Vivint Solar, Inc. v. Jim Lundberg ( 2024 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
VIVINT SOLAR, INC., a Delaware )
corporation, )
)
Plaintiff/Counterclaim Defendant, )
)
v. ) C.A. No. 2020-0988-PAF
)
JIM LUNDBERG, )
)
Defendant/Counterclaim Plaintiff. )
MEMORANDUM OPINION
Date Submitted: January 31, 2024
Date Decided: May 30, 2024
Michael C. Heyden, Jr., GORDON REES SCULLY MANSKUHANI, LLP,
Wilmington, Delaware; Peggy A. Tomsic, Bryant L. Watson, MAGLEBY,
CATAXINOS & GREENWOOD, Salt Lake City, Utah; Attorneys for
Plaintiff/Counterclaim Defendant Vivint Solar, Inc.
Timothy R. Dudderar, POTTER ANDERSON & CORROON LLP, Wilmington,
Delaware; Alan C. Bradshaw, Chad R. Derum, Mitch M. Longson, MANNING
CURTIS BRADSHAW & BEDNAR PLLC, Salt Lake City, Utah; Attorneys for
Defendant/Counterclaim Plaintiff Jim Lundberg.
FIORAVANTI, Vice Chancellor
This case involves a dispute between a Delaware corporation and one of its
former employees over equity incentive awards. Jim Lundberg is a former associate
general counsel of Vivint Solar, Inc. (“Solar” or the “Company”). While employed
at Solar, Lundberg received several equity incentive awards under an equity
incentive plan. In the summer of 2016, Lundberg left Solar to join Vivint Smart
Home, Inc. (“Smart Home”). Solar and Smart Home shared a common parent that
owned more than 50% of the equity of both companies. When Lundberg left Solar
for Smart Home in August 2016, Solar canceled Lundberg’s unvested awards.
Lundberg claims not to have known this until the summer of 2020, after he inquired
about his awards following Solar’s announcement that it was being acquired in a
merger. The Company then informed Lundberg that all of his awards had been
canceled. What followed was sprawling litigation in Utah and in this court.
The central issue in this case is whether Lundberg’s awards continued to vest
after he left Solar and went to work for Smart Home. Under the operative equity
incentive plan, participation in the plan terminates on the last day that a participant
“actively provides services for a member of the Company Group.” Lundberg argues
that Smart Home is within the definition of Company Group.
The operative equity incentive plan is administered by the Solar board of
directors and its Compensation Committee, which are defined as the
“Administrator.” Solar argues that the Administrator has determined that once a
Solar employee’s employment at Solar terminates, all of the employee’s unvested
awards are canceled and all vested stock option awards are canceled unless they are
timely exercised. Solar maintains that under the express terms of the plan, the
Administrator’s determination is final and binding and this court must afford it
deference.
In this post-trial opinion, the court finds that the plan Administrator never
made a determination to interpret the plan as Solar claims it did. The court concludes
that, under the plain language of the plan, Smart Home and Solar are both within the
definition of Company Group and that Solar breached the plan by canceling
Lundberg’s vested and unvested awards after he seamlessly moved from Solar to
Smart Home. Accordingly, Lundberg is entitled to damages, but only as to the
portions of his counterclaims that are not otherwise time-barred.
The court also concludes that Lundberg breached the plan by initially filing
claims in Utah in contravention of the exclusive forum provision in the plan, but that
does not entitle Solar to monetary damages or a permanent injunction.
I. BACKGROUND
These are the facts as the court finds them after trial.1
1
Other factual findings are contained in the analysis of the claims. The trial record consists
of deposition testimony from ten witnesses, some of whom were deposed more than once,
2
A. The Parties
Solar is a Delaware corporation with its executive offices in Lehi, Utah.2 The
Company provides full-service residential solar energy systems in the United
States.3 On September 30, 2014, Solar registered its stock on the New York Stock
Exchange under the symbol “VSLR” in an Initial Public Offering (the “IPO”).4 In
October 2020, the Company was acquired by non-party Sunrun Inc. (“Sunrun”).5
Solar is now a wholly owned subsidiary of Sunrun.6 Sunrun’s stock is publicly
traded on the Nasdaq Global Select Market.
Smart Home, a non-party, is a Delaware corporation with its executive offices
in Utah.7 At all relevant times, non-party 313 Acquisition LLC (“313 Acquisition”)
and approximately 200 exhibits. Attentive readers will notice that exhibit numbers range
into the 300s. This is explained by the parties’ decision not to number the exhibits
sequentially. The deposition testimony is cited as “Dep.,” with dates for people who have
multiple depositions; trial exhibits are cited as “JX”; stipulated facts in the pre-trial order
are cited as “PTO”; and references to the docket are cited as “Dkt.,” with each followed by
the relevant section, page, paragraph, exhibit, or docket number. Dkt. 1 is cited as
“Compl.” Dkt. 49 is cited as “Answer.” Citations to testimony presented at trial are in the
form “Tr. # (X)” with “X” representing the surname of the speaker, if not clear from the
text.
2
PTO ¶ 24(a).
3
Dkt. 154 ¶ 16 [hereinafter “Black Decl.”].
4
JX 20 at SOLAR001363–64; Black Decl. ¶ 23.
5
Black Decl. ¶ 16.
6
Id.
7
Compl. ¶ 4; Answer ¶ 4.
3
owned more than 50% of the outstanding stock of both Solar and Smart Home.8 313
Acquisition was an investment vehicle controlled by The Blackstone Group.9
Lundberg, a Utah resident, began his employment as Solar’s Associate
General Counsel in May 2014.10 In July 2016, Lundberg became employed by
Smart Home, where he is currently employed. 11 On August 21, 2016, Lundberg’s
employment with Solar officially terminated. 12 As part of his agreement with Smart
Home, Lundberg continued to oversee a few matters for which he was responsible
at Solar and assisted with the transition of a few matters to his successor while he
was employed at Smart Home.13
B. Solar’s Equity Compensation Plans
Solar had two equity incentive plans before Sunrun acquired the Company in
2020. In July 2013, Solar adopted the 2013 Omnibus Incentive Plan (the “2013
8
313 Acquisition’s ownership of at least 50% of the equity of Solar and Smart Home at all
relevant times is not disputed. See Def.’s Post Tr. Br. 3 (presenting argument based on the
fact that “50% or more of each entity’s voting stock was owned by 313 Acquisition”); Pl.’s
Post Tr. Br. 58 (conceding that “313 Acquisition owned more than 50% of both companies
and elected the majority of directors to both boards”).
9
Wallace Dep. 8:13–16, 11:19–12:2.
10
PTO ¶ 24(b).
11
Id. ¶ 24(h).
12
Id. ¶ 24(g).
13
JX 1 at SOLAR000928; JX 44 at VSH000048; Black Decl. ¶¶ 52–54.
4
Plan”).14 Solar granted equity awards under the 2013 Plan until September 2014.15
In connection with its IPO, Solar implemented a 2014 Equity Incentive Plan in
September 2014 (the “2014 Plan”).16 Since then, Solar granted equity awards under
the 2014 Plan. 17 All of the awards at issue in this case were granted under the 2014
Plan. 18 The 2014 Plan and all of the award agreements granted under the 2014 Plan
are governed by Delaware law and designate Delaware courts as the exclusive forum
for all legal claims under those agreements.19
The 2014 Plan provides that Stock Option and Restricted Stock Unit (“RSU”)
awards continue to vest until the “Termination of Status Date.”20 The Termination
of Status Date occurs when the award recipient’s status as a “Service Provider”
ends.21 The 2014 Plan defines a Service Provider as, among other things, an
14
JX 20 at SOLAR001531; JX 332 at Lundberg000761.
15
Black Decl. ¶ 18.
16
Id. ¶ 23; JX 20 at SOLAR001528.
17
Black Decl. ¶ 18.
18
PTO ¶¶ 24(c)–(e).
19
JX 2 § 3(h); JX 3 Ex. A ¶ 12(i); JX 4 Ex. A ¶ 13(i); JX 5 Ex. A ¶ 12(i).
20
JX 2 § 3(c)(iii).
21
Id. § 3(c)(i).
5
individual “employed by the Company or any member of the Company Group.”22
“Company Group” is defined to include Solar, its subsidiaries, its parent, and “any
entity that, from time to time and at the time of any determination, directly or
indirectly, is in control of, is controlled by or is under common control with the
Company.”23
Administration of the 2014 Plan is delegated to Solar’s “Board or a Committee
of the Board constituted to satisfy Applicable Laws (the ‘Administrator’).” 24 The
2014 Plan provides that, “[s]ubject to the [2014] Plan, any limitations on delegations
specified by the Board, and Applicable Laws, the Administrator will have the
authority, in its sole discretion to make any determinations deemed necessary or
advisable to administer the Plan.”25 It also declares that “[t]he Administrator’s
decisions, determinations and interpretations will be final and binding on all
Participants and any other holders of Awards.” 26 The Administrator’s unilateral
22
Id. § 21(kk) (defining “Service Provider” as “an Employee, Director or Consultant”); id.
§ 21(m) (defining “Employee” as “any person, including Officers and Directors, employed
by the Company or any member of the Company Group. However, with respect to
Incentive Stock Options, an Employee must be employed by the Company or any Parent
or Subsidiary of the Company. Neither service as a Director nor payment of a director’s
fee by the Company will constitute ‘employment’ by the Company.”).
23
Id. § 21(j).
24
Id. § 3(a)(i).
25
Id. § 3(b).
26
Id. § 3(i).
6
authority, however, is not absolute. For example, Section 18(c) provides that “no
amendment, alteration, suspension or termination of the Plan or an Award under it
will materially impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing
and signed by the Participant and the Company.”27
The 2014 Plan expressly permits the Administrator to delegate certain tasks
and powers, such as “ministerial duties” and “the authority to grant Options, Stock
Appreciation Rights, or other Awards.”28 Interpreting the 2014 Plan is not one of
the delegable tasks.
C. Administration of the 2014 Plan
On May 9, 2014, Solar’s board of directors (the “Board”) created the
Compensation Committee.29 Among the committee’s duties was to “administer the
Company’s equity compensation plans.”30 Upon its creation, the Compensation
Committee kept minutes, which describe its discussions about and resolutions with
respect to the equity plans it administered. 31 The Board also approved resolutions
27
Id. § 18(c).
28
Id. § 3(a)(ii), 3(b)(xi).
29
JX 142 at SOLAR219755.
30
Id.
31
See, e.g., JX 25; JX 26; JX 28; JX 38.
7
relating to compensation. 32 Several of the Compensation Committee’s resolutions
delegated authority to Solar’s officers to carry out each resolution’s intent.33 There
is no document evidencing a delegation of authority to interpret the 2014 Plan to any
person or entity other than the Compensation Committee.
On February 25, 2015, Solar entered into an agreement with Morgan Stanley
Smith Barney LLC (“Morgan Stanley”) to provide administrative services for the
2013 Plan and 2014 Plan. 34 In addition to tracking the awards internally, Morgan
Stanley sent periodic statements to employees. 35 To assist in Morgan Stanley’s
timely administration of the awards, Solar used an automated program to allow its
human resources management platform, Workday, to notify Morgan Stanley of an
32
See, e.g., JX 321; JX 344.
33
Black Decl. ¶ 37; see, e.g., JX 26 at SOLAR230240 (“RESOLVED FURTHER: That
the Committee hereby authorizes and empowers the officers of the Corporation to take all
action and to prepare, execute, deliver and file all agreements, documents and instruments
that such officer deems necessary or advisable to carry out the intent of these resolutions
and evidence the equity award grants hereby made, including without limitation the
appropriate award agreement for each such grant and, at the time each such [sic] is
exercised or vested, as the case may be, to issue the underlying vested shares of common
stock in accordance with the terms of the 2014 Plan and respective award agreements, and
to authorize payment of all expenses and fees of the Corporation arising in connection with
the actions taken in accordance with the foregoing resolutions, and to carry out the intent
and accomplish the purpose thereof and of these resolutions.”); JX 28 at SOLAR230256
(same); JX 38 at SOLAR230268 (same).
34
JX 143 at SOLAR192177.
35
Black Dep. 47:1–7; see, e.g., JX 7; JX 8; JX 9; JX 15.
8
employee’s termination.36 Upon notification of an employee’s termination, the
Morgan Stanley system would automatically forfeit the unvested portion of the
award.37 Solar believed that Morgan Stanley communicated the forfeiture of the
equity awards to terminated employees, but neither party has produced a termination
notice from Morgan Stanley for Lundberg or any other employee. 38 In mid-2017,
Solar switched from Morgan Stanley to Merrill Lynch as its third-party
administrator. 39 After the transition, employees with legacy Morgan Stanley
accounts retained access to those accounts, and Solar could still access that
information through its Merrill Lynch portal. 40
D. Lundberg Joins Solar and Receives Several Equity Grants
On May 16, 2014, Solar hired Lundberg as its Associate General Counsel.41
Within months of starting his employment, Lundberg received equity grants of
Meads Dep. 83:12–20, 86:7–18, 92:16–21; Dkt. 153 Ex. B ¶¶ 4–10 [hereinafter “Meads
36
Decl.”].
37
02/14/2023 Lindquist Dep. 131:13–132:25; Black Dep. 43:22–44:22; Meads Dep.
83:12–20, 86:7–18, 92:16–21.
38
Black Dep. 44:24–45:24; Meads Decl. ¶ 11; see also Black Dep. 46:13–19 (“Q: Can
you identify a form of email that was allegedly sent to individuals who had been
terminated? A: I cannot. Q: Have you ever seen such an email? A: Yes. I’ve seen those
emails from brokerages. I don’t recall Morgan Stanley specifically.”).
39
Black Dep. 47:10–17; Black Decl. ¶ 28.
40
Black Decl. ¶ 28.
41
PTO ¶ 24(b). Lundberg was originally employed by Vivint Solar Developer, LLC, which
became Solar, as defined, later that year. JX 116.
9
30,000 stock options under the 2013 Plan. 42 Those grants are not at issue in this
case.
In April 2015, Lundberg received a notification letter from Tessa White,
Solar’s Senior Vice President of Human Capital, indicating that Lundberg would be
receiving another round of equity grants, this time under the 2014 Plan. 43 The letter
stated that Lundberg “must be employed by Vivint Solar on the effective date of
grant to receive the awards and that the awards will be subject to a vesting schedule,
and all vesting will be subject to your continued employment with Vivint Solar
through applicable vesting dates.”44 The letter also explained that Lundberg’s
awards would be subject to the terms and conditions applicable to the stock option
awards or RSU awards granted under the 2014 Plan, as described in the 2014 Plan
and their respective equity agreements.45 Other individuals received notification
letters with identical language.46
42
JX 103 at Lundberg000186; Dkt. 19 Ex. 1 ¶¶ 12, 48–49.
43
JX 12. White helped Lindquist carry out the Compensation Committee’s resolutions.
09/16/2021 Lindquist Dep. 83:23–84:3.
44
JX 12 at SOLAR001347.
45
Id.
46
See, e.g., JX 59 at SOLAR233028; JX 316 at SOLAR215192.
10
On May 14, 2015, Solar granted Lundberg 7,632 unvested stock option
awards pursuant to a “2015 Option Agreement” 47 and 7,632 unvested RSUs pursuant
to a “2015 RSU Agreement” (together, the “2015 Grants”). 48 The two agreements
underlying the 2015 Grants stated that the defined terms in the 2014 Plan applied to
the grants 49 and that “[i]f there is a conflict between the Plan and this Agreement,
the Plan will prevail.” 50
In connection with these awards, Lundberg created a Morgan Stanley
StockPlan Connect account and reviewed and accepted the 2014 Plan, the 2014 Plan
Prospectus, and 2015 Option Agreement and 2015 RSU Agreement. 51 Thereafter,
Lundberg received periodic statements from Morgan Stanley about his awards.52
E. The Failed Merger with SunEdison and the 2016 Grant
In mid-2015, Solar and SunEdison, Inc. (“SunEdison”) announced that they
had signed a definitive merger agreement that provided for SunEdison’s acquisition
of Solar.53 The merger was never consummated, and SunEdison filed for bankruptcy
47
PTO ¶ 24(c); JX 4.
48
PTO ¶ 24(d); JX 3.
49
JX 3 at SOLAR000035; JX 4 at SOLAR000043.
50
JX 3 Ex. A ¶ 1; JX 4 Ex. A ¶ 1.
51
07/27/2021 Lundberg Dep. 138:19–139:5, 142:3–16.
52
See, e.g., JX 7; JX 8; JX 9; JX 15.
53
Black Decl. ¶ 58; 3/9/2023 Lundberg Dep. 41:8–15; 2/14/2023 Lindquist Dep. 105:12–
14; Meads Dep. 17:18–24; JX 44 at VSH000048.
11
in April 2016. 54 The resulting uncertainty of Solar’s future led key employees to
look for other opportunities. 55
To minimize the exodus of employees, David Bywater, Solar’s new interim
CEO, presented the Compensation Committee with a proposed employee retention
plan.56 The new retention plan aimed to incentivize key employees to stay at Solar
by granting them substantial RSUs that would vest over two years. 57 The
Compensation Committee approved the new retention plan on May 9, 2016.58 The
Compensation Committee’s authorizing resolution stated that the RSU awards were
“subject to the Participant continuing to be a Service Provider (as defined in the 2014
Plan) through each applicable vesting dates [sic].” 59 Lundberg was among the
recipients of RSU awards under the new retention plan. 60
On May 11, 2016, Solar notified Lundberg that he was granted an additional
88,706 unvested RSUs under the 2014 Plan pursuant to the “2016 RSU Agreement”
54
Black Decl. ¶ 58.
55
Id. ¶ 59.
56
JX 38; Bywater Dep. 159:10–24.
57
See Bywater Dep. 158:7–16 (“[T]he order of magnitude of the outflow of talent, and the
existential threat that it created, was obviously very heavy upon my consciousness.”); JX
38.
58
JX 38 at SOLAR230267–68.
59
Id. at SOLAR230268.
60
Id. at SOLAR230271.
12
(the “2016 Grant” and together with the 2015 Grants, the “Awards”).61 The grant
date for the 2016 Grant is May 9, 2016.62 Like the notification letter for the 2015
Grants, the notification letter for the 2016 Grant stated that “all vesting will be
subject to your continued employment with Vivint Solar through applicable vesting
dates.”63 The letter also stated that Lundberg’s awards were subject to the terms and
conditions applicable to RSU awards granted under the 2014 Plan, as described in
the 2014 Plan and the award agreement. 64 The 2016 RSU Agreement, like the
agreements for the 2015 Grants, stated that it incorporated defined terms from the
2014 Plan and that the 2014 Plan controlled in the event of any conflict. 65
F. Vesting Schedule and Delivery
A quarter of the awards under the 2015 Grants were to vest after one year, and
1/16th of the awards would vest on each of the next twelve quarterly anniversary
dates.66 The 2016 Grant had an accelerated vesting schedule: half of the 2016 Grant
61JX 22.
62
Id.; PTO ¶ 24(e).
63
JX 22.
64
Id.65
JX 5 at SOLAR000054; id. Ex. A ¶ 1.
66
JX 3 at SOLAR000035; JX 4 at SOLAR000043.
13
vested one year from the grant date and the remaining half vested two years from
the grant date.67
According to the 2014 Plan, “Payment of earned Restricted Stock Units will
be made when practicable after the date set forth in the Award Agreement and
determined by the Administrator.”68 The award agreements for the RSU portion of
the 2015 Grants and for the 2016 Grant both provided that “vested Restricted Stock
Units will be paid in whole Shares as soon as practicable after vesting, but in each
such case within the period 60 days following the vesting date.”69 The stock option
portion of the 2015 Grants became exercisable on the date of vesting.70
The Awards’ vesting schedules require the participant to “continu[e] to be a
Service Provider through each such date” for vesting to continue. 71 If Lundberg
ceased to be a Service Provider, the unvested portion of each of the Awards would
immediately terminate, and any vested stock options would terminate if not
exercised within three months after the termination of his Service Provider status.72
67
JX 22 (specifying that the tranches would vest on May 15, 2017, and May 15, 2018).
68
JX 2 § 6(d).
69
JX 3 Ex. A ¶ 2; JX 5 Ex. A ¶ 2.
70
JX 4 Ex. A ¶ 2.
71
JX 3 at SOLAR000035; JX 4 at SOLAR000043; JX 5 at SOLAR000054.
72
JX 3 at SOLAR000035; JX 4 at SOLAR000043; JX 5 at SOLAR000054.
14
All of the award agreements state that “[t]he date of Participant’s termination as a
Service Provider is detailed in Section 3(c) of the Plan.” 73
G. Lundberg Moves from Solar to Smart Home
In the wake of the failed SunEdison merger, Lundberg decided to leave
Solar. 74 At that time, Lundberg had multiple ongoing projects at Solar. Among
them were the securities litigation related to Solar’s IPO and the ongoing SunEdison
bankruptcy.75
In April 2016, Lundberg confided in Shawn Lindquist, Solar’s Chief Legal
Counsel, that he was considering leaving Solar to rejoin his prior law firm.76
73
JX 3 Ex. A ¶ 5; JX 4 Ex. A ¶ 4; JX 5 Ex. A ¶ 5.
74
JX 335 at SOLAR196454.
