Court Opinion

ID: 6352511
Source: CourtListenerOpinion
Date Created: 2022-06-22 16:01:34.838567+00
Date Added: 2024-06-11T12:48:47.707547
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

W.D.C. HOLDINGS, LLC d/b/a NORTHSTAR                )
COMMERCIAL PARTNERS; NSIPI                          )
ADMINISTRATIVE MANAGER, LLC;                        )
NORTHSTAR COMMERCIAL PARTNERS                       )
MANAGEMENT, LLC; and NORTHSTAR                      )
HEALTHCARE DEVELOPMENT, LLC                         )
                                                    )
               Plaintiffs,                          )
                                                    )
       v.                                           )      C.A. No. 2020-1026-JTL
                                                    )
IPI PARTNERS, LLC; IPI DATA CENTER                  )
PARTNERS FUND I-A, L.P.; IPI DATA CENTER            )
PARTNERS FUND I-B, L.P.; IPI NSIPI DATA             )
CENTER HOLDINGS, LLC; DULLES NCP, LLC;              )
DULLES NCP II, LLC; MANASSAS NCP, LLC;              )
QUAIL RIDGE NCP, LLC; MATTHEW                       )
A’HEARN; and LUKE GILPIN                            )
                                                    )
               Defendants.                          )

                             MEMORANDUM OPINION

                             Date Submitted: May 3, 2022
                             Date Decided: June 22, 2022

Stephen B. Brauerman, Sarah T. Andrade, BAYARD, P.A., Wilmington, Delaware;
Christopher O. Murray, Julian R. Ellis, Jr., BROWNSTEIN HYATT FARBER
SCHRECK, LLP, Denver, Colorado; Counsel for Plaintiffs.

Matthew F. Davis, Justin T. Hymes, POTTER ANDERSON & CORROON LLP,
Wilmington, Delaware; Charles F. Connolly, AKIN GUMP STRAUSS HAUER & FELD,
Washington, DC; Stephen M. Baldini, Stephanie Lindemuth, AKIN GUMP STRAUSS
HAUER & FELD, New York, New York; Counsel for Defendants.

LASTER, V.C.
       When Amazon, Inc. was seeking partners to build data centers, Christian Kirschner

facilitated an introduction between his brother Casey, who worked at Amazon, and plaintiff

W.D.C. Holdings, LLC d/b/a Northstar Commercial Partners (“Northstar”), a privately

held commercial real estate company.1 Amazon selected Northstar to build nine data

centers on three parcels of land.

       To fund the projects, Northstar joined forces with defendant IPI Partners, LLC, a

firm that manages two investment funds dedicated to financing data centers. Through

affiliates, Northstar and IPI Partners created NSIPI Data Center Venture, LLC (the “Joint

Venture”) as the entity through which they would develop the data centers for Amazon.

Under the limited liability company agreement that governs the Joint Venture (the “LLC

Agreement”), a Northstar affiliate managed the day-to-day business of the Joint Venture.

An IPI Partners’ affiliate controlled the board of managers of the Joint Venture (the “Board

of Managers”) and had the ability to remove the Northstar affiliates from their roles under

specified circumstances, including the occurrence of a “Cause Event.”

       After several of the data centers were completed, a Northstar employee raised

concerns with IPI Partners about payments that Northstar was making to a trust that

Christian had established and questioned whether the payments constituted improper

kickbacks for Casey and others. A second Northstar employee raised similar concerns with

Amazon. Their allegations led to agents from the Federal Bureau of Investigation (the

       1
           For clarity, this decision refers to Christian and Casey Kirschner using their first
names.
“FBI”) executing a search warrant at the home of Brian Watson, Northstar’s founder and

chief executive officer.

       Hours after the search warrant was executed, Watson received letters from IPI

Partners and its affiliates that (i) removed Watson and the Northstar affiliates from their

roles with the Joint Venture and (ii) terminated certain other agreements between the Joint

Venture’s affiliates and other Northstar affiliates. In each case, the letters asserted the

existence of and relied on a particular Cause Event that depended on Watson having

personally acted or failed to act as a result of gross negligence, fraud, or willful misconduct

(a “Watson Cause Event”).

       Through this action, Northstar and its affiliates have challenged their removal. They

assert that a Watson Cause Event never occurred, so IPI Partners never had the opportunity

to exercise its removal and termination rights. They acknowledge that a kickback scheme

may have taken place, but they allege that Watson sought and received assurances that the

payments to Christian’s trust were legitimate. They assert that Watson neither acted nor

failed to act as a result of gross negligence, fraud, or willful misconduct.

       The plaintiffs contend instead that IPI Partners wanted to own 100% of the

economic rights associated with the Joint Venture and used the alleged kickback scheme

as a pretext to cut out Northstar and its affiliates. The plaintiffs maintain that by declaring

a Watson Cause Event without an adequate basis for doing so, IPI Partners and its affiliates

willfully breached the terms of the LLC Agreement, breached the terms of the related

agreements with Northstar’s affiliates, and committed the torts of conversion and civil

conspiracy.

                                              2
         The defendants moved to dismiss the complaint in its entirety. They argue that there

was no breach of the LLC Agreement because IPI Partners properly determined that a

Watson Cause Event had occurred. The defendants maintain that it is not reasonably

conceivable that Northstar’s payments to Christian’s trust did not provide a sufficient basis

for IPI Partners to invoke a Watson Cause Event.

         The defendants also argue that even if it was reasonably conceivable that a Watson

Cause Event had not occurred, the plaintiffs failed to state a non-exculpated claim for

breach. The LLC Agreement contains an exculpation provision which eliminates monetary

liability for “Covered Persons” unless the damage arose because of the Covered Person’s

gross negligence, fraud, or willful misconduct. The defendants argue that it is not

reasonably conceivable that the decision by IPI Partners and its affiliates to declare a

Watson Cause Event and exercise their removal and termination rights could have resulted

from gross negligence, fraud, or willful misconduct. There is some irony in the defendants

making this argument, because the same contractual standard—gross negligence, fraud, or

willful misconduct—serves both as the trigger for a Watson Cause Event and as the

threshold for a non-exculpated claim. For purposes of exculpation, the defendants seek the

benefit of the doubt that they refused to give Watson for purposes of the Watson Cause

Event.

         The defendants separately argue that the plaintiffs failed to state a claim for

conversion or civil conspiracy. They assert that this is a contract dispute, nothing more,

and that it should not be reclothed in tort guise. The two individual defendants alternatively

moved to dismiss the action as to themselves for lack of personal jurisdiction.

                                              3
       This is a pleading-stage decision where Northstar receives the benefit of all

reasonable inferences. The well-pled facts support a reasonable inference that a Watson

Cause Event had not occurred. It is therefore reasonably conceivable that IPI Partners and

its affiliates failed to properly exercise their termination and removal rights. The complaint

accordingly states a claim for breach of the LLC Agreement. The well-pled facts support a

reasonable inference that IPI Partners and its affiliates knew they did not have a basis to

invoke a Watson Cause Event but did so anyway because they wanted to cut Northstar out

of the Joint Venture. Those allegations give rise to a non-exculpated claim. The defendants’

motion to dismiss the claim for breach of the LLC Agreement is denied.

       The plaintiffs also have stated claims for breach of two sets of agreements related

to the Joint Venture. One set of agreements treated terminations for cause differently from

terminations without cause. The defendants terminated those agreements for cause, but the

well-pled facts support a reasonable inference that a cause event had not occurred. The

complaint therefore supports a reasonable inference that the defendants breached those

agreements by terminating them improperly. The other set of agreements required payment

of a termination fee regardless of whether the defendants terminated the agreements for

cause. The complaint alleges that the defendants failed to pay the termination fee, thereby

stating a claim for breach.

