GreenTech Consultancy Co. v. Hilco IP Services, LLC ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
GREENTECH CONSULTANCY CO., )
WLL, )
)
Plaintiff, )
)
v. ) C.A. No. N20C-07-052 AML CCLD
)
HILCO IP SERVICES, LLC, )
)
Defendant. )
Submitted: March 2, 2022
Decided: May 11, 2022
MEMORANDUM OPINION AND ORDER
Upon Plaintiff GreenTech Consultancy Co.’s Motion for Summary Judgment,
DENIED
Upon Defendant Hilco IP Services, LLC’s Motion for Summary Judgment,
GRANTED IN PART, DENIED IN PART
Theodore A. Kittila, Esq., William E. Green, Jr., Esq., Halloran Farkas & Kittila
LLP, Wilmington, Delaware, Counsel for Plaintiff GreenTech Consultancy Co.
Richard L. Renck, Esq., Duane Morris LLP, Wilmington, Delaware, Counsel for
Defendant Hilco IP Services, LLC.
LeGrow, J.
In 2017, Plaintiff GreenTech Consultancy Company, WLL (“GreenTech”)
and Defendant Hilco IP Services, LLC (“Hilco”) entered into a joint venture to
develop and commercialize certain intellectual property owned by GreenTech. They
memorialized the “general terms and conditions” of their agreement in a Term Sheet,
which recognized the need for a subsequent agreement “setting forth the specific
terms and conditions of the proposed transaction in more detail.” The Term Sheet
also recognized that the final closing “shall be subject to” several conditions
described therein. Ultimately, Hilco developed misgivings about the venture and
backed out before closing. GreenTech could not afford to maintain its ownership of
the intellectual property without Hilco’s financial support. In this action, GreenTech
seeks to recover damages pursuant to the Term Sheet under alternative claims for
breach of contract and promissory estoppel.
Both parties have moved for summary judgment as to GreenTech’s claims.
Their briefing raises a series of questions, including: (1) does GreenTech have
standing to maintain this action when one portion of the term sheet refers to
GreenTech’s members, rather than GreenTech, receiving an interest in the joint
venture; (2) what were Hilco’s obligations under the Term Sheet, which expressly
contemplated further negotiations between the parties; (3) did Hilco breach its
obligations; (4) if Hilco breached, is GreenTech entitled to recover its expectation
damages; and (5) can GreenTech maintain its alternative promissory estoppel claim?
For the reasons explained below, the Court holds: (1) GreenTech has standing
because Hilco’s proffered interpretation of the Term Sheet is neither reasonable nor
consistent with its terms; (2) Hilco was obligated to “negotiate [with GreenTech] in
good faith in an effort to reach final agreement within the scope that ha[d] been
settled in the preliminary agreement”1—i.e., the Term Sheet; (3) whether Hilco
breached this obligation is a factual question that cannot be resolved on summary
judgment; (4) the Court cannot determine GreenTech’s entitlement to damages on
the present record; and (5) GreenTech cannot maintain its promissory estoppel
claim. Accordingly, GreenTech’s motion is DENIED and Hilco’s motion is
GRANTED as to the promissory estoppel claim and DENIED as to the breach of
contract claim.
I. BACKGROUND
A. Parties and notable non-parties
Greentech is a Bahraini limited liability company owned by Anwar Ahmed
and his wife, Asmar Malik.2 Hilco is a Delaware limited liability company with its
principal places of business in New York, Massachusetts, and Illinois.3 Non-party
Internet Corporation for Assigned Names and Numbers (“ICANN”) is an entity that
1
SIGA Technologies, Inc. v. PharmAthene, Inc., 67 A.3d 330, 349 (Del. 2013) (citing Teachers
Ins. & Annuity Ass'n. of Am. v. Tribune Co., 670 F.Supp. 491, 498 (S.D.N.Y.1987)).
2
Compl. at ¶ 1 (D.I. 1).; GreenTech’s Mot. for S.J., Ex. 2 (D.I. 64).
3
Compl. at ¶ 2.
2
oversees the coordination of policies of the Internet’s Domain Name System
(“DNS”).4 Non-party Etihad Etisalat Company is a large Saudi Arabian
telecommunications company that does business as “Mobily.”5
B. GreenTech obtains the dotMobily TLDs
A top-level domain (“TLD”) is the extension to the right of the dot in an
Internet domain name (i.e., delaware.gov).6 The number of permitted TLDs was
limited for much of the Internet’s history (e.g., .com, .org, .edu, etc.).7 That changed
in 2012, when ICANN opened the DNS to virtually any potential TLD.8 The change
in policy caused many entities to apply to ICANN to obtain new, customized TLDs.9
In 2012, Wael Nasr of WiseDots LLC (“WiseDots”) requested that Ahmed
assist WiseDots in applying to obtain two TLDs from ICANN.10 The TLDs were
English and Arabic versions of “.mobily” (together, the “dotMobily TLDs”).
WiseDots could not apply for the dotMobily TLDs directly because financial
constraints prevented it from meeting ICANN’s application requirements.11
GreenTech agreed to help. On May 10, 2012, Ahmed, Malik, and GreenTech
4
Id. at ¶ 8.
5
Id. at ¶ 9.
6
Id. at ¶ 1.
7
Id. at ¶ 8.
8
Id.
9
GreenTech’s Mot. for S.J. at 1.
10
Hilco’s Mot. for S.J., Ex. B at 83:12–18, 84:1–14, 85:1–8 (Deposition Transcript of Anwar
Ahmed).
11
Id., Ex. B. at 103:4–104:5, 125:14–21.
3
entered into a written agreement with WiseDots, under which GreenTech would
“cause[] its name to be entered into the ICANN . . . application slots as an applicant
for the potential new gTLDs.”12 GreenTech then applied for the rights to become
the registry operator for the dotMobily TLDs.13 The dotMobily TLDs were
significant because Etihad Etisalat Company does business as “Mobily.” GreenTech
and WiseDots believed there was a chance the dotMobily TLDs might catch on in
the Middle East, thereby increasing their value.14
In June 2014, WiseDots entered into a gTLD Agreement with Mobily.15 The
gTLD Agreement stated in relevant as part follows:
WiseDots, as discussed with Mobily, has applied for the [dotMobily]
TLDs using an entity named GreenTech, an affiliate of WiseDots, as
the applying entity only and that this arrangement is clearly stated in
the response to question 18a of the TLDs registry applications.16
The gTLD Agreement contemplated that ownership of the dotMobily TLDs would
be transferred to Mobily once the registry agreements for the dotMobily TLDs had
been formalized with ICANN.17 The transfer was to occur “through a petition to
ICANN by WiseDots immediately and without any conditions as soon as ICANN
12
Id., Ex. F (GREENTECH_00005692-00005698). gTLD stands for “generic top-level
domain.” See GreenTech’s Mot. for S.J., Ex. 1 at 1. gTLDs are a category of TLD created and
maintained by ICANN for use as general purpose domains. See id., Ex. 1 at 1–2.
13
Compl. at ¶ 9.
14
GreenTech’s Mot. for S.J. at 7.
15
Hilco’s Mot. for S.J., Ex. G; Compl. at ¶ 9.
16
Hilco’s Mot. for S.J., Ex. G.
17
Id.
4
rules allow.”18 Although the record is silent regarding what came of the gTLD
Agreement, it appears ownership of the dotMobily TLDs never was formally
transferred to Mobily.
