Court Opinion

ID: 6335122
Source: CourtListenerOpinion
Date Created: 2022-04-26 19:03:52.618257+00
Date Added: 2024-06-11T09:23:48.562437
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SCHNEIDER NATIONAL CARRIERS, INC.,                        )
                                                          )
          Plaintiff/Counterclaim Defendant,               )
                                                          )
         v.                                               ) C.A. No. N21C-10-157-PAF
                                                          )
RAYMOND J. KUNTZ, as Sellers’                             )
Representative for RAYMOND J. KUNTZ and                   )
STEVE B. WILLIAMSON,                                      )
                                                          )
          Defendant/Counterclaim Plaintiff.               )

                               MEMORANDUM OPINION

                            Date Submitted: February 16, 2022
                              Date Decided: April 25, 2022

Michael A. Pittenger, Kelly L. Henry, POTTER ANDERSON & CORROON LLP,
Wilmington, Delaware; Locke Beatty, MCGUIREWOODS LLP, Charlotte, North
Carolina; Attorneys for Plaintiff and Counterclaim Defendant Schneider National
Carriers, Inc.

John M. Seaman, Matthew L. Miller, ABRAMS & BAYLISS LLP, Wilmington,
Delaware; Anthony S. Fiotto, MORRISON & FOERSTER LLP, Boston,
Massachusetts; Attorneys for Defendant and Counterclaim Plaintiff Raymond J.
Kuntz, in his capacity as Sellers’ Representative for Raymond J. Kuntz and Steve B.
Williamson.

FIORAVANTI, Vice Chancellor*

*
    Sitting by designation pursuant to Del. Const. art. IV, § 13(2).
      This breach of contract case involves the purchase of a group of trucking

companies. The contract contained covenants governing the buyer’s operation of

the acquired companies after the closing of the transaction. The buyer’s breach of

any one of those covenants would require the buyer to pay $40 million to the sellers.

One of those covenants, and the main focus of disagreement, required the buyer to

“cause one or more of the Acquired Companies to acquire, in the aggregate, not less

than sixty (60) class 8 tractors” every year for three years after the acquisition. The

buyer contends this covenant only required the buyer to acquire at least 60 tractors

per year across all of the acquired companies, which the buyer undisputedly did.

The sellers contend the covenant required the buyer to expand the acquired

companies’ fleet of tractors by at least 60 tractors per year, which the buyer

undisputedly did not do.

      This case was originally filed in the Court of Chancery, where the court

previously denied the parties’ cross-motions for judgment on the pleadings and later

for summary judgment, having determined that the covenants at issue are

ambiguous. Following trial, but before decision, the Court of Chancery questioned

whether it had subject matter jurisdiction over this case. The case was then

transferred to the Superior Court and the undersigned was designated to sit on the

Superior Court for the purpose of deciding all issues in the case.
         In this post-trial opinion, the court agrees with the sellers that the stock

purchase agreement required the buyer to grow the fleet by 60 class 8 tractors per

year. Therefore, the sellers have established their claim for breach of contract and

are entitled to contract damages of $40 million. The sellers have not satisfied their

burden of proof on their remaining claims for breach of contract as to the other

remaining operating covenants or breach of the implied covenant of good faith and

fair dealing. The sellers are also entitled to their reasonable attorneys’ fees and

expenses under the indemnification provision of the stock purchase agreement.

I.       BACKGROUND

         The following recitation reflects the facts as the court finds them after trial.1

         A.     The Stock Purchase Agreement

         Plaintiff and Counterclaim Defendant Schneider National Carriers, Inc.

(“Schneider”) is a transportation company headquartered in Green Bay, Wisconsin.2

Watkins & Shepard, LLC (“W&S”) was a Montana-based trucking company

1
  The trial testimony is cited as “Tr.”; deposition testimony is cited as “Dep.”; trial exhibits
are cited as “JX”; and stipulated facts in the pre-trial order are cited as “PTO,” with each
followed by the relevant section, page, paragraph, or exhibit number. Documents filed on
the Court of Chancery docket (C.A. No. 2017-0711-PAF) for this case are cited as “Ct. Ch.
Dkt.” followed by their docket number. Documents filed on the Superior Court docket
(C.A. No. N21C-10-157-PAF) are cited as “Super. Ct. Dkt.” followed by their docket
number.
2
    PTO, III ¶ 1.

                                               2
established in 1974.3 Raymond J. Kuntz and Steve B. Williamson (the “Sellers”)

are the former principal stockholders of W&S. 4 Kuntz served as the Chief Executive

Officer of W&S. 5

         On June 1, 2016, Schneider acquired W&S and its subsidiaries, Watkins &

Shepard Leasing, LLC, and Lodeso, Inc. (collectively, the “Acquired Companies”),

from the Sellers pursuant to a Stock Purchase Agreement (the “SPA”). For tax and

liability reasons, Watkins & Shepard Leasing, LLC owned W&S’s fleet of tractors

and leased the tractors to W&S. 6 Lodeso, Inc. was a Michigan-based logistics

company engaged in the business of contracting with agents or independent

contractors to arrange for final-mile delivery, and did not itself own any trucks.7

Defendant and Counterclaim Plaintiff Kuntz is the designated Sellers’

Representative in the SPA. Kuntz was to remain with W&S after the closing of the

transaction, consulting with Schneider on integrating W&S and applying his

3
 Id. At the time of the transaction, Schneider was a Nevada corporation, and W&S was a
Montana corporation. JX 108.00006.
4
    PTO, III ¶ 2.
5
    Tr. 9:18–22 (Kuntz).
6
    Id. at 45:12–24 (Kuntz).
7
    Id. at 41:8–42:5 (Kuntz).

                                          3
expertise to Schneider’s business. 8         Kuntz eventually resigned from his role

following Schneider’s purchase of the Acquired Companies.9

         Under the SPA, the aggregate purchase price for W&S was set between

$128,750,000 and $168,750,000. The purchase price contained three elements.

First, the parties agreed to a non-contingent closing payment of $68,750,000 (less

certain specified sums) to be made at closing on June 1, 2016. Second, the parties

agreed to three, non-contingent, deferred consideration payments totaling

$60,000,000, payable in three increments of $20,000,000 (less certain specified

sums) with each payment being due following each of the first three anniversaries

of the closing date. Third, and central to this dispute, the parties agreed to the

possibility of three additional payments totaling a maximum of $40,000,000 (the

“Earnout Payments”). The Earnout Payments would be payable in three increments

of up to $13,333,333.33, if the Acquired Companies generated enough earnings

before interest, taxes, depreciation, and amortization or “EBITDA” (the “EBITDA

Targets”) during three successive periods (each being a “Measurement Period”).10

         The first Measurement Period ran from July 1, 2016 to June 30, 2017, with an

EBITDA Target of $36,000,000.11 The second Measurement Period ran from July

8
    Id. at 99, 169–70 (Kuntz); id. at 650–53 (Rourke); id. at 988–89 (Elkins); see JX 173.
9
    Tr. 653:4–7 (Rourke).
10
     PTO, III ¶ 5.
11
     Id. ¶ 7.

                                               4
1, 2017 to June 30, 2018, with an EBITDA Target of $46,000,000.12 The third

Measurement Period ran from July 1, 2018 to June 30, 2019, with an EBITDA Target

of $59,000,000.13 The EBITDA Targets were set based on Sellers’ pre-acquisition

financial projections.14

          As to be expected, the Sellers wanted to maximize the prospects of achieving

the Earnout Payments. Schneider, on the other hand, wanted flexibility in operating

its newly Acquired Companies and integrating them into Schneider’s overall

business. To that end, Section 2.4(e) of the SPA provides that, after the transaction,

Schneider, the Acquired Companies, and their affiliates would have the right to

operate the businesses “as they see fit,” subject to certain operating covenants in

Exhibit E to the SPA. Section 2.4(e) states that “there is no guarantee of any

[Earnout Payment]” and that Schneider “is not making nor has it made any

12
     Id. ¶ 8.
13
     Id. ¶ 9.
14
     Id. ¶ 6.

                                            5
representation or warranty to such Seller . . . as to the value to such Seller of the

potential right to receive any [Earnout Payment].”15

         Sellers negotiated limitations on Schneider’s operational freedom, which are

reflected in four operating covenants (the “Operating Covenants”). The Operating

Covenants are contained in Exhibit E to the SPA. Paragraph 1 to Exhibit E states

that Schneider must, during each Measurement Period, “cause one or more of the

Acquired Companies to acquire, in the aggregate, not less than sixty (60) class 8

tractors” (the “Tractor Acquisition Covenant”). 16

15
     JX 108 (“SPA”) § 2.4(e). Section 2.4(e) states:
         During each Measurement Period, the Buyer shall operate the Acquired
         Companies and Lodeso in the manner provided for on Exhibit E. Each Seller
         acknowledges and agrees that (i) so long as the Buyer operates the Acquired
         Companies and Lodeso in such manner, the Buyer, the Acquired Companies
         and each of their respective Affiliates will have the right to otherwise operate
         their business as they see fit and will have no obligation (fiduciary or
         otherwise) to act in any manner in an attempt to protect or maximize any
         payments under this Section 2.4, (ii) any [Earnout Payment] is contingent on
         the performance of the business of the Acquired Companies, and there is no
         guarantee of any [Earnout Payment] . . . under this Agreement or otherwise;
         and (iii) the Buyer is not making nor has it made any representation or
         warranty to such Seller, and the Buyer expresses no opinion, as to the value
         to such Seller of the potential right to receive any [Earnout Payment].
16
   SPA, Ex. E. A class 8 tractor is considered a truck that is regularly seen hauling a 53-
foot trailer on an interstate highway, whereas a class 7 tractor is smaller, and is normally
used for what is called the “final mile” delivery. Tr. 43:2–16 (Kuntz). At trial, the parties
used the terms “class 8 tractor” and “truck” interchangeably. Unless otherwise stated, the
reference to “trucks” and “tractors” in this opinion refers to class 8 tractors.

                                                6
         Paragraph 2 to Exhibit E requires Schneider, during each Measurement

Period, to “work in good faith . . . to seek to capture synergies available to the

Acquired Companies” (the “Synergy Covenant”).17 The final paragraph in Exhibit

E contains two covenants requiring Schneider to refrain from (1) transferring any

material portion of the Acquired Companies’ assets outside of the Acquired

Companies (the “Material Asset Covenant”); and (2) materially changing the “type

or nature” of any Acquired Company’s business until the Measurement Periods

ended (the “Business Continuity Covenant”). 18

         In the event that Schneider violated any of the Operating Covenants, the

Earnout Payments were to be collectively accelerated and due in full within five

17
     SPA, Ex. E. The Synergy Covenant, in full, requires Schneider to:
         work in good faith with the Acquired Companies to seek to capture synergies
         available to the Acquired Companies as a result of becoming a subsidiary of
         the Buyer and its Affiliates, such as, by way of representative example, fuel
         cost savings, tire cost savings, equipment cost savings, insurance savings and
         access to the Buyer’s and its Affiliates’ driver recruiting and management
         capabilities, safety initiatives and purchasing power.
18
     Id. In full, the final paragraph to Exhibit E states:
         In addition, except as the Buyer and Sellers’ Representative may otherwise
         agree in writing, from the Closing Date through and including the last day of
         the final Measurement Period, the Buyer shall not, and shall not permit any
         of the Acquired Companies to reorganize, consolidate or otherwise take steps
         to sell, dispose or otherwise transfer any material portion of the assets of the
         Acquired Companies to an entity other than an Acquired Company or to
         materially alter or change the type or nature of any Acquired Company’s
         business from the business conducted by the Acquired Companies
         immediately prior to the Closing.

                                                 7
business days of the failure to operate pursuant to any of the Operating Covenants

(the “Acceleration Payment”). 19

          B.         The Negotiation of the SPA

                     1.   W&S Seeks a Strategic Partner.

          In 2013, W&S began expanding its service into delivering freight from stores

engaged in e-commerce, including Costco.com.20 W&S grew to become the largest

specialized carrier of furniture and the second largest specialized carrier of carpet in

the United States.21 To accommodate the increased growth and achieve increased

efficiencies, W&S built a truck terminal in Fontana, California, located closer to

furniture shippers and manufacturers.22

          Kuntz explained that trucking companies engaged in delivering freight for e-

commerce customers have less time to conform their trucking fleet to the needs of

those customers than for customers in other industries. Traditionally, once a

trucking company signs a contract to haul freight, there is sufficient lag time before

the first delivery so as to enable the trucking company to acquire the necessary

tractors and to hire drivers.23 According to Kuntz, e-commerce businesses, on the

19
     Id. § 2.4(f).
20
     Tr. 20:12–24 (Kuntz).
21
     Id. at 14:14–23 (Kuntz).
22
     Id. at 38:4–39:2 (Kuntz).
23
     Id. at 78:21–79:1 (Kuntz).

                                              8
other hand, require companies like W&S to begin hauling their freight the day after

a contract’s signing. 24 Additionally, freight arriving from e-commerce businesses

often arrives in variable quantities.25        Therefore, it is imperative for trucking

companies to have an appropriately sized tractor fleet immediately upon signing a

contract with an e-commerce business.26 W&S struggled to acquire trucks and hire

drivers to keep up with the expansion and increasing demands of its e-commerce

clients.27 Kuntz, Kelly Darlington, W&S’s operations manager, 28 and Richard

Schenk, W&S’s director of truckload operations, 29 each testified that W&S had

difficulty purchasing enough trucks to accommodate the increased growth.30

           In June 2015, W&S engaged a private equity firm, Cascadia Capital

(“Cascadia”), to help W&S sell its business.31 Schneider demonstrated interest in

acquiring W&S, and Kuntz began negotiating with Schneider over the terms of that

transaction. At the time, Schneider did not have any experience in handling the

24
     Id. at 79:1–11 (Kuntz).
25
     Id.
26
     Id.
27
   Id. at 20:10–24 (Kuntz) (“[W]e were constantly struggling to . . . get enough trucks. And
so we could see, with the tremendous opportunity of e-commerce freight that we had in
front of us, that we didn’t have the capital to invest in enough equipment to keep up with
it.”).
28
     Id. at 347:2–5 (Darlington).
29
     Id. at 425:14–17 (Schenk).
30
     Id. at 350:18–351:21 (Darlington); id. at 429:8–23 (Schenk).
31
     Id. at 526:23–527:3 (Schiller).

                                              9
delivery of furniture and carpeting. 32 Kuntz told Schneider’s then-CEO, Chris

Lofgren, that W&S “needed a capital partner to go forward” as a result of W&S’s

growth in e-commerce. 33

                2.     Schneider and W&S Negotiate the Transaction and Discuss
                       Acquiring Additional Equipment for W&S.

         Cascadia prepared and delivered to Schneider a Confidential Information

Memorandum (the “CIM”) and Supplemental Financial Package (“SFP”).                   In

December 2016, three Schneider executives—George Grossardt, Bob Elkins, and

Michael Gasick held a conference call with Kuntz to discuss both documents.34

Grossardt, Schneider’s then-Senior Vice President of Corporate, led Schneider’s

deal team.35 The SFP contained a slide entitled “Capital Expenditures Analysis,”

projecting that W&S would acquire 45 growth tractors (i.e., new tractors to be added

to grow the fleet, not to replace retired tractors) in 2016, 60 growth tractors in 2017,

and 60 growth tractors in 2018. 36 Kuntz discussed with the Schneider executives on

the December 2016 call the purchase of growth tractors, as described in the CIM.37

32
     Id. at 19:2–6 (Kuntz).
33
     Id. at 63:17–22 (Kuntz).
34
     Id. at 64:5–65:20 (Kuntz); see JX 9 (CIM); JX 16 (SFP).
35
     Tr. 756:12–24 (Gasick); id. at 612:2–7 (Rourke); id. at 534:20–22 (Schiller).
36
     JX 16.00005.
37
     Tr. 65:5–13 (Kuntz).

                                              10
The CIM and the SFP projected that capital expenditures would be used both to

replace existing tractors and to increase the overall fleet size.38

           In January 2016, Kuntz discussed the prospective transaction with Grossardt,

Gasick, and Elkins. Grossardt represented to Kuntz that Schneider could “provide

[W&S] as many trucks as [Kuntz] wanted,” and Grossardt and Elkins allayed

Kuntz’s fears that it would be difficult to find enough drivers. 39 In a follow-up email,

Kuntz explained that “adding an additional 12 trucks per month after a transaction”

would cause a “large increase in EBITA.” 40           Grossardt responded to Kuntz,

indicating that Schneider’s “equipment life cycle” would require replacement of

“about 200 tractors and 900 trailers immediately,” which would be “over and above

growth equipment that is already in your plan.” 41

           W&S and Cascadia provided financial projections for W&S during the due

diligence process. 42 Their projections assumed that W&S would acquire 60 growth

tractors per year. 43 Schneider’s internal documents consistently incorporated that

38
     JX 239; Tr. 61:3–62:4 (Kuntz).
39
     Tr. 70:14–71:10 (Kuntz).
40
     JX 22.
41
     Id.
42
     Tr. 734:13–21 (Gasick).
43
   JX 239 at Tab 2016 Budget p.3., Tab 2017 Projection p.3, Tab 2018 Projection p.3
(showing a 60 tractor per year increase: 630 tractors at the beginning of 2016, 690 at the
beginning of 2017, 750 at the beginning of 2018, and 810 at the end of 2018).