       By contrast, the complaint fails to state claims for conversion and civil conspiracy.

The conversion claim is dismissed because the plaintiffs failed to allege facts supporting

the existence of an independent tort, which is a prerequisite for stating a claim for

conversion. The civil conspiracy claim is dismissed because the plaintiffs failed to allege

                                              4
facts supporting the existence of an underlying wrong sufficient to sustain a conspiracy

claim.

         This decision does not reach the question of whether the individual defendants

would have been subject to personal jurisdiction. The claims for conversion and civil

conspiracy are the only claims that the plaintiffs asserted against the individual defendants.

With the dismissal of those claims, it is not necessary to address the jurisdictional issues.

         At the hearing on the defendants’ motion to dismiss, the court asked the parties to

discuss the possibility of staying this case pending the outcome of related litigation that

Amazon is pursuing in federal court in Virginia (the “Amazon Litigation”). The parties

seemed amenable to a stay. Two weeks later, however, the parties notified the court that

they were unable to agree to a stay. Within thirty days, any party who opposes a stay will

show cause why this case should not be stayed pending the final disposition of the Amazon

Litigation.

                            I.    FACTUAL BACKGROUND

         The facts are drawn from the operative complaint and the documents it incorporates

by reference. See Dkt. 22 (the “Amended Complaint” or “Am. Compl.”). For purposes of

the motion to dismiss, the well-pled allegations of the Amended Complaint are assumed to

be true, and the plaintiffs receive the benefit of all reasonable inferences.

A.       The Amazon Introduction

         Watson founded Northstar in 2000 as a privately held commercial real estate

company. Part of Northstar’s business model involved working with individuals who could

introduce Northstar to potential partners for new real estate projects.

                                              5
       In late 2016, Northstar established a referral relationship with Christian. Northstar

paid Christian $4,000 per month to provide introductions. Christian also received

commissions for introductions that led to deals.

       In July 2017, Christian arranged for Watson to meet with Casey, who worked as a

transaction manager in Amazon’s real estate department. Casey invited Northstar to give a

presentation to a group of Amazon executives about its real estate development

capabilities. The presentation took place in September 2017. The attendees included

Casey’s supervisor, who oversaw Amazon’s data centers in the Americas.

       As part of its business model, Amazon contracts with developers to build and own

data centers, then lease them back to Amazon. After the September 2017 meeting, Amazon

invited Northstar to make a formal proposal for a data center development deal.

       In late 2017, Amazon awarded Northstar the opportunity to develop two data centers

on land known as the Dulles parcel. Amazon selected Northstar over three to five other

bidders. Amazon subsequently entered into the pertinent transaction documents with

Northstar affiliates, including development agreements and leases.

       Amazon’s initial award to Northstar led to additional development deals for data

centers on land known as the Manassas and Quail Ridge parcels. In total, Amazon awarded

Northstar development contracts for nine data centers on the three different parcels.

       Christian asked Northstar to make special arrangements for the commissions he

would receive for the successful deals with Amazon. Rather than paying the commissions

to Christian directly, he asked that they be paid to the Villanova Trust, which was a trust

that Christian had established.

                                             6
       Northstar alleges that because Casey worked at Amazon, “Northstar sought

assurances from Christian that none of the monies paid to [the] Villanova [Trust] would

benefit Casey or his family while he was an employee at Amazon.” Id. ¶ 62. Northstar

alleges that Christian provided satisfactory assurances, leading Northstar to agree to pay

the commissions to the Villanova Trust. Northstar alleges that it paid Christian’s

commissions “from its share of normal and customary fees as the sponsor and manager of

the projects.” Id. ¶ 60.

       According to the Amended Complaint, Northstar now believes that Christian’s

“assurances may have been false.” Id. ¶ 64. The Amended Complaint alleges that “Kyle

Ramstetter, a former Northstar employee who worked on the Amazon account, may have

conspired with one or more persons to divert some of the referral fees paid to Christian to

third parties, including himself.” Id. ¶ 65. The Amended Complaint thus does not deny the

existence of a kickback scheme. Instead, Northstar primarily contends that Watson was

himself deceived by his representatives such that he did not know about the kickback

scheme. See Dkt. 42 at 45 (“What we do dispute is that if there was anything untoward

going on there, that [] Watson had any awareness of it.”).

B.     The Joint Venture

       Northstar needed a financial partner to provide the estimated $500 million in

funding necessary to develop the data centers. In early 2018, Northstar selected IPI Partners

as its equity partner. IPI Partners manages two investment funds— defendants IPI Data

Center Partners Fund I-A, L.P., and IPI Data Center Partners Fund I-B, L.P. (jointly, “the

Funds”)—that specialize in data center projects.

                                             7
       Together, Northstar and IPI Partners formed the Joint Venture. On March 2, 2018,

an affiliate of IPI Partners and two affiliates of Northstar entered into the LLC Agreement.2

The IPI affiliate was IPI NSIPI Data Center Holdings, LLC (“IPI Holdings”), which served

as the “IPI Partners Member.” The first Northstar affiliate was Sterling NCP FF, LLC (the

“Northstar Member”), which served as the “Sponsor Member.” The second Northstar

affiliate was NSIPI Administrative Manager, LLC (the “Northstar Manager”), which

served as the “Administrative Manager.”

       The LLC Agreement identified Watson as the “Principal.” Among other things,

Watson represented that as Principal, he would be actively involved in the business and

affairs of the Joint Venture and that he owned and controlled Northstar Member and

Northstar Manager. See LLCA §§ 4.4, 9.2.

       The LLC Agreement established a Board of Managers to govern the business and

affairs of the Joint Venture. Watson was the “initial Sponsor Board Member.” Id. § 7.2(a).

Defendants Matthew A’Hearn and Luke Gilpin of IPI Partners were the “initial IPI Board

Members.” Id.

       As the Administrative Manager, Northstar Manager was responsible for

implementing the decisions of the Board of Managers and conducting the day-to-day

activities of the Joint Venture. Id. § 7.9(a). For those services, Northstar Manager was

       2
        The operative version is the Amended and Restated Limited Liability Company
Agreement of NSIPI Data Center Venture, LLC, which this decision has already defined
as the LLC Agreement. Dkt. 22 Ex. A (“LLCA”).

                                             8
entitled to receive service fees, including acquisition fees, financing fees, and disposition

fees. See id. § 8.7 (the “Service Fees”). Under a distribution waterfall, Northstar Manager

was entitled to receive a share of the returns available to the members depending on the

internal rate of return that the Joint Venture generated. See id. § 6.2 (the “GP Promote”).

       The LLC Agreement made clear that IPI Holdings could remove Northstar Manager

from its role as Administrative Manager upon the occurrence of a Cause Event. Section

7.9(f) stated:

       Removal of the Administrative Manager. [Northstar Manager] may be
       removed and replaced as the Administrative Manager by the Board of
       Managers in its sole and absolute discretion by reason of a Cause Event or a
       Key Person Event (as set forth in Section 8.4(a)(iii)).

Id. § 7.9(f). The cross-referenced section (Section 8.4(a)(iii)) appears in a provision that

granted IPI Holdings broad authority to remove Northstar’s affiliates from the Joint

Venture upon the occurrence of a Cause Event. It stated:

       Elective Remedies. Upon a (y) Key Person Event, or (z) Cause Event, the IPI
       Member will have the right (but not the obligation), upon delivery of written
       notice to the Administrative Manager, as applicable, to:

       (i) terminate the right of [Northstar Member] to (a) appoint any Managers to
       the Board of Managers . . . and (B) approve Material Actions . . . ;

       (ii) immediately remove any or all Sponsor Board Members from the Board
       of Managers and appoint successor members to the Board of Managers . . . ;

       (iii) subject to Section 8.4(b) (Removal of Administrative Manager),
       immediately remove and replace [Northstar Manager] as the Administrative
       Manager;

       (iv) . . . immediately remove [Northstar Member] and [Northstar Manager]
       as members of the Company; and

       (v) dissolve the Company . . . .

