 (where they lived while they were Journey employees) and their employment

agreements provide that their “principal work location[s] w[ould] be at the

Company’s office in Utah.”52 SerVaas and Rekhter reside in Indianapolis, Indiana53

47
     Compl. ¶ 186.
48
  “[T]he elements for a claim under 19 Del. C. § 1103 are: 1) plaintiff was an employee
of the employer, 2) under a contract made in Delaware or to be performed in Delaware, 3)
whose wages were withheld, and 4) there were no reasonable grounds to withhold the
wages.” Nikolouzakis v. Exinda Corp., 2012 WL 3239853, at *12 (D. Del. Aug. 7, 2012).
49
     19 Del. C. § 1101(a)(3).
50
     Id.
51
     Compl. ¶¶ 7–8.
52
  Compl. Ex. E (Executive Employment Agreement of Justin Rees) § 3; Compl. Ex. E
(Executive Employment Agreement of Kelly Rees) § 3.
53
     Compl. ¶¶ 5–6.

                                              12
(where they lived while they were Journey employees) and their employment

agreements provide that their “principal work location[s] w[ould] be at the

Company’s office in Indiana.”54 The Complaint does not allege that any Founder

ever traveled to Delaware for work or any other purpose.

          In Klig v. Deloitte LLP, the court held that a partner at Deloitte could not avail

himself of the Wage Act because he “did not work wholly or partly within

Delaware,” but “instead worked out of Deloitte’s New York office.”55 The court

explained that “Delaware can readily regulate within its borders, but cannot regulate

the wages of an individual working in another state, outside of Delaware’s

jurisdiction.”56 Other courts are in accord.57

54
  Compl. Ex. E (Executive Employment Agreement of Peter SerVaas) § 3; Compl. Ex. E
(Executive Employment Agreement of Ilya Rekhter) § 3.
55
     Klig v. Deloitte LLP, 36 A.3d 785, 797 (Del. Ch. 2011).
56
     Id. at 798.
57
   See Blood v. Columbus, US, Inc., 2017 WL 3432773, at *2 (Del. Super. Ct. Aug. 10,
2017) (“It is undisputed that Blood worked in Maryland, not Delaware. It is also undisputed
that the Contract was not to be performed, even in part, in Delaware. The Court finds that
under the plain language of Section 1101(a)(3), the Delaware Wage Payment and
Collection Act does not apply to the contract in this case.”); see also Redick v. E Mortg.
Mgmt., LLC, 2013 WL 1089710, at *11 n.9 (D. Del. Mar. 15, 2013) (“It is also worth noting
that other states, including Delaware, have interpreted their respective wage laws to extend
only to regulation of employment within state borders.”), report and recommendation
adopted, 2013 WL 5461616 (D. Del. Sept. 30, 2013); Priyanto v. M/S AMSTERDAM, 2009
WL 175739, at *7 (C.D. Cal. Jan. 23, 2009) (“This court has found no decision applying
any state’s wage laws to nonresidents who did not work in the state, regardless of the other
contacts. Courts interpreting other states’ wage laws have, like the IASCO court, focused
on the situs of an employee’s work in determining if a wage law applies, not where
managerial decisions, actions, or inactions occur.”).

                                              13
         The plaintiffs argue that the Wage Act is nonetheless applicable for two

reasons. First, they contend that the Wage Act applies because the SPA, DCAs, and

Reallocation Agreement “are governed by and construed in accordance with the law

of the State of Delaware.”58 But “the fact that a contract contains a Delaware choice-

of-law provision has no bearing on where the contract is made or performed.”59 The

Delaware choice of law provisions here do not permit the Founders to press a claim

under the Wage Act.

