Court Opinion

ID: 4363885
Source: CourtListenerOpinion
Date Created: 2019-02-01 15:05:40.229481+00
Date Added: 2024-06-11T14:49:02.870884
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

IDT CORPORATION and        )
HOWARD JONAS,              )
                           )
               Plaintiffs, )
                           )
             v.            )           C.A. No. N18C-03-032 PRW CCLD
                           )
U.S. SPECIALTY INSURANCE )
COMPANY, NATIONAL UNION )
FIRE INSURANCE COMPANY )
OF PITTSBURGH, PA, and XL  )
SPECIALTY INSURANCE        )
COMPANY,                   )
                           )
               Defendants. )

                       Submitted: October 25, 2018
                        Decided: January 31, 2019

            Upon Plaintiffs IDT Corporation and Howard Jonas’
                  Motion for Partial Summary Judgment,
                  GRANTED in part; DENIED in part.

            Upon Defendant U.S. Specialty Insurance Company’s
                  Cross-Motion for Summary Judgment,
                  GRANTED in part; DENIED in part.

 Upon Defendant National Union Fire Insurance Company of Pittsburgh, PA’s
                     Motion for Summary Judgment,
                  GRANTED in part; DENIED in part.

            Upon Defendant XL Specialty Insurance Company’s
               Motion for Summary Judgment and Joinder,
                              DENIED.
                 MEMORANDUM OPINION AND ORDER

Brian M. Rostocki, Esquire, Benjamin P. Chapple, Esquire, Reed Smith LLP,
Wilmington, Delaware, Robin L. Cohen, Esquire (pro hac vice), Keith McKenna,
Esquire (pro hac vice) (argued), McKool Smith, P.C., New York, New York,
Attorneys for Plaintiffs.

John C. Phillips, Jr., Esquire, David A. Bilson, Esquire, Phillips, Goldman,
McLaughlin & Hall, P.A., Wilmington, Delaware, Alexander R. Karam, Esquire
(pro hac vice) (argued), Addison Draper, Esquire (pro hac vice), Clyde & Co US
LLP, Washington, DC, Attorneys for Defendant U.S. Specialty Insurance Company.

Henry duPont Ridgely, Esquire, John L. Reed, Esquire (argued), Ethan H.
Townsend, Esquire, DLA Piper LLP, Wilmington, Delaware, Joseph G. Finnerty III,
Esquire (pro hac vice), Megan Shea Harwick, Esquire (pro hac vice), Eric S.
Connuck, Esquire (pro hac vice), DLA Piper LLP, New York, New York, Attorneys
for Defendant National Union Fire Insurance Company of Pittsburgh, PA.

Timothy Jay Houseal, Esquire, Jennifer M. Kinkus, Esquire, Young Conaway
Stargatt & Taylor, LLP, Wilmington, Delaware, Charles C. Lemley, Esquire (pro
hac vice) (argued), Wiley Rein LLP, Washington, DC, Attorneys for Defendant XL
Specialty Insurance Company.

WALLACE, J.

                                     -2-
I.    INTRODUCTION

      Plaintiffs IDT Corporation and Howard Jonas seek declaratory relief and

damages for breach of contract against Defendant Insurers U.S. Specialty Insurance

Company, National Union Fire Insurance Company of Pittsburgh, PA, and XL

Specialty Insurance Company, allegedly arising from those insurers’ obligations to

cover costs IDT and Jonas incurred in a Delaware Court of Chancery case—In re

Straight Path Communications Inc. Consolidated Stockholder Litigation, No. 2017-

0486-SG (Del. Ch.) (the “Straight Path Action”).

      Now before the Court are the parties’ several requests for summary judgment.

On those, the Court rules as follows: IDT’s Motion for Partial Summary Judgment

on Defense Costs is GRANTED, in part, and DENIED, in part; U.S. Specialty’s

Cross-Motion for Summary Judgment is GRANTED, in part, and DENIED, in part;

National Union’s Motion for Summary Judgment is GRANTED with respect to

National Union’s coverage obligations for IDT, and DENIED with respect to

National Union’s duty to defend Jonas in the Straight Path Action; and XL

Specialty’s Motion for Summary Judgment and Joinder is DENIED.

                                       -3-
II.     FACTUAL BACKGROUND

      A. THE PARTIES.

        IDT is a Delaware corporation founded by Jonas in 1990 with its principal

place of business in New Jersey. 1 Jonas has served as IDT’s Chairman since its

incorporation, served as its CEO at various times, and controls a majority of IDT’s

voting stock. 2      Straight Path Communications Inc. is a Delaware corporation

headquartered in Virginia that owns two subsidiaries -- one holds 39 GHz and 28

GHz fixed wireless spectrum licenses (the “Spectrum Assets”); the other holds a

majority stake in intellectual property related to internet communications (the “IP

Assets”). 3 Prior to its spin-off in 2013, Straight Path was a wholly-owned subsidiary

of IDT. 4

      B. THE STRAIGHT PATH ACTION.

        On July 31, 2013, Straight Path was spun-off from IDT (the “Spin-Off”).

One of Jonas’s sons, Davidi Jonas, served as Straight Path’s CEO and President at

the time of the Spin-Off. 5 Under the Spin-Off’s terms, Straight Path common stocks

1
        Pls.’ Compl. ¶ 8.
2
       Opening Br. in Supp. of Pls.’ Mot. for Partial Summ. J. on Defense Costs against Def. U.S.
Specialty Ins. Co. [hereinafter “Pls.’ Br.”] Ex. 4 Verified Consolidated Amended Class Action and
Derivative Compl. [hereinafter “Straight Path Compl.”] ¶ 18.
3
        Straight Path Compl. ¶ 16.
4
        Id. ¶¶ 17, 34.
5
        Id. ¶ 20.

                                              -4-
were distributed pro rata to IDT stockholders, including Jonas, who maintained

voting control of Straight Path through a dual-class structure.6 In fact, the Spin-Off

resulted in Jonas retaining complete voting control over both IDT and Straight Path.7

But following the Spin-Off, Straight Path was a stand-alone company. 8

       Jonas also retained certain consent rights with respect to Straight Path after

the Spin-Off, including the right to consent to any merger, consolidation, or sale of

all of Straight Path’s assets. 9 In addition, as part of the Spin-Off, IDT and Straight

Path entered into a Separation and Distribution Agreement (“Separation

Agreement”) under which IDT agreed to indemnify Straight Path for any liabilities

arising from or related to conduct pre-dating the Spin-Off. 10

       In November 2015, Sinclair Upton Research alleged that IDT had defrauded

the Federal Communications Commission when it sought renewal of certain of its

39 GHz licenses in 2011 and 2012. Sinclair Upton alleged that Straight Path had

failed to comply with the FCC’s substantial service requirements because none of

6
       Id. ¶ 36; id. ¶ 21 (explaining that Jonas’s Straight Path stock was then held in a trust of
which Jonas was the beneficiary).
7
       Id. ¶ 40.
8
       Id. ¶ 36.
9
       Id. ¶ 39.
10
       Id. ¶ 36.

                                              -5-
the systems that IDT had purportedly constructed under those licenses were

operational.11 In 2016, the FCC commenced an investigation into Sinclair Upton’s

allegations and concluded that Straight Path had engaged in fraudulent practices

when seeking its license renewals.

       In mid-January, 2017, Straight Path and the FCC entered into a consent decree

(the “Consent Decree”) under which Straight Path:

       - agreed to forfeit 20% of its spectrum licenses;

       - was required to sell its remaining spectrum licenses to a third-party within
         one year of the Consent Decree and to pay 20% of the proceeds of the sale
         to the FCC; and

       - agreed to pay a $100 million fine.

Under the Consent Decree that $100 million fine could be reduced to $15 million if

Straight Path completed the required third-party sale within the one-year time

frame. 12 But if Straight Path failed to sell its licenses or failed to pay the required

fine, its licenses would be forfeited to the FCC. 13 The terms of the Consent Decree

left Straight Path with little choice but to sell itself. 14

11
       Id. ¶¶ 42, 45.
12
       Id. ¶¶ 42–55.
13
       Id. ¶ 55.
14
       Id. ¶¶ 54, 60, 63.

                                             -6-
      Soon after Straight Path entered into the Consent Decree with the FCC,

Straight Path’s Board of Directors formed a Special Committee to consider matters

relating to the imminent sale of its remaining assets.15 While the Board’s financial

advisor reached out to potential bidders, the Special Committee considered its

indemnification rights under the Separation Agreement and the feasibility of

asserting an indemnification claim against IDT (the “Indemnification Claim”) for

the financial liability incurred by Straight Path under the Consent Decree.16 At a

meeting held in February 2017, the Special Committee decided to preserve and

pursue the Indemnification Claim for the benefit of Straight Path’s stockholders.17

      Later that month, the Special Committee’s counsel advised Straight Path’s

counsel of the Special Committee’s intention to preserve the Indemnification Claim

and advised Straight Path’s counsel that the Special Committee was exploring its

alternatives with respect thereto. Those alternatives included selling only the

Spectrum Assets or assigning the Indemnification Claim to a litigation trust, which,

in either case, would permit Straight Path to pursue the Indemnification Claim

against IDT post-closing. 18      As the sales process moved forward, the Special

15
      Id. ¶¶ 69–73.
16
      Clark Aff. to Straight Path Compl., Ex. C, at 39–40.
17
      Straight Path Compl. ¶71.
18
      Id. ¶ 72.