                                             9
Id. § 8.4(a).

       The removal of Northstar Member and Northstar Manager under Section 8.4 had

significant economic implications. Generally speaking, if IPI Holdings removed Northstar

Manager as Administrative Manager by reason of a Cause Event, then

       (A) the Administrative Manager will retain zero percent (0%) of the Carried
       Interest Distributions and corresponding allocations of Net Profits,

       (B) any successor Administrative Manager will be eligible to receive up to
       one hundred percent (100%) of the Carried Interest Distributions and
       corresponding allocations of Net Profits, which amounts will thereafter be
       forever forfeited by the Administrative Manager, and

       (C) the IPI Member will retain any remaining portion of the Carried Interest
       Distributions and corresponding allocations of Net Profits, which amounts
       (if any) will thereafter be forever forfeited by the Administrative Manager[.]

Id. § 8.4(b)(iii).

       This case does not involve a “Key Person Event.” This case only involves an alleged

“Cause Event.”

       The LLC Agreement defined a Cause Event as follows:

       “Cause Event” means, with respect to any Sponsor Member, a Sponsor
       Board Member, the Administrative Manager, or the Principal (as the case
       may be), [that] any one of the following has occurred:

       (a) such Person’s conviction of or plea of guilty or no contest to (i) a felony,
       or (ii) any crime involving fraud, material misrepresentation, material
       misappropriation of funds, or embezzlement;

       (b) a material breach of this Agreement which, if capable of being cured, is
       not cured prior to the 30th day following a written demand therefore delivered
       by the IPI Member;

       (c) an act or omission arising from the gross negligence, willful misconduct
       or fraud by the Principal, which results in material damage to the Company
       or a Subsidiary owning an Investment; or

                                             10
       (d) a material breach of any agreement (excluding this Agreement) between
       any Sponsor Member, the Administrative Manager or any of their respective
       Affiliates (on the one hand) and the Company or any Subsidiary (on the other
       hand) which, if capable of being cured, is not cured within the applicable
       cure period.

Id. § 1.1, at 4.

       The relevant Cause Event for this dispute is Cause Event (c), which is the Watson

Cause Event. Notably, a Watson Cause Event only arises if there is an act or omission

“arising from the gross negligence, willful misconduct or fraud by the Principal,” viz. by

Watson himself. The other cause events could involve actions or omissions by persons

other than Watson, such as lower-level Northstar employees. The definition of Cause Event

continues by providing expressly that if a Cause Event under one of those sections arises

because of (i) an act or omission “by an employee, officer, manager or member . . . who is

not the Principal and (ii) in all events, without the actual prior knowledge of the Principal,”

then a Cause Event will not have occurred as long as the Principal promptly cures the Cause

Event. Id.

C.     The Development Of The Data Centers

       The Joint Venture created four special purpose vehicles to own the parcels where

the data centers would be built. Each special purpose vehicle is a Delaware limited liability

company. Those entities are Dulles NCP, LLC, Dulles NCP II, LLC, Manassas NCP, LLC,

and Quail Ridge, NCP, LLC (collectively, the “Property Owners”).

       Northstar bore the ultimate responsibility for “developing, managing, and leasing

the data centers back to Amazon.” Dkt. 33 at 6. Northstar created plaintiff Northstar

Healthcare Development, LLC (“Northstar Development”) to handle the development

                                              11
function. Northstar Development entered into a development agreement with each of the

Property Owners (collectively, the “Development Agreements”). Under each Development

Agreement, the Property Owner agreed to pay Northstar Development a termination fee

equal to “the difference between the Minimum Development Fee and the actual amount of

the Development Fee which had previously been paid,” subject to certain conditions

precedent (the “Termination Fee”). Id. Ex. C § 13.1(b); see id. §§ 8.1(a)–(b).

       Northstar created plaintiff Northstar Commercial Partners Management, LLC

(“Northstar Property”) to handle the property management function. Northstar Property

entered into a property management agreement with each of the Property Owners

(collectively, the “Property Agreements”). Either party could terminate a Property

Agreement “upon thirty (30) days prior written notice to the other party, without cause,”

and “upon fifteen (15) days prior written notice to the other party, for cause.” Dkt. 22 Ex.

D §§ 10.2.5–.6. The Property Agreements do not define “cause.”

       In November 2018, the Joint Venture completed the first data center, known as

Dulles I. In March 2019, the Joint Venture completed Dulles II. In June 2019, the Joint

Venture completed Manassas I, and in November 2019, the Joint Venture completed

Manassas II. The Joint Venture completed a fifth data center in May 2020. After the

completion of each data center, Amazon took possession and began paying rent.

       In summer 2019, after the completion of only three data centers, IPI Partners offered

$20 million to acquire Northstar’s interest in the Joint Venture. As part of its offer, IPI

Partners proposed to hire certain key Northstar employees to operate the Joint Venture after

                                            12
acquiring Northstar’s interest. Two of those key Northstar employees were Ramstetter and

Will Camenson.

       Northstar rejected the offer because it believed that the Joint Venture would become

more valuable as additional data centers came online. Northstar also regarded the proposal

to hire key Northstar employees as unacceptable.

       Northstar now believes Ramstetter and Camenson colluded with IPI Partners to

eliminate Northstar from the Joint Venture. In September 2019, Watson fired Ramstetter

and Camenson.

D.     Northstar Employees Raise Concerns About The Villanova Trust.

       In January 2020, Northstar’s then-Chief Operating Officer, Timothy Lorman, flew

to IPI Partners’ headquarters in Chicago to discuss his concerns about Northstar’s

payments to the Villanova Trust. Lorman presented the payments as evidence of bad faith

conduct by Northstar and suggested that Northstar won the initial Amazon opportunity

illegitimately based on kickbacks that would benefit Casey and others.

       The Amended Complaint alleges that Lorman knew at all times that Northstar paid

referral fees to Christian, including for the Amazon introduction, and that the Amazon-

related payments went through the Villanova Trust. The Amended Complaint takes offense

that Lorman did not tell Watson or Northstar about his concerns before discussing them

with IPI Partners.

       After meeting with Lorman, IPI Partners discussed the issue with Amazon. Gilpin,

a Vice President at IPI Partners, initiated the discussions. It turned out that two months

                                            13
before Lorman contacted IPI Partners, a different Northstar employee had emailed Jeff

Bezos, then Chief Executive Officer of Amazon, and raised similar concerns.

       Northstar contends that through these discussions, IPI Partners and Amazon

conspired against Northstar. The Amended Complaint alleges that IPI Partners

renegotiated the Joint Venture’s lease agreements for the data centers so that Amazon

would support IPI Partners in taking control of the Joint Venture. The Amended Complaint

further alleges that IPI Partners and Amazon decided to work together to secure a criminal

investigation into Northstar and Watson so that IPI Partners could use the criminal

investigation as a pretext to take control of the Joint Venture.

       The Amended Complaint alleges that IPI Partners had a financial motive to seize

control of the Joint Venture. According to Northstar, IPI Partners had demonstrated that it

wanted to acquire Northstar’s interest by offering to buy it for $20 million. By terminating

Northstar for cause, IPI Partners stood to gain approximately $70 million by cutting off

Northstar’s rights to the Service Fees and the GP Promote. The Amended Complaint

alleges that A’Hearn and Gilpin stood to benefit personally from that windfall.