In December 2014, GreenTech executed registry agreements with ICANN
relating to the dotMobily TLDs (the “Registry Agreement”).19 The Registry
Agreements required GreenTech to pay ICANN quarterly registration fees to
maintain ownership of the dotMobily TLDs, among other things.20 GreenTech
maintains Mobily agreed to share the expense of those fees, but ultimately failed to
do so.21 GreenTech could not pay the fees without Mobily’s support, which created
the risk ICANN might terminate the Registry Agreements and revoke the dotMobily
TLDs. GreenTech attempted to avoid termination by soliciting new investors. One
such potential investor was Kevin Wilson (“Wilson”), the former CFO of ICANN
and then-CEO of WiseDots.22
C. Hilco enters the picture
Hilco is in the business of providing advisory assistance concerning Internet
services.23 The CEO of Hilco at all relevant times was Gabriel Fried (“Fried”). In
March 2016, Fried emailed Wilson a draft document titled “New gTLD Program
18
Id.
19
Id., Ex. I.
20
Id.
21
GreenTech’s Mot. for S.J. at 7; see also Compl. at ¶ 9–11.
22
GreenTech’s Mot. for S.J. at 7–8.
23
Compl. at ¶ 5.
5
Overview,” which identified “a significant investment opportunity in the gTLD
industry.”24 In late 2016, Fried and Wilson began negotiating the terms of an
employment agreement whereby Wilson would lead a d/b/a of Hilco called TLD
Advisors. Hilco and Wilson executed an employment agreement in May 2017.25
Under the agreement, Wilson was permitted to continue working on certain projects
predating his employment, including the dotMobily TLDs.26
Wilson presented the dotMobily TLDs to Fried. On July 13, 2017, Fried
emailed a draft investment memo to his colleagues at Hilco.27 The memo detailed
the many ways in which the status of the dotMobily TLDs was, in Fried’s words,
“messy.”28 The dotMobily TLDs had not been launched; there were no domain
registrations and thus no revenue; GreenTech owed ICANN about $75,000 in unpaid
fees and had no ability to pay them; GreenTech owed approximately $160,000 to
vendors; and going forward, fees to ICANN and related services would be
approximately $63,000 per year.29 Furthermore, GreenTech’s relationship with
Mobily was “currently non-existent,” ICANN had threatened to revoke the
dotMobily TLDs from GreenTech, and GreenTech had no means to fund operations
24
GreenTech’s Mot. for S.J., Ex. 7 at 2, 8.
25
Id., Ex. 10.
26
Id., Ex. 10 at 4.
27
Id., Ex. 11 at 1.
28
Id., Ex. 11 at 2.
29
Id., Ex. 11 at 3.
6
without support from Mobily or other investors.30 Finally, the memo noted that
GreenTech had entered into a joint venture with WiseDots and “two individuals who
were instrumental in obtaining the [Registry Agreements].”31 Despite these issues,
Fried and Wilson identified “a few paths forward” to assume control of the Registry
Agreements, each of which would be contingent on ICANN’s approval.32 According
to GreenTech, Fried and Wilson continued working on the dotMobily TLDs through
the summer of 2017.33
D. Hilco and GreenTech execute the Term Sheet
GreenTech and Hilco executed a six-page “Term Sheet” titled
“ACQUISITION OF THE DOT MOBILY TLDS” on September 8, 2017.34 The
Term Sheet’s opening paragraph explains it contains the “general terms” of the
parties’ agreement, which would be subject to further documentation:
This term sheet, dated as of September 8, 2017 . . . sets forth the general
terms and conditions pursuant to which (i) NEWCO, a newly-formed
Delaware limited liability company (“NEWCO”), will purchase
selected assets and liabilities as specified below from GreenTech
Consultancy Company, WLL, a Bharani limited liability company or
its designee (“GreenTech”) which owns the ICANN Registry
Agreements (“RAs”) for .mobily and [the Arabic equivalent of .mobily]
. . . in exchange for assumption of certain specified liabilities
(“Assumed Liabilities”) and a 30% interest in NEWCO (the “Dot
Mobily TLDs Acquisition”), upon the terms and conditions as set forth
below. The parties recognize that this transaction will require further
30
Id.
31
Id., Ex. 11 at 4.
32
Id.
33
GreenTech’s Mot. for S.J. at 13.
34
Id., Ex. 12 at 1.
7
documentation, including the preparation of a formal membership
interest purchase agreement and an asset purchase agreement setting
forth the specific terms and conditions of the proposed transaction in
more detail (collectively, the “Transaction Documents”).35
The Term Sheet further provided Hilco (d/b/a TLD Advisors) “shall form”
NEWCO.36 Another section, titled “Use of Funds,” set forth the parties’ agreement
regarding the funds Hilco agreed to invest:
Prior to Closing: TLD Advisors shall invest up to $250,000 in order to
fund the following direct expenses:
• Retention of counsel to handle ICANN mediation tasks, to
negotiate all aspects of curing the breach with ICANN including
payments to be made to ICANN, to negotiating the replacement
of the Continued Operations (“COI”) with an acceptable Letter
of Credit (“LoC”) or other financial instrument as necessary, and
to negotiate the transfer of the RAs to NEWCO or its designee.
• Funding of trust fund(s) held by an attorney that can be used to
fund Assumed Liabilities37 of GreenTech at closing
• Creation of Transaction Documents
At the Closing, NEWCO shall acquire all of the identified assets of
GreenTech in exchange for acquiring the Assumed Liabilities of
GreenTech and providing for the members of GreenTech to hold 30%
of NEWCO. 70% of NEWCO is to remain with TLD Advisors.38
35
Id.
36
Id.
37
The Term Sheet elsewhere defined “Assumed Liabilities” as specified unpaid invoices relating
to the operation and maintenance of the dotMobily TLDs. Id., Ex. 12 at 2.
38
Id., Ex. 12 at 1–2.
8
Another section of the Term Sheet contained a “Termination Provision” that set forth
certain financial consequences to GreenTech if it terminated the transaction before
closing:
If GreenTech chooses to terminate any time before the Closing Date,
then TLD Advisors is entitled to receive either three (3) times its
cumulative investment as of the notice of termination date in cash or a
non-dilutable equity stake in GreenTech at a valuation of $150k for
100% of GreenTech. For example, if TLD Advisors has funded $50k
and GreenTech decides to terminate and not complete the Conditions
to Closing as described below, then GreenTech must fund $150k to
TLD Advisors or provide 50k/150k, or 1/3, of the non-dilutable equity
ownership of GreenTech.39
The Term Sheet also listed the “Conditions to Closing:”
The Closing shall be subject to (1) negotiation and execution of the
Transaction Documents; (2) the receipt of approvals from ICANN for
the terms of the cure of the breach; (3) the receipt of the approval from
ICANN for the terms of the transfers of the Registry Agreements,
including the modification of the COI; and (4) the receipt of agreements
on terms of payment for all vendors listed in the Assumed Liabilities
above.40
Finally, the Term Sheet stated that it and the Transaction Documents “will be
governed by and construed pursuant to the laws of the State of Delaware without
reference to its conflicts of laws principles.”41 Closing was to take place “as soon as
39
Id., Ex. 12 at 3.
40
Id.
41
Id., Ex. 12 at 4.
9
practicable but no later than March 31, 2018.”42 The parties later extended the
closing date to December 31, 2018.43
Ahmed initialed and affixed GreenTech’s seal to every page of the Term Sheet
and signed it on behalf of GreenTech. Fried initialed each page and signed the Term
Sheet on behalf of Hilco.
E. Hilco and GreenTech work together
Hilco and GreenTech initially cooperated in curing the Assumed Liabilities
after executing the Term Sheet. Hilco paid the outstanding vendor invoices and
ICANN fees. When ICANN demanded proof that GreenTech had adequate means
to develop the dotMobily TLDs, Hilco’s parent, Hilco Global, provided a “Letter of
Support” indicating the venture between Hilco and GreenTech had Hilco Global’s
support.44 Furthermore, Hilco and Wilson were able to cure various alleged breaches
and bring the dotMobily TLDs back into good standing with ICANN. ICANN
closed its “compliance ticket” relating to GreenTech and the dotMobily TLDs on
June 8, 2018.45 Despite the apparent progress, however, GreenTech complains Fried
often reneged on his commitments to attend various meetings with ICANN.46
42
Id., Ex. 12 at 3.