75
Smart Home 30(b)(6) Dep. 16:2–11. Lundberg’s offer letter from Smart Home identified
both projects and conditioned his employment at Smart Home on his continued work for
Solar on each “for no additional compensation or consideration” while employed at Smart
Home. JX 44 at VSH000048 (describing Lundberg’s ongoing major projects at Solar as
of May 27, 2016, as relating to “the SunEdison, Inc. unsecured creditors’ committee and
the liquidation of VSLR’s claim in the SunEdison bankruptcy, including the pending
litigation involving Solar that is related to that certain Agreement and Plan of Merger
between SunEdison and Solar dated as of July 20, 2015, as amended on December 9, 2015,
and (2) the securities class action lawsuits related to Solar’s initial public offering of
common stock currently pending in the U.S. District Court for the Southern District of New
York against Solar and certain of its officers and directors”); Pl’s Answering Tr. Br. 36–
37 (“Lundberg also admits that it was ‘Lundberg’s Vivint Smart Home offer [that] was
expressly conditioned on Lundberg’s agreement to continue to provide ‘consulting
services’ to Vivint Solar on certain outstanding legal matters, including the SunEdison
bankruptcy, ‘for no additional compensation.’” (alteration in original) (quoting Def.’s
Opening Tr. Br. 22)).
76
JX 335 at SOLAR196454; 02/14/2023 Lindquist Dep. 101:22–102:17.
15
Lundberg at that time was unaware that Lindquist was about to leave Solar to join
Smart Home. In an email memorandum, Lindquist urged Bywater to persuade
Lundberg to remain in the fold. 77 Lindquist wrote, in pertinent part:
We need to keep [Lundberg] in the Vivint family - he is way too
valuable. I’ll want to be able to speak with him about it this weekend
and do all that I can to persuade him to come over to [Smart Home]. If
he’s interested, I’d map out a [sic] 8-12 week transition plan that would
be ideal for both companies and enable him to continue to sit on the
Creditors’ Committee of the [SunEdison] bankruptcy even after he
comes over to [Smart Home]. 78
Thereafter, Lundberg discussed with Bywater, Lindquist, and Dan Black
(Lindquist’s eventual successor) the possibility of Lundberg’s moving to Smart
Home with an active concurrent period in which he would continue running his Solar
matters while he transitioned them to his successor.79 Ultimately, Bywater
convinced Lundberg to move to Smart Home instead of pursuing another
opportunity. 80 Bywater admittedly “was not happy about it. . . . [But Bywater]
77
JX 335 at SOLAR196453–54; see also JX 336; JX 47; JX 52; JX 53.
78
JX 335 at SOLAR196454.
79
07/27/2021 Lundberg Dep. 77:12–84:18.
80
JX 336.
16
agreed that it would be great to have [Lundberg] continue to help us during this
transition period.”81
On May 27, 2016, Smart Home sent Lundberg an offer letter.82 The offer was
conditioned on Lundberg’s continuing to provide services to Solar on certain
outstanding projects during a transition period.83 The letter also specified that Smart
Home would not pay additional compensation to Lundberg for the transition work.84
Lundberg accepted the offer and joined Smart Home on July 18, 2016. 85 Lundberg
agreed to oversee the Solar legal matters to which he had been assigned and to
facilitate a smooth transition to his yet-to-be-named replacement. 86
After Solar hired Jared Fields as Lundberg’s replacement on July 27, 2016,
Lundberg began transitioning the matters he had overseen to his successor.87
Lundberg’s employment with Solar formally ended on August 21, 2016.88 Lundberg
81
Bywater Dep. 76:4–78:16; see id. (explaining that Bywater “was very upset with what
was going on because the entire management team was leaving” but that he was “sure
having [Lundberg] help us stabilize was in the best interest of Vivint Solar”).
82
JX 44.
83
Id. at VSH000048.
84
Id.
85
PTO ¶ 24(h).
86
Black Decl. ¶¶ 52–53.
87
Id. ¶ 54.
88
PTO ¶ 24(g).
17
testified that he continued to work on the SunEdison bankruptcy matter and the
securities litigation into late 2017. 89 According to Black, “Lundberg’s transition
work was completed by the end of December 2016,” but he may have provided
occasional assistance after that time. 90
H. Solar Cancels Lundberg’s Awards
When Lundberg’s employment with Solar terminated, he possessed 5,247
unvested stock option awards and 2,385 vested stock option awards granted in 2015;
5,247 unvested RSUs and 2,385 vested RSUs granted in 2015; and 88,706 unvested
RSUs granted in 2016. 91 Lundberg had engaged in “Exercise and Sell-to-Cover
Transactions” upon the vesting of each of the two tranches of RSUs that had vested,
selling enough RSUs to cover the taxes associated with vesting of each tranche,
leaving him with 1,343 shares as of June 30, 2016.92 Lundberg also had 16,000
unvested stock option awards and 14,000 vested stock option awards granted in
2014, which are not at issue in this case.93
Upon his termination from Solar, Lundberg was removed from Solar’s
Workday, which then automatically signaled to Morgan Stanley that Lundberg had
89
See 07/27/2021 Lundberg Dep. 66:22–67:10.
90
Black Decl. ¶ 54.
91
JX 88.
92
JX 7; JX 8.
93
JX 88.
18
been terminated. 94 Solar canceled Lundberg’s unvested stock options and RSUs in
its own system and returned them to the equity award pool available for grant under
the 2014 Plan. 95 Solar also canceled Lundberg’s vested stock option awards granted
under the 2015 Option Agreement after Lundberg did not exercise them within the
three-month exercise period after he left Solar.96
In its annual report on Form 10-K for the period ended December 31, 2016,
Solar disclosed that it had experienced a high forfeiture rate of awards that year due
to the departure of several members of the management team.97 The 10-K did not
name Lundberg as one of the key employees who had left.98
I. Lundberg’s Notice of the Cancellation of His Equity Awards
Lundberg’s quarterly stock plan summary for the period January 1, 2016
through March 31, 2016, showed that 1,908 shares granted in 2015 had vested and
94
09/21/2021 Lundberg Dep. 173:6–174:5; Meads Dep. 83:5–11, 83:16–20; 86:7–18.
95
Black Decl. ¶ 62; JX 100 at JX100.9–10.
96
Black Decl. ¶ 63; JX 100 at JX100.9–10. Solar contends that this cancellation is reflected
Morgan Stanley’s records. Pl.’s Opening Tr. Br. 42. The Morgan Stanley records Solar
produced in this action do not show that the vested stock options had been canceled—just
that their exercise date had been accelerated. JX 88.
97
JX 126 at SOLAR193651.
98
Id. (reporting only that “[d]uring the year ended December 31, 2016, several of the
Company’s senior management, including the Company’s former CEO, left the
Company”).
19
been delivered by Solar. 99 The statements Lundberg received after he left Solar did
not reflect that any unvested awards continued to vest or that shares had been
delivered upon or within 60 days after the vesting date of any tranche.100 An “AdHoc
Statement” 101 for May 14, 2015 to August 21, 2016, showed that all of Lundberg’s
unvested RSUs and 21,247 options had been canceled on August 21, 2016; listed
November 21, 2016, as the last date to exercise the 2,385 vested stock option awards
from the 2015 Option Agreement; and September 20, 2016 as the last date to exercise
99
JX 7; JX 3 at SOLAR000035 (explaining that one fourth of the 7,632 shares––1,908––
will vest on the first anniversary of the 2015 Grants). The quarterly Stock Plan Summary
for January 1, 2016 to March 31, 2016, shows that Lundberg received all 1,908 shares on
March 10, 2016. JX 7 at MS000030.
100
Lundberg’s 2016 Year-End Stock Plan Summary showed that tranches of 1,908 shares
and 477 shares with the grant ID of 150514, which corresponds to the May 14, 2015 grant
date of the 2015 Grants, were delivered on March 10, 2016, and June 7, 2016, respectively,
and that Lundberg engaged in the Exercise and Sell-to-Cover Transactions, but presented
no other entries for that year. JX 9; see also JX 377 Ex. GG at JX377.41, JX377.43
(showing only that Lundberg’s opening balances as of June 30, 2016, and September 30,
2016, and closing balances on September 30, 2016, and December 31, 2016, were all 1,343
shares, and stating that no intermediate transactions had occurred); JX 15 (showing that
Lundberg sold his 1,343 Solar shares in that account on July 6, 2017 but not providing any
additional information on his Awards or when those 1,343 shares vested).
101
Black pulled this Morgan Stanley document from Solar’s portal to the legacy Morgan
Stanley accounts through Solar’s new Merrill Lynch’s platform as he prepared to respond
to Lundberg’s demand in July 2020. Black Decl. ¶ 28. This statement was generated on
July 30, 2020, and reflects Lundberg’s Awards during the period from May 14, 2015 to
August 21, 2016, as described above, and is the best evidence in the record of the
transactions that occurred within Morgan Stanley’s system during that time. JX 88.
20
14,000 options that had been granted in 2014. 102 The AdHoc Statement, though
reflective of Morgan Stanley’s internal records, was never sent to Lundberg, and
neither it nor any of the statements he received explicitly stated that the vested stock
options had been forfeited.103
Like the AdHoc Statement, Solar’s internal documents indicate that the
Awards were canceled when Lundberg moved to Smart Home. An updated
capitalization report that included all equity grants as of June 28, 2016, showed that
Lindquist forfeited his unvested equity awards and triggered the three-month
exercise period when he terminated his employment with Solar. 104 Also, Solar’s
102
JX 88. 16,000 of the canceled options and the 14,000 options to be exercised by
September 20, 2016, were from the award granted under the 2013 plan and are not at issue
in this case.
103
JX 9 (showing no new vesting in the last two quarters of 2016, but not demonstrating
that Lundberg’s vested shares were forfeited); JX 15 (showing no new vesting in the third
quarter of 2017, but not demonstrating that Lundberg’s vested shares were forfeited).
Quarterly statements from Lundberg’s account showed 1,051 shares in his account at the
end of the first quarter of 2016, and then 1,343 at the end of the second quarter. JX 377
Ex. GG at JX377.37, JX377.39. The statements for the third and fourth quarters, however,
did not indicate any cancellation or forfeiture, and the 1,343 shares stayed in Lundberg’s
account for the rest of the year. Id. at JX377.41, JX377.43. The statement for the June 30,
2016 to September 30, 2016 period, during which Solar canceled Lundberg’s Awards,
states “No transactions during this period.” Id. at JX377.41.
104
JX 69 at JX69.3–4. Lindquist’s shares illustrated by the capitalization report were
granted under the 2013 Plan, not the 2014 Plan. Id. Garner Meads, Solar’s former Director
of Equity Compensation, testified that JX 69 was consistent with the way those reports are
prepared and the way Meads understood Solar “to be administering the 2014 Plan.” Meads
Dep. 143:19–144:2; accord Black Decl. ¶¶ 43–45. Black oversaw the administration of
the 2014 Plan from May 2016 until Solar’s acquisition by Sunrun. Black Decl. ¶ 13.
21
February 14, 2017, internal cancellation report showed that all of Lundberg’s
unvested option awards and RSUs under the 2014 Plan had been canceled, as well
as the 2,385 vested stock options. 105 These internal documents were not accessible
or communicated to Lundberg.
On the other hand, Lundberg retained access to his online Solar Morgan
Stanley account after he left Solar. The portal clearly presents outstanding awards
upon login.106 A record of the logins to Lundberg’s account that Morgan Stanley
provided in this case shows that, before his employment with Solar terminated in
2016, Lundberg logged into his Morgan Stanley account on five different occasions,
for periods lasting between one minute and six-and-a-half minutes. 107 Then, on
August 29, 2016, eight days after he left Solar, Lundberg logged into his account for
fourteen minutes. 108 On October 10, 2016, the Morgan Stanley system recorded two
logins, the first lasting approximately four minutes and the second lasting 23
seconds. 109 On June 15, 2017 and July 3, 2017, the Morgan Stanley system recorded
105
See JX 100 at JX100.9–10 (illustrating that 5,247 unvested stock options and 5,247
unvested RSUs of the 2015 Grants, 88,706 RSUs of the 2016 Grant, and 2,385 vested stock
options of the 2015 Grants were canceled by Solar). According to Meads, leaving Solar
for employment elsewhere would result in the cancellation of unvested equity awards.
Meads Dep. 133:16–22.
106
JX 18 at SOLAR001249.
107
JX 19 at JX19.4–5; JX 314 (authenticating JX 19).
108
JX 19 at JX19.4.
109
Id.
22
logins after several failures, but did not contain any logout information.110 On July
6, 2017, the date on which Lundberg sold the remaining 1,343 RSUs that had vested
prior to his termination, Lundberg logged into the system twice for about 22 minutes
in total.111 The last login before the dispute leading to this action was on October 9,
2019. 112 Although Lundberg may have had some difficulties in retrieving his
account after he left Solar, his contention that he was unable to log in for years and
could only log onto the portal around July 2020 was not credible and not supported
by the evidence. 113
J. Sunrun’s Acquisition of Solar and Lundberg’s Demand Letter
On July 6, 2020, Solar and Sunrun publicly announced that they had entered
into a merger agreement, pursuant to which Sunrun would acquire Solar in a stock-
for-stock merger. 114 Solar’s stock price increased on the news. 115 The merger closed
on October 8, 2020.116
110
Id. at JX19.3–4.
111
Id. at JX19.3; JX 15 at MS000028.
112
JX 19 at JX19.3.
113
09/10/2021 Lundberg Dep. 56:6–57:19. Solar switched its third-party administrator
from Morgan Stanley to Merrill Lynch in 2017. Black Dep. 47:10–18; Black Decl. ¶ 28.
Lundberg did not create a Merrill Lynch account because he had left Solar. 07/27/2021
Lundberg Dep. 166:23–167:6.
114
JX 149 at JX149.41; Black Decl. ¶ 70; JX 39.
115
JX 39; 02/14/2023 Lindquist Dep. 152:22–153:3.
116
JX 149 at JX149.41.
23
On July 23, 2020, between the announcement and the closing of the merger,
Lundberg demanded that Solar deliver all his Awards, and on July 28, 2020, he sent
a purported notice of exercise of his options. 117 On August 6, 2020, Solar, through
outside counsel, sent a letter rejecting Lundberg’s demands. 118 Solar took the
position that Lundberg had ceased to be a “Service Provider” when he terminated
his employment with Solar on August 21, 2016, and therefore had “not been
employed by, a consultant for, or a director of the Company Group.” 119 The letter
also stated that Lundberg’s Morgan Stanley account showed that his equity awards
were forfeited shortly after his termination date at Solar.120 Solar indicated that it
117
Neither the July 23 nor the July 28 notices are in the record, but they are referenced in
other trial exhibits. See JX 107 at Lundberg000184 (stating, in a follow-up letter, that
Lundberg had attached “a copy of my July 23, 2020 letter to Vivint Solar, Inc., with
reference to my Restricted Stock Unit Agreement under the Vivint Solar, Inc. 2014 Equity
Incentive Plan, as well as my Exercise Notice dated July 28, 2020 (collectively the
‘Notices’),” though the version of the letter produced to the court did not have such
attachments); JX 108 (providing Solar’s “response to [Lundberg’s] July 23, 2020, and July
28, 2020, letters” and explaining Solar’s position regarding the Awards and Lundberg’s
awards under the 2013 Plan). A subsequent September 22, 2020 letter from Lundberg
asked that Solar “please consider this letter as my Exercise Notice for the exercise of 7,632
Options at the applicable Exercise Price of $14.15, which have previously vested under my
2015 Option Agreement.” JX 135 at Lundberg000951. With the letter, Lundberg
purported to deliver the exercise price for all 7,632 of the options under the 2015 Option
Agreement, attaching a check for the exercise price of those options and certain options
under the 2013 Plan. Id. at Lundberg000951–52.
118
JX 108.
119
Id. at VSLRUT000155.
120
Id. at VSLRUT000154.
24
believed that the 2014 Plan’s plain language supported Solar’s interpretation 121 and
explained that “[s]ince the Plan’s inception, the Plan Administrator has consistently
interpreted and administered the Plan and all RSU award agreements in that
manner.”122 Lundberg testified that he did not receive the letter until several days
later. 123
K. Procedural History
On September 29, 2020, Lundberg filed a complaint in the United States
District Court for the District of Utah (the “Federal Action”) asserting breach of
121
Id. at VSLRUT000155–56. Solar’s letter correctly quoted the 2014 Plan’s definition of
“Company Group”: “‘the Company, any Parent or Subsidiary of the Company and any
entity that, from time to time and at the time of any determination, directly or indirectly, is
in control of, is controlled by or is under common control with the Company.’” It then
informed Lundberg: “Since your VSLR Termination Date, you have not been employed
by, a consultant for, or a director of the Company Group. Vivint Smart Home (“VVNT”)
is not a parent or subsidiary of VSLR. It is not an entity that directly or indirectly is in
control of VSLR or controlled by VSLR, and it is not commonly controlled by VSLR.” Id.
Notably, Solar’s letter did not claim that Solar and Smart Home were not under common
control.
122
Id. at VSLRUT000156 (“[T]he Plan is crystal clear that, when it comes to interpreting
that language, the Plan Administrator has sole discretion to interpret that language, and its
interpretation in that regard ‘is final and binding’ on you as a Participant . . . . The Plan is
equally crystal clear that, when it comes to transfers among VSLR and members of the
Company Group, the Plan Administrator has the right to determine the effect of such a
transfer for purposes of the Plan and that such determination will be final and binding.”);
see also id. at VSLRUT000160 (“The Plan is clear that VSLR’s grant of those Stock Option
Awards to you was voluntary and solely within VSLR’s discretion . . . .”).
123
9/10/2021 Lundberg Dep. 100:7–18. This is consistent with a follow-up letter that
Lundberg sent on August 7, 2020, which indicated that he had not heard back from Solar.
JX 107.
25
contract claims against Solar under the 2014 Plan (the “Delaware Claims”) and the
2013 Plan.124 Solar moved to dismiss the Federal Action on several grounds,
including for improper venue and lack of federal jurisdiction.125
On November 2, 2020, Lundberg filed an Arbitration Demand (the
“Arbitration”), alleging the same Delaware Claims against Solar. 126 Again, Solar
moved to dismiss for improper venue and lack of subject matter jurisdiction, among
other grounds.127
On November 16, 2020, Solar filed this action, alleging that Lundberg
breached the exclusive Delaware forum provision in the 2014 Plan by filing the
Federal Action and the Arbitration.128 Solar seeks damages and a permanent
injunction enjoining Lundberg from prosecuting the Delaware Claims in any forum
other than the Delaware Court of Chancery or the United States District Court for
the District of Delaware. 129 Solar also seeks a decree validating the Administrator’s
124
Dkt. 19 Ex. 1. The Federal Action also brought claims for, among other things,
conversion, negligent misrepresentation, and violations of the Securities Exchange Act of
1934. Id. Ex. 1.
125
Id. Ex. 2.
126
Compl. ¶¶ 10–11, 107.
127
Dkt. 28 Ex. 7.
128
See generally Compl. Solar also filed a motion to expedite with its complaint, which
the court granted on November 25, 2020. Dkts. 2, 20.
129
Compl. ¶¶ 108–118.
26
interpretation and administration of the 2014 Plan and Solar’s decision to forfeit
Lundberg’s equity awards.130
Also on November 16, 2020, Solar moved for a preliminary antisuit
injunction, 131 which the court granted on January 20, 2021. 132 On February 8, 2021,
Lundberg filed his Delaware Claims as counterclaims in this action.133 In its answer
to Lundberg’s counterclaims, Solar asserted affirmative defenses, including that the
Delaware Claims are time-barred. 134 Lundberg and Solar agree that, for purposes of
determining whether Lundberg’s counterclaims are time-barred, those claims were
asserted on September 29, 2020—the date on which he filed the Federal Action.135
The court held a one-day trial on June 7, 2023. 136 After the trial, this court
requested supplemental submissions, the last of which were received on January 31,
2024. 137
130
Id. ¶ 121.
131
Dkt. 3.
132
Dkt. 42.
133
Dkt. 49.
134
Dkt. 59.
135
Def.’s Opening Tr. Br. 6; Pl.’s Opening Tr. Br. 75.
136
Dkt. 175. The parties stipulated to trial on a paper record, and the day of trial was
devoted solely to argument and presentation of designated deposition testimony. Dkts.
152, 179.
137
Dkts. 180–82; 186–87.
27
II. ANALYSIS
At the heart of this dispute is whether Solar could and did cancel Lundberg’s
awards upon the termination of Lundberg’s employment with Solar.138 Solar argues
that it properly exercised its discretion in interpreting the 2014 Plan to permit
cancellation of Lundberg’s Awards when his employment with Solar ended in
August 2016. Lundberg argues that the Administrator of the 2014 Plan never made
such a discretionary decision and that, even if it had, the Company’s interpretation
is contrary to the plain language of the 2014 Plan. Specifically, Lundberg maintains
that under the plain and unambiguous language of the 2014 Plan, his awards
continued to vest as long as he was providing services to a member of the Company
Group. Lundberg contends that Smart Home was a member of the Company Group
because it and Solar were under the common control of 313 Acquisition. Therefore,
Lundberg insists that his awards continued to vest while he was employed at Smart
Home.
138
The Awards consist of three separate grants, each of which Lundberg received under a
different agreement. Though the interpretation of each agreement is independently at issue
in this case, the 2014 Plan controls itself and each agreement, so its interpretation is
dispositive. JX 3 Ex. A ¶ 1 (stating that, in the event of conflict between the award
agreement and the 2014 Plan, the 2014 Plan controls); JX 4 Ex. A ¶ 1 (same); JX 5 Ex. A
¶ 1 (same). For the sake of clarity, the court refers only to the 2014 Plan when discussing
questions of interpretation pertinent to the Awards.