E.     IPI Partners Declares A Watson Cause Event.

       On April 2, 2020, FBI agents executed a search warrant at Watson’s Colorado home

and asked him about Northstar’s payments to the Villanova Trust. The FBI agents indicated

that Watson could expect a criminal indictment in the near future. As of the date of the

motion to dismiss hearing, more than two years later, Watson had not been indicted.

       Immediately after the execution of the search warrant, Watson received notices from

IPI Partners that removed Watson, Northstar Manager, and Northstar Member from their

                                             14
positions with the Joint Venture. Watson also received notices terminating the Property

Agreements and Development Agreements.

       The letters from IPI Partners stated that the removals and terminations were for

cause. The letters asserted that IPI Holdings had “identified conduct of [Northstar

Manager] and the Principal [Watson] constituting gross negligence, willful misconduct,

and/or fraud, which have resulted in, and continue to result in, material damages to the

[Joint Venture] and its Subsidiaries, including the Principal’s causing of the gross

negligence, willful misconduct, and/or fraud of [Northstar Manager].” Dkt. 25 Ex. 2. The

letter identified the “material damages” as including, but not being limited to, damages to

the Joint Venture’s relationship with Amazon. Id. IPI Partners thus declared and acted

based on a Watson Cause Event.

       The letters that terminated the Development and Property Agreements also asserted

that the terminations were “for cause.” The letter terminating Northstar Property claimed

that the terminations were because Northstar Property had “engaged in activities that

constitute cause to terminate” the agreements. Dkt. 22 Ex. E. The letters terminating

Northstar Development claimed that the terminations were because Northstar

Development had “engaged in activities that constitute fraud, gross negligence and

intentional misconduct.” Id. Ex. G. Both groups of letters cited “credible information that

raised substantive concerns about self-dealing and fraud” by Northstar and its affiliates. Id.

Exs. E, G.

       Amazon subsequently filed the Amazon Litigation against thirteen parties,

including Watson and Northstar, in the United States District Court for the Eastern District

                                             15
of Virginia. See Amazon.com, Inc. v. WDC Hldgs. LLC, No. 1:20-cv-00484 (E.D. Va.). By

order dated June 5, 2020, the district court granted Amazon’s motion for a preliminary

injunction. See Amazon.com, Inc. v. WDC Hldgs. LLC, 2020 WL 4720086 (E.D. Va. June

5, 2020), aff’d, 2021 WL 3878403 (4th Cir. Aug. 31, 2021) (per curiam). In its decision

granting the preliminary injunction, the district court found that there was “good cause to

believe that” Watson, Northstar, and Northstar affiliates had “participated in a fraudulent

kickback scheme relating to certain real property lease transactions.” Id. at *1. The district

court required Watson and Northstar to post funds totaling $21,250,000.00, representing

sums that they allegedly received improperly. Id. at *2. On appeal, the United States Court

of Appeals for the Fourth Circuit affirmed the district court’s ruling. See WDC Hldgs.,

2021 WL 3878403.

F.     This Litigation

       On December 2, 2020, the plaintiffs filed this litigation, in which they challenged

their removals and terminations. Emphasizing that the letters from IPI Partners arrived just

after the FBI executed the search warrant at Watson’s home, the plaintiffs infer that IPI

Partners had advance notice of the execution of the search warrant and timed its letters to

coincide with that event. They assert that IPI Partners used the investigation “as a pretext

to terminate Northstar from the Joint Venture.” Am. Compl. ¶ 77.

       After the defendants moved to dismiss the original complaint, the plaintiffs filed the

currently operative Amended Complaint. It asserts claims for (i) breach of the LLC

Agreement; (ii) conversion; (iii) breach of the Property Agreements; (iv) breach of the

                                             16
Development Agreements; and (v) civil conspiracy. The defendants again moved to

dismiss.

       At the hearing on the defendants’ motion to dismiss, both sides provided updates on

the Amazon Litigation, which is currently in discovery. IPI Partners is not a party to the

Amazon Litigation, but it is participating in the discovery process. Both sides cited

developments in the Amazon Litigation which they claimed supported their respective

positions on the motion to dismiss.

       There is also related litigation in this court brought by Northstar Member against

the Joint Venture, IPI Holdings, A’Hearn and Gilpin. In that litigation, Northstar Member

represents that its investors other than Watson have assumed control of the entity and do

not challenge Northstar Member’s removal from the Joint Venture. Instead, they assert that

the defendants acted improperly and in bad faith when valuing Northstar Member’s

membership interest as part of a buyout that followed the removal of Northstar Member.

Sterling NCP FF, LLC v. NSIPI Data Ctr. Venture, LLC, C.A. No. 2021-0059-JTL, Dkt.

19 ¶¶ 80–96 (Nov. 24, 2021). In January 2022, the defendants moved to dismiss Northstar

Member’s complaint for failure to state a claim on which relief can be granted, or in the

alternative to stay proceedings.

                               II.    LEGAL ANALYSIS

       The defendants contend that the Amended Complaint fails to state a claim on which

relief can be granted, warranting dismissal under Court of Chancery Rule 12(b)(6). When

considering such a motion,

                                           17
         a trial court should accept all well-pleaded factual allegations in the
         [c]omplaint as true, accept even vague allegations in the [c]omplaint as
         “well-pleaded” if they provide the defendant notice of the claim, draw all
         reasonable inferences in favor of the plaintiff, and deny the motion unless the
         plaintiff could not recover under any reasonably conceivable set of
         circumstances susceptible of proof.

Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del.

2011).

         “The reasonable conceivability standard asks whether there is a possibility of

recovery.” Garfield v. BlackRock Mortg. Ventures, LLC, 2019 WL 7168004, at *7 (Del.

Ch. Dec. 20, 2019). The Delaware Supreme Court has compared Delaware’s

“conceivability” standard to the federal “plausibility” standard and explained that

conceivability is “more akin to ‘possibility,’ while the federal ‘plausibility’ standard falls

somewhere beyond mere possibility but short of probability.” Cent. Mortg., 27 A.3d at 537

n.13. The “‘plausibility’ pleading standard is higher than [Delaware’s] governing

‘conceivability’ standard.” Id. at 537. The federal “plausibility” standard also “invites

judges to determine whether a complaint states a plausible claim for relief and draw on

judicial experience and common sense.” Id. (cleaned up). Until the Delaware Supreme

Court “decides otherwise or a change is duly effected through the Civil Rules process, the

governing pleading standard in Delaware to survive a motion to dismiss is reasonable

‘conceivability.’” Id.

         Although this standard favors the plaintiff, “a trial court is required to accept only

those reasonable inferences that logically flow from the face of the complaint and is not

required to accept every strained interpretation of the allegations proposed by the plaintiff.”

                                               18
Feldman v. AS Roma SPV GP, LLC, 2021 WL 3087042, at *5 (Del. Ch. July 22, 2021)

(cleaned up). This court need not “accept conclusory allegations unsupported by specific

facts.” Price v. E.I. du Pont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011), overruled

on other grounds by Ramsey v. Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255, 1277

(Del. 2018).

A.     Count I : Breach Of The LLC Agreement

       In Count I, Northstar Manager asserts that IPI Holdings breached the LLC

Agreement by wrongfully terminating Northstar Manager from its role as Administrative

Manager, thereby depriving Northstar Manager of its right to receive the GP Promote and

Service Fees. In seeking dismissal of this claim, IPI Holdings argues that (i) the Amended

Complaint fails to allege a breach of the LLC Agreement; (ii) the Amended Complaint fails

to allege satisfaction of applicable conditions precedent; and (iii) even if there was a breach,

the LLC Agreement’s exculpation provision precludes liability for damages. For reasons

explained below, Count I states a non-exculpated claim for breach of contract.