         Second, the plaintiffs assert that the Wage Act applies because the SPA,

DCAs, and Reallocation Agreement were “partly performed” in Delaware.60 They

argue that partial performance in Delaware occurred “because the Founders

facilitated work and delivered services in Delaware for the University of

58
     Pls.’ Answering Br. 13 (quoting Compl. ¶ 174).
59
   Hirtle Callaghan Hldgs. v. Thompson, 2020 WL 5820735, at *7 (E.D. Pa. Sept. 30,
2020); see also FdG Logistics LLC v. A&R Logistics Hldgs., Inc., 131 A.3d 842, 855 (Del.
Ch. 2016) (holding that a Delaware choice of law provision did not import “every provision
of Delaware statutory law into the commercial relationship of contracting parties”), aff’d
148 A.3d 1171 (Del. 2016) (TABLE); Eurofins Panlabs, Inc. v. Ricerca Biosciences, LLC,
2014 WL 2457515, at *18 n.136 (Del. Ch. May 30, 2014) (“Certainly, an analysis of
whether the Delaware Securities Act applies is an application of Delaware law and
therefore complies with the choice of law provision. However, Eurofins’s argument is not
responsive to the issue of whether it alleged a nexus to Delaware.”); Hadfield v. A.W.
Chesterton Co., 2009 WL 3085921, at *3 (Mass. Super. Sept. 15, 2009) (noting “that
contractual choice of law provisions do not defeat the presumption against extraterritorial
application of state wage statutes”).
60
     See Pls.’ Answering Br. 17–23.

                                            14
Delaware.”61 Essentially, the plaintiffs posit that the location of the customer—not

the location of the employee—should determine which state’s employment laws

apply. To support this theory, the plaintiffs equate the “partly” performed language

in Section 1101(a)(3) of the Wage Act with Delaware’s long-arm statute, 10 Del. C.

§ 3104, contending that if an employee “facilitate[s] work or transact[s] business in

Delaware,” they may avail themselves of the Wage Act.62

          But the purposes of the long-arm statute and the Wage Act are fundamentally

different.        The long-arm statute ensures that Delaware’s exercise of personal

jurisdiction over a non-resident is consonant with due process.63 The Wage Act, on

the other hand, “was enacted by the General Assembly in 1965 (55 Del. Laws, Ch.

19) to provide for payment of wages and to enforce their collection.”64 The apparent

“[l]egislative intent was to leave it to the Courts to decide, in any given case, whether

a person is or is not an employee” for purposes of the statute.65

61
     Id. at 17.
62
     Id. at 18 n.8.
63
   See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); Carlton Invs. v. TLC
Beatrice Int’l Hldgs., Inc., 1995 WL 694397, at *7 (Del. Ch. Nov. 21, 1995) (questioning
whether “contacts with Delaware would provide either a statutory or a constitutionally
sufficient basis” to require adjudication in Delaware under Section 3104).
64
   State ex rel. Christopher v. Planet Ins. Co., 321 A.2d 128, 132–33 (Del. Super. 1974);
see also Rypac Packaging Mach. Inc. v. Coakley, 2000 WL 567895, at *13 (Del. Ch. May
1, 2000).
65
     Fairfield Builders, Inc. v. Vattilana, 304 A.2d 58, 60 (Del. 1973).

                                               15
         There is no reason to conclude that the reach of the Wage Act is—or should

be—coterminous with the application of Delaware’s long-arm statute. The plaintiffs

have cited no case (and the court is aware of none) supporting the theory that the

minimum contacts of facilitating work or delivering services remotely to customers

in Delaware, which could potentially provide a basis for personal jurisdiction, can

trigger the application of the Wage Act. Delaware “cannot regulate the wages of an

individual working in another state” or “enforce its vision of appropriate

employment law regulation within” another state’s territory.66

         The plaintiffs’ customer-nexus theory is also unworkable in practice. It would

mean that employees who “facilitate work or transact business”67 with customers in

multiple states could be subject to numerous and potentially conflicting employment

law regimes.68       Because the plaintiffs “did not work wholly or partly within

Delaware,”69 the Wage Act does not apply to them. Count VII is dismissed.

66
     Klig, 36 A.3d at 797–98.
67
     Pls.’ Answering Br. 18 n.8.
68
  Counsel for the plaintiffs could not estimate how many customers the Founders served
while employed by Ford and Journey. See Hr’g Tr. 23–24 (June 3, 2021) (Dkt. 65).
Hypothetically, if Journey had customers in 50 states, the plaintiffs’ interpretation of the
law would mean that the Founders could avail themselves of 50 different wage statutes.
69
  Klig, 36 A.3d at 797. Because the court finds the Wage Act inapplicable to the Founders,
the parties’ other arguments as to Count VII need not be addressed.

