CRE Niagara Holdings, Inc. v. Resorts Group, Inc. ( 2023 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CRE NIAGARA HOLDINGS, LLC,
CLUB EXPLORIA, LLC, and CRE
NIAGARA PARTICIPATION
HOLDINGS, LLC,
Plaintiffs,
v. C.A. No. N20C-05-157 PRW CCLD
RESORTS GROUP, INC.,
Defendant.
CRE NIAGARA HOLDINGS, LLC,
CLUB EXPLORIA, LLC, and CRE
NIAGARA PARTICIPATION
HOLDINGS, LLC,
Plaintiffs,
v. C.A. No. 2021-0953-PW
RESORTS GROUP, INC.,
Defendant.
Submitted: March 1, 2023
Decided: March 24, 2023
MEMORANDUM OPINION AND ORDER
Upon Defendant Resorts Group, Inc.’s Superior Court Motion to Dismiss for Lack
of Subject Matter Jurisdiction and Superior Court Motion for Partial Judgment on
the Pleadings,
DENIED.
Upon Defendant Resorts Group, Inc.’s Court of Chancery Motion to Dismiss for
Lack of Subject Matter Jurisdiction,
GRANTED.
Upon Plaintiffs CRE Niagara Holdings, LLC, et al.’s Court of Chancery Motion
for Partial Summary Judgment on Counts III and IV,
DENIED AS MOOT.
Richard P. Rollo, Esquire, Travis S. Hunter, Esquire, Dorronda R. Bordley, Esquire,
RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; J. David Washburn,
Esquire, Charles L. Perry, Esquire, KATTEN MUCHIN ROSENMAN LLP, Dallas, Texas;
David A. Crichlow, Esquire, Brian L. Muldrew, Esquire, KATTEN MUCHIN
ROSENMAN LLP, New York, New York, Attorneys for Plaintiffs CRE Niagara
Holdings, LLC, Club Exploria, LLC, and CRE Niagara Participation Holdings,
LLC.
Garvan McDaniel, Esquire, HOGAN MCDANIEL, Wilmington, Delaware; David S.
Rosner, Esquire, Ronald R. Rossi, Esquire, Paul J. Burgo, Esquire, Stephen P.
Thomasch, Esquire, Jed I. Bergman, Esquire, KASOWITZ BENSON TORRES LLP, New
York, New York, Attorneys for Defendant Resorts Group, Inc.
WALLACE, J.
The Plaintiffs originally filed this action in the Superior Court on May 18,
2020. Shortly thereafter, the Plaintiffs filed an Amended Complaint, asserting
claims against the Defendant for (1) fraudulent inducement, (2) breach of
contract/indemnification, and (3) declaratory relief. The dispute centers around one
primary agreement, two ancillary agreements, and a supplemental agreement.
In April 2021, the Court issued a decision denying the Defendant’s motion to
dismiss the Amended Complaint. Thereafter, the Defendant filed an Answer,
Counterclaims, and a Third-Party Complaint (that also was later amended) asserting
claims against Third-Party Defendants on eleven grounds. In May 2022, the Court
issued a second decision denying in part and granting in part the motions to dismiss
the Counterclaims and Third-Party Complaint, as well as denying the Defendant’s
motion to stay.
The Defendant has filed a Motion to Dismiss the Amended Complaint for
Lack of Subject Matter Jurisdiction and for Partial Judgment on the Pleadings
relating to Plaintiff’s declaratory judgment claim. That Motion is now ripe for
decision.
Relatedly, the same Plaintiffs filed a Complaint against the same Defendant
in the Court of Chancery (that also was later amended) and asserts claims for specific
performance and anticipatory repudiation, and seeks three declarations. The
Defendant has filed a Motion to Dismiss the Chancery Amended Complaint. That
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Motion, too, is now ripe for decision. Additionally, the Plaintiffs have filed a Motion
for Partial Summary Judgment relating to two of the declaratory judgment claims.
That Motion is also now ripe for decision.
I. FACTUAL AND PROCEDURAL BACKGROUND
The facts here are taken from the Superior Court action’s Amended
Complaint1 and the Court of Chancery action’s Amended Complaint.2 The facts
overlap and will be discussed together. As there are two previously-issued decisions
from the Superior Court action,3 the Court will only provide a brief recitation of the
facts here.
A. THE PARTIES
Plaintiffs CRE Niagara Holdings, LLC (“CRE Niagara”); Club Exploria,
LLC, a successor by merger to CRE Bushkill Group, LLC; and CRE Participation
Holdings, LLC (collectively, “CRE” or “Plaintiffs”) are Delaware LLCs.4 CRE
1
Plaintiffs’ Superior Court Amended Complaint (“SAC”), Sept. 15, 2020 (D.I. 40 Super.). The
Superior Court action is N20C-05-157 PRW CCLD. Any document identifier number from this
action will be distinguished by the designation “Super.”; for example, (D.I. 40 Super.).
2
Plaintiffs’ Court of Chancery Amended Complaint (“CAC”), June 7, 2022 (D.I. 35 Ch.). The
Court of Chancery action is captioned 2021-0953 PW. Any document identifier number from this
action will be distinguished by the designation “Ch.”; for example, (D.I. 35 Ch.).
3
CRE Niagara Hldgs., LLC v. Resort Groups, Inc., LLC, 2021 WL 1292792 (Del. Super. Ct.
Apr. 7, 2021) (denying Defendant’s Motion to Dismiss); CRE Niagara Hldgs., LLC v. Resort
Groups, Inc., 2022 WL 1749181 (Del. Super. Ct. May 31, 2022) (denying, in part, and granting,
in part, Plaintiffs’/Third-Party Defendants’ Motion to Dismiss, and denying Defendant’s Motion
to Stay).
4
SAC ¶¶ 5-7.
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Niagara and Club Exploria, LLC are also citizens of Pennsylvania and have
members who are citizens there.5 Defendant Resorts Group, Inc. (“RGI” or
“Defendant”) is a Pennsylvania corporation with its principal place of business in
East Stroudsburg, Pennsylvania.6 Before the transaction at the center of this
controversy occurred RGI owned timeshare resorts in Pennsylvania.7
B. THE UNDERLYING TRANSACTION
On May 19, 2017, RGI and CRE Niagara entered into a Unit and Asset
Purchase Agreement (the “UAPA”), through which CRE Niagara acquired the assets
of the Pennsylvania timeshare resorts and ownership of specified entities, including
CRE Bushkill Group, LLC.8 CRE Niagara purchased the timeshare business and
existing timeshare contracts, and RGI retained the right to the payment stream under
those contracts.9 There are four agreements to the transaction: (1) the UAPA;10
(2) the Servicing Agreement, which addressed the servicing of receivables from
sales by RGI;11 (3) the Participation Agreement, which provided CRE an interest in
the receivables collected by RGI from the Servicing Agreement (the Servicing and
5
See id. ¶ 10.
6
Id. ¶ 7.
7
Id. ¶ 13.
8
Id. ¶¶ 15-16.
9
See id. ¶¶ 23-25.
10
See id. ¶ 16.
11
See id. ¶ 25.