                                            -7-
Committee became increasingly concerned whether any potential bidders for

Straight Path would have an interest in pursuing the Indemnification Claim against

IDT post-closing or what value, if any, potential bidders might ascribe to the

Indemnification Claim in their bids to acquire Straight Path. 19 On March 13, 2017,

the Special Committee decided that it was in the best interests of Straight Path’s

stockholders to exclude the Indemnification Claim from any sale of Straight Path,

and informed potential bidders of that determination.20

       Around the same time, Davidi Jonas became aware of the Special

Committee’s interest in pursuing the Indemnification Claim and recognized that

pursuing the claim could be harmful to his family’s interests in IDT. 21 IDT had a

market capitalization of less than $350 million and any successful enforcement of

Straight Path’s indemnification rights under the Separation Agreement would likely

bankrupt IDT. 22     Presumably, Davidi Jones advised his father of the Special

Committee’s plans with respect to the Indemnification Claim and, on March 14th

and 15th, Jonas intervened in the Straight Path sales process.23

19
       Clark Aff. to Straight Path Compl., Ex. C, at 39–40.
20
       Straight Path Compl. ¶ 75.
21
        Id. ¶¶ 76-78. Davidi Jonas and his siblings own over 10% of IDT’s outstanding equity.
His father, Howard, owned 11.3% of IDT’s equity. Id.
22
       Id.
23
       Id. ¶ 79.

                                             -8-
      Jonas contacted each Special Committee member and threatened to blow up

the sales process if they continued to adhere to their plan to preserve the

Indemnification Claim against IDT post-closing.24 His threat was credible given

that Jonas was the controlling stockholder of Straight Path and his consent was

required to approve any sale.25         Jonas also threatened the Special Committee

members personally in an effort to persuade them to settle the Indemnification Claim

for a nominal amount. 26

      On March 15, 2017, an IDT representative advised Straight Path that Jonas

was interested in acquiring the IP Assets as part of any settlement of the

Indemnification Claim against IDT. 27 As discussions continued over the next few

days, Jonas made clear he would not support a sale of Straight Path as a whole, but

would consent to sell only the Spectrum Assets.28 In addition, Jonas’s counsel

advised the Special Committee’s counsel that Jonas would not support any

24
      Id. ¶ 83.
25
      Id. ¶ 80.
26
      Id.¶ 83.
27
      Id. ¶ 84.
28
      Clark Aff. to Straight Path Compl., Ex. C, at 42.

                                             -9-
transaction that would enable the Indemnification Claim to be pursued against IDT

post-closing. 29

       Realizing that it had no other options if it did not want to risk a proposed third-

party merger of Straight Path, the Special Committee acquiesced to Jonas’s

demands.30 On April 9, 2017, Straight Path and IDT executed a binding term sheet

under which Straight Path agreed to sell the IP Assets to IDT for $6 million and to

settle the Indemnification Claim against IDT for $10 million plus a right to receive

22% of the net proceeds from any sale of the IP Assets (the “2017 Term Sheet”).31

       Meanwhile, the bidding continued for the Spectrum Assets and as of April 7,

2017, Verizon had proposed to acquire Straight Path for $1.262 billion. This created

substantial liability for IDT under the Separation Agreement.32 Given the increasing

value of Straight Path’s Indemnification Claim, the Special Committee attempted to

extract additional settlement consideration from IDT. It didn’t work.33

29
       Id.; Straight Path Compl. ¶ 84.
30
       Straight Path Compl. ¶ 86.
31
       Id. ¶¶ 86–88.
32
       Clark Aff. to Straight Path Compl., Ex. C, at 45-46.
33
       Id. at 47.

                                             - 10 -
       After a bidding war between AT&T and Verizon, Verizon ultimately acquired

Straight Path for a total enterprise value of $3.1 billion.34 On February 28, 2018, the

Verizon merger closed and, in accord with the Consent Decree’s terms, the FCC

collected $614 million.

     C. THE STRAIGHT PATH SHAREHOLDER LITIGATION COMMENCES.

       The Straight Path shareholder litigation was initiated in our Court of Chancery

in July 2017—three months after the 2017 Term Sheet was executed.35 Two class

actions were filed and later consolidated into the Straight Path Action.36 A verified

complaint was filed on August 29, 2017 (the “Underlying Complaint”).37

       The Underlying Complaint was brought as a class action directly challenging

the Verizon merger and, in the alternative, derivatively on behalf of Straight Path.38

34
       Straight Path Compl. ¶ 98.
35
       Pls.’ Compl. ¶ 41.
36
       Pls.’ Compl. ¶ 43. This case was there captioned In Re Straight Path Communications Inc.
Stockholder Litigation, Case No. 2017-0486-SG.
37
       Pls.’ Compl. ¶ 44.
38
       Id.

                                            - 11 -
The named defendants in the Underlying Complaint were IDT, Howard Jonas,

Davidi Jonas, the Patrick Henry Trust, 39 and Straight Path as a nominal defendant.40

       The Straight Path Action has four counts:

       - Count I alleges that Howard Jonas, in his capacity as the controlling
          stockholder of Straight Path, breached his fiduciary duties to the company
          and its stockholders.41 Specifically, the Underlying Complaint asserts that
          Jonas used his position as a controlling stockholder to extract unique
          benefits from the sales process to the detriment of Straight Path’s minority
          stockholders.42 Those benefits included the acquisition of the IP Assets
          and settlement of the Indemnification Claim for well below fair value. 43

       - Count II alleges that Davidi Jonas breached his fiduciary duties to Straight
          Path and its stockholders by putting his personal interests and those of his
          family above those of the company and its stockholders.44

       - Count III alleges that IDT aided and abetted Davidi Jonas and his father in
          their respective breaches of fiduciary duty. 45

39
       Straight Path Compl. ¶ 21 (The Patrick Henry Trust was the trust established on July 31,
2013, and created to hold Howard Jonas’s Class A Common Stock and Class B Common Stock in
Straight Path.).
40
       Pls.’ Compl. ¶ 44.
41
       Straight Path Compl. ¶¶ 102, 113, 120–124.
42
       Id. ¶ 122.
43
       The IP Assets were, in connection with the Consent Decree, previously valued at
approximately $50 million. Id. ¶ 54, n.3.
44
       Id. ¶¶ 125–29.
45
       Id. ¶¶ 130–33.

                                            - 12 -
       - Count IV seeks a declaratory judgement and the imposition a constructive
           trust, but that request became moot upon the closing of the Verizon
           merger. 46

       In November 2017 letter opinion holding that the matter was not ripe for

decision, the Court of Chancery concluded that the Straight Path shareholders were

“in favor of the merger” with Verizon, and the claim against IDT “arise[s] from

[Straight Path] assets transferred [in 2017] to another entity controlled by [Howard

Jonas], which was a condition of his support for the merger” with Verizon. 47 In a

later opinion denying the defendants’ motion to dismiss the Straight Path Action,

the Court found that the plaintiffs’ claims were direct as opposed to derivative and,

accordingly, survived the closing of the Verizon merger. 48

       After the Straight Path Action was filed in July 2017, IDT and Jonas tendered

their claims seeking coverage under the insurance policies. 49 U.S. Specialty refused

to defend them or pay defense costs. 50 National Union similarly refused coverage

46
       Id. ¶¶ 134–39.
47
       See In re Straight Path Commc’ns Inc. Consol. Stockholder Litig., 2017 WL 5565264, at
*1 (Del. Ch. Nov. 20, 2017).
48
       See In re Straight Path Commc’ns Inc. Consol. Stockholder Litig., 2018 WL 3120804 (Del.
Ch. June 25, 2018).
49
       Pls.’ Compl. ¶ 48.
50
       Id. ¶ 49.

                                            - 13 -
for past and future loss, even if they exceeded the U.S. Specialty policy limits ($10

million for each of IDT and Jonas).51 XL Specialty reserved its right to deny

coverage for Jonas to the extent his loss is not indemnified or indemnifiable in

connection with the Straight Path Action. 52 Upon denial of coverage by those

Insurers, IDT and Jonas commenced this action.

       The issue before this Court is whether the actions taken by Jonas as set forth

in the Underlying Complaint in the Straight Path Action and the losses53 associated

therewith are covered by the terms of the subject insurance policies.