       Delaware law governs the LLC Agreement. LLCA § 15.11. To allege a breach of

contract, it is enough at the motion to dismiss stage to “simply allege first, the existence of

the contract; second, the breach of an obligation imposed by that contract; and third, the

resultant damage to the plaintiff.” Garfield v. Allen, — A.3d —, 2022 WL 1641802, at *23

(Del. Ch. May 24, 2022) (cleaned up). A complaint need not allege quantifiable (or

quantified) damages because the breach of contract is itself an injury that gives rise to a

right of action. Id. It is thus more accurate to describe the elements of a claim for breach of

contract as “(i) a contractual obligation, (ii) a breach of that obligation by the defendant,

                                              19
and (iii) a causally related injury that warrants a remedy, such as damages or in an

appropriate case, specific performance.” AB Stable VIII LLC v. Maps Hotels & Resorts

One LLC, 2020 WL 7024929, at *47 (Del. Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del.

2021).

         1.    It Is Reasonably Conceivable That A Watson Cause Event Had Not
               Occurred.

         The LLC Agreement empowered a majority of the Board of Managers to “remove[]

and replace[] [Northstar Manager] as the Administrative Manager . . . in its sole and

absolute discretion by reason of a Cause Event . . . as set forth in Section 8.4(a)(iii).” LLCA

§ 7.9(f). Section 8.4(a)(iii) provided that “[u]pon a . . . Cause Event, [IPI Holdings] will

have the right (but not the obligation), upon delivery of written notice to [Northstar

Manager] . . . to . . . immediately remove and replace [Northstar Manager] as

Administrative Manager.” Id. § 8.4(a)(iii). In this case, IPI Holdings only invoked the

Watson Cause Event: “an act or omission arising from the gross negligence, willful

misconduct or fraud by [Watson], which results in material damages to the Company or a

Subsidiary owning an Investment.” Id. § 1.1, at 4.

         Northstar Manager contends that a Watson Cause Event did not occur. Northstar

Manager does not dispute that there could have been an illicit kickback scheme. Northstar

Manager instead contends that for the kickback scheme to qualify as a Watson Cause

Event, it had to arise from gross negligence, willful misconduct, or fraud by Watson

personally. If Watson was not personally involved, then the kickback scheme would not

qualify as a Watson Cause Event. The scheme still might qualify as a Cause Event under

                                              20
one of the other subparts of the definition, but IPI Holdings did not invoke any of the other

Cause Events and in those cases, Northstar had the right to cure.

        Northstar Manager alleges that Watson did not engage in or know of the kickback

scheme. The Amended Complaint asserts that Watson sought assurances from Christian

that there was not any type of kickback scheme, received those assurances, and relied on

them.

        At the pleading stage, Northstar is entitled to the inference that Watson was not

personally involved in the kickback scheme. Crediting the allegations of the Amended

Complaint, it is reasonably conceivable that a Watson Cause Event did not occur.

        IPI Partners disagrees and contends that the only reasonable inference is that Watson

was involved in the kickback scheme and that a Watson Cause Event did occur. IPI Partners

is correct that the pled facts support a reasonable inference that a kickback scheme existed.

The pled facts even support a reasonable inference that Watson could have been involved.

The pled facts do not compel the conclusion that Watson was involved. The pled facts

support an inference that Watson could have been duped.

        At the pleading stage, the plaintiff gets the benefit of a favorable inference.

Accordingly, it is reasonably conceivable that a Watson Cause Event did not occur.

        2.     The Role Of The Exculpation Provision

        Seemingly anticipating that the allegations of the Amended Complaint support a

reasonable inference that Watson was not personally involved in the kickback scheme, the

defendants seek the protection of the exculpatory provision in the LLC Agreement. That

provision states:

                                             21
       No Covered Person, nor any member, manager, partner, officer, director,
       trustee, shareholder, or beneficiary of such Covered Person, in such capacity,
       will be liable to the Company or any other Covered Person for any loss,
       damage, or claim incurred by reason of any action taken or omitted to be
       taken by such Covered Person, except that each applicable Member will be
       liable to the Company and its other non-affiliated Members for its gross
       negligence, fraud or willful misconduct by its related or affiliated Covered
       Person.

Id. § 11.1(a) (the “Exculpation Provision”). The phrasing of the Exculpation Provision is

clumsy, but the thrust is that a Covered Person only will be liable in damages if the

challenged act arose from the Covered Person’s gross negligence, fraud or willful

misconduct.

       Relying on the Exculpation Provision, the defendants argue that Northstar Manager

cannot state a claim for breach of the LLC Agreement simply by alleging that IPI Holdings

terminated Northstar Manager based on a Watson Cause Event that never existed. The

defendants assert that the Amended Complaint must support a reasonable inference that

IPI Holdings acted on the basis of gross negligence, fraud, or willful misconduct.

       This court has previously defined willful misconduct as “intentional wrongdoing,

not mere negligence, gross negligence or recklessness.” Dieckman v. Regency GP LP, 2021

WL 537325, at *36 (Del. Ch. Feb. 15, 2021), aff’d, 264 A.3d 641 (Del. 2021) (TABLE);

see Bandera Master Fund LP v. Boardwalk Pipeline P’rs, LP, 2021 WL 5267734, at *79

(Del. Ch. Nov. 12, 2021) (“The concept of misconduct involves unlawful, dishonest, or

improper behavior . . . .” (cleaned up)). Determining whether an actor engaged in willful

misconduct requires discerning the actor’s subjective intent. Dieckman, 2021 WL 537325,

at *36 (stating that to determine whether an individual engaged in willful misconduct turns

                                            22
on the “state of mind” of the actor). “At the pleading stage, the trial court must draw

reasonably conceivable inferences in favor of the plaintiff based on what the allegations of

the complaint suggest, recognizing that it may be virtually impossible for a plaintiff to

sufficiently and adequately describe the defendant’s state of mind at the pleading stage.”

Voigt v. Metcalf, 2020 WL 614999, at *26 (Del. Ch. Feb. 10, 2020) (cleaned up).

       It is reasonably conceivable that IPI Holdings engaged in willful misconduct by

terminating Northstar Manager without a sufficient basis to believe that a Watson Cause

Event had occurred. Northstar points to the following facts to support an inference that IPI

Holdings had a motive to manufacture a basis to terminate Northstar Manager and used the

FBI’s search of Watson’s home as a pretext for removal:

•      IPI Partners engaged in discussions with Amazon about future data-center
       development opportunities without telling Northstar, suggesting that IPI Partners
       wanted to exclude Northstar. Dkt. 33 at 17 (citing Am. Compl. ¶ 74).

•      IPI Partners offered Northstar $20 million to buy out its interest in the Joint Venture.
       Id. (citing Am. Compl. ¶ 123).

•      IPI Partners “leveraged its relationship with . . . Lorman[] to gain access to
       information about Northstar’s business relationship with Christian Kirschner and
       [the] Villanova [Trust].” Id. (citing Am. Compl. ¶¶ 9, 10).

•      IPI Partners did not contact Northstar after Lorman raised concerns about the
       Villanova Trust. Id. (citing Am. Compl. ¶ 11). Northstar maintains that if IPI
       Partners had asked, then “Watson would have told IPI [Partners] about the
       arrangement. It was no secret.” Id. at 18.