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Participation Agreements are the “Ancillary Agreements”);12 and (4) the
Supplemental Agreement, which supplemented the Servicing and Participation
Agreements.13 The Ancillary Agreements were executed on May 18, 2017.14 The
Supplemental Agreement was executed on December 28, 2018.15
C. SUPERIOR COURT PROCEDURAL HISTORY
Eventually, a dispute arose between the parties regarding RGI selling
timeshares, pre-transaction, to “less creditworthy” purchasers, which CRE believes
was contrary to the representations and warranties made by RGI in the UAPA.16 In
May 2018, RGI sent CRE a letter asserting that CRE’s collected funds didn’t meet
scheduled benchmarks, but CRE denied such shortfall and instead blamed RGI for
its alleged misrepresentations.17
CRE filed the current Superior Court action on May 18, 2020.18 The same
day, RGI filed an action in the United States District Court for the Southern District
of New York asserting breach-of-contract claims under the agreements.19 On May
12
See id. ¶¶ 17, 23.
13
See id. ¶ 43 n.5.
14
Id. ¶ 17.
15
Id., Ex. J.
16
See id. ¶¶ 28-30; CRE Niagara Hldgs., LLC, 2021 WL 1292792, at *1-2.
17
See SAC ¶¶ 29-31, Ex. D, Ex. E.
18
See Complaint (“Compl.”), May 18, 2020 (D.I. 1 Super.).
19
See Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction and for Partial
Judgment on the Pleadings (“Def.’s Super. MTD”) at 6, Aug. 15, 2022 (D.I. 156 Super.).
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19, 2020, RGI filed an action in the United States District Court for the District of
Delaware.20 In August 2020, both federal actions were dismissed for lack of
diversity.21
In July 2020, RGI filed a motion to dismiss CRE’s Complaint in the Superior
Court action.22 In August 2020, RGI filed an amended motion to dismiss, or, in the
alternative, to stay the Superior Court action.23 In September 2020, CRE filed the
current Amended Complaint, asserting claims for fraudulent inducement (Count I),
breach of contract/indemnification (Count II), and a declaratory judgment (Count
III).24 Count III is at issue now. Count III seeks a declaration that “there is no
subsisting claim by RGI for any default of [sic] breach by any Plaintiff of the UAPA,
the Servicing Agreement and/or the Participation Agreement,” and that Club
Exploria “is entitled to terminate the Servicing Agreement and/or is not restricted or
obligated by” a schedule attached to the agreements.25 In October 2020, RGI filed
a motion to dismiss the Amended Complaint, or, in the alternative, to stay the action
thereunder.26 In that motion, RGI sought to dismiss Amended Complaint Counts I
20
Id. at 6-7; SAC ¶ 10.
21
Def.’s Super. MTD at 7; SAC ¶¶ 10-11.
22
See Defendant’s First Motion to Dismiss, July 8, 2020 (D.I. 11 Super.).
23
See Defendant’s Am. First Motion to Dismiss or Stay, Aug. 7, 2020 (D.I. 28 Super.).
24
See SAC ¶¶ 62-87.
25
Id. ¶ 87.
26
See Defendant’s Second Motion to Dismiss or Stay, Oct. 15, 2020 (D.I. 46 Super.).
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and II under Rule 12(b)(6), dismiss the portions of Counts I and III relating to the
Servicing Agreement and Participation Agreement for improper venue, and dismiss
or stay the entire action under the doctrine of forum non conveniens.27
In April 2021, the Court issued a decision denying RGI’s motion in full.28 The
following is a brief summary of that decision. The Court found the UAPA’s forum
selection clause applies and the parties waived any objection to an inconvenient
forum.29 This was in response to RGI’s argument that the Ancillary Agreements’
forum selection clause chose New York, so any non-UAPA claims must be litigated
there.30 But, the Court found the UAPA was later-executed and its Delaware forum
selection clause governed.31 The Court also found that Counts I and II survived
RGI’s timeliness challenges.32 Shortly thereafter, the Court denied RGI’s motion
for reargument.33
In June 2021, RGI filed its Answer with Affirmative Defenses and
27
See id. at 11-35.
28
See CRE Niagara Hldgs., LLC, 2021 WL 1292792.
29
See id. at *11.
30
See id. at *4.
31
Id. at *5-7.
32
See id. at *10.
33
CRE Niagara Hldgs., LLC v. Resort Groups, Inc., LLC, 2021 WL 2110769 (Del. Super. Ct.
May 25, 2021).
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Counterclaims, and a Third-Party Complaint.34 In September 2021, RGI amended
this filing as it relates to the Counterclaims.35 Also in September 2021, CRE and the
Third-Party Defendants filed two motions to dismiss RGI’s Third-Party
Complaint.36 In February 2022, RGI filed a renewed motion to stay the non-UAPA
claims in the Superior Court action in light of related litigation in New York state
court.37 In May 2022, the Court issued a Letter Order resolving the above-mentioned
motions.38 The Court held in pertinent part that RGI’s breach-of-contract claim
under the UAPA survived dismissal,39 but its claims under the Servicing Agreement
and Participation Agreement were dismissed with prejudice based on RGI’s
representations to the Court.40 Namely, RGI maintained its non-UAPA claims
should be litigated in New York in compliance with those agreements’ forum
selection clauses, and that RGI proffered them in the Superior Court action only to
preserve the claims in the event they were thrown out in New York. 41 The Court
34
See Defendant’s Answer with Affirmative Defenses and Counterclaims and Third-Party
Complaint, June 9, 2021 (D.I. 81 Super.). The Third-Party Complaint is not highly relevant for
the purposes of the current motions, so it will not be discussed in detail.
35
See Defendant’s Answer with Affirmative Defenses and Amended Counterclaims and Third-
Party Complaint, Sept. 1, 2021 (D.I. 92 Super.).
36
See D.I. 95 Super.; D.I. 96 Super.
37
See Defendant’s Renewed Motion to Stay, Feb. 4, 2022 (D.I. 126 Super.).
38
See CRE Niagara Hldgs., LLC, 2022 WL 1749181.
39
See id. at *5.
40
See id.
41
See id. at *9.
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noted that the New York Supreme Court held the non-UAPA claims belong in New
York, and the Court dismissed RGI’s non-UAPA claims with prejudice.42
Additionally, the Court denied RGI’s motion to stay its non-UAPA claims.43 In July
2022, CRE filed its Answer to RGI’s Amended Counterclaim.44
D. NEW YORK COURT PROCEDURAL HISTORY
On August 12, 2020, a day after the United States District Court for the
Southern District of New York dismissed RGI’s non-UAPA claims, RGI filed its
complaint in the Supreme Court of New York (the “New York Action”). 45 That
complaint asserts claims against CRE for, inter alia, breach of the Servicing
Agreement and Participation Agreement.46 In February 2021, RGI amended its
complaint in the New York Action47 and asserted claims against CRE (and others)
for, inter alia, breach of the Servicing Agreement, the Participation Agreement, the
UAPA, and the Supplemental Agreement.48 In December 2021, the New York
Supreme Court issued a decision on CRE’s (and other defendants’) motion to
42
See id. at *9-10.
43
See id. at *10.
44
See Plaintiff/Counterclaim Defendants’ Answer to Amended Counterclaim, July 12, 2022 (D.I.
146 Super.).
45
See Def.’s Super. MTD at 7.
46
See id.
47
See id. at 7, Ex. 7 (displaying a copy of RGI’s amended complaint in the New York Action).
48
See id., Ex. 7 ¶¶ 283-332.