                                            11
assumption into its own analyses of the prospective transaction. Schneider’s internal

projections assumed that W&S would acquire 60 growth tractors per year.44 A

presentation to Schneider’s board of directors in February 2016 states that “[g]rowth

capex is assumed to be 60 tractors and 180 trailers per year” and that “60 growth

tractors provides . . . $5M of EBITDA.”45 The assumption that W&S would acquire

60 growth tractors annually was then used in Schneider’s own valuation calculations

based on W&S’s projections, even after those calculations were “modified for more

reasonable assumptions.”46 Indeed, although he was unwilling to concede the issue,

Mark Rourke, Schneider’s then-COO and eventual CEO, testified that every

projection that Schneider and W&S created relied on the assumption that W&S

would acquire 60 growth tractors annually after the transaction. 47

44
     JX 102.00040.
45
     JX 27.00002.
46
     JX 27.00003; Tr. 817:4–24 (Gasick).
47
     Tr. 670:7–672:13 (Rourke):
         Q. And you saw from reviewing [the CIM] that the plan that [W&S] had for
         obtaining its EBITDA targets was to grow the fleet. Correct?
         A. As well as a number of other items on that income statement. But yes.
         Q. And you understand that the strategy was to grow the fleet by 60 Class 8
         tractors a year to attain those EBITDA targets. Correct?
         A. As well as the revenue that supports that, yes.
         ...
         Q. The internal Schneider projections included a plan to grow the fleet by
         60 additional Class 8 tractors; yes, sir?

                                              12
                3.         The Letters of Intent

         On March 7, 2016, Schneider sent W&S a non-binding letter of intent.

Schneider proposed a purchase price of $145 million in guaranteed consideration

and up to $30 million of Earnout Payments contingent upon W&S reaching certain

EBITDA Targets. 48 The initial letter of intent contained EBITDA Targets of $36

million for one year after closing, $46 million for two years after closing, and $59

million for three years after closing.49 The EBITDA Targets in the first letter of

intent originated from W&S’s projections. 50

         On March 14, 2016, Schneider sent W&S a revised letter of intent that

contained certain “assumptions,” including “[s]ufficient tractor and trailer capital to

support profitable growth; a minimum of 60 tractors and sufficient trailers for each

12 month EBITDA Measurement Period.” 51 In a subsequent draft of the letter of

         A. We had a projection to grow the business, yes, 60 tractors.
         Q. . . . [E]very single projection that Schneider received from [W&S] had
         the 60 tractor—or 60 Class 8 tractor growth a year plan, did it not?
         A. . . . Yes.
         Q. And, in fact, every projection and valuation document that Schneider did
         included that 60-tractor growth a year, did it not?
         A. . . . [Y]es.
48
     JX 38.
49
     JX 38.00004.
50
     Tr. 762:21–763:6 (Gasick); PTO, III ¶ 6.
51
     JX 43.00004.

                                                13
intent, Sellers’ counsel added language indicating that the “Definitive Agreement

will contain mutually agreeable operational covenants with the goal of optimizing

the achievement of the EBITDA Targets,” and requiring “[s]ufficient tractor and

trailer capital to support profitable growth, including a minimum of 60 tractors and

sufficient trailers for each 12 month EBITDA Measurement Period.” 52

         On March 18, 2016, the parties executed a final letter of intent. 53 The final

letter of intent provided for total consideration of $175 million, consisting of: (1)

$85 million at closing, (2) three guaranteed payments of $20 million each year for

three years after closing, and (3) three contingent payments of up to $10 million for

achieving at least 80% of EBITDA targets of $36 million within 12 months after

closing, $46 million within 24 months after closing, and $59 million within 36

months of closing.54 The final letter of intent largely preserved the language

regarding the acquisition of 60 growth tractors annually, stating that the “Definitive

Agreement will contain mutually agreeable operational covenants, including but not

limited to . . . . Sufficient tractor and trailer capital to support profitable growth; a

minimum of 60 tractors and sufficient trailers for each 12 month EBITDA

Measurement Period.” 55 No one from Schneider informed W&S that the 60 tractors

52
     JX 45.00005.
53
     See JX 47.
54
     Id. at 47.00002.
55
     Id. at 47.00005.

                                           14
referenced in the letter of intent were intended to be replacement tractors (i.e., new

tractors to be added to the fleet to replace retiring tractors).56 In fact, Rourke testified

that the reference to a “minimum of 60 tractors” in this letter of intent meant “60

additional growth capex tractors.”57

         Internal Schneider documents postdating the final letter of intent demonstrate

that Schneider understood the agreement would require purchasing 60 growth

tractors per year for W&S after the acquisition. A presentation in April 2016 to

Schneider’s board of directors stated that W&S’s “[g]rowth opportunities are being

hampered by [its] capability to acquire growth capital,” and assessed the return on

capital from an acquisition of W&S based on “60 tractors/180 trailers of growth

assumed annually.” 58 Schneider management also submitted a Hart-Scott-Rodino

filing to the Federal Trade Commission, which included slides projecting future

EBITDA based on the assumption that Schneider would add 60 growth tractors per

year after the transaction. 59

56
     Tr. 694:5–20 (Rourke).
57
  Id. at 679:10–18 (Rourke) (“Q. You understood when you signed this [letter of intent]
that 60 tractors related to the 60 additional growth capex tractors, did you not? A. At the
time, yes. Q. So that’s the commitment in the [letter of intent]. Correct? A. At that
portion of the process.”).
58
     JX 64.00018, .00026.
59
   JX 286.00199; see also Kardish Sept. 27, 2019 Dep. 98:7–101:18. Kardish did not testify
at trial.

                                            15
                  4.   The Parties Exchange the First Drafts of the SPA.

          On April 8, 2016, Schneider sent the first draft of the SPA to the Sellers, which

contained the same price terms as the final letter of intent. 60 The first draft of the

SPA did not include any operating covenants or any provision obligating Schneider

to purchase tractors.61 The initial draft of the SPA permitted Schneider to operate

the business “as [it saw] fit,” without any “obligation (fiduciary or otherwise) to act

in any manner in an attempt to protect or maximize” the Earnout Payments.62

          On April 21, 2016, Sellers’ counsel circulated a second draft of the SPA.63

The Sellers’ second draft requested that Schneider propose “post-closing operational

covenants,” including a covenant “to continue to operate the business on a stand-

alone, independent basis” and a “covenant to provide appropriate equipment

purchase support.”64 Kuntz’s attorney, Jamie Hutchinson, testified that the request

for a covenant to provide “appropriate equipment purchase support” was a reference

to the provision in the letter of intent to increase the fleet size by 60 tractors every

year.65

60
     See JX 56.
61
     Id. §§ 2.1–2.4.
62
     Id. § 2.4(e).
63
     See JX 65.
64
     JX 65.00026.
65
     Tr. 264:22–265:9 (Hutchinson).

                                             16
                  5.    The Parties Meet to Negotiate the Terms of the SPA.

         On May 3, 2016, Rourke, Elkins, Grossardt, Kuntz, and Cascadia met in

Green Bay, Wisconsin to discuss the transaction. The parties memorialized the

meeting in a set of meeting notes. 66 According to the notes, the goal of the meeting

was to “come away with a comprehensive understanding of all of the key deal points

and issues and design an action plan/strategy to completing these open items.”67

After discussing various matters, including an environmental review of W&S’s

facilities, key employee agreements, and changes to accounting methods as a result

of the acquisition, the parties turned to W&S’s recent performance. In the first

quarter of 2016, W&S missed its target EBITDA by almost 30%. 68 The Sellers,

though, declined to offer revised projections. Christian Schiller, a managing director

at Cascadia, believed the earnings miss was primarily attributable to “just a timing

issue” along with hedge positions relating to fuel costs. 69 The contemporaneous

notes of the Green Bay meeting state that Sellers concluded that they would “hold

[their] position on valuation and there will be no retrade or valuation changes.” 70

66
     See JX 78.
67
     Id. at 78.00003.
68
     JX 68; Tr. 193:22–194:10 (Kuntz).
69
     Tr. 881:3–884:2 (Schiller).
70
     JX 78.00007.

                                           17
         The parties then negotiated the Earnout Payments. Under a heading entitled

“Define and Simplify Earn Out,” the notes state: “Ray [Kuntz] began this point with

a statement . . . . We will start adding trucks.” 71 Kuntz explained at trial that, at this

time, W&S could not wait to begin purchasing growth tractors in order to meet its

EBITDA Targets, “particularly before the fall e-commerce season really lit up.”72

The parties also discussed integration efforts, including that Schneider “would be

worried about underutilization of the assets. I.E. adding assets before the revenue is

there,” because Schneider would “want to make sure there is good return on the

assets.”73 Rourke testified that this statement was an expression of Schneider’s

business philosophy, because Schneider is not “capital constrained, and we have

access to capital to place into the business to the degree that we’re successful . . . .

Not in advance of being successful, but as we’re being successful.” 74

         On May 10, 2016, Kuntz and Rourke continued to negotiate. Kuntz and

Rourke agreed to reallocate money from the non-contingent closing payment into

the Earnout Payments to account for risk associated with W&S’s recent earnings

misses. 75 Kuntz and Rourke’s testimony differ regarding whether Kuntz discussed

71
     Id. at 78.00008.
72
     Tr. 114:9–19 (Kuntz).
73
     JX 78.00008.
74
     Tr. 625:3–626:5 (Rourke).
75
     JX 86; Tr. 118:3–22 (Kuntz); id. at 628:10–629:1 (Rourke).

                                             18
the need for 60 additional tractors and drivers on this call. According to Kuntz, he

told Rourke that he needed Rourke’s “assurance” that the 60 tractors “in the LOI”

would be provided to him.76 Kuntz testified that Rourke responded by telling him,

“We’re an operations company. We hire drivers. That’s what we do. We will

provide you the drivers.”77 Rourke, on the other hand, testified that he did not recall

agreeing to increase the fleet by 60 trucks each year during that call. 78

         Late that evening, Gasick sent Rourke, Grossardt, and Lori Lutey (Schneider’s

then-CFO) “a draft overview of the changes to the Buffalo deal from the original

LoI terms.” 79      The overview described three “changes to valuation and deal

structure” that Rourke and Kuntz discussed, including shifting $10 million from the

closing payment into the Earnout Payments. 80 The following morning, Rourke sent

an email to Kuntz to follow up on their discussion.81 The summary email detailed

revised price terms, with a closing payment of $68.75 million and total compensation

of $168.75 million, listing certain outstanding items and a target closing date. Kuntz

76
     Tr. 118:19–22 (Kuntz).
77
     Id. at 118:3–119:2 (Kuntz).
78
   Id. at 629:22–24 (Rourke) (“No. I don’t recall doing that at all.”). Rourke did recall
discussing other issues during that call. Id. at 627:14–628:9, 629:2–17 (Rourke).
79
     JX 281.
80
     Id. at 281.00004.
81
     JX 86; Tr. 628:18–631:1 (Rourke).

                                           19
agreed, stating that he “just brief[ed the] crew to get it done.”82 Neither the overview

nor the summary email addressed any operating covenants, including the purchase

of 60 growth tractors annually.

         On May 11, 2016, the parties held an “all hands” call involving many

representatives from the parties and their counsel. 83 Kuntz testified that he and

Hutchinson “were adamant that we needed operational cover that would protect us

[so] that we got the 60 additional trucks that Mark Rourke alluded to,” and that Kuntz

and Hutchinson were “adamant that [they] needed protection that [Schneider] just

couldn’t randomly pull assets . . . out of our operation, material assets that would

keep us from making our EBITDA.”84             Hutchinson specifically recalled the

discussions about the Earnout Payments from the call and stated that, from Kuntz’s

perspective, “one of the most important points was the increase in the aggregate fleet

size. And in particular, that was the adding an additional 60 trucks per measurement

period.”85 Hutchinson testified that he “raised the issue” that an operating covenant

would be necessary to prevent Schneider from transferring material assets out of

W&S after the transaction. 86 Hutchinson recalled that they discussed the transfer of

82
     JX 86.
83
     JX 84.
84
     Tr. 130:8–15 (Kuntz).
85
     Id. at 270:1–15 (Hutchinson).
86
     Id. at 270:16–271:12 (Hutchinson).

                                          20
assets “sort of in a general way,” but that “we also did discuss the trucks,

specifically,” because the additional trucks were “one of the key components for the

ability to meet the earn-out target” considering the revenue was “based on having an

increase in the overall fleet size.”87 Hutchinson testified that there was “agreement

. . . on a bunch of the major points, including . . . the increase in fleet size, and that

there would be operational covenants as part of the transaction.” 88

         Schneider’s witnesses contradicted Kuntz and Hutchinson’s testimony about

the May 11, 2016 call. David Whelpley, counsel for Schneider, did not recall that

Kuntz “said that the only way to make the earn-out was via trucks.” 89 In addition to

testimony from Whelpley, Schneider cites testimony from Schiller, who did not

recollect “any call involving [Schneider’s counsel] or Schneider representatives . . .

requiring Schneider to provide a net increase of 60 tractors each year for three years

as a term of the stock purchase agreement.” 90

                6.      The Parties Finalize the Terms of the SPA.

         On May 13, 2016, Schneider provided a revised draft of the SPA to the

Sellers.91 In that draft, Schneider replaced language indicating that it would “operate

87
     Id. at 271:22–272:7 (Hutchinson).
88
     Id. at 271:4–12 (Hutchinson).
89
     Id. at 1092:4–7 (Whelpley).
90
     Id. at 885:17–24 (Schiller).
91
     JX 88.

                                           21
the Acquired Companies in the manner provided for on Exhibit A,” with language

providing that it would “have the right to operate their business as they see fit and

will have no obligation (fiduciary or otherwise) to act in any manner in an attempt

to protect or maximize any [Earnout Payments].”92          Schneider included new

proposed language in Exhibit A, which contains principles and assumptions for

calculating EBITDA based on the parties’ financial projections. The assumptions

were:      “[c]apital expenditure equivalent to 60 class 8 tractors” and “[a]ssets

includ[ing] 760 tractors for the first Measurement Period, 820 tractors for the second

Measurement Period, and 880 tractors for the third Measurement Period.”93

Whelpley testified that Exhibit A was intended solely as an accounting assumption

and was not an operating covenant. 94

         On May 17, 2016, Sellers responded with a list of remaining material issues,

noting that the “Post-Closing earn-out covenants remain limited and Buyer

favorable.” 95 Schneider responded with a comment on the material issues list that

Schneider would be “willing to agree that any of the following actions will accelerate

the unpaid earn-out: (1) failure by the Acquired Companies to acquire sixty (60)

tractors during each Measurement Period and (2) any transfer, sale or disposition

92
     Id. at 88.00027.
93
     Id. at 88.00087.
94
     Tr. 1093:11–1094:15 (Whelpley).
95
     JX 91.00004.

                                          22
during any Measurement Period of a material portion of the Acquired Companies’

assets (determined on a consolidated basis).” 96

            On May 20, 2016, Schneider circulated a revised draft of the SPA

incorporating the latest exchange of comments between the parties.97 Schneider

deleted the assumption that, for measuring EBITDA, there would be “[c]apital

expenditure equivalent to 60 class 8 tractors” and that assets would “include 760

tractors for the first Measurement Period, 820 tractors for the second Measurement

Period and 880 tractors for the third Measurement Period.”98 At the same time,

Schneider added two operating covenants, which were located in Exhibit D to that

draft. 99 The first covenant required Schneider to “cause one or more of the Acquired

Companies to acquire, in the aggregate, sixty (60) class 8 tractors” during each

Measurement Period. 100 The second covenant required Schneider to “cause the

Acquired Companies to not sell, dispose of, or otherwise transfer to any other Person

a material portion of the assets of the Acquired Companies” without consent by the

Sellers.101 Hutchinson understood that the change from the accounting assumption

96
     JX 92.00005.
97
     JX 94.00001.
98
     Id. at 94.00083.
99
     Id. at 94.00090.
100
      Id.
101
      Id.

                                         23
to the operating covenant was a “simplification of the prior draft,” and that he did

not understand that Schneider was “unwilling to provide 60 tractors to increase the

size of the fleet” as a result of the changes from the May 13 to the May 20 draft of

the SPA.102 Kuntz testified that, like Hutchinson, his understanding of the deal had

not changed between the May 13 and May 20 draft. 103

         On May 25, 2016, Sellers proposed a revision to the operating covenants.

Sellers sought to impose an obligation on Schneider to “cause one or more of the

Acquired Companies to acquire, in the aggregate, not less than sixty (60) class 8

tractors (the “Tractors”) and such greater number of Tractors and other equipment

necessary to the accommodate the Acquired Companies’ operations, including any

growth related thereto.” 104        Sellers also included eight separately numbered

paragraphs containing additional operating covenants for the Acquired Companies,

covering matters including employee compensation, reassignment of personnel,

cutting staff, and closing a key terminal.105 Schneider struck the language in the next

turn of the SPA that would have required Schneider to acquire “such greater number

of Tractors and other equipment necessary to accommodate the Acquired

Companies’ operations, including any growth related thereto,” as well as seven of

102
      Tr. 285:15–286:1, 292:3–7 (Hutchinson).
103
      Id. at 140:9–141:7 (Kuntz).
104
      JX 98.00009.
105
      Id. at 98.00009–10.