28
The court starts with the substance of the dispute over the terms of the 2014
Plan—Lundberg’s counterclaim for breach and Solar’s claim for declaratory
judgment. Thereafter, the opinion will address Solar’s laches defense and the
appropriate measure of damages. Lastly, the opinion considers the remedies that
Solar seeks for Lundberg’s filing of claims outside of Delaware in breach of the 2014
Plan’s exclusive forum provision.
A. Breach of Contract
To prevail on his breach of contract counterclaims, Lundberg must establish
by a preponderance of the evidence: “(i) a contractual obligation, (ii) a breach of
that obligation by the defendant, and (iii) a causally related injury that warrants a
remedy, such as damages or in an appropriate case, specific performance.” AB
Stable VIII LLC v. Maps Hotels & Resorts One LLC, 2020 WL 7024929, at *47 (Del.
Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del. 2021).
The parties agree that the 2014 Plan and the agreements underlying each of
the Awards are valid and binding contracts. 139 The parties hotly dispute whether
Solar breached the 2014 Plan. Fundamentally, these claims turn on whether Smart
Home is a member of the “Company Group,” as that term is defined in the 2014
Plan. Company Group is defined to include “any entity that . . . directly or indirectly
139
PTO ¶ 24(f).
29
. . . is under common control with” Solar.140 Solar argues that it did not breach the
2014 Plan because the Administrator exercised its discretionary authority to interpret
the 2014 Plan so as to require forfeiture of Lundberg’s awards upon the termination
of his employment with Solar, meaning that Smart Home is not part of the Company
Group. Solar insists that its interpretation is final and binding upon Lundberg.
A significant threshold question is whether Solar’s decision to cancel
Lundberg’s RSUs and options upon his termination of employment with Solar is
entitled to any deference. Lundberg argues that it is not because there is no evidence
that the Administrator ever interpreted the 2014 Plan as Solar has in this litigation.
Lundberg argues that, under the plain and unambiguous language of the 2014 Plan,
Smart Home is under common control with Solar and, therefore, his awards could
not be terminated without his written agreement, which he did not give.141 The court
first addresses whether the Administrator interpreted the 2014 Plan or made a
discretionary determination that is entitled to deference.
140
JX 2 § 21(j).
141
See id. § 18(c) (“Subject to [exceptions not applicable here], no amendment, alteration,
suspension or termination of the Plan or an Award under it will materially impair the rights
of any Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant and the
Company.” (emphasis added)).
30
1. The Administrator made no determination that Smart Home
was outside the definition of Company Group.
The 2014 Plan grants to the Administrator “the authority, in its sole discretion
to make any determinations deemed necessary or advisable to administer the [2014]
Plan.” 142 According to the 2014 Plan, the Administrator’s “decisions,
determinations and interpretations will be final and binding on all Participants.”143
Solar argues that under this court’s caselaw, the Administrator’s discretionary
decisions should be accorded deference, and that Solar’s decision to cancel
Lundberg’s awards entitles Solar to a judicial declaration confirming its
interpretation of the 2014 Plan.
Solar consistently employed a practice of terminating awards under the 2014
Plan when plan participants stopped working at Solar or one of its subsidiaries.144
142
Id. § 3(b).
143
Id. § 3(i).
144
Black Decl. ¶¶ 38–39.
31
Solar’s IPO Prospectus,145 the 2014 Plan Prospectus,146 and statements by Solar
employees147 either directly confirm or do not contradict this practice. Solar
145
JX 20. Solar’s IPO Prospectus indicated that the Compensation Committee’s
administration of the 2014 Plan was subject to the 2014 Plan’s provisions. Id. at
SOLAR001529. It also stated that stock options’ sunset exercise period in their award
agreement is triggered “[a]fter the termination of service of an employee, director or
consultant” and that, for RSUs, the Administrator “may impose whatever conditions to
vesting it determines to be appropriate (for example, the administrator may set restrictions
based on the achievement of specific performance goals or continued service to us).” Id.
Solar’s briefing in this case emphasizes that “[n]owhere in Solar’s IPO Prospectus’
representations regarding the 2014 Plan does it state that continued service also may be
with SmartHome.” Pl.’s Opening Tr. Br. 16–17.
146
JX 21. The 2014 Plan Prospectus presents 56 questions and answers about the 2014
Plan. Id. Award recipients were required to read and sign the 2014 Plan Prospectus to
accept their awards. JX 11 at SOLAR000474; JX 17 at SOLAR000396. Among other
things, the 2014 Plan Prospectus states that “termination of status” will occur “at midnight
at the end of the last day in the primary work location in which you are actively providing
services to the Company or any parent or subsidiary of the Company.” JX 21 at
SOLAR001094. Phrased slightly differently from the 2014 Plan’s Termination of Status
Date, the Prospectus’s Termination of Status presents Solar’s narrower interpretation.
147
For example, Lindquist emailed White and Sara Spengler, the Director of Equity
Compensation, template language for award offer letters under the 2014 Plan, which stated
that “[a]ll vesting shall be subject to your continued employment with the Company
through applicable vesting dates.” JX 27 at SOLAR217142–43. This language was then
used in the offer letters that White sent to employees. See, e.g., JX 29 at SOLAR230124;
JX 12 at SOLAR001347; JX 22 at SOLAR001117; JX 59 at SOLAR233028. Lindquist
also recommended that the educational webinar presenting the 2014 Plan to grantees state
that an award “terminates if you leave Vivint Solar.” JX 32 at SOLAR210525. The final
draft of the webinar stated that “[a]ll vesting is subject to continued service on the
applicable vesting dates.” JX 37 at SOLAR210595. Lundberg attended the webinar.
07/27/2021 Lundberg Dep. 157:22–159:4. A later-developed presentation included the
same representation but cautioned that the 2014 Plan’s terms controlled. JX 74 at
SOLAR000478–79, SOLAR000488. Additionally, Bywater, the architect of the 2016
retention awards, understood the term “Service Provider” to be an employee of Solar, and
stated that he “wasn’t going to award them for leaving.” Bywater Dep. 133:6–136:3.
32
followed this practice even for other employees who, like Lundberg, left Solar to
work for Smart Home. 148
Although Solar demonstrated a consistent practice of forfeiting unvested
awards upon a recipient’s termination of employment with Solar or its subsidiaries,
the Company did not present any persuasive evidence that the Administrator ever
made a determination to this effect, either generally or in a specific instance. Indeed,
the evidence revealed that no such decision was made.
The logical starting point is the records of the Administrator, which in this
case is the Compensation Committee. To its credit, the Compensation Committee
kept detailed minutes that reflect discussions about the 2013 Plan and 2014 Plan and
multiple resolutions documenting Compensation Committee decisions to administer
the plans and to grant awards.149 These minutes evince the Compensation
Committee’s care in recording its decisions, a practice to be commended. But these
minutes and resolutions do not show that the committee ever exercised its discretion
as Solar claims in this litigation. Nor has Solar presented evidence of the Board or
148
See, e.g., JX 69 at JX69.3–4 (showing that Solar terminated Lindquist’s awards under
the 2013 Plan when he moved to Smart Home).
149
JX 25 at SOLAR230233 (discussing the consulting firm that the Compensation
Committee engaged to advise them on the equity incentive program); JX 26 at
SOLAR230237–40 (discussing and adopting a resolution approving equity incentive
awards under the 2014 Plan); JX 28 at SOLAR230254–56 (same); JX 38 at
SOLAR230267–68 (same).
33
Compensation Committee having requested or been presented with legal advice on
the interpretation of “Company Group” prior to or in connection with the
cancellation of Lundberg’s awards. 150
Beyond the documentary record, no Compensation Committee member could
recall the committee having ever discussed the provisions of the 2014 Plan that are
at issue in this case. 151 For example, Black, a member of Solar’s legal team
150
Section 11(a) of the 2014 Plan provides: “Unless otherwise provided by the
Administrator, a Participant will not cease to be an Employee in the case of . . . any transfer
between locations of the Company or other members of the Company Group.” JX 2 §
11(a). There is no evidence of the Administrator’s having “otherwise provided” with
respect to Lundberg’s moving to Smart Home, and the court finds it made no such
determination.
151
See, e.g., Wallace Dep. 29:7–31:10 (Compensation Committee member) (“Q: Do you
have a recollection of ever discussing, in connection with either the board of directors or
the compensation committee of Vivint Solar, the meaning of common control? . . . A:
No.”); id. at 42:8–15 (“Q: Do you have a recollection of parsing the words of any provision
or any definition within any of the equity plans of Solar, yes or no? . . . A: No, I don’t.”);
D’Allesandro Dep. 19:4–22 (Compensation Committee member) (“Q: Do you have a
recollection in connection with the Vivint Solar equity plans ever addressing or discussing
the meaning of, ‘common control,’ under those plans? . . . A: I have no recollection.”);
id. at 19:24–20:7 (“Q: In connection with the Vivint Solar plans do you recall addressing
the issue of vesting when an individual transferred between the [sic] Vivint Solar and
Vivint Smart Home? . . . A: I -- I don’t ever remember people talking about transfers
between the companies, one. And two, I have no recollection of any -- any such
discussion.”); id. at 40:11–18 (“Q: Do you have any recollection of the compensation
committee at Vivint Solar addressing equity awards provided to Jim Lundberg? . . . A: I
-- I have no such recollection one way or the other.”); id. at 41:19–24 (“Q: Do you have a
recollection of the compensation committee ever discussing a specific term or provision of
any [sic] Vivint Solar’s equity plans? . . . A: I -- I do not recall.”); id. at 42:9–14 (“Q: Do
you recall the Vivint Solar compensation committee ever exercising its discretion with
respect to an interpretation of the plan documents? . . . A: I -- I don’t recall one way or
the other.”).
34
throughout the 2014 Plan’s administration and Solar’s Chief Legal Officer from
2017 to 2020, 152 could not remember any exercise of discretion by the Compensation
Committee other than the granting of new equity awards. 153
The court concludes that the Administrator made no actual decision to
interpret the 2014 Plan as Solar claims in this litigation. Because the Administrator
made no such decision, there is no decision to which any deference is owed. 154
152
Black Decl. ¶¶ 5–10.
153
Black Dep. 54:11–25 (“Q: Do you have a recollection of any occasion where the
compensation committee exercised discretion in connection with the equity plans? . . . A:
Yes. To the extent that granting of equity is an example of discretion. Q: Okay. Other
than the granting of equity do you recall any other exercise of discretion? . . . A: Nothing
comes to mind.”).
154
This opinion does not address whether a decision of the Administrator to interpret the
2014 Plan is entitled to deference. Historically, this court has enforced discretionary acts
of plan administrators that are not inconsistent with a plan that grants them final
discretionary authority. See Maher v. N.E.C.A. - Loc. Union No. 313 I.B.E.W. Pension Tr.
Fund, 1978 WL 4954, at *2 (Del. Ch. May 30, 1978) (“Section 9.1 of the Plan does provide
that decisions of the Trustees in administering the Plan shall be final, and therefore this
Court must give deference to the decision of the trustees denying plaintiff a pension
inasmuch as the decision was based on a reasonable application of the Plan’s provisions.”);
Friedman v. Khosrowshahi, 2014 WL 3519188, at *6–10 (Del. Ch. July 16, 2014)
(declining to find that discretionary plan administration that was consistent with the
language of the plan was not in good faith or constituted an uninformed decision), aff’d,
2015 WL 1001009 (Del. Mar. 6, 2015); Stemerman v. Ackerman, 184 A.2d 28, 32–34 (Del.
Ch. 1962) (enforcing a stock option committee’s administration of a plan where the court
found two exercises of discretion, one consistent with the plain language of the plan and
the other a reasonable interpretation of the plan); W.R. Berkley Corp. v. Hall, 2005 WL
406348, at *4 (Del. Super. Feb. 16, 2005) (“[W]hen a stock option committee is vested
with final, binding and conclusive authority to determine a participant’s right to receive or
retain benefits, that decision made in accordance with the provisions of the agreement will
not be second guessed by the Court absent a showing of fraud or bad faith.”). But a recent
35
2. The Awards continued to vest while Lundberg was employed
by Smart Home.
a. The plain language of the 2014 Plan allows continued
vesting and nonforfeiture of Awards held by employees
of entities under common control with Solar.
The 2014 Plan and the Awards are construed under “well-established
principles of contract interpretation.” Weinberg v. Waystar, Inc., 294 A.3d 1039,
1043 (Del. 2023); accord Terrell, 297 A.3d at 619 (applying “traditional principles
of contract interpretation” to the terms of a stock option agreement). “Delaware
adheres to the ‘objective’ theory of contracts, i.e. a contract’s construction should be
that which would be understood by an objective, reasonable third party.” Osborn ex
rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal quotation marks
omitted). The court must read the contract as a whole and “enforce the plain
meaning of clear and unambiguous language.” Manti Hldgs., LLC v. Authentix
Acquisition Co., 261 A.3d 1199, 1208 (Del. 2021). If the contract is unambiguous,
the court will give effect to the plain meaning of its terms. Id. “A contract is not
decision of the Delaware Supreme Court could be read to suggest that a committee’s
decision on a pure question of law, such as interpreting an equity incentive plan, is entitled
to no deference. Terrell v. Kiromic Biopharma, Inc., 297 A.3d 610, 623 (Del. 2023)
(“[T]he Committee was assigned the authority to ‘interpret the meaning of a legal
document’—the Stock Option Agreement. As a question of law, the Committee’s
contractual interpretation was subject . . . to de novo review.”); see Sanders v. Wang, 1999
WL 1044880, at *7–9 (Del. Ch. Nov. 8, 1999) (finding that an administrator’s purported
exercise of discretion in a manner contrary to the unambiguous language of the governing
plan was invalid). Although the parties have briefed the issue, the court is not required to
reach it, and the court declines to do so in dicta.
36
rendered ambiguous simply because the parties do not agree upon its proper
construction. Rather, a contract is ambiguous only when the provisions in
controversy are reasonably or fairly susceptible of different interpretations or may
have two or more different meanings.” Rhone-Poulenc Basic Chems. Co. v. Am.
Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
Lundberg’s Awards at issue in this case provide:
Any [securities] that have not vested as of the time of Participant’s
termination as a Service Provider will cease vesting and will revert to
the Plan on the 30th day following the Termination of Status Date. The
date of Participant’s termination as a Service Provider is detailed in
Section 3(c) of the Plan. 155
The 2014 Plan defines a “Service Provider” as “an Employee, Director or
Consultant.”156 It defines “Employee” as “any person . . . employed by the Company
or any member of the Company Group.” 157 But it also makes an important
155
JX 3 Ex. A ¶ 5 (cleaned up); JX 5 Ex. A ¶ 5 (same); JX 4 Ex. A ¶ 5 (same other than
the above omitting “immediately” before “will cease vesting”); see also JX 3 Ex. A ¶ 3
(“Shares scheduled to vest on a date or upon the occurrence of a condition will not vest
unless Participant continues to be a Service Provider beginning on the Grant Date through
the date that the vesting is scheduled to occur.”); JX 5 Ex. A ¶ 3 (same); JX 4 Ex. A ¶ 2
(same); JX 3 at SOLAR000035 (“If Participant ceases to be a Service Provider for any or
no reason before Participant vests in the Restricted Stock Units, the unvested Restricted
Stock Units will immediately terminate.”); JX 5 at SOLAR000054 (same); JX 4 at
SOLAR000043 (“If Participant ceases to be a Service Provider for any or no reason before
Participant fully vests in the Option, the unvested portion of the Option will immediately
terminate.”).
156
JX 2 § 21(kk).
157
Id. § 21(m).
37
distinction. The 2014 Plan specifies that, for Incentive Stock Options (“ISOs”),158
“an Employee must be employed by the Company or any Parent or Subsidiary of the
Company.”159 Thus, the drafters of the 2014 Plan determined that ISOs would
terminate when the employee was no longer employed by Solar or any parent or
subsidiary of Solar. As to other awards, however, vesting would not terminate if a
Service Provider was employed by a member of the Company Group.
Under the 2014 Plan, Lundberg’s status as a Service Provider and, therefore,
his “right to vest in any Award under the Plan w[ould] cease as of the Termination
of Status Date.” 160 The “Termination of Status Date” is defined as “midnight at the
end of the last day in the primary work location in which [Lundberg] actively
provides services for a member of the Company Group.”161 The “Company Group”
is “the Company, any parent or Subsidiary of the Company, and any entity that, from
time to time and at the time of any determination, directly or indirectly, is in control
of, is controlled by or is under common control with the Company.”162 All of the
158
Under the 2014 Plan, ISOs were options subject to additional qualifications and
limitations. Id. §§ 4(d), 21(s). Lundberg did not receive any ISOs. See id. § 4(a); JX 4.
159
JX 2 § 21(m).
160
Id. § 3(c)(iii).
161
Id. § 3(c)(i).
162
Id. § 21(j).
38
awards at issue in this case provide that in the event of any conflict between the
award and the 2014 Plan, the terms of the 2014 Plan control. 163
Solar reads the term Company Group narrowly to mean only Solar or its
subsidiaries. Under that reading, according to Solar, Lundberg’s Termination of
Status Date under the terms of the 2014 Plan was August 21, 2016, the same date
that his employment with Solar terminated. Lundberg argues that his Termination
of Status Date was not August 21, 2016, because at that time and thereafter he was
actively employed by a member of the Company Group, i.e., Smart Home.
Solar’s reading of the Plan is not a reasonable one. First, it violates the canon
against surplusage. “Contractual interpretation operates under the assumption that
the parties never include superfluous verbiage in their agreement, and that each word
should be given meaning and effect by the court.” NAMA Hldgs., LLC v. World Mkt.
Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch. 2007), aff’d, 945 A.2d 594 (Del.
2008); see also Manti Hldgs., 261 A.3d at 1208 (“Contracts will be interpreted to
give each provision and term effect and not render any terms meaningless or
illusory.” (internal quotation marks omitted)). Solar reads the following key
language out of the definition of Company Group: “any entity that, from time to
time and at the time of any determination, directly or indirectly, is in control of, is
163
JX 3 Ex. A ¶ 1 (“If there is a conflict between the Plan and this Agreement, the Plan
will prevail.”); JX 4 Ex. A ¶ 1 (same); JX 5 Ex. A ¶ 1 (same).
39
controlled by or is under common control with the Company.” Recognizing that its
reading of the 2014 Plan ignores this language, Solar urges the court not to apply the
canon against surplusage, citing caselaw which notes that the canon is “not a
technical rule of law designed to trap a careless draftsperson.” Majkowski v. Am.
Imaging Mgmt. Servs., LLC, 913 A.2d 572, 588 (Del. Ch. 2006). Solar argues that,
instead of looking to the plain language of the 2014 Plan, the court should instead
look to its intent and the purposes of the plan. The 2014 Plan identifies the “Purposes
of the Plan” as “to attract and retain personnel for positions with the Company, to
provide additional incentive to Employees, Directors, and Consultants [], and to
promote the success of the Company’s business.”164 Solar asserts that an
interpretation that awards under the 2014 Plan would continue to vest after a Solar
employee moves to another company is contrary to the 2014 Plan’s purpose.
This court eschews the rule against surplusage only if its application would
produce absurd results. See Majkowski, 913 A.2d at 588, 588–89 (declining “an
extreme application” of the rule against surplusage that would have “ben[t] contract
language to read meaning into the words that the parties obviously did not intend”).
But application of the rule in this case would not produce an absurd result, and the
definition of Company Group, in its entirety, does not reflect careless drafting. The
164
JX 2 § 1.
40
plain language of this provision confirms that the drafters intended the term
Company Group to have meaning. It is a defined term. In addition, the definition
of Employee shows that the drafters rejected the interpretation that Solar advocates.
The 2014 Plan expressly provides that an Employee is a person “employed by the
Company or any member of the Company Group.”165 But it goes on to state that
“with respect to [ISOs], an Employee must be employed by the Company or any
Parent or Subsidiary of the Company.” 166 This distinction shows that the drafters
intended that awards other than ISOs would continue vesting if a Participant
continued to work for one of Solar’s siblings. The drafters were careful, not careless.
Nor is this result contrary to the purpose of promoting the overall success of
Solar’s business. Solar and its CEO had this in mind when they persuaded Lundberg
to stay “in the family” by moving to Smart Home and continuing to perform services
for Solar for no additional compensation.167 Therefore, the court reads the term
Company Group “in a way that does not render any provisions illusory or
165
Id. § 21(m) (emphasis added).
166
Id.
167
JX 335; JX 336; JX 44 at VSH000048. Additionally, when Solar was first formed, it
relied on Smart Home for “back-office type purposes” including “software, infrastructure,
things like that.” Black Dep. 108:14–22. The companies later entered into a series of
“Intercompany Agreements” that referred to Solar and Smart Home as “affiliate business
entities” in their recitals and provided for, among other things, co-marketing of their
respective product lines and licensing of the Vivint trademark and assignment of associated
goodwill. JX 324 at SOLAR019882, SOLAR019886–88; JX 325; JX 326.