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dismiss the New York Action.49 The New York court dismissed RGI’s claims
against CRE under the UAPA because of “the broad Delaware forum selection
clause contained in that agreement.”50 The New York court did not dismiss the
Servicing Agreement and Participation Agreement claims because those agreements
“contain broad mandatory New York forum selection clauses applicable to all claims
related to these agreements.”51
E. Court of Chancery Procedural History
On November 5, 2021, CRE filed its complaint in the Court of Chancery,
asserting claims against RGI for specific performance under the Servicing
Agreement and Participation Agreement, and anticipatory repudiation.52
Simultaneously, CRE submitted a motion for entry of a status quo order for the
purpose of “prohibiting [RGI] from unilaterally dispersing disputed funds to itself
in the very near future.”53 RGI opposed the motion.54 The Court granted CRE’s
49
See Letter for Judicial Review, Ex. A (“New York Action Dec. 27 Decision”), Dec. 30, 2021
(D.I. 109 Super.).
50
Id., Ex. A at 2.
51
Id., Ex. A at 3. The New York Court also made other findings with respect to RGI’s other
claims, but those are not particularly relevant for the present motions here. See generally id., Ex.
A. On February 28, 2023, the Supreme Court of New York, Appellate Division affirmed the New
York Action Dec. 27 Decision in full. See Letter for Judicial Review, Ex., Mar. 1, 2023 (D.I. 177
Super.).
52
See Verified Complaint, ¶¶ 32-51, Nov. 5, 2021 (D.I. 1 Ch.).
53
See Plaintiffs’ Motion for Entry of a Status Quo Order at 1, Nov. 5, 2021 (D.I. 1 Ch.).
54
See Defendant’s Opposition to the Motion for Entry of a Status Quo Order, Mar. 8, 2022 (D.I.
19 Ch.).
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motion for entry of a status quo order.55 Later, CRE filed its current Amended
Complaint in the Court of Chancery action, asserting five claims: specific
performance (Count I), anticipatory repudiation (Count II), declaratory judgment
regarding UAPA § 8.5(a) (Count III), declaratory judgment regarding UAPA § 8.7
(Count IV), and breach of the UAPA (Count V).56
F. Current Superior Court and Chancery Motions
RGI filed its current Motion to Dismiss for Lack of Subject Matter Jurisdiction
and for Partial Judgment on the Pleadings (the “Superior Court Motion to Dismiss”),
relating to CRE’s declaratory judgment claim (Count III).57
Between the Opposition and Reply filings, CRE sent a letter to the Court
regarding “material development[s]” in the New York Action.58 The letter stated
that RGI filed an “emergency motion” in the New York Action, seeking to enjoin
CRE from further pursuing: “(1) parts of the [Superior Court] Action . . . ; (2) [the
Court of Chancery] Action Counts I-II . . . , and Counts III-IV . . . ; and (3) CRE’s
motion for summary judgment on [the Court of Chancery] Action Counts III-IV.”59
55
See Order Governing Accounting & Resolving Status Quo Motion, Apr. 28, 2022 (D.I. 32 Ch.)
(granting CRE’s Motion).
56
See CAC ¶¶ 45-85.
57
See Def.’s Super. MTD.
58
See Letter for Judicial Review (“New York Action Development Letter”) at 1, Sept. 30, 2022
(D.I. 166 Super.).
59
Id.
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In September 2022, the New York Supreme Court submitted an order for CRE to
show cause why the New York Supreme Court should not enjoin CRE from pursuing
claims in Delaware for the claims that are related to the agreements with New York
forum selection clauses.60
In November 2022, CRE sent a follow-up letter to the Court.61 The letter
stated the New York Supreme Court denied RGI’s motion to enjoin CRE.62 The
New York Supreme Court’s Order stated that court would not issue the anti-suit
injunction RGI requested.63 The New York Supreme Court’s reasoning was
primarily premised on the fact that this (Delaware) Court has “extensive knowledge”
of the complex issues of this litigation and has been mindful of the impact of the
overlapping claims.64 The New York Supreme Court also criticized the parties for
the “poor [contract] drafting decisions that resulted in multi-forum litigation.”65 In
essence, the New York Supreme Court deferred to this Court to decide the merits of
the issues in the first instance.66
60
See id., Ex. B (displaying a copy of the New York Supreme Court’s Order).
61
See Letter for Judicial Review (“New York Action Development Letter Update”), Nov. 17,
2022 (D.I. 170 Super.).
62
Id., Ex. at 1.
63
Id., Ex. at 1.
64
Id., Ex. at 1.
65
Id., Ex. at 2.
66
Id., Ex. at 2.
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Concerning the Court of Chancery action, RGI filed its Motion to Dismiss the
Amended Complaint (the “Chancery Motion to Dismiss”),67 seeking to dismiss the
Amended Complaint in full.68 CRE filed its Opposition to the Chancery Motion to
Dismiss.69 Contemporaneously, CRE filed its Motion for Summary Judgment on
Counts III and IV (the “Chancery Motion for Summary Judgment”).70
II. LEGAL STANDARD
A. SUBJECT MATTER JURISDICTION UNDER SUPERIOR COURT RULE 12(b)(1)
“A party may move to dismiss under Rule 12(b)(1) for lack of subject matter
jurisdiction.”71 “Whenever it appears by suggestion of the parties or otherwise that
the Court lacks jurisdiction of the subject matter, the Court shall dismiss the
action.”72 When the Court considers a Rule 12(b)(1) motion, “the Court need not
accept [a plaintiff’s] factual allegations as true and is free to consider facts not
alleged in the complaint.”73 “The movant ‘need only show that the Court lacks
67
See Defendant’s Motion to Dismiss (“Def.’s Ch. MTD”), Aug. 15, 2022 (D.I. 39 Ch.).
68
See id. at 15-38.
69
See Plaintiffs’ Answering Brief (“Pls.’ Ch. Answering Br.”), Sept. 22, 2022 (D.I. 43 Ch.).
70
See Plaintiffs’ Motion for Summary Judgment (“Pls.’ Mot. for Summ. J.”), Sept. 22, 2022 (D.I.
43 Ch.). Plaintiffs filed one, omnibus brief for their Opposition to Defendant’s Chancery Motion
to Dismiss and their Opening Brief in support of their Chancery Motion for Summary Judgment.
71
Blue Cube Spinco LLC v. Dow Chem. Co., 2021 WL 4453460, at *5 (Del. Super. Ct. Sept. 29,
2021) (citing Del. Super. Ct. Civ. R. 12(b)(1)).
72
Del. Super. Ct. Civ. R. 12(h)(3); see also Blue Cube Spinco LLC, 2021 WL 4453460, at *5.
73
Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1284 n.14 (Del. 2007) (internal
quotation marks and citation omitted); Nelson v. Russo, 844 A.2d 301, 302 (Del. 2004) (“In
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jurisdiction,’”74 but “the non-movant bears the ‘far more demanding’ burden ‘to
prove jurisdiction exists.’”75 “A motion to dismiss challenging jurisdiction of the
subject matter based on lack of ripeness is properly considered under Rule
12(b)(1).”76
B. JUDGMENT ON THE PLEADINGS UNDER SUPERIOR COURT RULE 12(c)
When a party moves under Rule 12(c) for judgment on the pleadings, “the
Court accepts the truth of all well-pleaded facts and draws all reasonable factual
inferences in favor of the non-movant.”77 The Court will grant a 12(c) motion only
when, after drawing all reasonable inferences in favor of the non-moving party, “no
material factual dispute exists and the movant is entitled to judgment as a matter of
law.”78
“The standard for a motion for judgment on the pleadings is almost identical
deciding whether the Superior Court has subject matter jurisdiction . . . [the Court] must look
beyond the language in the complaint.”).