                                            24
the eight newly proposed operating covenants. Those proposed covenants were not

included in the final version of the SPA.106

         At this time, Schneider continued to create projections for W&S which

assumed the purchase of 60 growth tractors annually after the W&S acquisition.

Schneider’s “3YP Capital Expenditure Summary” dated May 25, 2016 indicated that

Schneider intended to purchase 60 growth tractors in 2017, 2018, and 2019, in

addition to purchasing replacement tractors for those years.107 Schneider’s internal

valuation model dated May 26, 2016 also assumed that Schneider would add 60

tractors annually, for a total of 820 tractors in 2016, 880 tractors in 2017, and 940

tractors in 2018. 108

         The parties executed the SPA on June 1, 2016, and closed the transaction that

same day.109 According to Rourke, Schneider executive Bob Elkins was responsible

for ensuring that Schneider complied with the SPA after the acquisition. 110 Elkins

admitted that he had never reviewed any drafts of the SPA prior to the acquisition,

that he never saw the final SPA while he was the head of the division that included

W&S, and that he had never seen a copy of Exhibit E to the SPA, which contained

106
      JX 103.00079–80.
107
      JX 100.0004.
108
      JX 102.00035, .00040.
109
      PTO, III ¶ 3.
110
      Tr. 661:13–662:19 (Rourke).

                                           25
all of the Operating Covenants for the post-closing operation of W&S. 111 Elkins

testified that he had never been briefed regarding the terms of the SPA, and that he

was not aware of the Tractor Acquisition Covenant, the Material Asset Covenant, or

the Business Continuity Covenant.112 He agreed that it would have been helpful to

know about the obligations created by the covenants as the head of W&S after the

acquisition.113

         On June 10, 2016, after the SPA closed, Aaron Cousineau, the controller for

the division of Schneider that included W&S, sent Elkins a draft of a

“Capital/Release/Expenditure Request” (a “CLER”) for 26 tractors.114 Cousineau

wrote that the CLER included “verbiage calling out this will be 26 of the 60 growth

tractors.”115 The CLER stated that the request was for “New Business Tractors for

W&S Growth (26 tractors),” that “Tractors will be used to fund 26 of total 60 tractors

per agreement,” and that “Funds will be reconciled against W&S growth capital for

first 12 months per agreement (26 of 60 growth tractors).” 116 The CLER further

stated that the funds for the tractors had been “committed to dealers prior to close.”117

111
      Id. at 973:19–974:10 (Elkins).
112
      Id. at 974:11–975:13 (Elkins).
113
      Id. at 975:14–24 (Elkins).
114
      JX 118.
115
      Id. at 118.00001.
116
      Id. at 118.00004.
117
      Id. at 118.00005.

                                           26
On direct examination, Cousineau testified that he did not participate in negotiations

regarding the SPA, did not review drafts of the SPA, and did not “see[] or gain[]

visibility to that document until assisting in some of the earn-out documents.” 118 On

cross-examination, Cousineau testified that the language in the CLER regarding

purchasing tractors “pursuant to the agreement” was based on his understanding that

the SPA required purchasing 60 growth tractors.119

         After the acquisition, like Cousineau, Schneider executive Michael Gasick

acted as if the SPA contractually required Schneider to purchase 60 growth tractors

in each of the next three years. On January 30, 2017, Gasick emailed Elkins stating:

         We need to prepare you to have a conversation with Ray [Kuntz] about
         the contractual 60 class 8 tractors that were part of the SPA. We will
         likely need a waiver from him that he agrees he does not need the 60
         tractors. . . . The SPA is clear that we need to provide the 60 class 8
         tractors in each of the three years of the earn out. We all know he does
         not need them, so he needs to waive this requirement for the first 12
         month period. The waiver needs to happen no later than June. 120

118
   Tr. 1044:1–1045:5 (Cousineau). The record reflects that Cousineau did receive at least
one email from Schneider’s counsel regarding the “Earn-Out Principles,” though the
substance of that email is redacted on the grounds of attorney-client privilege. JX 288.
Although Cousineau received this email, he testified on cross-examination that he did not
“communicate with counsel regarding the stock purchase agreement” during the SPA
negotiations. Tr. 1073:1–6 (Cousineau).
119
      Tr. 1074:17–1076:19 (Cousineau).
120
      JX 164.

                                           27
At this time, Schneider had already purchased 71 replacement tractors.121 At trial,

Gasick “did not know exactly” if he was aware of how many tractors Schneider had

purchased at the time of this email, but he testified that he communicated “regularly”

regarding “tracking . . . 60 tractors.”122 Kuntz did not waive the Tractor Acquisition

Covenant.

          C.      Schneider’s Operation of W&S Post-Closing

          The parties agree that, for each Measurement Period, W&S acquired more

than 60 tractors—but not 60 growth tractors—and that Schneider informed the

Sellers that W&S’s EBITDA fell short of the EBITDA Targets. During the first

Measurement Period, Schneider caused W&S to acquire 71 class 8 tractors and

eliminated or sold 108 class 8 tractors. 123 On July 21, 2017, Schneider provided the

Sellers’ Representative with an Annual Contingent Payment Statement (“ACPS”)

which represented that the Acquired Companies’ EBITDA for the first Measurement

Period was $18.7 million, as compared to the EBITDA Target of $36 million.124

During the second Measurement Period, Schneider caused W&S to acquire 102 class

8 tractors and eliminated or sold 104 class 8 tractors.125 On July 27, 2018, Schneider

121
      JX 255.
122
      Tr. 781:4–17, 777:22–778:4 (Gasick).
123
      PTO, III ¶ 12.
124
      Id. ¶ 13.
125
      Id. ¶ 12.

                                             28
provided the Sellers’ Representative with an ACPS representing that the Acquired

Companies’ EBITDA for the second Measurement Period was $837,000, as

compared to the EBITDA Target of $46 million.126 During the third Measurement

Period, Schneider caused W&S to acquire 137 class 8 tractors and eliminated or sold

199 class 8 tractors. 127      On July 25, 2019, Schneider provided the Sellers’

Representative with an ACPS which represented that the Acquired Companies’

EBITDA for the third Measurement Period was negative $26.3 million, as compared

to the EBITDA Target of $59 million. 128 Schneider thus did not make any of the

Earnout Payments to the Sellers. 129

          The parties’ explanations differ as to the cause of W&S’s failure to hit the

EBITDA Targets. Sellers argue that Schneider shrank the size of W&S’s fleet every

Measurement Period, leased 70 W&S tractors to another of Schneider’s divisions in

February 2017 (the “Tractor Lease”), 130 and reallocated approximately half of

W&S’s space at what was its largest terminal in Fontana, California (the “Fontana

Terminal”). 131 Sellers also contend that Schneider stopped recruiting drivers for

126
      Id. ¶ 14.
127
      Id. ¶ 12.
128
      Id. ¶ 15.
129
      Id. ¶ 16.
130
      JX 175; Tr. 995:12–23 (Elkins).
131
      Tr. 457:1–21 (Schenk).

                                           29
W&S. 132 Sellers point out that, in June 2017, Schneider issued an order “to minimize

the new accounts we were going after” to “slow[] the pipeline of when business

starts to be implemented” because W&S had fallen behind in servicing its existing

business. 133

         Schneider attributes W&S’s failure to hit the EBITDA Targets to other

factors. Schneider argues that Sellers’ projections were too aggressive, 134 customers

failed to materialize as committed, 135 and existing customer relationships were

marginal.136 In its post-trial briefing, Schneider explained that integrating W&S, a

trucking company, and Lodeso, a company that provided final mile distribution

services, proved to be challenging. 137 Schneider also pointed to a driver shortage

across the trucking industry.138

         Schneider’s attempt to create a consolidated first-to-final-mile trucking

network through acquiring W&S ultimately ended in failure, costing Schneider

132
   JX 203; Tr. 172:16–174:19, 182:3–184:11 (Kuntz); id. at 437:22–440:24, 462:19–463:4
(Schenk); id. at 945:22–949:11 (Elkins).
133
      JX 202.00001; Tr. 180:22–183:5, 186:11–187:10 (Kuntz); id. at 386:1–6 (Darlington).
134
      Tr. 924:11–925:19 (Elkins).
135
      JX 124.
136
      JX 203.0001.
137
      Plaintiff/Counterclaim Defendant’s Opening Post-Trial Brief (“Pl.’s Op. Br.”) 27–28.
138
      Id. at 28–29.

                                             30
nearly $180 million. 139 On July 29, 2019, Schneider’s board of directors approved

a structured shutdown of its first-to-final mile services. 140

          D.      Procedural History

          On October 4, 2017, Schneider initiated this litigation in the Court of

Chancery, seeking a declaratory judgment that it was not obligated to pay the

Earnout Payments and that it had complied with the Tractor Acquisition Covenant

(Compl. Count I).141            The Sellers counterclaimed, contending that Schneider

breached the SPA (Countercl. Count I) or breached the implied covenant of good

faith and fair dealing inherent in the SPA (Countercl. Count II). 142

          In 2018, the parties filed cross-motions for judgment on the pleadings. In their

motions, the parties disputed whether Schneider breached the Tractor Acquisition

and Business Continuity Covenants.143 The parties also disputed whether Schneider

operated W&S so as to prevent it from achieving the EBITDA Targets in violation

of the implied covenant of good faith and fair dealing. 144           Justice, then-Vice

Chancellor, Montgomery-Reeves denied the cross-motions for judgment on the

139
      Tr. 660:10–661:1 (Rourke).
140
      JX 229.00003.
141
      Ct. Ch. Dkt. 1 ¶¶ 14–15.
142
      Ct. Ch. Dkt. 3 ¶¶ 56–71.
143
      Ct. Ch. Dkt. 74 at 2–3.
144
      Id. at 3.

                                              31
pleadings and held that the parties had “advance[d] reasonable but conflicting

interpretations of the contractual provisions at issue in the pending cross-

motions.”145 The court concluded that both interpretations were “commercially

reasonable,” and that, “[t]o the extent some issues ultimately may be decided as a

matter of law, a fuller development of the facts should serve to clarify the law or

help the Court determine its application to this dispute.”146 The court further held

that, “[b]ecause both parties assert reasonable interpretations of the express terms of

the contract, the holes that the implied covenant may or may not fill cannot be

determined at this stage.”147

          Following discovery, the parties filed cross-motions for summary judgment.

In a July 16, 2020 opinion, the undersigned denied the motions, concluding that there

were disputed issues of material fact that needed to be resolved through trial.148 The

court held a four-day trial in January 2021. There were 296 trial exhibits submitted

into evidence, and ten witnesses testified.149

145
   Id. ¶ 5; see also id. ¶ 8 (“Schneider and Kuntz each offers a reasonable interpretation of
the contract language.”).
146
      Ct. Ch. Dkt. 74 ¶¶ 8, 14.
147
      Id. ¶ 13.
148
      See Ct. Ch. Dkt. 197.
149
      Trial was held remotely via Zoom technology.

                                             32
         After post-trial argument, the court questioned whether the Court of Chancery

had subject matter jurisdiction over this case.150 The parties had initially asserted

that the Court of Chancery had subject matter jurisdiction under 8 Del. C. § 111.151

That provision gives the Court of Chancery jurisdiction over civil actions “to

interpret, apply, enforce or determine the validity of the provisions of . . . [a]ny

instrument, document or agreement . . . to which a corporation and 1 or more holders

of its stock are parties, and pursuant to which any such holder or holders sell or offer

to sell any of such stock.” 8 Del. C. § 111(a)(2). The court questioned its jurisdiction

over this matter because neither of the corporations subject to the SPA are Delaware

corporations. See Darby Emerging Markets Fund, L.P. v. Ryan, 2013 WL 6401131,

at *7 (Del. Ch. Nov. 27, 2013) (“To the extent Section 111 is ambiguous with respect

to its application to foreign entities, the synopsis appears to resolve that ambiguity

by limiting Section 111’s application to Delaware corporations.”). 152

150
   The issue of subject matter jurisdiction can be raised at any time, including by the court.
See Ct. Ch. R. 12(h)(3); IBM Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch. 1991)
(“[U]nlike many jurisdictions, judges in the Delaware Court of Chancery are obligated to
decide whether a matter comes within the equitable jurisdiction of this Court regardless of
whether the issue has been raised by the parties.”).
151
      Compl. ¶ 10; Countercl. at 6.
152
   The court in Darby was referring to the synopsis of a 2003 amendment to § 111. See
2003 Delaware Laws Ch. 84 (S.B. 127) (“This amendment expands the jurisdiction of the
Court of Chancery with respect to a variety of matters pertaining to Delaware
corporations.” (emphasis added)); see also 1 ROBERT S. SAUNDERS ET AL., FOLK ON THE
DELAWARE GENERAL CORPORATION LAW § 111.01 (7th ed. 2021) (“The application of
section 111 is limited to Delaware corporations.”).

                                             33
         The parties maintained that the Court of Chancery had jurisdiction over this

action, but “to avoid any doubt,” they moved to transfer this case to the Superior

Court under 10 Del. C. § 1902.153 The motion was granted on September 3, 2021.154

On September 1, 2021, while that motion was pending, the Chief Justice of the

Delaware Supreme Court designated the undersigned “to sit as a Judge on the

Superior Court for the purpose of hearing and deciding all issues” in this case

pursuant to Del. Const. art. IV, § 13(2), upon the case’s transfer.155 Schneider filed

its complaint in the Superior Court on October 20, 2021.156

         In January and February 2022, the parties filed supplemental letters on the

issue of fee shifting, citing the recent decision in LPPAS Representative, LLC v. ATH

Holding Co., LLC, 2022 WL 94610 (Del. Ch. Jan. 10, 2022).157               The court

considered this case submitted for decision on the date of Kuntz’s final letter on

February 16, 2022.158

153
      Ct. Ch. Dkt. 263.
154
      Ct. Ch. Dkt. 267.
155
      Super. Ct. Dkt. 2, Ex. C.
156
      See Super. Ct. Dkt. 1.
157
      Super. Ct. Dkt. 4–6.
158
      See infra note 308.

                                          34
II.   ANALYSIS

      This opinion first addresses whether Schneider breached any of the four

Operating Covenants in the SPA.        After that, the opinion considers whether

Schneider breached the implied covenant of good faith and fair dealing. Lastly, the

opinion addresses Kuntz’s claim for attorneys’ fees under the indemnification

provision in the SPA.

      A.     The Breach of Contract Claim

      “Under Delaware law, the elements of a breach of contract claim are: 1) a

contractual obligation; 2) a breach of that obligation by the defendant; and 3) a

resulting damage to the plaintiff.” H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129,

140 (Del. Ch. 2003). A party asserting a breach of contract claim bears the burden

of proving a breach by a preponderance of the evidence. Base Optics Inc. v. Liu,

2015 WL 3491495, at *13 (Del. Ch. May 29, 2015). “Proof by a preponderance of

the evidence means proof that something is more likely than not. It means that

certain evidence, when compared to the evidence opposed to it, has the more

convincing force and makes you believe that something is more likely true than not.”

Del. Exp. Shuttle, Inc. v. Older, 2002 WL 31458243, at *17 (Del. Ch. Oct. 23, 2002).

      Delaware adheres to the objective theory of contracts. The objective theory

of contracts requires the court to construe a contract as it would be “‘understood by

an objective, reasonable third party.’” Osborn v. Kemp, 991 A.2d 1153, 1159 (Del.

                                         35
2010) (quoting NBC Universal v. Paxson Commc’ns Corp., 2005 WL 1038997, at

*5 (Del. Ch. Apr. 29, 2005)); accord Salamone v. Gorman, 106 A.3d 354, 367–68

(Del. 2014). If a contract’s language is clear and unambiguous, the court will give

effect to the plain meaning of the contract’s terms and provisions. Osborn, 991 A.2d

at 1159–60. A contract is ambiguous if the court is able to “reasonably ascribe

multiple and different interpretations to a contract.” Id. at 1160. The “determination

of ambiguity lies within the sole province of the court.”            Id.   “The primary

consideration in the construction of contract language is to fulfill, to the extent

possible, the reasonable expectations of the parties at the time they contracted.” Bell

Atl. Meridian Sys. v. Octel Commc’ns Corp., 1995 WL 707916, at *5 (Del. Ch. Nov.

28, 1995).

               1.    The Tractor Acquisition Covenant

         The Tractor Acquisition Covenant required Schneider to “cause one or more

of the Acquired Companies to acquire, in the aggregate, not less than sixty (60) class

8 tractors” each Measurement Period. 159          The Court of Chancery previously

determined that both parties’ competing interpretations were reasonable when

denying the parties’ cross-motions for judgment on the pleadings160 and, later, cross-

159
      SPA, Ex. E.
160
   Ct. Ch. Dkt. 74 ¶ 8 (“Schneider and Kuntz each offers a reasonable interpretation of the
contract language.”).

                                            36
motions for summary judgment.161 Schneider maintains, as it has throughout this

litigation, that the plain meaning of the Tractor Acquisition Covenant mandates

judgment in its favor. 162 Schneider argues that the contract only requires it to

purchase 60 tractors during each Measurement Period. Kuntz argues that the SPA

requires Schneider to grow the fleet by 60 tractors during each Measurement Period.