41
meaningless.” O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 287 (Del. 2001)
(internal quotation marks omitted). The 2014 Plan provides that vesting stops once
a Service Provider is no longer employed by Solar, a parent or subsidiary of Solar,
or any entity under common control with Solar.
b. Solar and Smart Home were under common control
throughout the Awards’ vesting periods.
If Solar and Smart Home were under common control at the time Lundberg
left Solar to join Smart Home, then Lundberg’s awards would continue to vest while
he actively provided services to Smart Home. Although the phrase “under common
control” is not defined under the 2014 Plan, that does not render the phrase
ambiguous. See AT&T Corp. v. Lillis, 953 A.2d 241, 253 (Del. 2008) (“Delaware
courts have found other terms, undefined by the contract and undefined under
Delaware law, to be unambiguous.”); see also Sycamore P’rs Mgmt., L.P. v.
Endurance Am. Ins. Co., 2021 WL 4130631, at *16 (Del. Super. Sept. 10, 2021)
(“The term ‘non-monetary relief’ is not defined. But context clarifies its meaning.”);
Bitgo Hldgs., Inc. v. Galaxy Digital Hldgs., Ltd., No. 219, 2023, slip op. at 22 (Del.
May 22, 2024) (“Language from a contract need not be perfectly clear for an
interpretation of it to be deemed as the only reasonable one.”). Lundberg argues that
Solar and Smart Home were under the common control of 313 Acquisition at all
relevant times because it is undisputed that 313 Acquisition owned at least 50% of
outstanding common stock and voting power of both entities. Solar concedes that
42
313 Acquisition owned a majority of the outstanding stock of both entities, but
argues that majority ownership, standing alone, does not place Solar and Smart
Home under common control.
Lundberg maintains that, when viewing the 2014 Plan as a whole, the parties
intended control to mean ownership of at least 50% of an entity’s outstanding stock.
Specifically, Lundberg points to Section 21(e)(i) of the 2014 Plan, which defines
“Change in Control” as occurring when a “Person”168 “acquires ownership of the
stock of the Company that, with the stock held by such Person, constitutes more than
50% of the total voting power of the stock of the company . . . .” 169 This synthesis
of terms is a reasonable interpretation of the 2014 Plan’s plain language.170
168
Defined as “any one person, or more than one person acting as a group.” JX 2 § 21(e)(i).
169
Id.
170
Under the 2014 Plan, a Change in Control could also occur upon, over a 12-month
period, replacement of a majority of the Board by directors not nominated by the existing
board or a change in ownership of assets having at least 50% of the value of the Company’s
prior assets. Id. §§ 21(e)(ii)–(iii). Though both parties discussed § 21(e)(i), see Pl.’s
Opening Tr. Br. 66, Def.’s Answering Tr. Br. 27, and Def.’s Post Tr. Br. 14–15, neither
party addressed §§ 21(e)(ii)–(iii) in their briefing or at argument. The additional definitions
also support Lundberg’s position that ownership of a majority of the Company’s stock
constitutes control. Replacing a majority of the Company’s board without its consent, as
contemplated by § 21(e)(ii), would require action by a majority of the Company’s voting
stock, and § 21(e)(iii) specifically exempts from a “Change in Control” any transfers of
assets to “an entity controlled by the Company’s stockholders immediately after the
transfer” and “a Person, that owns, directly or indirectly, 50% or more of the total value or
voting power of all the outstanding stock of the Company”—indicating that, under the 2014
Plan, assets so transferred are still considered as being under unchanged control.
43
Lundberg’s reading of the term control is also consistent with Delaware
fiduciary law. “Delaware courts will deem a stockholder a controlling stockholder
when the stockholder: (1) owns more than 50% of the voting power of a corporation
or (2) owns less than 50% of the voting power of the corporation but ‘exercises
control over the business affairs of the corporation.’” In re Tesla Motors, Inc.
S’holder Litig., 2018 WL 1560293, at *12 (Del. Ch. Mar. 28, 2018) (emphasis
omitted) (quoting Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1113–14 (Del.
1994)); see also In re PNB Hldg. Co. S’holders Litig., 2006 WL 2403999, at *9 (Del.
Ch. Aug. 18, 2006) (“Under our law, a controlling shareholder exists when a
stockholder: 1) owns more than 50% of the voting power of a corporation; or 2)
exercises control over the business and affairs of the corporation.”); Williamson v.
Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006) (“A
shareholder is a ‘controlling’ one if she owns more than 50% of the voting power in
a corporation . . . .”).
Solar contends that the phrase “under common control” has not been defined
under Delaware law and points to Weinstein Enterprises, Inc. v. Orloff, 870 A.2d
499 (Del. 2005), where the Court observed:
[T]he term “control” does not have a fixed legal meaning. Its definition
varies according to the context in which it is being considered, e.g.,
fiduciary responsibility, tort liability, filing consolidated tax returns,
sale of control. For that reason, “control”—or its absence—is
frequently used to describe a judicial conclusion that is reached after a
fact specific analysis.
44
Id. at 506–07. Solar argues that under Weinstein, mere majority ownership does not
constitute control. Solar’s argument oversimplifies the Weinstein decision, which
does not support Solar’s position in this case.
In Weinstein, the Delaware Supreme Court addressed whether, under Section
220 of the Delaware General Corporation Law (the “DGCL”), a corporation was
required to produce for inspection documents of a less-than-wholly-owned
subsidiary. The Court first addressed the definition of “subsidiary” in Section
220.171 The Court held that the question of whether an entity was a subsidiary under
the statute “must be determined by applying the concept of control normally used
for the purpose of imposing fiduciary responsibility” under Delaware law.
Weinstein, 870 A.2d at 508. Therefore, mere ownership of a majority of the voting
power constituted control under that portion of the statute. The Court then
considered another subsection of the statute, which permitted a stockholder to
inspect documents of the subsidiary “‘to the extent that . . . [t]he corporation could
obtain such records through the exercise of control over such subsidiary.’” Id.
(quoting 8 Del. C. § 220 (b)(2)(b)). The Court held that the “fiduciary definition”
171
“‘Subsidiary’ means any entity directly or indirectly owned, in whole or in part, by the
corporation of which the stockholder is a stockholder and over the affairs of which the
corporation directly or indirectly exercises control . . . .” 8 Del. C. § 220(a)(2). At the time
of the Weinstein opinion, the definition of subsidiary was contained in subsection (a)(3).
45
of control did not carry over to Section 220(b)(2)(b), which required actual exercise
of control to cause the subsidiary to produce its books and records. Id. at 509. Thus,
the use of term control in “quite different contexts” within the same statute rendered
the statute ambiguous. Id.
Unlike in Weinstein, the 2014 Plan does not use the term control in different
contexts. Nor does the 2014 Plan contemplate any action by 313 Acquisition in
connection with the issuance of awards or their vesting. Construing “common
control” to mean mere ownership of a majority of the voting power of Solar and
Smart Home is consistent with the drafters’ use of the term “control” in Section
21(e), which reflects the only definition of control found in the contract. It is also
consistent with the fiduciary definition of control under Delaware law, which
governs the 2014 Plan. Viewing the 2014 Plan as a whole, under the plain and
unambiguous language of the contract, the term control as used in the definition of
Company Group means ownership of 50% of the voting power of an entity. That is
the only reasonable reading of the language of the contract.172
172
Solar urges the court to interpret “common control” using 26 C.F.R. § 1.414(c)-2, an
Internal Revenue Code regulation that treats a “controlling interest” as arising upon control
of at least 80% of either the voting power of a company or at least 80% of each class of its
stock. Under that definition, Solar and Smart Home would not have been under common
control at any point relevant to the vesting of the Awards. Solar then suggests that the
court consider a free-floating inquiry into the definition of control by pointing to the
46
It is uncontested that 313 Acquisition owned more than 50% of the voting
power of Solar and Smart Home until at least August 5, 2020. Because 313
Acquisition owned more than 50% of the voting power of Solar and Smart Home at
definition of control under Rule 405 governing the Securities Act of 1933. See 17 C.F.R.
§ 230.405 (defining control to mean “the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise”). Solar argues that the
question of control under the federal regulations “is based on the totality of the
circumstances, including an appraisal of the influence upon management and policies of a
corporation by the person involved.” Pl.’s Post Tr. Br. 55 (internal quotation marks
omitted). Solar argues that applying this test, the circumstances here show that Smart
Home was not under common control with Solar.
These authorities are not referenced in the 2014 Plan in connection with the definition of
Company Group, and they cannot create ambiguity in an unambiguous contract. See
Rhone-Poulenc, 616 A.2d at 1196 (“[A] contract is ambiguous only when the provisions
in controversy are reasonably or fairly susceptible of different interpretations or may have
two or more different meanings. . . . Courts will not torture contractual terms to impart
ambiguity where ordinary meaning leaves no room for uncertainty.”). If the drafters
wanted to import a definition from a federal statute or regulation, they knew how to do so.
See, e.g., JX 2 § 21(x) (defining “Parent” as “a ‘parent corporation,’ whether now or
hereafter existing, as defined in [Internal Revenue] Code Section 424(e)”). The court will
not superimpose terms the contracting parties could easily have employed but eschewed.
See Sanders, 1999 WL 1044880, at *9 (declining to add a term to the plan at issue where
other plans demonstrated that the drafters “knew how to authorize this type of material
alteration when they so desired”); cf. Am. Legacy Found. v. Lorillard Tobacco Co., 2005
WL 5775806, at *11 (Del. Ch. Aug. 22, 2005) (presuming an “implicit agreement by the
parties to avoid the use of legal terms of art” where sophisticated parties included two
critical phrases “that have no accepted blackletter legal definition”). Nor is there any
evidence that any of these authorities were ever presented to the Administrator in
connection with interpreting or applying the term Company Group. Additionally, to the
extent Solar’s reading of the agreement could be said to create ambiguity—and the court
concludes it does not—Solar does not address the question of whether any ambiguity
should be construed against Solar, as the drafter of the 2014 Plan. Cf. Weinberg, 294 A.3d
at 1061 (noting that the Court did not need to reach the issue of whether the terms of an
equity incentive plan should be construed against the drafter because the terms were
unambiguous).
47
all relevant times, 313 Acquisition controlled both entities. Therefore, Solar and
Smart Home were under common control at the time Lundberg became an employee
of Smart Home and terminated his employment with Solar.
The court finds that Lundberg was employed by Solar or by Smart Home
throughout the vesting period for his Awards. By working at Solar or a company
under common control with Solar, he was working for a member of the Company
Group throughout the vesting periods and was an Employee under the terms of the
2014 Plan. As an Employee, he maintained his Service Provider status, and the
Termination of Status Date did not occur prior to the vesting of each of his Awards.
Therefore, the Awards continued to vest and could not have been forfeited.
Accordingly, Solar is not entitled to declaratory judgment with respect to its
interpretation, and Lundberg is entitled to appropriate damages for those
counterclaims that are not time-barred. 173
173
Lundberg also argued that he was entitled to continued vesting for some of his Awards
because he was a “Consultant,” as defined under the 2014 Plan, during the period in which
he provided transitional services for Solar. Solar argues that Lundberg was not a
Consultant, emphasizing that it and Lundberg never entered into a formal agreement. The
court need not reach this issue because it has already determined that Lundberg qualified
for continued vesting as an “Employee,” as defined under the 2014 Plan.
48
3. Some of Lundberg’s counterclaims are time-barred.
Solar argues that Lundberg’s breach of contract claims under the 2015 RSU
Agreement and 2016 RSU Agreement (the “RSU Agreements”) are time-barred.174
Solar bears the burden of proving all elements of this affirmative defense by a
preponderance of the evidence. Slovin v. Knotts, 1980 WL 268097, at *2 (Del. Ch.
Dec. 5, 1980).175
174
Solar, in its posture as the plaintiff, also seeks a declaration to this effect. The relevant
burdens and arguments are identical. For the sake of clarity, the court refers only to the
affirmative defense in its analysis.
175
Solar did not present any argument on this defense with respect to the 2015 Option
Agreement in its trial briefing. In its argument on its laches defense, Solar only ever
referred to the RSU Agreements, and only identified the size and vesting schedule of the
RSU awards. See, e.g., Pl.’s Opening Tr. Br. 69 (“The below chart sets forth the vesting
and delivery dates of the allegedly vested RSUs granted under the 2015 RSU Agreement:
. . . .”); id. at 68 (“Lundberg, in his counterclaims, alleges Solar breached the 2015 RSU
Agreement and 2016 RSU Agreement by failing to deliver to him the stock underlying the
RSU equity awards when he demanded it and seeking as damages the value of the stock
underlying those RSU awards (‘RSU Counterclaims’). However, those RSU
Counterclaims are barred by Delaware’s one-year statute of limitations, 10 Del. C. §
8111.”); Pl.’s Answering Tr. Br. 68 (arguing, with respect to Solar’s limitation defense,
only that “All of Lundberg’s RSU Counterclaims based on his 2015 RSU Agreement and
2016 RSU Agreement are barred by Delaware’s one-year statute of limitations in 10 Del.
Code § 8111, as Solar demonstrated in its Opening Trial Brief. See Transaction ID
69968687, 68-7. Lundberg’s RSU Counterclaims are to recover a benefit from Solar that
he allegedly earned for work he already performed. According to Lundberg, there is no
further work he needs to perform to receive the benefit of the stock underlying his RSU
equity awards. Therefore, under Delaware’s temporal test, § 8111 applies to Lundberg’s
RSU Counterclaims, barring those RSU Counterclaims because they were not filed within
one year of accruing. Id.” (emphasis omitted)). Lundberg’s argument as to the statute of
limitations defense focused solely on the RSU awards, noting that “Solar’s limitations
argument does not apply to Lundberg’s stock option claims.” Def.’s Answering Tr. Br. 55
49
“Although the limitations of actions applicable in a court of law are not
controlling in equity, the Court of Chancery ordinarily will follow the applicable
statute of limitations.” IAC/InterActiveCorp v. O’Brien, 26 A.3d 174, 177 (Del.
2011) (internal quotation marks omitted). Where a party has asserted “a legal claim
seeking legal relief in the Court of Chancery, the statute of limitations (and its tolling
doctrines) logically should apply strictly and laches should not apply.” Kraft v.
WisdomTree Invs., Inc., 145 A.3d 969, 983 (Del. Ch. 2016). Yet “extraordinary
circumstances may provide an exception to the strict application of statutes of
limitations for purely legal matters, separate and apart from the application of tolling
doctrines.” Id.; see also id. at 977–78 (citing IAC, 26 A.3d at 175–76, 178, and
Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 767–68, 770–72 (Del. 2013)).
n.134. Solar’s subsequent filings did not contend otherwise, nor did its counsel argue that
these counterclaims were time-barred at oral argument or in its post-trial briefing. See Tr.
7:1–4 (Solar’s Counsel) (“Solar further has proved with overwhelming evidence that all
Lundberg’s counterclaims based on his RSU agreement [sic], 2015 and 2016, are time-
barred . . . .”); id. at 34:5–6, 34:12 (Solar’s Counsel) (“His 2015 RSU agreement and option
agreement . . . . [A]gain, that’s Exhibits 3 and 4.”); see generally Pl.’s Post Tr. Br. “An
affirmative defense is ‘[a] defendant’s assertion raising new facts and arguments that, if
true, will defeat the plaintiff’s . . . claim.’” Emerald P’rs v. Berlin, 787 A.2d 85, 91–92
(Del. 2001) [hereinafter “Emerald II”] (alterations in original) (quoting Black’s Law
Dictionary 430 (7th ed. 1999)); see Slovin, 1980 WL 268097, at *2 (“[S]tatute[s] of
limitations . . . and laches are affirmative defenses”). Here, Solar has not presented
argument on its affirmative defense regarding the timeliness of the 2015 Option
Agreement. Therefore, the court concludes that Solar has abandoned its affirmative
defense of the statute of limitations with respect to the 2015 Option Agreement. Emerald
I, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”).
50
Lundberg’s breach of contract counterclaims are legal claims seeking money
damages—a legal remedy. Absent extraordinary circumstances, the applicable
statutory limitations period will apply.
The parties have jousted over several alternative statutes of limitations with
respect to the RSU awards. Solar argues that Lundberg’s counterclaims are subject
to a one-year statute of limitations under 10 Del. C. § 8111. Lundberg argues that
his counterclaims are subject to no limitations period, but if they are, then Utah’s
six-year statute of limitations governing contracts, Utah C. § 78B-2-309(1)(b),
should apply. Alternatively, each side argues that if their favored limitations period
does not apply, then Delaware’s three-year limitations period for contract actions,
10 Del. C. § 8106, should govern.
a. There are no extraordinary circumstances warranting
departure from applying an analogous Delaware
limitations period.
“The time fixed by the statute of limitations is deemed to create a presumptive
time period for purposes of the Court’s application of laches absent circumstances
that would make the imposition of the statutory time bar unjust.” Meso Scale
Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d 62, 77 (Del. Ch. 2013).
Lundberg argues that the unusual or extraordinary circumstances of this case
require departure from applying the statute of limitations by analogy, relying solely
on this court’s decision in Juran v. Bron, 2000 WL 1521478 (Del. Ch. Oct. 6, 2000).
51
Juran is inapposite. The claims in Juran were filed in Delaware, but the applicable
contract was governed by California law. Id. at *11. Under California law, the
applicable limitations period was four years. The court concluded that the California
choice of law provision did not require the court to apply the California statute of
limitations by analogy, noting that choice of law provisions “will only include the
statute of limitations of the chosen jurisdiction if their inclusion is specifically
noted.” Id. The court also declined to apply Delaware’s one-year period under 10
Del. C. § 8111. Rather, the court ultimately selected a two-year period because the
“special or unusual circumstances” presented in that case would make it “inequitable
to apply the statute of limitations at law.” Id. Unlike in Juran, where California law
governed the underlying claims but Delaware provided the procedural law as the
forum, Delaware law governs both the substantive and procedural law in this case.
To determine whether “unusual conditions or extraordinary circumstances”
warrant a departure from the presumptive limitations period, Delaware courts
consider several factors:
1) whether the plaintiff had been pursuing his claim, through litigation
or otherwise, before the statute of limitations expired; 2) whether the
delay in filing suit was attributable to a material and unforeseeable
change in the parties’ personal or financial circumstances; 3) whether
the delay in filing suit was attributable to a legal determination in
another jurisdiction; 4) the extent to which the defendant was aware of,
or participated in, any prior proceedings; and 5) whether, at the time
this litigation was filed, there was a bona fide dispute as to the validity
of the claim.
52
IAC, 26 A.3d at 178; see also Levey, 76 A.3d at 770–772 (finding “unusual
conditions and extraordinary circumstances” warranting non-application of the
statute of limitations where four of the five IAC factors favored such a finding).
Lundberg does not grapple with the IAC factors, which the court finds do not
support disregarding the application of a limitations period. To the extent any of the
factors support deviating from the analogous statutory period, the parties have
already agreed that Lundberg’s claims were asserted on September 29, 2020, the
date that he first raised them in Utah.176 No unusual or special circumstances exist
in this breach of contract action that warrant departing from the application of a
statute of limitations period by analogy. The question for the court is which statutory
period to apply.
Lundberg argues that if the court applies a statutory limitations period, then it
should apply the six-year Utah statute of limitations for breach of contract because
the factual nexus of this case is in Utah. Solar counters that the court must look to
Delaware law for the statute of limitations.
“[T]he general rule is that the forum state’s statute of limitations applies.”
TrustCo Bank v. Mathews, 2015 WL 295373, at *5 (Del. Ch. Jan. 22, 2015) (internal
quotation marks omitted); see also CHC Invs., LLC v. FirstSun Cap. Bancorp, 2020
176
Pl.’s Opening Tr. Br. 75; Def.’s Opening Tr. Br. 5–6.
53
WL 1480857, at *4 (Del. Ch. Mar. 23, 2020) (“At common law, the law of the forum
supplies the limitations period.”), aff’d, 241 A.3d 221 (Del. 2020). If the law of two
different states may apply to an action, Delaware follows the Restatement (Second)
of Conflict of Laws to resolve the conflict, subject to Delaware’s borrowing statute.
CHC Invs., 2020 WL 1480857, at *4–5 (citing 10 Del. C. § 8121). 177 In this action,
only one state’s law applies. The 2014 Plan and the Awards at issue in this case are
all governed by Delaware law and require that any disputes be litigated in the courts
in Delaware.178 Thus, Delaware law provides the applicable limitations period.
Utah’s six-year statute of limitations is inapplicable.
b. Section 8106’s three-year limitations period, not
Section 8111’s one-year limitations period, applies to
Lundberg’s RSU counterclaims.
Having decided that Delaware law will inform the presumptive limitations
period, the court must determine which statute applies. There are two Delaware
177
Lundberg fails to address the borrowing statute, 10 Del. C. § 8121. Under the borrowing
statute, when a case arising factually in a foreign jurisdiction is brought in Delaware, the
court will apply the shorter statute of limitations. The court applies a longer foreign statute
of limitations only if the party asserting the otherwise barred claim was forced to litigate
that claim in Delaware. CHC Invs., 2020 WL 1480857, at *4–8. A party subject to an
enforceable forum selection provision is not forced to litigate the claim in Delaware;
instead, the party is deemed to be before this court voluntarily. Id. at *8. Lundberg is party
to an exclusive Delaware forum provision with respect to his counterclaims. Not only is
that provision enforceable, it has, in fact, been enforced. Dkts. 47–48. Therefore,
Lundberg is voluntarily before this court and subject to a Delaware statute of limitations.
See CHC Invs., 2020 WL 1480857, at *8.