74
Blue Cube Spinco LLC, 2021 WL 4453460, at *5 (quoting Airbase Carpet Mart, Inc. v. AYA
Assocs., Inc., 2015 WL 9302894, at *2 (Del. Super. Ct. Dec. 15, 2015), aff’d, 2016 WL 4938890(Del. Sept. 16, 2016)).
75
Id. (quoting Appriva, 937 A.2d at 1284 n.14 (internal quotation marks omitted)).
76
Benefytt Techs., Inc. v. Capitol Specialty Ins. Corp., 2022 WL 16504, at *5 (Del. Super. Ct.
Jan. 3, 2022) (citing Energy Transfer Equity, L.P. v. Twin City Fire Ins. Co., 2020 WL 5758027,
at *5 (Del. Super. Ct. Sept. 28, 2020)); B/E Aerospace, Inc. v. J.A. Reinhardt Hldgs., LLC, 2020
WL 4195762, at *2 (Del. Super. Ct. July 21, 2020)).
77
Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *8 (Del. Super. Ct. Aug. 16, 2021)
(citing Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund II, L.P., 624 A.2d 1199,
1205 (Del. 1993)).
78
Id. (citing Del. Super. Ct. Civ. R. 12(c)).
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to the standard for a motion to dismiss.”79 The Court thus accords a plaintiff
opposing a Rule 12(c) motion the same benefits as a plaintiff opposing a Rule
12(b)(6) motion.80 Given the similarity between a 12(c) motion and a 12(b)(6)
motion, “the Court engages certain 12(b)(6) procedures during 12(c) review,”81 such
as considering “documents outside the pleadings”82 that are “integral to and
incorporated referentially into them.”83
III. PARTIES’ CONTENTIONS
A. SUPERIOR COURT ACTION CONTENTIONS
RGI contends that CRE’s declaratory judgment claim (Count III) should be
dismissed to the extent Count III concerns the Ancillary Agreements and the
Supplemental Agreement.84 RGI offers two primary reasons for its contention.
First, RGI claims that litigating Count III in this Court is “unnecessary” and would
result in “duplicative litigation and risk inconsistent judgments.”85 Specifically, RGI
79
Silver Lake Off. Plaza, LLC v. Lanard & Axilbund, Inc., 2014 WL 595378, at *6 (Del. Super.
Ct. Jan. 17, 2014) (internal quotation marks and citation omitted).
80
Intermec IP Corp., 2021 WL 3620435, at * 8 (citing Alcoa World Alumina LLC v. Glencore
Ltd., 2016 WL 521193, at * 6 (Del. Super. Ct. Feb. 8, 2016), aff’d sub nom., Glencore Ltd. v. St.
Croix Alumina, LLC, 2016 WL 6575167 (Del. Nov. 4, 2016)).
81
Id.82
Id. (citing Jiménez v. Palacios, 250 A.3d 814, 827 (Del. Ch. 2019), aff’d, 2020 WL 4207625(Del. July 22, 2020)).
83
Id. (citing McMillan v. Intercargo Corp., 768 A.2d 492, 500 (Del. Ch. 2000)).
84
See Def.’s Super. MTD at 11.
85
See id.-14-
argues that CRE’s Count III, as it relates to the Ancillary Agreements and the
Supplemental Agreement, mirrors RGI’s affirmative claims in New York and, thus,
litigating Count III here would risk inconsistent judgments and present
overwhelming hardship.86 Second, RGI claims that Count III should be dismissed
as overripe because there is a “simultaneous non-declaratory judgment action”
pending in New York.87 RGI invokes the Superior Court’s seven-factors from Burris
v. Cross,88 and also relies on the Court of Chancery’s decision in Markusic v. Blum.89
RGI claims that in light of these cases, Count III should be dismissed as overripe.
On the other side, CRE argues its declaratory judgment claim is proper in this
Court.90 CRE’s attack on RGI’s assertions is twofold. First, CRE argues that
litigating Count III here is proper under the “law of the case” doctrine.91
Specifically, CRE claims the Court previously held Count III was properly filed in
Delaware due to the language in UAPA Section 9.6. 92 Second, CRE argues RGI’s
“overripeness” argument fails because Count III “is the only claim related to the
86
See id. at 13.
87
Id. at 14.
88
583 A.2d 1364 (Del. Super. Ct. 1990).
89
2021 WL 2456637 (Del. Ch. June 16, 2021); see Def.’s Super. MTD at 14-21.
90
See Plaintiffs’ Answering Brief (“Pls.’ Super. Answering Br.”) at 8, Sept. 22, 2022 (D.I. 164
Super.).
91
See id.92
See id. at 8-9 (citation omitted)
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[Ancillary Agreements] that is filed in the correct forum based on the plain language
of the UAPA.”93 Additionally, CRE argues Burris does not apply, and even if it did,
the seven factors weigh in CRE’s favor.94
B. COURT OF CHANCERY ACTION CONTENTIONS
In the Chancery Amended Complaint, CRE’s Count I seeks “specific
performance directing RGI to abide by its contractual commitments under the
Servicing Agreement and Participation Agreement” and to pay CRE funds from the
Lockbox.95 In Count II, CRE claims that RGI anticipatorily repudiated the Servicing
Agreement and Participation Agreement and asks for an injunction “prohibiting RGI
from disbursing funds from the Lockbox account to itself until Plaintiffs’ offset
rights are established.”96 In Count III, CRE seeks a declaration that UAPA Section
8.5(a) limits liability via an indemnification cap.97 In Count IV, CRE seeks a
declaration that UAPA Section 8.7 limits the types of claims that can be brought by
RGI.98 And in Count V, CRE alleges RGI breached the UAPA by filing the New
93
See id. at 14.
94
See id. at 14-20.
95
CAC ¶¶ 45-55; see also id. ¶ 3 (noting that the Servicing Agreement defines the parameter of
the Lockbox Account).
96
Id. ¶¶ 56-64.
97
Id. ¶¶ 65-70.
98
Id. ¶¶ 71-76.
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York Action.99
RGI moved to dismiss the Amended Complaint under Court of Chancery
Rules 12(b)(1) and 12(b)(6).100 Broadly, RGI argues “[t]he legal and factual issues
in Counts I-IV are before the New York court, which ruled it had exclusive
jurisdiction over such claims.”101 RGI makes a series of global arguments as applied
to all counts. First, RGI claims that McWane compels the Court to dismiss or stay
this action.102 Second, RGI argues CRE is collaterally estopped from “attacking the
New York court’s ruling by arguing that the UAPA, or at minimum, Delaware law,
applies to RGI’s indemnification claims” because the New York court found the
UAPA does not govern the Servicing Agreement or Participation Agreement.103
Third, RGI argues the claims do not sound in equity and therefore the Court of
Chancery lacks subject matter jurisdiction.104
IV. DISCUSSION
A. RGI’S SUPERIOR COURT RULE 12(b)(1) ARGUMENT FAILS.
RGI believes Count III, as it relates to the Ancillary Agreements and the
99
Id. ¶¶ 77-85.
100
Def.’s Ch. MTD at 1.
101
Id. at 17.
102
Id. at 19-20.
103
Id. at 21-22.
104
Id. at 23.
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Supplemental Agreement, should be dismissed under Rule 12(b)(1). RGI asserts
dismissal is warranted because the Ancillary Agreements’ forum selection clause
states New York is the proper forum for claims under those agreements. RGI
contends allowing CRE to litigate non-UAPA claims in Delaware runs the risk of
duplicative litigation and inconsistent judgments. CRE relies on the “law of the
case” doctrine in light of this Court’s previous determination that the broad language
of UAPA Section 9.6 permits the non-UAPA claims to be heard in this Court.