III.   LEGAL STANDARD

       This Court cannot grant any party’s motion for summary judgment under

Delaware Superior Court Civil Rule 56 unless no genuine issue of material fact

exists and that party is entitled to judgment as a matter of law. 54 Summary judgment

51
       Id. ¶ 50.
52
       Id. ¶ 51.
53
        U.S. Specialty’s policy defines “Loss” to include “Defense Costs” and any damages,
settlements, judgments (including pre- and post-judgment interest) or other amounts that: (1) an
Insured Person is legally obligated to pay as a result of any Claim, or (2) a Company is legally
obligated to pay as a result of any Securities Claim. U.S. Specialty Policy ¶¶ Definition (G);
Endorsement 5.
54
     Del. Super. Ct. Civ. R. 56; Motors Liquidation Co. DIP Lenders Trust v. Allianz Ins. Co.,
2017 WL 2495417, at *5 (Del. Super. Ct. June 19, 2017), aff’d sub. nom, Motors Liquidation Co.
DIP Lenders Trust v. Allstate Ins. Co., 2018 WL 3360976 (Del. July 10, 2018);

                                             - 14 -
will not be granted if there is a material fact in dispute 55 or if “it seems desirable to

inquire thoroughly into [the facts] to clarify the application of the law to the

circumstances.”56 The burden is on the moving party to demonstrate their claim is

supported by undisputed facts.57 If that burden is met, the non-moving party must

demonstrate that “there is a genuine issue for trial.” 58 And in determining whether

there is, the Court must view the facts in the light most favorable to the non-moving

party. 59

       The Court cannot grant a motion for summary judgment “[i]f . . . the record

reveals that material facts are in dispute, or if the factual record has not been

55
        A fact is material if it might affect the outcome of the suit under governing law. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“Only disputes over facts that might
affect the outcome of the suit under the governing law will properly preclude the entry of summary
judgment.”); see also In re Asb. Litigation, 2006 WL 3492370, at *3 (Del. Super. Ct. Nov. 28,
2006); Farmers Bank of Willards v. Becker, 2011 WL 3925428, at *3 (Del. Super. Ct. Aug. 11,
2011).
56
       Ebersole v. Lowengrub, 180 A.2d 467, 468-69 (Del. 1962).
57
       CNH Indus. Am. LLC v. Am. Cas. Co. of Reading, 2015 WL 3863225, at *1 (Del. Super.
Ct. June 8, 2015); Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
58
        Del. Super. Ct. Civ. R. 56(e). See CNH Indus. Am. LLC, 2015 WL 3863225, at *1 (“If the
motion is properly supported, then the burden shifts to the non-moving party to demonstrate that
there are material issues of fact for resolution by the ultimate fact-finder.”; see also Tanzer v. Int’l
Gen. Indus., Inc., 402 A.2d 382, 385 (Del. Ch. 1979) (“If the movant puts in the record facts which,
if undenied, entitle him to summary judgment, the burden shifts to the defending party to dispute
the facts by affidavit or proof of similar weight.”).
59
      Judah v. Del. Trust Co., 377 A.2d 624, 632 (Del. 1977) (“The facts must be viewed in the
manner most favorable to the nonmoving party . . . with all factual inferences taken against the
moving party and in favor of the nonmoving party.”).

                                                - 15 -
developed thoroughly enough to allow the Court to apply the law to the factual

record . . . .”60 But “a matter should be disposed of by summary judgment whenever

an issue of law is involved and a trial is unnecessary.” 61

       These well-established standards and rules equally apply when, as here, the

parties have filed cross-motions for summary judgment. 62 Where cross-motions for

summary judgment are filed and neither party argues the existence of a genuine issue

of material fact, “the Court shall deem the motions to be the equivalent of a

stipulation for decision on the merits based on the record submitted with the

motions.”63 But where cross-motions for summary judgment are filed and an issue

of material fact exists, summary judgment is not appropriate. 64 To determine

whether there is a genuine issue of material fact, the Court evaluates each motion

60
       CNH Indus. Am. LLC, 2015 WL 3863225, at *1.
61
        Jeffries v. Kent Cty. Vocational Tech. Sch. Dist. Bd. of Educ., 743 A.2d 675, 677 (Del.
Super. Ct. 1999); Brooke v. Elihu-Evans, 1996 WL 659491, at *2 (Del. 1996) (“If the Court finds
that no genuine issues of material fact exist, and the moving party has demonstrated his entitlement
to judgment as a matter of law, then summary judgment is appropriate.”).
62
        Verizon Commc’ns Inc. v. Illinois Nat’l Ins. Co., 2017 WL 1149118, at *5 (Del. Super. Ct.
Mar. 2, 2017); Capano v. Lockwood, 2013 WL 2724634, at *2 (Del. Super. Ct. May 31, 2013)
(citing Total Care Physicians, P.A. v. O'Hara, 798 A.2d 1043, 1050 (Del. Super. Ct. 2001)).
63
       Del. Super. Ct. Civ. R. 56(h).
64
        Motors Liquidation, 2017 WL 2495417, at *5; Comet Sys., Inc. S’holders’ Agent v. MIVA,
Inc., 980 A.2d 1024, 1029 (Del. Ch. 2008).

                                              - 16 -
independently. 65 And where it seems prudent to make a more thorough inquiry into

the facts, summary judgment is denied and the matter submitted for resolution by

trial.66

IV.        DISCUSSION

     A. CHOICE OF LAW.

           The insurance policies here contain no choice-of-law provisions. In the

absence of the parties’ express choice of law, Delaware courts employ the “most

significant relationship test” to determine which state’s law applies. Under that test

the law of the jurisdiction bearing the most significant relationship to the insurance

coverage as a whole is applied.67 IDT and Jonas urge that Delaware law should

apply to govern their insurers’ coverage obligations.68 The insurers argue that New

Jersey law should apply because the policy was issued to IDT in New Jersey, but

65
       Motors Liquidation, 2017 WL 2495417, at *5; Fasciana v. Elec. Data Sys. Corp., 829 A.2d
160, 167 (Del. Ch. 2003).
66
        Ebersole. 180 A.2d at 470-72; Pathmark Stores, Inc. v. 3821 Associates, L.P., 663 A.2d
1189, 1191 (Del. Ch. 1995) (“[S]ummary judgment may not be granted when the record indicates
a material fact is in dispute or if it seems desirable to inquire more thoroughly into the facts in
order to clarify the application of law to the circumstances.”).
67
        See generally Certain Underwriters at Lloyds, London v. Chemtura, 160 A.3d 457 (Del.
2017); Travelers Indem. Co. v. CNH Indus. Am. LLC, 2018 WL 3434562 (Del. July 16, 2018).
See, e.g., Liggett Gp., Inc. v. Affiliated FM Ins. Co., 788 A.2d 134, 145 (Del. Super. Ct. 2001)
(applying North Carolina law to over one-hundred policies because North Carolina had the most
significant relationship to the coverage as a whole).
68
       Pls.’ Br., at 15–16. See also Tr. for Oral Argument on Cross-Mots. For Summ. J. held on
Oct. 12, 2018 [hereinafter “O.A. Tr.”], at 6–7 (Pls.’ Argument).

                                              - 17 -
concede that “there is no apparent conflict” on the relevant coverage issues between

the laws of the two states. 69

       Delaware courts recognize that, where possible, a court should avoid a choice-

of-law analysis altogether if the result would be the same under the law of either of

the competing jurisdictions.70 Here, the Court divines no material or significant

differences between the laws of Delaware and New Jersey with respect to this

coverage dispute. 71

       If these parties’ concessions and the Court’s inability to detect a true conflict

weren’t enough, there is one more thing. Delaware courts have consistently held

that Delaware law should be applied to resolve disputes over insurance coverage of

directors’ and officers’ liability. When they must engage the multifaceted “most

69
        Defendant U.S. Specialty Ins. Co.’s Opening Br. in Supp. of Its Cross-Mot. for Summ. J.
[hereinafter “U.S. Specialty Opening Br.”] at 11, n.4. See also O.A. Tr., at 30 (U.S. Specialty’s
Argument) (“I don’t see [choice of law] as an issue. Plaintiffs have not identified any difference
in the law between Delaware and New Jersey in terms of how these cases are interpreted”);
Defendant National Union Fire Ins. Co. of Pittsburgh, PA’s Opening Br. in Supp. of its Mot. for
Summ. J. [hereinafter “National Union Br.”], at 13 (arguing that “New Jersey law should govern,”
but conceding that “[t]he relevant principles of policy interpretation that are at issue on this motion
are substantial the same in both New Jersey and Delaware.”).
70
         Deuley v. DynCorp Int'l, Inc., 8 A.3d 1156, 1161 (Del. 2010). See Laugelle v. Bell
Helicopter Textron, Inc., 2013 WL 5460164, at *2 (Del. Super. Ct. Oct. 1, 2013) (“[I]t must be
first determined that there is an actual—rather than no or merely a ‘false’—conflict. If there is no
actual conflict, ‘the Court should avoid the choice-of-law analysis altogether.’”); see also Lagrone
v. Am. Mortell Corp., 2008 WL 4152677, at *5 (Del. Super. Ct. Sept. 4, 2008) (“In such instances
of ‘false conflicts’ of laws, the Court may resolve the dispute without a choice between the laws
of the competing jurisdictions.”).
71
       And the insurers do not object to the application of Delaware law. See O.A. Tr., at 30 (U.S.
Specialty’s Argument) (“I don’t see [choice of law] as an issue.”).