43
Id., Ex. 14.
44
Id., Ex. 15.
45
Id., Ex. 16.
46
Id., Ex. 23 at 286:21–287:6, 296:5–17.
10
The relationship between GreenTech and Hilco became contentious in the
spring and summer of 2018. On May 25, 2018, Hilco informed Wilson that Hilco
would exit the dotMobily TLD investment “absent meaningful progress transferring
the [Registry Agreements] to [Hilco’s] control within 60 days.47 Ultimately, Hilco
did not exit the investment within 60 days. Fried, however, sent an email to his
Hilco colleagues on August 2, 2018, stating: “[j]ust an FYI that we are parting ways
with Kevin [Wilson]. He has agreed to continue to pursue Mobily with us and may
refer opportunities to us for additional work.”48 The record does not reveal why
Hilco terminated Wilson.
F. Hilco develops projections for the dotMobily TLDs
In September 2018, Fried exchanged emails with Jennie-Marie Larsen of
DomainDiction, who prepared a business plan and projects to develop the dotMobily
TLDs. Fried told her he “like[d] the quality of the thinking”49 and found Larsen’s
September 6, 2018 projections to be “reasonably reliable.”50 GreenTech emphasizes
this exchange because its damages expert, Dr. Brett A. Margolin, used Larsen’s
projections to calculate GreenTech’s damages as of the date of Hilco’s alleged
breach of Term Sheet—November 30, 2018.
47
Hilco’s Mot. for S.J., Ex. U.
48
Id., Ex. 17.
49
Id., Ex. 18.
50
Id., Ex. 19.
11
G. Hilco exits the dotMobily TLD investment
According to GreenTech, Hilco stopped performing its obligations under the
Term Sheet after it fired Wilson in August 2018. The ICANN registry fees for the
dotMobily TLDs were due quarterly. Nevertheless, Hilco began “dragg[ing] its
feet” and “at various times asked Mr. Wilson and Mr. Ahmed if they wanted to pay
the quarterly ICANN fees themselves.”51
On October 29, 2018, Fried asked Wilson if he wanted to “buy [Hilco’s]
position in Mobily.”52 The next quarterly ICANN payment was due on November
30, 2018. On November 21, 2018, David Peress, Executive Vice President of Hilco,
emailed Fried and Jack Hazan, another Hilco executive, regarding Peress’s
conclusion that Hilco should not invest additional funds in developing the dotMobily
TLDs:
I met with Gabe today and discussed the [dotMobily TLD] investment.
That discussion confirmed my concern that in order to move this
opportunity forward, we will be required to fund additional investments
just to get to the point of having a commercializable asset. The Term
Sheet contemplated that by March 31, 2018, an LLC would be formed
to assume the rights of Green Tech under the RA. I reviewed a draft
Memo dated 5/15/18, it discusses the proposed LLC to be named My
Mobile TLD LLC. However, as of today, this LLC has not been
formed. It suggests a budget for achieving the Closing contemplated
by the Term Sheet with several undefined amounts. Of course, funding
that budget, and getting us to the point of being able to launch the TLDs
is just the first step. We then have to operate the TLDs. As of today,
51
GreenTech’s Mot. for S.J. at 21; see also id., Ex. 21 (“Do you or Anwar want to pay the Icann
fee?”).
52
Id., Ex. 24.
12
we have no clear strategy for doing so, no employee or consultant
willing to do that, and n [sic] budget for what it will cost to do so.
Given these risks and the likely expenses, my recommendation is to
stop funding this investment. I would allow Green Tech to go into
default with ICANN. Maybe Anwar and Green Tech can come up with
some money to buy out our position. If so, great. If not, I am prepared
to walk away from the money we have spent. I think it would be a waste
to continue to throw any more dollars away on this endeavor.53
Fried responded: “If you make the decision to walk away, which I’m supportive of,
we should notify Anwar as soon as possible, in case he wants to step in and take over
the payments.”54 Additionally, Hazan asked Peress to clarify whether “[w]e are
keeping this alive.”55 Peress responded: “In my judgment, we are best served by not
making any more payments. Possibly Anwar can come up with the $ to buy us out.
There is no other exit at this point in my opinion.”56 Hazan then asked: “If we miss
a payment and Anwar steps in and makes it, are we risking a default in our
obligations under the LOI and basically handing it back to GreenTech? I thought
keeping it alive for one more quarter will give us more leverage.”57 Peress
responded: “I read the Term Sheet. It doesn’t obligate us to make that payment. If
Green Tech wants to Terminate, they have to buy us out.”58 Peress indicated that he
53
Id., Ex. 25.
54
Id.
55
Id.
56
Id.
57
Id.
58
Id.
13
was “going to contact Anwar.”59 Fried concluded the email chain by saying: “I am
good with your decision whatever it is.”60
Peress emailed Fried the next day, on November 27, saying in relevant part:
“It would be great to get this all resolved quickly. I know that [Hazan] stated 2.5X.
I am willing to take much less. We have invested $170k over one year. If we could
get $250k back before year end and out of having to deal further with Anwar and
Kevin, I would be all over that.”61
Nasr emailed Fried on November 28. His email indicated that Hilco had not
yet contacted Ahmed: “[I] will come back shortly on the $200K+icann payment
through MobileDots. [P]lease keep it between us (not even Anwar) for now.”62
Shortly thereafter, Fried emailed Peress that he was “pretty sure they don’t have any
money,” to which Peress responded: “If they have no money, then this is a waste of
time, and we should just stop paying.”63 Peress then asked Fried whether he saw
“any reason to spend more money on this.”64 Fried responded: “Paying the Nov.
Payment is an option on something happening that results in repayment of our
investment. I think the probability of that happening before the Feb. Payment is due
is pretty low. If you want to offer to Kevin that if he makes the Nov payment we
59
Id.
60
Id.
61
Id., Ex. 26.
62
Id., Ex. 27.
63
Id.
64
Id.
14
will change the terms of the term sheet so that we will take less $$ to release
greentech that might be best.”65
Ultimately, Hilco did not make the November ICANN payment. Hilco did
not tell GreenTech beforehand that it did not intend to make the payment,66 despite
the email discussions between Fried, Peres, and Hazan about contacting GreenTech
and Ahmed. In its motion for summary judgment, Hilco explains it became
“frustrated with the lack of progress on the dotMobily investment” and GreenTech’s
failure to “satisf[y] the conditions to closing as set forth in the Term Sheet, such as
transferring the Registry Agreements to Newco.”67 Furthermore, Hilco cites its
growing concern about various “competing claims to ownership of the dotMobily
TLDs” it had received from various third parties.68 “[I]n light of GreenTech’s
continued lack of progress and the increasingly unwieldy situation involving the
competing ownership claims to the dotMobily TLDs, Hilco concluded that the
project appeared unfortunately to be a futile exercise.”69
H. The Registry Agreements lapse
ICANN terminated the Registry Agreements after the November 30, 2018
registry fees went unpaid. As a result, the dotMobily TLDs ceased to exist. In May
65
Id.
66
GreenTech’s Mot. for S.J. at 10.
67
Hilco’s Mot. for S.J. at 13.
68
Id.
69
Id. at 15.
15
2019, Jack Hazan of Hilco asked Fried if they could salvage the dotMobily TLDs:
“Do we have standing to go step in and take back mobily before it expires. I bet the
Saudis will grab it if they can.”70 Fried replied: “It reverted back to Icann. It’s done.