                                            16
         B.       Claims for Breach of the SPA and the Reallocation Agreement

         Plaintiffs next assert that Journey and Ford breached Schedule 7.14 of the SPA

and the Reallocation Agreement “by improperly purporting to terminate each

Founder for Cause when there was no Cause as defined in the DCAs to terminate

any Founder.”70 In doing so, the plaintiffs contend that Ford “prevent[ed] the

Founders from satisfying the 2020 performance metrics included in Schedule 7.14

and payable by March 15, 2021,”71 depriving the plaintiffs of the second tranche of

bonus payments. The plaintiffs’ claim lacks a contractual underpinning and fails

based on the plain language of the SPA and the Reallocation Agreement.

         Although this count is for breach of the SPA and the Reallocation Agreement,

the plaintiffs’ arguments rest on “[c]ombin[ing]” those agreements with the “Cause”

provisions in the DCAs.72 Sections 4.a and 4.e of the DCAs detail two distinct

vesting outcomes depending on whether a Founder is terminated with or without

“Cause.” Under Section 4.a of the DCAs, if a Founder is terminated “without Cause”

or resigns “for Good Reason” as defined in the agreement, that Founder’s unvested

deferred consideration “will vest effective as of the date of his or her employment

termination.”73 Alternatively, if a Founder is terminated “for Cause” or resigns

70
     Compl. ¶ 142.
71
     Id. ¶ 143.
72
     Pls.’ Answering Br. 36.
73
     Compl. Ex. A § 4.a.

                                           17
“without Good Reason,” that “Founder will forfeit any portion of the Aggregate

Founder Deferred Consideration Amount that has not vested as of the date of his or

her employment termination.”74

           Unlike the DCAs, the SPA and the Reallocation Agreement do not distinguish

between “without Cause” and “for Cause” terminations.              The Reallocation

Agreement provides that Journey employees will only receive their “Transaction

Bonus payments” if two conditions are met: (i) “the performance targets are

attained, and [(ii)] the employee is still employed with the Company on each payment

date.”75 Similarly, the Transaction Bonus Agreements that were “executed in

connection with the Transaction Bonus”76 provide that each Founder will only

receive their “Transaction Bonus payments if the performance targets set forth below

are attained, and the Employee is still employed with the Company Group on each

payment date.”77

           The plaintiffs assert that the Transaction Bonuses contemplated by the

Transaction Bonus Agreements “are a modification of Section 7.14 of the SPA and

Schedule 7.14.”78 But Section 7.14 of the SPA contains little mention of the

74
     Id. § 4.e.
75
     Compl. Ex. D at 1 (emphasis added).
76
     Id.
77
     O’Toole Decl. Ex. 1 § 3 (emphasis added).
78
     Pls.’ Answering Br. 36.

                                            18
Founders’ continued employment with Journey, except to provide that “nothing in

this Section 7.14 shall create any rights in any employees of the Company.”79 The

plaintiffs point to nothing in Section 7.14—or the SPA as a whole—that

distinguishes between a “for Cause” or “without Cause” termination. Nor could

they. No such language is found in the agreement.

         In short, the SPA and the Reallocation Agreement lack a for cause/without

cause distinction.80        And the “Cause” provisions of the DCAs cannot be

“[c]ombined” with those contracts.81 Each contract must be read on its own terms.82

Delaware courts construe contracts “as a whole and giving effect to all its

provisions,” placing priority on parties’ “intentions as reflected in the four corners

of the agreement.”83 The plaintiffs’ attempt to read provisions of the DCAs into

separate agreements violates these principles and cannot support a claim for breach

of the SPA or the Reallocation Agreement.