                                                - 18 -
significant relationship” test, Delaware courts recognize that for directors’ and

officers’ liability, “the insured risk is the directors’ and officers’ ‘honesty and

fidelity’ to the corporation[.]” 72      So, “the state of incorporation has the most

significant relationship” because the policy is issued pursuant to Delaware law, 73

and “Delaware’s law ultimately determines whether a director or officer of a

Delaware corporation” breaches his or her fiduciary duties.74

       Here, IDT and Straight Path are both Delaware corporations.75 The insurance

policies covered directors’ and officers’ liabilities, and the Straight Path Action

asserts claims against Jonas and IDT for purported breaches of fiduciary duty owed

to Straight Path. The merits of those claims are (or have been) determined under

Delaware law. Thus, under any choice-of-law analysis, Delaware law bears the

“most significant relationship” to the issues of the insurers’ coverage liability here.

And, the Court, therefore, finds Delaware law is the appropriate governing authority.

72
       Mills Ltd. P’ship v. Liberty Mut. Ins. Co., 2010 WL 8250837, at *6 (Del. Super. Ct. Nov.
5, 2010).
73
        Id. (citing to DEL. CODE ANN. tit. 8, § 145, which provides for indemnification of, among
others, officers and directors).
74
       Id.
75
       Straight Path Compl. ¶ 28; Pls.’ Compl. ¶ 8.

                                             - 19 -
     B. PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT                                    AND
        U.S. SPECIALTY’S CROSS-MOTION FOR SUMMARY JUDGMENT ON                              THE
        COVERAGE OF DEFENSE COSTS IN THE STRAIGHT PATH ACTION.

       Jonas, IDT, and U.S. Specialty submit cross-motions for summary judgment

with respect to U.S. Specialty’s duty to defend Jonas and IDT in the Straight Path

Action.76 Because both sides make substantially the same arguments in their

respective papers, the Court addresses their respective motions together.

       1. APPLICABLE RULES OF CONTRACT INTERPRETATION
          FOR INSURANCE POLICIES.

       Insurance policies are contracts. 77 It is a well-established principle that

“[u]nder Delaware law, the interpretation of contractual language, including that of

insurance policies, is a question of law.” 78 The objective is to give effect to the

parties’ mutual intent at the time of contracting. 79 In construing the language of a

contract, the Court should interpret the language in the same manner as it “would be

76
       Pls.’ Br. ¶ 1; U.S. Specialty Opening Br. ¶ 2.
77
       Goggin v. National Union Fire Ins. Co. of Pittsburgh, 2018 WL 6266195, at *4 (Del.
Super. Ct. Nov. 30, 2018); Cont’l Ins. Co. v. Burr, 706 A.2d 499, 500–01 (Del. 1998) (“. . . an
insurance policy is a contract of adhesion …”); Hallowell v. State Farm Mut. Auto. Ins. Co., 443
A.2d 925, 926 (Del. 1982) (“. . . an insurance policy is an adhesion contract . . .”).
78
        O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 286 (Del. 2001). See also Eagle Force
Hldgs., LLC v. Campbell, 187 A.3d 1209, 1212 (Del. 2018) (“Whether [a] contract’s material terms
are sufficiently defined is mostly, if not entirely, a question of law.”); Exelon Generation
Acquisitions, LLC v. Deere & Co., 176 A.3d 1262, 1263 (Del. 2017) (“The proper construction of
any contract ... is purely a question of law[.]”).
79
       Exelon Generation Acquisitions, 176 A.3d at 1263.

                                              - 20 -
understood by an objective, reasonable third party.” 80 Absent ambiguity, all contract

terms—including those in insurance policies—should be accorded their plain,

ordinary meaning. 81 A contract term is not ambiguous merely because the parties

disagree on its meaning.82 Rather, ambiguity exists when the disputed term “is fairly

or reasonably susceptible to more than one meaning.”83

       Because an insurance policy is “an adhesion contract and is not generally the

result of arms-length negotiation,” the rules of construction “differ from those

applied to most other contracts.”84 Where there is ambiguity in the policy language,

the doctrine of contra proferentem requires that the insurance contract be construed

most strongly against the insurer and in favor of the insured because the insurer is

the drafter of the policy. 85 In construing an ambiguous policy term, the Court looks

to “the reasonable expectations of the insured at the time when he entered into the

contract[.]” 86 But this rule is applicable only where the policy language is indeed

80
       Salamone v. Gorman, 106 A.3d 354, 367–68 (Del. 2014).
81
      Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012); Goggin v. National
Union Fire Ins. Co. of Pittsburgh, 2018 WL 6266195, at *4.
82
       Id.
83
       Id.
84
       Hallowell, 443 A.2d at 926.
85
       Id. (citing Steigler v. Insurance Co. of North America, 384 A.2d 398, 400 (Del. 1978);
Novellino v. Life Ins. Co. of North America, 216 A.2d 420, 422 (Del. 1966)).
86
       Id. at 927.

                                           - 21 -
ambiguous.87 When an insurance contract’s language is “clear and unambiguous a

Delaware court will not destroy or twist the words under the guise of construing

them.” 88 And when that language “is clear and unequivocal, [each] party will be

bound by its plain meaning.”89

       Now, the Court must decide whether the Straight Path Action presents a claim

or claims covered under the U.S. Specialty, National Union, or XL Specialty

insurance policies.

       2. THE TERMS OF THE U.S. SPECIALTY POLICY.

       U.S. Specialty’s policy covers the period from June 6, 2016, to June 6, 2017,

which is when the alleged actions giving rise to the Straight Path Action occurred.

Insuring Agreement (B) of the U.S. Specialty’s policy states as follows:

               (B) The Insurer will pay to or on behalf of the Company
               Loss arising from:

               (1) Claims 90 first made during the Policy Period or the
               Discovery Period (if applicable) against the Insured
               Persons for Wrongful Acts, if the Company has paid

87
       Id. at 926.
88
       Id.
89
       Id.
90
       A “Claim” includes, among other things, “any written demand for monetary or non-
monetary,” and “any civil proceeding commenced by service of a complaint or similar pleading.”
See U.S. Specialty policy at Definitions (B)(2). U.S. Specialty does not dispute that the Straight
Path Action is a “Claim” made during the “Policy Period.”

                                              - 22 -
              such Loss to or on behalf of the Insured Persons as
              indemnification or advancement, and/or

              (2) Securities Claims first made during the Policy Period
              or the Discovery Period (if applicable) against the
              Company for Wrongful Acts.91

      Put more succinctly, U.S. Specialty is liable for the “Losses” (above the

applicable self-insured retentions) incurred by IDT for (1) “Claims” against an

“Insured Person” for “Wrongful Acts” and (2) “Securities Claims” against the

“Company” for “Wrongful Acts.” A look at each of the foregoing defined terms in

the U.S. Specialty policy is necessary to determine whether U.S. Specialty’s duty to

pay defense costs has been triggered by the Straight Path Action.

      3. U.S. SPECIALTY HAS THE DUTY TO DEFEND JONAS
          IN THE STRAIGHT PATH ACTION BECAUSE
          HIS ACTIONS CONSTITUTE “WRONGFUL ACTS.”

      The first question is whether Jonas is an “Insured Person” who has engaged

in “Wrongful Acts” through the conduct alleged in the Straight Path Action. The

U.S. Specialty policy defines an “Insured Person,” in relevant part, as “any past,

present or future director or officer of the Company.” 92 The “Company” is IDT.93

Under those definitions, Jonas is an “Insured Person” under the U.S. Specialty

91
      Pls.’ Compl. ¶ 17; Pls.’ Compl. Ex. A ¶ Insuring Agreement (emphasis in original).
92
      Id. ¶ Definition (F).
93
      Id. ¶¶ Definitions (C), (O), Endorsement No. 32, Endorsement No. 3.