         The court’s prior determinations that the Tractor Acquisition Covenant is

susceptible to multiple reasonable interpretations—and is therefore ambiguous—is

the law of the case. 163 The law of the case doctrine usually “requires that matters

previously ruled upon by the same court be put to rest.” Frank G.W. v. Carol M.W.,

457 A.2d 715, 718 (Del. 1983). The rule is not absolute. Until a final judgment is

entered, interlocutory rulings “remain[] within the control of the court.” Id. (quoting

46 AM. JUR. 2D Judgments § 700 at 851 (1969)). Nevertheless, adherence to the law

of the case is particularly important when, as here, a successor judge inherits a case.

In those circumstances, the general rule of the law of the case should be maintained

except in “extraordinary circumstances.” Id.; accord Miller v. Wolstenholme, 540

161
   Ct. Ch. Dkt. 197 at 28 (“Both parties have offered contested evidence as to the proper
interpretation of the Tractor Acquisition Covenant. . . . Thus, summary judgment cannot
be granted.”).
162
      Pl.’s Op. Br. 33–34.
163
   Taylor v. Jones, 2006 WL 1510437, at *5 (Del. Ch. May 25, 2006) (“‘[O]nce a matter
has been addressed in a procedurally appropriate way by a court, it is generally held to be
the law of that case and will not be disturbed by that court unless compelling reason to do
so appears.’”) (quoting May v. Bigmar, Inc., 838 A.2d 285, 288 n.8 (Del. Ch. 2003)).

                                            37
A.2d 1088 (Del. 1988) (TABLE). To be sure, the Delaware Supreme Court “take[s]

a dim view of a successor judge in a single case overruling a decision of his

predecessor.” Frank G.W., 457 A.2d at 718.

      Schneider has not established extraordinary circumstances warranting

departure from the determination of Justice, then-Vice Chancellor, Montgomery-

Reeves that the Tractor Acquisition Covenant is ambiguous.             Then, as now,

Schneider’s and Kuntz’s conflicting positions are each reasonable interpretations,

and a “reasonable third person reading the [Tractor Acquisition Covenant] would be

uncertain” as to whether the Tractor Acquisition Covenant required the purchase of

60 tractors in total or 60 growth tractors during each Measurement Period. Eagle

Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997); see Ct.

Ch. Dkt. 74 ¶¶ 3–8 (discussing the reasonableness of the parties’ respective positions

regarding the Tractor Acquisition Covenant). Accordingly, the court’s prior ruling

is the law of the case. The court did not depart from that ruling in denying cross-

motions for summary judgment and does not do so here.

      Because the Tractor Acquisition Covenant is ambiguous, the court must

consider extrinsic evidence to determine its meaning. “When contractual language

is reasonably susceptible to more than one meaning, all objective extrinsic evidence

is considered: the overt statements and acts of the parties, the business context, prior

dealings between the parties, and the business customs and usage in the industry.”

                                          38
Bell Atl. Meridian Sys., 1995 WL 707916, at *6.          A “party seeking judicial

enforcement of their interpretation of the ambiguous language” may prevail by

“show[ing] by a preponderance of the evidence that the other party knew or had

reason to know of the meaning they attached to the language.”             Id. (citing

Restatement (Second) of Contracts § 201 (1981) and Corbin on Contracts § 543

(1960)); see also Kabakoff v. Zeneca, Inc., 2020 WL 6781240, at *20 (Del. Ch. Nov.

18, 2020) (observing that the court must “discern the intended meaning” of the

contract “from the preponderance of the extrinsic evidence” (internal citations

omitted)).

         Kuntz has established by a preponderance of the evidence that Schneider

knew that the Tractor Acquisition Covenant required it to purchase 60 growth

tractors every Measurement Period. The documentary evidence establishes that the

deal between Schneider and the Sellers required Schneider to purchase 60 growth

tractors every Measurement Period. From the outset of their negotiations, the parties

assumed that W&S would acquire 60 growth tractors annually. Cascadia marketed

W&S based on the assumption that it would acquire 60 growth tractors in 2017 and

2018, as shown in the SFP.164 The projections W&S and Cascadia provided to

Schneider assumed that W&S would acquire 60 growth tractors in 2016, 2017, and

164
      See JX 239.

                                         39
2018. 165 In analyzing the deal, Schneider incorporated those same assumptions into

its internal projections 166 and its board presentations. 167

         The assumption that W&S would acquire 60 growth tractors annually formed

part of the parties’ understanding of the business deal. All of the letters of intent that

the parties exchanged assumed Schneider would purchase “a minimum of 60 tractors

and sufficient trailers for each 12 month EBITDA Measurement Period.”168 There

is no dispute that when the parties executed the final, nonbinding letter of intent the

parties understood the deal to require Schneider to purchase 60 growth tractors per

year after the acquisition. Rourke understood the reference to 60 tractors in the final

letter of intent to refer to “60 additional growth capex tractors.”169

         The SPA’s drafting history also supports Kuntz’s interpretation of the Tractor

Acquisition Covenant. The Sellers’ first draft requested that Schneider add a

covenant obligating it to provide “appropriate equipment purchase support,”170

which Sellers’ negotiator said was a specific reference to the 60 growth tractors per

165
   JX 239 at Tab 2016 Budget p.3., Tab 2017 Projection p.3, Tab 2018 Projection p.3
(showing a 60 tractor per year increase: 630 tractors at the beginning of 2016, 690 at the
beginning of 2017, 750 at the beginning of 2018, and 810 at the end of 2018).
166
      JX 102.00040.
167
      JX 27.00002–3; JX 64.00018, .00026.
168
      JX 43.00005, 45.00006, 47.00005.
169
      Tr. 679:10–18 (Rourke).
170
      JX 65.00026; see Tr. 264:22–265:9 (Hutchinson).

                                            40
Measurement Period referenced in the letter of intent. The May 13 draft that

Schneider circulated specifically contemplated that the Acquired Companies’ fleet

would grow by 60 tractors per Measurement Period through the use of an example.171

Schneider then replaced this example on May 20 with the language: “to acquire, in

the aggregate, sixty (60) class 8 tractors.”172

         The documentary record and witness testimony show that the principal

negotiators on both sides struck a deal with the understanding that Schneider would

be required to purchase 60 growth tractors during each Measurement Period. In the

final drafting of the SPA, the lawyers for Schneider sought to water down all of the

operational covenants so as to provide Schneider with maximum autonomy in

operating the business, post-close. But the evidence clearly and conclusively shows

that Schneider and its counsel never expressed any view, either internally or to

Sellers, that the 60 growth tractor term, upon which the parties had previously

agreed, was subject to further negotiation or that Schneider changed its mind on that

term at the end of the process of documenting the deal. 173

         Schneider’s conduct in performing its obligations under the SPA underscores

this conclusion. As this court has observed, “in giving effect to the parties’

171
      See JX 88.00087.
172
      JX 94.00090.
173
      Tr. 292:3–7 (Hutchinson).

                                           41
intentions, it is generally accepted that the parties’ conduct in the performance of the

contract before any controversy has arisen should be given great weight.” S’holder

Rep. Servs. LLC v. Gilead Scis., Inc., 2017 WL 1015621, at *16 (Del. Ch. Mar. 15,

2017), aff’d, 177 A.3d 610 (Del. 2017) (internal quotations and citations omitted).

Aaron Cousineau, the controller for the division of Schneider that included W&S,

testified that the draft of the CLER he sent to Schneider executive Bob Elkins

reflected his understanding that Schneider was required to purchase 60 growth

tractors as was required under the SPA. 174 In addition, Gasick was prepared to have

Elkins ask Kuntz for a waiver so that Schneider could avoid purchasing all 60 growth

tractors as was required under the Tractor Acquisition Covenant. 175

         The business realities of the deal also reinforce Kuntz’s position. Kuntz

pursued the deal with Schneider to grow W&S. 176 The SPA and the history

surrounding its formation evince an agreement that was designed to foster W&S’s

growth as well.177 Meanwhile, there is scant extrinsic evidence in support of

Schneider’s position that it was only required to purchase 60 gross tractors per

Measurement Period.

174
      Tr. 1074:17–1076:19 (Cousineau); see JX 118.
175
      See JX 164.
176
      Tr. 63:17–22 (Kuntz).
177
      See, e.g., JX 239, 27.00002–3, 45.00005, 88.00087.

                                             42
         Schneider argues that, despite all of the foregoing evidence, the Sellers

ultimately “failed to secure” their prior deal to acquire 60 growth tractors every

Measurement Period. Schneider points to Sellers’ proposed revisions in a May 25,

2016 draft of the SPA, and Sellers’ rejection of that language as evidence that

Schneider considered and rejected the concept of growth tractors.178 The following

paragraph reflects the Sellers’ proposed additional language to the Tractor

Acquisition Covenant in bold, and Schneider’s rejection in strikethrough text. It

states that, during each Measurement Period, the Buyer shall:

         cause one or more of the Acquired Companies to acquire, in the
         aggregate, not less than sixty (60) class 8 tractors (the “Tractors”) and
         such greater number of Tractors and other equipment necessary to
         accommodate the Acquired Companies’ operations, including any
         growth related thereto;179

         Schneider argues that its rejection of Sellers’ language, including the term

“growth,” demonstrates that Schneider “expressly reject[ed] Sellers’ attempt to tie

Schneider’s obligation to provide tractors to the growth of the Acquired

Companies.”180 When considered in the overall context of negotiations, including

the Sellers’ May 25, 2016 turn of the SPA containing additions to the operational

covenants, however, Schneider’s argument is unpersuasive.

178
      Pl.’s Op. Br. 35–37.
179
      Compare JX 98.00009, with JX 103.00079.
180
      Pl.’s Op. Br. 36.

                                            43
         Sellers’ May 25, 2016 revisions included numerous additional operational

covenants that could rightfully be interpreted as severely encroaching upon

Schneider’s ability to operate the Acquired Companies post-close, tying all of them

one way or another to achieving the EBITDA Targets.181 Schneider’s May 27, 2016

draft struck nearly all of them. 182 But Schneider did not materially alter the original

language requiring Schneider to purchase 60 tractors in the aggregate. Sellers’ lead

negotiator, Hutchinson, credibly testified that prior to receiving Schneider’s

revisions and at no time thereafter was he every told that Schneider was unwilling

to provide 60 growth tractors. 183 Indeed, Schneider points to no evidence that it

communicated to Sellers that the deal struck with Kuntz over adding 60 tractors to

the overall fleet during each Measurement Period was no longer operative. Nor does

Schneider point to any internal communications to support this argument.

         Schneider’s argument is also unconvincing in light of the Forthright

Negotiator Principle. The court may employ this principle when it is engaged in the

interpretation of an ambiguous contract and “a review of the extrinsic evidence does

not lead the court to an ‘obvious’ conclusion” regarding the “‘shared intent’ of the

181
    JX 99.00007–08. For example, Sellers proposed covenants pertaining to compensation
and benefits of employees, reassignment of personnel, cutting staff and expenses, and
altering the ability to obtain financing at the Acquired Companies.
182
      JX 103.00079–80.
183
      Tr. 292:3–7 (Hutchinson).

                                          44
parties.” Comrie v. Enterasys Networks, Inc., 837 A.2d 1, 13 (Del. Ch. 2003). Under

the Forthright Negotiator Principle,

         [o]nly an objectively reasonable interpretation that is in fact held by one
         side of a negotiation and which the other side knew or had reason to
         know that the first party held can be enforced as a contractual duty.
         This principle is capable of resolving disputes arising from ambiguous
         contract language because it is logically impossible for a contracting
         party, operating in good faith, both to have a subjective interpretation
         of ambiguous language different from that of her counterparty and to
         know of her counterparty's differing interpretation.

Id. (quoting U.S. W., Inc. v. Time Warner Inc., 1996 WL 307445, at *10 (Del. Ch.

June 6, 1996)) (emphasis in original). As of the May 13 draft, the parties mutually

understood that Schneider was to ensure that W&S’s fleet would grow by 60 net

tractors in each Measurement Period, given that there was an example in that draft

describing assets to include 760 tractors in the first Measurement Period, 820 tractors

in the second Measurement Period, and 880 tractors in the third Measurement

Period.184 In the May 20 draft, Schneider replaced the text “Capital expenditure

equivalent to 60 class 8 tractors” and the accompanying example with the sentence:

“The Buyer shall cause one or more of the Acquired Companies to acquire, in the

aggregate, sixty (60) class 8 tractors.”185 There is no indication that Schneider’s

edits were meant to alter the meaning of the Tractor Acquisition Covenant in the

184
      JX 88.00087.
185
      Compare id., with JX 94.00090.

                                             45
May 13 draft. Hutchinson and Kuntz testified that Sellers understood the May 20

draft to reflect the “same understanding” between the parties in the prior draft and

that the May 20 draft was merely a “simplification” of this understanding.186 Both

sides agree that no one from Schneider informed Sellers that the meaning in the May

20 draft, or any draft circulated thereafter, was meant to differ from the draft that

had been disseminated on May 13.187 Indeed, there is no persuasive evidence that at

186
      Tr. 140:9–18 (Kuntz); id. at 285:23 (Hutchinson).
187
      Id. 140:19–141:7 (Kuntz):
         Q. Did anyone tell you, between—at any time, did anyone tell you at any
         time before you signed this agreement that the 60 Class 8 tractors were not
         the tractors that had been discussed you needed to make the EBITDA targets,
         the additional growth?
         A. No one ever did.
         Q. Did anyone ever tell you, prior to you signing this from [W&S]—from
         Schneider or McGuireWoods, that they could use or—they could replace a
         tractor and that would count as one of the 60 tractors?
         A. No one ever said that.
Tr. 292:3–7 (Hutchinson) (“Q. Did anyone ever tell you, up until this point or at any time,
that by striking this language, Schneider was unwilling to provide 60 tractors to increase
the size of the fleet? A. No. Never.”); id. at 694:5–13 (Rourke):
         Q. . . . Isn't it true that at no point up until the execution of the SPA did you
         or anyone on the Schneider team tell anyone at Watkins & Shepard or their
         representatives that the 60 tractors referred to in the LOI were actually
         replacement tractors?
         A. I don't have any knowledge of that, no.
Tr. 1106:18–22 (Whelpley) (“Q. Did you ever tell [W&S’] lawyers that the provision
concerning 60 tractors didn’t mean growing the fleet by 60 tractors? A. No, I did not have
that discussion with them.”); id. at 1124:16–24 (Whelpley):
         Q. Well, let me straightly ask you this: Did you have any conversations
         between—after sending over the May 13th draft with Watkins & Shepard or

                                                46
the time of the May 20 draft, Schneider’s own representatives had adopted

Schneider’s current interpretation of the Tractor Acquisition Covenant. Schneider

had reason to know that Sellers maintained their understanding of the Tractor

Acquisition Covenant from the May 13 draft.            Due to the ambiguity of the

subsequent drafts, it was Schneider’s burden to indicate that its understanding of the

covenant had changed, considering Sellers’ silence on the matter. Schneider’s

failure to do so thus further supports Sellers’ interpretation of the Tractor Acquisition

Covenant.

      In considering all of the evidence, the court is persuaded that the parties

intended the Tractor Acquisition Covenant to require Schneider to grow the fleet by

at least 60 tractors during each Measurement Period for the Acquired Companies.

There is no dispute that Schneider did not do so in the First Measurement Period.

Sellers have therefore established that Schneider breached the SPA.

             2.     The Material Asset Covenant

      Under the Material Asset Covenant, Schneider could not “reorganize,

consolidate or otherwise take steps to sell, dispose or otherwise transfer any material

portion of the assets of the Acquired Companies to an entity other than an Acquired

      their lawyers or Cascadia about the change from the May 13 language that
      we just looked at to the May 20 new Exhibit D? Did you have any
      conversations with anybody on the other side about the change in meaning?
      A. I don't recall that, no.

                                           47
Company” from the close of the transaction to the end of the final Measurement

Period.188 A key term of this covenant is the word “material.” Although it is

undefined in the SPA as a freestanding term, Kuntz contends that the SPA “has a

low threshold for what qualifies as ‘material.’” 189 To support that proposition, he

points to the SPA’s definition of a “Material Contract,” which includes, in pertinent

part:

         (b) each Contract pursuant to which any third party is indebted or owes
         money to an Acquired Company and the remaining unpaid balance of
         which is in excess of $50,000 and (c) each Contract providing for the
         purchase, maintenance or acquisition, or the sale or furnishing, of
         materials, supplies, merchandise, equipment or services . . . that would
         reasonably be expected to result in payments in excess of $50,000
         within any 12-month period . . . . 190

         Schneider counters that Kuntz’s reliance on one of the SPA’s defined terms

does not provide the court with a “generally applicable definition” of the word

“material.”191 Schneider also focuses on other defined terms in the SPA using the

word “material” that Kuntz ignores, such as “Material Customers” and “Material

Suppliers.”192      Neither of these defined terms offers the support for Kuntz’s

188
      SPA, Ex. E.
189
      Defendant and Counterclaim Plaintiff’s Post-Trial Opening Brief (“Def.’s Op. Br.”) 67.
190
      JX 108.00014.
191
      Plaintiff/Counterclaim Defendant’s Post-Trial Answering Brief (“Pl.’s Ans. Br.”) 52.
192
      See SPA § 4.19(a), (b).