79
     Compl. Ex. B § 7.14.
80
  See Hr’g Tr. 32 (counsel for the plaintiffs arguing that cause requirement in the DCAs
should be “import[ed] . . . into the transaction bonus agreement”).
81
     Pls.’ Answering Br. 36.
82
  See, e.g., Golden Rule Fin. Corp. v. S’holder Representative Servs. LLC, 2021 WL
305741, at *9 (Del. Ch. Jan. 29, 2021); In re Energy Transfer Equity L.P. Unitholder Litig.,
2017 WL 782495, at *10 (Del. Ch. Feb. 28, 2017) (holding that “each specific agreement
must be interpreted in accordance with its own terms”).
83
  Salamone v. Gorman, 106 A.3d 354, 368 (Del. 2014) (quoting GMG Cap. Invs., LLC v.
Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012)).

                                            19
         The for cause/without cause distinction in the DCAs is also inconsistent with

the terms of the Reallocation Agreement. The Reallocation Agreement requires that

the Founders must still be “employed with the Company on each payment date” to

receive the “Transaction Bonus payments.”84 That unambiguous and unconditional

requirement would become superfluous if the “Cause” provisions in the DCAs were

read into it.

         For these reasons, Count III fails to state a claim for relief and is dismissed.

         C.     Claim for Breach of the Implied Covenant of Good Faith and Fair
                Dealing
         The plaintiffs largely repackage their breach of contract claims as a claim for

breach of the implied covenant of good faith and fair dealing in the DCAs, the SPA,

and the Reallocation Agreement.85 The plaintiffs assert that those agreements each

contain an “implied term” that the defendants would not “terminate any Founder in

bad faith or classify any termination of any Founder as for Cause in bad faith.”86

84
     Compl. Ex. D at 1.
85
     See Compl. ¶¶ 145–160.
86
   Id. ¶ 154; see also id. ¶ 158 (alleging that the terminations were “part of a larger scheme
to oust the Founders from Journey and deprive the Founders of the Deferred Consideration
owed to them under the DCAs and the Transaction Bonuses owed to them under the SPA,
and Transaction Bonus Plan Reallocation Agreement”).

                                             20
      “Under Delaware law, the implied covenant of good faith and fair dealing

inheres in every contract.”87 To sustain a claim for a breach of the implied covenant,

a plaintiff “must allege a specific implied contractual obligation, a breach of that

obligation by the defendant, and resulting damage to the plaintiff.” 88 “The implied

covenant of good faith and fair dealing embodies the law’s expectation that ‘each

party to a contract will act with good faith toward the other with respect to the subject

matter of the contract.’”89

      Although the Complaint treats the relevant contracts collectively for purposes

of Count IV, my analysis is different for the DCAs, on one hand, and the SPA and

the Reallocation Agreement, on the other. I will address the plaintiffs’ implied

covenant claim under the DCAs first, and then address the SPA and the Reallocation

Agreement together.

             1.     The DCAs
      In the employment context, “[c]ourts have been reluctant to recognize a broad

application of the [implied] [c]ovenant out of a concern that the [c]ovenant could

87
   Amirsaleh v. Bd. of Trade of City of N.Y., Inc., 2009 WL 3756700, at *4 (Del. Ch. Nov.
9, 2009).
88
   Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009) (quoting
Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998)).
89
 Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1032 (Del. Ch. 2006) (quoting
Katz v. Oak Indus., Inc., 508 A.2d 873, 880 (Del. Ch. 1986)).

                                           21
thereby swallow the [d]octrine [of at-will employment].”90 The Delaware Supreme

Court has found that the implied covenant does not create a cause of action where

an employee is terminated “based solely on personal motivations.”91 Relatedly,

“[d]islike, hatred or ill will, alone, cannot be the basis for a cause of action for

termination of an at-will employment.”92

           These principles cut against finding an “implied” term in the DCAs regarding

bad faith terminations. The subject of the implied covenant claim is seemingly

covered by the “Cause” provisions in the DCAs.93 Logically, if an employee is

properly terminated for cause under a contract, the employer’s subjective

motivations would be meaningless. And if the employer cited cause but had none,

the termination would ultimately be without cause and contract provisions

addressing the consequences of a without cause termination would apply. At the

pleadings stage and drawing all reasonable inferences in favor of the plaintiffs,