                                           - 23 -
policy. He was the Chairman of IDT’s board of directors during the events that

spawned the Straight Path Action. 94

       As an Insured Person under the U.S. Specialty policy, Jonas must be covered

if the actions alleged in the Straight Path Action constitute “Wrongful Acts.” The

U.S. Specialty policy defines “Wrongful Act” to include any:

              (1) actual or alleged act, error, misstatement, misleading
              statement, neglect, omission or breach of duty: (a) by an
              Insured Person in his capacity as such, including . . . while
              acting as a Controlling Person, or (b) with respect only to
              Securities Claims, by the Company; or

              (2) matter claimed against an Insured Person solely by
              reason of his or her service in such capacity. 95

       Central to the current dispute is the first defined type of “Wrongful Act.” The

Court finds the terms of the U.S. Specialty policy unambiguous. Its plain language

is not “susceptible to more than one meaning.”96 So, to construe the meaning of

“Wrongful Act,” the Court gives the policy’s words their plain, ordinary meaning.97

94
       Pls.’ Compl. ¶ 25; U.S. Specialty Answer ¶ 25; In re Straight Path Commc’ns Inc. Consol.
Stockholder Litig., 2018 WL 3120804., at *2.
95
       U.S. Specialty Policy ¶¶ Definition (P)(1), Endorsement No. 6 (emphasis added).
96
       Goggin, 2018 WL 6266195, at *4; Alta Berkeley VI C.V., 41 A.3d at 385.
97
       Goggin, 2018 WL 6266195, at *4; Alta Berkeley VI C.V., 41 A.3d at 385.

                                            - 24 -
       a. The “Covered” Conduct is Not Limited to Breach of Duty.

       The definition of “Wrongful Act” provides a laundry list of conduct that might

constitute a Wrongful Act.            Despite many wide-ranging examples explicitly

expressed therein, U.S. Specialty offers a narrow reading of this definition. U.S.

Specialty seeks to essentially limit “Wrongful Acts” to conduct that constitutes

“breach of duty.” 98

       But “Wrongful Acts” are not limited only to conduct that constitutes a “breach

of duty.”      Rather, Wrongful Acts encompass a broad array of specifically

enumerated conduct. The types of conduct preceding in the list connects to “breach

of duty” via a disjunctive “or.” 99 And so, each term in the string must be afforded a

separate and independent meaning.100               “Breach of duty” does not absorb, or

incorporate, or otherwise make the other exemplified conduct duplicative or

meaningless. To the contrary, each term represents a separate, independent act that,

if other requirements are satisfied, is capable of triggering coverage obligations

under the U.S. Specialty policy. Therefore, in construing the language of the U.S.

98
       U.S. Specialty Opening Br., at 15 (averring that the central questions are “(1) what duty
was allegedly breached and (2) to whom that duty was owed.”).
99
       U.S. Specialty Policy ¶¶ Definition (P)(1), Endorsement No. 6.
100
       Loughrin v. United States, 573 U.S. 351, 357 (2014) (citing United States v. Woods, 571
U.S. 31, 45 (2013) (“[The] ordinary use [of ‘or’] is almost always disjunctive, that is, the words it
connects are to ‘be given separate meanings’.”)).

                                               - 25 -
Specialty Policy, the Court finds that a “Wrongful Act” is not limited to a “breach

of duty.” Any conduct that is an “act,” or an “error,” or a “misstatement,” or a

“misleading statement,” or “neglect,” or an “omission” could be a “Wrongful Act.”

       b. Jonas Acted in His Insured Capacity that Gave Rise
          to the Straight Path Action.

       To be a “Wrongful Act” under the U.S. Specialty policy, the conduct must be

taken “by an Insured Person in [his] capacity as such[.]”101 Because Jonas’ “Insured

Person” status is based on his position as IDT’s Chairman, his insured capacity must

necessarily derive from acts taken in his capacity as IDT’s Chairman. On this the

parties agree.102 The parties dispute, however, whether the conduct must be taken

in, and solely in, Jonas’s capacity as IDT’s Chairman, and not in his capacity as

Straight Path’s controlling stockholder.

       U.S. Specialty takes the position that the Court should only look at “the

capacity characterized by the Underlying Complaint.”103 That is, U.S. Specialty

relies exclusively on how the Underlying Complaint characterizes Jonas’s alleged

101
       U.S. Specialty Policy ¶¶ Definition (P)(1), Endorsement No. 6 (emphasis added).
102
        Pls.’ Br., at 23 (“To this respect, he is alleged to have been acting solely in his capacity as
IDT’s Chairman . . .”); U.S. Specialty Opening Br., at 17 (“[T]he Underlying Complaint does not
assert any Claim against Jonas for actions he took in his insured capacity as chairman or controlling
stockholder of IDT.”).
103
       U.S. Specialty Opening Br., at 15–16 (citing to numerous allegations against Jonas
characterized in the Straight Path Compl.) (emphasis added); U.S. Specialty Opp’n, at 12–13 (the
same).

                                                - 26 -
misconduct.104 According to U.S. Specialty, because the claim against Jonas is

characterized as a “breach of his fiduciary duties” to Straight Path as Straight Path’s

controlling stockholder,105 and not to IDT, those acts could not have been committed

in Jonas’s insured capacity as IDT’s Chairman. 106 In truth, this is just a slight

variation on the prior argument that the only “Wrongful Acts” covered by the

insurance policies are for breach of fiduciary duty. Such a reading of the U.S.

Specialty policy is inconsistent with Delaware law interpreting such insurance

policies.

       In determining whether the duty to defend and advance defense costs is

triggered, the Court must examine whether “the underlying complaint alleges facts

that fall within the scope of coverage.”107 Although the Court looks to the allegations

of the underlying complaint, the Court is not “limited to the plaintiff’s unilateral

characterization of the nature of [its] claims.” 108 Rather, the Court reviews “the

complaint as a whole” and considers “all reasonable inferences that may be drawn

104
       U.S. Specialty Opening Br., at 15–16; U.S. Specialty Opp’n, at 12–13.
105
      U.S. Specialty Opening Br., at 15–16; U.S. Specialty Opp’n, at 13 (referencing to Straight
Path Compl. ¶ 122).
106
       U.S. Specialty Opening Br., at 16–17.
107
      Verizon Commc’ns, 2017 WL 1149118, at *6 (finding that the same law applies in
Delaware and New York regarding the duty to defend and to advance defense expenses).
108
       Id. at *7.

                                               - 27 -
from the alleged facts.” 109 The key is “whether the allegations of the complaint,

when read as a whole, assert ‘a risk within the coverage of the policy.’” 110

       The Court here looks beyond the characterization of the acts alleged by the

Straight Path plaintiffs and examines those acts to determine if they were taken by

Jonas in his insured capacity as IDT’s Chairman.

       The Underlying Complaint provides a detailed account of Jonas’s alleged

wrongdoing. It alleges Jonas served as IDT’s Chairman and CEO during the 2011–

2012 period when IDT’s fraudulent conduct occurred that resulted in the Consent

Decree. 111 The Underlying Complaint describes and explains that the financial

hardship imposed by the Consent Decree112—coupled with IDT’s indemnification

obligation to Straight Path for pre-Spin-Off liabilities incurred under the Separation

Agreement 113—prompted Jonas to interfere with Straight Path’s sale process.114 The

Underlying Complaint alleges that Jonas leveraged his voting control in Straight

109
       Blue Hen Mech., Inc. v. Atl. States Ins. Co., 2011 WL 1598575, at *2 (Del. Super. Ct. Apr.
21, 2011), aff’d, 29 A.3d 245 (Del. 2011).
110
       Verizon Commc’ns, 2017 WL 1149118, at *7 (citing Cont'l Cas. Co. v. Alexis I. duPont
Sch. Dist., 317 A.2d 101, 103 (Del. 1974)).
111
       Straight Path Compl. ¶ 18.
112
       Id. ¶¶ 52–55.
113
       Id. ¶ 36.
114
       Id. ¶ 81.

                                             - 28 -
Path in exchange for Straight Path relinquishing the right to pursue its

Indemnification Claim against IDT post-closing, and selling its IP Assets to IDT.115

The Underlying Complaint further avers that Jonas got his way. The 2017 Term

Sheet entered into between IDT and Straight Path provided Straight Path

stockholders with only nominal consideration for the IP Assets and the

Indemnification Claim. 116

       Read as a whole, the Straight Path Action, paints a picture of Jonas

singlehandedly furthering his own and IDT’s interests at the expense of Straight Path

and its stockholders. In examining the nature of the claims and alleged acts, the

Court finds that the Underlying Complaint has sufficiently asserted “a risk within

the coverage” of the U.S. Specialty policy. That is, Jonas took the alleged wrongful

actions he did for the benefit of IDT and himself in his capacity as the Chairman of

IDT. The fact that Jonas may at the same time also be a controlling stockholder of

Straight Path and breaching his concomitant fiduciary duties there does not mean

that his actions weren’t taken in his capacity as an IDT officer. 117 Had U.S. Specialty

115
       Id. ¶¶ 80–85, 93–94.
116
       Id. ¶¶ 88–91, 99.
117
       See Continental Copper & Steel Industries, Inc. v. Johnson, 491 F. Supp. 360 (S.D.N.Y.
1980) (finding that coverage existed for actions taken in a dual capacity under similar policy
language and similar facts).