178
JX 2 § 3(h).
54
statutes of limitations that the parties contend apply to Lundberg’s RSU
counterclaims. Section 8106 of Title 10 of the Delaware Code applies a three-year
limit to claims arising from a promise, which includes claims for breach of contract.
It states, in pertinent part: “no action based on a promise[ and] no action based on a
statute . . . shall be brought after the expiration of 3 years from the accruing of the
cause of such action.” 10 Del. C. § 8106.
Section 8111 of Title 10 imposes a shorter limitations period for claims arising
out of work, labor, or personal services. 10 Del. C. § 8111. Prior to its amendment
in 2023, Section 8111 imposed a one-year limitations period. The 2023 amendment
extended the limitations period to two years. If Section 8111 governs this case, the
pre-amendment limitations period of one year would apply. 179 The relevant version
of Section 8111 stated:
No action for recovery upon a claim for wages, salary, or overtime for
work, labor or personal services performed, or for damages (actual,
compensatory or punitive, liquidated or otherwise), or for interest or
penalties resulting from the failure to pay any such claim, or for any
other benefits arising from such work, labor, or personal services
performed or in connection with any such action, shall be brought after
the expiration of 1 year from the accruing of the cause of action on
which such action is based.
179
The amendment, which was enacted during the pendency of this action, only applies to
claims that accrued after the amendment took effect on April 26, 2023. 84 Del. Laws 2023,
ch. 20, eff. Apr. 26, 2023 (“This Act applies to claims when the date of the accruing of the
cause of action on which the action is based is on or after [April 26, 2023].”). All of the
claims at issue in this action accrued prior to the amendment, so if Section 8111 is
applicable, the one-year limitations period would govern.
55
In Goldman v. Braunstein’s, Inc., 240 A.2d 577 (Del. 1968), the Delaware
Supreme Court offered guidance to the trial courts deciding which of the two statutes
applies in a particular case. The Court said that Section 8111 applies to claims
“arising from services which have been performed,” while Section 8106 applies
where the “recoverable loss[] arose upon or after termination of the employer-
employee relationship.” Goldman, 240 A.2d at 578. 180
The Goldman standard is easy to articulate, but not always easy to apply. In
the more than half century since Goldman, courts still acknowledge that the line
between Section 8111 and Section 8106 can be a bit fuzzy. See, e.g., Cochran v.
Stifel Fin. Corp., 2000 WL 286722, at *5 (Del. Ch. Mar. 8, 2000) [hereinafter
“Cochran I”] (“Delaware courts have grappled with the overlap between §§ 8106
and 8111 for many years.”), aff’d in part, rev’d in part, 809 A.2d 555 (Del. 2002);
Little Switzerland, Inc. v. Hopper, 867 A.2d 955, 958 (Del. Ch. 2005) (“[A]lmost
every claim for an item specifically mentioned in § 8111 will arise out of a contract
generally covered by § 8106.”); Roos v. Del. Valley Radiology, P.A., 1989 WL
37157, at *4 (D. Del. Apr. 3, 1989) (“Employment litigation in Delaware often
implicates both sections because nearly every claim for wages is based on an
180
The Goldman Court was addressing Section 8111’s predecessor, Section 8110, which
was not materially different from the pertinent version of the statute at issue here. For ease
of reference, this opinion will refer only to Section 8111.
56
underlying promise, express or implied, to pay the wages.”); Turner v. Diamond
Shamrock Chems. Co., 1987 WL 17175, at *1–2 (Del. Sept. 14, 1987) (observing,
for example, that “[t]here are two Delaware Statutes of Limitation, each of which,
by analogy, may be applied to an ERISA claim[:] first, 10 Del. C. § 8111[; and]
second, 10 Del. C. § 8106”). This court has also explained the difficulty in
determining whether to apply Section 8111 or 8106 in specific circumstances.
In 2000, Chief Justice Strine, while a Vice Chancellor on this court, delivered
an in-depth analysis of the caselaw addressing Section 8111 and Section 8106 both
before and after Goldman. Cochran I, 2000 WL 286722. The case presented the
question of which limitations period applied to a claim for director indemnification.
The court identified a tension between Sorensen v. Overland Corp., 142 F. Supp.
354 (D. Del. 1956), aff’d sub nom. Sorensen v. Overland Corp., 242 F.2d 70 (3d Cir.
1957), a pre-Goldman decision from the District of Delaware holding that a claim
for director indemnification was subject to Section 8111,181 and Scharf v. Edgcomb
Corp., 1997 WL 762656 (Del. Ch. Dec. 4, 1997), which held that Section 8106
governed the limitations period for an indemnification claim. See Cochran I, 2000
WL 286722, at *5–8. Sorensen read Section 8111 broadly, opining that “[t]he word
‘benefits’ is embracing and covers all advantages growing out of the employment.”
181
As in Goldman, the provision at issue in Sorensen was the predecessor to Section 8111.
57
142 F. Supp. at 360. Noting the compelling arguments in favor of each approach,
this court in Cochran I erred towards the longer limitations period and applied
Section 8106’s three-year limitations period. 2000 WL 286722, at *9. On appeal of
Cochran I, the Delaware Supreme Court was more critical of Sorensen, describing
our case law as “not approving Sorensen” and observing that “[e]ven at the federal
level there is some doubt as to Sorensen’s viability.” Stifel Fin. Corp. v. Cochran,
809 A.2d 555, 558 (Del. 2002) [hereinafter “Cochran II”]. The Court found that
indemnification, “a right conferred by contract, under statutory auspice,” was subject
to Section 8106 and left “the Goldman dichotomy intact.” Id. at 559. And, as our
Supreme Court explained, its analysis was also “strengthened by the general rule
that, if there is doubt as to which of two statutes of limitations applies, that doubt
should be resolved in favor of the longer period.” Id. (citing Sonne v. Sacks, 314
A.2d 194, 196 (Del. 1973)).182
A few years later, Little Switzerland presented another Section 8111 and
Section 8106 conflict. 867 A.2d 955. In that case, the defendant’s employment
182
There is a suggestion in Sorensen that an employee’s claims pertaining to stock options
would fall within Section 8111’s ambit. See 142 F.Supp. at 361 (“Professor Washington
contrasts ‘direct rewards for services’, such as salaries, bonuses and options, with
indemnification against litigation expenses as ‘another type of reward’.” (quoting George
T. Washington, Corporate Executives’ Compensation 313 (1942)). Sorensen did not dilate
on this issue as to stock options, and this court did not locate any decisions relying upon
Sorensen on this issue. In any event, this court must follow Goldman and Cochran II.
58
agreement entitled him to a payment in the event of a change of control. Id. at 957.
A change of control occurred while the defendant was employed by the corporation,
and the corporation made a change of control payment. Id. Approximately 18
months later, the defendant disputed the corporation’s determination of the amount
owed under the contract and sought to arbitrate his claim. The corporation filed suit
in this court to enjoin the defendant from pursuing arbitration, arguing that the claim
was untimely. Id. at 958. Chief Justice Strine, while Vice Chancellor, held that
under a “clear” application of the Goldman test, Section 8111 applied because
“[n]either the obligation of [the corporation] nor the size of that Bonus was
contingent on any efforts by [the defendant] after the Change in Control.” Id. at
959–60.
The court also rejected the employee’s attempt to suggest Cochran II created
a broad exception to the Goldman test whenever a plaintiff could conjure a statutory
hook to the claim. The court explained:
In my view, Cochran [II] must be read as a case dealing with a unique
area of employment relationships that is grounded in, and shaped by,
statute, and not as a wide exception to Goldman. Here, Hopper’s right
to a Change in Control Bonus is entirely attributable to his having
performed work for Little Switzerland up until the moment the Change
in Control occurred. His rights do not flow out of any specific provision
of our corporate law and the vindication of his interests cannot be said
to serve any larger purpose than is usually, albeit importantly, served
by the judicial enforcement of private contracts.
59
Id. at 961. The court’s trenchant view that if the “line between § 8106 and § 8111
can never be clearly discerned, a statute has been, by judicial interpretation,
repealed,” id., is certainly true, and is an outcome to be avoided. See Taylor v.
Diamond State Port Corp., 14 A.3d 536, 542 (Del. 2011) (“In our constitutional
system, this Court’s role is to interpret the statutory language that the General
Assembly actually adopts, even if unclear and explain what we ascertain to be the
legislative intent without rewriting the statute to fit a particular policy position.”);
Leatherbury v. Greenspun, 939 A.2d 1284, 1293 (Del. 2007) (“Although construing
a statute of limitations does not constitute the creation of an exception to the statute
in violation of the prohibition against judicial legislation, creating an exception
under the guise of ‘construction’ where a statute is clear and unambiguous is
improper.” (footnote omitted)). In Little Switzerland, Goldman’s application
produced a clear result. But when faced with a cloudier choice between applying
Section 8106 or Section 8111, our Supreme Court in Cochran II expressly directed
the trial courts to resolve any doubt over which statute applies in favor of Section
8106. 809 A.2d at 559.
Under the Goldman test, the court focuses on when the plaintiff’s claim arose.
The cases illustrate that this is not necessarily when the claim became monetizable,
but rather when the underlying source of the right accumulated to the plaintiff. In
Turner, the Supreme Court held that claims for “separation pay allegedly due . . .
60
under an employee welfare benefit plan . . . arise out of work, labor or personal
services performed for defendant.” 1987 WL 17175, at *2. There, the right was
membership in the benefit plan. Although the plan specifically contemplated the
delivery of separation pay at the end of the employment relationship, membership
in the plan arose and the benefits thereunder accumulated during employment, so
the Court construed it as one for services performed and applied Section 8111’s one-
year statute of limitations. Id. That the right only matured into one for payment
after the employment relationship mattered not—the right belonged to the plaintiffs
before termination. By contrast, Goldman found that a wrongful termination claim
arose “upon or after termination of the employer-employee relationship” and,
therefore, fell under Section 8106’s three-year statute of limitations. 240 A.2d at
578. There, the plaintiff’s alleged harms were fundamentally tied to the employment
relationship, but arose from the allegedly wrongful termination itself, which
occurred as or after the employment relationship ended. Id. Therefore, under the
temporal test that the case established, Section 8106 applied. Id.
This temporal split becomes more complicated when the arrangement
providing for the benefit can potentially give rise to payments both during and after
the employment relationship. In that scenario, courts applying these competing
statutes have looked to when the conditions precedent to payment were satisfied.
For example, the United States Court of Appeals for the Third Circuit, applying
61
Delaware law, considered which statute applied to a real estate broker’s claim for
payment of a commission where the broker was employed at the time the sales
contract was signed, but the closing of the sale occurred after the broker’s
employment had ended. See Lindsey v. M.A. Zeccola & Sons, Inc., 26 F.3d 1236,
1244–46 (3d Cir. 1994). The Lindsey court reasoned that the claim was subject to
Section 8106 because “[i]t was not certain if or when Lindsey would be paid because
the [] agreement was contingent,” “[h]er right to payment did not accrue until after
her employment was terminated,” a previous case had applied Section 8106 to an
independent broker’s commissions and Lindsey’s commission was distinguishable
from her salary, and because of the Delaware Supreme Court’s instruction to “apply
the longest statute of limitations in case of doubt.” Id.Weik, Nitsche & Dougherty, LLC v. Pratcher, 2020 WL 5036096 (Del. Ch.
Aug. 26, 2020), presented this court with counterclaims seeking damages for breach
of an agreement between a law firm and departed attorneys. The agreement provided
for the attorneys to receive contingency fees for legal matters and set additional
compensation independent of case outcomes. The court conceptually divided the
claims, applying Section 8111 “[t]o the extent any alleged damages are unpaid
compensation for services performed” and Section 8106 “to the extent any alleged
damages would have been owed to [the lawyers] after [their termination] and
because of a breach of the Succession Agreements.” Id. at *8. Though the
62
appropriate delineation of the lawyers’ claims was unclear and required
supplemental briefing after the court’s ruling on the limitations defense, the court’s
ruling clearly split those claims along Goldman’s temporal termination line.183
Neither the parties in this case nor the court were able to identify a Delaware
decision that directly addressed whether Section 8111 or 8106 applies to a former
employee’s claim for breach of an equity incentive plan or stock option agreement.
Both sides identified Nahill v. Raytheon Co., a decision of the Massachusetts
Superior Court, which involved application of Delaware law. 2008 WL 4107330(Mass. Super. July 9, 2008). In Nahill, Raytheon Corporation awarded John P.
Nahill 5,000 restricted shares. Id. at *1. Under the terms of the grant, the shares
vested if Nahill remained continuously employed by Raytheon during the vesting
period and met certain performance-based goals. Id. During the vesting period,
Nahill, at Raytheon’s request, took a CEO position at Flight Operations, LLC, a joint
venture entity of which Raytheon was the majority owner. As a result, Nahill was
“an executive caught between two companies” for several months, but remained on
Raytheon’s payroll. Id. at *2. After his award had fully vested, Raytheon moved
Nahill to Flight Operations’ payroll. Id. Months later, Raytheon canceled Nahill’s
The parties settled the case before the court issued a final implementing order splitting
183
Defendants’ damages line-items between the two statutes of limitations. Weik, Nitsche &
Dougherty, LLC v. Pratcher, C.A. No. 2018-0803-MTZ (Del. Ch.), Dkts. 147–48.
63
already-vested shares, purportedly because Nahill had not met performance goals,
pursuant to a forfeiture term in the governing stock plan. Id. at *1–2. More than
two years later, Nahill filed suit alleging that the share cancellation breached his
employment contract and constituted conversion of the shares. Id. Raytheon moved
for summary judgment, arguing that both the breach of contract and conversion
claims were time-barred under Section 8111. Nahill contended that Section 8106
applied. The Nahill court concluded, “in light of the temporal guidance from
Goldman,” that Section 8111 applied to Nahill’s claim asserting breach of his
employment contract. Id. at *5. The Nahill court reasoned that “Nahill’s right to
the value of the 5,000 restricted shares is entirely attributable to his having
performed work for Raytheon during the Vesting Period” and “no future work (i.e.,
beyond June 26, 2003) was contemplated.” Id. The Nahill court concluded,
however, that Section 8111 did not apply to Nahill’s conversion claim. Id. at *5–6.
Solar argues that Nahill’s reasoning is applicable here. The court disagrees.
First, Nahill’s shares had fully vested before Raytheon canceled them and “no future
work [] was contemplated” at the time of cancellation. Id. Unlike in Nahill, the only
RSUs at issue in this case were canceled prior to their vesting, and Lundberg’s
entitlement to each tranche was contingent on his satisfying conditions into the
future, after his employment with Solar had ended. Nahill fell on one side of
64
Goldman’s temporal divide—this case falls on the other.184 Second, Nahill’s claim
sought a remedy for breach of his employment agreement. Nahill, 2008 WL
4107330, at *1. Here, Lundberg’s employment agreement is not at issue.
Unlike in Little Switzerland and Nahill, Lundberg did not have a right to the
shares underlying his RSU awards prior to the termination of his employment with
Solar. His right to vesting of his RSUs required that he continue providing services
to Smart Home—not Solar—after his employment with Solar terminated.
The positions that Solar took earlier in this case also lead to the application of
Section 8106. In its successful motion for entry of an antisuit injunction against
Lundberg, Solar argued that Lundberg “is not an employee of [Solar] now and is not
claiming his right to the equity awards as a [Solar] employee. Dispositively, he
could bring the Delaware Claims in the absence of the [Solar] Employment
Agreement.” 185 Solar also argued that Lundberg’s counterclaims “do not arise from
184
Nahill cited Cochran II, but only in passing reference to its factual context, not its legal
analysis. See Nahill, 2008 WL 4107330, at *5 (“Delaware courts have applied the three-
year statute of limitations in actions arising out of other elements of the employer-employee
relationship. See, e.g., Goldman v. Braunstein’s, Inc., 240 A.2d 577 (Del. 1968) (wrongful
discharge); Stifel Financial Corp. v. Cochran, 809 A.2d 555 (Del. 2002) (indemnification);
Rich v. Zeneca, Inc., 845 F.Supp. 162, 166 (D. Del. 1994) (wrongful discharge).”).
185
Dkt. 39 at 22 n.7. At the time, Solar was seeking to keep the claims under the 2014 Plan
in Delaware and to avoid the mandatory arbitration provision in Lundberg’s employment
agreement, which required arbitration, in Utah and under Utah law, of any claims arising
from his employment. See JX 367 §§ 15(a), 16(g), 16(h).
65
or relate to [Lundberg’s] employment with [Solar].” 186 The court relied on those
arguments in granting the antisuit injunction. 187 Therefore, Solar is estopped to
argue that Lundberg’s claims pertaining to the 2014 Plan and his Awards arise from
his employment with Solar. See Motorola Inc. v. Amkor Tech., Inc., 958 A.2d 852,
859 (Del. 2008) (“judicial estoppel [] prevents a litigant from advancing an argument
that contradicts a position previously taken that the court was persuaded to accept as
the basis for its ruling”); Siegman v. Palomar Med. Techs., Inc., 1998 WL 409352,
at *3 (Del. Ch. July 13, 1998) (“Judicial estoppel prevents a litigant from advancing
an argument that contradicts a position previously taken by that same litigant, and
that the Court was persuaded to accept as the basis for its ruling.”); see, e.g., In re
Silver Leaf, L.L.C., 2004 WL 1517127, at *2 (Del. Ch. June 29, 2004) (finding a
party judicially estopped from contesting this court’s personal jurisdiction where a
party “obtained dismissal of the New Jersey action because he represented that the
Delaware Court of Chancery had exclusive jurisdiction”); see also New Hampshire
186
Dkt. 39 at 22 n.7; see also Dkt. 44 at 17:22–18:5 (Solar’s Counsel arguing that the
parties “expressly excluded [the RSUs] from the terms and conditions of the employment
agreement”).
187
Dkt. 48 at 28:9–17 (The Court: “The claims arising under the 2014 plan are subject to
the forum selection clauses in the 2014 plan and the 2015 and 2016 equity award
agreements, rather than the arbitration provision in the employment agreement. Therefore,
Vivint Solar has demonstrated a reasonable probability of success on its claim that
Lundberg has breached the equity award agreements by asserting claims arising under the
2014 plan outside of Delaware.”).
66
v. Maine, 532 U.S. 742, 743 (2001) (“The purpose of the doctrine is to protect the
integrity of the judicial process by prohibiting parties from deliberately changing
positions according to the exigencies of the moment.”).
Solar granted the Awards while Lundberg was an employee of Solar. But,
like the real estate agent in Lindsey, Lundberg had no right to them at the time, as
certain future conditions needed to occur first. Lundberg’s right to any given tranche
under the Awards only arose if he maintained his status as a Service Provider, e.g.,
an employee of the Company Group, as of the vesting date for each tranche. All of
the tranches at issue here vested while Lundberg was employed by Smart Home. At
that point, his employment with Solar had ended, and his right to receive the shares
upon vesting was based upon a promise by Solar, not as compensation for work or
services performed for Solar.
The court concludes that Section 8106’s three-year limitations period applies
to Lundberg’s RSU counterclaims. Unlike in Nahill, Lundberg’s canceled RSUs
had not vested while he was employed at Solar. Rather, Lundberg’s entitlement to
those shares arose from services that still needed to be performed—for Smart
Home—in order for the RSUs at issue to vest. Thus, his counterclaims arose “upon
or after termination of the employer-employee relationship,” so “the period of
limitations applicable to the present suit is not the one-year provision of [Section
8111], but is the three-year period of [Section] 8106.” Goldman, 240 A.2d at 578;
67
accord Cochran I, 2000 WL 286722, at *6 (“[W]here a plaintiff’s claims arise upon
or after termination of the employer-employee relationship, then § 8111 is
inapplicable and § 8106 applies.” (internal quotation marks omitted)). This result
also draws support from Cochran II, where the Court held that the limitations period
in Section 8106 applies to claims for officer or director indemnification. The Court
reasoned that the right to indemnification, grounded in Section 145 of the DGCL,
was a right “conferred by contract, under statutory auspice” and therefore subject to
the three-year limitations period. Cochran II, 809 A.2d at 559. Like the statutory
source of director and officer indemnification, options and restricted stock units are
grounded in statute. See 8 Del. C. §§ 151–153, 157, 161 (authorizing the issuance
of stock and rights to acquire equity in the corporation and to regulate its capital
structure).188 Lundberg’s counterclaims allege violation of the 2014 Plan itself, a
creature of both statute and contract. Finally, to the extent there is any doubt as to
which statute applies, the court is to err on the side of the longer limitations period.
Sonne, 314 A.2d at 196; Cochran II, 809 A.2d at 559. Accordingly, Section 8106
provides the applicable limitations period.
188
Nahill did not discuss this reasoning, perhaps because the parties did not address it. Or
maybe it was due to the nature of Nahill’s breach of contract claim, which appears to have
been limited to a claim for breach of his employment agreement, not breach of a separate
contract governing an incentive award or an equity incentive plan.
68
c. Section 8106’s three-year statute of limitations bars
Lundberg’s RSU counterclaims arising before
September 29, 2017.