Our opportunity to take it was last fall.”71 ICANN formally completed termination
of the dotMobily TLDs Registry Agreements on September 9, 2019.72
I. Litigation
GreenTech filed its Complaint in this Court on July 7, 2020, alleging Hilco
breached the Term Sheet by “failing to provide the agreed-to funding for the
operations of the dotMobily TLDs including the payment of ICANN fees and other
invoices necessary for the back-end support. “The breach of the [Term Sheet]
resulted in the loss of the dotMobily TLDs,” causing damages to GreenTech “in an
amount greater than $3 million.”73 GreenTech also pleaded an alternate claim for
promissory estoppel, alleging Hilco made representations and promises to the effect
that GreenTech could rely on Hilco to fund the parties’ ongoing joint venture.74
GreenTech “invested time, money, and goodwill in working with Hilco” allegedly
in reasonable reliance on Hilco’s representations and suffered injury when Hilco
failed to follow through.75
70
GreenTech’s Mot. for S.J., Ex. 28.
71
Id.
72
Id., Ex. 29.
73
Compl. at ¶ 24.
74
Id. at ¶¶ 26–30.
75
Id.
16
Hilco filed its Answer on September 24, 2020. Both parties moved for
summary judgment on January 10, 2022.
II. STANDARD OF REVIEW
The standard of review on a motion for summary judgment is well-settled.
The Court’s principal function when considering such a motion is to examine the
record to determine whether genuine issues of material fact exist, “but not to decide
such issues.”76 Summary judgment will be granted if, after viewing the record in a
light most favorable to a nonmoving party, no genuine issues of material fact exist
and the moving party is entitled to judgment as a matter of law. 77 If, however, the
record reveals that material facts are in dispute, or if the factual record has not
sufficiently developed to allow the Court to apply the law to the factual record, then
summary judgment will be denied.78 The moving party bears the initial burden of
demonstrating that the undisputed facts support his claims or defenses.79 If the
motion is supported properly, then the burden shifts to the non-moving party to
76
Merrill v. Crothall-American Inc., 606 A.2d 96, 99-100 (Del. 1992) (internal citations
omitted); Oliver B. Cannon & Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322, 325 (Del. Super.
1973).
77
Id.78
See Ebersole v. Lownegrub, 180 A.2d 467, 470 (Del. 1962); see also Cook v. City of
Harrington, 1990 WL 35244, at *3 (Del. Super. Feb. 22, 1990) (citing Ebersole, 180 A.2d at
467) (“Summary judgment will not be granted under any circumstances when the record
indicates . . . that it is desirable to inquire more thoroughly into the facts in order to clarify the
application of law to the circumstances.”).
79
See Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970) (citing Ebersole, 180 A.2d at 470).
17
demonstrate that there are material issues of fact for resolution by the ultimate fact-
finder.80
“These well-established standards and rules equally apply [to the extent] the
parties have filed cross-motions for summary judgment.”81 Where cross-motions
for summary judgment are filed and neither party argues the existence of a genuine
issue of material fact, “the Court shall deem the motions to be the equivalent of a
stipulation for decision on the merits based on the record submitted with the
motions.”82 But where cross-motions for summary judgment are filed and an issue
of material fact exists, summary judgment is not appropriate. 83 To determine
whether there is a genuine issue of material fact, the Court evaluates each motion
independently.84 The Court will deny summary judgment if the Court determines it
is prudent to make a more thorough inquiry into the facts.85
80
See Brzoska v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).
81
IDT Corp., 2019 WL 413692, at *5 (citations omitted); see Capano v. Lockwood, 2013 WL
2724634, at *2 (Del. Super. Ct. May 31, 2013) (citing Total Care Physicians, P.A. v. O'Hara,
798 A.2d 1043, 1050 (Del. Super. Ct. 2001)).
82
Del. Super. Ct. Civ. R. 56(h).
83
Motors Liquidation Co. DIP Lenders Tr. v. Allianz Ins. Co., 2017 WL 2495417, at *5 (Del.
Super. Ct. June 19, 2017), aff’d sub nom., Motors Liquidation Co. DIP Lenders Tr. v. Allstate
Ins. Co., 191 A.3d 1109 (Del. 2018); Comet Sys., Inc. S’holders’ Agent v. MIVA, Inc., 980 A.2d
1024, 1029 (Del. Ch. 2008); see also Anolick v. Holy Trinity Greek Orthodox Church, Inc., 787
A.2d 732, 738 (Del. Ch. 2001) (“[T]he presence of cross-motions ‘does not act per se as a
concession that there is an absence of factual issues.’”) (quoting United Vanguard Fund, Inc. v.
TakeCare, Inc., 693 A.2d 1076, 1079 (Del. 1997))).
84
Motors Liquidation, 2017 WL 2495417, at *5; see Fasciana v. Elec. Data Sys. Corp., 829
A.2d 160, 167 (Del. Ch. 2003).
85
Ebersole, 180 A.2d at 470–72.
18
III. PARTIES’ CONTENTIONS
A. Hilco’s motion for summary judgment
Hilco advances three arguments in support of its summary judgment motion.
The first two arguments are different theories asserting GreenTech lacks standing to
maintain this action. The third argument addresses the merits of GreenTech’s
claims, averring Hilco did not breach its obligations under the Term Sheet.
Additionally, Hilco argues GreenTech cannot recover expectation damages if the
Court agrees the Term Sheet was a preliminary agreement. Finally, Hilco contends
GreenTech cannot maintain its promissory estoppel claim simultaneously with its
breach of contract claim.
First, Hilco contends GreenTech lacks standing to maintain this action under
Delaware statutory law. Section 18-902 of the Delaware Limited Liability Company
Act provides that, “[b]efore doing business in the State of Delaware, a foreign
limited liability company shall register with the Secretary of State.”86 To register
with the Secretary of State, a foreign limited liability company must provide “a
statement from an authorized person that, as of the date of filing, the foreign limited
liability company validly exists as a limited liability company under the laws of its
formation.”87 The Act further provides:
86
6 Del. C. § 18-902.
87
6 Del. C. § 18-902(1)(b).
19
A foreign limited liability company doing business in the State of
Delaware may not maintain any action, suit or proceeding in the State
of Delaware until it has registered in the State of Delaware, and has
paid to the State of Delaware all fees and penalties for the years or parts
thereof, during which it did business in the State of Delaware without
having registered.
Hilco argues GreenTech is attempting to do business in Delaware, but, as a foreign
LLC, GreenTech first must register with the Secretary of State, which it has not
done. According to Hilco, GreenTech cannot do so because it “does not a possess a
valid, non-expired license as a business entity in Bahrain, and has not possessed such
a license since at least February 2019.”88 Consequently, Hilco contends GreenTech
cannot maintain any action in Delaware.
GreenTech responds that Hilco’s reliance on Section 18-1902 is misplaced.
GreenTech acknowledges a foreign LLC must register with the Secretary of State
before “doing business” in Delaware. But GreenTech says it does not do business
in Delaware, that it never has, and that it does not intend to in the future.89
GreenTech says it simply wants to enforce its contract with Hilco, and according to
the Delaware Limited Liability Company Act, “[m]aintaining, defending, or settling
an action or proceeding” does not “constitute doing business for the purpose of this
88
Hilco’s Mot. for S.J. at 21.
89
GreenTech’s Answering Br. at 16.
20
subchapter.”90 Thus, GreenTech contends it does not need to register with the
Secretary of State to maintain this action.
Second, Hilco alternatively argues GreenTech is not the proper plaintiff for
the damages GreenTech seeks to recover. The Term Sheet states: “At the Closing,
NEWCO shall acquire all of the identified assets of GreenTech in exchange for
acquiring the Assumed Liabilities of GreenTech and providing for the members of
GreenTech to hold 30% of NEWCO.”91 According to Hilco, this term shows that
GreenTech itself would hold no interest in NEWCO; instead, Anwar Ahmed and
Asmar Malik would hold the interest on an individual basis because they were the
“members of GreenTech.” “But Ahmed and Malik are not plaintiffs in this action,
and GreenTech, for its part, has no colorable claim to the alleged damages
GreenTech seeks.”92 Thus, Hilco contends GreenTech lacks standing to maintain
this action.