                                            - 29 -
intended the coverage to be so limited, it should have, and could have, drafted the

policy accordingly.

       4. U.S. SPECIALTY HAS NO DUTY TO DEFEND IDT
           BECAUSE THE STRAIGHT PATH ACTION                      IS   NOT   A
           “SECURITIES CLAIM.”

       Does U.S. Specialty have a separate duty to defend IDT in the Straight Path

Action? With respect to the claims against IDT, U.S. Specialty has the obligation to

provide coverage for “Securities Claims [] against the Company for Wrongful

Acts.”118 There is no dispute that IDT, being the Named Corporation, is within the

meaning of “Company.” 119 But is the Straight Path Action a “Securities Claim?”120

       Under the U.S. Specialty policy, Securities Claim means a Claim which:

               (1) is brought by or on behalf of one or more securities
                   holders of the Company in their capacity as such, or

               (2) arises from the purchase or sale of, or offer to purchase
                   or sell, any securities issued by the Company, whether
                   such purchase, sale or offer involves a transaction with
                   the Company or occurs in the open market.121

118
       U.S. Specialty Policy ¶ Insuring Agreement (B)(2).
119
       Id. ¶¶ Declarations, Item 1; Definition (H); Endorsement 32; see also Pls.’ Br., at 24; U.S.
Specialty Opening Br., at 20.
120
        U.S. Specialty Policy ¶¶ Definition (P); Endorsement 6 (“Wrongful Act” is an “actual or
alleged act, error, misstatement, misleading statement, neglect, omission or breach of duty . . . (b)
with respect only to Securities Claims, by the Company[.]”).
121
       Pls.’ Compl. Ex. A ¶ Definition (N).

                                               - 30 -
       IDT argues that the Straight Path Action is a Securities Claim under both

definitions.122    U.S. Specialty contends that the Straight Path Action satisfies

neither.123

       a. The Straight Path Action is Not a Securities Claim
          Because It Was Brought by Straight Path’s Securities
          Holders, not IDT.

       To fall under the first part of the definition of a “Securities Claim,” a claim

must be brought by “securities holders of the Company.” 124 The U.S. Specialty

policy defines “Company” to include “the Named Corporation,” here IDT, and any

“Subsidiary” thereof. The U.S. Specialty policy defines a “Subsidiary,” in relevant

part, as:

                      . . . any entity, including any limited liability
                      company[]:

                      (1)     during any time on or before the inception of
                              the Policy Period in which the Named
                              Corporation owns or owned more than 50%
                              of the issued and outstanding securities
                              representing the right to vote for the election
                              of such entity’s directors or managers (or the
                              legal equivalent thereof), either directly or
                              indirectly through one or more other
                              Subsidiaries; . . .

122
       Pls.’ Br., at 23–24.
123
       U.S. Specialty Opening Br., at 19–20.
124
       U.S. Specialty Policy ¶ Definition (N)(1).

                                               - 31 -
                               An entity ceases to be a Subsidiary when the
                               Named Corporation ceases to own more
                               than 50% of its issued and outstanding
                               securities representing the right to vote for the
                               election of such entity’s directors or managers
                               (or the legal equivalent thereof), either
                               directly or indirectly through one or more
                               other Subsidiaries. The coverage afforded
                               under this Policy with respect to Claims
                               against a Subsidiary or any Insured Person
                               thereof will apply only in respect of
                               Wrongful Acts committed or allegedly
                               committed after the effective time that such
                               entity becomes a Subsidiary and prior to the
                               time that such entity ceases to be a
                               Subsidiary.”125

       Because the Straight Path Action is brought by securities holders of Straight

Path, the Straight Path Action can only be a Securities Claim under the first

provision if Straight Path is a Subsidiary of IDT during the relevant time period.126

       IDT doesn’t deny that it ceased to hold “more than 50% of the voting rights”

of Straight Path after the 2013 Spin-Off.127 Nevertheless, it argues, Straight Path

continues to qualify as IDT’s Subsidiary under the policy because “Straight Path’s

role as a Subsidiary” pre-Spin-Off is “central to the Straight Path Action.”128 Put

125
       Id. ¶¶ Definitions (O), Endorsement No. 3.
126
        See also Pls.’ Br., at 24 (conceding that “the Straight Path Action is a ‘Securities Claim’ as
long as Straight Path is a ‘Company’ under the Policy[.]”).
127
       Pls.’ Br., at 24–25.
128
       Id. (emphasis added).

                                               - 32 -
another way, IDT proposes that a former subsidiary of IDT is within the meaning of

“Subsidiary” under the U.S. Specialty policy so long as the former subsidiary’s role

is purportedly pivotal to the Underlying Complaint. This Court can’t buy into IDT’s

attempted rewrite of the policy’s terms.

      In construing the term “Subsidiary,” the Court finds that the policy language

is clear and unambiguous and must, therefore, afford those terms their plain and

ordinary meaning.129 The policy language provides that an entity qualifies as a

Subsidiary under the policy if IDT owns more than 50% of its voting rights. That

entity ceases to be a Subsidiary when IDT no longer owns more than 50% of its

voting rights. 130 The definition of “Subsidiary” specifies that the benchmark is

“more than”131—not “equal to,” not “no less than,”—50% of the entity’s voting

rights. And the definition’s calculation for voting control accounts for direct and

indirect control “through one or more other Subsidiaries”132; it thereby makes clear

that for indirect control to be taken into account, the intermediary must also qualify

as a Subsidiary. 133 The “Subsidiary” definition in no way includes, either expressly

129
      Goggin, 2018 WL 6266195, at *4; Alta Berkeley VI C.V., 41 A.3d at 385.
130
      U.S. Specialty Policy ¶¶ Definition (O); Endorsement 3.
131
      Id. ¶¶ Definition (O); Endorsement 3.
132
      Id.
133
      Id.

                                              - 33 -
or impliedly, language that allows a former subsidiary to continue to constitute a

Subsidiary under any other circumstances.

      Reading the plain language of the policy, the Court rejects IDT’s proposed

rewriting of its terms and finds that as of the effective date of the 2013 Spin-Off,

Straight Path ceased to be a Subsidiary of IDT. The Wrongful Acts alleged in the

Straight Path Action took place in 2017—four years after Straight Path ceased to be

a subsidiary of IDT—when IDT is alleged to have aided and abetted Straight Path’s

release of its Indemnification Claim. Therefore, Straight Path does not fall within

the definition of “Company.” Accordingly, the Straight Path Action does not

constitute a “Securities Claim” under the first part of the definition because the

Straight Path Action was not brought by IDT’s securities holders.

      b. The Straight Path Action is Not a Securities Claim
         Because a Spin-Off is Not a “Sale of Securities.”

      The second prong of the “Securities Claim” definition requires that the claim

against IDT in the Straight Path Action “arises[] from the purchase or sale of . . .

any securities issued by the Company . . .” 134 This unambiguous language must be

afforded its ordinary meaning.135

134
      Id. ¶ Definition (N)(2).
135
      Goggin, 2018 WL 6266195, at *4; Alta Berkeley VI C.V., 41 A.3d at 385.

                                          - 34 -
      Given that the Court has determined that Straight Path is not a Subsidiary

under the U.S. Specialty policy and is, therefore, outside of the meaning of

“Company,” this second provision of the “Securities Claim” definition can only be

satisfied if the claim against IDT in the Straight Path Action “arises from the

purchase or sale of securities issued by IDT.” IDT says it does.

      According to IDT, the Straight Path Action arises from Straight Path’s sale

of its IP Assets and settlement of its Indemnification Claim against IDT due to

Jonas’s coercion.136 Jonas was in a position to exert such pressure because of his

dual control of both Straight Path and IDT after the Spin-Off.137 The terms of the

Spin-Off provided that each IDT shareholder received one share of Straight Path

stock for every two shares of IDT stock owned. 138 IDT claims that because the Spin-

Off involved IDT shares, it “may be deemed a purchase and sale of securities for

purposes of triggering insurance coverage under the U.S. Specialty Policy.” 139

      IDT’s posits that the Spin-Off is a “sale of securities.”140 Yet federal and

various state courts have consistently held that a spin-off is not a “purchase or sale

136
      Pls.’ Br., at 28.
137
      Id.
138
      Id.
139
      Id.
140
      Id.

                                        - 35 -
of securities” within the meaning of the Securities Act of 1933 because it does not

affect a fundamental change in the stockholders’ holdings.141 Moreover, the word

“spin-off” is merely a short-hand term used in corporate transactional parlance for a

certain type of dividend. That is, one in which a parent corporation distributes all of

the shares of one of its wholly-owned subsidiary corporations to its existing

stockholders.142 Under 8 Del. C. §173, [d]ividends may be paid in cash, in property,

or in shares of the corporation’s capital stock.” Accordingly, in Delaware statutory

terms, a “spin-off” is a dividend paid in the property of the parent corporation, not a

sale of its securities.143

       Accordingly, IDT’s argument that the Spin-Off here was a “sale of securities”

fails. The Court finds that the Straight Path Action does not implicate a “Securities