Having determined the applicable statute of limitations, the court turns next
to whether any of Lundberg’s counterclaims are time-barred. For statute of
limitations purposes, the parties agree that Lundberg asserted his claims on
September 29, 2020, the date that he filed the Federal Action. 189 Applying Section
8106’s three-year limitations period, any counterclaim that accrued prior to
September 29, 2017, is untimely. Solar argues that Lundberg’s counterclaims
pertaining to three tranches of RSUs under the 2015 RSU Agreement and one
tranche under the 2016 RSU Agreement accrued before September 29, 2017, and are
time-barred. 190 Thus, absent a meritorious tolling argument, claims as to these
tranches are time-barred. Lundberg advances several arguments in favor of the
timeliness of these counterclaims. None are successful.
i. Solar’s breaches of the RSU Agreements were
segmentable, not continuing.
Lundberg argues that Solar’s cancellation of the Awards and failure to deliver
each tranche constitute one continuing breach, such that the statute of limitations
189
Pl.’s Opening Tr. Br. 75; Def.’s Opening Tr. Br. 5–6.
190
Pl.’s Opening Tr. Br. 75–76.
69
should not begin to run until after Solar failed to deliver the last tranche. Solar argues
that its failure to deliver each tranche is a separate, segmentable breach.
“The continuing breach doctrine is narrow and typically is applied only in
unusual situations.” AM Gen. Hldgs. LLC v. The Renco Gp., Inc., 2016 WL
4440476, at *11 (Del. Ch. Aug. 22, 2016) (internal quotation marks omitted).
Continuing breach is an exception to the general rule and arises only when “there is
a continuing injury whose damages cannot be determined until the cessation of the
wrong.” Branin v. Stein Roe Inv. Couns., LLC, 2015 WL 4710321, at *7 (Del. Ch.
July 31, 2015) (quoting Oliver B. Cannon & Son, Inc. v. Fid. & Cas. Co. of N.Y.,
484 F. Supp. 1375, 1390 (D. Del. 1980)). But breach of a recurring obligation does
not necessarily give rise to continuing breach. A series of harms only gives rise to
continuing harm where “the various acts are ‘so inexorably intertwined that there is
but one continuing wrong.’” Lebanon Cnty. Empls.’ Ret. Fund v. Collis, 287 A.3d
1160, 1197 (Del. Ch. 2022) (quoting Ewing v. Beck, 520 A.2d 653, 662 (Del. 1987)).
“[I]f a continuing wrong can be segmented, the applicable statute of limitations will
apply to each alleged wrong and not to the course of wrongful conducts as a whole.”
Price v. Wilm. Tr. Co., 1995 WL 317017, at *3 (Del. Ch. May 19, 1995). In a case
for breach of contract, if the aggrieved party “‘could have alleged a prima facie case
for breach of contract . . . after a single incident,’” Delaware courts “have determined
that the ‘continuing breach’ doctrine does not apply even when confronted with
70
‘numerous repeated wrongs of similar, if not same, character over an extended
period.’” AM Gen., 2016 WL 4440476, at *12 (alteration in original) (quoting Price,
1995 WL 317017, at *2–3).
Here, Lundberg could have alleged a prima facie case for breach of contract
as soon as Solar failed to deliver a single tranche.191 Though future breaches of the
same contract were entirely possible, and did in fact occur, nothing about the
character of the Awards would prevent the calculation of damages with respect to
each independent breach.192 That Lundberg may have had to file multiple times to
191
As of January 13, 2017, the date on which the first at-issue tranche became due, Solar
had a contractual obligation to deliver the shares, breached that obligation, and Lundberg
suffered harm from Solar’s failure to deliver those shares.
192
The authorities upon which Lundberg relies are all either distinguishable or, upon
inspection, support Solar’s position, not Lundberg’s. In Branin, the plaintiff’s
indemnification claim did not accrue under the specific terms of the contract until after the
underlying litigation ended, which was within the limitations period. 2015 WL 4710321,
at *6. The court noted that the continuing breach doctrine would have applied if the claim
had accrued earlier because the defendants’ obligation was expanding as the underlying
case proceeded and was entirely contingent on the outcome of that other action. Id. at *7.
Unlike in Branin, Solar’s contractual obligation to deliver RSUs, once vested, was set and
not contingent on future events.
In In re ASHINC Corp., the “discrete and readily determinable breach” “led to an
unforeseeable chain of events [] with serious consequences for the Debtor and damages
that could not have been known (or sought) at the time of the breach.” 2022 WL 2666888,
at *11 (D. Del. July 11, 2022). Here, Lundberg presents no chain of unforeseeable
consequences, and his damages for Solar’s failure to deliver shares upon vesting were
immediately knowable upon Solar’s breach.
In Matter of Burger, the alleged breach arose from claims that a farmer failed to meet a
service contract’s standard of care with respect to a herd of cattle. 125 B.R. 894, 897
71
(Bankr. D. Del. 1991). The court held that the doctrine of continuing breach applied
because, among other reasons, “any claim by the Investors for damages necessarily relies
on the liquidation of the herd which, under the terms of the contract, was scheduled to take
place on or about September 1, 1988,” a date from which the Investors’ claim was timely.
Id. at 902. Therefore, continuing breach applied because the exact amount of their damages
was unknowable until the unique asset was sold. Here, the value of each tranche of
Lundberg’s awards was immediately knowable when owed, and his RSUs were not unique.
In re Estate of Balk, 138 A.3d 572 (N.J. Super. Ct. App. Div. 2016), and Girardot v.
Chemours Co., 2018 WL 1472337 (Del. Super. Mar. 26, 2018), support Solar’s argument,
not Lundberg’s. Lundberg cited these cases in support of the proposition that “[t]he
continuing breach principle is often applied in the context of ‘installment’ contracts, not
unlike the RSU Agreements . . . .”). Def.’s Answering Tr. Br. 71. Neither case, however,
stands for that proposition, and the courts in both cases found the claims segmentable, not
continuing, under Delaware’s definition of “continuing breach.” See Balk, 138 A.3d at
576–77 (holding that “a new statute of limitations begins to run against each installment
as that installment falls due and a new cause of action arises from the date each payment is
missed” such that an initial breach in 2007, not constituting a total breach, did not render
time-barred “payments which were due from the six years prior to the motion’s filing date
of June 2, 2014” (emphasis added)); Girardot, 2018 WL 1472337, at *3 (determining that
“the relevant accrual date is 30 days after each severance payment was required to be
made” (emphasis added)); see also Worrel v. Farmers Bank of State of Del., 430 A.2d 469,
476, 474–76 (Del. 1981) (affirming that “the statute of limitations began to run with respect
to each installment only from the time it became due, unless the seller had the option of
declaring the whole sum due and exercised that option, in which case the statute began to
run from the date of the exercise of the option” and holding that the failure to deliver an
installment payment outside of the limitations period did not defeat a claim for those
moneys when the creditor took action evidencing an election of default within the
limitations period (emphasis added)). While Balk does refer to such breach as
“continuing,” a close examination of the decision and of the caselaw on which it relied
reveals that the courts of New Jersey refer to the independent accrual of segmentable claims
“when the initial[, non-total] breach of a contract occurred outside the statutory period, but
successive breaches occurred within it” as “continuing breach.” Nat’l Util. Serv., Inc. v.
Cambridge-Lee Indus., Inc., 199 F. App’x 139, 142–43 (3d Cir. 2006) (applying New
Jersey law, under which claims “could be considered a series of continuing breaches for
which plaintiffs could maintain an action for any breach occurring within six years of the
filing of the complaint, even if more than six years had elapsed since Newark’s initial
breach” (internal quotation marks omitted)). Needless to say, another jurisdiction’s use of
different language does not change the substance of our laws.
72
pursue damages for breaches in a timely manner is unpersuasive, particularly where,
as here, the interpretation of the contract at issue in the first action would effectively
decide all subsequent actions arising under the same instrument. Furthermore, mere
inconvenience does not result in application of the “narrow” continuing breach
doctrine, and cases like this present breaches that “while . . . repetitive, [are] not
‘continuing’ in the legal sense.” AM Gen., 2016 WL 4440476, at *12–13. The court
finds that the doctrine of continuing breach does not apply, and Lundberg’s
counterclaims with respect to each tranche accrued separately.
ii. The statute of limitations is not tolled for any of
Lundberg’s RSU counterclaims.
“The general law in Delaware is that the statute of limitations begins to run,
i.e., the cause of action accrues, at the time of the alleged wrongful act, even if the
plaintiff is ignorant of the cause of action.” In re Dean Witter P’ship Litig., 1998
WL 442456, at *4 (Del. Ch. July 17, 1998), aff’d, 725 A.2d 441 (Del. 1999). “For
breach of contract claims, the wrongful act is the breach, and the cause of action
accrues at the time of breach.” Certainteed Corp. v. Celotex Corp., 2005 WL
217032, at *7 (Del. Ch. Jan. 24, 2005).
Lundberg next argues that “his RSU claims did not accrue, or should be tolled,
until Solar denied Lundberg’s demand for their delivery in August 2020 because
73
Lundberg was not on notice of the claims.” 193 Lundberg asserts that he was not on
notice of Solar’s interpretation of the 2014 Plan until he received the letter from
Solar’s attorneys formally rejecting his demand for his Awards sometime after
August 7, 2020. As the party arguing that a statute of limitations period should be
tolled, Lundberg bears the burden of presenting and proving an exception to the
general rule of accrual. U.S. Cellular Inv. Co. of Allentown v. Bell Atl. Mobile Sys.,
Inc., 677 A.2d 497, 504 (Del. 1996). He has failed to do so.
Lundberg received regular quarterly account statements reflecting his Awards
and Award activity under the 2014 Plan from January 2016 to June 2020.194 He
received those statements “[p]robably within a few weeks” of the end of each
quarterly reporting period.195 Shares from RSU awards that had vested would be
reflected on the statement. 196 Thus, Lundberg’s account statement would reveal to
193
Def.’s Answering Tr. Br. 55 (footnote omitted).
194
7/27/21 Lundberg Dep. 129:15–23; see, e.g., JX 377 Ex. GG.
195
7/27/21 Lundberg Dep. 129:10–14.
196
JX 377 Ex. GG at JX377.37 (showing “release” of 1,051 shares on March 6, 2016, and
an ending balance of 1,051 shares at the end of the first quarter of 2016); id. at JX377.39
(showing “release” of 292 shares on June 6, 2016, and an ending balance of 1,343 shares
at the end of the second quarter of 2016).
74
him within, at most, several weeks after a vesting date whether Solar had delivered—
or failed to deliver—shares upon vesting. 197
Lundberg also had online access to his Morgan Stanley account. Lundberg’s
testimony that he was unable to log into his Solar Morgan Stanley account until mid-
2020 is not credible.198 Verified records from Morgan Stanley demonstrate eight
successful logins to Lundberg’s “Vivint Solar/Sunrun” account on six different days
during the period in which Lundberg testified he was unable to access that
account.199 Lundberg improperly seeks to place the burden upon Solar, claiming
that Solar had not established what he would have seen upon logging into his
account. The notion that Lundberg would have logged into his account without
197
Compare id. at JX377.37, JX377.39, with id. at JX377.41, JX377.43 (stating that there
were “No transactions during this period” and identifying ending balances of 1,343 shares
for the third and fourth quarters of 2016).
198
9/10/21 Lundberg Dep. 56:13–15, 56:25–57:8 (“I remember a couple of times looking
-- trying to log into the Morgan Stanley portal to see if there was any information reflected
therein. . . . I didn’t find any information -- I couldn’t log in at the time and -- and there
was some -- inability for me to log into the Morgan Stanley portal because Vivint Smart
Home also used Morgan Stanley. And so it appeared that -- the confusion I had is that it
appeared that -- that my -- that the Morgan Stanley portal access through Vivint Solar no
longer existed, and I was only going through my Vivint Smart Home access to a different
portal, but it was still a Morgan Stanley product.”). This statement’s demonstrable
noncongruence with documentary evidence leads the court to conclude that Lundberg’s
deposition testimony on this issue is not credible.
199
JX 19. This exhibit also shows Lundberg having logged in for two, six-and-a-half, six-
and-a-half, one, and four minutes earlier in 2016, prior to his termination. Id.75
checking his awards strains credulity.200 Beyond that, Solar introduced convincing
evidence that the Awards—or their absence—would have been displayed in
Lundberg’s Morgan Stanley account.201
Lundberg’s 2016 year-end Morgan Stanley account statement reflected 1,343
shares.202 On July 6, 2017, Lundberg logged into his Morgan Stanley account for
200
So does Lundberg’s contention that he believed that, at some unspecified point in the
future, Solar would decide to deliver the tranches it had stopped delivering after he moved
to Smart Home. See 7/27/2021 Lundberg Dep. 167:7–21 (“Q: Where did you expect
Vivint Solar to deliver the stock underlining the RSUs granted under Exhibits-3 and 5 if
you no longer had a Morgan Stanley account and hadn’t opened a Merrill Lynch account?
A: I believe that when -- at such time as when Vivint Solar determined they were going to
be issuing the shares, that they would notify me whether I -- whether I needed to open a
Merrill Lynch account or whether I could simply designate a -- a separate account that I
was using to have those shares transferred to. Q: Did anyone from Vivint Solar tell you
that they would be contacting you when they were ready to deliver the shares underlying
the RSUs? A: I don’t recall a specific reference that they would be contacting me.”). Nor
is Lundberg’s contention that the switch to Merrill Lynch explained Solar’s failure to
deliver his RSUs any more persuasive. Compare JX377 at JX377.41, JX377.43 (stating
that there were “No transactions during this period” for the third and fourth quarters of
2016), with Black Dep. 47:10–17 and Black Decl. ¶ 28 (explaining that Solar did not switch
to Merrill Lynch until mid-2017).
201
JX 17 at SOLAR000396 (presenting the landing page, which clearly displayed awarded,
vested, and unvested awards, in an email explaining to award recipients how to accept their
awards); JX 18 at SOLAR001249 (presenting enlarged visuals from a draft of the final
email); cf. 7/27/2021 Lundberg Dep. 183:1–8 (stating, when asked about JX 17, that “I
don’t recall ever seeing that information on that portal. Doesn’t mean it wasn’t there. I
was -- I was always more -- more -- I always emphasized the hard copy more so than the
electronic version. That’s why I would send myself copies of those types of email so I
could print them and have a hard copy of them. I don’t recall the specific information that
is reflected in this being available to me on the portal.”); id. at 184:16–17 (“I am not here
saying that it wasn’t there. I don’t recall ever having seen it there.”).
202
JX 9.
76
18 minutes203 and effectuated the sale of his entire position of 1,343 shares, leaving
a zero share balance. 204 Thus, Lundberg knew no later than July 6, 2017, and likely
much earlier, that Solar had not delivered the RSUs that became due more than three
years before he filed the Federal Action.205 Indeed, Lundberg testified that the
Morgan Stanley portal reflected RSUs if they had vested.206
The 2014 Plan states that the Award agreements will state the time after which
RSUs must be delivered,207 and the RSU Agreements required delivery of each
tranche within 60 days of vesting.208 As to each tranche of shares, Lundberg’s claims
203
JX 19. This exhibit also shows a second, one-minute login several hours later on July
6, 2017. Id.204
JX 15.
205
The delivery period for two of those tranches had already expired months earlier by this
time, and only a week remained for the expiration of that period with respect to the next
two tranches. Lundberg’s decision to sell out at this point underscores the logical inference
that he did not expect further shares to be delivered, and his deposition testimony confirms
that he understood that he was selling his entire investment. See 7/27/2021 Lundberg Dep.
166:11–22 (“Q: And why did you decide to sell the shares? A: I decided to sell the shares
because I was no longer a -- well, I -- I felt like that I could legally do so because I felt like
I no longer was privy to inside information and so that I could sell them. And I also wanted
to close out that account. Q: And when you say ‘close out that account,’ what do you
mean? A: I -- I understood I wouldn’t be utilizing that account anymore and so I wanted
to -- I wanted to close out the use of the Morgan Stanley account and the shares that were
in that.”).
206
9/10/21 Lundberg Dep. 60:3–4.
207
JX 2 § 6(d).
208
“[V]ested Restricted Stock Units will be paid in whole Shares as soon as practicable
after vesting, but in each such case within the period 60 days following the vesting date.”
JX 3 Ex. A ¶ 2; JX 5 Ex. A ¶ 2 (same).
77
accrued no later than 60 days after the vesting date, when that tranche was due.209
Therefore, the court must look next to that series of breaches to determine the
appropriate time or times from which the statute of limitations runs.
iii. Lundberg’s counterclaims for the four RSU
tranches due before September 29, 2017, are
time-barred.
Section 8106’s three-year statute of limitations bars Lundberg’s
counterclaims for damages for Solar’s failure to deliver three tranches of the 2015
RSU award, which became due on January 13, 2017, April 15, 2017, and July 13,
2017, and the first tranche of the 2016 RSU award, which became due on July 14,
209
Lundberg had previously raised in his briefing on the motion for judgment on the
pleadings an alternative theory that he did not pursue at trial. See PTO ¶ 25 (stipulating
that “Solar and Lundberg respectfully refer to their respective Trial Briefs for their
statements of the issues of fact they intend to establish at trial and statements of legal issues
to be tried.” (emphasis added)); Emerald I, 726 A.2d at 1224 (“Issues not briefed are
deemed waived.”). Even if it had been presented, it fails. Lundberg contended that Solar
had discretion to delay delivery of the RSUs indefinitely, so the breach did not occur until
he received the letter from Solar’s counsel in August 2020 that rejected his request for
delivery of his awards. The 2014 Plan stated that “Payment of earned Restricted Stock
Units will be made when practicable after the date set forth in the Award Agreement and
determined by the Administrator.” JX § 6(d). Lundberg’s 2015 and 2016 RSU
Agreements stated that “vested Restricted Stock Units will be paid in whole Shares as soon
as practicable after vesting, but in each such case within the period 60 days [sic] following
the vesting date.” JX 3 Ex. A ¶ 2; JX 5 Ex. A ¶ 2. Lundberg’s argument that Solar had
full discretion to delay the awards indefinitely ignores the requirement in the 2014 Plan
and the award agreements that the RSUs be delivered when practicable, and Lundberg
presents no argument that Solar was unable to deliver his RSUs for any reason. Solar’s
breach occurred upon its failure to deliver each tranche within 60 days of the vesting date,
as outlined in each award agreement. Although the 2014 Plan states it controls in the event
of any conflict between it and an award agreement, there is no conflict concerning the
required time for payment of underlying stock pursuant to the awards.
78
2017. Solar is entitled to declaratory judgment under its second count that
Lundberg’s claim as to these four tranches is time-barred. The remainder of
Lundberg’s counterclaims arising from the Awards, altogether eight tranches of the
2015 RSU award, the second tranche of the 2016 RSU award, and the entire 2015
stock option award, are not time-barred.
4. Damages
The general measure of damages for breach of contract is based on the injured
party’s expectation interest. Duncan v. Theratx, 775 A.2d 1019, 1022 (Del. 2001)
(citing Restatement (Second) of Contracts § 347 cmt. a (1981)).
When determining expectation damages, courts determine an amount
that will give the injured party the benefit of its bargain by putting that
party in the position it would have been but for the breach. The primary
element of expectation damages is the [] value that the performance
would have had to the injured party, or the loss in value caused by the
deficient performance compared to what had been expected.
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 695 (Del. 2019)
(internal quotation marks and footnote omitted).
a. The RSU Agreements
Lundberg’s damages are not confined to the monetary value of the Solar
shares on the date that Solar was required to deliver them under the terms of the RSU
Award agreements. Lundberg’s damages must also account for the resulting
restraint of Lundberg’s elective action in choosing when to sell the shares. See Am.
Gen. Corp. v. Cont’l Airlines Corp., 622 A.2d 1, 10 (Del. Ch. 1992) (“The injury
79
that the plaintiff suffers is the deprivation of his range of elective action, and by
applying the conversion measure of damages a court endeavors to restore that range
of elective action.”), aff’d, 620 A.2d 856 (Del. 1992). The parties acknowledge that
a damages award equal to the face value of the awards on the date of breach does
not, necessarily, make Lundberg whole.210
Lundberg is entitled to damages based upon the highest market price of the
Solar shares reached within a reasonable time of Lundberg’s discovery of the breach.
Am. Gen., 622 A.2d at 8; Haft v. Dart Gp. Corp., 877 F.Supp. 896, 902 (D. Del.
1995); Segovia v. Equities First Hldgs., LLC, 2008 WL 2251218, at *21 (Del. Super.
May 30, 2008).211 The parties agree on the appropriate framework but disagree as
to its application. Specifically, they dispute the appropriate beginning and ending
dates of the “reasonable time” in which these damages should be measured.212
210
Pl.’s Answering Tr. Br. 68; Def.’s Answering Tr. Br. 74; Pl.’s Post Tr. Br. ¶ 127.
211
“The intuition behind this rule is that the issuer-defendant should bear the risk of
uncertainty in the share price because the ‘defendant’s acts prevent a court from
determining with any degree of certainty what the plaintiff would have done with his
securities had they been freely alienable.’” Duncan, 775 A.2d at 1023 (quoting Am. Gen.,
622 A.2d at 10). This approach also recognizes that “the issuer should not bear the risk of
all subsequent share price increases because it is impossible to know whether and when
the stockholders actually would have sold their shares during the restricted period.” Id. at
1023–24 (emphasis added). The reasonable time framework, therefore, strikes a balance
between placing the risk of uncertainty on the party in the wrong and avoiding speculative
damages awards.
212
See, e.g., Pl.’s Answering Tr. Br. 69, 74; Def.’s Post Tr. Proposed Findings of Fact 10–
11, 15, 17–21.