The law of the case doctrine is a “judicially-created doctrine that prevents
parties from relitigating issues[s] that previously have been decided.”105 Under this
doctrine, “a court’s legal ruling at an earlier stage of proceedings controls later stages
of those proceedings, provided the facts underlying the ruling do not change.”106
“Once a matter has been addressed in a procedurally appropriate way by a court, it
is generally held to be the law of that case and will not be disturbed by that court
unless [a] compelling reason to do so appears.”107 The law of the case doctrine “is
not inflexible in that, unlike res judicata, it is not an absolute bar to reconsideration
of a prior decision that is clearly wrong, produces an injustice[,] or should be
105
Zurich Am. Ins. Co. v. Syngenta Crop Protection LLC, 2022 WL 4091260, at *3 (Del. Super.
Ct. Aug. 24, 2022).
106
Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 894-95 (Del.
2015) (citation omitted).
107
Zirn v. VLI Corp., 1994 WL 548938, at *2 (Del. Ch. Sept. 23, 1994); see also Bragdon v.
Bayshore Prop. Owners Ass’n, Inc., 251 A.3d 661, 677 (Del. Ch. 2021) (citing Zirn, 1994 WL
548938, at *2).
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revisited because of changed circumstances.”108 “This Court has held: ‘A party
seeking to have the Court reconsider the earlier ruling must demonstrate newly
discovered evidence, a change of law, or manifest injustice.’”109
In April 2021, the Court issued its first of two decisions in this matter. In the
April 2021 decision, the Court analyzed the competing forum selection clauses of
the UAPA—with a Delaware forum selection clause—and the Ancillary
Agreements—with their New York forum selection clauses.110 The Court held that
the UAPA’s Delaware forum selection clause governed disputes arising from the
UAPA and the Ancillary Agreements for two reasons. First, RGI conceded “CRE’s
affirmative claims are based on an alleged breach of representations and warranties
set forth in the UAPA.”111 Second, the UAPA is the later-executed document, and
UAPA Section 9.6’s “plain language itself includes the Ancillary Agreements within
its forum selection clause.”112 The Court, therefore, held Delaware was the proper
forum for CRE’s claims.113
In May 2022, the Court issued its second decision and dismissed RGI’s non-
108
Hamilton v. State, 831 A.2d 881, 887 (Del. 2003) (emphasis in original) (internal quotation
marks and citations omitted).
109
Zurich Am. Ins. Co., 2022 WL 4091260, at *3 (quoting E.I du Pont de Nemours & Co. v.
Admiral Ins. Co., 711 A.2d 45, 55 (Del. Super. Ct. 1995)).
110
See CRE Niagara Hldgs., LLC, 2021 WL 1292792, at *5-7.
111
See id. at *6.
112
See id. at *7.
113
See id.
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UAPA claims with prejudice.114 The Court never reached CRE’s Rule 12(b)(6)
arguments on RGI’s non-UAPA claims because “RGI’s own representations to this
Court [were] sufficient to bar each claim.”115 Namely, RGI represented that it filed
non-UAPA claims in this Court, even though it believed those claims belonged in
New York, just in case the New York court dismissed them.116 The Court noted the
New York court agreed RGI’s non-UAPA claims must be litigated in New York,117
and then the Court held RGI to its representations and dismissed RGI’s non-UAPA
claims based on those representations.118
Here, RGI argues “if anything, CRE’s argument is barred by the law of the
case” in light of the Court’s May 2022 decision.119 RGI’s reasoning is that the
necessary inference to be drawn from that decision is RGI’s claims were dismissed
to avoid duplicative litigation and inconsistent judgments.120 Not so. Rather, the
Court dismissed RGI’s non-UAPA claims based on RGI’s representations that it
filed those claims in Delaware only as a safety net if the New York court dismissed
114
See CRE Niagara Hldgs., LLC, 2022 WL 1749181, at *9-10.
115
See id. at *9.
116
See id.
117
See id.
118
See id. at *10.
119
Defendant’s Reply Brief (“Def.’s Super. Reply”) at 8-9, Oct. 13, 2022 (D.I. 167 Super.).
120
Id. at 9.
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RGI’s non-UAPA claims in New York.121 It does not follow that CRE’s non-UAPA
claims must be dismissed under Rule 12(b)(1) based on the law of the case. Indeed,
the opposite is true—the Court previously held Delaware is the proper forum for
certain non-UAPA claims because (1) RGI conceded CRE’s affirmative claims are
based on breaches set forth in the UAPA, and (2) UAPA Section 9.6 encompassed
certain claims under the Ancillary Agreements.122
Additionally, there has been no “newly discovered evidence, a change of law,
or manifest injustice” since the Court issued its two previous decisions. Any
perceived injustice derives solely from the parties’ own tactical decisions and
representations, not from any of the multiple courts that have dealt with this morass.
Any risk of “duplicative litigation” or “inconsistent judgments” is a result of the
parties’ tactical decisions, which have already unnecessarily burdened multiple
courts. The New York Supreme Court said it best in denying RGI’s request for an
anti-suit injunction: “While it would have made more sense for the parties to
expressly bargain to only litigate in one court (and equal sense to pick one now),
they have only themselves to blame for their poor drafting decisions that resulted in
121
See CRE Niagara Hldgs., LLC, 2022 WL 1749181, at *9 (“The Court need not reach CRE’s
arguments that [RGI’s non-UAPA] claims fail on their merits, as advanced in its 12(b)(6) Motion.
Instead, RGI’s own representations to this Court are sufficient to bar each claim.”); see also id. at
*10 (“RGI represented that it filed its Amended Counterclaims and Third-Party Complaint just in
case the New York court determined those claims belong in Delaware. The New York court
didn’t.”).
122
See CRE Niagara Hldgs., LLC, 2021 WL 1292792, at *6-7.
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multi-forum litigation.”123
Simply put, if anything, the law of the case dictates that CRE’s Count III is
properly in Delaware. RGI’s Motion to Dismiss for Lack of Subject Matter
Jurisdiction is DENIED.
B. RGI’S SUPERIOR COURT RULE 12(c) ARGUMENT FAILS.
RGI’s next basis to dismiss Count III is that it’s “overripe.”124 RGI argues
Count III is overripe because RGI pleaded an affirmative, non-declaratory claim in
New York, which makes CRE’s Count III overripe under Burris and Markusic.125
RGI argues that the seven-factors set out in Burris control, and when the Court
analyzes these factors, judgment in RGI’s favor is proper.126 CRE counters that the
overripeness argument fails because Count III still serves a practical and useful
purpose especially when it’s the only claim related to the Ancillary Agreements in
this Court.127 CRE believes Burris is inapposite for several reasons,128 and that even
if Burris applies, the factors weigh in favor of denying RGI’s Motion.129
As an initial matter, the term “overripe” as used in this context appears in only
123
New York Action Development Letter Update, Ex. at 2.
124
See Def.’s Super. MTD at 14.
125
See id. at 14-15; Def.’s Super. Reply at 12-13.
126
See Def.’s Super. MTD at 15-21.
127
See Pls.’ Super. Answering Br. at 13-14.
128
See id. at 14-17.
129
See id. at 17-20.
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six Delaware cases: Burris, both previously-published decisions in this case,
Markusic, and two other Superior Court cases. Put differently, there aren’t many
decisions discussing this doctrine.