                                              48
definition of “material” that he draws from “Material Contract.”193 The SPA’s

definition of “Material Contract” does not carry the interpretive heft that Kuntz seeks

to ascribe to the Material Asset Covenant. Indeed, at post-trial oral argument, Kuntz

retreated from the position he took in his briefs, acknowledging that Schneider

would not be in breach of the Material Asset Covenant if it transferred $50,000 worth

of assets outside of W&S, arguing instead that the “level of materiality” is based on

the “facts and circumstances of every case.” 194

         For its part, Schneider argues that a material asset transfer must be considered

within the specific context of the contract language. The Material Asset Covenant

states that Schneider shall not “reorganize, consolidate or otherwise take steps to

sell, dispose or otherwise transfer any material portion of the [acquired] assets.”

Schneider insists that the Material Asset Covenant “expressly ties the types of

transfers it covers to changes that would fundamentally alter the structure of the

Acquired Companies—such as through a reorganization or consolidation—not

routine tractor management.”195 Kuntz counters that Schneider’s position ignores

the negotiations surrounding the provision. Kuntz notes that it was Sellers, not

Schneider, who added the words “reorganize, consolidate, or otherwise” to the May

193
      Pl.’s Ans. Br. 52–53.
194
      Ct. Ch. Dkt. 251 at 129:4–16.
195
      Pl.’s Op. Br. 62–63.

                                            49
25, 2016 draft of the SPA. Kuntz argues the Sellers added this language so as to

increase, not reduce, the covenant’s protection to the Sellers. 196

       The parties have devoted very little of their briefing to what the parties

intended when drafting the Material Asset Covenant. Thus, because the parties have

not defined a contractual term, the court may turn to a dictionary as a reliable source

to determine what the parties intended. Lorillard Tobacco Co. v. Am. Legacy

Found., 903 A.2d 728, 738 (Del. 2006) (“[D]ictionaries are the customary reference

source that a reasonable person in the position of a party to a contract would use to

ascertain the ordinary meaning of words not defined in the contract.”); accord

Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., 2021 WL 1053835, at *4 (Del. Ch. Mar.

19, 2021); see also Wenske v. Blue Bell Creameries, Inc., 2018 WL 3337531, at *10

(Del. Ch. July 6, 2018) (“in the case of an undefined term [in a contract], the

interpreting court may consult the dictionary, if that is deemed useful, when

determining the term’s plain meaning”).          Dictionary definitions of “material”

include: “having real importance or great consequences”;197 “[o]f such a nature that

knowledge of the item would affect a person’s decision-making; significant;

196
   Defendant and Counterclaim Plaintiff’s Post-Trial Answering Brief (“Def.’s Ans. Br.”)
46; JX 98.00009.
197
           Material,          MERRIAM-WEBSTER.COM,                https://www.merriam-
webster.com/dictionary/material (last visited Feb. 7, 2022).

                                            50
essential”;198 and “[b]eing both relevant and consequential; crucial.” 199 See Metro

Storage Int’l LLC v. Harron, 2019 WL 3282613, at *8 n.5 (Del. Ch. July 19, 2019)

(citing same dictionaries when defining “materially”).200

         Materiality is a context-specific determination. See SphereCommerce, LLC

v. Caulfield, 2022 WL 325952, at *7 n.64 (Del. Ch. Feb. 3, 2022) (observing that

whether a contract breach is material “‘is necessarily imprecise and flexible’”

(quoting Restatement (Second) of Contracts § 241, cmt. a (1981))); Constantini v.

GJP Developers, Inc., 2015 WL 5122992, at *8 n.93 (Del. Ch. Aug. 24, 2015)

(“Whether a breach [of contract] is material is a context-specific analysis . . . .”); In

re Massey Energy Co., 2011 WL 2176479, at *29 (Del. Ch. May 31, 2011)

(analyzing whether derivative claims were “material in relation to the value of [the

company] as an entity”); Rosser v. New Valley Corp., 2005 WL 1364624, at *8 (Del.

Ch. May 27, 2005) (noting that the valuation of the company’s major assets would

198
      Material, BLACK’S LAW DICTIONARY (11th ed. 2019).
199
     Material, THE AM. HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE,
https://ahdictionary.com/word/search.html?q=Material (last visited Feb. 7, 2022).
200
    In one sentence, Schneider argues that Kuntz failed to plead a breach of the Material
Asset Covenant in his Counterclaim. Pl.’s Op. Br. 58. In the Joint Pre-Trial Stipulation,
however, the parties jointly asked the court to rule on this issue. PTO, IV ¶ 6. Therefore,
Schneider consented to trying this issue. See Ct. Ch. R. 15(b) (“When issues not raised by
the pleadings are tried by express or implied consent of the parties, they shall be treated in
all respects as if they had been raised in the pleadings.”); Jackson's Ridge Homeowners
Ass’n v. May, 2007 WL 2214500, at *1 (Del. Ch. Aug. 1, 2007); see also 5 CHARLES ALAN
WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1219 (4th ed.)
(“[C]larification as to a legal theory may be achieved through the use of pretrial
conferences and pretrial orders . . . .”).

                                             51
be material in one context, but not in another); see also Bandera Master Fund LP v.

Boardwalk Pipeline P’rs, LP, 2021 WL 5267734, at *68 (Del. Ch. Nov. 12, 2021)

(observing that determining the existence of a “material adverse effect” for contract

purposes is “one of the most difficult issues under Delaware law”).

          Turning to the application of the Material Asset Covenant, Kuntz argues that

Schneider violated the covenant in two ways. First, Kuntz contends that Schneider

breached the covenant when it executed the Tractor Lease. 201 Second, Kuntz asserts

that Schneider breached the Material Asset Covenant by reallocating approximately

half of the space in W&S’s Fontana terminal to Schneider’s dedicated automotive

parts delivery business. 202

                         a.   The Tractor Lease

          In February 2017, Schneider caused W&S to enter into the Tractor Lease.203

Under the Tractor Lease’s terms, W&S leased 70 of its tractors to Schneider from

February 22, 2017 through the end of that calendar year.204 The monthly lease

payment was calculated in an attached schedule for each of the respective 70 tractors

and fluctuated between $330.19 and $2,691.07 per month.205 Each of the 70 tractors

201
      Def.’s Op. Br. 66; see JX 175.
202
      Def.’s Op. Br. 70.
203
      See JX 175.
204
      Id. ¶ 2.
205
      Id., Schedule A.

                                           52
was one of three different models and had a model year ranging from 2014 through

2017. 206

            Kuntz argues that the 70 tractors were material assets because they made up

approximately 10% of W&S’s assets, 207 8.5% of W&S’s tractor capacity, 208 and

could generate significant revenue and EBITDA.209 Kuntz also points to lost profits

that he attributes to the Tractor Lease. Specifically, Kuntz asserts that just one month

after the execution of the Tractor Lease, one of W&S’s largest customers, Wayfair,

increased its orders more than three-fold from approximately $45,000 to $150,000

per day.210 Kuntz argues that the increased business from Wayfair required the use

of more tractors, which were no longer available due to the Tractor Lease.211 Thus,

W&S was required to hire third-party carriers to accommodate the surge in demand,

which Kuntz alleges was more costly than if W&S had, instead, used its own tractors.

Additionally, Kuntz contends that W&S was unable to accommodate the increased

demand through the use of third-party carriers alone, leading to delays and damage

206
      Id.
207
      Def.’s Op. Br. 68 (citing JX 9.00040, 110).
208
      Def.’s Ans. Br. 45 (citing JX 254).
209
      See Def.’s Op. Br. 68.
210
      Id. at 69; see JX 178.00007.
211
      Def.’s Op. Br. 69.

                                              53
to W&S’s reputation. 212 Kuntz argues that Wayfair eventually pulled business from

W&S once it realized that W&S could not handle its additional freight. 213

            Schneider counters that the 70 tractors subject to the Tractor Lease were not

a material portion of W&S’s assets. According to Schneider, the 70 tractors

represented less than 10% of W&S’s assets. 214

            Schneider also disagrees with Kuntz’s recounting of W&S’s falling out with

Wayfair. Schneider asserts that between the time of executing the SPA and the

signing of the Tractor Lease, W&S’s monthly average of “open tractors” grew from

approximately 20 to between 60 and 80. 215 Those tractors were sitting idle without

drivers and were thus generating costs, but no revenue.216 According to Schneider,

W&S could not fill the tractors “due to a lack of freight volume, a rapid influx of

new tractors due to purchase commitments W&S had made prior to the acquisition,

and challenges in hiring and retaining a sufficient number of drivers.” 217 Schneider

contends that the Tractor Lease made sense for both Schneider and W&S.

Schneider’s expert, Donald Orr, opined that “mov[ing] . . . open tractors to other

212
      Id.
213
      Id. at 69–70; see JX 188.
214
      See Pl.’s Op. Br. 62 (citing JX 1.00009).
215
      Id. at 59 (citing JX 147, DDX 7); see also JX 148.
216
   See Tr. 472:1–10 (Schenk); id. at 941:10–22 (Elkins); Clowdis June 5, 2020 Dep.
249:11–250:11.
217
      Pl.’s Op. Br. 59.

                                                  54
operations where tractors could be used” is a “common, practical solution, given that

the industry has such a significant problem keeping drivers in tractors.”218 Moving

tractors from one division to another division that can use them “is a practical

approach for both divisions.” 219

          Schneider argues that even if those 70 tractors had been available for the

increased business from Wayfair, they would not have been operational when

needed due to the time it would have taken to hire and train drivers.220 The use of

third-party carriers was therefore more practical because their drivers and tractors

would be ready to work immediately upon being hired. 221 Schneider also contends

that it was “common” for W&S to use third-party carriers when it did not have

enough tractors to accommodate demand and that this is a practice accepted in the

broader industry.222 In addition, Schneider disputes that the 70 tractors would have

been suitable for the consumer deliveries that Wayfair required.223

218
      JX 232.00023.
219
   Id. According to Richard Schenk, the former director of truckload operations at W&S,
if W&S needed to contract for Schneider trucks or outside carriers to haul freight, W&S
would receive revenue credit for the freight hauled by those carriers. Tr. 490:11–23
(Schenk).
220
      Pl.’s Ans. Br. 56–57.
221
      See id.
222
      Pl.’s Op. Br. at 61–62.
223
      Pl.’s Ans. Br. 57.

                                          55
         The parties presented industry expert opinions on this issue, but not valuation

expert opinion. 224 Having considered the evidence as presented, the court concludes

that Kuntz has not carried his burden. First, Kuntz has failed to prove that the 70

tractors made up approximately 10% of W&S’s assets at the time of the Tractor

Lease. Kuntz uses a Tangible Personal Property spreadsheet dated June 1, 2016 to

determine the value of the 70 tractors, but calculates the value of W&S’s total assets

based on a fiscal year 2014 audit.225 A subsequent audit values W&S’s total assets

in 2014 about 8% higher than the number Kuntz uses, which would further decrease

the asset share of the 70 tractors. 226 Between 2014 and 2015, W&S’s total assets

increased by over 13%. 227 Between 2013 and 2014, total assets increased by over

40%, and by over 14% within the prior one-year period. 228 The parties have not

presented direct evidence of the value of W&S’s total assets in 2016. The changes

in W&S’s total asset values from 2012 through 2015 show that the value of W&S

224
     Both parties submitted expert opinion testimony from trucking industry experts.
Schneider’s expert, Donald Orr, worked in the trucking industry from the early 1970s until
retiring in 2019. JX 232.00004–05. Kuntz’s expert, Charles Clowdis, Jr., is the Managing
Director of Trans-Logistics Group, Inc., a transportation and logistics firm created in 2018.
JX 244.00003. Clowdis has nearly five decades of experience in the field of motor-carrier
transportation, fleet operations, and supply chain management. Id. Both experts were
deposed and submitted reports, but neither testified live at trial.
225
      See JX 9.00040, 110.
226
    Compare JX 9.00040 ($88,771,000 based on 2015 audit), with JX 242.00006
($95,864,234 based on 2016 audit).
227
      See JX 242.00006.
228
      See JX 9.00040, 242.00006.

                                             56
total assets could change significantly in any given year. Furthermore, the data

available to the court show that the value of W&S’s total assets was trending upward.

Even assuming that the 70 transferred tractors were worth approximately $8.4

million as Kuntz asserts—which, as discussed below, the court does not accept—

these amount to just over 9% of W&S’s total assets at the end of 2015.

          Kuntz’s per-tractor EBITDA calculation is similarly suspect. Kuntz asserts

that each of the 70 tractors could generate an average of $83,333 of EBITDA per

year.229 But he makes this calculation based on a 2016 presentation that values the

EBITDA generated by 60 new tractors at $5 million (or $83,333 per tractor) per

year.230 Only two of the 70 leased tractors had a 2017 model year, the year the

Tractor Lease was signed. 231 And the per-tractor monthly rent amount ranged from

$330.19 to $2,691.07. 232      It is thus apparent that these 70 tractors differed

significantly from the 60 new tractors that were considered in the 2016 presentation.

The court cannot, therefore, ascribe comparable EBITDA generating value to them

on this record.

          The Tractor Lease did not cause W&S’s business relationship with Wayfair

to fail. Schneider worked in good faith to recruit more drivers for W&S, and

229
      Def.’s Ans. Br. 46.
230
      JX 286.00199.
231
      See JX 175.
232
      See id.

                                          57
Schneider was under no obligation to transfer drivers from its other affiliates to

W&S when its recruiting efforts failed.233 Indeed, Schneider also counters that: (1)

even if Schneider had not executed the Tractor Lease, those 70 tractors would not

have been operational by the time Wayfair’s increased freight began to arrive, 234 and

(2) the 70 tractors implicated by the Tractor Lease were not suitable for Wayfair’s

business. 235 Kuntz has not meaningfully addressed those points. Kuntz has failed

233
   According to Schenk, drivers could not freely move from Schneider to W&S due to
regulatory requirements and other training and logistical issues. Tr. 491:2–492:18
(Schenk) (“So you couldn’t just willy-nilly move a driver over.”); see also infra II.A.4.
234
      Tr. 1060:10–1061:4 (Elkins):
         Q. Do you believe that the leasing of those open tractors was a significant
         contributing factor to the increase in purchased transportation costs from
         February to March?
         A. No, I do not.
         Q. And why is that?
         A. So trucks themselves aren’t . . . —they don’t drive themselves. This
         would have been more driver-focused, meaning— . . . that big of a spike,
         though it’s only $2 1/2 million, but you look at it on a percent base, that’s
         really hard and tough to service in a period of time of 30 days or even, say,
         60 days to get drivers in, trained on the equipment to be able to service that
         kind of a revenue increase.
235
      Id. at 1013:14–1014:7 (Elkins):
         Q. And straight trucks do a lot of consumer deliveries. Is that fair?
         A. Yes, consumer deliveries and setups, yes.
         Q. Did the Wayfair freight involve a lot of consumer deliveries?
         A. Yes.
         Q. . . . Would you believe, then, that the purchased transportation costs in
         March 2017 that my colleague showed you would partly be made of
         increases from straight truck purchased transportation?

                                              58
to demonstrate that W&S would have kept Wayfair’s business but for the Tractor

Lease. Based upon the evidence, Kuntz has not shown that the leasing of 70 tractors

pursuant to the Tractor Lease constituted a transfer or disposition of a material

portion of W&S’s assets in violation of the Material Asset Covenant.

                      b.     Reallocating Space Within the Fontana Terminal

         Prior to the sale of the Acquired Companies, W&S built a new terminal

facility in Fontana, California.         W&S constructed the Fontana Terminal to

accommodate growth, and chose the location because of its proximity to the

Southern California ports, which receive freight being shipped from China and

Vietnam—countries from where a large percentage of furniture manufacturers ship

their goods.236 W&S sought to maximize efficiencies at the new terminal, such as

minimizing the frequency with which freight was handled, thus reducing the risk of

damage.237 Incoming freight was unloaded from manufacturers’ inbound trailers on

         A. That’s a fair assessment, yes.
         Q. And you would not have been able to use those open truck tractors
         without drivers to cover the Wayfair freight, would you?
         A. No, sir, would not be able to.
None of the trucks that were part of the Tractor Lease included straight trucks that would
have been suitable for Wayfair deliveries. Compare JX 175.00003–.00005 (schedule of
trucks part of Tractor Lease, consisting of three models: Volvo D13, Volvo Cummins, and
Freightliner Cascadia), with JX 256.00002–.00006 (list of W&S leased trucks where no
straight trucks are the models included in the Tractor Lease).
236
      Tr. 34:6–19, 38:19–39:2 (Kuntz).
237
      Darlington Aug. 22, 2019 Dep. 21:17–21.