80
i. The parties’ experts and the assumptions upon
which they were directed to rely
Each side presented damages experts who calculated Lundberg’s potential
recovery. Solar’s expert, Timothy J. Meinhart, of Willamette Management
Associates, presented damages calculations under four “reasonable time”
scenarios. 213 The start date under each scenario was determined by Solar’s
counsel. 214 For the end date of each period, Meinhart selected the date by which
Lundberg could have sold the shares without depressing the market price of Solar’s
213
See generally JX 318.
214
Id. ¶ 2 (“In this report, I set forth my analysis and opinions estimating potential damages,
assuming that Lundberg has met his burden of establishing liability and entitlement to the
equity awards, under four different damage scenarios with specific assumptions provided
by Vivint Solar’s legal counsel.”). In Scenario 1, Meinhart assumed that (a) Lundberg was
entitled to damages only for those RSU tranches which vested prior to July 15, 2017 (“the
date Lundberg allegedly stopped working as a consultant for Vivint Solar”), and (b)
Lundberg learned of the breaches of the RSU Agreements on September 13, 2017, marking
the start of the “reasonable time” period for calculating his damages for all vested RSUs.
Id. ¶¶ 36, 37–38.
In Scenario 2, Meinhart assumed that (a) Lundberg was entitled to damages for all of the
RSU Awards, and (b) the start date for the “reasonable time” period was July 14, 2018, for
awards under the 2016 RSU Agreement and July 13, 2019, for awards under the 2015 RSU
Agreement, the dates upon which the final tranche of shares was to have been delivered
under each agreement. Id. ¶¶ 41–42.
In Scenario 3, Meinhart assumed that (a) Lundberg was entitled to shares under all of the
RSU Awards and (b) the “reasonable time” for all of the RSU Awards should be calculated
from August 6, 2020, the date of Solar’s counsel’s letter to Lundberg informing him that
his awards had been canceled upon his termination from Solar. Id. ¶¶ 45–46.
In Scenario 4, Meinhart assumed that (a) Lundberg was entitled to all of shares underlying
the RSU Awards, and (b) the “reasonable time” should be calculated from August 21, 2016,
when Solar canceled Lundberg’s unvested tranches under the RSU awards. Id. ¶¶ 49–50.
81
stock. 215 Meinhart referred to this as the “dribble-out period.”216 For each scenario,
Meinhart applied the Amihud Measure to determine the effect of these hypothetical
sales on the market price for Solar’s shares and calculated the dribble-out period for
each block, resulting in periods of “reasonable time” ranging from one to nine
days.217 Meinhart’s calculations resulted in potential RSU damages of $206,028,
$518,930, $2,536,731, and $306,287 in the four scenarios Solar submitted to him for
analysis.218
Lundberg contends that a 60-day “reasonable time” period is appropriate
because of the time it would have taken him to consider the transaction. 219 The
damages calculation by Lundberg’s expert, Richard S. Hoffman, of Loan Peak
215
Id. ¶¶ 31–33, 52, 57–60.
216
Id. ¶ 52.
217
The Amihud Measure, developed by Professor Yakov Amihud, estimates the price
impact of changes in historic trading volume. Id. ¶ 54. Meinhart used the Amihud Measure
to calculate how many shares could be sold into the market without affecting the trading
price. Id. ¶¶ 54–60 (explaining Meinhart’s application of the Amihud Measure); id. Ex. 1
(presenting a summary of and conclusions from Meinhart’s calculations); id. Ex. 2 (same).
218
Id. ¶ 5.
219
“Lundberg’s damage expert has used a reasonable period of 60 days following the first
date by which Lundberg could have sold his converted stock for Lundberg to assess the
market and the tax consequences of any sale, the reasonable value of his shares, speculate
on obtaining a return in the marketplace, and sell his shares over a period of time that would
not depress the market.” Def.’s Opening Tr. Br. 77 (footnote omitted). Lundberg cited
Comrie v. Enterasys Networks, Inc., 837 A.2d 1 (Del. Ch. 2003), in support of his
application of this period. Comrie did not, however, consider any of these factors. Rather,
its 90-day “period of time comes from the fact that, upon termination, the BIT Group had
90 days to exercise all vested options.” Id. at *20.
82
Valuation Group, was more straightforward than Meinhart’s. Hoffman calculated
damages based on the highest intermediate share price within two alternative 60-day
periods. The first period started on December 15, 2020, and the second started on
January 1, 2021.220
Hoffman selected each time period based upon Lundberg’s declaration as to
when he could and would have sold his shares after learning of Solar’s breach.221
Lundberg asserts that he was not on notice of Solar’s breach until August 2020, after
receiving a response letter from Solar’s counsel informing him that all of his
unvested awards had been canceled upon his termination of employment from Solar
in 2016.222 When he received the letter in August 2020, the Solar-Sunrun merger
had been publicly disclosed, but the transaction had not yet closed. Lundberg asserts
that he could not have sold his shares in August 2020 because he possessed material
non-public information about disputes between Solar and Smart Home that arose
after the announcement of the Solar-Sunrun merger.223 According to Lundberg,
220
JX 351 at JX351.9.
221
Id. at JX351.8, JX351.8–9 (explaining that “consistent with what [Hoffman]
underst[oo]d Mr. Lundberg will testify to, [Hoffman] measured damages assuming Mr.
Lundberg would have sold his shares in the sixty days following when he first could
possibly have done so (mid-December 2020)” and “the period he declared he likely would
have been willing to do so (January and February 2021)” and calculating damages
accordingly).
222
JX 77 ¶ 1 [hereinafter “Lundberg Decl.”].
223
Id. ¶ 2.
83
those issues were resolved in November 2020.224 But even then, Lundberg maintains
that his first reasonable opportunity to sell the shares would not have been until
January 2021 “because of the tax advantage of selling in a later tax year, [and]
because selling in December 2020 presented a reduced but nonetheless significant
risk that [Lundberg] would be selling with knowledge of current material non-public
information.”225
The Solar-Sunrun merger closed on October 8, 2020. In the merger, each
share of Solar stock was converted into 0.55 shares of Sunrun stock.226 Hoffman
calculated damages for Lundberg’s RSU Awards based upon the number of Sunrun
shares that Lundberg would have received in the merger and the trading price of
224
Id. ¶ 5.
225
Id. ¶¶ 5–6. Lundberg did not enter any evidence to this effect beyond his six-paragraph
declaration. Solar submitted a competing declaration from Black, who asserted that this
information was not material. Black Decl. ¶¶ 71–74. The burden of establishing a longer
“reasonable time” is on the party seeking damages to establish a longer period. Wyndham,
Inc. v. Wilm. Tr. Co., 59 A.2d 456, 460 (Del. Super. 1948) (“Plaintiff has not shown that a
period so long as to include March 25 was reasonably required . . . .”). The court finds that
Lundberg has not met his burden with respect to his assertion that he was in possession of
material non-public information. Lundberg has proffered only his six-page declaration in
support of his assertion that he was in possession of material non-public information. This
is weak evidence. And even weighing Lundberg’s declaration against Black’s declaration,
the court does not find reason to weigh Lundberg’s more heavily—rather, having already
determined that Lundberg’s deposition testimony regarding his lack of access to his
Morgan Stanley account lacked credibility, the court is inclined to place more weight on
Black’s declaration than Lundberg’s. Lundberg’s assertions regarding his preference for
favorable tax treatment rely upon his inability to sell until at least November 2020, which
the court finds to be counterfactual, and, therefore, beside the point.
226
JX 351 at JX351.9.
84
those shares during Hoffman’s two measurement periods. 227 Hoffman determined
that the highest intermediate price of Sunrun stock during both measurement periods
occurred on January 12, 2021, the date on which Sunrun’s stock reached $100.93.228
Hoffman calculated Lundberg’s damages for all of the Awards at issue in this case
to be $5,663,538.229
The parties did not take issue with either expert’s calculations, 230 sparring
instead over the assumptions upon which they directed their experts to rely. But
neither side’s assumptions regarding the date on which to begin the “reasonable
time” were correct. As discussed earlier, Lundberg knew of Solar’s breaches with
respect to the RSU Awards no later than 60 days after the vesting date for each
tranche, which is the date upon which Solar was required to deliver the shares.231
Therefore, the court rejects Lundberg’s assertion that he was not aware of the breach
until after receiving the letter from Solar’s counsel in August 2020. The court
227
Id.228
Id.229
Id. Unlike Meinhart, Hoffman did not provide separate calculations for the RSU
Awards and the options. Replicating Hoffman’s calculations with just the RSU Awards
yields damages of $5,347,866.89.
230
Hoffman specifically noted that he “duplicated [Meinhart’s] calculations and found no
mathematical errors,” “the share prices, volumes traded, and range in share price was
accurate for the time period over which [Meinhart] gathered the data from August 2016
through October 2020,” and “for ease of comparability, [Hoffman] estimated damages
using as much of the model Mr. Meinhart created as is practical.” Id. at JX351.4.
231
See supra § II(A)(3)(c)(ii).
85
declines to accept the assumptions upon which the parties directed their experts to
rely and, instead, proceeds with its own calculation of Lundberg’s damages.
ii. The court’s calculation of damages for the RSU
Agreements
“What constitutes a reasonable period of time is a question of law for the court
to determine.” Segovia, 2008 WL 2251218, at *21. Lundberg advocates for a 60-
day period. Solar argues that 60 days is not reasonable, pointing to the statement in
Duncan that the “‘reasonable time’ in this context is the ‘time in which [the plaintiff]
could have disposed of its shares without depressing the market had it been able to
do so.’” 775 A.2d at 1023 n.9 (alteration in original) (quoting Madison Fund, Inc.
v. Charter Co., 427 F. Supp. 597, 609 (S.D.N.Y. 1977)). The Duncan Court
reframed this period, observing that “[a]lternatively, one may think of this period as
the time required for the stockholders to determine whether they wish to sell their
shares immediately after the restrictions are lifted or to retain them for speculative
purposes.” Id. at 1024 n.14.
Our courts have pursued a context-specific approach to determining the
reasonable time period rather than focusing solely upon on when a non-breaching
party could have disposed of its shares in the open market without the market price.
See, e.g., Am. Gen., 622 A.2d at 13 (considering, in determining the “‘reasonable
time,’” that American General knew in advance that it would be harmed, “would
have been prepared to proceed to replace its shares immediately thereafter if it had
86
desired to do so,” and had the “resources and financial means” to have acted
quickly); Comrie, 837 A.2d at 20 (finding that “the ‘reasonable period’ for
determining the ‘highest intermediate value’ . . . is 90 days from the date of vesting.
This period of time comes from the fact that, upon termination, the BIT Group had
90 days to exercise all vested options.”); Segovia, 2008 WL 2251218, at *2, *22
(deciding, without further discussion, that the period from the conversion of shares
in “February and March of 2006” until May 31, 2006, was a “reasonable time” from
which to determine the highest intermediate value). “Two or three months has been
accepted as a reasonable period of time to replace an asset on the open market.”
Diamond Fortress Techs., Inc. v. EverID, Inc., 274 A.3d 287, 308 (Del. Super. 2022)
(setting a three-month “reasonable time” for replacement of cryptocurrency tokens
and relying on Segovia, Comrie, and Gallagher v. Jones, 129 U.S. 193 (1889), where
the U.S. Supreme Court affirmed the application of a two-month reasonable period).
The court concludes that, based on the specific facts of this case, a 90-day
period from the date by which Solar was required to deliver each tranche of shares
is a “reasonable time” for the calculation of Lundberg’s damages. 232 See Duncan,
775 A.2d at 1023 n.10 (“the court should apply a compromise attempt to value the
232
Solar was not contractually required to deliver the underlying shares until 60 days after
vesting. Thus, Lundberg was not improperly restrained from trading the shares until after
that date.
87
chance that the plaintiff might at some time have profited by a rise in value” (internal
quotation marks omitted)). This period is also in accord with those employed in
Comrie, Segovia, and Diamond Fortress. Based on this conclusion, the court
calculates Lundberg’s damages under the RSU Agreements as follows:
Breach End of the Highest RSUs Sale Proceeds
Date “Reasonable Intermediate
Time” Value233
10/13/2017 1/11/2018 $4.28 447 $1,913.16
1/13/2018 4/13/2018 $4.25 447 $1,899.75
4/15/2018 7/14/2018 $5.80 447 $2,592.60
7/13/2018 10/11/2018 $6.15 447 $2,749.05
7/14/2018 10/12/2018 $6.15 44,353 $272,770.95
10/13/2018 1/11/2019 $7.44 447 $3,325.68
1/13/2019 4/13/2019 $5.65 447 $2,525.55
4/15/2019 7/14/2019 $8.40 447 $3,754.80
7/13/2019 10/11/2019 $9.82 447 $4,389.54
Therefore, Lundberg is entitled to a total base damages award of $295,921.08 from
the RSUs.
b. The 2015 Option Agreement
Next, the court turns to Lundberg’s options under the 2015 Option Agreement.
For those options that had already vested, the date of breach was November 21, 2016,
233
Values used herein are the highest trading price per day, as taken from Meinhart’s
report. JX 318 Ex. 15; see JX 351 at JX351.4 (stating that Hoffman agreed that these
“share prices, volumes traded, and range[s] in share price [were] accurate”).
88
when Solar canceled them. 234 For the remaining eleven tranches, the date of breach
was the date of vesting, when they should have become exercisable under the terms
of the 2015 Option Agreement. As with Lundberg’s RSU Awards, the court
concludes that Lundberg knew of the breaches at or shortly after the vesting dates
for each tranche. 235
The exercise price of each of these options, $14.15,236 far exceeded the value
of Solar’s stock until more than a year after the final tranche became exercisable.237
Therefore, using the same reasonable time period methodology employed in
234
See JX 88 at JX88.1 (demonstrating that, after Solar removed Lundberg from its
Workday, Morgan Stanley set Lundberg’s options under the 2015 Option Agreement to be
canceled on November 21, 2016).
235
As with the RSU Awards, Lundberg’s unsupported testimony on this point is
outweighed by the weight of the otherwise uncontested documentary evidence. See JX 17
at SOLAR000396 (presenting the landing page, which clearly displayed awarded, vested,
and unvested awards—including options—in an email explaining to award recipients how
to accept their awards); JX 18 at SOLAR001249 (presenting enlarged visuals from a draft
of the final email); JX 19 (demonstrating Lundberg logging into his Morgan Stanley
account multiple times after leaving Solar); cf. 7/27/2021 Lundberg Dep. 233:23–234:2
(“Q: Was there any indication on your Morgan Stanley account that you could access
through your portal that those -- any of the stock options awards had vested by the time
you left Vivint Solar? A: Not to my -- not in my recollection.”); 9/10/21 Lundberg Dep.
56:13–15, 56:25–57:2 (“I remember a couple of times looking -- trying to log into the
Morgan Stanley portal to see if there was any information reflected therein. . . . I didn’t
find any information -- I couldn’t log in at the time and -- and there was some -- inability
for me to log into the Morgan Stanley portal . . . .”); see generally supra § II(A)(3)(c)(ii).
236
JX 318 ¶ 22; JX 351 at JX351.6.
237
Solar’s stock price hit a daily high over $14.15 per share for the first time after all of
Solar’s breaches on July 7, 2020, when the share price peaked at $15.10 per share. See
generally JX 318 Ex. 15.
89
measuring damages for the RSU Agreements (90 days from breach), the “in the
money” or “intrinsic” value of each tranche was $0. 238
Hoffman, Lundberg’s expert, correctly notes that even “stock options that are
‘out of the money’ do have value.”239 See Palkon v. Maffei, 311 A.3d 255, 273 (Del.
Ch. 2024) (observing that an out of the money call option “has value because there
are future states of the world in which the stock price exceeds the strike price”).
Indeed, Hoffman identifies methods by which the options could be valued.240 He
does not, however, attempt to value these options while they were out of the money.
Instead, he argues that “it is less likely that a person would sell their ‘out of the
money options’ than it is to assume they would simply continue holding on to them
hoping for the options to one day be in the money.” 241 Hoffman then repeated
Lundberg’s contentions as to why, if Lundberg had held onto the options, he would
not have sold the shares until a time period in which his recovery would, incidentally,
be maximized.242
238
See Comrie, 837 A.2d at 5 n.7 (“The ‘in the money’ or ‘intrinsic’ value of a stock option,
as used in this litigation, is the difference between the exercise price of an option and the
fair market value of the underlying stock.”).
239
JX 351 at JX351.6.
240
Id. at JX351.6 n.8 (listing “the Lattice approach, Black-Scholes, Monte Carlo approach,
etc.”).
241
Id. at JX351.6.
242
Id. at JX351.8 (relying on Lundberg Decl.).
90
These arguments miss the point. Lundberg’s position that he might have held
the options until they were in the money, rather than acquiring a constructive
replacement at the time of breach, is not unreasonable, but an award of damages
based on that hypothetical is not the court’s understanding of what the law requires.
A plaintiff may not “pick and choose, with hindsight, a single date to set that value.
Rather, the date should be established by resort to a ‘constructive replacement’
purchase by the plaintiff, i.e., how long it would have taken the plaintiff to replace
the securities on the open market.” Am. Gen., 622 A.2d at 13. 243 The court must,
therefore, look at what the cost of acquiring a “constructive replacement” for these
significantly out of the money options would have been. Hoffman asserts that their
value is non-zero, but he does not attempt to assign an actual monetary value to any
of the options during the period in which they were out of the money.244
243
Following this approach allows for consistency of outcomes without the intrusion of
hindsight and, in some circumstances, could result in higher damages than would have
resulted from waiting for the options to be in the money. For example, had Solar gone
bankrupt or been acquired for cash at a low price per share, these options never would have
been in the money, and Lundberg’s damages from the options could have been maximized
by receiving the value of a constructive replacement within 90 days of vesting rather than
by waiting for them to be in the money.
244
It is apparent that Lundberg did not want his expert to value his options using the
traditional valuation methods for periods in which they were out of the money. Rather,
Lundberg made the tactical decision to seek the maximum damages possible by relying not
only on a run up in the price of Solar stock after announcement of the Sunrun merger, but
also on a post-merger Sunrun price during the most advantageous period available. The
court rejects that gambit.
91
There is, therefore, no evidence in the record on what the actual value of these
underwater options would have been at the times at which the court must measure
damages other than that it is non-zero.245 Absent evidence of what that value would
actually be, any non-zero compensatory damages award would be speculation by the
court. “This Court simply cannot credit [Lundberg] with market prescience. And,
as the United States Supreme Court has observed, even where the defendant by his
own wrong has prevented a more precise computation, the factfinder may not render
a verdict with respect to damages based on speculation or guesswork.” Duncan, 775
A.2d at 1024 n.12 (cleaned up) (internal quotation marks omitted). “The burden is
upon [Lundberg] to furnish such proof. If he fails in this respect, the [factfinder]
cannot supply the omission by speculation or conjecture.” Laskowski v. Wallis, 205
A.2d 825, 826 (Del. 1964) (internal quotation marks omitted).
245
Meinhart assigned a $0 value to the options during the periods in which they were
underwater, but was instructed to assume that each option needed to be exercised within
90 days of vesting and was asked only to calculate net proceeds, not the options’ value, so
his report is of no probative value on this point either. JX 318 at JX318.13 n.34 (disclosing
that “[w]ithin all the scenarios discussed in [his] report, [Meinhart] was asked by legal
counsel to assume the Vivint Solar stock options would expire as worthless unless
exercised within 90 days of a triggering event”); Meinhart Dep. 48:3–8 (“In terms of the
90-day period, it really didn’t come into play directly in what I’m doing with that particular
calculation I just described. It certainly would come into play with a valuation of the option
itself, but not necessarily the net proceeds that I was estimating in my damages
calculation.”). As explained earlier in this opinion, that assumption was incorrect, because
the deadline to exercise within 90 days only arose if Lundberg were no longer a Service
Provider under the 2014 Plan. Lundberg was, at all relevant times, a Service Provider
under the 2014 Plan. See supra § II(A)(2)(b).
92
Nevertheless, “[e]ven if compensatory damages cannot be or have not been
demonstrated, the breach of a contractual obligation often warrants an award of
nominal damages.” Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC, 2009
WL 1111179, at *12 (Del. Ch. Apr. 27, 2009); see Restatement (Second) of
Contracts § 346(2) (1981) (“If the breach caused no loss or if the amount of the loss
is not proved under the rules stated in this Chapter, a small sum fixed without regard
to the amount of loss will be awarded as nominal damages.”). “Nominal damages
are usually assessed in a trivial amount, selected simply for the purpose of declaring
an infraction of the Plaintiff’s rights and the commission of a wrong.” Ivize of
Milwaukee, 2009 WL 1111179, at *12 (internal quotation marks omitted).
Therefore, in recognition of Lundberg’s rights and Solar’s wrongs, the court awards
nominal damages of $1 for each of Solar’s breaches under the 2015 Option
Agreement. In total, the court concludes that the appropriate award of damages for
Solar’s breach of the 2015 Option Agreement is $12.246
5. Pre- and post-judgment interest
“In Delaware, prejudgment interest is awarded as a matter of right. Such
interest is to be computed from the date payment is due.” Citadel Hldg. Corp. v.
Roven, 603 A.2d 818, 826 (Del. 1992) (citation omitted). Where damages do not
246
This is derived from Solar’s cancellation of Lundberg’s options that had vested prior to
his move to Smart Home and Solar’s failure to deliver each of the 11 remaining tranches.