“The basic purpose of the Declaratory Judgment Act is to enable the court to
adjudicate a controversy prior to the time when a remedy is traditionally available
and, thus, to advance to [a] stage at which a matter is traditionally justiciable.”130 A
declaratory judgment is intended to “promote preventive justice,”131 but it’s not “a
means of eliciting advisory opinions from courts.”132 The Court has discretion to
grant or deny a declaratory judgment,133 but the Court cannot exercise this discretion
unless there is an “actual controversy.”134 An actual controversy exists if all of the
following elements are met:
(1) It must be a controversy involving the rights or other legal relations
of the party seeking declaratory relief; (2) it must be a controversy in
which the claim of right or other legal interest is asserted against one
who has an interest in contesting the claim; (3) the controversy must be
between the parties whose interests are real and adverse; [and] (4) the
issue involved in the controversy must be ripe for judicial
130
Diebold Comput. Leasing, Inc. v. Com. Credit Corp., 267 A.2d 586, 591-92 (Del. 1970)
(citation omitted); see also DEL. CODE ANN. tit. 10, § 6501 (2023).
131
Stabler v. Ramsay, 88 A.2d 546, 551 (Del. 1952), adhered to on reh’g, 89 A.2d 544 (Del.
1952).
132
Ackerman v. Stemerman, 201 A.2d 173, 175 (Del. 1964) (citing Stabler).
133
See DEL. CODE ANN. tit. 10, § 6506 (2023); Sec. Nat’l Mortg. Co. v. Lehman Brothers Hldgs.
Inc., 2016 WL 6396343, at *6 (Del. Super. Ct. Aug. 24, 2016).
134
See Gannett Co., Inc. v. Bd. of Managers of the Delaware Criminal Justice Info. Sys., 840 A.2d
1232, 1237 (Del. 2003); XL Specialty Ins. Co. v. WMI Liquidating Tr., 93 A.3d 1208, 1216-17
(Del. 2014).
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determination.135
Here, the parties don’t really contest the first three elements. Instead, the
fourth element—ripeness, or to be more exact, overripeness—is at issue.
RGI asks the Court to dismiss Count III as overripe citing Markusic and
Burris. RGI tells the Court that it need not engage in the longer Burris analysis
because Markusic states: “The court need not engage in the [Burris] analysis . . . .
Where non-declaratory claims are pending in another court, the declaratory version
of those same claims are overripe and risk the unnecessary burdening on the court’s
resources and possibility of inconsistent factual and legal findings between the
courts.”136 While Markusic was recently affirmed by the Delaware Supreme
Court,137 the Court here would be remiss if it rested its decision on Markusic without
engaging in the Burris analysis.
The Superior Court in Burris set out seven factors to consider whether a claim
should be dismissed as overripe:
1. Whether the defendant is truly an unwilling litigant, thus
necessitating declaratory action.
2. What form of relief is truly being sought by the plaintiff and
whether that relief, if not solely a declaration of rights, would
require resort to another court for supplemental relief. If so,
135
Rollins Int’l, Inc. v. Int’l Hydronics Corp., 303 A.2d 660, 662-63 (Del. 1973).
136
See Markusic, 2021 WL 2456637, at *5; Def.’s Super. MTD at 14-15.
137
Markusic v. Blum, 2022 WL 4451486 (Del. Sept. 23, 2022) (affirming the Court of Chancery’s
decision without a separate opinion).
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whether both the rights and relief could be attained in a single non-
declaratory action already available.
3. Whether another remedy exists and whether it would be more
effective or efficient and, thus, whether declaratory judgment
would serve a useful purpose.
4. Whether another action is pending, instituted either before or after
the instant action, at the time of consideration of the Motion to
Dismiss, and whether plaintiff would be able to raise all claims and
defenses available in the instant action, as part of the pending
action.
5. Whether the instant action has truly been instituted to seek a
declaration of rights or merely for tactical or other procedural
advantage.
6. Whether the instant action was filed in apparent anticipation of
other pending proceedings.
7. Whether plaintiff will suffer any prejudice if the instant action is
dismissed.138
Application of the Burris factors is appropriate here. In E.I. Dupont De
Nemours & Co. v. Huttig Building Products,139 the Superior Court declined to
engage in the Burris analysis because it determined the defendant effectively “cast
a cloud” upon the contract at issue by filing a second action in California a month
after the Delaware action was instituted.140 On the other hand, in Security National
138
Burris, 583 A.2d at 1372-73.
139
2002 WL 32072447 (Del. Super. Ct. May 28, 2002).
140
See id. at *4-5.
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Mortgage Company v. Lehman Brothers Holdings Inc.,141 the Court engaged in the
Burris analysis.142 There, this Court determined “the parties ha[d] moved far
forward to litigate the claim” because they were actively pursuing litigation in the
United States Bankruptcy Court for the Southern District of New York.143 The
present case is more like Lehman Brothers than Huttig Building Products because
RGI is actively pursuing similar claims in New York, which were originally filed
less than one day after CRE initiated this action.144 As such, it’s proper to engage in
the Burris analysis.145
Factor One: RGI is a willing litigant.
RGI is a willing litigant. RGI initially brought an action in the Southern
District of New York within a day of the filing of this action. Though later dismissed
for lack of diversity, RGI proceeded with the New York Action shortly thereafter in
state court. Further, on March 30, 2020, less than two months before the lawsuits
started, RGI sent a default notice to CRE, suggesting that CRE “preserve documents
141
2016 WL 6396343 (Del. Super Ct. Aug. 24, 2016).
142
See id. at *8-11.
143
Id. at *8.
144
See Declaration of Paul Burgo ¶ 2, Aug. 15, 2022 (D.I. 156 Super.) (“On May 18, 2020, RGI
filed a complaint in the United States District Court for the Southern District of New York,
asserting claims for breach of contract under the Servicing, Participation, and Supplemental
Agreements.”); see also Compl. (having a filing date of May 18, 2020).
145
See Sec. Nat’l Mortg. Co., 2016 WL 6396343, at *8.
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in view of potential litigation.”146 CRE argues RGI is “active” but “unwilling”
because RGI does not want to litigate in Delaware.147 That misses the point. This
factor asks whether the party is a willing litigant as it relates to the causes of action
generally, not in a specific court.148
Factor Two: CRE is seeking declaratory relief under Count III.
Count III seeks a declaration that:
[T]here is no subsisting claim by RGI for any default of [sic] breach by
any Plaintiff of the UAPA, the Servicing and/or Participation
Agreement. This includes a declaratory judgment that there is no
default or breach as asserted by RGI . . . and that Club Exploria (as
successor by merger to CRE Bushkill) is entitled to terminate the
Servicing Agreement and/or is not restricted or obligated by Schedule
2.149
The relief sought by CRE here could also be sought in the New York Action
because RGI has advanced affirmative claims that CRE (and others) breached the
UAPA, Ancillary Agreements, and Supplemental Agreement.150 The Court
previously held, however, that Delaware is the proper forum for this lawsuit because
146
SAC, Ex. I at 4.
147
See Pls.’ Super. Answering Br. at 17.
148
See Burris, 583 A.2d at 1373 (explaining the defendant was a willing litigant because it was
actively pursuing a lawsuit in the Court of Chancery); Sec. Nat’l Mortg. Co., 2016 WL 6396343,
at *8 (explaining the defendant was a willing litigant because it was actively pursuing claims in
the United States Bankruptcy Court for the Southern District of New York).
149
SAC ¶ 87.
150
See Def.’s Super. MTD, Ex. 7 ¶¶ 283-332 (asserting claims by RGI against CRE for breach of
these agreements).