GreenTech contends Hilco’s argument rests on an unreasonable interpretation
of the Term Sheet and “[r]ead as a whole, it is clear that the Term Sheet intends for
GreenTech to have a 30% interest in NEWCO.”93 First, GreenTech points out that
the parties to the Term Sheet were Hilco and GreenTech, not Hilco and the
90
6 Del. C. § 18-912(a)(1).
91
GreenTech’s Mot. for S.J., Ex. 12 (emphasis added).
92
Hilco’s Mot. for S.J. at 22.
93
GreenTech’s Answering Br. at 18.
21
“members of GreenTech.” To that end, Ahmed initialed each page and executed the
Term Sheet on behalf of GreenTech, rather than in his personal capacity. Second,
GreenTech argues the Term Sheet refers to the “members of GreenTech” only once,
while the balance of the Term Sheet refers to GreenTech alone. For example, the
recitals stated GreenTech itself would receive a “30% interest in NEWCO.”94
Furthermore, the Term Sheet provided GreenTech would have the right to appoint
members of the NEWCO Board of Advisors, approve extraordinary events, and
receive distributions “proportionate to” its interest in NEWCO.95 GreenTech adds
that “Hilco’s misreading of the Term Sheet would also mean that because GreenTech
has no interest in NEWCO, its pro rata distribution would be zero, despite
GreenTech’s express right to distributions under the Term Sheet.”96 In short,
GreenTech contends Hilco’s interpretation of the Term Sheet is unreasonable
because it leads to absurd results. Instead, the “only reasonable interpretation that
makes sense of the Term Sheet as a whole” is that the “members of GreenTech”
would hold their 30% interest “through their interest in GreenTech.”97
Third, Hilco contends the Term Sheet is not a “final, binding contract, but
merely a preliminary ‘agreement to agree.’”98 Hilco emphasizes that the Term Sheet
94
GreenTech’s Mot. for S.J., Ex. 12 at 1.
95
Id., Ex. 12 at 3–4.
96
GreenTech’s Answering Br. at 19.
97
Id. at 20.
98
Hilco’s Mot. for S.J. at 26–27.
22
said closing “shall be subject to . . . the negotiation and execution” of a membership
interest purchase agreement for NEWCO and an asset purchase agreement to
transfer the dotMobily TLDs and potentially other GreenTech assets to NEWCO.
According to Hilco, this language is proof that the Term Sheet only was preliminary
in nature and it did not contain “all essential or material terms,” as an enforceable
contract must.99 Citing SIGA Techs., Inc. v. Pharmathene, Inc.,100 Hilco argues the
Term Sheet is, “at best, a Type II agreement that only obligated the parties to
negotiate the open issues in good faith.”101 Hilco insists it did so, and that it backed
out of the agreement only because it developed legitimate business concerns about
the project’s viability.
In response, GreenTech argues the Term Sheet was a binding contract that
encompassed all the substantial terms of the contemplated transaction. All that
remained to be done was for Hilco to “perform its contractual obligations (such as
paying the quarterly ICANN fees) and work toward the closing.”102 GreenTech says
Hilco’s discussion of “Type I” and “Type II” preliminary agreements is inapposite;
the transactions contemplated by the Term Sheet “could have, and would have, been
completed had Hilco performed its end of the bargain.”103 Moreover, GreenTech
99
Id. at 27–28.
100
SIGA Technologies, Inc. v. PharmAthene, Inc., 67 A.3d 330 (Del. 2013)
101
Id. at 32.
102
GreenTech’s Answering Br. at 23.
103
Id. at 23–24.
23
argues Hilco breached the Term Sheet even if it were a “Type II” preliminary
agreement because Hilco “did not negotiate in good faith with GreenTech with
respect to the transfer of the Registry Agreements.”104 Instead, GreenTech argues
Hilco abandoned its obligations under the Term Sheet, failed to pay the ICANN fees
due November 30, 2018, and pressured GreenTech to buy its way out the Term Sheet
under the Termination Provision if GreenTech wanted to move on. As GreenTech
puts it, Hilco “sought to force GreenTech to pay Hilco for Hilco’s own failure ‘to
negotiate the open issues in good faith.’”105 GreenTech adds that Hilco cannot claim
to have developed legitimate business concerns about the transaction because Hilco
knew all the potential issues before it entered into the Term Sheet.
Finally, Hilco argues GreenTech cannot recover expectation damages if the
Court agrees that the Term Sheet is a Type II preliminary agreement. A plaintiff can
recover expectation damages under such an agreement only if the “trial judge makes
a factual finding, supported by the record, that the parties would have reached an
agreement but for the defendant’s bad faith negotiations.”106 Hilco contends that
even assuming it negotiated in bad faith, “the record is clear that the closing would
not have occurred.”107 Hilco cites the fact that various third parties asserted
104
Id. at 24.
105
Id. at 25 (emphasis in original).
106
SIGA, 67 A.3d at 350–351.
107
Hilco’s Mot. for S.J. at 34–35.
24
ownership of the dotMobily TLDs during negotiations, the lack of evidence that
ICANN would have allowed the dotMobily TLDs to be transferred to NEWCO, and
the lack of evidence that the parties would have agreed on the contract terms that
remained unsettled.
Hilco addresses GreenTech’s promissory estoppel claim briefly. Hilco
contends that if the Court finds the Term Sheet was a Type II preliminary agreement,
then the promissory estoppel claim would be barred. Otherwise, the promissory
estoppel claim fails “for the same reasons that [the] contract claim fails—Hilco
satisfied its promises.”108
B. GreenTech’s motion for summary judgment
GreenTech’s counterarguments to Hilco’s motion double as arguments in
support of its own motion. Specifically, GreenTech contends the Term Sheet meets
all the criteria of a binding contract: the parties intended for the Term Sheet to bind
them, it contained sufficiently definite terms, and it was supported by consideration.
From there, GreenTech contends it is entitled to summary judgment on its breach of
contract claim because “Hilco abandoned its obligations under the Term Sheet,
failed to pay the quarterly ICANN fees due on November 30, 2018, and left
GreenTech without a viable means to replace the funding and expertise offered by
108
Id. at 33 n.16.
25
Hilco.”109 GreenTech adds that Hilco “understood its obligations, and consciously
elected not to perform.”110 As a result, GreenTech permanently lost the dotMobily
TLDs. GreenTech says the proper measure of its damages is the “monetary
equivalent of Hilco’s performance—had Hilco performed its obligations under the
Term Sheet, formed NEWCO, and launched the [dotMobily] TLDs into the
market.”111 In other words, “[b]ecause of Hilco’s breach, GreenTech lost the
economic value of its expectation interest in NEWCO.”112
IV. ANALYSIS
The questions before the Court are (1) whether GreenTech has standing; (2)
whether the Term Sheet is a Type II preliminary agreement; (3) whether Hilco
breached its obligations under the Term Sheet; (4) whether GreenTech can recover
expectation damages if it can establish breach; and (5) whether GreenTech can
maintain its promissory estoppel claim. The Court holds that (1) GreenTech has
standing; (2) the Term Sheet is a Type II preliminary agreement; (3) whether Hilco
breached is a factual question; (4) the Court cannot determine on summary judgment
whether expectation damages are available; and (5) GreenTech cannot maintain its
promissory estoppel claim.
109
GreenTech’s Mot. for S.J. at 27.
110
Id.111
Id. at 28.
112
Id. at 29.
26
A. GreenTech has standing to maintain this action.
Hilco argues GreenTech lacks standing because (1) it did not (and allegedly
cannot) register to do business in Delaware and (2) the Term Sheet did not provide
GreenTech any interest in NEWCO. The first argument is contrary to Delaware law,
while the latter is contrary to the Term Sheet’s plain and unambiguous language.
1. GreenTech does not need to register with Delaware’s Secretary of
State to bring this action.