•      After hearing Lorman’s concerns, IPI Partners renegotiated the leases for the data
       centers with Amazon. By doing so, IPI Partners secured Amazon’s support for its
       takeover of the Joint Venture. IPI Partners also manufactured a basis for claiming
       that the Joint Venture was harmed. Id. (citing Am. Compl. ¶ 12).

                                              23
•      Still without contacting Northstar to get Watson’s side of the story, IPI Partners and
       Amazon worked together to convince the Department of Justice to investigate
       Watson. Id.

•      The same day as the FBI executed the search warrant on Watson’s home, Watson
       received the termination letters from IPI Partners. Id. at 19 (citing Am. Compl. ¶¶
       13, 82).

•      IPI Partners stood to gain approximately $70 million by terminating Northstar
       Manager for cause. Id. (citing Am. Compl. ¶ 78).

These facts support a reasonable inference that IPI Partners created a pretext to terminate

Northstar Manager because it had a financial incentive to do so, not because there was a

Watson Cause Event.

       In response, IPI Partners argues that the only reasonable inference is that IPI

Partners had a good faith basis to believe that Watson was involved in the kickback scheme.

IPI Partners stresses that Northstar recognized that there could have been a kickback

scheme and that two individuals came forward with similar allegations about a kickback

scheme. Those allegations support the existence of a kickback scheme. They do not mean

that Watson necessarily was involved.

       To take the next step, IPI Partners argues that the fact that the FBI secured a search

warrant from a judge to search Watson’s home means that it necessarily was reasonable to

believe that Watson was involved in the kickback scheme. IPI Partners emphasizes that it

waited to terminate Northstar for cause until after the FBI executed the search warrant. See

Dkt. 42 at 62. The issuance of a federal search warrant reflects a determination by a federal

judge that probable cause exists “that contraband or evidence of a crime will be found in a

particular place.” United States v. Whitner, 219 F.3d 289, 296 (3d Cir. 2000) (cleaned up).

                                             24
The United States Supreme Court has described “probable cause [a]s a fluid concept—

turning on the assessment of probabilities in particular factual contexts—not readily, or

even usefully, reduced to a neat set of legal rules.” Illinois v. Gates, 462 U.S. 213, 232

(1983).

       The issuance of a search warrant does not imply that the owner of the location where

the search warrant is executed committed a crime. The fact that a search warrant issued

does not mean that Watson was involved in the kickback scheme.

       When evaluating the significance of the issuance of a search warrant for purposes

of a Watson Cause Event, it is important to recognize that the list of Cause Events

specifically includes “such Person’s conviction of or plea of guilty or no contest to (i) a

felony, or (ii) any crime involving fraud, material misrepresentation, material

misappropriation of funds, or embezzlement.” LLCA § 1.1, at 4. As this language

demonstrates, the drafters of the LLC Agreement knew how to use criminal proceedings

as triggers for a Cause Event. They did not identify the issuance of a search warrant as a

Cause Event. In particular, they did not do so for purposes of a Watson Cause Event.

       The allegations of the complaint support competing inferences. One reasonable

inference is that IPI Holdings determined in good faith that the execution of the search

warrant provided sufficient proof that Watson had engaged in fraud, gross negligence, or

willful misconduct, plus sufficient proof that the Joint Venture was harmed by that conduct,

such that IPI Holdings properly determined that a Watson Cause Event had occurred.

Another reasonable inference is that IPI Partners was looking for a way to force Northstar

out of the Joint Venture and seized upon the execution of the search warrant, even though

                                            25
that event did not provide a good faith basis to conclude that Watson had engaged in fraud,

gross negligence, or willful misconduct, nor that the Joint Venture had suffered material

damages.

       “At the pleading stage, it is not possible to select between competing inferences.”

In re Pilgrim’s Pride Corp. Deriv. Litig., 2019 WL 1224556, at *18 (Del. Ch. Mar. 15,

2019). A court cannot choose the inference that seems more likely. Instead, the court must

“draw all reasonable inferences in favor of the non-moving party. As a result, there are

sometimes reasonable (even, potentially, more likely) inferences that must be passed over

at this stage of the proceedings.” In re Trados Inc. S’holder Litig., 2009 WL 2225958, at

*7 n.36 (Del. Ch. July 24, 2009). “The plaintiffs receive the benefit of the doubt.” Pilgrim’s

Pride, 2019 WL 1224556, at *18.

       It is reasonably conceivable that IPI Holdings knew that it did not have sufficient

evidence to determine whether Watson was personally involved in a kickback scheme such

that a Watson Cause Event had occurred, yet decided to act regardless so as to seize the

economic benefits of the Joint Venture. It is reasonably conceivable that IPI Holdings acted

willfully, thereby committing a non-exculpated breach of the LLC Agreement.

       3.     It Is Reasonably Conceivable That Northstar Manager Can Recover
              The GP Promote And Service Fees.

       IPI Holdings further argues that Northstar Manager cannot state a claim to recover

the GP Promote and Service Fees because Northstar Manager failed to satisfy the

conditions precedent required to earn those fees. Implicit in IPI Holdings’ argument is that

IPI Holdings properly terminated Northstar Manager.

                                             26
       IPI Holdings is correct that Northstar Manager cannot receive Service Fees or the

GP Promote if Northstar Manager was properly terminated. But if IPI Holdings did not

properly terminate Northstar Manager, then IPI Holdings would not have been justified in

failing to pay the Service Fees and the GP Promote. As explained above, it is reasonably

conceivable that IPI Holdings wrongfully terminated Northstar Manager.

       The defendants argue that even if Northstar Manager was terminated improperly,

there is still no breach because Northstar Manager’s entitlement to the GP Promote and

Service Fees depends on “certain monetary thresholds [being] satisfied” and other

“conditions precedent.” Dkt. 25 at 29. But if IPI Holdings wrongfully terminated Northstar

Manager, then IPI Holdings wrongfully prevented Northstar Manager from satisfying the

conditions precedent and thus the possibility of earning those amounts. In that setting,

principles of contract law like the prevention doctrine and the concept of anticipatory

repudiation could come into play to enable Northstar Manager to recover. See Restatement

(Second) of Contracts § 245 (Am. L. Inst. 1981), Westlaw (database updated May 2022)

(discussing the prevention doctrine); id. § 250 (discussing the anticipatory repudiation

doctrine).

       Additionally, the Amended Complaint pleads that as of March 31, 2020—two days

before Northstar’s termination—IPI Partners owed Northstar $3.8 million in Service Fees.

Am. Compl. ¶ 78. The Amended Complaint asserts that Northstar “had been requesting IPI

[Partners] to pay [those fees] for months.” Id. After being terminated due to a Cause Event,

Northstar Manager lost the ability to earn further Service Fees. Northstar Manger did not

lose its right to receive Service Fees it had already earned. Because the Amended

                                            27
Complaint pleads that the $3.8 million was earned before Northstar’s termination on April

2, 2020, it is reasonably conceivable that IPI Holdings breached the LLC Agreement by

not paying the amounts already due.

B.       Count II: Conversion

         In Count II of the Amended Complaint, Northstar and Northstar Manager asserted

a claim for conversion against IPI Partners, the Funds, IPI Holdings, A’Hearn, and Gilpin

(collectively, the “Tort Defendants”). In their opposition brief, the plaintiffs clarified that

this claim was asserted by Northstar Manager, Northstar Property, and Northstar

Development (collectively, the “Tort Plaintiffs”). The defendants object to this

clarification, but the issue does not affect the outcome.