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the UAPA’s Delaware forum selection clause governs the UAPA and the Ancillary
Agreements.151 So, while it is plausible CRE could seek the same relief in the New
York Action, the law of the case holds “[t]his Court is the proper forum for CRE’s
suit.”152 There is an affirmative claim in New York that mirrors the declaratory
judgment action here, but the Court has already held that this Court is the proper
forum for CRE’s lawsuit, which includes the declaratory judgment action. Therefore
this factor is neutral.
Factors Three and Four: CRE’s Count III claim may serve a useful
purpose, but CRE could likely raise its claims and/or defenses in the New
York Action.
Considering the Court’s prior decision, Count III serves a useful purpose
inasmuch as it permits CRE to pursue its claims under the UAPA and Ancillary
Agreements in accordance with the Court’s holding that Delaware is the proper
forum for CRE’s suit. On this ground, factor three favors CRE.
CRE argues the New York court determined the UAPA is governed by a
Delaware forum selection clause, and thus CRE would not be able to raise all claims
and defenses available in the New York Action.153 But this assertion appears
conclusory, as RGI points out—“CRE [] fails to explain what defenses from the
151
See CRE Niagara Hldgs., LLC, 2021 WL 1292792, at *6-8.
152
See id. at *7.
153
See Pls.’ Super. Answering Br. at 19.
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UAPA it could possibly rely on in litigating its claims that it did not breach the
[Ancillary] Agreements, nor does it explain why it would be unable to assert them
defensively in New York.”154 Because CRE has yet to provide an adequate
explanation as to why it wouldn’t be able to raise the appropriate claims or defenses
in the New York Action, factor four favors RGI.
Factors Five and Six: This action may have been initiated to seek a
declaration of rights, but it may also have been filed in anticipation of the
New York Action.
CRE claims, and the Court must accept at this stage, it filed this action in
accordance with the UAPA’s forum selection clause.155 RGI paints a different
picture. RGI says CRE filed this action for tactical advantage shortly after RGI sent
CRE notices of default on the Ancillary Agreements. RGI points to CRE’s Motion
for Summary Judgment in the Chancery action and says CRE believes Delaware law
on indemnification and willful misconduct is more advantageous.156 But, if
anything, that argument goes to the Chancery action and RGI fails to directly connect
it to the Superior Court action. The argument, therefore, is not persuasive and factor
five favors CRE.
RGI claims it is the “natural plaintiff” and CRE filed this action in anticipation
154
Def.’s Super. Reply at 15.
155
See Pls.’ Super. Answering Br. at 19.
156
See Def.’s Super. Reply at 16 (citing Pls.’ Ch. Answering Br. at 20-21).
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of the New York Action. RGI points to certain caselaw for the proposition that
“[s]eeking a declaratory judgment prior to the natural plaintiff bringing an action can
be viewed as ‘filing in anticipation’ of litigation.”157 RGI says it’s the natural
plaintiff because CRE’s damages, at most, make up a “small offset of RGI’s much
larger damages.”158 CRE argues this action was not anticipatorily filed because, in
its view, it had to file or it would have faced a “timeliness” challenge under the
agreements if it did not file.159 It does appear CRE filed this action in anticipation
of litigation based on the “natural plaintiff” argument by RGI, as well as the fact that
RGI’s damages, if proven, are significantly greater than CRE’s damages.160 For
these reasons, factor six favors RGI.
Factor Seven: CRE would be prejudiced if this action is dismissed.
RGI argues CRE will suffer no prejudice if the non-UAPA portions of Count
III are dismissed because CRE can pursue those in the New York Action.161 In
briefing and at argument, CRE countered that it would suffer prejudice if Count III
was dismissed because the New York Action’s decision was on appeal to the New
157
See Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Turner Constr. Co., 2014 WL 703808, at *4
(Del. Super. Ct. Feb. 17, 2014).
158
See Def.’s Super. Reply at 16-17.
See Pls.’ Super. Answering Br. at 19-20; see also Def.’s Super. Reply at 16 n.13 (noting the
159
UAPA timeliness limitations period expired a year before CRE filed in Delaware).
160
See Def.’s Super. Reply at 17 n.16 (explaining the possible damages disparity).
161
See Def.’s Super. MTD at 20-21.
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York Appellate Division, which could have found all claims must be brought in
Delaware.162 The New York Appellate Division issued no such decision.163 But
also, says CRE, dismissal would deprive it of the bargain it struck through the
UAPA.164 CRE is correct—it likely will be deprived of its bargain struck through
the UAPA if Count III is dismissed because the Court previously held the UAPA,
with its Delaware forum selection clause, covers the Ancillary Agreements. This
factor favors CRE.
Factors one, four, and six favor RGI. Factors three, five, and seven favor
CRE. Factor two is neutral. Weighing the factors (some of which are more
substantial than others) and viewing the facts in the light most favorable to CRE, the
Court DENIES RGI’s Motion to Dismiss Count III for overripeness.
C. CHANCERY COUNTS I AND II LACK AN EQUITABLE BASIS AND THE COURT
WILL NOT RETAIN JURISDICTION OVER THE ACTION.
The Court of Chancery, one is oft-reminded, “is proudly a court of limited
jurisdiction”165 that enjoys subject matter jurisdiction “only when (1) the complaint
162
See Pls.’ Super. Answering Br. at 20.
163
See Letter for Judicial Review, Ex., Mar. 1, 2023 (D.I. 177 Super.) (unanimously affirming the
New York Action Dec. 27 Decision in full, which held UAPA claims properly belong in
Delaware).
164
See Pls.’ Super. Answering Br. at 20.
165
Citizens Against Solar Pollution v. Kent Cnty., 2023 WL 2199646, at *2 (Del. Ch. Feb. 24,
2023); Nask4Innovation Sp. Z.o.o. v. Sellers, 2022 WL 4127621, at *3 (Del. Ch. Sept. 12, 2022);
Parseghian v. Frequency Therapeutics, Inc., 2022 WL 2208899, at *5 (Del. Ch. June 21, 2022);
Perlman v Vox Media, Inc., 2019 WL 267520, at *4 (Del. Ch. June 27, 2019).
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states a claim for relief that is equitable in character, (2) the complaint requests an
equitable remedy when there is no adequate remedy at law[,] or (3) Chancery is
vested with jurisdiction by statute.”166 “An adequate remedy at law is one that will
‘afford the plaintiff full, fair, and complete relief.’”167 “Plaintiff bears the burden of
establishing the court’s subject matter jurisdiction.”168
“Although specific performance is an equitable remedy upon which equity
jurisdiction might be predicated, that is true only if the complaint, objectively
viewed, discloses a genuine need for such equitable relief.”169 “The fact that a
complaint contains a prayer for an equitable remedy, without more, does not
conclude the jurisdictional analysis.”170 “[T]he appropriate analysis requires a
realistic assessment of the nature of the wrong alleged and the remedy available in
order to determine whether a legal remedy is available and fully adequate.”171
CRE asserts the Court of Chancery has jurisdiction because the claims seek
166
S’holder Rep. Servs. LLC v. DC Cap. P’rs Fund II, L.P., 2022 WL 439011, at *2 (Del. Ch.
Feb. 14, 2022) (internal quotation marks and citation omitted).
167
Alliance Compressors LLC v. Lennox Indus. Inc., 2020 WL 57897, at *3 (Del. Ch. Jan. 6,
2020) (quoting El Paso Nat’l Gas Co. v. TransAmerican Nat’l Gas Corp., 669 A.2d 36, 39 (Del.