141
       Rathborne v. Rathborne, 683 F.2d 914, 918 (5th Cir. 1982); Isquith v. Caremark
International Inc. et al., 1997 WL 162881, at *6 (N.D. Ill Mar. 26, 1997), aff’d, 136 F.3d 531 (7th
Cir. 1998), cert. denied, 525 U.S. 920 (Oct. 5, 1998); Fed. Ins. Co. v. Campbell Soup Co., 2004
WL 1631405, at *9 (N.J. Super. Ct. Law Div., July 2, 2004). See also SEC Staff Legal Bulletin
No. 4 Staff Legal Bulletin No. 4 (Cf), Release No. SLB-4 (CF) (Sept. 16, 1997); ISSUE NO. 239,
Corp. Governance Guide 35990017.
142
       See, generally, Anadarko Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171, 1172
(Del. 1988); In re MCA, Inc., 598 A.2d 687,690 (Del. Ch.1991) (referring to a spin-off as a stock
dividend).
143
        IDT and Jonas suggest that this Court’s decision in Verizon Communications Inc. v. Illinois
National Insurance supports their broad view that any spin-off constitutes a purchase or sale of
securities. But the facts surrounding Verizon’s 2006 spin-off of its print and electronic directories
business, and the specific policy language at issue there, are far different than the facts and policy
language here.

                                               - 36 -
Claim” under any natural reading of the definition. And so, U.S. Specialty is not

obligated to provide for IDT’s defense in the Straight Path Action.

      C. NATIONAL UNION’S MOTION FOR SUMMARY JUDGMENT.

        National Union issued a first layer policy for an aggregate liability of $10

million in excess of the primary U.S. Specialty policy issued to IDT. 144 In its

summary judgment motion, National Union incorporates U.S. Specialty’s arguments

with respect to the coverage obligations for Jonas, asserting that because the Straight

Path Action is not a claim against Jonas for Wrongful Acts, National Union’s

obligation to provide any excess coverage is not triggered.145 In addition to U.S.

Specialty’s arguments, National Union also says that it is not obligated to provide

coverage for IDT’s defense costs for the Straight Path Action.146 For the reasons

now explained, the Court GRANTS National Union’s motion with respect to its

coverage obligations for IDT, and DENIES its motion with respect to its duty to

defend Jonas.

        The Court has concluded that the Straight Path Action constitutes a

“Wrongful Act” taken by Jonas in his insured capacity as IDT’s Chairman.147

144
        National Union Br., at 5; Ex. B (National Union Excess Policy) ¶ Declarations.
145
        National Union Br., at 1.
146
        National Union Br., at 1–2.
147
        See supra, Section IV.B.1.

                                             - 37 -
Accordingly, the Court finds that National Union has the obligation to provide

coverage for Jonas in connection with the Straight Path Action under the terms and

conditions of the National Union’s excess policy. But does the Straight Path Action

trigger National Union’s coverage obligation for IDT?

       Under the National Union excess policy language, it (1) “attaches only after”

the total limits of the $10 million primary policy issued by U.S. Specialty have been

fully exhausted;148 (2) follows the terms, conditions, and limitations contained in the

primary U.S. Specialty Policy; but (3) may be subject to certain terms of its own.149

       With respect to this motion, no terms of the National Union excess policy alter

or otherwise amend the relevant terms and conditions of the U.S. Specialty policy it

lay under. In turn, National Union’s arguments (and their resolution) follow U.S.

Specialty’s: the Straight Path Action is not a “Securities Claim” under either of the

definitions.150

       But with respect to the second provision requiring that a Securities Claim

arises from the sale of securities, National Union makes an additional argument.151

148
       National Union Excess Policy ¶ Insuring Agreement. Above the Court has found that U.S.
Specialty has the duty to defend Jonas, but not IDT. Therefore, the National Union policy limit
available to IDT is the amount of $10 million, but that is only for coverage obligations for
Jonas. See Supra, Section IV.B.
149
       Id.
150
       National Union Br., at 12–23.
151
       Id., at 4, 20–24 (citing authorities of both New Jersey and Delaware).

                                             - 38 -
National Union says the term “arising out of,” requires a “meaningful nexus”

between the Spin-Off and the claims against IDT brought in the Straight Path

Action.152 And, National Union says no such linkage exists between the Spin-Off

and the allegations against IDT set forth in the Straight Path Action. 153

        The Court need not consider National Union’s additional argument on the

meaning of “arising out of.” Having concluded that the primary insurer, U.S.

Specialty, has no duty to defend IDT in the Straight Path Action, National Union’s

obligation to provide excess coverage for IDT is not triggered. Thus, the Court

GRANTS National Union’s Motion for Summary Judgment with respect to its

coverage obligation for IDT.        The Court, in accordance with its preceding

discussions herein, DENIES National Union’s Motion for Summary Judgment to

the extent National Union seeks to be excused from coverage obligation to Jonas in

the Straight Path Action.

      D. XL SPECIALTY’S MOTION FOR SUMMARY JUDGMENT.

        XL Specialty contends it has no coverage obligations to IDT in the Straight

Path Action under the Side A policy it issued to IDT.154 The Side A Policy provides

152
        Id., at 21–23.
153
        Id., at 23–24.
154
       XL Specialty Ins. Co’s Opening Br. in Support of its Mot. for Summ. J. and Joinder
[hereinafter “XL Specialty Br.”], at 1.

                                         - 39 -
coverage for Jonas’s losses in excess of the indemnification provided by IDT, up to

the policy limit. 155

       XL Specialty’s attack is two-fold. First, it incorporates U.S. Specialty’s

arguments that the Straight Path Action is not a claim for “Wrongful Acts” because

it is not brought against Jonas in his insured capacity. 156 Second, XL Specialty

claims that a declaratory judgment on the scope of coverage is premature for

adjudication because no “actual controversy” currently exists. 157

       Having already concluded that Jonas’s actions complained-of in the Straight

Path Action do constitute “Wrongful Acts” undertaken by Jonas in his capability as

IDT’s Chairman, 158 the Court moves directly to XL Specialty’s second argument.

       XL Specialty issued the Side A Policy for Management Liability to IDT for

the period of June 6, 2016, to June 6, 2017. 159 The Insuring Agreement states:

           The Insurer will pay on behalf of the Insured Persons Loss
           resulting from a Claim first made against the Insured Persons
           during the Policy Period . . . for a Wrongful Act, except to the
           extent that such Loss is paid by any other Insurance Program
155
       Pls.’ Compl. ¶ 5; Pls.’ Compl. Ex. C [hereinafter “XL Specialty Policy”].
156
        Id. ¶¶ 1–2, 4–7. The definition of a “Wrongful Act” in the XL Specialty Policy is
substantively identical to that in the U.S. Specialty Policy with some inconsequential differences
in the wording. Thus, the Court already decided the merits of XL Specialty’s first argument above
when it resolved the same against U.S. Specialty. See supra, Section IV.B.1.
157
       XL Specialty Br. ¶¶ 2, 7–10.
158
       Supra, Section IV.B.1.
159
       Pls.’ Compl. ¶ 31; XL Specialty Policy.

                                              - 40 -
           or as indemnification or advancement from any source. In the
           event that Loss is not paid by such other insurance or as
           indemnification or advancement, this Policy will respond on
           behalf of the Insured Persons as if it were primary . . . 160

       “Insured Persons” include “any past, present, or future director or

officer[.]” 161 There is no dispute that Jonas qualifies as an “Insured Person” under

the Side A Policy, 162 or that there has not yet been a judgment or claim for

payment. 163 The contention is whether a declaratory judgment is appropriate absent

a judgment against the insured. Here, the Court finds it is.

       The principle impetus of a declaratory judgment is “to promote preventive

justice [] where an injury has not yet occurred.”164                The decision to issue a

declaratory judgment is within the Court’s discretion.165 And the discretion to

160
       XL Specialty Policy ¶ Insuring Agreement.
161
       Id. ¶¶ Definitions (I); Endorsement No. 7.
162
        XL Specialty Br., at 3; Pls.’ Opp’n to Defendant XL Specialty Ins. Co.’s Mot. for Summ.
J. and Joinder [hereinafter “Pls.’ Opp’n to XL Specialty”], at 4.
163
       XL Specialty Br., at 2, 7–10; Pls.’ Opp’n to XL Specialty, at 2–3, 14–19.
164
        Lamourine v. Mazda Motor of Am., Inc., 2006 WL 2767021, at *3 (Del. Super. Ct. Aug.
28, 2006). See also Bank of Delaware v. Allstate Ins. Co., 448 A.2d 231, 234 (Del. Super. Ct.
1982) (citing Clemente v. Greyhound Corporation, 155 A.2d 316, 320 (Del. Super. Ct. 1959)
(“[T]he principal reason for the invention of the declaratory judgment procedure was to enable the
law of a case to be determined before mere differences ripen into actual injuries.”)).
165
       XI Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1216 (Del. 2014) (citing
Gannett Co., Inc. v. Bd. of Managers of the Delaware Criminal Justice Info. Sys., 840 A.2d 1232,
1237 (Del. 2003) (“This Court reviews for abuse of discretion the Superior Court’s decision to
exercise declaratory judgment jurisdiction over a case.”)).