90
     E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, 442 (Del. 1996).
91
     Id. at 444.
92
     Id.
93
   See, e.g., Alliance Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746, 770
(Del. Ch. 2009) (“[T]he implied covenant only applies where a contract lacks specific
language governing an issue and the obligation the court is asked to imply advances, and
does not contradict, the purposes reflected in the express language of the
contract.”), aff’d, 976 A.2d 170 (Del. 2009); Dave Greytak Enters., Inc. v. Mazda Motors
of Am., Inc., 622 A.2d 14, 23 (Del. Ch. 1992) (explaining that the implied covenant does
not apply when “the subject at issue is expressly covered by the contract”), aff’d, 609 A.2d
668 (Del. 1992).

                                            22
however, I cannot find that the plaintiffs would not be able to recover under any

reasonably conceivable set of circumstances.

          In Sheehan v. AssuredPartners, Inc., the court declined to dismiss an implied

covenant claim based on employment agreements that—like the DCAs here—

detailed different outcomes should the employees be fired “with or without Cause.”94

The court explained that although the employment agreements “lay out two types of

terminations and a process applicable to each,” the employees nevertheless

“identifie[d] a possible gap” in the agreements—namely, “that a termination will not

be done in ‘bad faith.’”95 Likewise, in Smith v. Scott, the court allowed an implied

covenant claim based on an employment agreement and certain LLC agreements to

survive a motion to dismiss.96 The court (relying on Sheehan) found that a gap

potentially existed because the operative contracts failed “to define what is to occur

when a party to the contract invokes the ‘cause’ provision in bad faith to avail itself

of the contractual consequences of a for ‘cause’ termination.”97

94
     Sheehan v. AssuredPartners, Inc., 2020 WL 2838575, at *3 (Del. Ch. May 29, 2020).
95
     Id. at *11.
96
     Smith v. Scott, 2021 WL 1592463, at *6–9 (Del. Ch. Apr. 23, 2021).
97
  Id. at *8. The defendants contend that Sheehan and Smith are inapplicable because the
Founders “have pled no facts tending to show that Ford falsified any records, or that Ford
manufactured ‘fictitious grounds’ for their terminations.” Defs.’ Reply Br. 24 (Dkt. 29).
That reading of Sheehan and Smith is too narrow. Neither case requires that a plaintiff
plead magic words about falsifying records or manufacturing cause. Both cases provide
that “Cause” provisions like those in the DCAs do not contemplate terminations “in bad
                                            23
         Here, the plaintiffs allege that the defendants “acted in bad faith by

terminating each Founder for Cause when, in fact, no Cause existed” as part of a

“scheme to wrongfully pocket roughly $12 million it promised to pay the

Founders.”98 The factual allegations in the Complaint provide that the “Cause” the

defendants advanced when terminating the Founders was a pretext to cut costs and

hide losses from failed acquisitions.99 Applying the reasoning in Sheehan and Smith,

these allegations are (narrowly) sufficient to state a claim.100

                2.       The SPA and the Reallocation Agreement

         As explained above, the SPA and the Reallocation Agreement do not include

the “Cause” distinctions present in the DCAs.101              Instead, the Reallocation

Agreement provides that each Founder must be “still employed with the Company

on each payment date” to receive their “Transaction Bonus payments.”102 The

relevant question for my analysis of Count IV as it pertains to the SPA and the

faith” or for an “improper purpose.” Smith, 2021 WL 1592463, at *7–8; see Sheehan, 2020
WL 2838575, at *11.
98
     Compl. ¶¶ 1, 3.
99
     See id. ¶¶ 40–49.
100
    But see Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d
878, 896 (Del. 2015), as revised (Mar. 27, 2015) (Strine, C.J.) (reversing judgment entered
after trial in favor of buyer for breach of the implied covenant; explaining that the
challenged conduct was “either a breach of the Termination Provision or not a breach at all
if one of the exceptions applied”).
101
      See supra Part II.B.
102
      Compl. Ex. D at 1.

                                            24
Reallocation Agreement is whether there was an implied term that the defendants

would not terminate the Founders in bad faith.