6 Del. C. § 18-907(a) provides “[a] foreign limited liability company doing
business in the State of Delaware may not maintain any action, suit or proceeding in
the State of Delaware until it has registered in the State of Delaware . . . .”113 Hilco
argues this provision requires GreenTech to register in Delaware before it can pursue
this action. This argument fails because GreenTech is not a foreign LLC “doing
business” in Delaware. The record indicates the only activity GreenTech has ever
conducted in Delaware is filing this action. And 6 Del. C. § 18-912(a)(1) expressly
provides that “[m]aintaining, defending or settling an action or proceeding” does
“not constitute doing business for the purpose of this subchapter.”114 Consequently,
6 Del. C. § 18-907(a) does not require GreenTech to register with the State in order
to maintain this action. Instead, that statute simply requires a company doing
business in the State to register before it may bring an action in the jurisdiction.
113
6 Del. C. § 18-907(a).
114
6 Del. C. § 18-912(a)(1).
27
Hilco claims GreenTech does business in Delaware because it spent several
months negotiating the Term Sheet with a Delaware entity (i.e., Hilco), which
contemplated the formation of another Delaware entity (i.e., NEWCO).115 This
argument suffers at least two flaws. First, Hilco cites no authority showing that
simply negotiating and contracting with a Delaware entity constitutes “doing
business” in Delaware.116 Second, the Term Sheet did not contemplate that
GreenTech itself would do business in Delaware; instead, the Term Sheet stated
Hilco would form a Delaware LLC in which GreenTech would hold an interest. And
6 Del. C. § 18-912(b) expressly provides that “[a] person shall not be deemed to be
doing business in the State of Delaware solely by reason of being a member or
manager of a domestic limited liability company . . . .”117 In short, GreenTech does
not need to register with the Secretary of State to maintain this action.
115
Hilco’s Mot. for S.J. at 21–22.
116
In fact, in the context of personal jurisdiction, it is settled law that negotiating or contracting
with a Delaware entity is not sufficient to confer specific jurisdiction over a non-Delaware
resident. Mobile Diagnostic Gp Hldgs, LLC v. Suer, 972 A.2d 799, 808 (Del. Ch. 2009).
117
6 Del. C. § 18-912(b). Moreover, Hilco does not argue that NEWCO ever was formed, so
Hilco cannot argue that GreenTech transacted business in Delaware by participating in the
formation of a Delaware entity. Compare Terramar Retail Centers, LLC v. Marion #2 Seaport
Tr. U/A/D/ June 21, 2002, 2017 WL 3575712 at * 6 (Del. Ch. Aug. 18, 2017) (“Delaware courts
have held consistently that forming a Delaware entity constitutes the transaction of business
within Delaware that is sufficient to establish specific personal jurisdiction under Section
3104(c)(1).”).
28
2. GreenTech is the proper plaintiff to seek damages under the Term
Sheet.
GreenTech seeks damages based on the lost “economic value of its
expectation interest in NEWCO.”118 Hilco contends GreenTech has no interest in
such damages because the Term Sheet’s “Use of Funds” section “provid[ed] for the
members of GreenTech to hold 30% of NEWCO”119—according to Hilco, this
language means Anwar Ahmed and Asmar Malik were to hold the interest in
NEWCO solely on an individual basis. This argument fails.
Hilco asks the Court to interpret the Term Sheet. “When interpretating a
contract, the Court will give priority to the parties’ intentions as reflected in the four
corners of the agreement. ‘In upholding the intentions of the parties, a court must
construe the agreement a whole, giving effect to all provisions therein.’ The
meaning inferred from a particular provision cannot control the meaning of the entire
agreement if such an inference conflicts with the agreement’s overall scheme or
plan.”120
For several reasons, Hilco’s interpretation contravenes these fundamental
rules of construction. First, Mr. Ahmed and Ms. Malik were not parties to the Term
Sheet; only GreenTech was a party. The Term Sheet does not even refer to either
118
GreenTech’s Answering Br. at 27.
119
GreenTech’s Mot. for S.J., Ex. 12 at 2.
120
GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 779 (Del. 2012)
(internal citations and quotations omitted).
29
individual by name. Furthermore, the signature blocks called for the signee of
“GreenTech Consultancy Company, WLL” to specify both his name and title.121
Accordingly, Mr. Ahmed signed for GreenTech in his capacity as “CEO” and affixed
GreenTech’s company seal to each page of the Term Sheet. These formalities make
clear that the Term Sheet memorialized a deal between Hilco and GreenTech as
entities. Given these facts, one would not reasonably expect that the parties intended
for GreenTech to hold no interest in the joint venture it was entering through the
Term Sheet.
Second, Hilco’s interpretation is inconsistent with the Term Sheet’s overall
structure. The Term Sheet’s opening paragraph says NEWCO will purchase certain
assets and liabilities from GreenTech “in exchange for assumption of certain
specified liabilities . . . and a 30% interest in NEWCO . . . .”122 Unlike the “Use of
Funds” section on which Hilco relies, the opening paragraph makes no reference to
the “members of GreenTech.” Furthermore, the Term Sheet specifies that
GreenTech itself, and not its members, would hold all the rights associated with
NEWCO’s operations and corporate governance. For example, GreenTech would
have the right to appoint members to NEWCO’s Board of Advisors, approve
121
GreenTech’s Mot. for S.J., Ex. 12 at 6.
122
Id., Ex. 12 at 1.
30
extraordinary events, and receive cash distributions.123 These terms indicate
GreenTech was the real party in interest under the Term Sheet.
Third, the fact that GreenTech was to receive cash distributions “proportionate
to [its] interest in NEWCO”124 is particularly salient. Hilco’s interpretation would
nullify this language because GreenTech’s interest would be zero. That result would
violate the “cardinal rule . . . that, where possible, a court should give effect to all
contract provisions.”125 Finally, it defies common sense to imagine that the parties
would provide for distributions to GreenTech proportionate to its interest in
NEWCO if they did not intend for GreenTech to hold any such interest.
The Term Sheet therefore cannot reasonably be interpreted as providing the
interest in NEWCO to Mr. Ahmed and Ms. Malik solely on an individual basis.
Instead, the only reasonable interpretation is that GreenTech was to receive the
interest in NEWCO, which GreenTech’s members would hold through their interest
in GreenTech. GreenTech therefore is the proper plaintiff to seek damages under
the Term Sheet.
123
See id., Ex. 12 at 3–4.
124
Id., Ex. 12 at 4.
125
See Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1184 (Del. 1992)
(internal citation omitted) (emphasis in original).
31
B. The Term Sheet is a Type II preliminary agreement.
The parties disagree on what type of contract the Term Sheet is and what
duties it imposed on Hilco. GreenTech contends the Term Sheet meets all the criteria
of a binding contract, while Hilco contends it was a Type II preliminary agreement.
Hilco’s position is correct.
In SIGA Techs., Inc. v. PharmAthene, Inc.126, the Supreme Court of Delaware
recognized two types of preliminary agreements. A “Type I” agreement “is a fully
binding preliminary agreement, which is created when the parties agree on all the
points that require negotiation (including whether to be bound) but agree to
memorialize their agreement in a more formal document.”127 In contrast, “[p]arties
create a Type II agreement when they ‘agree on certain major terms, but leave other
terms open for further negotiation.’”128 A Type II agreement “does not commit the
parties to their ultimate contractual objective but rather to the obligation to negotiate
the open issues in good faith in an attempt to reach the alternative objective within
the agreed framework.”129 A Type II agreement “does, however, bar a party from
renouncing the deal, abandoning the negotiations, or insisting on conditions that do
not conform to the preliminary agreement.”130
126 SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330 (Del. 2013).
127
SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 349 n.82 (Del. 2013).
128
Id. at 349 (internal citations omitted).
129
Id. (internal citations omitted).
130
Id. n.85 (internal citations omitted).