         “Conversion is an act of dominion wrongfully exerted over the property of another,

in denial of his right, or inconsistent with it.” Arnold v. Soc’y for Sav. Bancorp, Inc., 678

A.2d 533, 536 (Del. 1996) (cleaned up). “Generally, the necessary elements for a

conversion under Delaware law are that a plaintiff had a property interest in the converted

goods; that the plaintiff had a right to possession of the goods; and that the plaintiff

sustained damages.” Goodrich v. E.F. Hutton Gp., Inc., 542 A.2d 1200, 1203 (Del. Ch.

1988).

         A claim for conversion is a tort claim. “[I]n order to assert a tort claim along with a

contract claim, the plaintiff must generally allege that the defendant violated an

independent legal duty, apart from the duty imposed by contract.” Kuroda v. SPJS Hldgs.,

L.L.C., 971 A.2d 872, 889 (Del. Ch. 2009). That is because “[w]here . . . the plaintiff’s

                                               28
claim arises solely from a breach of contract, the plaintiff generally must sue in contract,

and not in tort.” Id. (cleaned up).

       The Tort Plaintiffs contend that they sufficiently “alleged [that] the Tort Defendants

violated an independent tort duty to refrain from taking the Tort Plaintiffs’ property—the

contractual right to earn fees and GP [P]romotes.” Dkt. 33 at 38. But that alleged property

right derives from the Tort Plaintiffs’ contract rights. What the Tort Plaintiffs really are

claiming is a breach of contract, not the tort of conversion.

       The plaintiffs have properly cited the standard for pleading a conversion claim along

with a contract claim, but they have failed to show how they met that standard. Count II is

dismissed.

C.     Counts III and IV: Breach Of The Property And Development Agreements

       In Counts III and IV, Northstar Property and Northstar Development assert claims

for breach of the Property and Development Agreements. Virginia law governs those

claims. Dkt. 25 Ex. 1 §§ 1.1.2, 13.3; Dkt. 33 Ex. C § 15.4. Under Virginia law, “[t]he

elements of a breach of contract action are (1) a legally enforceable obligation of a

defendant to a plaintiff; (2) the defendant’s violation or breach of that obligation; and (3)

injury or damage to the plaintiff caused by the breach of obligation.” Filak v. George, 594

S.E.2d 610, 614 (Va. 2004). Delaware’s procedural law, however, governs the standard of

review for the motion to dismiss. See Tumlinson v. Advanced Micro Devices, Inc., 106

A.3d 983, 987 (Del. 2013) (“As a general rule, the law of the forum governs procedural

matters . . . .” (cleaned up)); Novarus Cap. Hldgs., LLC v. AFG Me W. Hldgs., LLC, 2021

WL 2582985, at *7 (Del. Ch. June 23, 2021) (applying Delaware’s motion to dismiss

                                             29
standard of review even though Georgia’s substantive law applied to the underlying

claims). It is reasonably conceivable that the Amended Complaint states a claim for breach

of the Property and Development Agreements under Virginia law.

       1.     Breach Of The Property Agreements

       In Count III, Northstar Property alleges that Dulles NCP and Manassas NCP

breached their respective Property Agreements by wrongfully terminating the agreements

for cause and by using the alleged termination for cause to justify only providing 15-days’

notice of termination rather than 30-days’ notice. Northstar Property argues that it has

suffered damages including the loss of 15-days of service fee revenue.3

       The Property Agreements provide that “[e]ither party [can] . . . terminate the

[Property Agreement] upon thirty (30) days prior written notice to the other party, without

cause” or “upon fifteen (15) days prior written notice to the other party, for cause.” Dkt.

22 Ex. D. §§ 10.2.5–.6 (Property Agreement with Dulles NCP); Dkt. 25 Ex. 1 §§ 10.2.5–

.6 (Property Agreement with Manassas NCP). In their termination letters, Dulles NCP and

Manassas NCP asserted that they were terminating the respective Property Agreements

“for cause immediately upon expiration of the 15-day notice period.” Dkt. 22 Ex. E

(termination letters from Dulles NCP and Manassas NCP).

       3
         Northstar Property does not seek to recover from the other Property Owners,
because the development of their data centers had not yet reached the stage where the
centers required property management services.

                                            30
       For the same reasons that Northstar Manager pled facts supporting the reasonable

inference that cause did not exist for its termination from the LLC Agreement, Northstar

Property has pled facts supporting the reasonable inference that cause did not exist to

terminate the Property Agreements. Accordingly, it is reasonably conceivable that

Northstar Property was entitled to the thirty-day written notice and that the fifteen-day

notice was insufficient. The Amended Complaint therefore states a claim for breach of the

Property Agreements. The motion to dismiss Count III is denied.

       2.     Breach Of The Development Agreements

       In Count IV, Northstar Development alleges that Dulles NCP II and Quail Ridge

NCP breached their respective Development Agreements by wrongfully terminating the

agreements for cause and using the alleged termination for cause to justify not paying fees

owed under the agreements.4

       Northstar Development has been unable to locate the Development Agreement with

Dulles NCP II, but expresses confidence that it exists and that discovery will uncover it.

The defendants do not deny the existence of the Development Agreement with Dulles NCP

II. They instead argue that because the Amended Complaint failed to attach a copy of the

agreement or allege when it was executed, by whom, or any consideration exchanged, the

claim against Dulles NCP II must be dismissed. “Delaware is a notice pleading

       4
        Northstar Development does not seek any amounts due from Dulles NCP and
Manassas NCP. Dkt. 33 at 32–33. That is because the development of those projects was
complete, and their Development Agreements had terminated.

                                            31
jurisdiction.” Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005). Under this standard, Northstar

Development has pled facts that make it reasonably conceivable that a Development

Agreement exists with Dulles NCP II. The fact that Dulles NCP II sent Northstar

Development a letter dated April 2, 2020, that purported to terminate that Development

Agreement strongly supports the existence of the agreement. See Dkt. 22 Ex. G.5

       The defendants also argue that the Amended Complaint (i) fails sufficiently to allege

that no “cause” existed under the Development Agreements to justify termination and (ii)

does not plead that all conditions precedent to Northstar Development’s right to payment

were met.

       First, it is not necessary for Northstar Development to plead cause, because the

Development Agreement requires the Property Owner to pay the Termination Fee

regardless of whether the termination was for cause:

       If [the Development Agreement] is terminated pursuant to the terms of
       Section 8.1(a) [termination without cause] or 8.1(b) [termination for default,
       including a “breach caused by [a] party’s fraud or intentional misconduct”] .
       . . Developer shall be paid an amount equal to the difference between the

       5
         The case that the defendants rely on is distinguishable. In Chilton v. Homestead,
L.C., the Circuit Court of Virginia, Bath County, dismissed a claim for breach of contract
in part because “[p]laintiffs ha[d] failed to allege facts sufficient for the court to find that a
written contract existed between the [p]laintiffs and [d]efendant.” 2008 WL 8225263, at
*15 (Va. Cir. Ct. Sept. 8, 2008). In that case, the plaintiffs conceded that they were “at [the
relevant] time, unaware of any written document constituting the terms of the contract
between [themselves] and [d]efendant.” Id. at *14 (cleaned up). The court concluded that
“[o]verall, there is no indication that [it] has been given any valid factual basis upon which
to find that a written contract . . . existed.” Id. at *15. Far from being “unaware of any
written document,” Northstar Development is “confident” that the Development
Agreement with Dulles NCP II exists and has provided a “valid factual basis” to support
that confidence. See id. at *14–15.

                                               32
       Minimum Development Fee and the actual amount of the Development Fee
       which had previously been paid [the Termination Fee]. The Minimum
       Development Fee is equal to forty percent (40%) of the Development Fee;
       provided, it is understood that the Minimum Development Fee shall only be
       paid to the extent Owner is reimbursed for such fee by the Project tenant
       [Amazon].