          Beyond its gap filling function, the implied covenant applies “when a party to

the contract is given discretion to act as to a certain subject and it is argued that the

discretion has been used in a way that is impliedly proscribed by the contract’s

express terms.”103 The Delaware Supreme Court has explained that “the mere

vesting of ‘sole discretion’ d[oes] not relieve the [party] of its obligation to use that

discretion consistently with the implied covenant of good faith and fair dealing.”104

Although contracts often grant wide—if not unfettered—discretion to one party, “the

law presumes that parties never accept the risk that their counterparties will exercise

their contractual discretion in bad faith.”105

          Even though the SPA and the Reallocation Agreement grant the defendants

the ability to terminate the Founders for any reason, it stands to reason that the

implied covenant prevents that right from being exercised in bad faith.106 Applying

the Rule 12(b)(6) standard, the Complaint adequately alleges that the defendants

terminated the Founders in bad faith as “part of a larger scheme to oust the Founders

103
   Oxbow Carbon & Mins. Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 504
n.93 (Del. 2019).
104
   Miller v. HCP Trumpet Invs., LLC, 2018 WL 4600818, at *1 (Del. Sept. 20, 2018)
(TABLE).
105
      Amirsaleh, 2008 WL 4182998, at *1.
106
      See id.

                                            25
from Journey and deprive the Founders of . . . the Transaction Bonuses owed to them

under the SPA, and Transaction Bonus Plan Reallocation Agreement.”107 Those

well-pleaded allegations are sufficient to state a claim for breach of the implied

covenant.

          The defendants’ motion to dismiss is therefore denied as to Count IV.

          D.       Claim for Unjust Enrichment
          Finally, the plaintiffs contend that Ford was unjustly enriched “by improperly

terminating each Founder for Cause without a valid basis to do so”108 and “relying

on that pretext to refuse to pay the Founders the Deferred Consideration it owes them

under the DCAs and the Transaction Bonuses it owes them under Schedule 7.14 of

the SPA and the Transaction Bonus Plan Reallocation Agreement.”109 This count

recasts the plaintiffs’ breach of contract claims as a claim for unjust enrichment.

Perhaps acknowledging that reality, the plaintiffs ask that “this claim . . . survive in

the alternative if this Court finds that Defendants [sic] failure to pay the Transaction

Bonuses did not breach any express contract.”110

          To state a claim for unjust enrichment, a plaintiff must prove: “(1) an

enrichment, (2) an impoverishment, (3) a relation between the enrichment and

107
      Compl. ¶ 158.
108
      Id. ¶ 164.
109
      Id. ¶ 162.
110
      Pls.’ Answering Br. 38.

                                            26
impoverishment, (4) the absence of justification and (5) the absence of a remedy

provided by law.”111 Before a court engages in this analysis, however, it must

consider the threshold question of “whether a contract already governs the relevant

relationship between the parties.”112 “When the complaint alleges an express,

enforceable contract that controls the parties’ relationship . . . a claim for unjust

enrichment will be dismissed.”113

         Here, the various agreements between Ford, Journey, and the Founders

comprehensively address the relationship between the parties.114 Because their

relationships are governed by contractual provisions—whether express or implied—

the plaintiffs cannot maintain a separate claim for unjust enrichment. Count VI is

dismissed.

111
      Jackson Nat. Life Ins. Co. v. Kennedy, 741 A.2d 377, 393 (Del. Ch. 1999).
112
   BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL
264088, at *7 (Del. Ch. Feb. 3, 2009).
113
   Bakerman v. Sidney Frank Importing Co., Inc., 2006 WL 3927242, at *18 (Del. Ch.
Oct. 10, 2006).
114
    See Nemec v. Shrader, 2009 WL 1204346, at *6 (Del. Ch. Apr. 30, 2009) (“Delaware
courts . . . have consistently refused to permit a claim for unjust enrichment when the
alleged wrong arises from a relationship governed by contract.”), aff’d, 991 A.2d 1120
(Del. 2010).

                                             27
III.   CONCLUSION

       For the reasons explained above, the defendants’ partial motion to dismiss is

granted in part and denied in part. The motion is granted as to Counts III, VI, and

VII. The motion is denied as to Count IV.

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