32
The Term Sheet is a Type II preliminary agreement as defined in SIGA. The
opening paragraph “sets forth the general terms and conditions” of the agreement;
however, it “recognize[d] that this transaction will require further documentation,
including the preparation of a formal membership interest purchase agreement and
asset purchase agreement setting forth the specific terms and conditions of the
proposed transaction in more detail (collectively, the ‘Transaction Documents’).”131
The Term Sheet’s reference to the “proposed” transaction shows the parties had not
yet agreed on its full terms and that more negotiations would be necessary.
Furthermore, the Term Sheet later described several “Conditions to Closing:”
The Closing shall be subject to (1) negotiation and execution of the
Transaction Documents; (2) the receipt of approvals from ICANN for
the terms of the cure of the breach; (3) the receipt of the approval from
ICANN for the terms of the transfers of the Registry Agreements,
including the modification of the COI; and (4) the receipt of agreements
on terms of payment for all vendors listed in the Assumed Liabilities
above.
This language demonstrates the parties “agree[d] on certain major terms, but le[ft]
other terms for further negotiation.”132 In particular, the Term Sheet said the
“negotiation . . . of the Transaction Documents” would be a condition to closing.
And, several significant terms of those Transaction Documents, which would govern
131
GreenTech’s Mot. for S.J., Ex. 12 at 1.
132
SIGA, 67 A.3d at 349 (internal quotations omitted).
33
the parties’ future relationship, remained unresolved. The Term Sheet therefore is a
Type II preliminary agreement as that term is defined in SIGA.
Unlike the agreement in SIGA, the Term Sheet here did not expressly state
that the parties would exercise “good faith” in negotiating the open issues. 133 At
argument, the parties agreed the Term Sheet nevertheless contained an implied
obligation to negotiate in good faith. The Supreme Court of Delaware’s recent
decision in Cox Communications, Inc. v. T-Mobile US, Inc. accords with that
conclusion.134 The agreement in Cox Communications similarly did not contain an
express obligation of good faith. Still, the Supreme Court recognized it as a Type II
preliminary agreement.135 The lack of an express good faith obligation therefore
does not hinder this Court’s conclusion that the Term Sheet is a Type II preliminary
agreement.
One final point must be clarified. In its opening brief, Hilco contends the
Term Sheet “is not a final, binding contract, but merely a preliminary ‘agreement to
agree.’”136 Hilco proceeds to explain that the Term Sheet did not contain “all
essential or material terms”—as a “binding contract” must—and that it is instead a
133
See id. at 337–38 (“. . . SIGA and PharmAthene will negotiate in good faith with the intention
of executing a definitive License Agreement in accordance with the terms set forth in the License
Agreement Term Sheet . . . .”).
134
Cox Commc’ns, Inc. v. T-Mobile US, Inc., 2022 WL 619700 (Del. Mar. 3, 2022).
135
Id. at *6.
136
Hilco’s Mot. for S.J. at 26–27.
34
Type II preliminary agreement.137 And in its answering brief, GreenTech asserts the
Term Sheet is not a Type II preliminary agreement or a “mere ‘agreement to agree’”
but rather a “binding contract.”138 Both parties appear to misinterpret SIGA. The
SIGA Court “reaffirm[ed] that where the parties agree to negotiate in good faith in
accordance with a term sheet, that obligation to negotiate in good faith is
enforceable.”139 In other words, Type II preliminary agreements are binding and
enforceable contracts. The difference between Type II preliminary agreements and
“normal” contracts is simply which obligations bind the parties. As the Supreme
Court explained in Cox Communications:
Delaware law has long recognized “that parties may make an agreement
to make a contract . . . if the agreement specifies all the material and
essential terms including those to be incorporated in the future
contract.” Under the traditional rule, the absence or indefiniteness of
material terms generally rendered an agreement unenforceable.
In SIGA I, however, we recognized that parties could enter into two
types of enforceable preliminary agreements. Type I agreements reflect
a consensus “on all the points that require negotiation” but indicate the
mutual desire to memorialize the pact in a more formal document. In
Type II agreements, the parties “‘agree on certain major terms, but
leave other terms open for future negotiation.’” Type I agreements are
fully binding; Type II agreements “do[] not commit the parties to their
ultimate contractual objective but rather to the obligation to negotiate
the open issues in good faith[.]”140
137
Id. at 27–28.
138
See GreenTech’s Answering Br. at 21–24.
139
SIGA, 67 A.3d at 333–34.
140
Cox Commc’ns, 2022 WL 619700, at *6.
35
C. Whether Hilco breached is a factual issue.
The next question raised by the parties’ motions is whether Hilco breached its
obligation to “to negotiate the open issues in good faith in an attempt to reach the . .
. objective within the agreed framework.”141 The Court finds neither party is entitled
to judgment as a matter of law on this question.
SIGA provides a framework for assessing whether a party negotiated in good
faith. Indicia of bad faith include “renouncing the deal, abandoning the negotiations,
or insisting on conditions that do not conform to the preliminary agreement.”142
Furthermore, SIGA noted that, under Delaware law, “bad faith is not simply bad
judgment or negligence, but rather it implies the conscious doing of a wrong because
of dishonest purpose or moral obliquity; it is different from the negative idea of
negligence in that it contemplates a state of mind affirmatively operating with furtive
design or ill will.”143 In SIGA, for example, the Court found persuasive evidence
that the defendant experienced “seller’s remorse” after entering the preliminary
agreement and attempted to negotiate a final agreement that contained terms
“drastically different and significantly more favorable” to itself.144
141
Id.142
Id. n.85.
143
Id. at 346 (quoting CNL–AB LLC v. E. Prop. Fund I SPE (MS REF) LLC, 2011 WL 353529,
at *9 (Del. Ch. Jan. 28, 2011)).
144
See id. at 346–47.
36
Here, the undisputed facts do not allow the Court to decide as a matter of law
whether Hilco negotiated in good faith. Hilco and GreenTech executed the Term
Sheet on September 8, 2017. Initially, Hilco and GreenTech cooperated in curing
the Assumed Liabilities, Hilco paid outstanding vendor invoices and ICANN fees,
and Hilco’s parent company provided a letter of support to assure ICANN that
GreenTech had the resources to develop the dotMobily TLDs. These measures
brought the dotMobily TLDs back into good standing with ICANN, which closed
its “compliance ticket” on June 8, 2018.145 These facts suggest Hilco attempted to
resolve the “Conditions to Closing” identified in the Term Sheet in good faith for at
least several months after executing it. Furthermore, the decision to extend the
“Closing Date” from the initial target of March 31, 2018 to December 31, 2018
potentially is another indication of good faith because it signaled that Hilco was
willing to invest more time and effort into closing the deal than either party initially
thought necessary. Finally, Hilco spent substantial sums on the dotMobily TLDs,146
another sign Hilco was making a good faith effort to reach closing. It appears the
only potential sign of bad faith through the spring of 2018 is that Hilco CEO Gabriel
Fried missed several important meetings he previously had agreed to attend.
145
GreenTech’s Mot. for S.J., Ex. 16.
146
See Hilco’s Mot. for S.J., Ex. M at 96:19–20 (Peress estimating Hilco spent $100,000–
$150,000); see id., Ex. B at 60:10–60:23 (Ahmed estimating Hilco spent around $120,000 total);
see id., Ex. N at 195:15–195:16 (Fried estimating Hilco spent around $150,000–$180,000).
37
The record, however, suggests the relationship between GreenTech and Hilco
began unravelling around May 2018. On May 25, Hilco informed Wilson that Hilco
would exit the dotMobily TLD investment “absent meaningful progress transferring
the [Registry Agreements] to [Hilco’s] control within 60 days. 147 This appears to
refer to one of the Conditions to Closing from the Term Sheet: “The Closing shall
be subject to . . . (3) the receipt of approval from ICANN for the terms of the transfers
of the Registry Agreements including the modification of the COI.”148 Although
Hilco’s message shows it was becoming impatient to reach closing, reasonable
minds could differ as to whether it amounts to bad faith. On the one hand, the
message provided clear notice that Hilco wanted to make meaningful progress
toward closing; on the other hand, it demanded that Wilson (and impliedly
GreenTech) comply with a deadline shorter than the parties’ previous agreement.