1995)).
168
DC Cap. P’rs Fund II, L.P., 2022 WL 439011, at *2 (citations omitted); Alliance Compressors
LLC, 2020 WL 57897, at *3 (“The party seeking an equitable remedy has the burden to show that
a legal remedy would be inadequate.” (quoting Amaysing Techs. Corp. v. Cyberair Commc’ns,
Inc., 2004 WL 1192602, at *2 (Del. Ch. May 28, 2004)).
169
Candlewood Timber Grp., LLC v. Pan Am. Energy, LLC, 859 A.2d 989, 997 (Del. 2004).
170
Id.171
Id. (internal quotation marks and citation omitted).
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equitable remedies.172 Specifically:
Counts I and II seek specific performance (an equitable remedy) of
RGI’s contractual obligations under the Servicing and Participation
Agreements to distribute funds held in the Lockbox account to CRE
Participation, and injunctive relief prohibiting distribution of funds
held in the Lockbox account to RGI until Plaintiffs’ offset rights
are established.173
Additionally, CRE argues an adequate remedy at law is lacking because it’s
unclear whether money damages would make it whole.174 Specifically, CRE asserts
that “RGI has no business operations or other assets that it could use to satisfy a
judgment—so if RGI steals funds that should otherwise go to Plaintiffs, it is unlikely,
if not impossible, that Plaintiffs could ever recover those funds.”175
In April 2022, the Court granted the parties’ stipulation and order governing
accounts and resolving the Status Quo Motion.176 That Order provided, in part:
1. On the first business day of each calendar month, RGI shall pay
CRE Niagara Participation Holdings LLC an amount equal to
33.06% of RGI’s Swept Timeshare Contract Payments during the
prior month.
2. On the first business day of each calendar month, RGI shall pay an
amount equal to 16.94% of RGI’s Swept Timeshare Contract
Payments during the prior month into the trust account of Kasowitz
Benson Torres LLP. The amounts held in such escrowed trust
account shall only be distributed as ordered by this Court, by
another court of competent jurisdiction following entry of final
172
Pls.’ Ch. Answering Br. at 35-36.
173
Id. (citation omitted).
174
Id. at 36.
175
Id. (citation omitted).
176
Order Governing Accounting & Resolving Status Quo Motion, Apr. 28, 2022 (D.I. 32 Ch.).
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judgment (including any appeal), or by mutual written agreement
of RGI and CRE Niagara Participation Holdings LLC.177
CRE’s fear that RGI could unilaterally distribute funds from the Lockbox is
addressed by the Court’s Order.178 And the disputed 16.94% sits in escrow until
final resolution of both the Chancery and Superior Court actions. So the entry of the
Status Quo Order effectively moots CRE’s argument that an adequate remedy at law
did not exist.179 While CRE continues to argue that the “Status Quo Order simply
ensures the funds are available for taking, not who is entitled to take” and “[a]lthough
the Lockbox Funds are currently stored in escrow, there remains a very real and
immediate controversy as to who owns the rights to the disputed 16.94%,”180 both
statements cut against the need for equitable relief. Accordingly, the specific
performance claims lack an equitable basis.
The Court of Chancery has the ability to retain jurisdiction even after finding
177
Id. ¶¶ 1-2.
178
CRE asserts that equitable relief is necessary because it’s likely that RGI cannot satisfy an
eventual judgment. Pls.’ Ch. Answering Br. at 36-37. But such a circumstance arises only in the
narrow instances where there are “serious questions about defendants’ ability to pay a damage
award.” Brinati v. TeleSTAR, Inc., 1985 WL 44688, at *4 (Del. Ch. Sept. 3, 1985) (citations
omitted). For example, such a circumstance may arise in the dissolution or liquidation context.
Id. at *1, *4; In re Cencom Cable Income P’rs, L.P. Litig., 2000 WL 130629, at *1, *7-9 (Del. Ch.
Jan. 27, 2000). That is not the case here.
179
See, e.g., Bauer v. Gilpin, 1994 WL 469220, at *2 (Del. Ch. Aug. 11, 1994) (“With respect to
plaintiffs’ complaint for specific performance, I conclude that the record demonstrates
unequivocally that the complaint has been effectively mooted by the parties entering into a
stipulation.”).
180
Pls.’ Ch. Answering Br. at 38.
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the seemingly equitable claims lack an equitable basis.181 But such retention is
wholly discretionary.182 Factors for the Court to consider when determining whether
to retain jurisdiction include, for example, whether retaining jurisdiction would
avoid a multiplicity of suits, to promote judicial efficiency, and to avoid extra
expense.183 The Court finds those efficiencies weigh against retaining jurisdiction.
Accordingly, RGI’s Motion to Dismiss for lack of subject matter jurisdiction
is GRANTED. Because the Court lacks jurisdiction to hear the action, CRE’s
Motion for Partial Summary Judgment is DENIED as MOOT.
V. CONCLUSION
For the foregoing reasons, RGI’s Motion to Dismiss the Amended Complaint
for Lack of Subject Matter Jurisdiction and for Partial Judgment on the Pleadings is
DENIED in full.
Because the Court of Chancery lacks jurisdiction over the Chancery Amended
181
Zeborski v. Progressive Direct Ins. Co., 2014 WL 2156984, at *9 (Del. Ch. Apr. 30, 2014).
The exercise of that discretion, via the clean-up doctrine, “can be appropriate for ‘any of several
reasons, including to resolve a factual issue which must be determined in the proceedings; to avoid
multiplicity of suits; to promote judicial efficiency; to do full justice; to avoid great expense; to
afford complete relief in one action; and to overcome insufficient modes of procedure at law.’” Id.(quoting Darby Emerging Mkts. Fund, L.P. v. Ryan, 2013 WL 6401131, at *8 (Del. Ch. Nov. 27,
2013)). Here, judicial efficiency and avoiding multiplicity of suits counsel against retaining
jurisdiction.
182
Id.; Biegler v. Underwriting Serv. Mgmt. Co., LLC, 2022 WL 17820533, at *5 (Del. Ch. Dec.
20, 2022) (“While this Court retains the power to decide those claims under the cleanup doctrine,
it may decline to exercise that jurisdiction where, as here, this Court has not made any factual
determinations.” (citation omitted)).
183
Zeborski, 2014 WL 2156984, at *9.
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Complaint, the Motion to Dismiss the Chancery Amended Complaint is GRANTED
subject to CRE’s right to transfer the action to the Superior Court under 10 Del. C.
§ 1902 (which might be done via appropriate amendment of its operative pleadings
there). As the Court lacks jurisdiction, it cannot hear the merits of CRE’s Motion
for Partial Summary Judgement on Counts III and IV. Accordingly, CRE’s Motion
for Partial Summary Judgment is DENIED as MOOT.
CRE has sixty days to elect to transfer the Chancery action to the Superior
Court (or amend the necessary pleadings that are already-extant therein to effect a
de facto transfer).184 If CRE does not move this Court to transfer the action (or file
the amendments that it deems necessary) within that time, that action will be
dismissed but with final judgment thereon withheld until such time as the stipulated
status quo order is no longer necessary.
IT IS SO ORDERED.
_________________________
Paul R. Wallace, Judge
184
DEL. CODE ANN. tit. 10, § 1902 (2023) (noting that a party adversely affected may transfer to
the appropriate court “within 60 days after the order denying the jurisdiction of the first court has
become final,” and that Section 1902 “shall be liberally construed to permit and facilitate transfers
of proceedings between the courts of this State in the interests of justice”).
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