Dkt. 33 Ex. C § 13.1(b) (Quail Ridge Development Agreement); see id. §§ 8.1(a), (b).

       The letters terminating the Development Agreements cited Section 8.1(b)(3) as the

reason for termination. Dkt. 22 Ex. G. The Development Agreements specifically provide

for a Termination Fee if the Development Agreement is terminated “pursuant to the terms

of . . . [Section] 8.1(b).” Dkt. 33 Ex. C § 13.1(b). By its terms, Section 8.1(b)(3) falls within

Section 8.1(b) and only protects the Property Owner from having to “pay any additional

portion of the Development Fee or Construction Management Fee” to Northstar

Development. Id. § 8.1(b)(3). It has no impact on the obligation of the Property Owner to

pay the Termination Fee. Northstar Development therefore did not have to plead that no

cause for termination existed.

       Second, Northstar Development has pled facts making it reasonably conceivable

that the conditions precedent to receiving the Termination Fee were satisfied. The

Termination Fee is calculated based on the Development Fee. And as the definition of the

Development Fee makes clear, (i) the calculated amount of the Development Fee must be

“in accordance with the approved Budget” and (ii) Amazon must have “reimbursed” the

Property Owner for the Development Fee. Id. § 13.1(a). It is reasonably conceivable that

the Development Fee was established “in accordance with the approved Budget” and that

Quail Ridge NCP and Dulles NCP II have been “reimbursed” by Amazon for the

                                               33
Development Fee. Discovery may reveal that one or both of the conditions precedent were

not satisfied. At this stage, however, it is reasonably conceivable that they were. See In re

Cadira Gp. Hldgs., LLC Litig., 2021 WL 2912479, at *14 (Del. Ch. July 12, 2021) (“It is

enough that the pleading allege[s] complete performance generally.” (cleaned up)). It is

thus reasonably conceivable that Dulles NCP II and Quail Ridge NCP breached their

respective Development Agreements by not paying the Termination Fee. The defendants’

motion to dismiss Count IV is denied.

D.     Count V: Civil Conspiracy

       In the final count of the Amended Complaint, Northstar and Northstar Manager

bring a claim for civil conspiracy against the Tort Defendants. In their opposition brief, the

plaintiffs change the parties bringing the civil conspiracy claim to the Tort Plaintiffs. As

with the conversion claim, the change does not affect the outcome.

       In Delaware, “to state a claim for civil conspiracy, a plaintiff must plead facts

supporting (1) the existence of a confederation or combination of two or more persons; (2)

that an unlawful act was done in furtherance of the conspiracy; and (3) that the conspirators

caused actual damage to the plaintiff.” Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d

1020, 1036 (Del. Ch. 2006). “Civil conspiracy is not an independent cause of action; it

must be predicated on an underlying wrong.” Kuroda, 971 A.2d at 892. Accordingly, if a

“plaintiff fails to adequately allege the elements of the underlying claim, the conspiracy

claim must be dismissed.” Id. Further, “unless the breach also constitutes an independent

tort, a breach of contract cannot constitute an underlying wrong on which a claim for civil

conspiracy could be based.” Id.

                                             34
         The Tort Plaintiffs failed to plead an underlying wrong. As discussed above, the

Amended Complaint fails to state a claim for conversion. Even though the Amended

Complaint states a claim for breach of contract, that breach cannot constitute the underlying

wrong to support a claim for civil conspiracy. See NACCO Indus., Inc. v. Applica Inc., 997

A.2d 1, 35 (Del. Ch. 2009) (“A breach of contract is not an underlying wrong that can give

rise to a civil conspiracy claim.”).

         The Tort Plaintiffs cite CMS Investment Holdings, LLC v. Castle, 2015 WL 3894021

(Del. Ch. June 23, 2015), to support their view that a “breach of contract [can] serv[e] as a

wholly independent underlying wrong where the breach constitutes the intentional misuse

of a position in a company to harm another member of the company.” Dkt. 33 at 51. Their

case does not support that assertion. The defendants in CMS Investment advanced as their

“principal argument” that there was no “unlawful act” to support the plaintiff’s civil

conspiracy claim. 2015 WL 3894021, at *21. That argument failed because the court found

that the plaintiff had sufficiently stated claims for breach of contract, breach of the implied

covenant of good faith and fair dealing, breach of fiduciary duty, and aiding and abetting

breaches of fiduciary duty. Id. The CMS Investment court did not identify which of the

surviving claims supported the plaintiff’s civil conspiracy claim, only that at least one of

them did. See id. Quite plainly, it was the claim for breach of fiduciary duty that did the

trick. Just two months later, the author of CMS Investment, former Vice Chancellor

Parsons, wrote in OptimisCorp v. Waite that “breach of contract claims cannot serve as a

predicate for [an] alleged civil conspiracy.” 2015 WL 5147038, at *56 (Del. Ch. Aug. 26,

2015).

                                              35
       Because the Tort Plaintiffs failed to identify any underlying wrong to support their

civil conspiracy claim, Count V is dismissed.

E.     The Order To Show Cause

       The final question is whether to stay this litigation pending the outcome of the

Amazon Litigation. “This Court possesses the inherent power to manage its own docket,

including the power to stay litigation on the basis of comity, efficiency, or simple common

sense.” Paolino v. Mace Sec. Int’l, Inc., 985 A.2d 392, 397 (Del. Ch. 2009). The court can

issue a stay sua sponte. See In re Bay Hills Emerging P’rs I, L.P., 2018 WL 3217650, at

*1 (Del. Ch. July 2, 2018); Cummings v. Estate of Lewis, 2013 WL 979417, at *10 (Del.

Ch. Mar. 14, 2013); Kingsland Hldgs. Inc. v. Fulvio Bracco, 1996 WL 422340, at *2 (Del.

Ch. July 22, 1996). In deciding whether to issue a stay, the court “must make a practical

judgment as to whether a stay is warranted under the circumstances of each case.” K&K

Screw Prods., L.L.C. v. Emerick Cap. Invs., Inc., 2011 WL 3505354, at *11 (Del. Ch. Aug.

9, 2011).

       The Amazon Litigation will address facts that go to the heart of this case. Two

central issues in the Amazon Litigation are whether there was a kickback scheme, and, if

so, whether Watson knew of or was involved in it. The Amazon Litigation likely will

provide answers to both questions, and those answers will bind Watson and Northstar. The

answers will have implications for this case.

       The Amazon Litigation is further along than this case. The parties to the Amazon

Litigation are engaged in discovery, and IPI Partners is participating as a non-party. At the

                                             36
motion to dismiss hearing, both parties referenced information learned in discovery that

they thought supported their positions in this litigation.

       It is inefficient for the Amazon Litigation and this litigation to run concurrently. The

Amazon Litigation is likely to provide clarity on pivotal issues. In any event, the discovery

and trial record from the Amazon Litigation can be used to streamline this proceeding.

       Although the parties were amenable to a stay when last before the court, they failed

to reach agreement on implementing a stay. The parties did not explain why no agreement

was reached.

       The court believes that a stay is warranted. Within thirty days, any party who

opposes a stay of this litigation pending the outcome of the Amazon Litigation will show

cause why a stay should not issue.

                                  III.    CONCLUSION

       The motion to dismiss is denied as to Counts I, III, and IV. The motion to dismiss

is granted as to Counts II and V. Because Gilpin and A’Hearn are not named defendants to

the surviving claims, this decision does not address their alternative theory that they must

be dismissed from this litigation for lack of personal jurisdiction. Within thirty days, any

party who opposes a stay of this litigation pending the outcome of the Amazon Litigation

will show cause why a stay should not issue.

                                              37