Despite its warning, Hilco ultimately did not exit the investment within 60
days. Wilson, however, drafted a “Status Update” report dated July 6, 2018 that
listed a number of outstanding issues with the dotMobily TLDs. Among other
things, WiseDots “continued to assert rights” to the dotMobily TLDs, GreenTech
was liable for “2 years of arrears ($40k)” to “Neustar,” and “[t]ransferring the RAs
is costly in terms of $ and time/legal resources.”149
147
Hilco’s Mot. for S.J., Ex. U.
148
GreenTech’s Mot. for S.J., Ex. 12 at 3.
149
Hilco’s Mot. for S.J., Ex. V at Hilco000000757.
38
The relationship between Hilco and GreenTech continued to devolve in the
months that followed. Hilco fired Wilson on August 2, 2018, although the record
does not reveal why. Hilco later became reluctant to continue paying ICANN fees,
occasionally asking Wilson and Ahmed if they would do it themselves. The situation
culminated with the ICANN payment due November 30, 2018. Through an email
chain from November 26, Hilco’s executives—Fried, Peress, and Hazan—agreed
that the “risks and likely expenses” of the investment had become unacceptable, that
Hilco should “allow GreenTech to go into default with ICANN,” and that “it would
be a waste to continue to throw any more dollars on this endeavor.”150 Furthermore,
they recognized that the Term Sheet’s Termination Provision gave Hilco “leverage”
over GreenTech: “If Green Tech wants to Terminate, they have to buy us out.”151
The email chain indicated Hilco intended to contact GreenTech before the payment
became due. Nevertheless, Hilco never warned GreenTech it did not intend to make
the payment. Hilco’s actions relating to the ICANN payment due November 30,
2018 reasonably could be viewed by a trier of fact as evidence of bad faith. Hilco
made a calculated decision to allow GreenTech to fall into default. Hilco recognized
it would have been prudent to warn GreenTech beforehand but failed to do so. Thus,
150
GreenTech’s Mot. for S.J., Ex. 25 at 2.
151
Id., Ex. 25 at 1.
39
Hilco effectively “renounce[ed] the deal” and “abandon[ed] the negotiations.”152 In
short, Hilco’s conduct in terminating the negotiations is evidence of bad faith.
According to GreenTech, Hilco’s failure to perform its “obligation” to make
the November 30, 2018 ICANN payment is additional evidence of bad faith.153 But
the Term Sheet does not obligate Hilco to make quarterly ICANN payments on
GreenTech’s behalf. Rather, the Term Sheet required Hilco to pay for counsel “to
handle ICANN mediation tasks” and “negotiate all aspects of curing the breach with
ICANN including payments to be made to ICANN,”154 while the “Assumed
Liabilities” that NEWCO would take on included “[u]npaid ICANN Registry Fee
invoices.”155 These terms indicate Hilco was obligated to pay only for the ICANN
fees that were outstanding when the Term Sheet was executed. The Term Sheet
makes clear that “liabilities associated for operation of the [dotMobily] TLDs
include ongoing registry fees for the ICANN [Registry Agreements] will be set up
and established for NEWCO as part of the transfer of the RAs.”156 The Term Sheet’s
unambiguous terms indicate NEWCO was to handle the ongoing ICANN payments,
not Hilco. In fact, the email exchanges relating to the November 30, 2018 ICANN
payment reveal that the Hilco executives believed—correctly—that the Term Sheet
152
SIGA, 67 A.3d at 349 n.85.
153
See GreenTech’s Answering Br. at 24–25.
154
GreenTech’s Mot. for S.J., Ex. 12 at 1.
155
Id., Ex. 12 at 2.
156
Id.40
did not obligate Hilco to make the payment.157 It nevertheless could be argued Hilco
acted in bad faith by failing to make the payment if GreenTech reasonably expected
Hilco to handle it and Hilco failed to communicate its intentions. But it cannot be
said that Hilco’s failure to do so breached its express obligations under the Term
Sheet.
Overall, the record of undisputed facts does not permit a conclusion as to
whether, as a matter of law, Hilco negotiated with GreenTech in good faith after the
parties executed the Term Sheet. It appears Hilco and GreenTech worked together
in good faith for at least several months between the fall of 2017 and the
spring/summer 2018. But the parties’ relationship became strained as progress
stalled, expenses mounted, and third parties pressed competing claims of ownership
to the dotMobily TLDs. Hilco ultimately made a calculated decision to back out of
the deal and allow GreenTech to default with ICANN; moreover, Hilco followed
through on its decision without warning GreenTech. Hilco’s conduct in ending the
relationship was far from commendable, but reasonable minds could differ as to
whether it amounted to bad faith in the full context of the challenges facing the
dotMobily TLDs. This issue is especially difficult to resolve on summary judgment
157
In the November 26 email chain, Hazan asked: “If we miss a payment and Anwar steps in and
makes it, are we risking a default in our obligations under the LOI and basically handing it back
to GreenTech? I thought keeping it alive for one more quarter will give us more leverage.”
Peress responded: “I read the Term Sheet. It doesn’t obligate us to make that payment [i.e., the
ICANN payment due November 30].” Id., Ex. 25 at Hilco000002757.
41
because “[w]here intent or state of mind is material to the claim at issue—as is the
case here—summary judgment is not appropriate.”158 Accordingly, neither party is
entitled to summary judgment on the issue of whether Hilco satisfied its obligation
to negotiate the open issues under the Term Sheet in good faith.
D. The Court cannot determine GreenTech’s entitlement to damages at this
stage.
The parties disagree whether GreenTech can recover expectation damages
under the Term Sheet. Per SIGA, “where the parties have a Type II preliminary
agreement to negotiate in good faith, and the trial judge makes a factual finding,
supported by the record, that the parties would have reached an agreement but for
the defendant’s bad faith negotiations, the plaintiff is entitled to recover contract
expectation damages.”159 The Court need not decide whether GreenTech can satisfy
this standard because the Court cannot determine on this record whether Hilco
negotiated in bad faith as a matter of law. In any event, this question involves a
number of factual issues, including the amount of progress the parties made in
reaching closing, the number of Conditions to Closing that the parties resolved, and
the threat of litigation from third parties relating to ownership of the dotMobily
TLDs. Conclusions on these question are best reserved for the more textured
presentation of witnesses and exhibits at trial.
158
Amirsaleh v. Bd. of Trade of City of New York, Inc., 2009 WL 3756700, at *4 (Del. Ch. Nov.
9, 2009).
159
SIGA, 67 A.3d at 349 (internal quotations omitted).
42
E. GreenTech’s promissory estoppel claim is barred.
GreenTech brought a claim for promissory estoppel as an alternative to its
breach of contract claim. In SIGA, the Supreme Court reiterated that “[p]romissory
estoppel does not apply . . . where a fully integrated, enforceable contract governs
the promise at issue.”160 Because the parties in SIGA were obligated to negotiate in
good faith by virtue of their Type II preliminary agreement, the Court concluded that
“a claim based on promissory estoppel cannot lie and a Vice Chancellor must look
to the contract as the source of a remedy on the breach of an obligation to negotiate
in good faith.”161 Here, as in SIGA, the parties had a Type II preliminary agreement.
Accordingly, GreenTech cannot maintain its alternative claim for promissory
estoppel.
V. CONCLUSION
For the foregoing reasons, GreenTech’s motion for summary judgment is
DENIED. Hilco’s motion for summary judgment is GRANTED as to the
promissory estoppel claim in Count II and DENIED as to the breach of contract
claim in Count I.
160
Id., 67 A.3d at 348.
161
Id.43