                                             59
one side of the terminal and then directly loaded onto outbound trailers on the other

side of the terminal.238 This process was most efficient when all of the doors at the

Fontana Terminal were available to W&S.239

         Schneider also had a nearby terminal in Rancho Cucamonga for its automotive

parts division. 240 The lease at that terminal was close to its expiration.241 Following

the closing of the W&S acquisition, Schneider consolidated the operations of the

two terminals into Fontana.242 After the consolidation, W&S lost approximately 21

of its 49 dock doors and 120,000 square feet of warehouse space. 243

         Kuntz argues that the space W&S lost at the Fontana Terminal materially and

negatively affected its cost-cutting operations, 244 and constituted a transfer of a

material asset. Once Schneider reduced the number of terminal doors dedicated to

W&S, W&S was no longer able to benefit from its operational efficiencies, which

consequently slowed down the time it took to unload and load its tractors.245

238
      Tr. 363:21–364:12 (Darlington).
239
      Darlington Aug. 22, 2019 Dep. 21:21–23:11
240
      Tr. 509:10–22 (Schenk), 955:3–22 (Elkins).
241
      Id. at 395:22–396:2 (Darlington).
242
      Id. at 152:3–11 (Kuntz).
243
   DDX 8. Kuntz asserts that it was unable to use 22 dock doors after the consolidation,
but does not cite to any evidence when making this assertion. See Def.’s Op. Br. 70; Def.’s
Ans. Br. 49. DDX 8 shows that 21 terminal doors were transferred to Schneider’s
automotive division.
244
      Def.’s Op. Br. 70–71.
245
      Tr. 369:6–371:7 (Darlington).

                                            60
According to Kuntz, this increased handling of freight also raised the risk that it

would be damaged in transport.246 Kuntz also asserts that the Fontana Terminal was

particularly valuable to W&S’s operations, and due to the fewer available terminal

doors, W&S was more frequently required to process freight that arrived in Fontana

elsewhere, further raising costs.247 Ultimately, Schneider provided W&S with

additional terminal space in Myrtle, Mississippi, which Kuntz contends added

thousands of miles to its delivery routes and increased handling costs. 248

         Schneider contests Kuntz’s claim as a matter of law and fact. Schneider

maintains that it had “sound business reasons” for consolidating its operations into

the Fontana Terminal. 249 According to Schneider, it did not make sense to operate

two terminals within about ten miles of each other in an expensive real estate

market.250 Schneider also argues that W&S’s use of the Fontana Terminal was not

efficient.251 W&S was running only two shifts of dock labor, rather than three.252

Schneider presented evidence that, even before the consolidation, the Fontana

246
      Def.’s Ans. Br. 50; see Vinci Oct. 2, 2019 Dep. 89:16–90:15.
247
      Shenck Aug. 23, 2019 Dep. 29:12–31:13; Tr. 34:20–36:16, 154:13–157:6 (Kuntz).
248
      JX 189.00001; Def.’s Op. Br. 50; Tr. 153:1–17, 156:2–157:6 (Kuntz).
249
      Pl.’s Op. Br. 66–68.
250
      See Tr. 955:23–956:12 (Elkins).
251
      Pl.’s Op. Br. 67–68.
252
   Tr. 396:15–17 (Darlington); id. at 957:13–22 (Elkins); see Pl.’s Op. Br. 68; JX
236.00021–23.

                                             61
Terminal experienced freight backups, had challenges with staffing, and experienced

parking problems around the facility. 253 Schneider observes that the consolidation

of facilities was among the synergies that the parties had contemplated before the

transaction.254 Schneider also notes that W&S was provided with additional space

at a terminal in Dallas, Texas. 255

         Schneider’s legal argument turns on the language of the Operating Covenants

and the parties’ negotiations. Schneider argues that during the give-and-take over

the terms of the Operating Covenants, it had struck Sellers’ proposed language that

would have prohibited Schneider from closing “a key terminal.”256 Thus, Schneider

contends that closing terminals was a right that it expressly reserved, and Sellers

cannot now seek to renegotiate that right through litigation. See GRT, Inc. v.

Marathon GTF Tech., Ltd., 2012 WL 2356489, at *7 (Del. Ch. June 21, 2012) (“a

party may not come to court to enforce a contractual right that it did not obtain for

itself at the negotiating table”). Essentially, Schneider contends that preserving its

greater right to close a key terminal included the lesser right to reduce W&S’s

dedicated space at a key terminal.

253
    Tr. 390:15–391:10, 396:18–397:11, 398:2–22 (Darlington); id. at 954:21–955:2
(Elkins); see JX 236.00020–21.
254
      Tr. 510:4–11 (Schenk).
255
      Pl.’s Op. Br. 68; Tr. 959:11–18 (Elkins).
256
      Pl.’s Op. Br. 65; see JX 98.00010, 103.00079.

                                              62
         Schneider’s argument has persuasive force with respect to Kuntz’s claim that

the consolidation of the Fontana Terminal violated the Material Asset Covenant.257

As in GRT, reading the Material Asset Covenant as preventing Schneider from

consolidating the Fontana Terminal operations would effectively read into that

provision an obligation that Schneider expressly rejected. GRT, 2012 WL 2356489,

at *8.

         In addition, Kuntz has not satisfied his evidentiary burden to establish that the

consolidation of the Rancho Cucamonga and Fontana terminals effected a transfer

of a material asset in violation of the Material Asset Covenant.

         Schneider’s consolidation of the Fontana Terminal was an example of the

failure to integrate the W&S operations into Schneider’s business. The result surely

made W&S less efficient and more costly to operate. But Kuntz has not specifically

quantified the magnitude of the Fontana Terminal consolidation on W&S. In

alleging the damage that Schneider’s actions caused, Kuntz contends that “[a]

257
   Kuntz argues that this case is distinguishable from GRT. There, the parties (Marathon
and GRT) expressly discussed the text that Marathon struck in a draft term sheet following
that draft’s circulation. GRT, 2012 WL 2356489, at *7. “Following this exchange with
Marathon, GRT gave up that point. . . . Even GRT’s principal negotiator of the term sheet
acknowledged that fact.” Id. Kuntz’s brief attempts to distinguish GRT, but only as to the
Tractor Acquisition Covenant. See Def.’s Ans. Br. 50–51. Kuntz is correct that GRT is
inapplicable as to the Tractor Acquisition Covenant, as there is no evidence that anyone on
the Sellers’ side understood that they were giving up their bargained-for agreement
requiring Schneider to acquire 60 growth tractors during each Measurement Period. Kuntz
did not distinguish GRT, however, as to the Material Asset Covenant and, specifically, the
consolidation of the Fontana Terminal operations.

                                            63
trucking company’s terminals . . . are critical to its operations and profitability” and

that rearranging the Fontana Terminal increased W&S’s costs.258 But Kuntz does

not attempt to quantify those specific costs.                Because those costs remain

unquantified, Kuntz cannot compare them to any collection of assets or financial

metrics to assert that those costs were indeed material. The gravamen of Kuntz’s

evidence consists of testimony making general statements regarding the

inefficiencies caused by the rearrangement of the Fontana Terminal; none of this

testimony quantifies the costs of this change. 259 This evidence does not satisfy

258
      Def.’s Op. Br .70–71; Def.’s Ans. Br. 48–50.
259
      See e.g., Vinci Oct. 2, 2019 Dep. 89:12–90:18:
         We would be able to load more trailers without having to double handle any
         freight. So we can go straight from a pickup trailer without hitting the floor
         first. That would, you know, reduce opportunity for damage, and speed up
         transit time. So having more doors is a big thing in our industry. . . . [T]he
         more you handle freight, the more opportunity for damage there is. And by
         having less doors, you’re going to have to hit the floor, as we call it, more
         often than just swinging it into another trailer. . . .
         Q. Can having less doors impact transit time?
         A. It can, yeah.
See Darlington Aug. 22, 2019 Dep. 25:7–23:
         Q. Did [the rearrangement of the Fontana Terminal] impact profitability of
         [a trucking] division?
         A. Well, it impacted service. So when you impact service, generally
         anything in transportation, you’re subject to losing revenue if you don’t react
         to it quick enough.
         Q. How did it impact service?
         A. Took longer to unload trailers. Instead of picking something up today
         and unloading it the same day . . . we would then be unloading some of that

                                               64
Kuntz’s burden to prove by a preponderance of the evidence that the consolidation

of the Fontana Terminal effected a transfer of a material W&S asset. Therefore, I

find that Schneider did not breach the Material Asset Covenant.

                3.        The Business Continuity Covenant

         The Business Continuity Covenant prohibited Schneider from materially

changing the “type or nature” of any Acquired Company’s business until the

conclusion of all the Measurement Periods. 260 Kuntz contends that Schneider

breached this covenant, too, and relies heavily on Schneider’s consolidation of

operations at the Fontana Terminal and the Tractor Lease. According to Kuntz,

Schneider “materially altered W&S’s operations by transferring dock doors and

tractors, and by failing to acquire seated tractors to keep up with demand.” 261 This

argument, however, fails to consider the difference between W&S’s business and its

operations.

         As discussed above, the Tractor Lease and consolidation of operations at the

Fontana Terminal affected W&S’s operations. 262 Kuntz has not shown, however,

         freight the second and third day before we got it shipped out. . . . [W]e added
         a third shift down there because of it, and that was hard to fill, too, at the
         same time—all at the same time. So trying to hire and bring that all in
         together was challenging.
260
      SPA, Ex. E.
261
      Def.’s Op. Br. 71.
262
      See supra II.B.2.

                                               65
that this resulting change in W&S’s operations altered the type or nature of its

business. 263 Nor has Kuntz argued how broad the scope of a business should be and

how significantly the business must change to materially alter its type or nature. At

trial, Hutchinson—Sellers’ counsel and principal negotiator—testified that when he

proposed the Business Continuity Covenant, he understood “type” to be “a broad

concept”: “So they had to stay in the trucking business. They couldn’t move to the

restaurant business, for example.”264 And he understood “nature” to mean “the

character of the business”: “So in this instance, we had a smaller business that was

in a discrete portion . . . of the trucking industry, supporting e-commerce companies,

moving furniture, et cetera.”265           Neither party disagrees with Hutchinson’s

interpretation of this covenant, which reflects a reasonable reading of the text.266

         Kuntz does not suggest that W&S’s business was so significantly affected that

it no longer resembles a trucking business. Therefore, in order for Schneider to have

violated the Business Continuity Covenant, Schneider’s actions must have

materially altered the character of W&S’s business so that it was not serving the

same discrete segment of the trucking industry that it previously had i.e., supporting

e-commerce, moving furniture, etc. Kuntz has not presented evidence that W&S

263
      See SPA, Ex. E.
264
      Tr. 290:6–13 (Hutchinson).
265
      Id. at 290:14–21 (Hutchinson).
266
      See Pl.’s Op. Br. 55 (relying on Hutchinson’s interpretation).

                                               66
began serving a different segment of the trucking industry. Rather, he argues that

because of Schneider, W&S lost business within the segment that it had historically

served.267 Kuntz has persuasively shown that Schneider failed on many levels to

integrate W&S into its existing business model. But proving an integration failure

is not enough to sustain Kuntz’s burden on this claim. Kuntz has not proven that

these integration failures resulted in a change in the nature of W&S’s business so as

to constitute a breach of the Business Continuity Covenant.

267
   See Def.’s Op. Br. 45–46 (“The decline in W&S’s overall tractor capacity exacerbated
truck shortages, leading to the higher costs, lower profitability, delays, and customer
defections.”); id. at 50 (“W&S was forced to reroute freight . . . despite the fact that it added
thousands of miles and significant additional handling costs. This lead [sic] to serious
shipping issues. The Fontana dock doors and space that Schneider transferred was material
to W&S’s business, and its disposition negatively impacted W&S’s performance.”).
Kuntz also points to Schneider’s order to slow the opening of new W&S accounts as proof
that Schneider was intentionally impeding W&S’s growth. See id. at 53, 72; JX 202.00001;
Tr. 180:22–183:5, 186:11–187:10 (Kuntz). The consequence of that action would have
been a change in the amount of business that W&S was doing, not a pivot in the type or
nature of W&S’s business. Furthermore, Kuntz mischaracterizes the extent of Schneider’s
order. Kuntz refers to this order as a “Stop Sell Order,” which “prohibit[ed] W&S from
taking on new customers.” Def.’s Op. Br. 72. Schneider only ordered W&S to temporarily
cease taking on new customers until it could catch up on processing its outstanding orders.
When Elkins asked Sheri Gerondale of Schneider if W&S was being ordered to “not go
after new accounts,” she responded that this was incorrect: “No not stopping selling. But
absolutely slowing the pipeline of when business starts to be implemented and hits the
terminal and first mile network. We did not eliminate anyone but held out on final decision
criteria pending profitability analysis data.” JX 202. Kuntz himself admitted at trial that
Schneider’s order was only temporary. Tr. 181:14–18 (Kuntz); see also id. at 386:1–6
(Darlington) (“There was a pause in [taking on new customers] for . . . 90 days . . . is what
period of time that we were to use that to try to get ourselves caught up.”).

                                               67
                4.    The Synergy Covenant

          The Synergy Covenant required Schneider to “work in good faith . . . to seek

to capture synergies available to the Acquired Companies.”268 Schneider cannot be

found to have breached the Synergy Covenant if it “[w]ork[ed] in good faith” to help

W&S capture synergies as a result of the acquisition.269 The Synergy Covenant

provides examples of the synergies that Schneider might pursue, such as cost savings

through its purchasing power, i.e., savings on fuel, tires, equipment, and insurance,

and assisting W&S in its driver recruiting efforts and safety initiatives. 270

          The evidence shows that Schneider made efforts to capture synergies under

the Synergy Covenant. Soon after the acquisition, Schneider formulated a plan to

track and achieve expected cost synergies related to fuel, tires, tractors, equipment,

insurance, facilities, and labor.271 Less than a year later, Schneider realized cost-

saving synergies that exceeded those expectations.272 As part of its initial plan,

Schneider       introduced   “safety   and     performance   objectives    to    improve

productivity.” 273 Schneider undertook efforts to improve W&S’s driver recruiting,

268
      SPA, Ex. E.
269
      See id.
270
      See id.
271
      See JX 128.00012–15.
272
      JX 157.00003; Tr. 646:11–22 (Rourke).
273
      JX 128.00013.

                                              68
utilizing the resources and strategies that it had devised to recruit its own drivers.

First, Schneider combined its recruiting department with those of W&S. 274 Next,

Schneider extended to W&S’s prospective driver pool the same incentives that

Schneider offered to its own prospective drivers (e.g., tuition reimbursement, sign-

on bonuses, referral program)275 in addition to those it had already added before

consolidating its recruiting departments. 276 After Schneider recognized that it was

struggling to hire enough W&S drivers, it planned recruiting events solely dedicated

to recruiting for W&S. 277

         Kuntz does not refute these examples of Schneider’s good faith attempts to

capture, and sometimes achieve, synergies.          Instead, he recycles many of his

previous arguments. Kuntz asserts that Schneider should have purchased more

tractors for W&S rather than increasing costs by leasing tractors from third-party

carriers, should not have consolidated space at the Fontana Terminal and leased

tractors from W&S, and should have transferred drivers from its other affiliates to

W&S when its recruiting efforts were not achieving their desired results.278 Again,

these shortcomings reflect a failed integration of W&S into Schneider’s operations

274
      JX 176; Tr. 931:10–932:13 (Elkins).
275
      JX 179.
276
      See JX 150.00001.
277
      See JX 195; Tr. 498:4–501:22 (Schenk).
278
      Def.’s Op. Br. 71–72.

                                               69
and perhaps poor planning and decision-making, not bad faith. Purchasing new

tractors for W&S’s exclusive use would not capture any synergy relating to

Schneider’s existing resources. Maintaining the status quo at the Fontana Terminal

was likewise immaterial from a synergistic perspective. Nor did the Synergy

Covenant obligate Schneider to transfer drivers to W&S from other affiliates. Driver

recruitment was just one example suggested by the Synergy Covenant. Even if

Schneider chose to pursue this synergy, Schneider was not required to achieve it

through transferring drivers rather than attempting to recruit new ones.

         From the transaction’s closing, Schneider stated that its “key guiding

principles for the integration plan” were to “support W&S and Lodeso revenue and

earnings growth,” detailing a plan to accomplish this through realizing synergies.279

Schneider’s inability to execute the integration plan is attributable to several factors,

but there is no credible evidence that it was due to a lack of the good faith that the

Synergy Covenant required. Schneider did not breach the Synergy Covenant.

         B.     The Implied Covenant of Good Faith and Fair Dealing Claim

         Kuntz argues that, to the extent the court does not find that Schneider breached

the Operating Covenants, it should nevertheless find that Schneider’s actions

breached the contractual implied covenant of good faith and fair dealing.280

279
      See JX 128.00012–15.
280
      Def.’s Op. Br. 73.

                                            70
Specifically, Kuntz alleges the following post-acquisition conduct establishes

Schneider’s breach:     (1) failing to acquire 60 growth tractors during each

Measurement Period; (2) the ordering of W&S to slow down and temporarily halt

taking on new customers; (3) consolidating its operations within the Fontana

Terminal resulting in fewer terminal doors for W&S; (4) the insufficient hiring of

drivers for W&S; and (5) the execution of the Tractor Lease. Kuntz contends that

these actions, or failures, are not merely due to a failure to integrate W&S with

Schneider’s business, or even incompetence, but, instead, bad faith.