93
accrue immediately upon breach, prejudgment interest is measured from the date on
which the damages began to accrue. Am. Gen., 622 A.2d at 13–14 (holding that
“[t]he date of the breach[] is not the appropriate starting point for the computation
of interest” and instead the appropriate date from which to measure prejudgment
interest is “the date on which [] damages began to accrue”).
In addition to the base damages for each RSU tranche that is not time-barred,
Lundberg is entitled to prejudgment interest at the legal rate, calculated with respect
to each tranche from the date such tranche became due. 6 Del. C. § 2301; Am. Gen.,
622 A.2d at 13–14. This interest shall be compounded. See Gotham P’rs, L.P. v.
Hallwood Realty P’rs, L.P., 817 A.2d 160, 173 (Del. 2002) (holding that the Court
of Chancery has discretion to award compound interest); Brown v. Ct. Sq. Cap.
Mgmt., L.P., 2024 WL 1655418, at *3 (Del. Ch. Apr. 17, 2024) (“[F]or the last few
decades, the Court of Chancery has awarded compound interest as a matter of
practice.”). The court also has discretion to select the compounding interval. Brown,
2024 WL 1655418, at *5. Interest shall be compounded quarterly. See id. (ordering
interest to be compounded quarterly); Murphy Marine Servs. of Del., Inc. v. GT USA
Wilm., LLC, 2022 WL 4296495, at *24 (Del. Ch. Sept. 19, 2022) (“When the Court
awards the legal rate of interest, the appropriate compounding rate is quarterly.”
(cleaned up) (internal quotation marks omitted)).
94
Prejudgement interest is not, however, warranted with respect to the nominal
damages arising from Solar’s breach of the 2015 Option Agreement. The court
awards nominal damages “merely in recognition of a technical injury and by way of
declaring the rights of [Lundberg].” Ivize of Milwaukee, 2009 WL 1111179, at *12
(internal quotation marks omitted). Because this award of nominal damages is
“merely symbolic,” an award of prejudgment interest is not warranted. In re
Mindbody, Inc., S’holder Litig., 2023 WL 7704774, at *10 (Del. Ch. Nov. 15, 2023)
(observing that “the compensatory and disgorgement purposes of prejudgment
interest arise from the premise that the damages award was ‘plaintiff’s money’—
money that the plaintiff would have had in her possession absent wrongdoing” are
“not served if nominal damages are merely symbolic”).
Post-judgment interest is also awarded as a matter of right. See Noranda
Aluminum Hldg. Corp. v. XL Ins. Am., Inc., 269 A.3d 974, 978 (Del. 2021) (citing 6
Del. C. § 2301(a)). Lundberg is awarded post-judgment interest at the legal rate on
the combined amount of the damages award and prejudgment interest. See NGL
Energy P’rs LP v. LCT Cap., LLC, No. 265, 2023, slip op. at 2 (Del. May 28, 2024)
(“Prejudgment interest is part of the ‘judgment’ and, as such, should be included in
the amount on which post-judgment interest accrues.”). Post-judgment interest shall
be compounded quarterly.
95
B. Finding Breach, the Court Need Not Reach Lundberg’s Implied
Covenant Counterclaims.
Having granted Lundberg’s requested relief under his contractual theories, the
duplicative implied covenant counterclaims are moot, and the court need not reach
them. See Wilm. Savs. Fund Soc’y, FSB v. Foresight Energy LLC, 2015 WL
7889552, at *10 (Del. Ch. Dec. 4, 2015) (“The Trustee is entitled to relief under the
express language of the Indenture, rendering it unnecessary to consider implied
obligations. [The implied covenant Count] is moot.”).
C. No Further Remedy Stems from the Forum Selection Clause.
At the beginning of this case, Solar sought, and obtained, a preliminary anti-
suit injunction preventing Lundberg from litigating his claims regarding the Awards
in Utah. Now, at the close of the case resolving those claims, Solar seeks an award
of fees it incurred enforcing the forum selection clause and a permanent injunction
enforcing the forum selection clause against Lundberg with respect to the Awards.
Neither is warranted.
1. Solar is not entitled to damages for the fees it incurred
enforcing the forum selection clause.
Solar argues that it is entitled to recover damages compensating it for the fees
it incurred in enforcing the forum selection clause, asserting that it is “entitled to
recover from Lundberg the damages it suffered as the result of Lundberg’s wrongful
96
conduct.” 247 The “wrongful conduct” of which Solar complains was Lundberg’s
filing of these claims outside of Delaware in violation of the forum selection clause.
To remedy this conduct, Solar sought and received the remedy our law provides—
specific performance of the forum selection clause. Solar now seeks its costs as the
prevailing party with respect to the preliminary injunction.
“Delaware follows the ‘American Rule,’ whereby a prevailing party is
generally expected to pay its own attorney’s fees and costs.” Montgomery Cellular
Hldg. Co. v. Dobler, 880 A.2d 206, 227 (Del. 2005). “The American Rule has two
general categories of exceptions: fee-shifting statutes and equitable doctrines.”
Goodrich v. E.F. Hutton Gp., Inc., 681 A.2d 1039, 1044 (Del. 1996) (footnote
omitted). Solar does not, however, articulate what exception to the American Rule
it relies on in seeking its fees, arguing only that “‘an award of such damages does
not contravene the American Rule.’”248 It does.
Solar’s sole citation supporting its single-paragraph argument that it is entitled
to fees is to O’Steen, which denied a motion to dismiss a claim seeking damages for
breach of a forum selection agreement. 2006 WL 2788414. There, John O’Steen,
the defendant in the Delaware action, filed a separate action in Ohio approximately
247
Pl.’s Opening Tr. Br. 78.
248
Id. at 78–79 (quoting Cornerstone Brands, Inc. v. O’Steen, 2006 WL 2788414, at *4
(Del. Ch. Sept. 20, 2006) [hereinafter “O’Steen”]).
97
one month after Cornerstone Brands, Inc. (“Cornerstone”), the Delaware plaintiff,
initiated the case in this court.249 Cornerstone raised the forum selection clause as a
defense in Ohio and prevailed on a motion to stay that action, which was
subsequently dismissed without prejudice. 250 A subsequent amended complaint in
the Delaware proceeding added a claim seeking damages for breach of the forum
selection clause. 251 The defendant argued that the claim was defective as a matter
of law because no Delaware precedent supported it. The O’Steen court denied the
motion to dismiss, reasoning that “the Supreme Court of Delaware implied [in El
Paso] that damages may be obtained for a breach of a forum selection clause, and
an award of such damages does not contravene the American Rule.” 252 Id. at *4
(citing El Paso Nat. Gas Co. v. TransAmerican Nat. Gas Corp., 669 A.2d 36, 40
(Del. 1995), overruled in part by Nat’l Indus. Gp. (Hldg.) v. Carlyle Inv. Mgmt.
L.L.C., 67 A.3d 373 (Del. 2013)).
249
Cornerstone Brands Inc. v. O’Steen, C.A. No. 1501-CC (Del. Ch.), Dkt. 79 ¶¶ 33–34;
id. at Dkt. 84 ¶¶ 33–34.
250
Id. at Dkt. 79 ¶¶ 33–34; id. at Dkt. 84 ¶¶ 33–34.
251
Id. at Dkt. 59 Ex. B; id. at Dkt. 79.
252
The court subsequently directed the parties to brief the issue, expressly reserving
judgment as to the amount of any award until final resolution of the case. Cornerstone
Brands, Inc. v. O’Steen, 2007 WL 2801384, at *1 (Del. Ch. May 18, 2007). The parties
settled the case before the court could resolve the issue. Cornerstone Brands, Inc. v.
O’Steen, C.A. No. 1501-CC (Del. Ch.), Dkts. 157–58.
98
In El Paso, the Court upheld this court’s dismissal of a cause of action seeking
to enforce a forum selection clause requiring litigation of claims sounding only in
law in this court for lack of subject matter jurisdiction. 669 A.2d 36. The appellant
argued that it was entitled to specific performance of its negotiated forum selection
provision and that the forum selection was a material term in the contract. The El
Paso Court observed that “[t]hese arguments simply miss the point; neither the Court
of Chancery nor the parties to a dispute can confer equitable jurisdiction where it is
otherwise lacking,” and reaffirmed that “jurisdiction of a court over the subject
matter cannot be conferred by consent or agreement.” Id. at 39 (internal quotation
marks omitted). This portion of El Paso remains good law.
After finding that this court lacked subject matter jurisdiction, the El Paso
Court also concluded that this court “correctly determined, inter alia, that El Paso
could raise the forum selection clause in the Settlement Agreement as a defense in
the first filed Texas action and, if successful, recover the costs of that litigation.” Id.
at 40. The El Paso Court reasoned that “the ability to raise the forum selection claim
as a defense in the Texas action was an adequate remedy at law” and that, because
“there is a defense cognizable at law the possessor of it has an adequate remedy at
law and equity will not enjoin his adversary from suing.” Id. (internal quotation
marks omitted). It was this precise scenario that was presented to the O’Steen court:
Cornerstone raised the forum selection clause as a defense in the Ohio action and
99
subsequently sought to recover the costs of that litigation. But this remedy, available
under our law at the time, has since been rejected by the Delaware Supreme Court.
Several years after O’Steen, the Court held that “[f]orum selection clauses are
presumptively valid and should be specifically enforced unless the resisting party
clearly shows that enforcement would be unreasonable and unjust, or that the clause
is invalid for such reasons as fraud and overreaching.” Ingres Corp. v. CA, Inc., 8
A.3d 1143, 1146 (Del. 2010) (cleaned up) (internal quotation marks omitted).
Litigants subsequently identified a tension between Ingres and El Paso’s second
holding. Reconciling Ingres and El Paso, this court reasoned that the Court’s ruling
in El Paso rested on a finding that the forum selection clause at issue was improper
from the outset. Carlyle Inv. Mgmt. L.L.C. v. Nat’l Indus. Gp. (Hldg.), 2012 WL
4847089, at *12 n.103 (Del. Ch. Oct. 11, 2012) (“In other words, the Supreme Court
found that the forum selection clause at issue in El Paso was itself an improper one
because it ignored the limited jurisdiction given this court by our state’s laws.”),
aff’d, 67 A.3d 373 (Del. 2013). On appeal, the Court affirmed this court’s ruling in
Carlyle in full and expressly overruled El Paso to the extent that it was inconsistent
with Ingres, Carlyle, and National Industries. Nat’l Indus., 67 A.3d at 385, 388 (“To
the extent that our decision in El Paso is inconsistent with our holding in this case
or Ingres, El Paso is overruled.”).
100
Solar finds no support from O’Steen for its contention that it is entitled to an
award of damages based on the fees it incurred in enforcing the forum selection
clause. First, O’Steen addressed a different factual scenario and the damages sought
provided an alternative remedy. In O’Steen, Cornerstone did not seek a preliminary
injunction from this court. Instead, guided by El Paso, Cornerstone used the forum
selection clause as a defense in the Ohio action and later sought damages as an
alternative remedy to injunctive relief in this court. Here, Solar sought and obtained
a preliminary anti-suit injunction in this court and, therefore, has already been
granted relief. See Scott v. City of Harrington, 1986 WL 4494, at *1 (Del. Ch. Apr.
14, 1986) (“Under the doctrine of election of remedies, a party who has two or more
inconsistent remedies available, and elects to pursue one of them to the exclusion of
the others, may not later pursue other inconsistent remedies.”). Second, and more
importantly, that portion of El Paso on which O’Steen relied has since been
overruled. The Delaware Supreme Court has made clear that “[f]orum selection
clauses are presumptively valid and should be specifically enforced [unless they are
unjust or invalid].” Ingres, 8 A.3d at 1146 (cleaned up) (emphasis added) (internal
quotation marks omitted); see also Carlyle, 2012 WL 4847089, at *12 (“[A]ny
remedy other than specific performance would deprive Plaintiffs of the benefit of
their bargain.” (internal quotation marks omitted)). Solar pursued and received the
remedy Delaware courts provide with respect to an enforceable forum selection
101
provision: enforcement thereof. Having prevailed on its motion for a preliminary
anti-suit injunction and received the relief available to it, Solar must identify an
exception to the American Rule supporting its request for fees.
Solar does not proffer an exception to the American Rule that supports the fee
award it seeks. To the extent that Solar relies on O’Steen as, itself, an exception to
the American Rule, it misapprehends the O’Steen court’s ruling. There, the
contemplated damages did not contravene the American Rule because they were not
fees for the prevailing party—they were the remedy. Here, Solar has already
received a remedy, and seeks its fees as the prevailing party. To the extent that Solar
is advocating for a per se exception to the American Rule for enforcement of forum
selection provisions, the court declines to create such a new exception. See In re
Del. Pub. Sch. Litig., 312 A.3d 703, 718 (Del. 2024) (“‘Historically, our courts have
been cautious about creating and expanding judge-made exceptions to the American
Rule absent express and clear legislative guidance.’” (quoting Dover Hist. Soc’y.,
Inc. v. City of Dover Plan. Comm’n, 902 A.2d 1084, 1091 (Del. 2006) (finding that,
despite having “clearly created a social benefit,” “that benefit is not of the kind that
justifies creating a new judge-made exception to the American Rule”)). Rather, the
authorities counsel the contrary. See Hydrogen Master Rts., Ltd. v. Weston, 228 F.
Supp. 3d 320, 332 (D. Del. 2017) (observing that “the remedy for breach of a valid
forum selection clause is specific performance” and that “[t]he court is aware of no
102
case where plaintiffs were allowed to recoup damages in addition to their remedy of
specific performance” (citing Carlyle, 2012 WL 4847089, at *12)); Barnard v.
Marchex, Inc., 2024 WL 406441, at *8 (D. Del. Feb. 2, 2024) (dismissing a claim
seeking damages for breach of a forum selection clause because “[u]nder Delaware
law, the remedy for breach of a valid forum selection clause is specific performance”
and observing that O’Steen is contradicted by more recent authority (alteration in
original) (internal quotation marks omitted) (quoting Carlyle, 2012 WL 4847089, at
*12)); accord BuzzFeed, Inc. v. Anderson, 2022 WL 15627216, at *21, *21 n.195
(Del. Ch. Oct. 28, 2022) (finding “no authority applying El Paso and [O’Steen]” to
grant fees with respect to enjoining arbitration but finding “myriad examples of this
Court enjoining arbitration without awarding fees or costs”); see also Versatile
Housewares & Gardening Sys., Inc. v. Thill Logistics, Inc., 819 F. Supp. 2d 230, 246
(S.D.N.Y. 2011) (denying a claim seeking damages for the fees incurred in
defending an action filed in breach of a forum selection clause and observing that
“[i]mposing a cost on someone seeking to enforce his rights—whether those rights
arise from contract, statute, or common law—may seem inequitable. But shifting
fees in such situations would create an exception that would swallow the ‘American
Rule’” (internal quotation marks omitted)).
That is not to say there is no circumstance in which the court would award
attorneys’ fees in connection with enforcement of a forum selection clause. For
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example, “this court has discretion to shift attorneys’ fees and costs when a party to
the litigation has acted in bad faith.” Auriga Cap. Corp. v. Gatz Props., 40 A.3d
839, 880–82 (Del. Ch. 2012) (shifting one-half of fees where a party “made this case
unduly expensive for the Minority Members to pursue” by “simply splatter[ing] the
record with a series of legally and factually implausible assertions”), judgment
entered sub nom. Auriga Cap. Corp. v. Gatz Props., LLC (Del. Ch. 2012), aff’d, 59
A.3d 1206 (Del. 2012). But “[t]he bad faith exception is applied in ‘extraordinary
circumstances’ as a tool to deter abusive litigation and to protect the integrity of the
judicial process.” Montgomery Cellular, 880 A.2d at 227; see Great Am.
Opportunities, Inc. v. Cherrydale Fundraising, LLC, 2010 WL 338219, at *29–30
(Del. Ch. Jan. 29, 2010) (awarding fees in connection with a preliminary injunction
only upon a showing of contempt of the injunction after its entry, and even then,
only for the fees and expenses incurred in prosecution of the motion for contempt).
Were a party to violate a forum selection clause in a manner so egregious as to
constitute bad faith, damages might be appropriate under the bad faith exception to
the American Rule. But that is not the case here. Solar makes no attempt to argue
that Lundberg’s original filing of these claims in Utah was in bad faith, nor does the
104
record support such a conclusion. 253 In fact, Solar did not brief, and therefore
waived, any recognized exception to the American Rule.254 Therefore, having failed
to establish an exception to the American Rule, Solar is not entitled to recover
damages for the fees it incurred in obtaining the antisuit injunction.
2. Solar is not entitled to a permanent injunction enforcing the
forum selection clause.
Solar argues that it is entitled to a permanent anti-suit injunction preventing
Lundberg from litigating claims arising out of the 2014 Plan in a venue outside of
Delaware. Lundberg counters that this ruling and any appeal thereof will resolve all
possible claims arising from the 2014 Plan.
253
Rather, it appears that Lundberg originally filed all his claims in Utah because of Utah
forum selection clauses in other agreements, and subsequently offered to consolidate all of
the cases in the forum of Solar’s choosing in an attempt to more efficiently resolve the
parties’ disputes. Dkt. 44 at 50:18–20, 51:18–20 (Lundberg’s Counsel) (“There’s no
reason for us to have these trifurcated proceedings all focused on the exact same legal and
factual dispute. . . . Let’s get this issue resolved in one place, whether it’s in one court in
Utah, one court in front of Your Honor, or one arbitration.”). Solar rejected Lundberg’s
offer. Id. at 69:20–70:1 (Solar’s Counsel) (“And I would say, Your Honor, this, ‘Gee, we
will offer to have everything resolved here,’ Your Honor, that isn’t the issue. My client is
entitled to the benefit of the bargain they struck with Mr. Lundberg in all the contracts at
issue. They’re entitled to it.”). The court enforced the forum selection clause, noting that,
as a result, the parties would “be litigating and/or arbitrating in at least two, and potentially
three or four, separate venues in Delaware and Utah.” Dkt. 48 at 30:19–21. At trial,
Lundberg’s counsel represented that the parties are now in six forums. Tr. 161:18–162:6.
Though, as the court observed in its ruling on the preliminary injunction, this is “inefficient
and a waste of all parties’ resources,” “it is the consequence of what the parties agreed to
do by contract.” Dkt. 48 at 30:22, 31:2–4. They did not, however, contractually agree to
shift fees in connection with enforcement of the forum selection clause.
254
Emerald I, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”).
105
To obtain a permanent injunction, “a party must show (i) actual success on
the merits, (ii) the inadequacy of remedies at law, and (iii) a balancing of the equities
that favors an injunction.” In re COVID-Related Restrictions on Religious Servs.,
285 A.3d 1205, 1232–33 (Del. Ch. 2022). “‘[F]or a complaint to properly state a
claim cognizable in equity solely because of a request for an injunction, the facts
alleged must, if assumed to be true, create a reasonable apprehension of a future
wrong.’” Id. at 1233 (quoting McMahon v. New Castle Assocs., 532 A.2d 601, 606
(Del. Ch. 1987)). A court may issue a permanent injunction “‘where there is reason
to believe that a defendant will resume his wrongful course of conduct.’” Id.(quoting Weiner v. Miller, 1990 WL 54915, at *1 (Del. Ch. Apr. 27, 1990)).
Solar does not face a reasonable apprehension of a future wrong absent a
permanent injunction enforcing the forum selection clause. Cf. BE & K Eng’g Co.,
LLC v. RockTenn CP, LLC, 2014 WL 186835, at *23–25 (Del. Ch. Jan. 15, 2014)
(entering a permanent injunction enforcing a forum selection clause with respect to
then-ongoing and future anticipated claims), judgment entered sub nom. Be&k Eng’g
Co., LLC v. Rocktenn Cp, LLC (Del. Ch. 2014), aff’d, 103 A.3d 512 (Del. 2014).
Solar has already achieved the relief sought by successfully obtaining an antisuit
injunction that forced Lundberg to litigate all of his claims that were subject to the
exclusive forum provision in this court. As Lundberg acknowledges, all claims that
could arise from the documents governed by that clause will be resolved upon the
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closure of this case. Accordingly, there is no reason to believe that Lundberg will
resume filing claims in contravention of the exclusive forum provision. Solar is not
entitled to a permanent injunction.
III. CONCLUSION
Solar is entitled to judgment on Count II as to the claims concerning the four
tranches of RSUs that accrued before September 29, 2017, which are time-barred.
Solar is not entitled to judgment as to the remainder of Count II, and Solar’s claims
for fees as damages and for a permanent injunction under its first count are denied.
Lundberg is entitled to a judgment in his favor for Solar’s breach of the
Awards with respect to the nine RSU tranches that are not time-barred and the 2015
Option Agreement, and the court awards damages equal to a base amount of
$295,921.08, plus prejudgment interest, as compensation for Solar’s breaches of the
RSU Agreements, and a symbolic award of $12 in nominal damages for Solar’s
breaches of the 2015 Option Agreement. Lundberg is entitled to post-judgment
interest on the sum of those amounts, which, together, constitute his judgment.
Lundberg’s counterclaims for breach of the implied covenant of good faith and fair
dealing are moot. The parties shall confer and submit a final implementing order.
If there are any other issues that the court needs to resolve before a final order
can be entered, then the parties shall submit a joint letter identifying them and
providing a schedule for their resolution.
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