                                              - 41 -
assume, or not to assume the jurisdiction lies fully with the Court—“the only

limitation being that the Court cannot abuse its discretion.”166 The Court may

“liberally exercise” its discretion to entertain a declaratory judgment “so that the

remedial purpose [] may be well served.”167 But the Court may not exercise that

discretion “unless the action presents an actual controversy.” 168

        “The prerequisites of a controversy” require that “the issue involved . . . be

ripe for judicial determination.”169 When determining if a declaratory judgment

claim satisfies the ripeness requirement, the Court “must weigh the reasons ‘for not

rendering a hypothetical opinion . . . against the benefits to be derived from the

rendering of a declaratory judgment.’” 170 That determination is largely “a matter of

practical common sense.” 171

166
       See Clemente, 155 A.2d at 321; Burris v. Cross, 583 A.2d 1364, 1372 (Del. Super. Ct.
1990); Mr. Kleen, LLC v. New Castle Cty. Dep't of Special Servs., 2014 WL 4243562, at *7 (Del.
Super. Ct. Aug. 19, 2014).
167
       Schick Inc. v. Amalgamated Clothing and Textile Workers Union, 533 A.2d 1235, 1238
(Del. Ch. 1987).
168
        XI Specialty Ins., 93 A.3d at 1216 (internal quotation omitted); see also Stroud v. Milliken
Enter., Inc., 552 A.2d 476, 479 (Del. 1989).
169
       Lamourine, 2006 WL 2767021, at *3 (citing Schick, 533 A.2d 1235, 1238 (Del. Ch. 1987)
(quoting Rollins Int'l, Inc. v. Int'l Hydronics Corp., 303 A.2d 660 (Del. 1973))).
170
       Id. (citing Stroud, 552 A.2d at 480).
171
       Hoechst Celanese Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 623 A.2d 1133,
1137 (Del. Super. Ct. 1992) (citing Schick, 533 A.2d at 1239).

                                               - 42 -
       And that application of practical common sense requires a balancing of: “(1)

a practical evaluation of the legitimate interests of the plaintiff in a prompt resolution

of the question presented; (2) the hardship that further delay may threaten; (3) the

prospect of future factual development that might affect the determination made; (4)

the need to conserve scarce resources; and (5) a due respect for identifiable policies

of law touching upon the subject matter in dispute.”172

       Applying this balancing to entreaties for declaratory judgment, Delaware

courts have concluded that the exercise of discretion may be proper in settling a

question of an insurer’s liability173 or determining an insurer’s duty to defend. 174 But

a duty-to-indemnify claim is unripe for declaration.175 For the reasons below, the

Court here finds that assuming jurisdiction for this declaratory judgment is

appropriate.

172
        See Mine Safety Appliances Co. v. AIU Ins. Co., 2014 WL 605753, at *3 (Del. Super. Ct.
Jan. 21, 2014); Monsanto Co. v. Aetna Cas. & Sur. Co., 565 A.2d 268, 274 (Del. Super. Ct. 1989);
Schick, 533 A.2d at 1239.
173
       Harleysville Mut. Cas. Ins. Co. v. Carroll, 123 A.2d 128, 131 (Del. Super. Ct. 1956)
(holding that under Delaware’s Declaratory Judgments Act, “[t]he question of liability under
insurance contracts has proved to be particularly susceptible to declaratory adjudication . . . even
though judgment has not been obtained against the party who asserts coverage.”).
174
         Bank of Delaware, 448 A.2d at 235–36 (granting declaratory judgment on provisions of
complaint regarding insurer’s duty to defend, and denying claims as to determination of financial
liability upon judgment that involve the application and effect of a federal law on the agreements
to indemnify).
175
       Id. (refusing to exercise discretion on declaratory judgment on issues relating to
determination of financial liability under a federal environmental law).

                                              - 43 -
       With respect to the first factor requiring a practical evaluation of the plaintiff’s

legitimate interest, IDT is the insured under the Side A Policy, and entitled to defense

costs and/or indemnification for insured claims.            As of now, IDT has been

indemnifying Jonas in his defense in the Straight Path Action. Given that the Court

has concluded the Straight Path Action constitutes a “Wrongful Act,” IDT has a

legitimate interest in now recovering the defense costs for Jonas associated with the

Straight Path Action.

       As to the second factor, a delay of this decision could cause unnecessary

hardship, if not immediately, then upon the moment the U.S. Specialty policy limit

is met. If XL Specialty’s motion were granted on ripeness ground, it would now be

dismissed from this action. If further facts develop (for example, U.S. Specialty

exhausts its policy limit) and the Side A Policy is then triggered, IDT (and/or Jonas)

would have no choice but to reinitiate separate litigation against XL Specialty. The

burden on a party to re-litigate issues is a well-recognized “obvious prejudice.”176

       Of course, the prospect of these duplicative efforts—the same parties, relying

on identical facts, contesting the same issues with undifferentiated arguments—are

contrary to the notion of judicial economy and the need to conserve the Court’s

176
       Mine Safety Appliances, 2014 WL 605753, at *5 (citing Hoechst Celanese Corp., 623 A.2d
at 1140).

                                           - 44 -
scarce resources. 177 Granting declaratory relief now, however, promotes judicial

economy and the efficient resolution of the issues in this action. By issuing this

declaratory judgment, the Court is not imposing or creating immediate financial

liability on XL Specialty. 178 Rather, a declaration by the Court simply affirms that

the Straight Path Action triggers XL Specialty’s coverage obligation under the Side

A Policy. XL Specialty’s duty to pay IDT is still subject to the Side A Policy’s terms

and conditions, i.e., upon the exhaustion of the U.S. Specialty policy limits. So

providing declaratory relief now does not unduly prejudice XL Specialty. Instead,

it clarifies the parties’ respective obligations and the triggering events for those

obligations.

       The other remaining factors—those that regarding possible future

development of facts and due respect for relevant policies of law—also lean towards

granting declaratory relief. Here, all the parties involved in the case have filed

motions (or cross-motions) for summary judgment relying on the contested

insurance policies’ language and the factual allegations in the Underlying

Complaint. Where all parties have filed for summary judgment, there appears no

177
       Id.
178
      Bank of Delaware, 448 A.2d at 235–36 (refusing to exercise discretion on declaratory
judgment on issues relating to determination of financial liability under a federal environmental
law).

                                             - 45 -
material factual dispute.179 Each party here acknowledges that, without further

discovery, the issues could be resolved at the summary judgment stage. Potential

future development of “facts,” if any, seems highly unlikely to pose a material or

determinative change of the Court’s resolutions of the legal issues herein.180

       Granting declaratory relief here is consistent with respecting the “policies of

the law touching upon the subject matter of the dispute.” 181 The most pertinent

policies of law in this motion concern the interpretation of insurance contracts. A

declaratory judgment complies with the fundamental principles of, among others,

according the contract terms their plain and ordinary meaning as the Court has found

them. 182

       XL Specialty is wrong here, its coverage issue is ripe for adjudication.

Accordingly, XL Specialty’s motion for summary judgment is DENIED.

179
       Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 1992 WL 22690, at *5 (Del. Super. Ct. Jan.
16, 1992) (quoting Empire of Am. Relocation Servs., Inc. v. Commercial Credit Co., 551 A.2d 433,
435 (Del. 1988)), aff'd sub nom, Rhone–Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616
A.2d 1192 (Del. 1992).
180
        Again, a fact is only material if it might affect the outcome of the suit under governing law.
See n. 55, supra.
181
       Schick, 533 A.2d at 1239.
182
       Goggin, 2018 WL 6266195, at *4; Alta Berkeley VI C.V., 41 A.3d at 385.

                                               - 46 -
V.    CONCLUSION
      For the reasons discussed above, IDT and Jonas’s Motion for Partial Summary

Judgment against U.S. Specialty is GRANTED, in part, and DENIED, in part.

Defendant U.S. Specialty’s Cross-Motion for Summary Judgment is GRANTED,

in part, and DENIED, in part. Defendant National Union’s Motion for Summary

Judgment is GRANTED with respect to its coverage obligation for IDT, and

DENIED as to its obligation to defend Jonas. Defendant XL Specialty’s Motion for

Summary Judgment and Joinder is DENIED.

      IT IS SO ORDERED.

                                              /s/ Paul R. Wallace
                                              Paul R. Wallace, Judge

                                     - 47 -