      Every contract governed by Delaware law is subject to the implied covenant

of good faith and fair dealing. Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434,

441–42 (Del. 2005). The implied covenant of good faith and fair dealing “requires

a party in a contractual relationship to refrain from arbitrary or unreasonable conduct

which has the effect of preventing the other party to the contract from receiving the

fruits of the bargain.” Id. at 442 (internal quotations omitted). The implied covenant

is used to “infer contract terms to handle developments or contractual gaps that . . .

neither party anticipated.” Dieckman v. Regency GP LP, 155 A.3d 358, 367 (Del.

2017) (internal quotations omitted). It applies only where a contract “lacks specific

language governing an issue and the obligation the court is asked to imply advances,

and does not contradict, the purposes reflected in the express language of the

contract.” All. Data Sys. Corp. v. Blackstone Cap. P’rs V L.P., 963 A.2d 746, 770

                                          71
(Del. Ch. 2009), aff’d, 976 A.2d 170 (Del. 2009). Thus, the doctrine “ensures that

the parties deal honestly and fairly with each other when addressing gaps in their

agreement.” Glaxo Grp. Ltd. v. DRIT LP, 248 A.3d 911, 919 (Del. 2021). To prevail

on this claim, Kuntz must prove “‘a specific implied contractual obligation, a breach

of that obligation by the defendant, and resulting damage to the plaintiff.’” Buckeye

P’rs, L.P. v. GT USA Wilmington, LLC, 2022 WL 906521, at *21 (Del. Ch. Mar. 29,

2022) (quoting Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10,

1998)).

      The implied covenant is a “limited and extraordinary legal remedy and not an

equitable remedy for rebalancing economic interests that could have been

anticipated.”   Glaxo Grp., 248 A.3d at 920 (internal quotations and citations

omitted). The implied covenant “cannot be used to circumvent the parties’ bargain,”

and “[i]t must be clear from what was expressly agreed upon that the parties who

negotiated the express terms of the contract would have agreed to proscribe the act

later complained of . . . had they thought to negotiate with respect to that matter.”

Lonergan v. EPE Hldgs. LLC, 5 A.3d 1008, 1017–18 (Del. Ch. 2010) (internal

quotations and citations omitted). Therefore, this doctrine should only be utilized

when “developments that could not be anticipated” by the parties occur, “not

developments that the parties simply failed to consider.” Nemec v. Shrader, 991

A.2d 1120, 1126 (Del. 2010). “Even where the contract is silent, an interpreting

                                         72
court cannot use an implied covenant to re-write the agreement between the parties,

and should be most chary about implying a contractual protection when the contract

could easily have been drafted to expressly provide for it.” Oxbow Carbon &

Minerals Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 507 (Del. 2019)

(internal quotations and bracketing omitted). The implied covenant is thus only

applied to a narrow set of circumstances: “where the contract as a whole speaks

sufficiently to suggest an obligation and point to a result, but does not speak directly

enough to provide an explicit answer.” Airborne Health, Inc. v. Squid Soap, LP, 984

A.2d 126, 146 (Del. Ch. 2009); see also Nemec 991 A.2d at 1128 (“the covenant is

a limited and extraordinary legal remedy”). As the Delaware Supreme Court

recently observed:

      It is one thing to imply a good faith obligation when the parties have
      expressly agreed that a certain act is within a party’s discretion. It is
      another matter to imply discretion to restrict actions expressly
      permitted by the parties’ agreement. The implied covenant imposes a
      good faith and fair dealing obligation when a contract confers discretion
      on a party. It should not be used to imply terms that modify or negate
      an unrestricted contractual right authorized by an agreement.

Glaxo Grp., 248 A.3d at 920–21(citations omitted).

      “Despite the appearance in its name of the terms ‘good faith’ and ‘fair

dealing,’ the covenant does not establish a free-floating requirement that a party act

in some morally commendable sense. Nor does satisfying the implied covenant

necessarily require that a party have acted in subjective good faith.” Allen v. El Paso

                                          73
Pipeline GP Co., 113 A.3d 167, 182–83 (Del. Ch. 2014), aff’d, 2015 WL 803053

(Del. Feb. 26, 2015) (TABLE); NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL

6436647, at *17 (Del. Ch. Nov. 17, 2014) (“A breach of the implied covenant also

does not necessarily require that a party have acted in bad faith.”). Rather, these

terms connote that a party take actions that are consistent with the agreement and its

purpose. MHS Cap. LLC v. Goggin, 2018 WL 2149718, at *11 (Del. Ch. May 10,

2018). Thus, “[w]hen exercising a discretionary right, a party to the contract must

exercise its discretion reasonably.” Gerber v. Enter. Prods. Hldgs., LLC, 67 A.3d

400, 419 (Del. 2013) (quoting and adopting the reasoning in ASB Allegiance Real

Est. Fund v. Scion Breckenridge Managing Member, LLC, 50 A.3d 434, 440–42

(Del. Ch. 2012), rev’d on other grounds, 68 A.3d 665 (Del. 2013)), overruled on

other grounds by Winshall v. Viacom Int’l, Inc., 76 A.3d 808 (Del. 2013).

      The first inquiry in an implied covenant claim is “whether there is a gap that

needs to be filled.” Allen, 113 A.3d at 183. If the contract expressly addresses a

particular issue, there is no gap to fill and the implied covenant does not apply.

Buckeye, 2022 WL 906521, at *21 (citing Fisk Ventures, LLC v. Segal, 2008 WL

1961156, at *10 (Del. Ch. May 7, 2008), aff’d, 984 A.2d 124 (Del. 2009)). Kuntz

contends that the implied covenant is applicable because “the parties never

contemplated that Schneider would or could affirmatively interfere with W&S’s

                                         74
ability to conduct its business in the ordinary course.”281 Kuntz’s argument ignores

the contract and the parties’ negotiations.

         The SPA expressly provides that:

         During each Measurement Period, the Buyer shall operate the Acquired
         Companies and Lodeso in the manner provided for on Exhibit E. Each
         Seller acknowledges and agrees that (i) so long as the Buyer operates
         the Acquired Companies and Lodeso in such manner, the Buyer, the
         Acquired Companies and each of their respective Affiliates will have
         the right to otherwise operate their business as they see fit and will have
         no obligation (fiduciary or otherwise) to act in any manner in an attempt
         to protect or maximize any payments under this [contingent payment
         provision].282

Exhibit E (i.e., the Operating Covenants) are limited to the Tractor Acquisition

Covenant, the Synergy Covenant, the Material Asset Covenant, and the Business

Continuity Covenant.          Only the Synergy Covenant contains a “good faith”

requirement.

         The SPA expressly addresses the Tractor Acquisition Covenant, and thus that

covenant cannot serve as the basis for an implied covenant claim over the acquisition

of tractors. 283 Similarly, the Synergy Covenant also addresses driver recruitment

281
      Def.’s Op. Br. 73.
282
      SPA § 2.4 (e) (emphasis in original).
283
    Although Kuntz suggests that Schneider’s “failing to grow W&S’s fleet by 60 class 8
tractors during each Measurement Period” might have been a breach of the implied
covenant, he concedes that the other four grounds for this claim are more tenable. See
Def.’s Op. Br. 73. I agree. Although the Tractor Acquisition Covenant was ambiguous, it
did not merely “suggest an obligation and point to a result,” which would be fitting for an
implied covenant analysis. See Airborne Health, 984 A.2d at 146. Both parties agree that

                                              75
and contains its own good faith requirement. Thus, there is no gap for the implied

covenant to fill there either. 284 The SPA does not expressly address the acts or

omissions that serve as the basis for the remaining three alleged violations of the

implied covenant, but that does not mean that the implied covenant applies. “The

implied covenant should not be used to fill the gap left by a rejected term because

doing so would grant a contractual right or protection that the party ‘failed to secure

. . . at the bargaining table.’” Buckeye, 2022 WL 906521, at *21 (quoting Aspen

Advisors LLC v. United Artists Theatre Co., 843 A.2d 697, 707 (Del. Ch. 2004),

aff’d, 861 A.2d 1251 (Del. 2004)).

      “[A]ny argument by a party that another party breached an implied term

invites consideration of evidence of the parties’ bargaining history.” Nationwide

Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 897–98 (Del.

2015). The bargaining history is fatal to Kuntz’s implied covenant claim. It

demonstrates that the parties did contemplate Schneider’s rights in conducting

W&S’s business post-acquisition. Sellers’ lead negotiator, Hutchinson, testified that

the Tractor Acquisition Covenant obligated Schneider to purchase 60 new tractors during
each Measurement Period. Their disagreement is confined to whether Schneider should
have also replenished any tractors that W&S lost during those Measurement Periods. And
that disagreement is centered on a matter of contractual ambiguity, i.e., growth vs. gross
tractors—not gap filling. See supra II.A.1; Nemec, 991 A.2d at 1126.
284
   Kuntz merely disputes the effectiveness of Schneider’s hiring methods. As explained
earlier in the discussion of the Synergy Covenant, Schneider took extensive efforts to
recruit and hire W&S drivers. Kuntz has not presented credible evidence that Schneider’s
efforts lacked good faith. See supra II.A.4.

                                           76
the parties discussed during the contract negotiations “how the business would be

operated to help ensure [W&S] had the ability to meet those earn-out targets.”285 He

also stated that the Sellers placed particular importance on the “transfer of major

assets out of [W&S]” and an “increase in the aggregate fleet size.”286 In the first

markup of the SPA that W&S sent to Schneider, W&S added a footnote addressed

to Schneider asking it to “propose additional post-closing operational covenants

(e.g., covenant to continue to operate the business on a stand-alone, independent

basis; covenant to provide appropriate equipment purchase support; etc.)” under the

section that formulated the Earnout Payments.287       W&S was aware that how

Schneider operated W&S post-closing could be critical to achieving the Earnout

Payments’ EBITDA Targets. Thus, W&S negotiated what eventually became the

Operating Covenants to constrain Schneider’s freedom in operating the Acquired

Companies during each Measurement Period.

         During their negotiations, the parties exchanged drafts of the SPA that

specifically addressed Schneider’s operation of W&S’s business post-closing.

Sellers’ May 25, 2016 draft of the SPA proposed the following additional covenants

(the “Rejected Covenants”):

285
      Tr. 270:11–14 (Hutchinson).
286
      See id. at 270:1–271:3 (Hutchinson).
287
      JX 65.00026.

                                             77
         Buyer shall not, and shall not permit any of the Acquired Companies or
         any of the Buyer’s Affiliates to:

         ...

         4. Unreasonably require any Acquired Company to cut staff, capital
         expenditures or general and administrative expenses, close a key
         terminal, or take other actions that are not commercially reasonable . .
         . and/or a prudent business practice;

         5. Require or allow any Acquired Company to engage in any activity
         for the purpose of increasing the long-term growth of the business of
         any Acquired Company, the Buyer or any of their respective Affiliates
         at the expense of maximizing the contingent payments that may be
         made to the Sellers’ Representative . . . under [the section of the SPA
         governing the earnout payments]; or

         6. Materially change, modify or alter any Acquired Company’s pricing,
         marketing, sales, financing or operations in such as manner as would
         reasonably be expected to hinder or impair in any material respect its
         achievement of the EBITDA Targets or the maximization of the
         contingent payments that may be made to the Sellers’ Representative .
         . . under [the section of the SPA governing the earnout payments]. 288

Schneider struck all of these covenants,289 several of which correspond to the

arguments underlying Kuntz’s implied covenant claim.

         The SPA expressly permitted Schneider to operate the Acquired Companies

as it saw fit. Sellers proposed, and Schneider rejected, covenants expressly designed

to limit Schneider’s decision-making so as not to materially “hinder or impair”

achievement of the Earnout Payments, including sacrificing the Earnout Payments

288
      JX 98.00009–10 (formatting).
289
      JX 103.00079–80.

                                           78
for long-term growth. Schneider ordered W&S to temporarily slow down W&S’s

customer acquisitions due to the “stress [its] network was under” and to ensure that

any new customer accounts would be profitable.290              Because the parties

contemplated, but ultimately decided against, including language restricting

Schneider’s ability to make operational changes that would prioritize long-term

growth and potentially risk achievement of the Earnout Payments, the implied

covenant is inapplicable here.

         The Rejected Covenants also contemplated restrictions on conduct that Kuntz

asserts as the basis for the remaining alleged breaches of the implied covenant.

Covenant four would have prohibited Schneider from causing W&S to make certain

business decisions, such as “[u]nreasonably” closing a key terminal, cutting staff, or

failing to make capital expenditures. The parties considered and rejected restricting

Schneider’s ability to make these types of operational decisions for W&S. Thus,

“the drafting history resolves any uncertainty about whether the parties would have

agreed to be bound by contractual language” placing limitations on Schneider’s

ability to make decisions regarding W&S’s operations i.e., allocating terminal doors,

leasing trucks, and staffing. Nationwide, 112 A.3d at 898. Therefore, the implied

covenant of good faith and fair dealing is inapplicable.

290
      JX 202; see Tr. 965:5–967:22 (Elkins).

                                               79
      Kuntz argues that the court should find that Schneider breached the implied

covenant based on the holdings in American Capital Acquisition Partners, LLC v.

LPL Holdings, Inc., 2014 WL 354496 (Del. Ch. Feb. 3, 2014), and Keating v.

Applus+ Technologies, Inc., 2009 WL 261091 (E.D. Pa. Feb. 4, 2009). In American

Capital, the court concluded that the plaintiff stated an implied covenant claim with

allegations that the acquirer “pivoted” sales from the acquired company, discouraged

clients from using the acquired company’s services, and transferred employees from

the acquired company to a different subsidiary of the acquirer, all in an effort to

avoid triggering earnout payments as part of a stock purchase agreement. 2014 WL

354496, at *6–7. The court reasoned that “had the parties contemplated that the

[acquirer] might affirmatively act to gut [the acquired entity] to minimize

[contingent] payments . . . , the parties would have contracted to prevent [the

acquirer] from shifting revenue from [the acquired company]” so as to avoid making

the contingent payments. Id. at *7.

      In Keating, a stock purchase agreement entitled the sellers to earnout

payments derived from contracts entered during a six-year period after closing.

Keating, 2009 WL 261091, at *1. Sellers alleged that the acquirer breached the

implied covenant by purposefully delaying its (ultimately successful) bid for a

government contract near the expiration of the six-year period so as to avoid making

the earnout payments. Id. The court, applying Delaware law, observed that the stock

                                         80
purchase agreement granted the acquirer “unqualified discretion in deciding which

contracts to pursue and when to pursue them.” Id. at *4. The court held that the

acquirer “had a duty to exercise its discretion reasonably,” and could not avoid its

contractual obligations “by creating, in bad faith, an outcome that technically

satisfies the express terms of the [stock purchase agreement], but deprives [the

sellers] of their legitimate expectations.” Id. Whether the acquirer did so “require[d]

a fact-intensive inquiry not appropriate in deciding a motion to dismiss.” Id.

         American Capital and Keating do not support Kuntz’s implied covenant

claims. First, both opinions involved a motion to dismiss, not a trial on the merits.

Second, unlike in those cases, all of Kuntz’s implied covenant claims arise from the

Operating Covenants that Kuntz heavily negotiated. Third, Kuntz did not prove that

Schneider affirmatively acted to gut the W&S business or purposefully acted in bad

faith to avoid making the Earnout Payments.

         The misconduct that Kuntz alleges Schneider engaged in under his implied

covenant theory is identical to that which he alleges under the Operating

Covenants.291       In this instance, though, Kuntz also asserts that Schneider’s

291
      Compare Def.’s Ans. Br. 59–62, with Def.’s Op. Br. 42–54, 66–72.

                                            81
misconduct was carried out with “subjective bad-faith.”292 Kuntz has fallen well

short of establishing his evidentiary burden. 293

         Kuntz’s continued assertion that Schneider stopped accepting new orders for

W&S business is factually flawed and does not establish an implied covenant claim.

First, Kuntz mischaracterizes what he refers to as the “Stop Sell Order.” The record

showed that Schneider only temporarily halted W&S’s customer acquisitions and

never sabotaged W&S’s ability to enlarge its business. 294 Nor does Kuntz explain

how Schneider’s consolidation of operations at the Fontana Terminal and execution

of the Tractor Lease were decisions lacking in good faith. 295 Instead, as discussed

in detail above, these decisions reflected a poorly executed integration of the

292
      See Def.’s Ans. Br. 57.
293
    In his answering brief, Kuntz raises for the first time the theory that Schneider’s
acquisition of W&S enabled it to funnel dividends to the Schneider family and facilitated
Schneiders’ initial public offering. Def.’s Ans. Br. 57–58. Kuntz appears to offer this
theory as a retort to Schneider’s argument that it would be implausible to think that
Schneider would pay $125 million to acquire W&S, spend millions more to integrate the
business, intentionally operate the business at a loss, only to then shut it down just to avoid
making Earnout Payments. Pl.’s Op. Br. 72. Kuntz did not connect the factual dots in any
persuasive way to prove his new theory. Furthermore, since it was raised for the first time
in the answering brief, it was not fairly presented. See Zhou v. Deng, 2022 WL 1024809,
at *17 (Del. Ch. Apr. 6, 2022) (deeming an argument raised for the first time in a post-trial
reply brief waived); In re IBP, Inc. S’holder Litigation, 789 A.2d 14, 62 (Del. Ch. 2001)
(deeming an argument not raised in the opening post-trial brief waived).
294
      See supra note 267.
295
      See Def.’s Ans. Br. 59–60.

                                              82
Acquired Companies into the larger Schneider business. Kuntz has not satisfied his

burden to establish a breach of the implied covenant. 296

         C.     Kuntz Is Entitled to an Award of Attorneys’ Fees and Expenses

         Delaware law generally follows the American Rule that litigants must pay

their own attorney’s fees. Johnston v. Arbitrium (Cayman Islands) Handels AG, 720

A.2d 542, 545 (Del. 1998). An exception to the general rule arises when parties

agree to fee shifting in a contract. Mahani v. Edix Media Grp., Inc., 935 A.2d 242,

245 (Del. 2007). Kuntz invokes that exception.

         Kuntz argues that Section 7.1 of the SPA obligates Schneider to compensate

him for his attorneys’ fees for a breach of any of the Operating Covenants. 297 Section

7.1 is an indemnification provision. Kuntz relies on Section 7.1(c), which states, in

pertinent part:

         the buyer will indemnify and hold harmless the Sellers . . . from and
         against any and all Losses incurred or suffered by any Seller
         Indemnified Party based upon, arising out of, or otherwise in respect of
         any . . . breach of any covenant (including making any Deferred
         Consideration Payment, or any required Annual Contingent Payment
         [Earnout Payment] or Annual Contingent True-Up Payment).298

296
   Because Kuntz has failed to prove conduct that would demonstrate breach of the implied
covenant of good faith and fair dealing, the court need not reach Schneider’s argument that
Kuntz has failed to prove damages from any such breach.
297
      See Def.’s Op. Br. 80–81.
298
      SPA § 7.1(c).

                                            83
          “Losses” is defined to include “reasonable fees and disbursements of legal

counsel.” 299 Kuntz argues that his attorneys’ fees and expenses are Losses that

Schneider must pay as a result of its breach of the Tractor Acquisition Covenant.

          Schneider insists, however, that Section 7.1 is a standard indemnity clause

that does not qualify as a contractual fee-shifting provision. Schneider relies on a

line of cases, starting with TranSched Systems Ltd. v. Versyss Transit Solutions,

LLC, 2012 WL 1415466 (Del. Super. Mar. 29, 2012), holding that a general

indemnity clause in a contract does not act as a fee-shifting provision for litigation

between the contracting parties (frequently referred to as “first-party claims”) unless

the language unequivocally so states. Under these cases, “indemnity agreements are

presumed not to require reimbursement for attorneys’ fees incurred as a result of

substantive litigation between the parties to the agreement absent a clear and

unequivocal articulation of that intent.” Id. at *2; accord Deere & Co. v. Exelon

Generation Acquisitions, LLC, 2016 WL 6879525, at *1 (Del. Super. Nov. 22, 2016)

(“Standard indemnity clauses are not presumed to apply to first-party claims.

Otherwise, a typical indemnification provision would swallow the American Rule.”

(internal quotations omitted)); Data Centers, LLC v. 1743 Hldgs. LLC, 2015 WL

9464503, at *6 (Del. Super. Nov. 20, 2015) (“Absent specific language showing

299
      Id. at 8.

                                           84
intent to extend the protections of an indemnity provision to claims brought against

parties to the contract, the Court will interpret the indemnity provision as applying

to third party claims only.”); SARN Energy LLC v. Tatra Defence Vehicle A.S., 2019

WL 6525256, at *1 (Del. Super. Oct. 31, 2019) (concluding the indemnity provision

was not a valid fee-shifting provision because it was not “a clear and unequivocal

agreement in connection with a dispute between parties involving a failure to fulfill

obligations under the contract”); Winshall v. Viacom Int’l Inc., 2019 WL 5787989,

at *5 (Del. Super. Nov. 6, 2019) (“[T]here is no explicit language that [the indemnity

provision] applies to the reimbursement of attorneys’ fees and expenses on first-

party claims between the parties. Instead, [the provision] applies to third-party

claims brought against the parties relating to indemnifiable Losses.”), aff’d on other

grounds, 237 A.3d 67 (Del. 2020) (TABLE); In re Bracket Hldg. Corp. Litigation,

2020 WL 764148, at *16 (Del. Super. Feb. 7, 2020) (“Without precise language

setting forth an intent to shift fees, counsel should not expect the Court to deviate

from the American Rule if care has not been taken in drafting a contract’s language.”

(internal quotations and bracketing omitted)); Ashland LLC v. Samuel J. Heyman

1981 Continuing Tr. for Heyman, 2020 WL 6582958, at *6 (Del. Super. Nov. 10,

2020) (“[A] party is not entitled to attorneys’ fees under an indemnification

provision when there is no specific language in the indemnification provision . . .

that covers fee-shifting.” (internal quotations omitted)); see Great Hill Eq. Partners

                                         85
IV, LP v. SIG Growth Eq. Fund I, LLLP, 2020 WL 7861336, at *5 (Del. Ch. Dec.

31, 2020) (“purely contractual indemnification provisions only shift first-party

claims if the contract explicitly so provides”); Nasdi Hldgs., LLC v. N. Am. Leasing,

Inc., 2020 WL 1865747, at *5–6 (Del. Ch. Apr. 13, 2020) (ORDER) (noting the only

fee-shifting specific language in the agreement was in the definition of “Losses,”

which was insufficient to warrant fee shifting under the indemnity provision); Senior

Housing Cap., LLC v. SHP Senior Housing Fund, LLC, 2013 WL 1955012, at *45

(Del. Ch. May 13, 2013) (“Here, there is no specific language in the indemnification

provision of the Management Agreements that covers fee-shifting. Therefore, I will

not interpret the provision in an expansive way that would be inconsistent with the

American Rule.”); see also Int’l Rail P’rs LLC v. Am. Rail P’rs, LLC, 2020 WL

6882105, at *5–6 (Del. Ch. Nov. 24, 2020) (discussing cases and distinguishing

indemnity provision contained in a limited liability company agreement), appeal

refused, 245 A.3d 517 (Del. 2021).

      The Delaware Supreme Court has not decided this issue. In Winshall v.

Viacom International, Inc., the Delaware Supreme Court was presented with the

issue, but the Court did not need to reach it in deciding the appeal. 237 A.3d 67

(Del. 2020) (TABLE) (holding the claim for fees under the indemnity clause was

“barred by a limitation on indemnification contained in the merger agreement”).

Thus, TranSched and its progeny are binding precedent. See Gatz Props., LLC v.

                                         86
Auriga Cap. Corp., 59 A.3d 1206, 1219 (Del. 2012) (“It is axiomatic . . . that once a

trial judge decides an issue, other trial judges on that court are entitled to rely on that

decision as stare decisis.”); Leonard Loventhal Acct. v. Hilton Hotels Corp., 2000

WL 1528909, at *4 (Del. Ch. Oct. 10, 2000) (observing that the doctrine of stare

decisis is applicable to “a decision of a court higher in rank, or of the same rank”

(quoting 20 Am. Jur. Courts § 201 (1965)), aff’d, 780 A.2d 245 (Del. 2001).

         Although TranSched requires a “clear and unequivocal articulation of . . .

intent” that an indemnity provision also cover first-party claims, “there is no

definitive language that must be used.” 2012 WL 1415466, at *2. “Each provision

is unique and must be decided under the facts of that particular case.” Id. Kuntz

contends that Section 7.1(c) demonstrates the “clear and unequivocal articulation”

of the SPA’s drafters to indemnify first-party disputes.300 Section 7.1(c) contains no

express reference to litigation between the parties. Section 7.1(c) also lacks any

mention of “prevailing parties”—“a hallmark term of fee-shifting provisions.” See

TranSched, 2012 WL 1415466, at *3.

         On the other hand, the language of the indemnity provision in the SPA is

different from that considered in other cases in a few material respects. First, Section

7.1(c) does not merely require indemnity for breach of any covenant, but expressly

300
      Def.’s Op. Br. 81.

                                            87
“includ[es] making any Deferred Consideration Payment, or any required Annual

Contingent Payment or Annual Contingent True-Up Payment.” The Deferred

Consideration Payment, Annual Contingent Payment, and Annual Contingent True-

Up Payment are payments that are made from Schneider to Kuntz.301 None of those

payments would arise from a third-party claim.

          Second, the definition of “Losses” states

          in no event shall Losses include, and no Party shall be liable to any
          other Party or Person in respect of (a) punitive or exemplary damages
          or (b) any other damages that are not the reasonably foreseeable result
          of the event that gave rise thereto or the matter for which
          indemnification is sought hereunder, except in each case of the
          foregoing clauses (a) and (b), to the extent any such damages are being
          sought in a Third-Party Claim for which a Person is entitled to
          indemnification under this Agreement. 302

“Third-Party Claim” is defined as “any event or condition that could reasonably be

expected to result in a Loss” that is brought by a third party. 303 Thus, the definition

of “Losses” makes an express distinction between indemnifiable damages arising

from third-party claims and non-third-party claims.

          Third, unlike in TranSched, the existence of a notice-of-claim provision in the

SPA does not undermine Kuntz’s position. In TranSched, the court found that the

301
   SPA §§ 2.3(a) (Deferred Consideration Payment), 2.4(b) (Annual Contingent Payment),
2.4(c) (Annual Contingent True-Up Payment).
302
      Id. at 8.
303
      Id. §§ 7.1(a), (b).

                                            88
requirement that a party seeking indemnity provide notice of the claim “makes no

sense in the context of a first-party action unless used as a threat by one party to

enforce its will against another.” 2012 WL 1415466, at *3. In this case, however,

the notice provision in the SPA specifically requires a claim notice for “any event or

condition that could reasonably be expected to result in a Loss,” 304 but then addresses

rights and obligations in the event that the claim notice “identifies” a third-party

claim. 305 This distinction reflects that the parties understood that claims within the

scope of the indemnity clause were not limited to third-party claims.

          Fourth, the SPA does not provide for fee shifting elsewhere in the agreement.

This distinguishes the SPA from several of the precedents, which concluded that the

existence of a fee-shifting clause elsewhere in the contract, “further demonstrate[d]

that the parties did not intend for Losses to encompass fee-shifting on first-party

claims.” Ashland, 2020 WL 6582958, at *7; see also Deere, 2016 WL 6879525, at

*2 (“[T]he parties’ use of specific fee-shifting language in [other sections of the

agreement], and their failure to include such language in [the indemnification

provision], indicates a lack of intent to create a clear and unequivocal agreement to

shit fees in first-party actions.”); Paul Elton, LLC v. Rommel Delaware, LLC, 2022

WL 793126, at *3 (Del. Ch. Mar. 16, 2022) (“Section 44 of the Lease Agreement

304
      Id. § 7.2(a).
305
      Id. § 7.2(b).

                                            89
contains an arbitration clause that specifically awards attorneys’ fees to the

prevailing party in arbitration between the two, demonstrating that the parties were

capable of drafting the sort of clear and unequivocal language required to shift fees

when they so intended.”); Great Hill, 2020 WL 7861336, at *6 (“Underscoring this

point [that the indemnity clause did not cover first-party claims] is the fact that the

parties did include a clear and unequivocal articulation of an intent to shift fees

elsewhere in the agreement . . . .” (emphasis in original)).

         The indemnification provision in the SPA does not expressly state that it

covers first-party claims. But TranSched and its progeny do not require that an

indemnity clause expressly state that it covers first-party claims. They create a

presumption that an indemnity clause does not apply to first-party claims. The

presumption is rebutted if the language of the agreement reveals a “clear and

unequivocal articulation” of the parties’ intent that it applies to first-party claims.

TranSched, 2012 WL 1415466, at *2. The language embodying that intent must be

“explicit.” Winshall, 2019 WL 5787989, at *5; accord Great Hill, 2020 WL

7861336, at *5. Explicit means “[e]xpressed without ambiguity or vagueness.”306

Applying the well-established principles of contract construction to the specific facts

of this case, and reading the SPA as a whole, Section 7.1(c) clearly and

306
      Explicit, BLACK’S LAW DICTIONARY (11th ed. 2019).

                                           90
unambiguously reflects the parties’ intent that it applies to first-party claims. Section

7.1(c)’s specific inclusion of Deferred Consideration Payments, Annual

Contribution Payments, and Annual Contingent True-Up Payments is a clear

indication that the parties intended Section 7.1(c) to cover claims between the

contracting parties. The distinction between third-party claims in the definition of

“Losses” and the notice provision, along with the absence of a fee-shifting provision

elsewhere in the SPA confirm this conclusion. Therefore, Kuntz is entitled to

recover his “reasonable fees and disbursements of legal counsel”307 for prevailing

on his claim for breach of the Tractor Acquisition Covenant. 308

         D.     Damages and Interest

         The Sellers are entitled to the $40,000,000 Acceleration Payment (minus

bonuses, incentive payments, and fees and expenses due to Cascadia, none of which

materialized) for Schneider’s breach of the Tractor Acquisition Covenant.309 Under

307
      SPA at 8 (definition of “Losses”).
308
    Following oral argument, Kuntz submitted to the court to a recent order issued in LPPAS
Representative, LLC v. ATH Holding Co., LLC, 2022 WL 94610 (Del. Ch. Jan. 10, 2022),
where the court was asked to enforce an indemnification provision. See Super. Ct. Dkt. 4.
The court ultimately awarded the plaintiff its attorneys’ fees under the indemnification
provision for reasons unrelated to the issues relevant to this opinion. See 2022 WL 94610
at *7. The LPPAS decision did not address the TranSched line of cases or their applicability
to that dispute. Therefore, LPPAS does not factor into the analysis here. See 250 Exec.,
LLC v. Christina Sch. Dist., 2022 WL 588078, at *5 (Del. Ch. Feb. 28, 2022) (“a decision
does not provide authority for a subject if the court did not address it at all”).
309
      See SPA § 2.4(f).

                                            91
the SPA, Schneider was required to make the Acceleration Payment within five

business days of the breach.310

            Under the Tractor Acquisition Covenant, Schneider was required to provide

W&S with 60 growth tractors by the end of each Measurement Period. The first

Measurement Period ended on June 30, 2017. 311 Schneider failed to deliver 60

growth tractors by that date. The Acceleration Payment was due five business days

later: July 10, 2017. That is also the date upon which pre-judgment interest began

to accrue. See Watkins v. Beatrice Companies, Inc., 560 A.2d 1016, 1020 (Del.

1989) (“[t]he general rule is that interest starts on the date when payment should

have been made” (internal quotations omitted)); Beard Research, Inc. v. Kates, 8

A.3d 573, 620 (Del. Ch.) (“interest is to be awarded from the date payment is due”),

aff’d sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010).

            Kuntz has requested, and is entitled to, prejudgment interest.312 “In Delaware,

prejudgment interest is awarded as a matter of right.” Citadel Holding Corp. v.

Roven, 603 A.2d 818, 826 (Del. 1992). Interest begins to accrue from the date

payment is due. Id. The court has “broad discretion, subject to principles of fairness,

in fixing the interest rate to be applied.” Levey v. Browstone Asset Mgt., LP, 2014

310
      Id.
311
      See PTO, III ¶ 7.
312
      PTO, V.B.4; Def.’s Op. Br. 79–80.

                                              92
WL 4290192, at *1 (Del. Ch. Aug. 29, 2014) (internal quotations and bracketing

omitted). “Unless the parties have specified another rate by contract or the court

determines that a different rate is warranted by the equities, the statutory rate of

interest governs.”     BTG Int’l, Inc. v. Wellstat Therapeutics Corp., 2017 WL

4151172, at *21 (Del. Ch. Sept. 19, 2017). The SPA is silent as to any pre- or post-

judgment interest rate. The legal rate is 5% above the Federal Reserve discount rate.

6 Del. C. § 2301(a). Under the circumstances of this case, interest should be

calculated “at the legal rate, compounded quarterly,” running from July 10, 2017 to

the date of payment, “with the rate of interest fluctuating with changes in the legal

rate.” Basho Techs. Holdco B, LLC v. Georgetown Basho Inv’rs, LLC, 2018 WL

3326693, at *45 (Del. Ch. July 6, 2018), aff’d sub nom. Davenport v. Basho Techs.

Holdco B, LLC, 221 A.3d 100 (Del. 2019). 313 Kuntz is also entitled to post-judgment

interest at the legal rate. Noranda Aluminum Hldg. Corp. v. XL Ins. Am., Inc., 2021

WL 5961628, at *7 (Del. Dec. 16, 2021); 6 Del. C. § 2301(a).

III.   CONCLUSION

       For the foregoing reasons, judgment is entered for Kuntz for breach of

contract in the amount of $40,000,000. Prejudgment interest is awarded beginning

July 10, 2017, at the legal rate, compounded quarterly. Post-judgment interest is

313
   See Levey, 2014 WL 4290192, at *1 (“A fluctuating interest rate adequately reimburses
a plaintiff for the loss of use of its capital by replicating the economic circumstances that
existed during the litigation.”).

                                             93
awarded at the legal rate, compounded quarterly. Kuntz is also entitled to an award

of his legal fees and expenses. As the prevailing party, Kuntz is awarded his costs.

Ct. Ch. R. 54(d); 10 Del. C. § 5106.

      Pursuant to Court of Chancery Rule 88, Kuntz shall submit an affidavit in

support of his fee and expense award within ten business days of this opinion.

      IT IS SO ORDERED.

                                        94